MAA Group Berhad: Annual Report 2018 (2024)

Embed code:

URL:

Create FREE account or Login to add your comment

Comments (0)

Transcription

2. CONTENTS 046 Other Bursa Securities Compliance Information 075 Statements Of Comprehensive Income For The Financial Year Ended 31 December 2018 Board Of Directors 049 Statement On Risk Management And Internal Control 076 Statements Of Changes In Equity For The Financial Year Ended 31 December 2018 005 Board Of Directors ’ Profile 053 Directors’ Responsibility Statement In Respect Of Annual Audited Accounts 078 Statements Of Cash Flows For The Financial Year Ended 31 December 2018 012 Key Senior Management Profile 054 Audit Committee Report 081 Notes To The Financial Statements 31 December 2018 016 Corporate Information 057 Sustainability Statement 195 List Of Substantial Shareholders’ And Directors’ Shareholdings As At 12 April 2019 018 Overseas Operations 064 Directors’ Report 196 Statistics Of Shareholdings As At 12 April 2019 019 Notice Of Twenty First Annual General Meeting 068 Statement By Directors 023 Perutusan Pengerusi 068 Statutory Declaration 026 Chairman’s Message 069 Independent Auditors’ Report 029 Management’s Discussion And Analysis 073 Statements Of Financial Position As At 31 December 2018 042 Corporate Governance Overview Statement 074 Statements Of Profit Or Loss For The Financial Year Ended 31 December 2018 002 Financial Highlights 004 ANNUAL REPORT 2018 Form of Proxy Sustainable And Value Investing |
3. FINANCIAL HIGHLIGHTS FIVE YEARS GROUP FINANCIAL HIGHLIGHTS Year Ended 31 December 2018 2017 2016 2015 2014 Statements of Profit or Loss (RM’ million) Total Operating Revenue 169119 297 (1) 566695 (Loss)/Profit Before Taxation (24)29 267 (1) 3319 Statements of Financial Position (RM’ million) Total Assets 757779 559 1,4511,560 Shareholders’ Equity 530559 546 410424 Financial Ratios (%) Return on Capital Employed -4.6%5.2% 48.9% 8.0%4.5% Return on Total Assets -3.2%3.7% 47.8% 2.3%1.2% (Loss)/Earnings per Share (sen) (10.0)9.2 92.3 8.35.5 1.92.0 2.0 1.41.4 Net Asset per Share (RM) Included six (6) months results of subsidiary, MAA Takaful Berhad (now known as Zurich Takaful Malaysia Berhad) before the completion of its disposal to Zurich Insurance Company Ltd (“Zurich”) on 30 June 2016. (1) 002 | Sustainable And Value Investing ANNUAL REPORT 2018
4. FINANCIAL HIGHLIGHTS (continued) Total Operating Revenue Profit/(Loss) Before Taxation (RM Million) (RM Million) 695 566 297 (1) 119 169 19 700 300 600 250 500 33 267 (1) 29 (24) 200 400 150 300 100 200 50 100 0 0 2014 2015 2016 2017 2018 0 2014 2015 2016 2017 2018 - 50 Shareholders’ Equity Total Assets (RM Million) (RM Million) 2000 1,560 1,451 559 779 757 600 424 410 546 559 530 500 1500 400 1000 300 200 500 100 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Included six (6) months results of subsidiary, MAA Takaful Berhad (now known as Zurich Takaful Malaysia Berhad) before the completion of its disposal to Zurich on 30 June 2016. (1) ANNUAL REPORT 2018 Sustainable And Value Investing | 003
5. BOARD OF DIRECTORS 1 . Tunku Dato’ Yaacob Khyra Executive Chairman 2. Tunku Yahaya @ Yahya Bin Tunku Tan Sri Abdullah Non-Independent Executive Director 3. Yeo Took Keat Non-Independent Non-Executive Director 4. Dato’ Narendrakumar Jasani A/L Chunilal Rugnath Senior Independent Non-Executive Director Chairman of Risk & Sustainability Committee Chairman of Nomination & Remuneration Committee Member of Audit & Governance Committee 4. 5. Onn Kien Hoe Independent Non-Executive Director Chairman of Audit & Governance Committee Member of Risk & Sustainability Committee Member of Nomination & Remuneration Committee 6. Tunku Dato’ Ahmad Burhanuddin Bin Tunku Datuk Seri Adnan Independent Non-Executive Director Member of Audit & Governance Committee Member of Risk & Sustainability Committee Member of Nomination & Remuneration Committee 7. Datin Seri Raihanah Begum Binti Abdul Rahman Independent Non-Executive Director Member of Audit & Governance Committee Member of Risk & Sustainability Committee Member of Nomination & Remuneration Committee 5. 6. 3. 7. 004 | Sustainable And Value Investing 1. 2. ANNUAL REPORT 2018
6. BOARD OF DIRECTORS ’ PROFILE Tunku Dato’ Yaacob Khyra has been a Director since its inception in November 1998. He was appointed as the Group Managing Director/Chief Executive Officer in 1999. Subsequently, he was re-designated as Executive Chairman of the Company on 28 August 2008. He currently holds the position of Executive Chairman of Mycron Steel Berhad (“MSB”) and Melewar Industrial Group Berhad (“MIG”). Tunku Dato’ Yaacob graduated with a Bachelor of Science (Hons) Degree in Economics and Accounting from City University, London. An accountant by training, he is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Malaysian Institute of Accountants. Tunku Dato’ Yaacob started his career as an Auditor with Price Waterhouse in London from 1982 to 1985 and subsequently, employed by the same firm in Kuala Lumpur from 1986 to 1987. Tunku Dato’ Yaacob joined Malaysian Assurance Alliance Berhad (now known as Zurich Life Insurance Malaysia Berhad) in 1987 until October 2006. Currently, Tunku Dato’ Yaacob is a Board Member of MIG, MSB, Melewar Group Berhad, Khyra Legacy Berhad, Yayasan Khyra, MAA Bancwell Trustee Berhad, Ithmaar Holding B.S.C., IB Capital B.S.C. (Closed) and several private limited companies. His shareholdings in the Company is disclosed on page 195 of the Annual Report. Tunku Dato’ Yaacob is the Chairman of the Board of Trustees for MAA-Medicare Charitable Foundation and The Budimas Charitable Foundation. He also sits on the Board of Altech Chemicals Limited which is listed in Australia as Non-Executive Director. Tunku Dato’ Yaacob does not have any personal interest in any business arrangements involving the Company. Tunku Dato’ Yaacob does not have any conflict of interest with the Company and he has had no convictions for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. TUNKU DATO’ YAACOB KHYRA Aged 58, Malaysian, Male Executive Chairman ANNUAL REPORT 2018 Sustainable And Value Investing | 005
7. BOARD OF DIRECTORS ’ PROFILE (continued) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah was appointed to the Board on 10 January 2007. He was re-designated as Non-Independent Executive Director of the Company on 1 December 2011 by virtue of his appointment as Head of E-Commerce (Vice President) of MAA Corporation Sdn Bhd, the wholly-owned subsidiary of MAA Group Berhad. Tunku Yahaya is the brother to Tunku Dato’ Yaacob Khyra, the Executive Chairman of the Company. Tunku Yahaya graduated in 1983 with a Bachelor of Science (Hons) Degree in Economics and Accountancy from City University, London. Upon completion, he joined Peat Marwick Mitchell & Co. in London that same year. In 1986, he obtained his Master of Science in Economics from Birkbeck College, University of London. Upon returning to Malaysia in 1986, he joined the advertising company, MZC-Saatchi & Saatchi. In 1988, he joined the management of the refurbished Central Market (KL) as Executive Director. In 1994, he was appointed to put into operation and manage the television station, Metro Vision as Managing Director. In 1997, he started the music recording label, Melewar Parallax Sdn Bhd. He currently sits on the Boards of Melewar Industrial Group Berhad, Mithril Berhad, Melewar Group Berhad, Khyra Legacy Berhad, MAA Credit Berhad, MAA Bancwell Trustee Berhad, Jat Acres Berhad and several private limited companies. Tunku Yahaya does not have any personal interest in any business arrangements involving the Company. Tunku Yahaya does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. TUNKU YAHAYA @ YAHYA BIN TUNKU TAN SRI ABDULLAH Aged 57, Malaysian, Male Non-Independent Executive Director 006 | Sustainable And Value Investing ANNUAL REPORT 2018
8. BOARD OF DIRECTORS ’ PROFILE (continued) Mr Yeo Took Keat was appointed to the Board on 24 February 2005. He was re-designated as Non-Independent Non-Executive Director of the Company on 2 January 2018 upon his retirement as the Group Chief Operating Officer of the Company in December 2017. Mr Yeo has vast experience in accounting and finance having served with various capacities in insurance companies and audit firms upon completing his studies in 1980. He joined Malaysian Assurance Alliance Berhad (now known as Zurich Life Insurance Malaysia Berhad) in 1986 and has held several positions, the last of which was as Senior Vice President – Finance & Administration before his transfer to MAA Group Berhad in May 2002 as the Group Chief Operating Officer. Mr Yeo is a Fellow of The Association of Chartered Certified Accountants, United Kingdom and a Member of the Malaysian Institute of Accountants. Mr Yeo currently sits on the Board of MAA International Group Ltd, the subsidiary of the Company. Mr Yeo does not have any personal interest in any business arrangements involving the Company. Mr Yeo does not have any family relationship with any Director and/or major shareholders of the Company and he has had no convictions for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. His shareholdings in the Company is disclosed on page 195 of the Annual Report. YEO TOOK KEAT Aged 61, Malaysian, Male Non-Independent Non-Executive Director ANNUAL REPORT 2018 Sustainable And Value Investing | 007
9. BOARD OF DIRECTORS ’ PROFILE (continued) Dato’ Narendrakumar Jasani A/L Chunilal Rugnath was appointed to the Board on 5 September 2012 as an Independent Non-Executive Director. Subsequently, he was appointed as the Senior Independent Non-Executive Director and as the Chairman of the Nomination & Remuneration Committee on 21 June 2018. He is the Chairman of the Risk & Sustainability Committee and a Member of Audit & Governance Committee. Dato’ Jasani is currently the Country Managing Partner of Grant Thornton Malaysia, a firm of public accountants. Regionally, he is the Chairman of Grant Thornton Cambodia. He qualified as a Chartered Accountant in England in 1974. He gained experience with Grant Thornton in the United Kingdom and locally with Ernst & Young. Whilst with the two firms, he was involved in rendering professional services for large financial institutions and a number of other international and public listed companies. Dato’ Jasani also actively contributes towards the professional development of the accounting standards and practice. He has served as the Vice President of Malaysian Institute of Accountants (MIA) and in the MIA Council. Dato’ Jasani was also involved in number of Committees including the Small & Medium Practice Committee (SMP), Insolvency Practice Committee (IPC), Valuation Committee (VC) and the Monitoring Committee (MC). In his professional capacity, he established the Malaysian chapter of the Institute of Chartered Accountants in England & Wales (“ICAEW”) in July 2002 and was the Chairman for 4 years. He remains actively involved as the ICAEW Past Chairman and Adviser. For initiating the Malaysian ICAEW Chapter and then the successful student training, he was awarded the Life Time Achievement Award by ICAEW. He is a Member of The Malaysia Institute of Chartered Public Accountants (MICPA) and a Member of the Institute of Singapore Chartered Accountants (ISCA) as well as Member of the Asean Chartered Professional Accountants (ACPA). Dato’ Jasani has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Dato’ Jasani does not have any personal interest in any business arrangements involving the Company. Additionally, he does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. DATO’ NARENDRAKUMAR JASANI A/L CHUNILAL RUGNATH Aged 69, Malaysian, Male Senior Independent Non-Executive Director Chairman of Risk & Sustainability Committee Chairman of Nomination & Remuneration Committee Member of Audit & Governance Committee 008 | Sustainable And Value Investing ANNUAL REPORT 2018
10. BOARD OF DIRECTORS ’ PROFILE (continued) Mr Onn Kien Hoe was appointed to the Board on 5 September 2012 as an Independent Non-Executive Director. Mr Onn is the Chairman of the Audit & Governance Committee of the Company and a Member of Risk & Sustainability Committee and Nomination & Remuneration Committee of the Company. He currently sits on the Boards of Avillion Berhad, Zurich Takaful Malaysia Berhad, Zurich General Takaful Malaysia Berhad, MAA International Group Ltd and several private limited companies. He was also appointed as General Committee member of Malaysian International Chamber of Commerce and Industry (MICCI) for the year 2018-2019. Mr Onn completed his professional qualification with the Association of Chartered Certified Accountants (U.K.) in 1988 and has been in the accounting profession since then. He is also a Member of the Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants (“MICPA”). Mr Onn is a partner with Crowe Malaysia PLT, an internationally affiliated accounting firm, and his role includes acting as the Co-Head of the Corporate Advisory Division of Crowe Malaysia PLT. Mr Onn has served as an examiner for the MICPA and was a Member of the Interpretation Committee of the Malaysian Accounting Standards Board. Mr Onn has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Mr Onn does not have any personal interest in any business arrangements involving the Company. Mr Onn does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. ONN KIEN HOE Aged 54, Malaysian, Male Independent Non-Executive Director Chairman of Audit & Governance Committee Member of Risk & Sustainability Committee Member of Nomination & Remuneration Committee ANNUAL REPORT 2018 Sustainable And Value Investing | 009
11. BOARD OF DIRECTORS ’ PROFILE (continued) Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan was appointed to the Board on 26 May 2017 as an Independent NonExecutive Director. Tunku Dato’ Ahmad Burhanuddin is a Member of Audit & Governance Committee, Risk & Sustainability Committee and Nomination & Remuneration Committee of the Company. Tunku Dato’ Ahmad Burhanuddin is an accountant by qualification. He is a Fellow of the Association of Chartered Certified Accountants (FCCA) and a member of the Institute of Malaysian Accountants. Tunku Dato’ Ahmad Burhanuddin served as the Executive Director of CIMB Bank, The Financial Controller (CFO) of Commerce Asset Holdings (now known as CIMB Bank Berhad), Executive Director of Commerce Asset Fund Managers, Group Chief Internal Auditor of the Commerce Group and chaired various committees in CIMB Bank from year 2001 to 2009, including being the Chairman of the Building Committee for the construction of Menara CIMB Bank and had under his direct purview the Bank’s International Branches, the Group Customer Care and Management Support Division and The Corporate Client Solutions which covered the group’s relationships with Government and Multinational Corporations. Tunku Dato’ Ahmad Burhanuddin served as the Group Managing Director and Chief Executive Officer of Themed Attractions Resorts & Hotels Sdn Bhd from April 2015 to July 2016. He also served as the Group Managing Director and Chief Executive Officer of Themed Attractions and Resorts Sdn Bhd, a wholly-owned subsidiary of Khazanah Nasional Berhad from October 2009 to April 2015. Tunku Dato’ Ahmad Burhanuddin was elected as the President of the Malaysian Association of Amusem*nt Themeparks & Family Attractions (MAATFA) in 2013 for a two-year term. He was also elected as the President of The Malay College Old Boys’ Association, continuing the legacy of his father who was the Past President and the Life President of the Association, in June 2016. Tunku Dato’ Ahmad Burhanuddin currently sits on the Boards of Jaya Raya Sdn Bhd and Granatum Ventures Sdn Bhd. Tunku Dato’ Ahmad Burhanuddin has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Tunku Dato’ Ahmad Burhanuddin does not have any personal interest in any business arrangements involving the Company. Tunku Dato’ Ahmad Burhanuddin does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. TUNKU DATO’ AHMAD BURHANUDDIN BIN TUNKU DATUK SERI ADNAN Aged 57, Malaysian, Male Independent Non-Executive Director Member of Audit & Governance Committee Member of Risk & Sustainability Committee Member of Nomination & Remuneration Committee 010 | Sustainable And Value Investing ANNUAL REPORT 2018
12. BOARD OF DIRECTORS ’ PROFILE (continued) Datin Seri Raihanah Begum Binti Abdul Rahman, was appointed to the Board on 22 February 2018. Datin Seri Raihanah is a Member of Audit & Governance Committee, Risk & Sustainability Committee and Nomination & Remuneration Committee of the Company. Datin Seri Raihanah is an Associate of the Chartered Insurance Institute (UK) and the Malaysian Insurance Institute. As a scholar of American Malaysian Insurance Sdn Bhd (later known as CIMB Bank Insurance) she started her insurance career with the company immediately after successfully completing her course in 1984 and has held various positions in the Underwriting and Marketing Departments before leaving in 1988 to join Malene Insurance Brokers Sdn Bhd (“Malene”). During her 10-year service at Malene, she was exposed to various aspects of the oil and gas industry and was involved in the Insurance programmes for Petronas, Shell, Esso (now known as Exxon-Mobil) and various other oil and gas-related companies such as Gas Malaysia Sdn Bhd and MISC Berhad. Her experience also included an attachment with a London-based Lloyds broker. She left Malene in 1997 when she was the Acting Chief Executive Officer, to dedicate more time in bringing up her three young children. To ensure that she was in touch with the insurance industry and coupled with her experience and knowledge in insurance underwriting and broking, she made time, from 1998 to 1999, while being a homemaker, to be a part-time lecturer with the Malaysian Insurance Institute who conducted short courses for those in the insurance industry to obtain a more in-depth knowledge of the business. In August 2005, Datin Seri Raihanah was appointed as a Non-Executive Director to the board of a public-listed fibre-based manufacturing company called Wang Zheng Berhad (“Wang Zheng”). She served as an active board member at Wang Zheng for 8 years. She was also appointed as a member of the Board of Trustees for the Malaysian Medical Association (“MMA”) Foundation for a three-year term from 2007. MMA Foundation is a non-profit organization which provides financial assistance for undergraduate medical students, continuing professional development, public health education and donations to charities. She was recently appointed as Independent Non-Executive Director of Melewar Industrial Group Berhad and Mycron Steel Berhad on 8 April 2019. Datin Seri Raihanah has no family ties with any of the Directors and/ or major shareholders of the Company nor any shareholding in the Company. Datin Seri Raihanah does not have any personal interest in any business arrangements involving the Company. Datin Seri Raihanah does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. DATIN SERI RAIHANAH BEGUM BINTI ABDUL RAHMAN Aged 57, Malaysian, Female Independent Non-Executive Director Member of Audit & Governance Committee Member of Risk & Sustainability Committee Member of Nomination & Remuneration Committee ANNUAL REPORT 2018 Sustainable And Value Investing | 011
13. KEY SENIOR MANAGEMENT PROFILE TUNKU DATO ’ YAACOB KHYRA Aged 58, Malaysian, Male Executive Chairman Tunku Dato’ Yaacob Khyra has been a Director of the Company since its inception in November 1998. He was appointed as the Group Managing Director/Chief Executive Officer of the Company in 1999. Subsequently, he was re-designated as Executive Chairman of the Company on 28 August 2008. His personal profile is listed in the Board of Directors’ Profile on page 005 of this Annual Report. TUNKU YAHAYA @ YAHYA BIN TUNKU TAN SRI ABDULLAH Aged 57, Malaysian, Male Non-Independent Executive Director Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah was appointed to the Board of Directors of the Company on 10 January 2007. He was re-designated as Non-Independent Executive Director of the Company on 1 December 2011 by virtue of his appointment as Head of E-Commerce (Vice President) of MAA Corporation Sdn Bhd, the wholly-owned subsidiary of the Company. His personal profile is listed in the Board of Directors’ Profile on page 006 of this Annual Report. DANIEL C. GO Aged 57, Filipino, Male President/Chief Executive Officer (“CEO”) Mr Daniel C. Go is the President/CEO of MAA General Assurance Philippines, Inc. ("MAAGAP") since the commencement of the company’s operation in 2001. He is one of the founder and pioneer of MAAGAP. He was appointed as a Director of MAA Mutualife Philippines, Inc. in April 2003. Mr Daniel C. Go has more than 36 years of work experience in the field of Non-Life Insurance. His career in insurance started in the middle of 1982 when he joined Prudential Guarantee and Assurance Inc. (PGAI) as a claims clerk for motor car. He rose from the ranks and became Assistant Vice President – Claims for All Lines then was further promoted to become Vice President for Marketing until 2001. Mr Go studied Bachelor of Science in Commerce, Major in Management at the University of the East. Mr Go has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Mr Go does not have any personal interest in any business arrangements involving the Company. Mr Go does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 012 | Sustainable And Value Investing ANNUAL REPORT 2018
