xox

Annual Report

2014 XOX Bhd (900384-X)

1 XOX Bhd (900384-X) – Annual Report 2014

Contents Corporate Information ............................................................................................................... 2

Profile of Directors and Chief Executive Officer ........................................................................ 4

Chairman's Statement ............................................................................................................... 8

Event Highlights ....................................................................................................................... 10

Awards and Achievements ...................................................................................................... 13

Plans/Products ......................................................................................................................... 14

Corporate Social Responsibility ............................................................................................... 17

Statement on Corporate Governance ..................................................................................... 18

Audit Committee Report .......................................................................................................... 26

Statement on Risk Management and Internal Control............................................................ 31

Statement of Directors' Responsibility .................................................................................... 33

Other Compliance Disclosures ................................................................................................. 34

Financial Statements ................................................................................................................ 36

Analysis of Shareholdings ...................................................................................................... 110

Notice of Annual General Meeting ........................................................................................ 112

Form of Proxy ................................................................................................................ Enclosed

Corporate Information


Board of Directors Dato’ Seri Abdul Azim bin Mohd Zabidi Non-Independent Non-Executive Chairman Datuk Chai Woon Chet Managing Director Soo Pow Min Independent Non-Executive Director Khoo Chuin Yuen Independent Non-Executive Director

Faidzan bin Hassan Independent Non-Executive Director Cheong Wai Loong Independent Non-Executive Director Hew Tze Kok Independent Non-Executive Director Datuk Lor Chee Leng Independent Non-Executive Director

Audit Committee Faidzan bin Hassan Chairman

Soo Pow Min Khoo Chuin Yen

Nomination and Remuneration Committee Cheong Wai Loong Chairman

Soo Pow Min Khoo Chuin Yen

Company Secretaries Tan Tong Lang (MAICSA 7045482) Chong Voon Wah (MAICSA 7055003) Principal Bankers Ambank (M) Berhad (8515-D) Public Bank Berhad (6463-H) Hong Leong Bank Berhad (97141-X)

Corporate Information


Registered Office Suite 10.03, Level 10, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Telephone: (03) 2279 3080 Facsimile: (03) 2279 3090 Business Office 31-3, Block C, Jaya One 72A, Jalan Universiti 46200 Petaling Jaya Selangor Darul Ehsan Telephone: (03) 7955 1388 Facsimile: (03) 7955 1288 Auditors UHY Suite 11.05, Level 11 The Gardens South Tower Mid Valley City Lingkaran Syed Putra Telephone: (03) 2279 3088 Facsimile: (03) 2279 3099 Share Registrar Shareworks Sdn Bhd (229948-U) No 2-1, Jalan Sri Hartamas 8 Sri Hartamas 50480 Kuala Lumpur Telephone: (03) 6201 1120 Facsimile: (03) 6201 3121 Listing ACE Market of Bursa Malaysia Securities Berhad Stock Name: XOX Stock Code: 0165 Website www.xox.com.my

Profile of Directors and Chief Executive Officer


Dato’ Seri Abdul Azim bin Mohd Zabidi Dato’ Seri Abdul Azim bin Mohd Zabidi, a Malaysian aged 55, is the Non-Independent Non-Executive Chairman of the Company having been appointed to the Board on 30 June 2010. He graduated with a Master of Arts in Business Law from the London Metropolitan University, United Kingdom in 1983. He is also a Fellow of The Chartered Institute of Secretaries, United Kingdom. He was Chairman of Bank Simpanan Nasional (BSN), Malaysia’s National Savings Bank. The Bank, which is a Government entity charged with inculcating the savings habit amongst Malaysians, has more than US$3.0 billion in assets and during his 10 years as Chairman of BSN, has seen a steady improvement in operating profits. Growing from his work with BSN, he is also active in the work undertaken by the Brussels based World Savings Banks Institute (WSBI). In 2000, he was appointed President (Asia Pacific) for WSBI and in 2003, he was elevated to its Board of Directors. He was elected as Vice President and Treasurer of WSBI from September 2006 until April 2009. A long association with the unit trusts/mutual funds and fund management industry culminated in his election as President of the Federation of Malaysian Unit Trust Managers, a post he held from 1998 to 2003. During this period, he was appointed Member of the Steering Committee of the International Investment Funds Association (IIFA), Montreal, Canada, a post he held until 2008. From 2007 to 2008, he was elected a member of the Board of Directors and Chairman of the Audit Committee of IIFA. Dato’ Seri Abdul Azim also sits on the Board of Directors of Timberwell Berhad and Wang-Zheng Berhad. Datuk Chai Woon Chet Datuk Chai Woon Chet, a Malaysian aged 36, was appointed to the Board on 13 January 2014 as Managing Director. He graduated with a Diploma in Business Economics (KDU). He was a Marketing Manager of Sanbumi Sawmill Sdn. Bhd. (a wholly-owned subsidiary of Sanbumi Holdings Berhad which is listed on the Main Board of Bursa Malaysia). He had been involved in the timber business industry with buyers from Japan, Europe, South Africa and Korea for the past 8 years. He also has extensive experience in property development, construction and the automotive sector. Datuk Chai Woon Chet also sits on the board of directors of Astral Supreme Berhad and various other private companies.



