ANNUAL REPORT 2011 1dayagroup.com.my/zata_da/src/doc/dmb_annual_report_2011... · 2019. 12. 12. ·...

ANNUAL REPORT 2011 1

Corporate Information

Corporate Structure

Financial Information

Profile of Directors

Chairman’s Statement

Corporate Social Responsibility

Corporate Governance Statement

Statement on Internal Control

Audit Committee Report

Financial Statements

Directors’ Responsibilities Statementon Financial Statements

Analysis of Shareholdings

Additional Compliance Information

List of Properties 2011

Notice of Ninth Annual General Meeting

Statement Accompanying Notice of NinthAnnual General Meeting

Form of Proxy

02040708122224303235

119

120123126128132

Contents

COMMITTEDACCOUNTABLERESOLUTE

ETHICAL

DAYA MATERIALS BERHAD (636357-W)2

BOARD OF DIRECTORS

Dato’ Azmil Khalili Bin Dato’ KhalidChairman/Independent Non-Executive Director

Dato’ Mazlin Bin Md. JunidExecutive Vice Chairman,President & Group Chief Executive Officer

Tham Jooi LoonGroup Managing Director

Fazrin Azwar bin Md. NorSenior Independent Non-Executive Director

Dato’ Sri Koh Kin Lip JPIndependent Non-Executive Director

Lim Soon FooIndependent Non-Executive Director

Ronnie Lim Hai LiangAlternate Director to Mr Lim Soon Foo

AUDIT COMMITTEE

Fazrin Azwar Bin Md. NorChairman/Independent Non-Executive Director

Dato’ Azmil Khalili Bin Dato’ Khalid Member/Independent Non-Executive Director

Dato’ Sri Koh Kin Lip JPMember/Independent Non-Executive Director

COMPANY SECRETARY

Chai Churn Hwa (MAICSA 0811600)Suite 18.01, 18th FloorMWE PlazaNo. 8, Lebuh Farquhar10200 PenangTel : 04-263 7762Fax : 04-263 5901

REGISTERED OFFICE

Suite 18.01, 18th FloorMWE PlazaNo. 8, Lebuh Farquhar10200 PenangTel : 04-263 7762Fax : 04-263 5901

HEAD/MANAGEMENT OFFICE

D5-1-10, Solaris DutamasNo.1, Jalan Dutamas 150480 Kuala LumpurMalaysiaTel : 03-6205 3170Fax : 03-6205 3171 Email : [email protected] Website : www.dmb.com.my

PRINCIPAL BANKERS

Hong Leong Bank Berhad AmIslamic Bank BerhadAmBank (M) Berhad Malayan Banking Berhad United Overseas Bank (Malaysia) Bhd

AUDITORS

Ernst & Young (AF 0039)Chartered AccountantsLevel 23A, Menara MileniumJalan DamanlelaPusat Damansara50490 Kuala LumpurTel : 03-7495 8000Fax : 03-2095 5332

REGISTRAR

Symphony Share Registrar Sdn. Bhd.55 Medan Ipoh 1AMedan Ipoh Bistari31400 IpohPerak Darul RidzwanTel : 05-547 4833Fax : 05-547 4363

STOCK EXCHANGE LISTING

MAIN Market of Bursa Malaysia Securities BerhadStock Name : DayaStock Code : 0091

DAYA MATERIALS BERHAD (636357-W)

Corporate Information

2


Committed


Corporate Structure

Daya Materials Berhad (“DMB”) was incorporated in Malaysia under the Companies Act, 1965 on 8 December 2003 as a public limited company. The principal activities of DMB are that of investment holding and provision of management services to its subsidiary companies. The particulars of the subsidiaries, are as follows:

Subsidiary Companies

Date and Place of

Incorporation

Issued and Paid-up Share

Capital

Effective Equity

Interest Principal Activities

Held by the Company

Daya Polymer Sdn. Bhd. (324073-U) (“DPSB”)

21-11-1994/ Malaysia

RM6,000,000 100.00% Manufacturing of semi-conductive compounds and cross-linkable polyethylene compounds for cables and wires and trading of specialty chemicals, related polymer compounds and hardware.

DMB Marketing & Trading Sdn. Bhd. (724943-U) (“DMTSB”)


RM2.00 100.00% General trading, marketing and investment holding.

Meridian Orbit Sdn. Bhd. (780242-P) (“MOSB”)


RM100,000 100.00% Investment holding.

Daya Secadyme Sdn. Bhd. (188542-W) (“DSSB”)

25-10-1989/Malaysia

RM1,008,000 100.00% Trading in petrochemicals products and investment holding.

Daya CMT Sdn. Bhd. (208646-U) (“DCMT”)

28-11-1990/Malaysia

RM8,000,000 100.00% Providing industrial facilities management including builder works, facility operation and maintenance services, upgrade, retrofit, design and build plant facilities.

DMB International Limited (“DINL”)

13-8-2008/Hong Kong

HKD3,000,000 100.00% Center for regional procurement and trading as well as international investments.

Daya Proffscorp Sdn. Bhd. (173309-T) (“DPRO”)

24-8-1988/Malaysia

RM1,650,000 100.00% Ownership and hiring of forklifts, cranes and heavy machineries and provision of related manpower services in the onshore and offshore oil & gas industry.

Daya Urusharta Sdn. Bhd. (863073-M) (“DUSB”)

3-7-2009/Malaysia

RM100,000 100.00% Property investment holding.

Daya OCI Sdn. Bhd. (291138-U) (“DOCI”)

2-3-1994/Malaysia

RM5,000,000 100.00% Supplying of equipment and specialty chemicals for oil & gas process plants, a provider of installation and maintenance services for air-conditioning and ventilation system, a provider for automatic welding services for offshore pipeline installation, a provider for maintenance services for both onshore plants and offshore facilities, a provider for warehousing and forwarding agency.

Held through subsidiaries

Daya Hightech Sdn. Bhd. (791561-V) (“DHSB”)

10-10-2007/Malaysia

RM100,000 100.00% Manufacturer of polymer compounds for cables and wires.

Seca Chemicals and Catalysts Sdn. Bhd. (710772-A) (“SCCSB”)

26-09-2005/Malaysia

RM100,000 100.00% Dealing in petroleum, oil & gas products and consulting services.



Corporate Structure(cont’d)

Subsidiary Companies

Date and Place of

Incorporation

Issued and Paid-up Share

Capital

Effective Equity

Interest Principal Activities

Held through subsidiaries (cont’d)

SD Equipment Sdn. Bhd. (651398-P) (“SDESB”)

05-05-2004/Malaysia

RM10,000 100.00% Providing safety equipment and apparels.

Seca Engineering and Manpower Services Sdn. Bhd. (704437-A) (“SEMSSB”)

28-07-2005/Malaysia

RM100,000 100.00% Providing engineering and manpower services.

Metriwell Sdn. Bhd. (736674-D) (“MWSB”)

06-06-2006/Malaysia

RM1,000 80.00% Dormant.

Daya Clarimax Sdn. Bhd. (597108-K) (“DCLX”)

28-10-2002/Malaysia

RM2,000,000 100.00% Providing recycling of waste solvent and manufacturing of high purity electronics and technical solvents.

Daya FMM Sdn. Bhd. (418776-U) (formerly known as CMT Industry (Kulim) Sdn. Bhd.) (“DFMM”)

27-01-1997/Malaysia

RM350,004 100.00% General contractors and related services.

Daya Land & Development Sdn. Bhd. (524602-D) (formerly known as IHP Supply Sdn. Bhd.) (“DLDSB”)

25-08-2000/Malaysia

RM500,000 100.00% Trader of all kinds of building material, hardware equipment and other related products.

PT Daya Secadyme Indonesia (“PTDSI”)

14-01-2010/Indonesia

USD100,000 100.00% Trading in petrochemicals products.