14. KEY SENIOR MANAGEMENT PROFILE (continued) ANAND KANAGASINGAM Aged 37, Malaysian, Male Senior Vice President – Financial Services Mr Anand Kanagasingam was appointed as the General Manager of the Company on 18 September 2017 and was subsequently redesignated to Senior Vice President – Financial Services on 1 April 2019. Mr Kanagasingam holds a Bachelor of Commerce in Corporate Finance & Marketing awarded by the University of Adelaide, Australia. He has over 10 years of credit and client relationship management experience in Corporate/Commercial Banking. Mr Kanagasingam began his career in the banking industry serving various renowned banks in Malaysia and the United Arab Emirates such as Affin Bank Berhad, the National Bank of Abu Dhabi, Standard Chartered Bank and Union National Bank. Prior to joining the Company, Mr Kanagasingam served the National Bank of Abu Dhabi as an Associate Director – Business Banking. He also serves on the Boards of several private limited companies in the group. Mr Kanagasingam has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Mr Kanagasingam does not have any personal interest in any business arrangements involving the Company. Mr Kanagasingam does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. LIM YONG HUEY Aged 55, Malaysian, Female Senior Vice President – Group Finance Ms Lim Yong Huey started her career as an auditor having served various capacities in audit firms the last with Price Waterhouse before she left the audit profession to join the commercial working as a finance manager in a public listed company. In August 2000, she joined the Company as Executive Manager – Group Finance and progressed within the Company to the position of Senior Vice President – Group Finance in January 2011. As the Senior Vice President – Group Finance, she oversees the overall finance functions, which include financial reporting, finance operations, budgeting, treasury, taxation, payroll and office administration. She is a Fellow member of the Association Chartered Certified Accountants (“ACCA”), United Kingdom. Ms Lim has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Ms Lim does not have any personal interest in any business arrangements involving the Company. Ms Lim does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. ANNUAL REPORT 2018 Sustainable And Value Investing | 013
15. KEY SENIOR MANAGEMENT PROFILE (continued) MUK SAI TAT Aged 55, Malaysian, Male Senior Vice President – Property & Development Mr Muk Sai Tat was appointed as the Senior Vice President – Property & Development of the Company on 08 April 2019. Mr Muk commenced his working career in 1983 with PricewaterhouseCoopers as an Audit Assistant and progressed to Audit Senior upon completion of Malaysian Association of Certified Public Accountants examination in June 1989. In September 1990, he joined Ogilvy & Mather (Malaysia) Sdn Bhd as an Accountant and later joined Energizer Battery Company (M) Sdn Bhd in 1991 as a Sales Accounting Manager and Financial Analyst. In 1996, he joined Emerson Electric (M) Sdn Bhd as a Financial Controller − Southeast Asia and later joined Pernas Otis Elevator Co. Sdn Bhd and Otis Manufacturing Company Sdn Bhd in 1999 as a Financial Controller/Chief Financial Officer. In 2000, he joined Skyline Concepts Sdn Bhd as a General Manager and later joined Concino Sdn Bhd in 2001 as the Group Chief Executive Officer. In 2003, Mr Muk joined Mangium Industries Bhd as the Group Chief Executive Officer/Executive Director and later joined WaKa Parter AG/Forestry Investment Trust (F.I.T.) and WaKa-Forest Investment Services AG (WaKa-FIS) in 2007 as a Representative for Asia (F.I.T.) and as a Director in Asia Pacific for WaKa-FIS in 2009. In 2010, he joined TT Resources Bhd as an Executive Director. In 2011, he joined Asian Business Solutions Sdn Bhd as a Partner/Consultant. Mr Muk holds a Master of Business Administration (General Management) from University of Bath, United Kingdom and is a member of the Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants. Mr Muk has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Mr Muk does not have any personal interest in any business arrangements involving the Company. Mr Muk does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. MUHAMMAD SAKIN SIM BIN ABDULLAH Aged 52, Malaysian, Male Vice President – Technical & Finance Mr Sakin has more than 28 years of work experience in the field of Non-Life Insurance. His career in insurance started in the middle of 1990 when he joined Malaysian Assurance Alliance Berhad (now known as Zurich Life Insurance Malaysia Berhad) as a Junior Accounting Executive. Mr Sakin rose from the ranks and was delegated his first foreign assignment where he was seconded by MAA Holdings (BVI) Ltd to MAA General Assurance Philippines, Inc. (“MAAGAP”) to head the Accounting & Finance Department of MAAGAP in December 2001. He currently holds the position of Treasurer / Vice President of MAAGAP. Mr Sakin completed his Diploma (LCCI) in Book-keeping & Accounting from Systematic Kuala Lumpur and also received his Diploma for the Non-Life Insurance Examination awarded by the Malaysian Insurance Institute (MII). Mr Sakin has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Mr Sakin does not have any personal interest in any business arrangements involving the Company. Mr Sakin does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 014 | Sustainable And Value Investing ANNUAL REPORT 2018
16. KEY SENIOR MANAGEMENT PROFILE (continued) ANGELINE LIM SUAN SEE Aged 53, Malaysian, Female Vice President – Group Chief Human Resource & Communications Officer Ms Angeline Lim joined the Company on 2 May 2000 as Manager, Communications. In 2002, she was promoted to Executive Manager and was subsequently promoted to Senior Manager in 2005 to oversee the Group Communications. In 2012, Angeline was promoted to Senior Manager – Group Human Resources, Training and Communications. She was then promoted to Vice President – Group Human Resource & Communications in February 2019, a position currently held. Ms Angeline Lim completed her Diploma in Public Relations, Advertising and Marketing from the London Chamber of Commerce in 1992. Subsequently in 2010, she completed her MBA from the University of Southern Queensland. Ms Angeline Lim has a combined 35 years’ working experience in the aviation, service and insurance industry. She has been with the Group for 19 years. Prior to joining the Group, she was attached to Malaysia Airlines, the Shangri La hotel, Hotel Istana, Palace of the Golden Horses and Malaysian Assurance Alliance Berhad (now known as Zurich Life Insurance Malaysia Berhad). Ms Angeline Lim has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Ms Angeline Lim does not have any personal interest in any business arrangements involving the Company. Ms Angeline Lim does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. ZALYFFAH BINTI JIMAN Aged 45, Malaysian, Female Senior Manager – Group Audit & Risk Ms Zalyffah has been with the Company since November 2001. She was the Internal Auditor for the Company and was re-designated to Senior Manager of Group Compliance & Custodian in 2015. She heads the Group Audit & Risk with effect from September 2017. She holds a Bachelor’s Degree in Accounting (Hons) from Universiti Utara Malaysia and is a member of the Malaysian Institute of Accountants and Institute of Internal Auditors Malaysia. To date, she has accumulated 21 years of professional experience in audit with various public-listed companies involved in financial service, insurance and stock broking. Ms Zalyffah has no family ties with any of the Directors and/or major shareholders of the Company nor any shareholding in the Company. Ms Zalyffah does not have any personal interest in any business arrangements involving the Company. Ms Zalyffah does not have any conflict of interest with the Company and has had no conviction for any offences within the past five (5) years, other than traffic offences, if any, and no public sanction or penalty imposed by the relevant regulatory bodies during the financial year. ANNUAL REPORT 2018 Sustainable And Value Investing | 015
17. CORPORATE INFORMATION BOARD OF DIRECTORS PRINCIPAL PLACE OF BUSINESS Tunku Dato ’ Yaacob Khyra (Chairman) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah Mr Yeo Took Keat Dato’ Narendrakumar Jasani A/L Chunilal Rugnath Mr Onn Kien Hoe Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan Datin Seri Raihanah Begum binti Abdul Rahman 13th Floor, No. 566, Jalan Ipoh 51200 Kuala Lumpur Telephone No. : 03 6256 8000 Facsimile No. : 03 6251 0373 AUDIT & GOVERNANCE COMMITTEE Mr Onn Kien Hoe (Chairman) Dato’ Narendrakumar Jasani A/L Chunilal Rugnath Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan Datin Seri Raihanah Begum binti Abdul Rahman REGISTERED OFFICE Suite 11.05, 11th Floor No. 566, Jalan Ipoh 51200 Kuala Lumpur Telephone No. : 03 6252 8880 Facsimile No. : 03 6252 8080 SHARE REGISTRAR RISK & SUSTAINABILITY COMMITTEE Dato’ Narendrakumar Jasani A/L Chunilal Rugnath (Chairman) Mr Onn Kien Hoe Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan Datin Seri Raihanah Begum binti Abdul Rahman TRACE MANAGEMENT SERVICES SDN BHD Suite 11.05, 11th Floor No. 566, Jalan Ipoh 51200 Kuala Lumpur Telephone No. : 03 6252 8880 Facsimile No. : 03 6252 8080 NOMINATION & REMUNERATION COMMITTEE Dato’ Narendrakumar Jasani A/L Chunilal Rugnath (Chairman) Mr Onn Kien Hoe Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan Datin Seri Raihanah Begum binti Abdul Rahman SECRETARY Ms Lily Yin Kam May (MAICSA No. 0878038) AUDITORS Messrs PricewaterhouseCoopers PLT LLP0014401-LCA & AF 1146 Chartered Accountants 016 | Sustainable And Value Investing ANNUAL REPORT 2018
18. CORPORATE INFORMATION (continued) CORPORATE 100% MAA ADVISORY SDN BHD 99% MAA GENERAL ASSURANCE PHILIPPINES, INC INTERNATIONAL 100% MAA INVESTMENTS LTD 100% MAA MUTUALIFE PHILIPPINES, INC 100% MAA HOLDINGS (BVI) LTD 100% INTERNATIONAL 100% MAA GROUP LTD 100% MAA-MEDICARE SDN BHD MAA CORPORATION MAA GROUP BERHAD 100% SDN BHD * MAA CAPITAL SINGAPORE PTE LTD 100% MAA CREDIT BERHAD 100% MENANG BERNAS SDN BHD 100% MAAXSITE SDN BHD 100% MAAXCLUB SDN BHD 20% 100% MAAX VENTURE SDN BHD KASTURI ACADEMIA 100% SDN BHD 20% MAA BANCWELL TRUSTEE BERHAD 100% INDOPELANGI SDN BHD 9% * Formerly known as Columbus Capital Singapore Pte Ltd before 2 January 2019 ANNUAL REPORT 2018 Sustainable And Value Investing | 017
19. OVERSEAS OPERATIONS Dagupan , Philippines San Fernando, Pampanga, Philippines Bulacan, Philippines Makati, Philippines Cavite, Philippines Batangas, Philippines Puerto Princesa, Palawan Manila, Philippines Iloilo, Philippines Bacolod, Philippines Cebu, Philippines Cagayan de Oro, Philippines Davao, Philippines General Santos, Philippines 018 | Sustainable And Value Investing ANNUAL REPORT 2018
20. NOTICE OF TWENTY FIRST ANNUAL GENERAL MEETING Incorporated in Malaysia NOTICE IS HEREBY GIVEN that the 21ST ANNUAL GENERAL MEETING of the Company will be held at the Crystal Function Room , 4th Floor, Mutiara Complex, 3 ½ Miles, Jalan Ipoh, 51200 Kuala Lumpur on Wednesday, 29 May 2019 at 10.30 a.m. for the following purposes: AS ORDINARY BUSINESS Resolution (1) To receive the Audited Financial Statements for the year ended 31 December 2018 together with the Reports of the Directors and the Auditors thereon. [Please refer to Explanatory Note A] (2) To approve the payment of Directors’ fees of RM408,000.00 for the period from 1 July 2019 to 30 June 2020 to be payable quarterly in arrears to the Non-Executive Directors of the Company and its subsidiary. 1 (3) To approve an amount of up to RM245,000.00 as benefits payable to the Non-Executive Directors of the Company and its subsidiary for the period from 1 July 2019 until 30 June 2020. [Please refer to Explanatory Note B] 2 (4) To re-elect the following Directors who are retiring in accordance with Article 113(1) of the Company’s Articles of Association and who, being eligible, offer themselves for re-election: (i) (ii) (5) 3 4 Dato’ Narendrakumar Jasani A/L Chunilal Rugnath Onn Kien Hoe To re-appoint Messrs. PricewaterhouseCoopers PLT as Auditors of the Company and to authorise the Directors to fix their remuneration. 5 AS SPECIAL BUSINESS (6) To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions:- (a) Proposed Renewal of Share Buy-Back Authority 6 “THAT subject to compliance with Section 127 of the Companies Act 2016 (“the Act”), the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and any prevailing laws, rules, regulations, orders, guidelines and requirements issued by any relevant authority, the Company be and is hereby unconditionally and generally authorised to purchase and hold such amount of shares in the Company (“Proposed Renewal of Share Buy-Back Authority”) as may be determined by the Directors of the Company from time-to-time through the Bursa Securities upon such terms and conditions as the Directors may deem fit in the interest of the Company provided that the aggregate number of shares to be purchased pursuant to this resolution does not exceed ten percent (10%) of the total number of issued shares of the Company and that an amount not exceeding the Company’s total audited retained profits of RM128,174,432.00 as at 31 December 2018 would be allocated by the Company for the Proposed Renewal of Share Buy-Back Authority. AND THAT such authority shall commence immediately upon passing of this Ordinary Resolution and will expire at the conclusion of the next Annual General Meeting (“AGM”) of the Company unless earlier revoked or varied by Ordinary Resolution of shareholders of the Company in a general meeting or upon the expiration of the period within which the next AGM is required by law to be held whichever is earlier but not so as to prejudice the completion of purchase(s) made by the Company before the aforesaid expiry date. AND THAT the Directors be and are hereby authorised to take all steps necessary to implement, finalise and to give full effect to the Proposed Renewal of Share Buy-Back Authority and further THAT authority be and is hereby given to the Directors to decide in their absolute discretion to either retain the shares so purchased as treasury shares or cancel them or both.” ANNUAL REPORT 2018 Sustainable And Value Investing | 019
21. NOTICE OF TWENTY FIRST ANNUAL GENERAL MEETING (continued) Resolution (b) Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature 7 "THAT the mandate granted by the shareholders of the Company on 5 June 2018 pursuant to Paragraph 10.09 of the Listing Requirements of Bursa Securities, authorising the Company and its subsidiaries ("the MAAG Group") to enter into the recurrent related party transactions of a revenue or trading nature which are necessary for the MAAG Group's day-to-day operations as set out in Section 3.3 of Part B of the Circular to Shareholders dated 30 April 2019 ("the Circular") with the related parties mentioned therein, be and is hereby renewed, provided that :- (a) the transactions are in the ordinary course of business and are on terms which are not more favourable to the related parties than those generally available to the public and on terms not to the detriment of the minority shareholders of the Company; and (b) the transactions are made at arm’s length and on normal commercial terms. AND THAT, authority conferred by such renewed and granted mandate shall continue to be in force (unless revoked or varied by the Company in general meeting), until : (a) the conclusion of the next AGM of the Company following the forthcoming AGM at which time it will lapse, unless by a resolution passed at that meeting or Extraordinary General Meeting whereby the authority is renewed; or (b) the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 340(2) of the Act but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act; or (c) revoked or varied by resolution passed by the shareholders in general meeting; whichever is the earliest. AND THAT the Directors of the Company be authorised to complete and do all such acts and things (including executing such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.” (c) Authority to Issue and Allot Shares Pursuant to Sections 75 and 76 of the Act 8 “THAT, subject always to the Act, the Articles of Association of the Company and the approvals of the relevant governmental/regulatory authorities, where such approval is necessary, the Directors be and are hereby authorised pursuant to Sections 75 and 76 of the Act, to issue and allot shares in the Company at any time until the conclusion of the next AGM, and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares to be issued does not exceed ten percent (10%) of the total number of issued shares of the Company for the time being and that the Directors be and are also empowered to obtain the approval from Bursa Securities for the listing of and quotation for the additional shares so issued.” (7) To consider and, if thought fit, to pass the following resolution as Special Resolution:- (a) Proposed Adoption of new Constitution of the Company (“Proposed Adoption”) 9 “THAT the Company’s existing Memorandum and Articles of Association be deleted in its entirety and that the new Constitution as set out in the Circular to Shareholders dated 30 April 2019 be and is hereby adopted as the new Constitution of the Company. AND THAT the Directors of the Company be and are hereby authorised to do all such acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Adoption with full powers to assent to any conditions, modifications and/or amendments as may be required by any relevant authorities to give effect to the Proposed Adoption.” BY ORDER OF THE BOARD LILY YIN KAM MAY (MAICSA NO. 0878038) Company Secretary Kuala Lumpur 30 April 2019 020 | Sustainable And Value Investing ANNUAL REPORT 2018
22. NOTICE OF TWENTY FIRST ANNUAL GENERAL MEETING (continued) NOTES: 1. Applicable to shares held through a nominee account. 2. A member entitled to attend, speak and vote at a meeting of the Company is entitled to appoint more than one (1) proxy to attend, speak and vote in his/her stead. A proxy may but need not be a member of the Company. 3. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/ her shareholdings to be presented by each proxy. 4. Where a member is an Exempt Authorised Nominee which holds shares in the Company for multiple beneficial owners in one securities account (“omnibus account”) as defined under the Securities Industry (Central Depositories) Act, 1991, there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds. 5. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing, and in the case of a corporation, either under seal or under hand of an officer or attorney duly authorised. 6. The instrument appointing a proxy must be deposited at the Company’s Registered Office, Suite 11.05, 11th Floor, No. 566, Jalan Ipoh, 51200 Kuala Lumpur, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. 7. Any alteration in the form of proxy must be initialled. 8. Form of Proxy sent through facsimile transmission shall not be accepted. 9. For the purpose of determining a member who shall be entitled to attend this 21st AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 79(a), 79(b) and 79(c) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 23 May 2019. Only a depositor whose name appears on the Record of Depositors as at 23 May 2019 shall be entitled to attend, speak and vote at the said meeting or appoint proxy(ies) to attend, speak and/or vote on his/her behalf. 10. Explanatory Notes to Ordinary Business: (A) Audited Financial Statements This Agenda item is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act 2016 does not require a formal approval of the shareholders and hence, is not put forward for voting. (B) Benefits Payable to Non-Executive Directors (Resolution 2) Section 230(1) of the Companies Act 2016 provides amongst others that the fees of the Directors and any benefits payable to the Directors of a listed company and its subsidiaries shall be approved at a general meeting. The proposed Resolution 2 is to seek shareholders’ approval for payment of Directors’ Benefits (excluding Directors’ fees) to the Non-Executive Directors for the period from 1 July 2019 until 30 June 2020. The benefits comprises the meeting allowances, benefits in kind and other emoluments payable to the Non-Executive Directors of the Company and its subsidiary, namely MAA International Group Ltd (“MAAIG”). In determining the estimated total amount of remuneration (excluding directors’ fees) for the Non-Executive Directors of the Company and its subsidiary, MAAIG, the Board considered various factors including the number of scheduled meetings for the Board and Board Committees as well as the number of Non-Executive Directors involved in these meetings. The Board is of the view that it is just and equitable for the Non-Executive Directors to be paid the directors’ remuneration (excluding directors’ fees) as and when incurred, particularly after they have discharged their responsibilities and rendered their services to the Company and its subsidiary throughout the relevant period. 11. Explanatory Notes to Special Business: (A) Proposed Renewal of Share Buy-Back Authority (Resolution 6) The Proposed Resolution 6, if passed, would empower the Directors to exercise the power of the Company to purchase its own shares (“the Proposal”) by utilising its financial resources not immediately required. The Proposal may have a positive impact on the market price of the Company’s shares. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company. (B) Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (Resolution 7) The Proposed Resolution 7, if passed, will empower the Company to conduct recurrent related party transactions of a revenue or trading nature which are necessary for the Group’s day-to-day operations, and will eliminate the need to convene separate general meetings from time to time to seek shareholders’ approval. This will substantially reduce administrative time, inconvenience and expenses associated with the convening of such meetings, without compromising the corporate objectives of the Group or adversely affecting the business opportunities available to the Group. ANNUAL REPORT 2018 Sustainable And Value Investing | 021