Soo Pow Min Soo Pow Min, a Malaysian aged 49, was appointed to the Board on 30 June 2010 as a Non-Independent Non-Executive Director and was redesignated on 5 January 2012 to an Independent Non-Executive Director. He graduated in 1990 with a Bachelor of Architecture in Structural Engineering from the University of Illinois, Chicago, United States of America. He started his career in 1990 with YTL Corporation Berhad as an Architect and was responsible for overseeing the architectural work of the company. In 1994, he founded Urban Builder as a sole proprietorship but subsequently ceased business in 1999 when he was appointed Director of Pembinaan Wincon Sdn Bhd, a position which he held to date. In 2009, he founded DP Land Sdn Bhd and has been the Director of DP Land Sdn Bhd since. Mr Soo is presently the Member of the Audit Committee and Nomination and Remuneration Committee of the Company. Khoo Chuin Yuen Khoo Chuin Yuen, a Malaysian aged 40, was appointed to the Board on 29 September 2011, as an Independent Non-Executive Director. He graduated with a Bachelor of Finance from the University of New Orleans, United States of America. He started his career as a Credit and Marketing Executive in MBF Finance Bhd in 1997. In 1999, he joined Citibank Berhad as a management associate and within three years, became the Manager of Mortgage Sales & Share Margin Financing. From 2004 to 2007, he worked in Prudential Fund Management Bhd, beginning as the Senior Regional Manager of Northern Region, before being promoted to be the Director of Marketing & Communications in 2006, and Chief Retail Marketing Officer in 2007. He was subsequently Chief Executive Officer & Acting Chief Investment Officer of Inter-Pacific Asset Management Sdn Bhd from January 2008 to February 2009. From November 2009 to date, he is the Chief Executive Officer of Standard Financial Planner Sdn Bhd. He is presently the Member of the Audit Committee and Nomination and Remuneration Committee of the Company. Faidzan bin Hassan Faidzan bin Hassan, a Malaysian aged 54, was appointed to the Board on 4 July 2012, as an Independent Non-Executive Director. He graduated with an Advanced Diploma in Accounting from the University Institute Technology Mara.



He was the Executive Director of Innosabah Securities Sdn Bhd from 1992 to 2000. Since 1995, he has been the principal partner/trustee of Sititrust & Administrators Limited, and since 2003, the Deputy Chairman of KIC Oil & Gas Ltd and the KIC Group of Companies. Encik Faidzan is presently the Chairman of the Audit Committee of the Company. Cheong Wai Loong Cheong Wai Loong, a Malaysian aged 42, was appointed to the Board on 30 September 2013 as an Independent Non-Executive Director. Mr Cheong graduated with a Bachelor Degree in Business Accounting & Finance, is a Fellow Member of The Institute of Public Accountants Australia and a member of the National Institute of Accountants, Australia. Mr Cheong is one of the pioneer shareholders of XOX Bhd who helped the Company open its first branch in Malaysia upon listing on Bursa Malaysia Securities Berhad and launching of the "Go Green recycling project". He is currently the Managing Director of Linear Design Sdn Bhd, a multi-award winning Interior Architecture Firm for some of the major developers in Malaysia and he also sits on the Boards of numerous private companies. Mr Cheong is the Chairman of the Nomination and Remuneration Committee of the Company. Hew Tze Kok Hew Tze Kok, a Malaysian aged 37, was appointed to the Board on 21 October 2013 as an Independent Non-Executive Director. Mr Hew is a fellow member of the Association of Chartered Certified Accountants (“FCCA”). He started his career path by practising in accounting firms, namely Wong Yew Seng & Co and BDO Binder for approximately 7 years. Thereafter he served the Securities Commission Malaysia (“SC”) for approximately 5 years in the area of enforcement of securities law. He was then appointed as an Investigating Officer of the SC with a ranking of Senior Manager. Subsequent to that, he joined KPMG Forensic Investigation Services as an Associate Director. Currently, Mr Hew also sits on the board of directors of Asia Bioenergy Technologies Berhad as Independent Non-Executive Director. Datuk Lor Chee Leng

Datuk Lor Chee Leng, a Malaysian aged 50, was appointed to the Board on 19 March 2014 as an Independent Non-Executive Director. He graduated with a Bachelor degree from the National University of Singapore.