Daya Proffscorp (Sabah) Sdn. Bhd. (922055-P) (“DPROS”)

15-11-2010/Malaysia

RM2.00 100.00% Ownership and hiring of forklifts, cranes and heavy machineries and provision of related manpower services in the onshore and offshore oil & gas industry.

Ultrafest Sdn. Bhd. (968989-X) (“USB”)

20-11-2011/Malaysia

RM2.00 100.00% Investment holding.

Zen Projects Sdn. Bhd. (974746-K ) (“ZPSB”)

11-01-2012/Malaysia


Joint Venture Company

Daya Sheffield Sdn. Bhd. (919845-U) (formerly known as Daya Oci-Ascent Sdn. Bhd.) (“DSFSB”)

26-10-2010/Malaysia

RM100,000 51.00% Recruiting and providing specialised, qualified and professional personnel for the onshore and offshore oil and gas industries.

Daya NCHO International Limited (formerly known as Daya Clarimax International Limited) (“DNIL”)

26-8-2010/Hong Kong

HKD 100,000 60.00% Investment holding to invest in tank services regionally.

Daya NCHO Sdn. Bhd. (933292-U) (“DNSB”)

22-2-2011/Malaysia

RM1,000,000 60.00% Providing ISO tank cleaning, repair and maintainance services.

Daya Campo (Sabah) Sdn. Bhd. (956357-W) (“DCSB”)

9-8-2011/Malaysia

RM10,000 60.00% Investment holding.

Terra Hill Development Sdn. Bhd. (971347-V) (“THDSB”)

12-12-2011/Malaysia




Corporate Structure(cont’d)



REVENUE(RM’000)

‘07 ‘08 ‘09 ‘10 ‘11

62

,25

8

‘06

29

,32

0

22

4,3

45

18

8,2

44

17

4,2

23

28

1,7

46

EBITDA(RM’000)

‘07 ‘08 ‘09 ‘10 ‘11

9,3

81

‘06

4,3

06

19

,88

3 24

,03

2 29

,20

6

30

,85

3

PBT(RM’000)

‘07 ‘08 ‘09 ‘10 ‘11

8,5

58

‘06

4,0

23

18

,28

4

20

,37

7

22

,73

3

23

,76

0

PAT(RM’000)

‘07 ‘08 ‘09 ‘10 ‘11

6,8

41

‘06

2,9

45

12

,14

8

13

,66

4 16

,96

6

17

,44

3

TOTAL EQUITY(RM’000)

‘07 ‘08 ‘09 ‘10 ‘11

10

1,2

88

‘06

32

,57

7

11

3,3

93

14

3,4

81

17

7,1

56

21

0,6

28

TOTAL ASSETS(RM’000)

‘07 ‘08 ‘09 ‘10 ‘11

11

3,7

60

‘06

39

,73

4

20

4,2

73

22

1,9

20 2

92

,05

0

37

8,1

15

Financial Information


Act Act Act Act Act Act2006

RM’0002007

RM’0002008

RM’0002009

RM’0002010

RM’0002011

RM’000

Revenue 29,320 62,258 224,345 188,244 174,223 281,746

EBITDA 4,306 9,381 19,883 24,032 29,206 30,853

PBT 4,023 8,558 18,284 20,377 22,733 23,760

PAT 2,945 6,841 12,148 13,664 16,966 17,443

Total Equity 32,577 101,288 113,393 143,481 177,156 210,628

Total Assets 39,734 113,760 204,273 221,920 292,050 378,115


Profile of Directors

Dato’ Azmil Khalili bin Dato’ Khalid

Malaysian, aged 52,Independent Non-Executive Chairman.

He was appointed to the Board on 19 September 2007. Dato’ Azmil graduated with a Bachelors Degree in Civil Engineering and subsequently with a Masters in Business Administration. He began his career with a United Kingdom company, Tarmac National Construction and upon his return to Malaysia worked for Trust International Insurance and Citibank NA.

Dato’ Azmil is currently the President & Chief Executive Officer of MTD Capital Bhd and concurrently holds the same position in MTD ACPI Engineering Berhad. He is also the Chairman of foreign subsidiaries of MTD Capital Bhd namely, MTD Walkers PLC, a company listed on the Colombo Stock Exchange in the Republic of Sri Lanka. Dato’ Azmil holds directorships in other public companies namely, MTD InfraPerdana Bhd and Metacorp Berhad, both are subsidiaries of MTD Capital Bhd. Dato’ Azmil is also a director of Environment Idaman Sdn. Bhd., a solid waste concession company; and a Trustee of the Perdana Leadership Foundation. Dato’ Azmil also sits on the board of several private limited companies.

Dato’ Azmil is the Chairman of the Nomination Committee and a member of the Audit Committee and Remuneration Committee of the Company.

Dato’ Mazlin bin Md Junid

Malaysian, aged 50,Executive Vice Chairman, President & Group Chief Executive Officer.

He was appointed to the Board on 16 August 2007. Dato’ Mazlin holds a Bachelor of Science in Mechanical Engineering from Brighton Polytechnic, Sussex, England and a Master in Business Administration from Cranfield University, England. He has extensive experience in corporate management, business and finance after serving Sime Darby Berhad and Aspac Executive Search Sdn. Bhd. as the Group Manager and the Managing

Director respectively.

Dato’ Mazlin was formerly an Independent, Non-Executive Director of Sapura Industrial Berhad and Sapura Technology Berhad. He was also formerly an Independent Non-Executive Director and Chairman of the Audit Committee of MTD Infraperdana Berhad.

He is also a director of several private limited companies which he owns.


Profile of Directors(cont’d)

Tham Jooi Loon

Malaysian, aged 46,Group Managing Director.

He was appointed to the Board on 30 May 2005. Mr. Tham Jooi Loon joined DPSB in 2003 as a Director. He graduated from McGill University in Montreal, Canada in 1988 with a Master of Business Administration specialising in corporate finance. He is also a qualified Chartered Financial Analyst. He started his career as a credit analyst with Chase Manhattan Bank in Kuala Lumpur in 1989. In 1995, he joined UBS and later became its Executive Director responsible for Malaysian investment banking and Asia-Pacific Mergers and Acquisitions practices. In 2003, Mr. Tham was appointed as a Director of Tradewinds Corporation Berhad and PIHP (Selangor) Berhad, both posts he held until 2005. Presently, he is a Director of several private

companies in Malaysia and Hong Kong.

Fazrin Azwar Bin Md Nor

Malaysian, aged 46,Independent Non-Executive Director.

He was appointed to the Board on 30 May 2005. En. Fazrin graduated from the University of Malaya with a Bachelor of Law (LLB) Honors Degree. He is an Advocate and Solicitor and a member of the Malaysian BAR. He is currently the Managing Partner of Messrs. Azwar & Associates.

En. Fazrin is also currently an Independent Non-Executive Chairman of Mercury Industries Berhad, an Independent Non-Executive Director and Audit Committee member of both Poh Kong Holdings Berhad and Tong Herr Resources Berhad and an Independent Non-Executive Director of Ire-Tex Corporation Berhad, all listed on the Main Market of Bursa Malaysia.

En. Fazrin is also an Independent Non-Executive Director of Times Offset (M) Sdn. Bhd. and a Non-Independent Non-Executive Director of the Kuchinta Holdings Group of Companies.

En. Fazrin is also a chartered member of The Malaysian Institute of Directors and The Institute of Internal Auditors Malaysia.

Encik Fazrin is the chairman of the Audit Committee. Encik Fazrin is a member of the Nomination Committee and Remuneration Committee of the Company.



Dato’ Sri Koh Kin Lip JP


He was appointed to the Board on 22 December 2008. Dato’ Sri Koh graduated from Plymouth Polytechnic, UK with a Higher National Diploma in Business Studies and a Council’s Diploma in Management Studies. He began his career in Standard Chartered Bank in 1977 as a trainee assistant. In 1978 he joined his family business and was principally involved in administrative and financial matters. In 1985, he assumed the role as a Chief Executive Officer of the family business. In 1987 he was pivotal and instrumental in the formation of Rickoh Holdings Sdn. Bhd., the flagship company of the family business. Presently Dato’ Sri Koh is also the Director of Malaysian AE Models Holdings Berhad, NPC Resources Berhad and Cocoaland Holdings Berhad.