23. NOTICE OF TWENTY FIRST ANNUAL GENERAL MEETING (continued) (C) Authority to Issue and Allot Shares Pursuant to Sections 75 and 76 of the Act (Resolution 8) The Ordinary Resolution proposed under Resolution 8 of the Agenda is a renewal of the General Mandate for the Directors to issue and allot shares pursuant to Sections 75 and 76 of the Act. This mandate will provide flexibility for the Company to undertake future possible fund raising activities, including but not limited to placement of shares for purpose of funding the Company’s future investment projects, working capital and/or acquisition(s) without having to convene another general meeting. The Proposed Resolution 8, if passed, will give authority to the Directors of the Company, from the date of the above AGM, to issue and allot shares in the Company up to an amount not exceeding in total ten percent (10%) of the total number of issued shares of the Company for the time being, for such purposes as they consider would be in the interest of the Company. This authority, unless revoked or varied by the Company at a general meeting, will expire at the conclusion of the next AGM of the Company. As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the 20th AGM held on 5 June 2018 and which will lapse at the conclusion of the 21st AGM to be held on 29 May 2019. (D) Proposed Adoption of new Constitution of the Company (Resolution 9) The Special Resolution proposed under Resolution 9, if passed, shall streamline the Constitution of the Company to be aligned with the new Companies Act 2016 which came into force on 31 January 2017, the updated provision of the Listing Requirements of Bursa Malaysia Securities Berhad, and prevailing statutory and regulatory requirements as well as to render clarity and consistency throughout; details of which are as set out in the Circular to Shareholders dated 30 April 2019. 12. Poll Voting All the Resolutions mentioned above will be put to vote by Poll. The detailed information on Special Business of Agenda 6 except for Ordinary Resolution 8 as mentioned above is set out in the Circular to Shareholders of the Company dated 30 April 2019 which is despatched together with the Company’s 2018 Annual Report. PERSONAL DATA POLICY By submitting an instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company (i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the AGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (including any adjournment thereof) and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the Purposes and (iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING Pursuant to Paragraph 8.27(2) of the Listing Requirements of Bursa Securities, the details of the Directors who are seeking for re-election or re-appointment in Agenda 4 of the Notice of the 21st AGM of the Company are set out in the Directors’ Profile on pages 008 and 009 of this Annual Report. The detailed information relating to general mandate for issue of securities pursuant to Paragraph 6.03(3) of the Listing Requirements of Bursa Securities are set out under Note C of the Notice of the 21st AGM of the Company. 022 | Sustainable And Value Investing ANNUAL REPORT 2018
24. PERUTUSAN PENGERUSI Pemegang Saham Yang Dihargai , Bagi pihak Lembaga Pengarah, saya dengan sukacitanya membentangkan Laporan Tahunan Kumpulan bagi tahun berakhir 31 Disember 2018. TUNKU DATO’ YAACOB KHYRA Pengerusi Eksekutif ANNUAL REPORT 2018 Sustainable And Value Investing | 023
25. PERUTUSAN PENGERUSI (bersambung) PERSEKITARAN OPERASI Ekonomi global terus berkembang tetapi pada kadar sederhana dengan unjuran pertumbuhan Keluaran Dalam Negara Kasar (“KDNK”) 3.1% pada S4 2018 (S4 2017: 3.7%). Di negara-negara maju, pasaran buruh menyokong tahap penggunaan swasta dengan kadar pengangguran lebih rendah dan pertumbuhan upah yang lebih tinggi. Di rantau Asia, pertumbuhan ekonomi secara umumnya lebih rendah, walaupun permintaan domestik kekal kukuh atas sokongan dasar yang berterusan. Ekonomi Malaysia mencatatkan pertumbuhan lebih perlahan sebanyak 4.7% pada S4 2018 (S4 2017: 5.9%), ini disokong oleh peningkatan permintaan domestik yang didorong oleh perbelanjaan swasta dalam suasana pertumbuhan eksport bersih yang kian merosot, dan ketidakstabilan harga komoditi tertentu seperti minyak dan minyak sawit mentah. Pada tahun yang dilaporkan, Kumpulan telah memberi tumpuan terhadap usaha mengembangkan perniagaan operasi dan pada masa yang sama, telah menyempurnakan beberapa cadangan korporat seperti yang dinyatakan pada bahagian seterusnya. PERKEMBANGAN TERKINI CADANGAN KORPORAT Kumpulan juga dengan sukacitanya membentangkan laporan berikut bagi cadangan korporat penting yang dilaksanakan pada tahun yang dilaporkan: (a)Mengenai status PN17 Syarikat, Bursa Malaysia Securities Berhad (“Bursa Securities”) menerusi surat bertarikh 30 Oktober 2018, memberi Syarikat lanjutan masa sehingga 30 April 2019 untuk mengemukakan rancangan penyusunan semula kepada pihak berkuasa kawal selia. (b)Pada 5 Jun 2018, para pemegang saham Syarikat telah meluluskan cadangan perubahan ke atas penggunaan baki hasil pelupusan seluruh 75% kepentingan ekuiti dalam MAA Takaful Berhad, dimana RM71.9 juta akan diubah peruntukkannya daripada penggunaan asal untuk peluang/ prospektif pelaburan di masa hadapan yang diperuntukkan kepada penggunaan bagi modal kerja, proses pembelian balik saham dan pembayaran dividen kepada pemegang saham. (c)Pada 29 Ogos 2018, Syarikat menerusi anak syarikat milik penuhnya, MAA Corporation Sdn Bhd (“MAA Corp”) menubuhkan sebuah syarikat yang dinamakan MAAX Venture Sdn Bhd (“MAAX Venture”) dengan modal berbayar RM2.00 yang terdiri daripada dua (2) saham biasa pada harga terbitan RM1.00 sesaham. Kegiatan utama MAAX Venture adalah menjalankan perniagaan pembiayaan setara (P2P). Modal berbayar MAAX Venture seterusnya ditambah kepada RM5 juta untuk mematuhi keperluan modal minimum Suruhanjaya Sekuriti Malaysia (“SC”) bagi sebuah syarikat P2P. Pada 6 September 2018, MAAX Venture mengemukakan permohonan kepada SC untuk mendapat kelulusan menjalankan perniagaan pembiayaan P2P. Permohonan tersebut masih dalam pertimbangan SC. 024 | Sustainable And Value Investing (d)Pada 30 Ogos 2018, Syarikat menerusi anak syarikat milik penuhnya, MAA International Corporation Ltd (“MAAIC”) memulakan penggulungan sukarela anggota menurut Seksyen 439(1)(b) Akta Syarikat 2016 dengan pelantikan Tetuan Mok Chew Yin dan Ong Hock An daripada BDO Consulting Sdn Bhd sebagai penyelesai. Dengan melepaskan kawalan dan penglibatan Kumpulan dalam hal ehwal operasi dan kewangan MAAIC kepada penyelesai, MAAIC kini tidak lagi menjadi anak syarikat Kumpulan pada 30 Ogos 2018 dan telah dikeluarkan daripada akaun disatukan kumpulan pada tarikh tersebut. (e)Pada 5 Disember 2018, Syarikat menerusi anak syarikat milik penuhnya, Keris Murni Sdn Bhd (“KMSB”), Genting Mutiara Sdn Bhd (“GMSB”), Jaguh Suria Sdn Bhd (“JSSB”) dan Pelangi Tegas Sdn Bhd (“PTSB”) yang diletakkan di bawah penggulungan sukarela ahli pada 30 Ogos 2017 telah dibubarkan selepas tamat tempoh tiga (3) bulan dari tarikh penyerahan dokumen oleh penyelesai berhubung dengan mesyuarat akhir dengan Suruhanjaya Syarikat Malaysia pada 5 September 2018, menurut Seksyen 459(5) Akta Syarikat 2016. Pembubaran KMSB, GMSB, JSSB dan PTSB tidak mempunyai kesan kewangan pada tahun yang dilaporkan kerana Syarikat tersebut telah dipisahkan daripada Kumpulan pada 30 Ogos 2017. (f)Pada 10 Disember 2018, Syarikat menerusi anak syarikat milik penuhnya, Columbus Capital Singapore Pte Ltd (“CCS”) telah memeterai Perjanjian Jualan Saham dengan Consortia Group Holdings Pty Limited (“Consortia”) untuk melupuskan keseluruhan 24,336,000 saham bersamaan kepentingan ekuiti 47.95% yang dipegang dalam syarikat bersekutu, Columbus Capital Pty Limited (“CCA”) untuk pertimbangan tunai berjumlah AUD21.0 juta. Pelupusan CCA disempurnakan pada 27 Disember 2018. TINJAUAN KEPUTUSAN Pada 2018, Kumpulan mencatatkan Rugi Sebelum Cukai berjumlah RM24.4 juta (2017: Untung Sebelum Cukai RM28.6 juta). Perniagaan Insurans Am yang dipegang menerusi MAA General Assurance Philippines, Inc (“MAAGAP”) menyumbangkan Untung Sebelum Cukai sebanyak RM14.9 juta, sebuah perniagaan Pinjaman Gadai Janji Runcit yang dipegang menerusi CCA menyumbangkan Untung Selepas Cukai sebanyak RM4.7 juta sebelum pelupusannya manakala perniagaan Perkhidmatan Pendidikan yang dipegang menerusi Kasturi Academia Sdn Bhd dan Indopelangi Sdn Bhd (“Kasturi”) menyumbangkan Untung Sebelum Cukai kecil berjumlah RM22,000. Bagaimanapun, keuntungan ini diimbangi oleh kerugian sebelum cukai berjumlah RM42.2 juta yang dicatatkan oleh segmen Pegangan Pelaburan. ANNUAL REPORT 2018
26. PERUTUSAN PENGERUSI (bersambung) Kerugian oleh segmen Pegangan Pelaburan timbul terutamanya daripada: (a)Kerugian nilai saksama bersih RM24.5 juta daripada aset kewangan yang diklasifikasikan pada nilai saksama menerusi untung atau rugi (“FVTPL”) selepas penggunaan piawaian perakaunan baharu - MFRS 9 ‘Financial Instruments’ berkuat kuasa 1 Januari 2018. Aset kewangan yang terbabit terdiri daripada pelaburan ekuiti. Kerugian nilai saksama disebabkan oleh kemerosotan ketara pasaran saham di seluruh rantau Asia pada tahun yang dilaporkan, (b)Kerugian nilai saksama RM2.8 juta daripada penilaian semula pelaburan hartanah, dan (c) Pemindahan perbezaan terjemahan mata wang asing terkumpul berjumlah RM9.0 juta daripada rizab mata wang asing kepada untung rugi selepas pelupusan CCA. Untung sebelum cukai 2017 disumbangkan terutamanya oleh : (a)Pendapatan lain yang timbul daripada penyelesaian hutang menerusi akaun belum terima lain berjumlah RM20.0 juta, (b) Rizab yang timbul daripada penggabungan perniagaan berjumlah RM10.0 juta berkaitan dengan MAAGAP, (c) Sumbangan untung sebanyak RM12.1 juta daripada perniagaan Insurans Am yang dipegang oleh MAAGAP, (d)Pelarasan RM1.8 juta untuk mengurangkan caj nilai kini ke atas baki pertimbangan jualan RM93.75 juta (“Pertimbangan Tertahan”) daripada pelupusan MAA Takaful Berhad yang perlu dibayar kepada Syarikat pada 30 Jun 2019, dan (e)Sumbangan untung daripada syarikat bersekutu Kumpulan, CCA dengan bahagian untung selepas cukai berjumlah RM6.1 juta. Maklumat mengenai perniagaan, operasi dan prestasi kewangan Kumpulan pada tahun yang dilaporkan dibincangkan secara berasingan dalam Penyata Perbincangan dan Analisis Pengurusan dalam halaman yang dilampirkan. DIVIDEN Syarikat terus membayar dividen sebagai ganjaran kepada pemegang saham atas sokongan mereka. Pada tahun yang dilaporkan, Syarikat membayar dividen interim 3.0 sen (2017: 9.0 sen) sesaham biasa di bawah sistem dividen satu peringkat. Lembaga Pengarah menyedari keutamaan perlu diberikan kepada peruntukan tunai untuk pemerolehan perniagaan baharu pada masa depan bagi melaksanakan rancangan penyusunan semula PN17 Syarikat, yang menyebabkan pembayaran dividen interim lebih rendah pada 2018. PROSPEK BAGI 2019 Dibayangi tanda-tanda pertumbuhan ekonomi yang semakin perlahan akibat ketegangan dagangan antara Amerika Syarikat dan China, prestasi ekonomi kurang baik di negara-negara Zon Eropah, ketidakpastian pasca Brexit dan tahap kecairan lebih ketat serta aliran modal keluar dari pasaran sedang membangun, Dana Wang Antarabangsa telah mengurangkan unjuran KDNK global bagi 2019 kepada 3.5%, lebih rendah daripada ramalan 3.9% sebelum ini. Dalam pada itu, Bank Negara Malaysia meramalkan ekonomi Malaysia akan mengekalkan tahap pertumbuhan sederhana pada 2019. Permintaan sektor swasta dijangka menjadi pendorong utama pertumbuhan di tengah-tengah kemerosotan perbelanjaan kerajaan, kejatuhan pelaburan awam dan swasta serta ketidakstabilan pasaran komoditi. Meninjau ke 2019, Syarikat akan meneruskan usaha untuk mengenal pasti perniagaan baharu yang bersesuaian dan berkeupayaan untuk menghasilkan untung yang mampan untuk diambil alih, bagi menangani dan menyempurnakan rancangan penyusunan semula PN17, tertakluk kepada kelulusan Bursa Securities, pihak berkuasa kawal selia yang lain dan pemegang saham jika diperlukan. Pada masa yang sama, Kumpulan akan meneruskan tumpuan untuk merangka strategi serta mengembangkan dan meningkatkan prestasi kewangan perniagaan operasi sedia ada dalam persekitaran ekonomi yang semakin mencabar di dalam dan luar negara. PENGIKTIRAFAN DAN PENGHARGAAN Bagi pihak Lembaga Pengarah, saya ingin mengucapkan ribuan terima kasih kepada pihak Pengurusan dan Kakitangan atas komitmen, dedikasi dan sumbangan mereka kepada Kumpulan. Saya juga ingin mengambil kesempatan ini untuk merakamkan setinggi-tinggi penghargaan kami kepada rakan perniagaan, pelanggan dan pemegang saham yang dihargai atas sokongan, keyakinan dan kepercayaan berterusan yang diberikan kepada kami. Akhir sekali, saya ingin mengucapkan terima kasih kepada rakan-rakan seperjuangan saya dalam Lembaga Pengarah atas kepimpinan dan sumbangan mereka kepada Kumpulan. Tunku Dato’ Yaacob Khyra Pengerusi Eksekutif TANGGUNGJAWAB SOSIAL KORPORAT Seperti usaha murni pada tahun-tahun sebelumnya, Kumpulan menunaikan tanggungjawab sosial korporat menerusi MAA Medicare Charitable Foundation dan juga memberikan sokongan kepada The Budimas Charitable Foundation. ANNUAL REPORT 2018 Sustainable And Value Investing | 025
27. CHAIRMAN ’S MESSAGE Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report of the Group for the year ended 31 December 2018. TUNKU DATO’ YAACOB KHYRA Executive Chairman 026 | Sustainable And Value Investing ANNUAL REPORT 2018
28. CHAIRMAN ’S MESSAGE (continued) OPERATING ENVIRONMENT The global economy continued to expand but at a moderate pace with a Gross Domestic Product (“GDP”) estimate growth of 3.1% in Q4 2018 (Q4 2017: 3.7%). In the advanced economies, labour markets supported private consumption with declining unemployment rates and higher wage growth. In the Asian region, economic growth trended lower, although domestic demand has remained resilient by on-going policy support. (d) On 30 August 2018, the Company’s wholly-owned subsubsidiary, MAA International Corporation Ltd (“MAAIC”) has commenced members’ voluntary winding up pursuant to Section 439(1)(b) of the Companies Act 2016, with the appointment of Messrs Mok Chew Yin and Ong Hock An of BDO Consulting Sdn Bhd as the liquidators. The Malaysian economy recorded a slower growth of 4.7% in Q4 2018 (Q4 2017: 5.9%), supported by an expansion in domestic demand driven by private sector spending amid declining net exports growth, and volatility in certain commodity prices like oil and crude palm oil. In the year under review, the Group focused its efforts to grow its operating businesses and at the same time, had completed several corporate proposals as mentioned in the next section. UPDATES ON CORPORATE PROPOSALS The Group is pleased to provide the following report for significant corporate proposals carried out during the year: (a)On the PN17 status of the Company, Bursa Malaysia Securities Berhad (“Bursa Securities”) has vide its letter dated 30 October 2018, granted the Company an extension of time of up to 30 April 2019 to submit the regularisation plan to the regulatory authorities. (b)On 5 June 2018, shareholders of the Company approved the proposed variations to the utilisation of balance proceeds from the disposal of its entire 75% equity interest in MAA Takaful Berhad, where an amount of RM71.9 million will be allocated from the initial utilisation for future investment opportunities/ prospective new business to be acquired to the revised utilisation for working capital, share buy-back exercise and payment of dividends to the shareholders. (c)On 29 August 2018, the Company’s wholly-owned subsidiary, MAA Corporation Sdn Bhd (“MAA Corp”) has incorporated a company by the name of MAAX Venture Sdn Bhd (“MAAX Venture”) with paid-up capital of RM2.00 consist of two (2) ordinary shares with issue price of RM1.00 each. The intended principal activity of MAAX Venture is to carry on peer to peer (“P2P”) financing business. The paid-up capital of MAAX Venture was subsequently increased to RM5 million to comply with the minimum capital requirement of Securities Commission Malaysia (“SC”) for P2P company. On 6 September 2018, MAAX Venture has submitted an application to SC for approval to operate the P2P financing business. The said application is still being reviewed by SC. ANNUAL REPORT 2018 With the relinquishment of the Group’s control and involvement in the operation and financial matters of MAAIC to the liquidators, MAAIC ceased to be a subsidiary of the Group on 30 August 2018 and has been deconsolidated from the group consolidated accounts on that date. (e)On 5 December 2018, the Company’s wholly owned subsubsidiaries, Keris Murni Sdn Bhd (“KMSB”), Genting Mutiara Sdn Bhd (“GMSB”), Jaguh Suria Sdn Bhd (“JSSB”) and Pelangi Tegas Sdn Bhd (“PTSB”) which were placed under members’ voluntary winding up on 30 August 2017 were dissolved after the expiration of three (3) months from the date of lodgement of the return by the liquidators relating to the final meeting with the Companies Commission of Malaysia on 5 September 2018, pursuant to Section 459(5) of the Companies Act 2016. The dissolution of KMSB, GMSB, JSSB and PTSB has no financial effect for the year under review as they had been deconsolidated from the Group on 30 August 2017. (f) On 10 December 2018, the Company’s wholly-owned subsubsidiary, Columbus Capital Singapore Pte Ltd (“CCS”) has entered into a Share Sale Agreement with Consortia Group Holdings Pty Limited (“Consortia”) to dispose of all the 24,336,000 shares equivalent to 47.95% equity interest held in associated company, Columbus Capital Pty Limited (“CCA”) for a total cash consideration of AUD21.0 million. The disposal of CCA was completed on 27 December 2018. OVERVIEW OF RESULTS In 2018, the Group recorded a Loss before taxation (“LBT”) of RM24.4 million (2017: Profit before taxation (“PBT”) of RM28.6 million). The General Insurance business held via MAA General Assurance Philippines, Inc (“MAAGAP”) contributed a PBT of RM14.9 million, the Retail Mortgage Lending business held via CCA contributed a share of Profit after taxation (“PAT”) of RM4.7 million before its disposal and the Education Services business held via Kasturi Academia Sdn Bhd and Indopelangi Sdn Bhd (“Kasturi”) contributed a small PBT of RM22,000. However, these profits were offset by the LBT of RM42.2 million recorded by the Investment Holdings segment. Sustainable And Value Investing | 027
29. CHAIRMAN ’S MESSAGE (continued) The loss by the Investment Holdings segment arose mainly from: PROSPECTS FOR 2019 (a)Net fair value loss of RM24.5 million from financial assets classified at fair value through profit or loss (“FVTPL”) following the adoption of new accounting standard - MFRS 9 ‘Financial Instruments’ effective from 1 January 2018. The financial assets concerned consist of equity investments. The fair value loss was caused by sharp decline in stock market across the Asia region during the year, Given the signs of economic slowdown affected by the trade tensions between US and China, the weaker economic performances by Eurozone countries, post-Brexit uncertainties and the tighter liquidity and capital outflows in the emerging markets, the International Monetary Fund (“IMF’) has cut its global GDP forecast for 2019 to 3.5%, down from the previously projected 3.9%. (b)Fair value loss of RM2.8 million from revaluation of investment properties, and Going forward, Bank Negara Malaysia expects the Malaysian economy to maintain moderate growth in 2019. Private sector demand is expected to remain the main driver of growth amid the government’s declining expenditure, lower public and private investments and volatility in the commodity markets. (c)Transfer of the cumulative foreign currency translation difference of RM9.0 million from foreign exchange reserve to profit of loss upon the disposal of CCA The PBT in 2017 was contributed mainly by: (a) Other income arising from loan settlement with other receivable of RM20.0 million, (b)Reserve arising from business combination of RM10.0 million related to MAAGAP, Moving into 2019, the Company will continue with its quest to identify new business(es) with the right fit and sustainable profit generating capabilities for acquisition, to address and complete the PN17 regularisation plan, subject to the approval of Bursa Securities, other regulators and if any the shareholders. At the same time, the Group will also continue its focus to strategise, grow and improve the financial performance of the existing operating businesses, in light of the increasing challenging economic environment locally and overseas. (c)Profit contribution of RM12.1 million from the General Insurance business held via MAAGAP, ACKNOWLEDGEMENT AND APPRECIATION (d)An adjustment of RM1.8 million to reduce the present value charge to the balance sale consideration of RM93.75 million (“Retained Consideration”) from the disposal of MAA Takaful Berhad which is payable to the Company on 30 June 2019, and On behalf of the Board, I would like to thank the Management team and Staff for their commitment, dedication and contributions to the Group. (e)Profit contribution from the Group’s associated company, CCA with total share of PAT of RM6.1 million. I would also like to take this opportunity to extend our appreciation to our valued business associates, valued customers and the shareholders for the continued invaluable support, confidence and trust they have placed in us. Details of the Group’s business, operations and financial performance during the year are discussed separately in the Management Discussion and Analysis Statement in the attached pages. Finally, I would like to thank my fellow Board members for their stewardship and contributions to the Group. DIVIDENDS The Company continues to pay dividends to remunerate the shareholders for their support. During the year, the Company has paid interim dividends of 3.0 sen (2017: 9.0 sen) per ordinary share under the single-tier dividend system. The Board of Directors recognises the priority to conserve cash readily for acquisition of future new business(es) to address the PN17 regularisation plan of the Company, thus the lower interim dividends payment in 2018. Tunku Dato’ Yaacob Khyra Executive Chairman CORPORATE SOCIAL RESPONSIBILITY Continuing from previous years, the Group discharges its corporate social responsibilities through MAA Medicare Charitable Foundation and also its support for The Budimas Charitable Foundation. 028 | Sustainable And Value Investing ANNUAL REPORT 2018
30. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 OVERVIEW OF THE GROUP’S BUSINESS OPERATIONS MAAG is listed on the Main Board of Bursa Malaysia Securities Berhad (“Bursa Securities”) with market capitalisation and total assets under management of RM135.4 million and RM756.9 million respectively as at end December 2018. MAAG has remained an investment holdings company. The Group’s significant business segments are general insurance via subsidiary MAA General Assurance Philippines, Inc. (“MAAGAP”) in the Philippines, education services via subsidiaries Kasturi Academia Sdn Bhd and Indopelangi Sdn Bhd (collectively “Kasturi”), and retail mortgage lending via associated company Columbus Capital Pty Limited (“CCA”) in Australia before its disposal on 27 December 2018. The other non-core business activities of the Group comprise of property management, consultancy services, hire purchase, leasing and other credit facilities. GROUP’S STRATEGIC DIRECTION • In 2018, MAAG has undertaken the following internal corporate restructuring: - Incorporated a new subsidiary, MAAX Venture Sdn Bhd (“MAAX Venture”) with an initial paid-up capital of RM2.00 on 29 August 2018. The intended principal activity of MAAX Venture is to carry on peer to peer (”P2P”) financing business. MAAX Venture’s paid-up capital was subsequently increased to RM5.0 million to comply with the minimum capital requirement of Securities Commission Malaysia (“SC”) for the application to operate the P2P financing business. To date, the said application is still being reviewed by SC. - Appointed liquidators to commence the members’ voluntary winding up of in-active subsidiary, MAA International Corporation Ltd (“MAAIC”) on 30 August 2018. With the said appointment and the relinquishment of control over MAAIC to the liquidators, MAAIC has ceased to be a subsidiary of the Group on 30 August 2018. - On 5 December 2018, the appointed liquidators completed the dissolution of in-active subsidiaries, Keris Murni Sdn Bhd, Genting Mutiara Sdn Bhd, Jaguh Suria Sdn Bhd and Pelangi Tegas Sdn Bhd which had commenced members’ voluntary winding up on 30 August 2017. The dissolution of these companies does not have a material effect on the earnings or net assets of MAAG in 2018 as they had already been deconsolidated from the Group on 30 August 2017. - On 27 December 2018, the Group disposed its 47.95% equity interest in associated company, CCA for a total cash consideration of AUD21.0 million, to unlock and realise the value of its investment in CCA at a satisfactory price-to-book ratio of approximately 2.09 times based on CCA’s unaudited net assets as at 30 September 2018. The said sale proceed is intended to be utilised towards future investment opportunities/prospective new businesses of the Group to address the PN17 status of the Company. • In June 2018, shareholders of MAAG approved the proposed variations to the utilisation of balance proceeds from the disposal of its entire 75% equity interest in MAA Takaful Berhad (“MAA Takaful”), where an amount of RM71.9 million will be allocated from the initial utilisation for future investment opportunities/prospective new business to be acquired to the revised utilisation for working capital, share buy-back exercise and payment of dividends to the shareholders. • On the PN17 status of the Company, the exercise to explore and identify new business and investments of the right fit to acquire has taken longer time than anticipated. In this regards, MAAG has assessed and evaluated companies engaged in various industries like manufacturing, retail and trading, oil and gas, green energy, hospitality, education, assisted reproductive technologies, etc. However the valuations demanded by these vendors are largely unattractive to the Company. Nevertheless in discharging its responsibility under the Bursa Securities Listing Requirements, MAAG will continue its efforts to identify new business and investments with reasonable pricing, long term sustainable profits and acceptable risk profile to address PN17 status of the Company. On 30 October 2018, Bursa Securities has granted an extension of time of up to 30 April 2019 for MAAG to submit a regularisation plan. Further announcement on the development of this matter will be made in due course. ANNUAL REPORT 2018 Sustainable And Value Investing | 029
31. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) REVIEW OF THE GROUP’S FINANCIAL PERFORMANCE AND CONDITION GROUP (Amount in RM’000) FY2018 FY2017 Total Operating Revenue 169,241 119,024 (Loss)/profit Before Taxation (24,373) 28,628 Total Assets 756,900 778,595 (10.0) 9.2 Dividend Rate (sen) 3.0 9.0 Net Assets Per Share (RM) 1.9 2.0 (Loss)/earnings Per Share (sen) The following analysis of financial performance should be read in conjunction with the audited financial statements of the Group for the financial year ended 31 December 2018. Review of Statements of Profit or Loss of the Group In 2018, the Group recorded a Total Operating Revenue of RM169.2 million (2017: RM119.0 million) with 87.7% comprised of gross earned premiums recorded by the General Insurance business held via MAAGAP. Major composition of Total Operating Revenue is shown below: FY 2018 2% 10% Investment income General insurance gross earned premiums 88% Education tuition fee income FY 2017 4% 13% Investment income General insurance gross earned premiums 83% 030 | Sustainable And Value Investing Education tuition fee income ANNUAL REPORT 2018
32. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) During the financial year under review, the Group recorded a Loss Before Taxation (“LBT”) of RM24.4 million (2017: Profit Before Taxation (“PBT”) of RM28.6 million). The LBT was caused mainly by: • • • Net fair value loss of RM24.5 million on investments mainly equity securities classified at fair value through profit or loss (“FVTPL”), resulted from decline in the local and regional equity markets triggered largely by the US interest rates hike and heightened trade tensions between US and China Fair value loss of RM2.8 million from revaluation of investment properties Transfer of the cumulative foreign currency translation difference of RM9.0 million from reserve to profit or loss upon the disposal of CCA The above losses have out-weighted the following profits: • • • • PBT contribution of RM14.9 million from the General Insurance business held via MAAGAP Profit contribution from the Retail Mortgage Lending business held via associated company, CCA with share of PAT of RM4.7 million before the completion of its disposal on 27 December 2018 A RM4.0 million reduction to the present value charge on the balance consideration of RM93.75 million (“Retained Consideration”) from the disposal of MAA Takaful receivable on 30 June 2019, the third anniversary of the sale completion date A gain of RM4.0 million from the disposal of CCA On another note, the PBT recorded in 2017 was contributed mainly by: • • • • • Other income from loan settlement with other receivable of RM20.0 million Reserve arising from business combination of RM10.0 million related to MAAGAP A RM1.8 million reduction to the present value charge on the Retained Consideration Profit contribution of RM12.1 million from the General Insurance business via MAAGAP Profit contribution from CCA with share of PAT of RM6.1 million During the financial year under review, staff costs (including Executive Directors) of the Group stood at RM21.2 million (2017: RM19.6 million). Staff costs were lower in 2017 due mainly to MAAGAP was only consolidated as a subsidiary in April 2017 from previously an associated company. At MAAGAP entity level, its total staff costs (including executive directors) in 2018 increased by 6.5% compared to 2017 with higher headcount of 211 (2017: 188) as at end December 2018; whereas the Investment Holdings and Education Services segment recorded reduction in total staff costs (including executive directors) of 10.1% and 2.2% respectively in 2018 driven by learner cost structure. It be noted in 2018, the Group has incurred a total professional fees of RM0.7 million (2017: RM0.8 million) for the engagement of consultants to conduct legal and financial due diligence work on prospective businesses for the PN17 regularisation exercise of the Company. In 2018, the Group recorded Other Comprehensive Profit (net of taxation) of RM3.4 million (2017: Other Comprehensive Loss of RM9.2 million), due mainly to the transfer of the cumulative foreign currency translation difference of RM9.0 million from reserve to profit or loss upon the disposal of CCA. In 2017, the Other Comprehensive Loss was due mainly to subsequent reclassification of realised foreign currency translation gain of RM10.2 million to profit or loss during the year, offset partly by net fair value gain of RM7.8 million from available-for-sale financial assets. The Group finances its foreign investments and operations by means of composition of Ringgit Malaysia and foreign denominated currencies; the Group does not hedge its foreign currency risk and monitors its exposure to transactional foreign currency fluctuation risk on an on-going basis. The Group’s significant reportable operating business segments during the financial year under review are Investment Holdings, Education Services, General Insurance and lastly Retail Mortgage Lending before its disposal on 27 December 2018. The performance of each significant operating business segments are attached in pages 036 to 041 of the Management Discussion and Analysis. In 2018, the Group recorded a Loss Per Share of 10.0 sen (2017: Earnings Per Share of 9.2 sen). ANNUAL REPORT 2018 Sustainable And Value Investing | 031
33. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) Review of Statements of Financial Position of the Group Shown below the Statements of Financial Position: GROUP FY2018 RM’000 Property, plant and equipment % FY2017 RM’000 % 4,105 0.5 4,612 0.6 46,234 6.1 49,982 6.4 658 0.1 590 0.1 - - 52,460 6.7 2,045 0.3 667 0.1 177 - 172 - 239,473 31.6 230,058 29.5 Reinsurance assets 40,023 5.3 34,943 4.5 Insurance receivables 47,608 6.3 44,322 5.7 Deferred acquisition costs 17,447 2.3 16,475 2.1 Retirement benefit assets 101 - - - Trade and other receivables 103,397 13.7 97,599 12.6 Liquid assets - fixed and call deposits and cash at banks 255,632 33.8 246,715 31.7 Total Assets 756,900 100.0 778,595 100.0 Total Liabilities 223,382 100.0 215,969 100.0 Net Assets 533,518 Investment properties Intangible assets Associates Deferred tax assets Tax recoverable Investments 562,626 Total Assets The Group’s Total Assets stood at RM756.9 million as at 31 December 2018 (2017: RM778.6 million). Below commentary on significant assets of the Group: (i)Investment Properties The Investment Properties are stated at fair value, determined based on valuation performed by external independent professional valuers. The carrying value of Investment Properties decreased by approximately 7.5% to RM46.2 million as at 31 December 2018 (2017: RM50.0 million), due mainly to fair value loss of approximately RM2.8 million based on the revaluation conducted by professional valuers. (ii)Associates The carrying value of Associates is Nil as at 31 December 2018 (2017: RM52.5 million) subsequent to the completion of the disposal of CCA on 27 December 2018. During the financial year under review, share of PAT from CCA total RM4.7 million before its disposal (2017: RM6.1 million full year). In the previous financial year, MAAGAP contributed a share of PAT of RM1.5 million as an associated company before it became a subsidiary in April 2017. 032 | Sustainable And Value Investing ANNUAL REPORT 2018
34. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) (iii)Investments The Group’s Investments comprise of: GROUP FY2018 RM’000 Investments at FVTPL - equity securities - unit trusts - derivatives Investments at fair value through other comprehensive income (“FVOCI”) - government debt securities - corporate debt securities - equity securities Investments at amortised costs (“AC”) - government debt securities - corporate debt securities Available-for-sale (“AFS”) investments - government debt securities - corporate debt securities - equity securities Total Investments % FY2017 RM’000 % 101,309 3,852 112 42.3 16 0.0 17,267 2,043 - 7.5 0.9 0.0 105,273 44.0 19,310 8.4 38,669 3,728 22,343 16.1 1.6 9.3 - - 64,740 27.0 - - 10,992 58,468 4.6 24.4 - - 69,460 29.0 - - - - 49,065 49,016 112,667 21.3 21.3 49.0 - - 210,748 91.6 239,473 100.0 230,058 100.0 With the adoption of MFRS 9 ‘Financial Instruments’ that had replaced MFRS 139 ‘Financial Instruments: Recognition and Measurement’ with effect from 1 January 2018, the Group classified financial assets based on the business model and the cash flow characteristics of the financial assets. During the financial year under review, the Asian markets were in negative performance fuelled by the outflow of funds due to the US Federal Reserve (“Fed”) rate hikes in the US and the trade war tension between China and US. The benchmark FTSE Bursa Malaysia (FBM) KLCI marked more than 7% year-to-date losses, while the PSEI in the Philippines down by 12.8% year-on-year. Arising from these volatile markets, the Group recorded the following in the consolidated statement of profit or loss: • • • net fair value loss total RM20.6 million on equity securities quoted overseas net fair value loss total RM3.0 million on equity securities quoted in Malaysia net fair value loss total RM5.3 million on equity securities unquoted overseas As at 31 December 2018, the total FVOCI reserve for investments classified at FVOCI stood at a negative of RM4.0 million. (iv)Other Receivables The Group’s Other Receivables included the balance sale consideration of RM93.75 million (“Retained Consideration”) from the disposal of MAA Takaful receivable on 30 June 2019, the third anniversary of the sale completion date (2017: RM89.8 million after accounted for time value of money with present value adjustment). Under the sale and purchase agreement, the Retained Consideration would be used to settle the purchaser, Zurich Insurance Company Ltd (“Zurich”)’s claims for breach of representations and warranties and also third party claims against MAA Takaful during the warranty period. As at 31 December 2018, the Group has not been notified of any claim. ANNUAL REPORT 2018 Sustainable And Value Investing | 033
35. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) (v)Liquid Assets - Fixed and call deposits and cash at banks The Group’s Liquid Assets comprised of: GROUP FY2018 RM’000 Fixed and call deposits Cash at banks Total Fixed and call deposits and cash at banks % FY2017 RM’000 % 177,175 69.3 214,539 87.0 78,457 30.7 32,176 13.0 255,632 100.0 246,715 100.0 The higher Liquid Assets of the Group at end December 2018 was contributed mainly from the sale consideration received from the disposal of CCA at year end. (vi)Insurance Receivables, Reinsurance Assets and Deferred Acquisition Costs As at 31 December 2018, insurance receivables, reinsurance assets and deferred acquisition costs stood at RM47.6 million (2017: RM44.3 million), RM40.0 million (2017: RM34.9 million) and RM17.4 million (2017: RM16.5 million) respectively. These assets are solely from MAAGAP. Insurance receivables consist of amounts due from brokers, agents and ceding companies, funds held by ceding companies and reinsurance recoverable on paid losses, net of allowance for impairment loss. It be noted that as at end December 2018, allowance for impairment loss stood at 2.1% of total insurance receivables, a slight improvement over 3.8% as at end December 2017, though the gross premiums of general insurance business underwritten by MAAGAP was higher by 8.6% during the financial year under review. Reinsurance assets represent balance due from reinsurance companies. Recoverable amounts are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Deferred acquisition costs consist of commissions and other acquisition costs incurred during the financial year that vary with and are related to securing new general insurance contracts and renewing of existing general insurance contracts, but which relate to subsequent financial periods, are deferred to the extent that they are recoverable from future revenue margins. These costs are amortised on a straight-line basis using the 24th method from the policy inception date to the date of termination. The higher reinsurance assets and deferred acquisition costs at end December 2018 correspond to the increase volume of general insurance business underwritten by MAAGAP during the financial year under review. Total Liabilities and Equity Total Liabilities and Equity of the Group stood at RM223.4 million (2017: RM216.0 million) and RM533.5 million (2017: RM562.6 million) respectively as at 31 December 2018. The higher Total Liabilities in 2018 was attributed mainly by the Total Liabilities of MAAGAP totalling RM213.6 million (2017: RM203.6 million) as at 31 December 2018. Excluding MAAGAP, Total Liabilities of the Company and other subsidiaries amounted to RM9.8 million (2017: RM12.4 million). On another note, the Equity/Shareholders’ funds of the Group decreased to RM533.5 million (2017: RM562.6million) as at 31 December 2018, driven mainly by the fair value losses recorded for the financial assets classified at FVTPL and the revaluation loss on investment properties totalling RM27.4 million, the reclassification of cumulative foreign currency translation difference of RM9.0 million from reserve to profit or loss arising from the disposal of CCA, coupled with total dividend payout of RM8.2 million had out-weighted the profit generated from the General Insurance Business, the Retail Mortgage Lending Business and the profit from disposal of CCA. As at 31 December 2018, Net Assets per Share stood at RM1.94 (2017: RM2.04). 034 | Sustainable And Value Investing ANNUAL REPORT 2018
36. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) GROUP’S FINANCING, LIQUIDITY AND CAPITAL MANAGEMENT As at 31 December 2018, the Group is in a healthy financial position with zero external debt and strong liquidity level. The Group’s capital management objectives are aimed to ensure there is adequate funding for meeting the following at the business segment level: • • • business operations and growth supervisory authorities’ capital requirements for insurance companies in the Philippines preservation of capital for new investment/business opportunities including the PN17 regularisation plan and rewarding the shareholders. As at 31 December 2018, MAAGAP’s net worth and risk based capital adequacy ratio were well above the minimum requirements set by the Philippines supervisory authority for insurance companies. On capital expenditure, property, plant and equipment held by the Group stood at RM4.2 million (2017: RM4.6 million) as at 31 December 2018. Moving into 2019, the Group does not expect to incur significant capital expenditure in its existing business segments, except the technological enhancement in MAAGAP with estimated budget cost of RM2.1 million. DIVIDEND POLICY During the financial year under review, the Company has paid interim dividends at 3.0 sen (2017: 9.0 sen) per ordinary share total RM8.2 million (2017: RM24.6 million) under the single-tier dividend system. The Board will continue to evaluate the dividend policy of the Company, taking into consideration main factors like funding requirements for sustainable operations and growth of the existing businesses of the Group, reserve for new investment/business opportunities to address PN17 regularisation plan of the Company and further capital injection if any for MAAGAP to meet the minimum net worth of Php900 million by 31 December 2019 as required under the Insurance Code issued by the Insurance Commission of the Philippines, etc. ANTICIPATED OR KNOWN RISKS The Group’s activities are exposed to variety of risks, including the risk of fraud, strategic and business risks. The Group’s overall risk management objective is to ensure the Group creates value for its shareholders whilst minimizing potential adverse effects on its performance and positions. The Group operates within an established risk management framework and clearly defined policies and guidelines that are approved by the Board of Directors (“Board”). The risks that most significantly affect the Group as a whole during 2018, the discussion of its impact to the Group’s business and performance together with the Group’s strategies to mitigate the identified risks forms part of the Statement of Risk Management and Internal Control of this Annual Report on page 049 to 052. OUTLOOK FOR 2019 Moving into 2019, the Group will continue its current efforts to explore new investment/business opportunities to prepare the PN17 regularisation plan for submission to Bursa Securities for approval. In this regards, the Group will look at new businesses that best fit its corporate objectives, risk appetites and are within the available financial capacity to acquire. Further announcement of the development in this area will be made by the Group in due course. On the general insurance business in the Philippines via MAAGAP, the Group will continue its efforts to grow the general insurance business while sustaining profitability of this business. For the Education Services business, 2019 will remain a challenging year with initiatives to contain costs, moving into social media to intensify marketing efforts and diversify its tuition offerings to improve student count. Lastly, the Group’s financial assets returns in 2019 will largely be dependent on the Asia stock market performance. Towards this end, the appointed external fund managers would continue to deploy active management strategy to improve the investment returns. ANNUAL REPORT 2018 Sustainable And Value Investing | 035
37. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) PERFORMANCE BY OPERATING BUSINESS SEGMENTS BUSINESS SEGMENT – INVESTMENT HOLDINGS 1) Business Operations Review Investment Holdings comprised of the Company and its subsidiaries, namely MAA Corporation Sdn Bhd, MAA International Group Ltd (“MAAIG”), MAA International Investments Ltd and MAA Capital Singapore Pte Ltd (formerly known as Columbus Capital Singapore Pte Ltd) whose principal activities are investments mainly in shares of subsidiaries and other equity securities, overseas investment properties held primarily for capital appreciation and local investment properties acquired from debt settlement arrangement during 2017. 2) Financial Performance Key financial performance (Amount in RM’000) FY2018 FY2017 9,247 10,900 (Loss)/profit Before Taxation (42,219) 11,811 Total Assets 434,950 479,124 8,949 11,242 Total Operating Revenue Total Liabilities Total Operating Revenue which comprised mainly of interest income, decreased by RM1.7 million to RM9.2 million (2017: RM10.9 million) in 2018, mainly due to deployment of funds for operations and dividend payment to the shareholders. In terms of management expenses, the Investment Holdings segment recorded a 3.6% reduction in 2018 compared to 2017. During the financial year under review, fixed and call deposits with licensed banks earned a weighted average effective interest rate at 3.9% (2017: 3.8%) per annum. In 2018, the Investment Holdings segment recorded a LBT of RM42.2 million (2017: PBT RM11.8 million). The loss arose mainly from: • • • Net fair value loss of RM24.5 million on investments in equity securities classified at FVTPL, resulted from the decline in local and regional equity markets triggered largely by the US interest rates hike and the trade war tensions between US and China Fair value loss of RM2.8 million from revaluation of investment properties Transfer of the cumulative foreign currency translation difference of RM9.0 million from reserve to profit or loss upon the disposal of CCA, which has out-weighted the gain on disposal of RM4.0 million In 2017, the PBT of RM11.8 million was contributed by: • • • Other income of RM20.0 million earned from settlement with other receivable Reserve arising from business combination of RM10.0 million related to MAAGAP Adjustment of RM1.8 million to reduce the PV Charge to the Retained Consideration At end December 2018, Total Assets stood at RM434.9 million (2017: RM479.1 million) where 51.3% comprised of low risk liquid assets in fixed and call deposits, cash and bank balances. Investment in these low risk liquid assets minimise exposure to mark-tomarket risk and ensure capital is preserved for business operations and new investment opportunities. Total Liabilities of the Investment Holdings segment stood lower at RM8.9 million as at end December 2018 (2017: RM11.2 million). 036 | Sustainable And Value Investing ANNUAL REPORT 2018
38. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) 3) Sustainability and Strategic Direction The Investment Holdings segment has been continuing its efforts to search for new investment opportunities that fit the corporate objectives, risk appetites and reasonable pricing that is within the available financial capacity of the Company, to address the current PN17 status of the Company under the Listing Requirements of Bursa Securities. Nevertheless on 27 February 2019, the Board received a proposal letter from Melewar Acquisitions Limited and Melewar Equities (BVI) Ltd (collectively the “Non-Entitled Shareholders”) informing the Company of their intention to privatise the Company and requesting that the Company undertakes a selective capital reduction and repayment exercise pursuant to Section 116 of Companies Act 2016 in respect of the ordinary shares in the Company (“Shares”) held by all the shareholders of the Company other than the Non-Entitled Shareholders (“Entitled Shareholders”), whose names appear in the Record of Depositors of the Company as at the close of business on an entitlement date to be determined and announced later by the Board (“Entitlement Date”) (“Proposal”). The Entitled Shareholders collectively hold 167,740,668 Shares, representing approximately 61.33% of the total issued shares of the Company. Pursuant to the Proposal, the issued share capital of the Company will be reduced by up to RM184,514,735 and the Entitled Shareholders will receive an aggregate capital repayment of RM184,514,735 which represents a cash repayment of RM1.10 for each Share held by the Entitled Shareholders on the Entitlement Date. For the avoidance of doubt, the Non-Entitled Shareholders will not be entitled to the capital repayment pursuant to the Proposal. On 27 February 2019, the Board has appointed Affin Hwang Investment Bank Berhad as the Principal Adviser. On 14 March 2019, the Board has further appointed Mercury Securities Sdn Bhd as the Independent Adviser to provide comments, opinion, information and recommendations to the Board except for the interested directors, namely Tunku Dato’ Yaacob Khyra and Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah, and to the Entitled Shareholders in respect of the Proposal. Subsequently on 25 March 2019, the Company announced the Board’s (save for Tunku Dato’ Yaacob Khyra and Tunku Yahaya @ Yahya Bin Tunku Tan Sri Abdullah who are deemed interested in the Proposal) decision on the Proposal, i.e. to table the Proposal to the shareholders of the Company for their consideration and approval at an extraordinary general meeting to be held at a later date. Notwithstanding the above stated event, the Company via the Investment Holdings segment will continue the exercise identifying new business(es) with the right fit and sustainable profit generating capabilities for acquisition and expansion of the Group. ANNUAL REPORT 2018 Sustainable And Value Investing | 037
39. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) BUSINESS SEGMENT – EDUCATION SERVICES 1) Business Operations Review Education Services held via Kasturi came into the Group following a debt settlement arrangement between subsidiary MAA Credit Berhad engaged in hire purchase, leasing and other financing activities and its non-performing loan debtor back in October 2012. Kasturi provides private tuition to students taking the Malaysian National curriculum through its centres in the Klang Valley. 2) Financial Performance Key financial performance (Amount in RM’000) FY2018 FY2017 3,607 5,005 22 (420) Total Assets 798 759 Total Liabilities 160 214 Total Operating Revenue Profit/(loss) Before Taxation Total Operating Revenue consists of tuition fee income recorded a 27.9% decrease to RM3.6 million (2017: RM5.0 million) in 2017, caused mainly by reduction in the number of students enrolment. Education Services segment recorded a marginal PBT of RM22,000 in 2018, turnaround from LBT of RM420,000 in 2017. The profit was contributed by improved margin resulted from leaner cost structure and other income of RM83,000 being final capital distribution from ex-subsidiaries upon the completion of the shareholders’ voluntary winding up exercise. The loss in 2017 was the result of operation reorganisation initiatives undertaken during that financial year namely: • Closure of three (3) tuition centres due to their loss incurring status and poor business prospects. Apart from cutting loss and reducing costs, this exercise had allowed for greater focus of management time on other centres with potential to grow further. The closure exercise had incurred a total one-off costs of RM79,000 for centre restoration work, write-off of renovation and other fixtures and forfeiture of rental and utilities deposits. • Consolidation of two (2) Kuala Lumpur centres and operations into a single new centre to resolve capacity issues and avoid duplication of infrastructure especially the quality of teaching resources. The consolidation exercise had incurred a total one-off costs of RM233,000 for centres restoration work, write-off of renovation and other fixtures and forfeiture of rental and utilities deposits. • Commenced shareholders’ voluntary winding up for the four (4) non-active subsidiaries, i.e. Keris Murni Sdn Bhd, Pelangi Tegas Sdn Bhd, Jaguh Suria Sdn Bhd and Genting Mutiara Sdn Bhd with the appointment of liquidators for a total liquidation fees of RM79,000. Total Assets base are not significant for the Education Services segment in view that it is a relatively capital light business. Total Assets at end December 2018 stood at RM798,000, marginally higher than RM759,000 at end December 2017. Total Liabilities as at 31 December 2018 of RM160,000 were also lower than 2017 of RM214,000, due mainly to the leaner cost structure. 3) Sustainability and Strategic Direction Private tuition is a highly competitive business given the wide and numerous players in a crowded market space, particularly the many non-registered individuals with low operating costs. The immense market competition has taken a toll on the Education Services segment over the last few years, given changes in the Malaysian education landscape with the sprouting of home schools and private schools offering alternative curriculum and the decentralisation of the standard Form 3 exam PMR previously conducted by the Ministry of Education to PT3 exam which included school-based assessments. 038 | Sustainable And Value Investing ANNUAL REPORT 2018
40. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) Moving forward the operating environment for the Education Services segment will continue to remain competitive and challenging. In 2019, we will continue with the following initiatives to improve the performance of the Education Services segment: • • • • To improve teacher/student ratio with the recruitment of experienced and proven crowd pulling qualities tutors while letting go those tutors with unsatisfactory student number. Intensify marketing efforts via social media Diversify tuition offerings Continue with costs control measures BUSINESS SEGMENT – RETAIL MORTGAGE LENDING 1) Business Operations Review The Group’s retail mortgage lending business is conducted through CCA (a 47.95% associated company incorporated and operating in Australia) that commenced operations in 2006. Over the years CCA grew from various mortgage portfolio acquisitions and origination of new mortgage portfolios with funding from domestic and offshore banks and its securitisation program via the capital markets in Australia. On 27 December 2018, the Group completed the disposal of CCA to unlock and realise the value of its investment at a satisfactory price-to-book ratio of approximately 2.09 times based on CCA’s unaudited net assets as at 30 September 2018. 2) Financial Performance Key financial performance FY2018* AUD’000 Total Operating Revenue RM’000 FY2017 AUD’000 RM’000 143,067 431,341 109,589 360,386 Profit Before Taxation 4,897 14,762 5,697 18,619 Group’s share of Profit After Taxation 1,560 4,696 1,877 6,150 Range of currency exchange rate 1 RM = 0.3317 to 0.3322 AUD 1 RM = 0.3040 to 0.3059 AUD *comprised of CCA’s financial results for the eleven (11) months ended 30 November 2018 before its disposal on 27 December 2018 CCA’s Operating Revenue consists of loan interest and fee income. In 2018, the Operating Revenue grew to AUD143.1 million for the eleven (11) months ended 30 November 2018, on the back of higher assets under management of AUD3.6 billion as at end November 2018 (2017: AUD2.6 billion as at end December). CCA recorded a PBT of RM14.8 million for the eleven (11) months ended 30 November 2018 with a share of profit after taxation of RM4.7 million to the Group. CCA recorded a higher net interest margin at 1.07% during the eleven (11) months ended 30 November 2018 (2017: 1.04%), attributed by re-pricing of interest rates for certain portfolios under management given the increase in weighted average cost of funds during this period. CCA’s operating costs as a percentage of operating revenue was higher at 10.3% for the eleven (11) months ended 30 November 2018 (2017: 8.4% full year), driven mainly by higher staff costs with increase in headcount to deal with higher business volume, credit assessment and the focus in retail sales. ANNUAL REPORT 2018 Sustainable And Value Investing | 039
41. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) BUSINESS SEGMENT – GENERAL INSURANCE 1) Business Operations Review The Group’s General Insurance business in the Philippines held via subsidiary, MAAGAP (formerly an associated company until April 2017) offers a wide range of products to both retail and corporate clients. The product offerings cover fire, motor, marine, personal accident, bond, engineering and general accident. MAAGAP distributes its products mainly via agency network, brokers and banks. MAAGAP has been steadily growing its business over the past few years and in 2017 ranked a credible 13th in terms of gross premium written among a total of 59 general insurance players in the Philippines. 2) Financial Performance Key financial performance FY2018 PHP’000 Gross premiums written RM’000 FY2017 PHP’000 RM’000 1,951,286 149,433 1,796,138 153,266 375,913 28,822 290,120 24,530 95,367 7,313 74,830 6,357 191,100 14,861 192,082 16,117 Claim ratio in % 38.8% 38.8% 45.8% 45.8% Commission ratio in % 33.7% 33.7% 28.8% 28.8% Total Assets 3,941,049 309,770 3,600,389 292,492 Total Liabilities 2,717,576 213,606 2,506,463 203,622 Underwriting surplus Investment income Profit Before Taxation Range of currency exchange rate 1 RM = 12.32 to 13.52 PHP 1 RM= 11.07 to 12.33 PHP MAAGAP’s profit contribution to the Group in 2017 - as an associated company till 18 April 2017 - as a subsidiary effective 19 April 2017 16,881 129,861 1,486 10,637 Total profit contribution 146,742 12,123 In 2018, total Gross Premiums Written (“GPW”) grew 8.6% to PHP1,951.3 million (RM149.4 million equivalent) (2017: PHP1,796.1 million (RM153.3 million equivalent)), driven mainly by increase in the production of both motor and non-motor classes of business. Motor classes recorded a marginal decrease in GPW of 0.6% to PHP756.8 million (RM57.9 million equivalent) (2017: PHP761.5 million (RM64.9 million equivalent)); whilst non-motor classes registered a 15.5% increase in GPW to PHP1,194.5 million (RM91.5 million equivalent) (2017: PHP1,034.6 million (RM88.4 million equivalent)). The motor and non-motor businesses contributed 38.8% (2017: 42.4%) and 61.2% (2017: 57.6%) respectively of the total Gross Premiums Written in 2018. The major factors driving the business growth were the increase in infrastructure development and construction projects on the back of the strong Philippines economy with a Gross Domestic Product growth of 6.7% in 2018. MAAGAP has registered a lower PBT of PHP191.1 million (RM14.9 million equivalent) in 2018, a marginal 0.5% decrease over PHP192.1 million (RM16.1 million equivalent) in 2017. Despite of the premium growth, higher underwriting surplus contributed by improved claim ratio and investment income, the lower PBT in 2018 was mainly caused by the net fair value loss of PHP68.2 million (RM5.0 million equivalent) on the financial assets classified at FVTPL due to decline in the Philippines stock market, and higher management expenses. Underwriting Surplus stood at PHP375.9 million (RM28.8 million equivalent) (2017: PHP290.1 million (RM24.5 million equivalent)), contributed mainly by growth in premiums earned and improvement in the combined claim and commission ratios at 72.5% (2017: 74.6%). All motor and non-motor classes of business registered underwriting surplus in 2018. 040 | Sustainable And Value Investing ANNUAL REPORT 2018
42. MANAGEMENT ’S DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (continued) In 2018, the claim ratio improved to 38.8% from 45.8% in 2017. The claim ratio for motor class was lower at 44.6% (2017: 58.9%) during the financial year under review, mainly attributed by reduction in the number of registered motor car claims by 1.2% compared to 2017, coupled with improvement in motor claims experience. For non-motor class, the claim ratio improved marginally from 34.0% in 2017 to 33.0% in 2018. MAAGAP recorded a higher net commission ratio from 28.8% in 2017 to 33.7% in 2018, driven by the increase volume of non-motor classes of business written with higher commission rates. MAAGAP recorded a total Investment Income of PHP95.4 million (RM7.3 million equivalent) – up 27.4% compared to PHP74.8 million (RM6.4 million equivalent) in 2017, on the back of higher amount of investible funds from PHP2.3 billion (RM188.6 million equivalent) as at end December 2017 to PHP2.5 billion (RM197.2 million equivalent) as at end December 2018. Investment income comprised of interest and dividend income. During 2018, MAAGAP registered a lower investment yield of 2% (2017: 7%). Though total investment income has improved, however this was offset by reduced gain from disposal of equity investment and the fair value loss underpinned by the volatile stock market during the financial year under review. Management expenses of MAAGAP increased 11.8% in 2018 compared to 2017. Staff costs rose by 6.5% in 2018 due mainly to annual salary increment and increase in headcount to support its business growth. On liquidity and funding resources to support business growth and operations including claims payment to insured, MAAGAP applies assets and liabilities matching in its investment policies, close credit monitoring of receivables and cash requirement projections to ensure there is sufficient liquid assets to meet its obligations. Under the New Insurance Code issued by the Insurance Commission (“IC”) of the Philippines, insurance companies in the Philippines are required to comply with both the Net Worth requirement at increasing levels at each internal of three (3) years until 31 December 2022 and the new Risk-Based Capital (“RBC”) framework. As at 31 December 2018, MAAGAP met both the Net Worth and RBC at levels well above the minimum required. For the financial year under review, MAAGAP has registered higher profit contribution to the Group total RM14.9 million (2017: RM12.1 million). 3) Sustainability and Strategic Direction Underpinned by strong consumption and investment environment, the International Monetary Fund foresees Philippines is likely to sustain economic growth of 6.7% in 2019. The non-life insurance sector in the Philippines registered a growth of 7.3% in net premiums written as at end of September 2018 over the same period in 2017, and is foreseen to continue with expansion in 2019. Riding on these favourable economic and market conditions, MAAGAP is expected to continue with its growth momentum in 2019. MAAGAP will continue to focus on organic growth by expanding customer base and distribution channels through its total fourteen (14) branches, enhance agency force, active monitoring of performance by line of business, active management and monitoring of the performance of internally managed and outsourced investment funds respectively. Barring unforeseen circ*mstances like the natural catastrophe exposure in the Philippines with typhoons and earthquakes and also the stock market performance, MAAGAP is expected to generate positive profit contribution to the Group in 2019. ANNUAL REPORT 2018 Sustainable And Value Investing | 041