Datuk Lor was previously the Group CEO of EON Bank Group, Malaysia. Under his leadership, EON Bank Group recorded many notable product innovations and financial achievements. Most significant was the transformation of the banking group from being



previously perceived as a non-descript player in the industry to being regarded as a rapidly growing bank and one of the most talked about in the country. EON Bank Group was awarded the “Asia’s Best Employer Brand – Malaysia” in 2011 and was ranked 337 in the “Top 500 Most Valuable Global Banking Brands” by Brand Finance Plc.

Before joining EON Bank, he was the Worldwide Director for Banking Solutions with Hewlett Packard Asia Pacific, and prior to that he was the EVP and Head of Consumer Banking for RHB Bank Malaysia.

Prior to returning to Malaysia in 2004, he was a Managing Director with DBS Bank (a leading bank in SEA) for 17 years, serving in various senior management capacities in both their Singapore and Thailand operations.

He has more than 25 years of senior level banking experience with extensive focus in retail banking, strategy formulation, business transformation, sales and marketing; and human capital development in various SEA countries.

He has previously, also served as a Director of the Malaysia Electronic Payment System (MEPS) Berhad as well as a member of the EMVCo Global Board of Advisors. Ng Kok Heng Chief Executive Officer Ng Kok Heng, a Malaysian aged 51, is the Chief Executive Officer of the Company. He graduated with a Bachelor of Computer Science (Honours) from the Universiti Sains Malaysia, Penang in 1987. Mr Ng was appointed as Managing Director and Chief Executive Officer of the Company on 30 June 2010. On 9 December 2013, he retired as Managing Director of the Company but continue to serve the Company as Chief Executive Officer of the Company. He started his career in 1987 as a Sales Manager in Communications Technology Sdn Bhd and was in charge of sales and marketing. In 1992, he was appointed Executive Director for MTL Communications Sdn Bhd and was responsible for the marketing, sales and business development of the company. Subsequently in 2000, he joined Wilco Systems Sdn Bhd as the Managing Director and was responsible for the performance as well as the day-to-day operations of the company. He was also a consultant to Teligent AB, Sweden, a telecommunications provider and has worked with key players in various South East Asian countries such as Telekom Malaysia Berhad, Singapore Telecommunications Limited and Smart Communications Inc. He leads highly specialised teams of IT integrators and implementers to implement systems for telecommunications providers. Note :

The Directors do not have any family relationship with any other Directors and/or major shareholders of the Company. The Directors do not have any conflict of interest with the Company and have no conviction for any offences, other than traffic offences, if any, within the past ten (10) years.

Chairman’s Statement


On behalf of the Board of Directors, I am pleased to present to you the Annual Report of the Group and Company for the financial year ended 30 June 2014. Financial Performance The Group continued to operate in a challenging environment with intense competition from incumbent and new operators as well as having to deal with the increased use of smartphones and mobile applications which have led to lower industry wide Average Revenue Per User (ARPU) from traditional voice and short message service (SMS). Despite the difficult business environment, the Group continued to make inroads in its quality subscriber acquisition programmes. At the end of June 2014, the Group had around 246,000 active subscribers, an increase from about 143,000 at the end of June 2013. This represented an increase in active subscribers by 72%. Following from this and coupled with the various programmes to improve our brand image and subscriber retention, the Group recorded higher revenues of RM57.0 million during the financial year compared to RM40.8 million in the previous financial period, an improvement by 39% year-on-year. Despite the improvement in revenues, the Group recorded a Net Loss for the year of RM1.60 million compared to a Profit for the year of RM4.5 million for the year ended June, 2013. The major reason for this was the inclusion of a one-off discount of RM10 million under our Cost of Sales for the year ended June, 2013 which was granted by the Group’s trade creditor. If the effect of this discount were to be excluded, the Group’s loss after taxation for the year ended June, 2013 would have been RM5.5 million. This compares favourably to the current financial year’s Net Loss of RM1.6 million. The Group also managed to recover RM1.96 million of trade receivables which were impaired during the previous financial year and this led to a contribution to the increase in Other Income. Notwithstanding the higher income figures, the loss position was attributed to the off-setting of higher selling and distribution expenses from various programmes initiated to improve the Group’s brand awareness, subscriber acquisition and retention. In addition, the Group’s administrative expenses also increased mainly due to higher depreciation expenses from increased telecommunication network and equipment assets and various other expenses such as rental, corporate expenses and also human resources. Industry Trend and Development In Bank Negara Malaysia’s Quarterly Bulletin for the second quarter of 2014, it was reported that the growth for the communication sub-sector remained robust at 10% growth for the first half of 2014, driven by strong demand for data communication services. The growth in demand for data services is expected to lead to lower demand for traditional mobile services such as voice, SMS and multimedia messaging service (MMS). This is because more consumers will be able to use the widely available mobile applications such as