Dato’ Sri Koh is the Chairman of the Remuneration Committee and a member of the Audit Committee and Nomination Committee of the Company.

Lim Soon Foo


He was appointed to the Board on 15 August 2011. Mr. Lim was admitted as Member of The Chartered Institute of Shipbrokers, London since 1979 and currently serving as Chairman and Principal Advisor to Wajah Nichiei Sdn. Bhd., Optic Marine Services International Limited (Hongkong), Optic Marine Engineering International Limited providing highly specialized services in the optic fibre submarine cable industry which extend into many countries in Asia Pacific region. The companies also worked alongside many Global Partners in the optic fibre submarine industry. Mr. Lim also sits in the board of several other companies involved in plantation, logging and real

estates.

Ronnie Lim Hai Liang

Malaysian, aged 32,Alternate Director to Mr. Lim Soon Foo.

He was appointed to the Board on 15 August 2011. Mr. Ronnie Lim graduated from the Flinders University of South Australia, Adelaide with a Bachelor of Commerce and Bachelor of Law. He began his career as Assistant Project Manager in small scale housing project developments in Adelaide. He later joined his family business as CEO of Wajah Nichiei Sdn. Bhd., Optic Marine Services International Limited (Hongkong), Optic Marine Engineering International Limited in the optic fibre submarine cable industry. Mr. Ronnie Lim also sits in the board of a number of family owned companies.



Conviction of OffencesAll the Directors have not been convicted of any offence within the past ten (10) years other than traffic offences, if any.

Conflict of InterestAll the Directors do not have any conflict of interest with the Company.

Attendance at Board MeetingsFor the financial year ended 31 December 2011, the Board of Directors of the Company met six (6) times.

Family Relationship and Major Shareholders

Save as disclosed herein, none of the Directors of the Company have any family relationship with any director or major shareholders of the Company:

a) Mr. Lim Soon Foo, the Independent Non-Executive Director and a major shareholder of the Company, is the father of Mr. Ronnie Lim Hai Liang, who is the Alternate Director of Mr. Lim Soon Foo and a shareholder of the Company.




Chairman’sStatement


Dear shareholders,

In my five years as the Chairman of Daya, I have sometimes proved too sanguine about the growth prospects of the Group, speaking adoringly about our strengthening franchise or improving operating performance. Indeed, the past five years have witnessed a pleasing sequence of uninterrupted growth in our earnings base. We have been riding a wave of double-digit growth in profitability every single year since 2007. But 2011 was a dichotomy. While we achieved respectable top line growth of 61.7%, the margin contraction we experienced was telling, confining us to our smallest growth in earnings yet. 2011 also marked the first time in five years we failed to make an acquisition despite a couple of close calls. Those were the low lights of the year.

ANNUAL REPORT 2011 13ANNUNUUUALALALALAA R RR RRRREPORORRRRRRTT TT TTT 20202020222001111111111111 13131313131333

Chairman’s Statement(cont’d)


Now, let me get to the more tantalizing developments that transpired last year. First, we were deeply enriched by the additional of two new members to our Board, namely, Mr. Lim Soon Foo and his son, Mr. Ronnie Lim, as Non-Executive Director and Alternate Director, respectively. They bring with them an incredible mix of business experience and operating savvy, especially in the field of offshore services - an area we intend to build our strategic capabilities as we position our business further upstream. Second, we embarked on a reorganisation of our top executive team in which Dato’ Mazlin Junid was appointed as President & Group CEO and Mr. Tham Jooi Loon as Group Managing Director. Mr. Tham Wooi Loon, who had served us brilliantly as our Managing Director for many years, decided to step down from the Board - though he will remain a key member of our Executive Committee. Third, after an extensive marketing campaign, we successfully pried open the huge Indonesian downstream chemical market with Pertamina, the national oil company, as our primary customer. Lastly, we managed to turnaround both our mobile crane and ISO tank cleaning & repair businesses, albeit at a slower pace than we would have liked.

Going forward, our Group will hold steadfast to our business model of pursuing organic growth while seeking out synergistic acquisitions. If there were ever any doubts as to the resiliency of our model, 2011 was awake-up call. After the lean spell, we are now hungrier. Our burning desire for growth is as poignant as ever. With a stronger balance sheet and a more entrenched Oil & Gas (“O&G”) platform, we are now in a better position to hunt for new assets and potential targets as we work diligently to secure some of the major upstream projects we have been eyeing the past 12 months. 2012 will test the intensity of our resolve and the potency of our execution.

REVIEW OF RESULTS

For FYE2011, the Group’s revenue grew by 61.7% from RM174.2 million to RM281.7 million, reflecting not only strong organic growth, but also the inherent scalability of two of our core businesses - O&G and Technical Services. Indeed, revenue of RM281.7 million was a record for our Group as the previous high was RM224.3 million. However, our cash flow as measured by EBITDA only increased marginally by 5.6% to RM30.9 million. Correspondingly, our PBT and PAT rose by 4.5% and 2.8% respectively to RM23.8 million and RM17.4 million. While the strong top line growth demonstrated our ability to secure new contracts and expand our market shares in a number of business segments, the compressed profit margin hinted a somewhat hollow victory. Pre-tax margin was reduced to 8.4% as compared to 13.0% in FYE2010. This was due largely to: (i) lower gross margins of some of the large contracts and projects we delivered; (ii) a significant drop in the performance of our Specialized Polymer business; and (iii) recognition of losses arising from a FPSO desludging contract and a crude tank cleaning contract, both of which were new services we rendered to our O&G clients. Nonetheless, we were able to control our operating expenses and other costs well, ensuring that we had another year of increased profitability.

SEGMENTAL ANALYSIS

Allow me to give you a more detailed evaluation of the operating performance of our three core businesses. (To facilitate comparisons, all profitability and cash flow figures provided in this section are before management fees and corporate guarantee fees paid by the Divisions to the holding company).




OIL & GAS DIVISION

The O&G Division remains the single most important pillar of our business. O&G revenue grew 97.4% to RM101.6 million in 2011 against RM51.5million in 2010. The significant growth was primarily attributable to our continued strength in downstream chemicals where we secured and delivered several large contracts. We remained the dominant leader in catalysts (key ingredients in many downstream applications), gas odorants (the smell in your cooking gas), DIPA (a carbon dioxide remover from the gas stream), DMDS (sulfiding/presulfiding agent to activate the catalysts & protection against formation of coke in petrochemical plants), among various other downstream products. We successfully expanded our market share in several sub-segments, further solidifying our overall market position.

2011 also marked a new milestone for our O&G business - for the first time, we successfully penetrated the Indonesian market. If you recalled in my last Chairman Statement, we had committed a lot of efforts and resources in the past 18 months in opening up the largest market in ASEAN. It was indeed satisfying that we finally sold a significant quantity of chemicals to Pertamina, Indonesia’s national oil company. We hope that this is only the beginning of a lucrative long-term relationship with the state-owned giant – after all, the market as a whole is probably six times the size of the Malaysian market. However, I must caution that much work has to be done in order to ensure not only increased receptiveness from our new Indonesian customers, but also reliable and uninterrupted supply from our principals. In a highly competitive market like Indonesia, there can be no guarantee that our initial success will automatically translate into an entrenched long-term income stream.

While O&G revenue accounted for only 36.1% of Group revenue, it contributed 65.5% of Group EBITDA and 64.0% of Group PBT. This reflected the increasing importance of the O&G business to us despite its relative low revenue contribution. We have every reason to believe that this revenue stream will continue to increase to become an even more significant contributor as we venture further upstream. Already we have successfully completed several offshore pipe-laying and upstream chemicals jobs. We are now actively exploring the possibility of participating in marginal oil field development and strategic marine and rigs services. As and when these ventures come into fruition, our O&G revenue is to set to rise dramatically.