43. CORPORATE GOVERNANCE OVERVIEW STATEMENT The Board of Directors of the Company (“Board”) is fully supportive of the latest Malaysian Code of Corporate Governance issued on 26 April 2017 (“Code”). The Company has also used its best endeavours to enhance its policies and procedures in order to apply the principles of the Code. The Company’s corporate governance practices and activities for the financial year ended 31 December 2018 are set out in this Corporate Governance Overview Statement as well as the Corporate Governance Report. The Corporate Governance Report is published on our website: https://www.maa.my/maa/maagroup/index.php?corporate-governance-1 BOARD LEADERSHIP AND EFFECTIVENESS Board Responsibilities The Board is aware that good governance starts from an effective and accountable Board. Throughout the financial year 2018, the Board has continued to lead and provide direction to management directly as well as indirectly through its committees in relation to the Group’s strategic direction and business. These have been further detailed under the Company’s Management Discussion and Analysis section of this Annual Report. In its exercise of oversight of the Company, the Board has met five (5) times in 2018 to monitor the Group’s operational and financial performance and to deliberate on the Group’s corporate and business matters which require consideration, direction and decision of the Board. The Board will continue to focus on good governance and towards protection of all stakeholders’ interest, and including the interest of the shareholders with a view to adding long term value to the Company’s shares. The Board is committed to promote good corporate governance culture within the Company which reinforces ethical, prudent and professional behaviour. To this end, the Board has approved and adopted the revisions and enhancements to its Board Charter and the Code of Conduct and Ethics to be in line with the principles and practices under the Code. The Board is also aware that sustainability is key to future of the Company, and had engaged Deloitte Risk Advisory Sdn Bhd (formerly known as Deloitte Enterprise Risk Services) to assist the Board to identify, evaluate and manage the material economic, environmental and social risks and opportunities for the Group. Further details on how the Group’s material sustainability risks and opportunities are managed can be found in the Sustainability Statement of this Annual Report. During the financial year ended 31 December 2018, the members of the Board have attended and participated in various programmes and forums to keep abreast of current trends and issues while enabling them to update and refresh their skills and knowledge necessary for the performance of their duties. The Board has met five (5) times during the financial year ended 31 December 2018 and is satisfied with the time commitment given by the directors of the Company in discharging their duties. 042 | Sustainable And Value Investing ANNUAL REPORT 2018
44. CORPORATE GOVERNANCE OVERVIEW STATEMENT (continued) Details of the meeting attendance by each of the Directors for the financial year ended 31 December 2018 are as follows: Members of the Board Meeting Attendance Tunku Dato’ Yaacob Khyra (Chairman) 5/5 Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah 5/5 Yeo Took Keat 5/5 Dato’ Narendrakumar Jasani A/L Chunilal Rugnath 3/5 Onn Kien Hoe 5/5 Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan 5/5 Datin Seri Raihanah Begum binti Abdul Rahman (Appointed on 22.2.2018) 5/5 Datuk Muhamad Umar Swift (Resigned on 8.2.2019) 5/5 Tan Sri Datuk Seri Razman Md Hashim (Retired on 5.6.2018) 3/3 Tan Sri Ahmad bin Mohd Don (Retired on 5.6.2018) 3/3 The programmes or forums attended by existing Directors include the following: Members of the Board Trainings Attended Tunku Dato’ Yaacob Khyra (Chairman) • Corporate Governance Briefing Sessions: MCCG Reporting & CG Guide Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah • MICG: Half-Day Seminar on Business Transformation Challenges – Shaping High Performance Organisations Yeo Took Keat • Corporate Governance Briefing Sessions: MCCG Reporting & CG Guide Dato’ Narendrakumar Jasani A/L Chunilal Rugnath • MIA - Forum with Audit Sole-Practitioners • Sustainability Engagement Series for Directors / Chief Executive Officer • MIA – Regional Engagement Session • Grant Thornton – GST to SST Talk 2018 • Grant Thornton – Regional Conference in Vietnam • LHDN/CTIM – National Tax Conference 2018 • Grant Thornton – 2018 Global Conference • MIA – International Accountants Conference • CTIM – 2019 Budget Seminar • Securities Commission – Business Judgement Rule to Help Directors Onn Kien Hoe • Briefing 2017 & 2018 IFRS • Understanding Fintech & Its Implications for Insurance Companies Programme • IFRS for SMEs – Key Practical Approaches Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan • Sustainability Report – Setting the Agenda for Value Creation Datin Seri Raihanah Begum binti Abdul Rahman (Appointed on 22.2.2018) • Sustainability Engagement Series for Directors / Chief Executive Officers • Mandatory Accreditation Programme (MAP) • Official Launch of the Pathway to a Governance Practitioner ANNUAL REPORT 2018 Sustainable And Value Investing | 043
45. CORPORATE GOVERNANCE OVERVIEW STATEMENT (continued) Board Composition The Board recognises that it is essential to have an appropriate mix of skills, knowledge, experience, diversity and independent elements in order for the Board to perform its role effectively. The Board comprises of seven (7) members as at the date of this Annual Report, of whom four (4) are Independent Non-Executive Directors. The Board Committees are also chaired by Independent Non-Executive Directors. The Board, with the recommendation of the Audit & Governance Committee (“AGC”) and the Nomination and Remuneration Committee, duly notes and fully supports the enhanced standards and requirements under the Code in relation to Board Composition. Tan Sri Ahmad bin Mohd Don and Tan Sri Datuk Seri Razman Md Hashim bin Che Din Md Hashim retired as directors as they have served the Company as Independent Directors for a cumulative period of over 11 years. With the cessation, Tan Sri Ahmad and Tan Sri Datuk Seri Razman also ceased to be members of all the Board Committees. The Board had appointed Datin Seri Raihanah Begum binti Abdul Rahman as an Independent Non-Executive Director on 22 February 2018. Datuk Muhamad Umar Swift resigned as Chief Executive Officer/Group Managing Director (“CEO/Group MD”) of the Company effective 8 February 2019. Remuneration The Board is aware that fair remuneration is critical to attract, retain and motivate Directors, CEO/Group MD and key senior officers. Procedures for determining the remuneration of directors, CEO/Group MD and key senior officers has been reviewed and enhanced on 23 November 2017 to be in line with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“MMLR of Bursa Securities”) and the Code. The Detailed Remuneration of the Directors for the financial year ended 31 December 2018 is set out below: Salary (RM’000) Bonus (RM’000) Benefits in Kind* (RM’000) Fees (RM’000) Meeting Allowance (RM’000) Others** (RM’000) Tunku Dato’ Yaacob Khyra 1,678 280 31 1 2 313 Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah 265 44 7 - - 60 1,373 229 53 15(N) 4(N) 256 - - - 81 11 - Dato’ Narendrakumar Jasani A/L Chunilal Rugnath - - - 61 15 - Onn Kien Hoe - - - 82 31 - Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan - - - 61 28 - Datin Seri Raihanah Begum binti Abdul Rahman (Appointed on 22.2.2018) - - - 52 20 - Tan Sri Datuk Seri Razman Md Hashim (Retired on 5.6.2018) - - - 26 16 - Tan Sri Ahmad bin Mohd Don (Retired on 5.6.2018) - - - 26 15 - Name Executive Directors Datuk Muhamad Umar Swift (Resigned on 8.2.2019) Non-Independent Non-Executive Director Yeo Took Keat Independent Non-Executive Directors * Benefits in kind include company car, petrol, driver and medical insurance benefits. ** Others include vehicle substitution and travelling allowances, long service award and EPF. (N) Director’s fees and meeting allowances received from an overseas subsidiary company. 044 | Sustainable And Value Investing ANNUAL REPORT 2018
46. CORPORATE GOVERNANCE OVERVIEW STATEMENT (continued) EFFECTIVE AUDIT AND RISK MANAGEMENT The AGC as well as the Risk & Sustainability Committee (“RSC”) comprise of four (4) members, all of whom are independent nonexecutive directors. Both the AGC and the RSC’s function as stipulated under the Terms of Reference has been approved by the Board. Further details on the AGC and the RSC together with their respective activities are set out in the Audit Committee Report and Statement on Risk Management and Internal Control of this Annual Report respectively. INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS The Board is aware of the importance of meaningful communication with its stakeholders including its shareholders. It is the Board’s expectation that all directors are to attend the AGM and will use its best endeavours to provide meaningful response to questions addressed to them. The Board has endorsed the adoption of the Code requirement for notice of the AGM to be given to the shareholders at least 28 days prior to the meeting. In line with the MMLR of Bursa Securities, the Company had implemented e-voting for all the resolutions set out in the Notice of AGM at the AGM and had appointed one (1) scrutineer to validate the votes cast at the AGM. COMPLIANCE WITH CODE The Board shall use its best endeavours to continually uphold corporate governance standards and ensure corporate governance practices are implemented in the business operations of the Company. ANNUAL REPORT 2018 Sustainable And Value Investing | 045
47. OTHER BURSA SECURITIES COMPLIANCE INFORMATION 1 . Status of Utilisation of Proceeds Raised from Corporate Proposals Brief explanations of the status of utilisation of proceeds raised from corporate proposals of the Group are as follow: (a) Disposal of MAAKL Mutual Bhd on 31 December 2013 Purpose (i) General working capital requirements Total Proposed Utilisation Actual Utilisation RM’000 RM’000 (N1) 53,061 53,061 53,061 Intended timeframe for utilisation RM’000 Explanations (if the deviation is 5% or more) - - Deviation No limit specified 53,061 Sale proceed net of selling expenses. (N1) (b) Disposal of MAA Takaful Berhad on 30 June 2016 Proposed Utilisation Actual Utilisation RM’000 RM’000 Future investment opportunity(ies)/ Prospective new business(es) to be acquired 68,250 - 93,750 - (ii) Working capital and share buy-back exercise 30,854 (iii) Payment of dividends to shareholders for the FYE 2017 (iv) Payment of dividends to shareholders Purpose (i) Total RM’000 Explanations (if the deviation is 5% or more) Within 24 months from the EGM held on 5 June 2018 - - Within 24 months from the receipt of the Retained Consideration - - 11,620 Within 24 months from the EGM held on 5 June 2018 - - 8,207 8,207 Utilised - - 32,822 - Within 24 months from the EGM held on 5 June 2018 - - (N2) 233,883 Intended timeframe for utilisation Deviation 19,827 (N2) (c) Revised utilisation of balance proceeds from the disposal of MAA Takaful Berhad as approved by the Shareholders during the EGM held on 5 June 2018. Disposal of Columbus Capital Australia Pty Ltd on 27 December 2018 Purpose (i) Future investment opportunities/ prospective new business(es) to be acquired Total Proposed Utilisation Actual Utilisation RM’000 RM’000 (N3) 56,713 56,713 - Intended timeframe for utilisation No limit specified RM’000 Explanations (if the deviation is 5% or more) - - Deviation - initial consideration received of AUD19,459,010 on 27 December 2018. (N3) 046 | Sustainable And Value Investing ANNUAL REPORT 2018
48. OTHER BURSA SECURITIES COMPLIANCE INFORMATION (continued) 2. Audit and Non-Audit Fees During the financial year ended 31 December 2018, the following audit and non-audit fees were incurred for services rendered by the external auditors or a firm or corporation affiliated to them: (a) (b) PricewaterhouseCoopers PLT and a firm or corporation affiliated to them (i) Audit fees paid or payable to PricewaterhouseCoopers PLT by the Group and the Company amounting to RM259,000 and RM213,000 respectively; (ii) Non-audit fee of RM60,000 paid to PricewaterhouseCoopers Taxation Services Sdn Bhd for tax advisory services. ScCip Gorres Velayo & Co (“SGV & Co”) (i) Audit fees paid or payable by subsidiaries, MAA General Assurance Phillippines, Inc (“MAAGAP”) and MAA Mutualife Philippines, Inc amounting to RM92,000 and RM8,400 respectively; (ii) Non-audit fees paid by MAA International Group Ltd: (iii) • RM37,000 for services rendered in connection with the agreed-upon procedure engagement for the review of management accounts; • RM18,000 for services rendered in connection with the review of 2016 and 2017 audit working papers by third parties; Non-audit fee paid by MAAGAP: • (c) RM44,000 for services rendered in connection with PFRS 9 implementation review. Leong Siew Hoong & Co and a firm or corporation affiliated to them (i) Audit fees paid or payable to Leong Siew Hoong & Co by subsidiaries, MaaxSite Sdn Bhd and MaaxClub Sdn Bhd amounting to RM1,000 and RM1,000 respectively; (ii) Non-audit fee paid or payable to LMC Taxation Services Sdn Bhd by the Group and the Company amounting to RM54,000 and RM12,300 respectively for taxation services. (d) Audit fees paid or payable to SCS Global & Co by subsidiaries, Kasturi Academia Sdn Bhd and Indopelangi Sdn Bhd amounting to RM10,500 and RM6,500 respectively. (e) Audit fees paid or payable to Enterprise Accountants LLP by subsidiary, MAA Capital Singapore Pte Ltd (formerly known as Columbus Capital Singapore Pte Ltd) amounting to RM15,000. 3. Material Contracts There was no material contracts (not being entered into in the ordinary course of business) entered into by the Group which involved Directors and Shareholders, either still subsisting at the end of the financial year ended 31 December 2018 or entered into since the end of the previous financial year. ANNUAL REPORT 2018 Sustainable And Value Investing | 047
49. OTHER BURSA SECURITIES COMPLIANCE INFORMATION (continued) Recurrent Related Party Transactions of a Revenue or Trading Nature On 5 June 2018, the Company sought approval for a shareholders’ mandate for the Group to enter into Recurrent Transactions (as defined in the Circular to Shareholders dated 30 April 2018) in their ordinary course of business with related parties (“Shareholders’ Mandate”) as defined in Chapter 10 of the Listing Requirements of Bursa Securities. The aggregate value of Recurrent Related Party Transactions conducted during the financial year ended 31 December 2018 are: Value of Transactions (1/1/2018 31/12/2018) RM’000 Transacting Party Nature of Transaction Related Party The Group Corporate secretarial and related services fees paid and payable Trace Management Services Sdn Bhd (“Trace”) A company in which TY* and TYY* have deemed interest by virtue of their substantial interest in The Melewar Corporation Berhad, the holding company of Trace. 270 MAA Corporation Sdn Bhd (“MAA Corp”) Office service fee income Melewar Equities Sdn Bhd (“MESB”) A company in which TY is deemed interested in MESB. MESB is a subsidiary of Khyra**. TY is a beneficiary of a trust known as Khyra, being the holding company of MESB. 13 Melewar Industrial Group Berhad (“MIG”) TY is a director of MIG. TY is deemed interested in MIG by virtue of him being a beneficiary of Khyra, who is the holding company of MESB and MKSB*** who are the major/substantial shareholders of MIG. 20 MESB TY is deemed interested in MESB. MESB is a subsidiary of Khyra. TY is a beneficiary of Khyra, being the holding company of MESB. 56 MIG TY is a director of MIG. TY is deemed interested in MIG by virtue of him being a beneficiary of Khyra, who is the holding company of MESB and MKSB who are the major/substantial shareholders of MIG. 87 Mycron Steel Berhad (“MSB”) MSB is a subsidiary of MIG. TY is a director of MSB. TY is deemed interested in MSB by virtue of Section 8(4)(c) and Section 197(1)(b) of the Companies Act 2016 via MIG. 143 MAA Corp The Company Office rental income Human Resource fee income Nature of Interest Definition: * TY is Tunku Dato' Yaacob Khyra * TYY is Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah ** Khyra is Khyra Legacy Berhad, the holding company of Melewar Acquisitions Ltd (“MAL”)**** and Melewar Equities (BVI) Ltd who are the major/substantial shareholders of the Company. *** Melewar Khyra Sdn Bhd (“MKSB”) is a wholly owned subsidiary of Khyra. ****MAL is a wholly owned subsidiary of Melewar Equities Sdn Bhd (“MESB”) who in turn is a wholly owned subsidiary of Khyra. 048 | Sustainable And Value Investing ANNUAL REPORT 2018
50. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTRODUCTION This statement on Risk Management and Internal Control is made pursuant to Bursa Securities Listing Requirements which obliges the Board of Directors of a listed company to account for the state of its internal control system in the Annual Report . The Malaysia Code on Corporate Governance 2017 (“Code”) further require the Board of Directors to set appropriate policies on internal control and seek assurance that the systems are functioning effectively. Pursuant to these requirements, the Board of Directors of the Company (“Board”) is pleased to present the following statement that is prepared in accordance with the “Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers” issued by Bursa Securities. BOARD RESPONSIBILITY The Board reaffirms its overall responsibility for the Group’s system of internal controls, including an assurance of its adequacy, integrity, and its alignment with business objectives. The Board is also of the view that, the risk management framework and internal control system in place are designed and have the capacity to manage the Group’s risks within the accepted risk appetite thresholds. The Board does not claim nor believes that the controls will totally eliminate the risks emanating from the exercise of poor judgment in decisionmaking, human error, deliberate circumvention of control processes by employees, and unforeseeable circ*mstances. It can therefore only provide reasonable, rather than absolute assurance against material misstatement, fraud or loss. Whilst the Board has the ultimate responsibility for the Group’s risk management and internal control systems, it has delegated the immediate oversight and implementation of these internal controls to the Management who make regular submissions to the Audit & Governance Committee (“AGC”) and Risk & Sustainability Committee (“RSC”) on the status of actions taken to mitigate and/or minimize identified risks. The risk management and internal control system is subject to the Board’s regular review via the independent Internal Audit function with a view towards appraising and ascertaining the relevancy, adequacy and effectiveness of the controls in place in key operational and business areas as identified in the annual Audit Plan. From time to time, the Board receives assurances from the Chief Executive Officer/Group Managing Director (“CEO/Group MD”) on the efficacy of the risk management and internal control system and that; it sufficiently safeguards the interests of the Group. RISK & SUSTAINABILITY MANAGEMENT COMMITTEE The RSC met four (4) times during the financial year ended December 2018. The attendance record of the members were as follows: Name Of Committee Members Total Meetings Attended Dato’ Narendrakumar Jasani A/L Chunilal Rugnath (Chairman, Independent Non-Executive Director) 1/4 Onn Kien Hoe (Member, Independent Non-Executive Director) 4/4 Tunku Dato’ Ahmad Burhanuddin Bin Tunku Datuk Seri Adnan (Member, Independent Non-Executive Director) 4/4 Datin Seri Raihanah Binti Abdul Rahman (Member, Independent Non-Executive Director) (Appointed on 22.2.2018) 3/3 Tan Sri Ahmad bin Mohd Don (Member, Independent Non-Executive Director) (Retired on 5.6.2018) 2/2 Tan Sri Datuk Seri Razman Md Hashim (Member, Independent Non-Executive Director) (Retired on 5.6.2018) 2/2 ANNUAL REPORT 2018 Sustainable And Value Investing | 049
51. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (continued) Management will ensure that the Chairman is briefed of the issues raised in the risk reports. As such, in his absence, Management ensured that they sought inputs and directions from the Chairman of the RSC for decisions and approvals by the Committee. During RSC meetings, the members were engaged in active discussions with the Group Audit & Risk Department (“GARD”) on risk management matters affecting the Group and its operations. The emphasis during the year was on the operations in Malaysia and Philippines. The Group’s operations in the Philippines ranked higher in terms of the priority. On 19 April 2017, MAA General Assurance Philippines, Inc (“MAAGAP”) received the approval from the Securities & Exchange Commission of Philippines for the increase in the authorised and paid-up share capital via a capital injection by MAA International Group Ltd (“MAAIG”), thus making MAAGAP a subsidiary of the Group. GARD stepped up the frequency of its visits to MAAGAP to ensure agreed risk mitigation measures are implemented as scheduled. Process such as claims, underwriting and investment were the main focus for MAAGAP. The risk management and internal control for MAAGAP is supported by its Internal Audit Department, Legal & Compliance Department and various management committees. The reporting of compliance matters is reported at MAAGAP Board and MAAG Board. A full risk review was conducted by Deloitte Risk Advisory Sdn Bhd (formerly known as Deloitte Enterprise Risk Services) (“Deloitte”) on MAAG and presented to the Board on 29 August 2018. Concerns raised were on the risk of acquiring non-performing asset and dissemination of sensitive and unauthorised information to external stakeholders and media. Management has put in place policy and procedures to mitigate the highlighted risk. GROUP AUDIT AND RISK The day-to-day responsibility for the risk management function lies primarily with those entrusted with risk management responsibilities in the operating units. GARD, oversees the implementation of the Enterprise Risk Management (“ERM”) framework which is based on the ISO 31000 Risk Management Standard. GARD continued to monitor the adequacy of the risk management practices of the Group including the businesses in the Philippines and Australia to ascertain the extent of compliance with ISO 31000. To ensure greater awareness of managing risks amongst the work-force so that it becomes embedded into the work culture, GARD held discussions with departmental heads and the staff on the importance of this responsibility. Sessions were conducted either in classroom settings or through the dissemination of information on risk management practices through the in-house communication channel. They covered areas such as the importance of risk management in the dynamic business environment, risk accountability, methods/techniques of risk identification and evaluation, as well as risk mitigation strategies. The Company has co-sourced the function of audit and risk management to an external provider, Deloitte. The appointment of Deloitte is to provide operational level risk assessment to leverage on the existing ERM efforts in the Group. INTERNAL CONTROL STRUCTURE & RISK MANAGEMENT FRAMEWORK Management acknowledges its responsibility for the management of risks, for developing, operating and monitoring the system of internal controls and for providing assurance to the Board that it has done so in accordance with the policies approved by the Board. The internal control system is periodically assessed to determine its adequacy and level of effectiveness. The evaluation is performed by Deloitte using the controls rating parameter stated in the risk management framework. Further assurance is provided by GARD. The internal auditors collaborate with risk management to ensure areas with higher risks are assessed more frequently and more intensely. Details on the worked performed by the Internal audit function can be found in the Audit Committee Report of this Annual Report. 050 | Sustainable And Value Investing ANNUAL REPORT 2018
52. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (continued) Establish the context Risk assessment Risk identification Risk analysis Risk evaluation Monitoring and review Communication and consultation The diagram below encapsulates the Risk Management process described in the ERM Framework which serves to inform and provide guidance to Directors, senior management, and staff on managing risks in the Group: Risk treatment The ERM Framework sets out: • the fundamentals and principles of risk management that are to be applied in all situations and throughout all levels of the Group; • the process for identifying, assessing, responding, monitoring and reporting of risks and controls; • the roles and responsibilities of each level of management in the Group; and • the mechanisms, tools and techniques for managing risks in the Group. The GARD ensures that all elements of the ERM Framework are implemented throughout the Group and its subsidiaries in a consistent fashion. The process includes the systematic application of procedures and practices to the activities of risk identification, assessment, treatment, monitoring and reporting. A quarterly review of risks is undertaken to ensure that the risk profiles remains relevant. This risk management process is applied to all levels of activity in the Group, with the objective of establishing accountability and ensuring mitigation at the point of risk assumption. The Group is exposed to various financial risks such as credit, interest rate, foreign currency exchange rates, as well as operational risks. The tolerance level for each class of these risks is expressed through the use of a risk impact and likelihood matrix. Once the risk level is determined, the risk owner is obliged to deal with the relevant risks by adhering to the Group’s risk treatment guidance on the actions to be taken and target timeline for implementation of the action plan. The Group will only accept a commercial level of risk that provides reasonable assurance on the long term profitability and survival of the Group. ANNUAL REPORT 2018 Sustainable And Value Investing | 051
53. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (continued) OTHER KEY ELEMENTS OF INTERNAL CONTROL AND RISK MANAGEMENT • A comprehensive and detailed set of “SOPs” and “ICPs” encompassing every key activity in all major facets of operations which are constantly revised to reflect changing circ*mstances. They are also easily accessed for reference purposes through a system based portal. • The CEO/Group MD meets monthly with Senior Management to discuss and review the financial and business performance of all operating entities, new business initiatives and other corporate issues of the Group including any policy papers to be tabled at the parent Board. • Annual Budgets of all operating subsidiary and associate companies are prepared by the relevant Business/Operating units and evaluated by Head Office before being tabled for approval at the applicable Boards. The budgets which include both operational and financial parameters and longer term initiatives are monitored on a monthly basis at the Management meetings mentioned above. • A formal and structured Document Sign-Off Policy where relevant Department Heads (apart from the originator) must review, comment and sign off on any proposed changes or introduction of new operational policies before it can be submitted to the CEO/ Group MD for endorsem*nt and adoption. • An Audit & Governance Committee (“AGC”) comprising entirely of Independent Directors. The AGC is not restricted in any way in the conduct of its duties and has unrestricted access to the internal and external auditors of the Company and to all employees of the Group. The AGC and the Board is also entitled to seek such other third party independent professional advice deemed necessary to the discharge of its responsibilities. • Review of all proposals for material capital investment by the Investment Committee and approval of the same by the Board prior to undertaking the said expenditure. • Reviews by the AGC of all risk management and internal control issues identified by the external and internal auditors. Findings are communicated to the Management and the AGC with recommendations for improvements. Follow-up action to ascertain the implementation status of the recommended remedial actions is conducted by GARD and the AGC is furnished with the relevant update. • Adoption and implementation of the annual risk-based internal audit plan after it has been approved by the AGC. • Clearly defined terms of reference, authorities and responsibilities of the various committees which include the AGC, RSC, Nomination and Remuneration Committee, Investment Committee, Executive Committee and Business Committee. • A well-defined organizational structure with clear segregation of duties, accountabilities and responsibilities between Senior Management and Division/Department Heads including appropriately formalized and documented financial and non-financial authority limits. • Distribution of papers at least five (5) days in advance of a scheduled Board or Board Committee meeting so as to allow sufficient time for members to digest the contents and to seek additional information so as to arrive at an informed decision. The Board maintains complete and effective control over the strategies and direction of the Group especially with regard to reserved matters. REVIEW OF RISK MANAGEMENT AND INTERNAL CONTROL The Board is of the opinion that, there were no significant weaknesses identified during the year in the system of risk management and internal control, contingencies or uncertainties that could result in material losses and adversely affect the Company and the Group. The Company and the Group continue to take the necessary measures to strengthen their internal control structure and the management of risks. REVIEW OF THE STATEMENT BY THE EXTERNAL AUDITOR As required by Paragraph 15.23 of the Bursa Securities Main Market Listing Requirements, the external auditors have reviewed this Statement on Risk Management and Internal Control. Their limited assurance review was performed in accordance with Recommended Practice Guide (“RPG”) 5 (Revised) issued by the Malaysian Institute of Accountants. RPG 5 (Revised) does not require the external auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group. 052 | Sustainable And Value Investing ANNUAL REPORT 2018
54. DIRECTORS ’ RESPONSIBILITY STATEMENT IN RESPECT OF ANNUAL AUDITED ACCOUNTS The Directors are responsible for ensuring that the annual audited financial statements of the Company and the Group are drawn up in accordance with the requirements of the applicable approved accounting standards in Malaysia, the requirements of the Companies Act 2016 and the Listing Requirements of Bursa Securities Malaysia Berhad. The Directors are also responsible for ensuring that the annual audited financial statements of the Company and the Group are prepared with reasonable accuracy from the accounting records of the Company and of the Group so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2018. In preparing the annual audited financial statements, the Directors have: (a) applied the appropriate and relevant accounting policies on a consistent basis; (b) made judgments and estimates that are reasonable and prudent; and (c) prepared the annual audited financial statements on a going concern basis. ANNUAL REPORT 2018 Sustainable And Value Investing | 053
55. AUDIT COMMITTEE REPORT COMPOSITION AND MEETINGS The Audit & Governance Committee (“AGC”) comprises of four members, all of whom are Independent Non-Executive Directors. This meets the requirements of paragraph 15.09(1) (a) and (b) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). This includes the newly appointed Datin Seri Raihanah Begum bt Abdul Rahman as committee member with effect from 22 February 2018. Subsequently two of the audit committee members, Tan Sri Datuk Seri Razman Md Hashim and Tan Sri Ahmad bin Mohd Don had retired as members of the AGC on 5 June 2018. The details of members and their respective attendance record at meetings held during the financial year ended 31 December 2018 are as follows: Name of Committee No. of Meetings Attended Onn Kien Hoe (Chairman, Independent Non-Executive Director) 5/5 Dato’ Narendrakumar Jasani A/L Chunilal Rugnath (Member, Independent Non-Executive Director) 2/5 Tunku Dato’ Ahmad Burhanuddin bin Tunku Datuk Seri Adnan (Member, Independent Non-Executive Director) 5/5 Datin Seri Raihanah Begum binti Abdul Rahman (Member, Independent Non-Executive Director) (Appointed on 22.2.2018) 3/4 Tan Sri Datuk Seri Razman Md Hashim (Member, Independent Non-Executive Director) (Retired on 5.6.2018) 3/3 Tan Sri Ahmad bin Mohd Don (Member, Independent Non-Executive Director) (Retired on 5.6.2018) 3/3 The Chairman of the AGC, Mr Onn Kien Hoe is a member of the Association of Chartered Certified Accountants, The Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants. The AGC, therefore, meets the requirement of paragraph 15.09 (1) (c) of the Listing Requirements of Bursa Securities which stipulates that, at least one (1) member of the AGC must be a qualified accountant. The AGC met according to the schedule of at least once every quarter. The Chief Executive Officer/Group Managing Director was invited to all AGC meetings to facilitate direct communications as well as to provide clarification on audit issues and the Group’s operations. The Group Audit & Risk Department (“GARD”) and members of Senior Management were also present at these meetings. The Committee members were provided with the agenda and relevant papers 5 days before each meeting. Minutes of the AGC meetings were distributed to the Board for notation and the Chairman of the AGC reported on the key issues discussed, to the Board. TERMS OF REFERENCE The terms of reference of the AGC can be found on the Group’s website. 054 | Sustainable And Value Investing ANNUAL REPORT 2018
56. AUDIT COMMITTEE REPORT (continued) SUMMARY OF ACTIVITIES During the financial year ended 31 December 2018, the AGC carried out its duties as set out in the terms of reference. The principal activities were as follows: Financial Reporting and Annual Report The AGC reviewed the following Group financial statements and made recommendations to the Board for approval of the same: Date of AGC Meetings Quarterly financial results/Financial statements reviewed 22 February 2018 Unaudited fourth quarter results for the period ended 31 December 2017 12 April 2018 Audited Financial Statements for the year ended 31 December 2017 23 May 2018 Unaudited first quarter results for the period ended 31 March 2018 29 August 2018 Unaudited second quarter results for the period ended 30 June 2018 22 November 2018 Unaudited third quarter results for the period ended 30 September 2018 The review of the unaudited quarterly financial results is to ensure the disclosures are in compliance with Malaysia Financial Reporting Standards and applicable disclosure provisions of the Listing Requirements of Bursa Securities. The AGC review of the audited financial statements of the Company and of the Group for the financial year ended 31 December 2017 encompassed the financial position and performance for the year and ensured that it complied with all disclosure and regulatory requirements prior to recommending the statements to the Board for approval. Significant matters that were highlighted by the external auditors in the financial statements and noteworthy judgments made by the Management were also reviewed and discussed during the AGC meetings. Some of the significant matters that were discussed during the year were in relation to PN17 status and compliance with Bursa Listing requirements. The issue on PN17 can be found in the Independent Auditor’s Report of this Annual Report. External Audit • Reviewed the audit scope, audit strategy, audit plan and audit report issued for the financial year; • Assessed the objectivity and independence of the external auditors for the engagement period although a written assurance was also provided by them on their independence. This was done in April 2019 after the reporting period, together with the assessment on the reappointment of the auditors; • The AGC of the Company met 5 times during the financial year and had its private sessions with the External Auditors twice i.e. on 22 February 2018 and 22 November 2018 to discuss the audit plan, audit findings, financial statements and other matters that required the Board’s attention; • Evaluated the performance and effectiveness of the external auditors and made recommendations to the Board on their appointment and audit fees. The assessment was made based on the criterion specified in the Group’s assessment policy for the appointment/reappointment of an external auditor. Amongst the qualifying conditions applied during the said exercise was the level of knowledge the auditors brought to the assignment, capabilities, experience, output quality, their ability to provide constructive observations and recommendations in areas which required improvement and lastly, the effectiveness in planning and conducting the audit exercise; and • Reviewed major audit findings raised and management’s response, including the implementation status of previous audit recommendations. ANNUAL REPORT 2018 Sustainable And Value Investing | 055
57. AUDIT COMMITTEE REPORT (continued) Key Audit Matters ("KAM") • The International Standards on Auditing for KAM (ISA701) comes into effect for audit reports and financial statements for financial years ending on or after 31 December 2016. This standard requires a section to be included in the Independent Auditor’s Report to highlight those matters that, in the Auditor’s professional judgement, were deemed most significant during the course of the audit. • The AGC has proactively engaged in active discussions with the external auditors for a better understanding of the Group’s role in providing the required information needs in order to ensure compliance and a smooth transition process. The AGC also ensured that mechanisms were put in place especially with regard to mutually agreed timelines so that full co-operation was extended by both the operating entities in the Philippines and Australia (who have a different set of External Auditors) to assist PricewaterhouseCoopers PLT (“PwC”), the Company's external auditors in completing this assessment in a timely and effective manner. Issues under KAM are reported in the Independent Auditor’s Report of this Annual Report. Internal Audit • Reviewed the annual audit plan for adequacy of scope and coverage of the key activities of the Group. Audit areas were discussed together with the audit procedures. Risks affecting the audit areas determined the frequency of audit coverage. The annual audit plan was approved for adoption following this review; • Reviewed the internal audit reports, audit recommendations and management’s responses to the same and actions taken to improve the system of internal controls and procedures. Internal audit reports in the financial year covered both the functions of the Company and its subsidiaries; • Monitored the implementation of the audit recommendations to ensure all key risks and controls have been addressed; and • Reviewed the Statement on Risk Management and Internal Control to confirm that it is consistent with their understanding of the state of internal controls of the Group and recommended the same to the Board for inclusion in the Annual Report. GROUP AUDIT & RISK The AGC is supported by GARD which collaborates with the outsourced service providers in discharging the internal audit role for the Group and its principal operating subsidiaries. GARD is headed by a Senior Manager with 17 years of internal audit experience and assisted by a Manager. Both are member of The Malaysian Institute of Accountants and Institute of Internal Auditors. In order to strengthen the controls within the Group, an outsourced service provider, that is Deloitte Risk Advisory Sdn Bhd (formerly known as Deloitte Enterprise Risk Services) (“Deloitte”) has been engaged for internal audit, risk management and sustainability reporting for the Group. The internal audit for Columbus Capital Pte Limited (“CCA”), an associate company in Australia is supported by BDO and Deloitte Philippines was appointed for MAA General Assurance Philippines, Inc (“MAAGAP”). The appointed service provider who applies the International Professional Practises Framework assisted the Board, AGC and Senior Management by providing an independent and objective assurance/assessment on the adequacy and effectiveness of the internal control system, risk management procedures and governance processes. The audit scope covers operational, financial and compliance of the Group and the subsidiaries. The results of the audits will be reported to the AGC on a quarterly basis to highlight control issues with risk exposures and effectiveness of the existing mitigating measures. The total cost incurred for internal audit function for the financial year ended 31 December 2018 was RM496,000 compared to RM240,000 in FY2017. The higher cost this year is attributed to increase in the number of staff in GARD and the appointment of outsourced service provider for MAA Group Berhad (“MAAG”) and MAAGAP. A review on corporate governance and compliance function was conducted to assess the effectiveness of the existing controls. For corporate governance, concerns were raised on PN17 status of the Company. There were no major issues for the compliance review except for some minor improvements on the compliance report. Other audits were also conducted on Kasturi Academia Sdn Bhd (“Kasturi”) and Indopelangi Sdn Bhd (“Indopelangi”). Issues highlighted mainly to enhance the existing policy and procedures. The internal audit of MAAGAP is focussed on the main sections i.e Underwriting, Claims and Investment. Issues that require attention were on authority limits, compliance to premium tariff and reinsurance arrangement. Branches audit were also performed to assess compliance towards company’s policies and procedures. As for the Sydney based CCA, the outsourced internal auditors, BDO finalised the audit on credit assessment in February 2018 and custodian audit in September 2018. As for credit audit, issues were on lack of documentation and inconsistent practises against the policy and procedures. However, all risks highlighted were rated as low risk. The audit on custodian audit noted a few minor shortcomings in terms of managing physical documents. All rectification measures have been implemented. Internal audit reports were tabled to the AGC of the Company in respect of the above mentioned entities. 056 | Sustainable And Value Investing ANNUAL REPORT 2018