Chairman’s Statement


WhatsApp, Viber, Skype, Line and many others to enjoy low or no cost voice, SMS and MMS services. Based on the foregoing, we anticipate another difficult year although your Board of Directors have taken steps to reduce costs further in order for the Group to register favourable results for the coming years. Future Prospects The Group remains committed in maintaining its focus on introducing innovative products and services to expand our subscriber base in accordance with the fast changing trends in the mobile telecommunications industry. In view of the changing consumer behaviour in using more data services we have realigned and planed our Group’s focus to ensure that it is in line with current consumer trends. The Group’s plans include additional promotion and enhancements on data plans, subscriber growth from the Group’s SIM-free mobile application brand named Voopee, online promotion and activities to promote focussed advertising and branding messages to target customers.

The Group’s financial performance is dependent on the growth of its subscriber base and the average monthly revenue from the sales of recharge vouchers per subscriber. We expect the Group to continue to make headway in the acquisition of subscribers through the various initiatives launched and planned to be launched.

Appreciation Lastly, we would like to offer our sincere gratitude and appreciation to our shareholders, customers, business associates, bankers and government authorities for their continued support. I would also like to express the Board’s, and my, special thanks to our major creditor for their relentless backing and encouragement. My appreciation is also extended to members of the Board of Directors for their guidance and wisdom in steering the company during these difficult period. The Board of Directors would also like to place on record our appreciation to our valued employees for their continuing commitment and dedication to the Group. Dato’ Seri Abdul Azim bin Mohd Zabidi Non-Independent Non-Executive Chairman

Event Highlights


Awards and Achievements


Plans/Products


Corporate Social Responsibility


In pursuit of any business objective, the Group needs to strike a balance between profitability and social responsibilities. The group is committed and uses its best endeavour, on an on-going basis to integrate corporate social responsibility practices into its day to day business operations. During the financial year, the Group has undertaken the following activities:

Statement on Corporate Governance


The Board of Directors (“the Board”) of XOX Bhd (“XOX” or “the Group” or “the Company”) strives to ensure good corporate governance practices are implemented and maintained throughout the Company and its subsidiaries (“Group”) as a fundamental part of discharging its duties to enhance shareholders’ values consistent with the principles and best practices set out in the Malaysian Code on Corporate Governance (“the Code”). The Board will continuously evaluate the Group’s corporate governance practices and procedures, and where appropriate will adopt and implement the best practices as enshrined in the Code to the best interest of the shareholders of the Company. The statement below sets out the manner in which the Group has applied the key principles and the extent of its compliance with the best practices set out in the Code throughout the financial year under review pursuant to Rule 15.25 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing Requirements”). A. Board of Directors The Board assumes responsibility for leading and controlling the Group. The Board has the overall responsibilities for corporate governance, risk management, internal controls, strategic direction, succession planning, formulation of policies and overseeing the investment and business of the Group. In carrying out its functions, the Board has delegated specific responsibilities to two (2) Board Committees, namely Audit Committee and Nomination and Remuneration Committee. These committees have the authority for their own specific issues and their recommendations are reported back to the Board. A.1 Board Balance The current Board of Directors consists of eight (8) members, comprising a Non-Independent Non-Executive Chairman, one (1) Executive Director who is also the Managing Director and six (6) Independent Non-Executive Directors. The Company thus complies with Rule 15.02 of the Listing Requirements whereby at least two (2) or one-third (1/3) of the Board of Directors, whichever is higher, are independent directors. There is a clear division of responsibilities between the Chairman of the Board and the Chief Executive Officer to ensure that there is a balance of power and authority. The Chairman is responsible for running the Board and ensuring that all Directors receive sufficient and reliable information on financial and non-financial matters to enable them to participate actively in Board decisions whilst the Chief Executive Officer is responsible over the operating units, organisation effectiveness and implementation of the Board’s policies and decisions. The size and composition of the Board reflects a balance of executive and non-executive directors who are reputable and professional person of calibre in the business environment to provide leadership and exercise control of the Group. The Independent Non-Executive Directors of the Company play a key role in providing unbiased and independent views, advice and contributing their knowledge and experience toward the formulation of policies