Accountable




TECHNICAL SERVICES DIVISION

Technical Services (“TS”) Division comprises of three main activities: (i) engineering & construction (“E&C”); (ii) ISO tank cleaning & repair (“Tank Services”); and (iii) solvent and waste oil recycling (“SWOR”).

This Division had another sublime year, thanks largely to the continued success of E&C. We had a major management revamp in early 2011 with the departure of several top executives involving in E&C, and naturally we had expected a dip in performance. To the contrary, the over hauled top management team did an exceptional job, not only rejuvenating staff morale, but also boosting our overall market presence. As a result, E&C achieved the highest revenue ever recorded in its history. I wish to take this opportunity to congratulate the entire management team there for their hard work, superb performance and most of all their rekindled team spirits.

Tank Services business achieved a notable turnaround in FYE2011, having suffered significant losses in the previous financial year due to high investment and start-up costs. It clawed its way back from persistent losses to break even and occasional profitability. Obviously, we are still not where we want to be, but being out of the life-support system is an important step towards long-term sustainability. With the close collaboration and technical assistance of our Singaporean partner, we expect this business to continue to improve operationally and become a positive contributor to the Group in 2012.

SWOR remains the only business in our portfolio which was not “operational” in 2011. We have so far invested nearly RM22.7 million in this business. I am glad to report that significant development and progress have been made in the past year and our new recycling plant in Port Klang is now ready for commercial production by April 2012.

As a whole, TS revenue recorded a healthy growth of 74.6% from RM92.1 million to RM160.8 million. However, due to the lower margins of certain jobs we delivered as well as the high investment costs in SWOR, EBITDA of this Division decreased marginally by 8.0% to RM10.4 million. As a result, PBT and PAT also declined by 9.5% and 5.5% to RM9.6 million and RM8.0 million, respectively.


Resolute


Revenue EBITDA PAT

2011

2010

OG

TS

SP

OG

TS

SP

101,615

160,782

19,310

281,707

51,476

92,083

30,632

174,191

24,064

10,369

2,279

36, 712

19,337

11,269

4,339

34,945

PBT

20,090

9,607

1,673

31,370

16,032

10,614

3,605

30,251

16,288

7,983

1,358

25,629

12,578

8,446

2,892

23,916

Segmental Contribution (RM’000)

Segmental Revenue2010

Segmental EBITDA2010

Segmental PBT2010

Segmental PAT2010

Segmental Revenue2011

Segmental EBITDA2011

Segmental PBT2011

Segmental PAT2011

OG29%

SP18%

TS53%

OG36%

SP7%

TS57%

OG66%

SP6%

TS28%

OG64%

SP5%

TS31%

OG64%

SP5%

TS31%

OG55%

SP13%

TS32%

OG53%

SP12%

TS35%

OG53%

SP12%

TS35%



SPECIALIZED POLYMER DIVISION

As I had predicted in a rather inauspicious manner in the previous Chairman Statement, Specialized Polymer (“SP”) Division had a poor year, after a rousing resurgent in 2010. The underlying economics of the business continued to weaken as a result of stifling foreign competition and the consequential market share contraction and margin erosion. For FYE2011, this Division reported a 37.0% drop in business, from RM30.6 million to RM19.3 million. Core profitability measures fell across the board to the depressed levels experienced in 2009, with EBITDA, PBT and PAT of RM2.3 million, RM1.7 million and RM1.4 million, respectively.

In order to rectify this situation, several strategic re-alignment initiatives had been put in place by our management towards the end of last year. Naturally, not all of these initiatives will be effective, but we will know the outcome of these efforts soon enough. Suffice to say that this is a battle that we have to win.


Ethical

DAYA MATERIALS BERHAD (636357-W)20 DAYA MATERIALS BERHAD (636357-W)20


FINANCIAL POSITION & LIQUIDITY

Our Group continued to be in a solid financial position as we prudently managed our balance sheet, replenished our cash and rebuilt our liquidity. Cash and cash equivalents stood at RM62.8 million as at 31 December 2011, as compared to RM34.2 million in the year before. The Group’s gearing ratio, calculated as net debt divided by total shareholders’ funds, dropped from 16.29% to a negligible1.8%. Our current ratio stood at a healthy 1.6x, based on current assets of RM188.6 million and current liabilities of RM114.7 million.

The Group’s normal trading operations were amply supported by more than RM200 million in available trade lines and term loans from a wide range of domestic and foreign financial institutions. As at the end of the financial year, only RM66.7 million of the total available line was drawn down, of which only RM17.9 million was of the short-term nature. This compared favourably against the total debts of RM68.5 million utilized in the previous financial year.

Strengthened by the continued profitability of our operations and a timely private placement of 85 million new shares during the year, our shareholders’ funds further expanded from RM176.6 million to RM210.6 million as at the end of 2011. Our overall improved financial strength implies significant untapped debt capacity, placing us in a strategic position to undertake larger acquisitions and embark on more sizeable projects.

DIVIDENDS

Given our continued profitability and stronger balance sheet, as well as the liquidity needs of our expanding businesses, the Board of Directors has resolved to declare a final dividend of 0.25 sen. This represents an increase of 4% as compared to the previous financial year. Like our income stream, our dividends payout has consistently increased every single year since 2006.

STOCK REPURCHASE

Last year was the first time we commenced our stock repurchase program. The Board felt that our shares had been trading at a discount to its fair value for quite some time, and there was a unique opportunity to invest in our own shares. We purchased a total of 1,787,100 shares at an average price of RM0.18 per share from the open market. Our principle is simple: we will continue to repurchase back our shares so long as our share price trades at an attractive discount to our perceived fair value, the expected rate of return from the repurchase exceeds that of other available investments and our liquidity can comfortably support such a repurchase. If any of these three conditions are not met, we will wait patiently until the opportunity presents itself.

ANNUAL REPORT 2011 21ANNUAL REPORT 2011 21


PROSPECTS

As I said earlier, 2011 was a year of positive but lacklustre earnings growth - akin to a painful constipation. The big question for us is how are we going to revitalize our margins and regain our growth momentum? What will give us the shot in the arm? My view is that if we stay true to our business model and execute our new 4-Year Plan with unyielding will and unbridled passion, 2012 may well be a defining moment in our corporate history.

Indeed, this year marks the beginning of Daya’s 4-Year Plan 2012-2015, which outlines our strategic vision and lays out a path that will lead us to our goal of RM1 billion in Group revenue by 2015. This is no doubt a fairly ambitious target as it represents a compound growth rate of 37.3% per annum, only slightly less than the 45.9% clip we achieved during the past four years. But it is also a target that we feel is well within our grasps.

We have grown from one single business in 2005 to three businesses today, but the whole is greater than the sum of its parts. Leveraging on the core competencies of one business to cross-sell the others’ products and services is the key to our success. Our combined networking capability is a powerful marketing tool. Already, our O&G Division is working hand-in-hand with our TS Division on a range of initiatives, including an O&G industrial park in Kimanis, Sabah as well as waste oil recycling from FPSO and other O&G facilities. More initiatives of this nature are in the pipeline.

The recent past has witnessed a series of rather calamitous world events: from the global financial crisis to the slow-motion implosion of the Eurozone. It is still too early to determine whether the economic recovery in the United States will take hold or the growth engine in China will sputter. Whatever the global or domestic economic trajectories may be, you can rest assured that we will continue to build the Group in such a way that it will prosper under any business environments. As such, we remain very excited about the outlook for the Group in the foreseeable future.

Finally, I would like to take this opportunity to inform you that our Board has established a Risk Management Committee chaired by our Group MD, Mr Tham Jooi Loon. The primarily role of this Committee is to assess the business, financial and market risks of each of our businesses and to ensure that adequate focus, resources and internal control systems are in place to manage these risks. This Committee reports to the Board in conjunction with the Audit Committee. Needless to say, we will continue to strengthen our management teams and diligently monitor external market conditions in order to minimize our risk exposures and ensure the proper execution of our business plans. Our aim is after all to meet our responsibilities to all our stakeholders, including customers, employees, suppliers and shareholders.