58. SUSTAINABILITY STATEMENT MAA Group Berhad (“MAAG”) is proud to present our Sustainability Report for the financial year ended on 31st December 2018. As the socioeconomic dynamics of the world becomes ever more globalised, the demand for businesses to become sustainably and responsibly-run becomes increasingly evident. At MAAG, we are not merely focused on our efforts to foster the financial performance of our businesses but to integrate sustainable practices such as environmental conservation and social welfare into the heart of our business decisions. We are determined to make the three pillars of Economic, Environmental and Social (“EES”) concerns key parts of our business operations. As a business, our commitment to continue providing favourable returns to our shareholders and investors is of great importance to MAAG. This pursuit of financial success, however, must not take precedence over our concerns regarding any negative impact this may have on the environment as well as our contribution to the socioeconomic welfare of the communities MAAG operate in. Our pursuit of this balance is manifestly shown through the sustainable strategies we have carefully mapped out and implemented. With this report, we are pleased to present the progress of the activities we have undertaken on our sustainability reporting journey to all interested stakeholders. Our Reporting Approach MAAG’s Sustainability Report has been prepared with reference to the latest Global Reporting Initiative (“GRI”) Standards and follows the GRI Standards Reporting Principles for defining reporting content, which include: • • • • Stakeholder Inclusiveness: capturing our stakeholder's expectations and concerns; Sustainability Context: presenting our performance in the wider context of sustainability; Materiality: identifying and prioritising the key sustainability issues that our Group encounters; and Completeness: reporting all sustainability topics that are relevant to our Group and influence our stakeholders. The Material references included in this report are as stated below: • • • • GRI 201-1: Economic Performance GRI 205-3: Anti-Corruption GRI 401-1: Employment GRI 419-1: Socioeconomic Compliance * GRI 416-2 on Customer Health and Safety was originally selected as a material disclosure, however has been omitted due to the independence of MAA Medicare Foundation from the Group in its management and operation. For more information on the Materiality Disclosures, please refer to the Materiality Matrix on page 060. Scope and Boundaries This report identifies the sustainability practices and progress of the Group, including our Malaysian and Philippines based subsidiaries, unless otherwise stated. The reporting will cover the period of 1 January 2018 to 31 December 2018. References to ‘MAAG’, ‘the Company’, ‘the Group’, ‘the Organisation’, ‘our’ and ‘we’ refer to MAA Group Berhad and relevant subsidiaries. References to ‘MAAGAP’ refer to our subsidiary, MAA General Assurance Philippines Inc. Our Sustainable Governance To manage the Group’s sustainability matters, we have incorporated our sustainability agenda under the Risk & Sustainability Committee (“RSC”). The RSC is responsible for managing and reviewing the Group’s sustainability strategy and communicating relevant concerns to the Board. The RSC ensures that the Group’s best practices and disclosures on sustainability are made in accordance with the required standards. Other aspects of corporate governance are elaborated from page 042 to 045. Feedback Do get in touch with us should you have any input or feedback on our Sustainability Report. Please direct your correspondence to: Name : Angeline Lim Email :AngelineLim@maa.my Telephone : +603 6256 8000 Fax : +603 6251 0373 Address : MAA Group Berhad 13th Floor, No. 566, Jalan Ipoh 51200 Kuala Lumpur Malaysia ANNUAL REPORT 2018 Sustainable And Value Investing | 057
59. SUSTAINABILITY STATEMENT (continued) RISK & SUSTAINABILITY COMMITTEE CHAIRPERSON’S MESSAGE At MAAG, we firmly believe that for a company to be acknowledged as truly successful, it must also create a meaningful relationship with the community it serves. To this end, the pursuit of sustainability is an essential component that must be integrated into all aspects of our business value chain. To achieve this, the leadership at MAAG has taken steps to incorporate economic, social and environmental (“EES”) considerations and safeguards throughout the planning and execution of our business practices. My goal is for MAAG to be viewed as a sustainably successful business; one that will draw clients and investors through our reputation as an organisation that embraces the urgent need for companies to embrace their EES obligations. Implementing sustainable practices is not without its challenges, as it must run through the entire group structure. I am confident that MAAG can achieve this standard, as the Group is prepared to pursue our sustainability goals first by diligently managing the effects of shifting global trends. These shifts will inevitably impact our business, and it is through responsible corporate governance and a culture of sustainable practice that we will adapt and thrive as a sustainable enterprise. The sustainability agenda we are continuously instilling in the Company will provide a competitive advantage for us by allowing us to adapt proactively in line with shifts in investor focus, customer demand, and government regulations. These issues are carefully considered during the development of our long term business strategy and plays a key role in mapping out the future of MAAG. While businesses are ultimately concerned with profitability, this must never overshadow our responsibility in engaging and giving back to the local community we operate in. This is currently done through our Corporate Social Responsibility (“CSR”) strategy. In 2018, we launched the MAA Tuition Scholarship for students to underscore our belief that the opportunity to pursue an education is a crucial factor in raising the socioeconomic standing of the community as a whole. We have also donated to Non-Governmental Organisations (NGOs) and charitable causes through our CSR initiatives as well as through our affiliate, The Budimas Charitable Foundation. With the MAA Medicare Charitable Foundation, we have created a vehicle to drive subsidised treatment under the Patients’ Welfare Fund (“PWF”) and the Foundation has also sponsored underprivileged children with school supplies such as stationary and bags under the Kids@Medicare programme. Our hope is that these programs will continue to encourage and drive positive change and growth for both the greater community and MAAG. It is our solemn promise to integrate economic, environmental and social considerations into our business decisions. The MAAG Board of Directors is unanimous in our commitment towards conducting our business in a balanced and sustainable manner. With this, we intend to continue our sustainability journey over the coming years building on the foundations we have since set. 058 | Sustainable And Value Investing ANNUAL REPORT 2018
60. SUSTAINABILITY STATEMENT (continued) Stakeholder Engagement MAAG places great emphasis on understanding the needs and concerns of our stakeholders. We believe proactive stakeholder engagement fosters greater confidence in our business. More importantly, it allows us to gleam valued insights on how the organisation can grow and improve. Our stakeholders have been segmented into seven key groups, allowing us to ascertain the needs and requirements of each segment. This year, we have reached out to our stakeholders through surveys to obtain feedback on any and all material concerns that they may have with MAAG and our business practices. The table below illustrates our methodology:Table 1: Stakeholder Engagement Table Stakeholder Group Mode of Engagement Frequency of Engagement Concerns Raised Shareholders / Investors Annual General Meeting Annual Report Quarter Financial Report Analyst Briefing Extraordinary General Meeting Shareholder Communication Announcement on Bursa Malaysia and Corporate Website Annually Annually Quarterly As and when needed As and when needed As and when needed As and when needed Economic Performance Corporate Governance Employees Annual Performance Appraisal Briefings and Trainings Event, Celebrations and Sporting Activities Management, Operational and Committee Meetings Annually Periodic Periodic As and when needed, monthly and Periodic Economic Performance Career Progression Fair Benefits Business Integrity Customers Feedback Channels such as Emails, Phone Calls and Hotlines Website and Social Media Product Launches and Roadshows Marketing and Promotional Programmes and Events As and when needed As and when needed As and when needed As and when needed Product Delivery Customer Privacy, Health & Safety Environmental Performance Government / Regulators Income Tax Filing Annual Return Official Meetings and Visits Industry Events and Seminars Annually Annually As and when needed As and when needed Regulatory Compliance Occupation & Customer Health & Safety Suppliers / Contractors Product Launches and Roadshows Meetings and Site Visits Supplier Assessment System Briefings and Trainings As and when needed As and when needed As and when needed As and when needed Business Integrity Ethical Procurement Employment Conditions Local Communities Community Outreach and Development Programmes Strategic Partnerships Charitable Contributions Website and Social Media Periodic Upon Mutual Agreement As and when needed As and when needed Community Outreach Employment Media Press Releases Site Visits Interviews Events Website and Social Media As and when needed As and when needed As and when needed As and when needed As and when needed Regulatory Compliance CSR Initiatives   ANNUAL REPORT 2018 Sustainable And Value Investing | 059
61. SUSTAINABILITY STATEMENT (continued) Materiality Matrix Effectively identifying material sustainability concerns for our organisation is crucial to ensure that our report reflects the topics most relevant to us. The material topics for MAAG were determined through a stakeholder engagement workshop; during which due consideration was given to the concerns identified from the survey responses in the Stakeholder Engagement Table 1. The materiality matrix is determined through ranking the concerns and topics by importance on a scale of low-to-high measuring the economic, environmental, and social (“EES”) impact of our business activities then marked accordingly by the weight of importance placed by our stakeholders. High 5 10 11 2 3 6 4 Medium Priority Influence on stakeholder assessments & decisions 9 8 Top Priority 1 7 List of Identified Topics for the 2018 MAAG Sustainability Report 1. GRI 201-1: Economic Performance 2. GRI 205-3: Anti-corruption 3. GRI 306-2: Effluent and Waste 4. GRI 307-1: Environmental Compliance 5. GRI 401-1: Employment 6. GRI 405-1: Diversity and Equal Opportunity 7. *GRI 416-2: Customer Health and Safety 8. GRI 418-1: Customer Privacy 9. GRI 419-1: Socioeconomic Compliance 10. GRI 204-1: Procurement Practices Low Significance of economic, environmental & social impacts to MAAG High 11. GRI 302-4: Energy Figure 1: Positioning and Selected Materiality Topics for MAAG The materiality matrix in Figure 1 illustrates the material topics ascertained for MAAG. The results are based on the prioritisation of concerns by the management during the materiality assessment workshop. Stakeholder concerns that were not deemed material to the Group were taken into account and noted for future planning; concerns that resonated strongly with management were given prioritised consideration. After due deliberation, the disclosure of *GRI 416-2 on Customer Health and Safety was omitted due to the structure of the MAA Medicare Charitable Foundation being independently managed and operated from the Group. The following pages provide a detailed account of our management approach for the selected material sustainability topics along with the relevant performance data. Economic Performance In 2011 the Group began taking steps to trade in major subsidiaries, and has since transitioned to a Practice Note 17/2005 or PN17 status company. A sound economic strategy is key to guaranteeing our Group’s profit, operational cash flow, and dividend distribution is not only maintained but will grow sustainably. Stable economic performance is a key target for MAAG in order to display a favourable business representation, an important factor to sustain as the Group looks to acquire new businesses that align with the Group’s vision, allowing us to expand our reach as well as steer ourselves back to the regularised main market listing. In order to ensure that our Group’s economic performance is optimally managed, we are guided by the Group-wide Standard Operating Procedures (“SOPs”) on the Budget Process (SOP-SP-01), which is managed by the Group Finance Department. We monitor our Group’s financial performance on a monthly basis for all major subsidiaries and compare our budgets against the data provided on a quarterly basis. In order to best achieve the Group financial targets, we have invested heavily in our human capital through training initiatives. To further strengthen the infrastructure of the Group’s financial management, we also engage external auditors for regular financial audits, undergo internal audit for business operations and engage risk management advisory for the Group. Please refer to the Annual Report page 073 for the detailed Financial Position of MAAG. 060 | Sustainable And Value Investing ANNUAL REPORT 2018
62. SUSTAINABILITY STATEMENT (continued) Anti-Corruption MAAG strives to undertake all our business operations with integrity. This is a critical issue to any successful company, as we seek to ensure our stakeholders confidence in the management of the business as well as ensuring our reputation remains unblemished in the public eye. Corruption and fraudulent practices are some of the main causes of inefficiency for any business, these actions result in serious ramifications from criminal sanctions, the halting of further business activities, as well as reputational damage in the areas we operate. At MAAG, we have undertaken rigorous measures in order to avoid corruption at any level. We will continuously remain vigilant in upholding any and all applicable local and international laws that apply to our businesses. At MAAG, we have established an anti-fraud framework, Enterprise Risk Management (“ERM”) mechanisms and whistle-blowing policies that govern and are in place at all our subsidiaries. Where our operations cross Malaysian boundaries, these subsidiaries are subject to additional international regulations, if applicable, with which they fully comply. To ensure that corruption practices are actively discouraged, MAAG has engaged legal advisors to draft internal anti-corruption policies, as well as conduct training at all levels of the Group on relevant procedures for dealing with corrupt practices. Through this, all the Group’s employees and management adhere to the policy. The Compliance division manages the implementation of all internal training and reporting processes to the management and Board of Directors. Any incidents related to financial corruption will be the purview of our external auditors, while on an operational level our internal audit processes are in place to ensure any malfeasance is dealt with. In 2018, no cases relating to confirmed incidents of corruption, dismissal of employees due to corruption, termination of business contracts due to corruption or public legal cases against the Company related to corruption were found throughout the Group. MAAGAP The MAAGAP Anti-Fraud policy was formulated in compliance with the guidelines set forth by the Insurance Commission through its Circular Letter (CL) No. 2016-50 (06-Sep-16). The policy identifies the measures that the Company shall implement to prevent, deter and detect fraud. The policy applies to all employees and officers of the Company. The Philippines subsidiary has an Anti-Fraud Investigation Team, which comprises management-level representatives from the HR, IA and Legal & Compliance departments. Employment For MAAG, it is crucial that we strive to be a fair and equitable employer that genuinely cares for the growth and future of its employees. Good talent is becoming an increasingly difficult commodity to acquire, particularly with the demand for strong communication skills that our Group requires. The employment process at MAAG is managed by our Human Resources (“HR”) Department, with the Head of HR reporting directly to the Group Managing Director. All relevant details are reported to the Remuneration and Nomination Committee (“RNC”) who are made up of members of the Board. The HR Group then prepares a comprehensive report detailing the turnover rate for the RNC annually. To maintain the quality management of our staff, all HR employees must attend a minimum of 4 training sessions per year to ensure that any updates in labour laws and management efficiency are up to date and internalised for Group implementation. Our HR Policies are developed and managed at Group level through our Handbook and Internal Control Procedures (“ICPs”), our policies are reviewed annually by Group HR with the support of all departments. Individual employee performance is evaluated through set annual KPIs. We encourage all our employees to consult HR to have a more in-depth understanding of their KPIs, HR policies and ICPs. Within this reporting period, we have recorded a total of 329 employees, which take into account 108 new employees and 84 employee turnovers. MAAG experienced a hiring rate of 26%, which comprised mostly of the under 30-year old group, and males had a higher ratio of hire over females. The Group had a turnover rate of 33% of which the majority came from the 30-to-50-year old age group and were equally represented from a gender perspective in 2018. Please refer to Figure 2 for the percentage breakdown of employee new hires by age and gender, as well as to Figure 3 for the percentage breakdown of employee turnover by age and gender: a) The total number of new employee hires in 2018 was 108 employees, and the percentage breakdown by age and gender can be viewed in Figure 2: 8% 33% 59% Under 30 years 30 - 50 years old Over 50 years old 44% 56% Male Female Figure 2: Percentage Breakdown of New Employees Hired by Age and Gender b) The total number of employee turnovers in 2018 was 84 employees, and the percentage breakdown by age and gender can be viewed in Figure 3: 8% 33% 59% Under 30 years 30 - 50 years old Over 50 years old 44% 56% Male Female Figure 3: Percentage Breakdown of Employees Turnover by Age and Gender ANNUAL REPORT 2018 Sustainable And Value Investing | 061
63. SUSTAINABILITY STATEMENT (continued) Socio-Economic Compliance Socioeconomic compliance is an important aspect of maintaining the image and reputation of MAAG. From the group level, MAAG have set in place several policies such as the Anti-Fraud Framework, Policy of Conflict of Interest, Compliance Framework and Enterprise Risk Management in place, in order to ensure that compliance to social and economic legislation is adhered. In the Philippines Insurance industry, MAAGAP have achieved a growth in market share through an increased volume of our branch operations, as well as solidified and expanded our relationship with relevant government agencies relating to insurance companies' operations. Our good performance, particularly in the settlement of claims, has assisted with shaping and stabilising the local industry, resulting in a more competitive market. Due to the strict regulation of the insurance businesses, we explore MAAGAP’s management approaches in further detail, as maintaining MAAGAP’s operating licence is key to maintaining our ranking as a dominant player in the industry. MAAGAP must ensure adherence to the Insurance Commission's regulation by obtaining a Certificate of Authority as proof of compliance to all the requirements of law to transact insurance business. An ISO management Team, designated by the President and CEO of MAAGAP, is in place to manage our operations and policy compliance. This safeguard us against any audit conducted on our operations, such as the annual random audit of policies by the Insurance Commission (“IC”) in the Philippines. Management of MAAGAP is responsible for reviewing the audit results and managing the improvement of MAAGAP’s processes based on the ISO team’s recommendations. On a group level, HR works to monitor due processes and reported grievances to ensure that violations against the Company's Code of Conduct are kept to a minimum. Any offenders of the Group’s internal policies will be dealt through disciplinary measures including suspension and termination of employment. The Group considers socioeconomic compliance a priority and has made its implementation a company-wide effort. Further details on these policies are laid out in our Company quality plan. MAAGAP Our subsidiary, MAAGAP non-life insurance is one of the fastest growing insurance companies and ranks Top 15 in the country. The growth has increased profits and investment funding, ultimately leading to competitive employee compensation packages in order to attract and retain talent. MAAGAP have obtained ISO 9001:2015 certification to ensure good management in its operations. There were no significant fines, non-monetary sanctions or cases brought through dispute resolution mechanisms for non-compliance with laws and regulations that resonates with anti-bribery or corruption and anti-competition law within for financial year of 2018 in our Malaysian subsidiaries. Our Philippines subsidiary, MAAGAP has received one minor fine for a breach in tariff rates. The cause of the tariff rate breach is due to the industry average rates being below the allowed tariff rate in order to remain competitive. MAAGAP’s mitigation plan is to maintain consistent communication with the Insurance Commission on this issue. 062 | Sustainable And Value Investing ANNUAL REPORT 2018