and in the decision making process. The Board structure ensures that no individual or group of individuals dominates the Board’s decision-making process. Although all the Directors have equal responsibility for the Company and the Group’s operations, the role of the Independent Directors are particularly important in ensuring that the strategies proposed by the Executive Directors are deliberated on and have taken into account the interest, not only of the Company, but also that of the shareholders, employees, customers, suppliers and the community. The Board has yet to identify a Senior Independent Non-Executive Director to whom concerns may be conveyed by shareholders and the general public. However, the Chairman of the Board encourages the active participation of each and every Board member in the decision making process. A.2 Board Charter As part of governance process, the Board has formalised and adopted the Board Charter. This Board Charter sets out the composition and balance, roles and responsibilities, operation and processes of the Board and is to ensure that all Board members acting on behalf of the Company are aware of their duties and responsibilities as Board members. A copy of the Board Charter is available at the Company’s website. A.3 Board Meetings and Supply of Information to the Board Board meetings are held regularly and the details of the attendance during the financial year ended 30 June 2014 are as follows:

Name of Directors No. of Meetings

Attended

Dato’ Seri Abdul Azim bin Mohd Zabidi 6/9

Soo Pow Min 9/9

Khoo Chuin Yuen 7/9

Faidzan bin Hassan 7/9

Cheong Wai Loong (Appointed on 30/09/2013) 6/6

Hew Tze Kok (Appointed on 21/10/2013) 5/6

Datuk Chai Woon Chet (Appointed on 13/01/2014) 4/4

Datuk Lor Chee Leng (Appointed on 19/03/2014) 1/2

Ng Kok Heng (Retired as Managing Director on 09/12/2013) 5/5

Yeah Eng Kong (Resigned on 01/11/2013) 4/5

The Directors have full and timely access to all information pertaining to the Group’s business and affairs to enable them to discharge their duties. Senior management are invited to attend the Board meetings to explain and clarify matters as required. Prior to the Board meetings, the agenda for every meeting together with a full set of Board papers containing information relevant to the business of the meetings are circulated to the Directors for their perusal in advance before the meeting date. This is to allow the Directors



to have sufficient time to review and consider the agenda items before the meeting and to obtain further explanations or clarifications, where necessary. The proceedings and resolutions reached at each Board meeting are documented in the minutes and signed by the Chairman of the next Board meeting. Besides Board meetings, the Board exercises control on matters that require Board’s approval through circulation of Directors’ Resolutions. These documents are kept at the registered office. All Directors have direct access to the advice and services of the Company Secretary who is responsible for ensuring the Board’s meeting procedures are adhered to and that applicable rules and regulations are complied with. The Board recognises that the Company Secretary is suitably qualified and capable of carrying out the duties required. The Board is satisfied with the service and support rendered by the Company Secretary in discharge of their functions. When necessary, Directors may whether as a full Board or in their individual capacity, seek independent professional advice, including the internal and external auditors, at the Company’s expense to enable the directors to discharge their duties with adequate knowledge on the matters being deliberated. A.4 Re-election of Directors In accordance with the Company’s Articles of Association, at the first Annual General Meeting (“AGM”) of the Company, all the Directors shall retire from office, and at the AGM in every subsequent year, an election of directors shall take place and one-third (1/3) of the Directors (including the Managing Director) for the time being, or if their number is not three (3), or a multiple of three (3), then the number nearest to one-third (1/3) with a minimum of one (1) shall retire from office and be eligible for re-election PROVIDED ALWAYS that all Directors including a Managing Director shall retire from office at least once in every three (3) years but shall be eligible for re-election. A retiring Director shall retain office until the close of the meeting at which he retires and shall be eligible for re-election. Any Director appointed during the year is required to retire and seek re-election by shareholders at the first AGM following his appointment. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with the Section 129 (6) of the Companies Act, 1965. A.5 Nomination and Remuneration Committee In line with the Best Practices of the Code, the Board has established a Nomination and Remuneration Committee which comprise exclusively of Independent Non-Executive Directors. The present members of the Nomination Committee of the Company are: Chairman Cheong Wai Loong



Members Soo Pow Min (Independent Non-Executive Director) Khoo Chuin Yen (Independent Non-Executive Director) The functions of the Nomination and Remuneration Committee are summarise as following:

a) The Committee shall regularly review the structure, size and composition of the Board and make recommendations to the Board with regard to any adjustments that are deemed necessary;

b) The Committee has to evaluate the effectiveness of the Board as a whole, the

various Committees and each individual Director’s contribution to the effectiveness on the decision making process of the Board;

c) The Committee shall give full consideration to succession planning for Directors and

other senior executives in the course of its work, taking into account the challenges and opportunities facing the company, and the skills and expertise needed on the Board in the future;

d) The Committee shall prepare a description of the role and capabilities required for a

particular appointment;

e) The Committee shall be responsible for identifying and nominating for the approval of the Board, candidates to fill board vacancies as and when they arise;

f) In determining the process for the identification of suitable new candidates, the