Chairman


Corporate Social Responsibility

“Business has a responsibility beyond its basic responsibility to its shareholders; a responsibility to a broader constituency that includes its key stakeholders : customers, employees, NGOs, government – the people of the communities in which it operates”

– Courtney Pratt, Former CEO Toronto Hydro

DMB, in delivering CARE, seeks to conduct its business activities responsibly whilst engaging the community and environment in its base of operations. The year in review saw DMB undertaking numerous community projects to enrich the communities within the locality of our operations.

June 2011

DPSB raised funds to undertake a project in giving the PERKIS (Persatuan Kebajikan Kanak-Kanak Istimewa Daerah Seberang Perai Selatan) center a fresh coat of paint. They also spent a day of fun and games with the special children.

July 2011

DCMT organized a ‘gotong royong’ at the Women’s Welfare Council Penang. This effort saw the staffs of DCMT spending their weekend cleaning and sprucing the community center.


Corporate Social Responsibility(cont’d)

July 2011

DOCI sponsored a mini garden at the Rumah Jagaan & Rawatan Orang Tua Al-Ikhlas. They also spent a day at the center, treating the occupants of the home to lunch and gifting goodie bags.

September 2011

DSSB donated 21 units of wheelchairs to selected patients at Pusat Perubatan Universiti Kebangsaan Malaysia (PPUKM) and 25 boxes containing used clothes to the Sahabat Universiti Kebangsaan Malaysia (UKM), a co-operative of UKM that channels back into the hospital, proceeds from sales of donated items.

November 2011

DPRO realized the dreams of Pusat Pemulihan Dalam Komuniti (PDK) Kompleks Penyayang Kemaman of having its own library and a more lively and comfortable classroom.



The Board of Directors of Daya Materials Berhad (“Board”) is pleased to report to shareholders on the manner the Company has applied the Principles, and the extent of compliance with the Best Practices as set out in Part 1 and Part 2 respectively of the Malaysian Code on Corporate Governance (Revised 2007) (“Code”).

The Board is supportive of the recommendations of the Code, which sets out the Principles and Best Practices on structures and processes that the Company may use in its operations towards achieving optimal governance framework.

The following paragraphs describe how the Company has applied the principles and complied with the best practices of the Code.

1. DIRECTORS

1.1a Composition and Balance

As at the date of this statement, the Board consists of six (6) members, comprising two (2) Executive Directors and four (4) Independent Non-Executive Directors. With this Board composition, the Company complies with paragraph 15.02(1) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) for the MAIN Market where at least two (2) Directors or 1/3rd of the board of directors of a listed company, whichever is the higher, are independent Directors with an appropriate mix of skills and experience.

The Directors from different backgrounds and specialization collectively bring depth and diversity in experience to the Group’s operations. The Independent Non-Executive Directors are independent from management and have no relationships that could interfere with the exercise of their independent judgment. They bring to bear objective and independent judgment to the decision making of the Board and provide an effective check and balance for the Executive Directors.

The profiles of the members of the Board are set out in this Annual Report under the section named Profile of Directors.

1.1b Duties and Responsibilities

The Board is primarily responsible for:

is being properly managed;

manage these risks;

where appropriate, replacing senior management;

communications policy for the Company; and

management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

1.2 Supply of Information

The Board has unrestricted access to timely and accurate information necessary in the furtherance of their duties. All Directors are furnished with the meeting agenda and other documents on matters requiring their consideration prior to and in advance of each meeting. The documents are comprehensive and include qualitative and quantitative information to enable the Board members to make an informed decision. Senior Management is invited to attend these meetings to explain and clarify matters being tabled.


Corporate Governance Statement(cont’d)

The Chairman undertakes primary responsibility for organizing information necessary for the Board to deal with the agenda and in ensuring all Directors have full and timely access to the information relevant to the matters that will be deliberated at the Board meeting.

During the financial year ended 31 December 2011, the Board met six (6) times where it deliberated on and considered matters relating to the Group’s financial performance, significant investments, change to management and control structure of the Group, corporate development, strategic issues and business plan. Details of each Director’s attendance of Board meetings are set out below.

Name of Director No. of meetings attended

Dato’ Azmil Khalili bin Dato’ Khalid 5/6

Dato’ Mazlin bin Md. Junid 6/6

Tham Wooi Loon (resigned w.e.f. 15-8-2011) 3/3

Tham Jooi Loon 6/6

Fazrin Azwar bin Md. Nor 5/6

Dato’ Sri Koh Kin Lip JP 6/6

Lim Soon Foo (appointed w.e.f. 15-8-2011) 2/3

Ronnie Lim Hai Liang (Alternate Director to Lim Soon Foo)(appointed w.e.f. 15-8-2011) 2/3

All proceedings from the Board meetings are recorded by way of minutes signed by the Chairman of the meeting.

All the Directors have access to the advice and services of the Company Secretary. If required, the Directors may engage independent professionals at the Group’s expense, in the furtherance of their duties.

1.3 Appointments to the Board

During the financial year ended 31 December 2011, members of the Nomination Committee were as follows:

Chairman : Dato’ Azmil Khalili bin Dato’ Khalid (Independent Non-Executive Director)Member : Fazrin Azwar bin Md. Nor (Independent Non-Executive Director) Dato’ Sri Koh Kin Lip JP (Independent Non-Executive Director)

The duties and functions of the Nomination Committee are:

i) To review regularly the Board structure, size and composition and make recommendations to the Board with regards to any adjustments that are deemed necessary;

ii) To propose and identify new nominees for appointment to the Board;iii) To assess Directors on an on-going basis, the effectiveness of the Board as a whole, the

Committees of the Board and the contribution of each individual Director;iv) To recommend to the Board, candidates for all directorships to be filled by the

shareholders or the Board;v) To recommend to the Board, Directors to fill the seats on Board Committees;vi) To review annually the Board’s mix of skills and experience and other qualities including

core competencies which non-executive Directors should bring to the Board. This should be disclosed in the Annual Report;

vii) To determine annually whether or not a Director is Executive, Non-Executive or Independent;


viii) To assess effectiveness of the Board as a whole, the committees of the Board and contribution by each individual Director, including independent non-executive directors as well as the chief executive officer to the effectiveness of the Board;

ix) To recommend to the Board for continuation (or not) in service of executive Director(s) and Directors who are due for retirement by rotation;

x) To consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any Director or shareholder; and

xi) To orientate and educate new Directors on the nature of the business, current issues within the Company and the corporate strategy, the expectations of the Company concerning input from the Directors and the general responsibilities of Directors.

The decision on appointment of new Directors rests with the Board after considering the recommendations of the Nomination Committee.

During the last financial year, the Nomination Committee met two (2) times and the details of attendance of each member are as follows:





1.4 Re-election of Directors

In accordance with the Company’s Articles of Association, one third or the number nearest to one-third of the Directors shall retire from office and be eligible for re-election at the annual general meeting. Furthermore, each Director shall retire from office at least once in every three years.

Information of the Directors who will be retiring at the forthcoming Annual General Meeting (“AGM”) is disclosed in the Statement Accompanying Notice of Annual General Meeting.

1.5 Directors’ Training

All members of the Board have completed the Mandatory Accreditation Programme (“MAP”) which was conducted by the Research Institute of Investment Analysts Malaysia as required by Bursa Securities. The Directors will continue to undergo further Continuous Education Program to keep themselves abreast with the latest developments in the market place and enhance their professionalism in discharging their fiduciary duties to the Company in compliances with paragraph 15.08 of Listing Requirements of Bursa Securities for the MAIN Market. The Board continues to monitor the needs of the Directors’ training.