Committee will ensure that an appropriate review or search is undertaken by an independent third party to ensure the requirement and qualification of the candidate nominated;

g) The Committee shall make recommendations to the Board on candidates it considers

appropriate for appointment; and

h) The Committee shall recommend to the Board concerning the re-election by shareholders of any director under the “retirement by rotation” provisions in the Company’s Article of Association.

i) The Committee shall review and recommend to the Board the framework of

remuneration of the Executive Directors and Senior Management, taking into account the performance of the individual, the inflation price index and information from independent sources on the rates of salary for similar jobs in selected group of comparable companies.

j) The Committee shall review and determine the bonus scheme for Executive

Directors depending on various performance measurements of the Group.



k) The Committee shall review and determine the other benefits in kind for the Executive Directors.

l) The Committee may request management or external consultants to provide

necessary information upon which the Board may make its assessment.

** Subject to shareholders’ approval in the general meeting, the Board as a whole determines the level of remuneration of the Non-Executive Director of the Company. The review of the remuneration of the Non-Executive Director should take into consideration fee levels and trends for similar positions in the market, time commitment required from the director and any additional responsibilities undertaken such as a director acting as chairman of a board committee or as the senior independent non-executive director. The individuals concerned should abstain from discussion of their own remuneration.

A.6 Directors’ Training All the Directors appointed to the Board have completed the Mandatory Accreditation Programme as prescribed by the Listing Requirements of Bursa Malaysia Securities Berhad. The Directors remain committed to undergoing further continuing education training programmes to upgrade and enhance their business acumen and professionalism in discharging their duties to the Group. The following Board members have attended several relevant courses/seminars during the financial year ended 30 June 2014 as detailed below:

Name of Director Courses Attended

Dato’ Seri Abdul Azim bin Mohd Zabidi

Directors Effectiveness and Responsibility on New Guidelines

Investing in Vietnam – Opportunities and Challenges

Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Khoo Chuin Yuen Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Soo Pow Min Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Faidzan bin Hassan Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Cheong Wai Loong Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Hew Tze Kok Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Datuk Chai Woon Chet (Appointed on 13/01/2014)

Corporate Compliance: Focussing on Directors' Duties, Liabilities and Expectations

Saved as disclosed above, Datuk Lor Chee Leng, an Independent Non-Executive Director appointed on 19 March 2014, was not able to attend any Directors’ training during the financial year due to overseas travelling and his busy work schedule. However, he has kept



himself abreast on financial and business matters through readings to enable him to contribute to the Board. He is also aware of the duties and responsibilities and will continue to undergo other relevant training programmes to keep abreast with new regulatory developments and requirements in compliance with the Listing Requirements on continuing education. A.7 Reinforce Independence The Non-Executive Directors are not employees of the Group and do not participate in the day to day management of the Group. The Non-Executive Directors are independent directors and are able to express their views without any constraint. This strengthens the Board which benefits from the independent views expressed before any decisions are taken. The Nomination and Remuneration Committee has reviewed the performance of the independent directors and is satisfied they have been able to discharge their responsibilities in an independent manner. None of the current independent board members had served the company for more than nine (9) years as per the recommendations of the Code. Should the tenure of an Independent Director exceed nine (9) years, shareholders’ approval will be sought at a General Meeting or if the services of the director concerned are still required, the director concerned will be re-designated as a Non-Independent Director. B. Directors’ Remuneration The determination of the remuneration for Non-Executive Directors is decided by the Board as a whole. The remuneration of Executive Directors is the purview of the Nomination and Remuneration Committee who will evaluate and recommend to the Board. Individual directors concerned have abstained from discussing and deciding on their own remuneration. The Directors’ fee including Non-Executive Directors if any, have to be endorsed by the Board and would seek approval from the shareholders of the Company at the Annual General Meeting. The compensations for Non-Executive Directors are linked to their experience and level of responsibility taken.



B.1 Details of Directors’ Remuneration The details of directors’ remuneration for the financial year ended 30 June 2014 are as follows:

Category Fee RM

Salaries RM

Allowances RM

Total RM

Executive Directors - 489,109 36,500 525,609

Non-Executive Directors - - 325,200 325,200

Total - 489,109 361,700 850,809

The Directors’ remuneration within the following bands is as follows:

Range of Remuneration Number of Executive Directors

Number of Non-Executive Directors

Below RM50,000 - 5

RM50,001 – RM100,000 - 3

RM350,001 – RM400,000 2 -

The above includes directors who have resigned during the financial year. The Board is of the view that the detailed remuneration disclosure of each director is not disclosed as the information will not add significantly to the understanding and evaluation of the Group’s corporate governance.