Save for the undermentioned Directors who have attended the training as follows, the other Directors have not attended any training during the financial year ended 31 December 2011 due to their respective conflicting schedule and travel commitments:

Fazrin Azwar bin Md. Nor

BAR Council Training Seminar on Effective Defense and International Law: Opportunities and Challenge.

Seminar on Policies, Incentives and Investment Opportunities in the Manufacturing and Services Sectors in Malaysia jointly organize by MIDA and BAR Council.

Green Technology Financing Programme organized by Malaysia Debt Ventures Berhad.

(cont’d)



Talk by John H. Stout - ‘The Board’s Responsibility for Corporate Culture - Selected Governance Concerns and Tools for Addressing Corporate Culture and Board Performance’ organized by Bursa Malaysia.

Sweden Malaysia Innovation Days - Innovation Forum at Pavilion KL organized by Embassy of Sweden, in cooperation with the Special Innovation Unit of the Prime Minister’s Office.

Talk by Rick Payne - ‘The CFO and Conflicts of Interest’ organized by ICAEW and Bursa Malaysia.

Bridging a Gap in Developing CSR Capacity - talk by Richard Welford, Chairman CSR Asia, organized by CSR Asia and Bursa Malaysia.

Sime Darby Lecture Series ‘Challenges to the Islamic World’ - talk by H.E. Shaukat Aziz, former Prime Minister of Pakistan, organized by Sime Darby.

The 2nd International Greentech & Eco Products Exhibition & Conference Malaysia at Kuala Lumpur Convention Centre (KLCC) organized by Malaysian Green Technology Corporation.

Securities Commission-Bursa Malaysia Corporate Governance Week - ‘Independent Directors Are A Myth’, An Oxford Union CG Style Debate.

1st December 2011 - 25th Sultan Azlan Shah Lecture - ‘Would It Have Made Any Difference - Cause and Effect in Commercial Law’.

Securities Commission-Bursa Malaysia Corporate Governance Week - ‘Risk Management and Internal Controls - Are The Boards Aware What They Are Up Against?’

MIDF Investment Seminar 2011, organized by The Malaysian Industrial Development Finance Berhad.

Dato’ Sri Koh Kin Lip JP

Maybank Investment Bank - “Invest Malaysia 2011”.

2. THE AUDIT COMMITTEE

The Board has on 1 June 2005 established the Audit Committee. The present Audit Committee comprises three (3) members. Please refer to the Audit Committee Report for further details.

3. DIRECTORS’ REMUNERATION

The remuneration of Directors is determined at levels, which will enable the Company to attract and retain Directors with the relevant experience and expertise to run the Company successfully. The remuneration of Executive Directors is structured to link rewards to corporate and individual performance. The determination of remuneration packages of non-executive directors, including non-executive chairman, should be a matter for the Board as a whole. The individuals concerned should abstain from discussing their own remuneration.

During the financial year ended 31 December 2011, members of the Remuneration Committee were as follows:

Chairman : Dato’ Sri Koh Kin Lip JP (Independent Non-Executive Director)Member : Dato’ Azmil Khalili bin Dato’ Khalid (Independent Non-Executive Director) : Fazrin Azwar bin Md. Nor (Independent Non-Executive Director)

(cont’d)



The duties and functions of the Remuneration Committee are:

i) To recommend to the Board the framework of Executive Directors’ remuneration and the remuneration package for each Executive Director, drawing from outside advise as necessary;

ii) To recommend to the Board, guidelines for determining remuneration of Non-Executive Directors;

iii) To recommend to the Board any performance related pay schemes for Executive Directors;iv) To review Executive Directors’ scope of service contracts; andv) To consider the appointment of the service of such advisers or consultants as it deems

necessary to fulfill its functions.

During the last financial year, the Remuneration Committee met one (1) time and the details of attendance of each member are as follows:





The details of the remuneration for Directors during the financial year ended 31 December 2011 are as below:

Aggregate remuneration categorized into components:

Executive Directors Non-Executive Directors Total

Fees (RM) 87,000 93,000 180,000

Salaries & other emoluments (RM) 2,565,865 46,000 2,611,865

Total(RM) 2,652,865 139,000 2,791,865

The number of Directors whose total remuneration fall within the following bands:

Range Executive Directors Non-Executive Directors

Below RM50,000 - 4

RM500,001 – RM550,000 1 -

RM750,001 – RM800,000 1 -

RM1,300,001 – RM1,350,000 1 -

4. SHAREHOLDERS

4.1 Dialogue with Investors

The Board recognizes the importance of timely dissemination of information to shareholders and other stakeholders. The primary tools of communication with the shareholders of the Company are through the annual report, announcements through Bursa Securities and circulars. The annual and quarterly reports and share price information are available on Bursa Securities website: www.bursamalaysia.com. The participation of shareholders and investors, both individual and institutional, at general meeting is encouraged whilst request for briefing from the press and investment analysts are usually met as a matter of course. Additional information about the Group is made available at its website: www.dmb.com.my.

(cont’d)



In addition to the above, the Board has identified En. Fazrin Azwar bin Md. Nor as the Senior Independent Non-Executive Director to whom concerns from the shareholders can be conveyed.

4.2 General Meeting

At the annual general meeting and extraordinary general meeting, the Chairman gives shareholders ample opportunity to participate through questions on the prospects, performance of the Group and other matters of concern addressed to the Board. Notice of the AGM and the Group’s annual report are sent out to the shareholders within the period prescribed by the Company’s Articles of Association. The notice of the meeting will also be advertised in the newspaper.

5. ACCOUNTABILITY AND AUDIT

5.1 Financial Reporting

The Board is responsible for presenting a balanced and meaningful assessment of the Group’s financial performance and prospects primarily through the annual report, financial statements and quarterly announcements of the Group’s results. The Audit Committee assists the Board in ensuring accuracy, adequacy and completeness of information for disclosure. The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 40 of the Annual Report and the Statement explaining the responsibility for preparing the annual audited financial statements is set out on page119 of the Annual Report.

5.2 Internal Control

The Board is ultimately responsible for the overall system of internal controls, which includes not only financial controls but also controls relating to operations, compliance and risk management. The internal control system which is designed to meet the needs of the Company and to manage risks to which the Company is exposed can only provide reasonable and not absolute assurance against material misstatement, loss or fraud.

Further details relating to internal control are set out in the Statement on Internal Control on pages 30 and 31 and the Audit Committee Report on pages 32 to 34.

5.3 Relationship with Auditors

The external auditors, Messrs Ernst & Young, have continued to report to members of the Company on theirs findings which are included as part of the Company’s financial reports with respect to each year’s audit on the statutory financial statements. In doing so, the Company has established a transparent arrangement with the auditors to meet their professional requirements.

Key features underlying the relationship of the Audit Committee with the external auditor and internal auditor are included in the Audit Committee Report.

(cont’d)




INTRODUCTION

The Board of Directors of Daya Materials Berhad (“Board”) is pleased to provide the following statement on the state of internal control of Daya Materials and its subsidiaries (“Group”), which have been prepared in accordance with the “Statement of Internal Control: Guidance for Directors of Public Listed Companies” (“Internal Control Guidance”) as adopted by the Bursa Malaysia Securities Berhad (“Bursa Securities”).

BOARD RESPONSIBILITY

The Board recognizes the importance of maintaining a sound internal control system covering risk management and the financial, operational and compliance controls to safeguard shareholders’ investment and the Group’s assets. The Board acknowledges its responsibility toward Group’s system of internal control and for the continuing review of its adequacy and integrity. The internal control system is designed to cater for the Group’s needs and to manage the risks to which it is exposed. It should be noted that the system of internal control is designed to manage rather than eliminate the risk of failure to achieve the business objectives of the Group, and can only provide reasonable and not absolute assurance against material misstatement or loss.

THE GROUP’S SYSTEM OF INTERNAL CONTROL

The Board has established an Internal Audit Department in November 2011 to undertake the internal audit function to identify risks in critical areas of the Group which was previously outsourced to an independent firm of Chartered Accountant. Audit visits were carried out at subsidiaries to undertake regular and systematic review of the systems of controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively within the Group. Audit findings will be circulated to the auditees for implementation and rectification. The final audit report together with the recommendation from the internal auditors and the feedback from the auditees will then be submitted to all members of Audit Committee for review on quarterly basis.

The internal audit function has adopted a risk-based approach in its audit work. The audit focused on areas with high risk, which were identified in the risk management framework, to ensure that the controls were functioning and where necessary, action plans were developed to improve on controls to manage significant risks.

The Group has put in place the following key elements of internal control:

i) There is a formal organization structure within the Group with delineated lines of responsibility, authority and accountability;

ii) Clearly documented internal policies, manuals, procedures and work instructions, and which are updated from time to time;

iii) Regular Board and management meetings are held where information is provided to the Board and management covering financial performances and operations;

iv) Major investments, acquisitions and disposals are appraised prior to approval by the EXCO or the Board;

v) Regular training and development programs are being attended by employees with the objective of enhancing their knowledge and competency level; and

vi) Management accounts and reports are prepared monthly for monitoring of actual performance versus budget. In this instance, material variances are explained and corrective actions, where necessary, are taken.

The Audit Committee established by the Board performs an oversight role in maintaining the integrity of the Group’s system of internal control. The Audit Committee will be assisted by the Group Internal Audit Department which performs regular review on the internal controls and risk management practices and also by the external auditors which review the financial reporting controls. The internal control system will continue to be reviewed, added on or updated in line with the changes in the operating environment.

The internal audit expense costs incurred for the financial year ended 31 December 2011 was RM39,457.


(cont’d)


RISK MANAGEMENT

The Group established a formal risk management framework, where a structured process to identify, evaluate, manage and communicate principal risks faced by the Group was formalized for adoption by all business units across the Group.

The senior management is responsible for identifying, managing and reporting on significant risks on an ongoing basis. These functions were carried out during the year with the assistance of the external consultant which conducted workshop and interviews with key management staffs. Significant risk matters and the relevant systems of controls to manage those risks are reported to the Directors for discussion.

The risk profile of the Group has been compiled to facilitate the Board and management to prioritize their focus on areas of high risks. Corresponding controls to manage the relevant risks identified have also been documented. Where there are deficiencies, action plans have been developed to improve on the system of controls in order to manage the risks more effectively.

CONTROL WEAKNESS

The management continues to take measures to strengthen the control environment. In the year under review, there were no material losses, incurred as a result of weakness in the internal control that would require disclosure in this annual report.

CONCLUSION

The Board is of the opinion that based on the current level of activities; the Group’s system of internal control is adequate and accords with the guidance provided by the Internal Control Guidance adopted by the Bursa Securities.

Date: 4 April 2012



COMPOSITION

Members of the Audit Committee, their respective designations and directorships are as follows:

Chairman: FAZRIN AZWAR BIN MD. NOR Chairman, Independent Non-Executive Director

Members: DATO’ SRI KOH KIN LIP JP Independent Non-Executive Director

DATO’ AZMIL KHALILI BIN DATO’ KHALID Independent Non-Executive Director

MEMBERSHIP

The Audit Committee shall be appointed by the Board from amongst the Directors and shall consist of not less than three (3) members, where all members must be non-executive directors with a majority of whom shall be Independent Directors.

The Board shall, within three (3) months of a vacancy occurring in the Audit Committee which results in the number of members reduced to below three (3), appoint such number of new members as may be required to make up the minimum number of three (3) members.

The members of the Audit Committee shall elect a Chairman from among their members who shall be an Independent Director. An alternate Director must not be appointed as a member of the Audit Committee.

The Board shall review the terms of office and performance of the Audit Committee and each of its members at least once (1) every three (3) years to determine whether the Audit Committee and the members have carried out their duties in accordance with their terms of reference.

AUTHORITY

The Committee shall, in accordance with the procedure determined by the Board and at the cost of the Company have authority to investigate any matter within its terms of reference, full and unrestricted access to any information pertaining to the Company and all the resources required to perform its duties. The Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity and be able to convene meetings/obtain independent/external professional or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary.

MEETINGS

The Committee shall meet at least four (4) times in a year subject to the quorum of at least two (2) independent directors or more frequently as circumstances required or upon the request of any member of the Committee with due notice of issues to be discussed and shall record its deliberations and conclusions in discharging its duties and responsibilities. The Committee may invite any Board member or any member of management or any employee of the Company who the Committee thinks fit to attend its meetings to assist and to provide pertinent information as necessary.

The Committee may regulate its own procedures, in particular:

a) The calling of meetings;b) The notice to be given of such meetings;c) The voting and proceedings of such meetings;d) The keeping of minutes; ande) The custody, production and inspection of such minutes.


(cont’d)


The Company Secretary shall act as Secretary of the Audit Committee and shall be responsible for drawing up the agenda with the concurrence of the Chairman and circulating it, supported by explanatory documentation to Audit Committee members prior to each meeting.

The Secretary shall also be responsible for recording the proceedings of the Audit Committee and the minutes of meetings tabled at Board meetings.

DUTIES

The duties of the Audit Committee include the following:

i) To review the quarterly results and the year-end financial statements, prior approval by the Board, focusing particularly on:

Changes in or implementation of accounting policies and practices; Significant adjustments or unusual events; Going concern assumption; and Compliance with applicable approved Financial Reporting Standards, regulatory and other

legal requirements;ii) To review with the external auditor, the audit scope and plan, including any changes to the planned

scope of the audit plan, and to discuss to ensure co-ordination where more than one audit firm is involved;

iii) To review with the external auditor, the results of the interim and final audits and the Management’s response thereto, including the status of previous audit recommendations;

iv) To review the assistance given by the Company’s employees to the auditors, and any difficulties encountered in the course of audit work, including any restrictions on the scope of activities or access to required information (in the absence of management where necessary);

v) To review the appointment and performance of external auditor, the audit fee and any question of resignation or dismissal before making recommendations to the Board;

vi) To review with the external auditor, its evaluations of the system of internal controls;vii) To review the adequacy of the internal audit scope, functions, authority, competency and resources

of the internal audit function and that it has necessary authority to carry out its work;viii) To review the internal audit programme, processes and reports to evaluate the findings of the

internal audit and to ensure that appropriate and prompt remedial action is taken by Management on the recommendations of the internal audit function;

ix) To review any appraisal or assessment of the performance of the internal audit function;x) To approve any appointment or termination of internal audit function;xi) Take cognisance of resignations of internal audit function and provide an opportunity to submits

its reasons for resigning; xii) To consider any related party transaction and conflict of interest situation that may arise within

the Group including any transaction, procedure or course of conduct that raises questions of management integrity;

xiii) To verify the allocation of Employees’ Share Option Scheme (“ESOS”) in compliance with criteria as stipulated in the By laws of ESOS of the Company, if any;

xiv) To direct and, where appropriate, supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts; and

xv) Such other responsibilities as may be agreed to by the Audit Committee and the Board.

SUMMARY OF ACTIVITIES

During the financial year ended 31 December 2011, the Audit Committee met five (5) times and the details of attendance of each member are as follows:






(cont’d)


In discharging its functions and duties, the Committee have considered, reviewed and discussed the followings:

i) Reviewed the external auditor’s scope of work and audit plan for the financial year. Prior to the audit fieldwork, representatives from the external auditor presented their audit strategy and plan to the Audit Committee;

ii) reviewed with the external auditor the results of the interim and final audits, the management letter, including management’s response and the evaluation of the system of internal controls;

iii) considered and recommended to the Board the re-appointment of the external auditor and approval of audit fees payable to the external auditor;

iv) met with external auditor twice (2) during the financial year without the presence of any Executive Directors, to discuss problems and reservations arising from the interim and final audits, if any, or any other matter the auditor may wish to discuss;

v) reviewed the internal audit function’s resource requirements, adequacy of plan, functions and scope for the financial year under review;

vi) reviewed the performance and competency of internal audit function;vii) reviewed the internal audit plan, processes and reports which highlighted the audit issues,

recommendations and Management’s response. Discuss with Management and ensure appropriate actions were taken to improve the system if internal controls based on improvement opportunities identified in the internal audit reports;

viii) reviewed the adequacy and effectiveness of the governance and risk management processes as well as the internal control system through risk assessment reports from the internal auditor. Significant risk issues were summarized and communicated to the Board for consideration and resolution;

ix) reviewed the unaudited quarterly financial results of the Group and making relevant recommendations to the Board for approval. The review and discussions were conducted with the Group Chief Financial Officer;

x) reviewed the audited financial statements of the Group prior to submission to the Board for its consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved Financial Reporting Standards for entities other than private entities issued by the MASB. Any significant issues resulting from the audit of the financial statements by the external auditors were deliberated;

xi) reviewed related party transactions entered into by the Group, conflict of interest situations and report the same to the Board;

xii) reviewed the Statement on Internal Control and its recommendation to the Board for inclusion in the Annual report; and

xiii) pertinent issues of the Group which has significant impact on the results of the Group.

SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION

In accordance with the internal audit plan, during the financial year the internal audit function carried out three risk-based internal audit assignments. The internal audit assignments were focused on three subsidiaries, namely Daya Proffscorp Sdn. Bhd., Daya OCI Sdn. Bhd. and Daya Secadyme Sdn. Bhd.. In addition, the internal audit function conducted follow-up reviews on previous audit findings. The internal auditors presented the internal audit reports to the Audit Committee during three Audit Committee meetings. The reports set out audit findings and recommendations for improvements and status of prior audit findings. The internal auditors also presented the internal audit plan for the financial year ending 31 December 2012 during one of the meetings. The internal audit plan will be revised and amended during the year to accommodate with the environmental changes within the Group.


Directors' Report

Statement by Directors

Statutory Declaration

Independent Auditors' Report

Income Statements

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

Supplementary Information

Financial Statements

36404041434445464851

118


Directors’ Report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2011.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services to its subsidiaries.

The principal activities of the subsidiaries are set out in Note 12 to the financial statements.

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

RESULTS

Group Company

RM RM

Profit for the year 17,442,602 12,977,516

Attributable to:

Equity holders of the Company 17,381,905 12,977,516

Non-controlling interests 60,697 -

17,442,602 12,977,516

There were no material transfers to or from reserves or provisions during the financial year.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

The amount of dividends paid by the Company since 31 December 2010 in respect of the financial year ended 31 December 2010 as reported in the directors’ report of that year was as follows:

RM

Final tax exempt (single-tier) dividends of 2.4% 2,877,982

At the forthcoming Annual General Meeting, a single tier dividends of 2.5% in respect of the financial year ended 31 December 2011 will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividends. Such dividends, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2012.

DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of this report are:

Dato’ Azmil Khalili Bin Dato’ KhalidDato’ Mazlin Bin Md. JunidTham Jooi LoonFazrin Azwar Bin Md. NorDato’ Sri Koh Kin Lip JPLim Soon Foo (Appointed on 15 August 2011)Ronnie Lim Hai Liang (Alternate director to Lim Soon Foo, appointed on 15 August 2011)Tham Wooi Loon (Resigned on 15 August 2011)


Directors’ Report

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement, to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive any benefits (other than benefits included in the aggregate amount of emoluments received or due and receivables by the directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except as disclosed in Note 26 to the financial statements.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company during the financial year were as follows:

Number of ordinary shares of RM0.10 each

1.1.2011/ Date of

appointment Acquired Disposed 31.12.2011

The Company

Direct interest

Dato’ Mazlin Bin Md. Junid 216,984,046 15,875,700 (34,000,360) 198,859,386

Tham Jooi Loon 58,300,198 1,200,000 - 59,500,198

Fazrin Azwar Bin Md. Nor 2,099,998 - - 2,099,998

Dato’ Sri Koh Kin Lip JP 78,115,098 - - 78,115,098

Lim Soon Foo 60,829,098 - - 60,829,098

Deemed interest

Dato’ Mazlin Bin Md. Junid (1) 9,000,360 9,000,360 - 18,000,720

Tham Jooi Loon (2) 4,709,998 - - 4,709,998

Lim Soon Foo (3) 279,000 - - 279,000

(1) Deemed interest through his son and daughter.(2) Deemed interest through his spouse.(3) Deemed interest through his son.

ISSUE OF SHARES

During the financial year, the Company increased its:

(a) issued and paid-up share capital from RM109,673,694 to RM119,915,854 by way of:

(i) the issuance of 85,000,000 new ordinary shares of RM0.10 each in the Company through a private placement to identified investors at an issue price of RM0.225 for the first tranche and RM0.22 per share for the second and third tranches for the total cash consideration of RM18,725,000; and

(ii) the issuance of 17,421,603 new ordinary shares of RM0.10 each in the Company pursuant to the conversion of RM3 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.1722 per share.

(cont’d)


ISSUE OF SHARES (cont’d)

The proceeds from the above issuance were to be utilised for future synergistic acquisitions, expansions and working capital purposes.

The new ordinary shares issued during the year ranked pari passu in all respects with the existing ordinary shares of the Company.

EMPLOYEE SHARE OPTION SCHEME

At an Extraordinary General Meeting held on 26 February 2009, the shareholders of the Company approved the proposed establishment of an Employee Share Option Scheme (“ESOS”) for the eligible directors and employees of the Company and its subsidiaries.

The ESOS will be administered by the ESOS Committee to be duly appointed and approved by the Board of Directors.

The aggregate number of ESOS Options exercised and ESOS Options offered and to be offered under the scheme shall not exceed 10% of the issue and paid-up ordinary share capital of the Company at any point during the duration of the scheme.

No options have been granted since the date of the establishment of the ESOS and at the date of reporting.

OTHER STATUTORY INFORMATION

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

(i) to ascertain that proper action has been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision for doubtful debts has been made; and

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

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

(i) the amount of the provision for doubtful debts in respect of the financial statements of the Group and of the Company or the amount written off for bad debts inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

(e) As at the date of this report, there does not exist:

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

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

(f ) In the opinion of the directors:

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

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

Directors’ Report(cont’d)


SIGNIFICANT AND SUBSEQUENT EVENTS

Details of significant and subsequent events are disclosed in Note 31 and Note 33 to the financial statements.

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 13 April 2012.

Dato’ Mazlin Bin Md. Junid Tham Jooi Loon

Directors’ Report(cont’d)


Statement by Directors

Statutory Declaration

We, Dato’ Mazlin Bin Md. Junid and Tham Jooi Loon, being two of the directors of Daya Materials Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 43 to 117 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2011 and of their financial performance and the cash flows for the year then ended.

The information set out in Note 35 to the financial statements on page 118 have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the directors dated 13 April 2012.

Dato’ Mazlin Bin Md. Junid Tham Jooi Loon

I, Tham Jooi Loon, being the director primarily responsible for the financial management of Daya Materials Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 43 to 117 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared bythe abovenamed Tham Jooi Loonat Kuala Lumpur in the Federal Territoryon 13 April 2012. Tham Jooi Loon

Before me,

Pursuant to Section 169(15) of the Companies Act, 1965

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


Independent Auditors’ Reportto the Members of Daya Materials Berhad

REPORT ON FINANCIAL STATEMENTS

We have audited the financial statements of Daya Materials Berhad, which comprise the statements of financial position as at 31 December 2011 of the Group and of the Company, and the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 43 to 117.

Directors’ responsibility for the financial statements

The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2011 and of their financial performance and cash flows for the year then ended.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 (“Act”) in Malaysia, we also report the followings:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 12 to the financial statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

(d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.


Independent Auditors’ Report

OTHER MATTERS

The supplementary information set out in Note 35 to the financial statements on page 118 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material

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