C. Communication with Shareholders and Investors C.1 Relationship with Shareholders The Board recognises the need for transparency and accountability to the Company’s shareholders as well as regular communication with its shareholders, stakeholders and investors on the performance and major developments in the Company. The Company ensures that timely releases of the quarterly financial results, press releases and corporate announcements are made to its shareholders and investors, which are clear, unambiguous, succinct, accurate and contains sufficient and relevant information. The Group also maintains a website www.xox.com.my whereby information can be obtained. The Company’s Annual Report and financial results are dispatched on annually basis to the shareholders to provide an overview of the Group’s business activities and performances. The Share Registrar is available to attend to administrative matters relating to shareholders’ interests.



C.2 Annual General Meeting The Annual General Meeting (“AGM”) represents the principal forum for dialogue and interaction with all the shareholders of the Company. At the AGM, the Board provides opportunities for shareholders to participate in the question and answer session where all Directors as well as the external auditors are present to respond to the shareholders’ questions during the AGM. The Company values feedback from its shareholders and encourages them to actively participate in discussion and deliberations. D. Accountability and Audit D.1 Financial Reporting The Board has a responsibility and aims to provide and present a fair and balanced assessment of the Group’s financial performance and its prospects. The financial statements of the Company are drawn up in accordance with the requirements of the applicable accounting standards in Malaysia and provision of the Companies Act, 1965. With assistance from the Audit Committee, the Board oversees the Group’s financial reporting processes and the quality of its financial reporting. D.2 Internal Control The Board is overall responsible for maintaining a sound system of internal controls and risk management practises to safeguard shareholders’ investment and Group’s assets. The Statement on Risk Management and Internal Control as set out on page 31 of the annual report provides an overview of the state of internal controls within the Group. D.3 Relationship with Auditors Through the Audit Committee, the Group has established a transparent and appropriate relationship with the Group’s auditors, in seeking professional advice and ensuring compliance with the applicable accounting standards and statutory requirements in Malaysia. From time to time, the auditors will highlight to the Audit Committee and the Board of Directors on matters that require the Audit Committee’s and Board’s attention and action. The Audit Committee has been explicitly accorded the power to communicate directly with both the External Auditors and Internal Auditors. Annual appointment or re-appointment of the external auditor is via shareholders’ resolution at the AGM on the recommendation of the Board. E. Statement of Compliance with the Code The Board is committed to ensure high standards of corporate governance and to their best ability and knowledge complied with the Best Practices set out in the Code.

Audit Committee Report


1 Members of the Audit Committee The Board has established a Audit Committee to assists the Board in fulfilling its fiduciary responsibilities relating to corporate accounting, financial reporting practices, system of internal control, the audit process and the process of monitoring compliance with laws and regulations. The members of Audit Committee shall be appointed by the Board from amongst the Directors of the Company and shall comprise of at least three (3) members, all of whom must be Non-Executive Directors, with a majority of them being independent. The Board shall at all the times ensure that at least one (1) member of the Audit Committee: i) must be a member of the Malaysian Institute of Accountants (“MIA”); or ii) if he is not a member of the MIA, he must have at least three (3) years' working

experience and: a) passed the examinations specified in Part I of the First Schedule of the

Accountants Act 1967; or b) must be a member of one of the associations of accountants specified in Part II of

the First Schedule of the Accountants Act 1967; or iii) fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities

Berhad (“Bursa Securities”). No alternate director shall be appointed as a member of the Audit Committee. The members of the Audit Committee shall elect a Chairman from among their number who shall be an Independent Director. The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Board at least once every three (3) years to determine whether the members have carried out their duties in accordance with their terms of reference. If a member of the Audit Committee resigns or for any other reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board shall, within three (3) months from the date of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. The Company Secretary or his nominee or such other persons authorised by the Board shall act as the Secretary of the Audit Committee. The present members of the Audit Committee are as follows:

Designation Name Directorship

Chairman Faidzan bin Hassan Independent Non-Executive Director

Member Soo Pow Min Independent Non-Executive Director

Member Khoo Chuin Yuen Independent Non-Executive Director



2 Functions of the Audit Committee The Audit Committee assists the Board in discharging its oversight responsibilities. The objectives of the Audit Committee are to provide an additional assurance to the Board by giving objective and independent reviews of the financial, operational and administrative controls and procedures, establishing and maintaining internal controls and reinforce the independence of the external auditors, ensuring that the auditors have free reign in the audit process. The Audit Committee shall, amongst others, discharge the following functions: (a) Review the following and report the same to the Board of Directors of the Company:

(i) with the external auditors, the audit plan, the nature and scope of work and

ascertain that it will meet the needs of the Board, the shareholders and regulatory authorities;

(ii) with the external auditors, their evaluation of the quality and effectiveness of the entire accounting system, the adequacy and integrity of the internal control system and the efficient of the Group’s operations;

(iii) with the external auditors, their audit report; (iv) the assistance given by employees of the Group to the external and internal

auditors; (v) the adequacy of the scope, functions, competency and resources of the internal

audit function and that it has the necessary authority to carry out its work including inter-alia the appointment of internal auditors;

(vi) the internal audit programme, processes and results of the internal audit programme, processes, major findings of internal investigation and Management’s response and whether or not appropriate action is taken on the recommendations of the internal audit function;

(vii) review any appraisal or assessment of the performance of members of the internal audit function;

(viii) the quarterly results and annual financial statements prior to the approval by the Board of Directors, focussing particularly on:

i. changes in or implementation of major accounting policies and practices;

ii. significant and unusual events; iii. significant adjustments arising from the audit; iv. compliance with accounting standards, other statutory and legal

requirements and the going concern assumption; v. the accuracy and adequacy of the disclosure of information essential

to a fair and full presentation of the financial affairs of the Group. (ix) any related party transactions and conflict of interest situations that may arise

within the Company or the Group and any related parties outside the Group including any transaction, procedure or course of conduct that raises questions of management integrity;

(x) any letter of resignation from the external auditors of the Company; (xi) whether there is any reason (supported by grounds) to believe that the

Company’s external auditors are not suitable for re-appointment; and



(xii) any significant audit findings, reservations, difficulties encountered or material weaknesses reported by the external and internal auditors, particularly any comments and responses in Management letters as well as the assistance given by the employees of the Group in order to be satisfied that appropriate action is being taken.

(b) Recommend the nomination of a person or persons as external auditors and the

external audit fee.

(c) Promptly report to Bursa Securities on any matter reported by it to the Board of the Company which has not been satisfactorily resolved resulting in a breach of the Listing Requirements.

(d) To verify the allocation of option pursuant to a share scheme for employees at the end of each financial year and to prepare a statement verifying such allocation in the annual reports.

(e) Carry out any other functions that may be mutually agreed upon by the Audit Committee and the Board which would be beneficial to the Company and ensure the effective discharge of the Audit Committee’s duties and responsibilities.

(f) To ensure the internal audit function of the Company reports directly to the Audit Committee.

3 Authorities of the Audit Committee (a) The Audit Committee is authorised by the Board to investigate any matter within the

Audit Committee’s terms of reference. It shall have full and unrestricted access to any information pertaining to the Group and shall have the resources it requires to perform its duties. All employees of the Group are required to comply with the requests made by the Audit Committee.

(b) The Audit Committee is authorised by the Board to obtain outside legal or external independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary, the expenses of which will be borne by the Company.

(c) The Audit Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity.

(d) The Audit Committee shall be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company, whenever deemed necessary, in order to enable the Audit Committee and the external auditors or the internal auditors or both, to discuss problems and reservations and any other matter the external auditors or internal auditors may wish to bring up to the attention of the Audit Committee.



(e) The Internal Auditors report directly to the Audit Committee and shall have direct access to the Chairman of the Audit Committee on all matters of control and audit. All proposals by Management regarding the appointment, transfer and removal of senior staff members of the Internal Audit of the Group shall require prior approval of the Audit Committee. The Audit Committee is also authorised by the Board to obtain information on any resignation of internal audit staff members and provide the staff member an opportunity to submit his reasons for resigning.

4 Meetings of the Audit Committee The Audit Committee shall meet at least four (4) times in a financial year, although additional meetings may be called at any time at the Audit Committee Chairman's discretion. The quorum for a meeting of the Audit Committee shall consist of not less than two (2) members, majority of whom must be Independent Directors. Other than in circumstances which the Chairman of the Audit Committee considers inappropriate, the Chief Financial Officer, the representatives of the internal auditors and external auditors will attend any meeting of the Audit Committee to make known their views on any matter under consideration by the Audit Committee or which in their opinion, should be brought to the attention of the Audit Committee. Other Board members, employees and external professional advisers shall attend any particular meetings upon invitation by the Audit Committee. At least twice in a financial year, the Audit Committee shall meet with the external auditors without the Executive Directors being present. The Audit Committee shall report to the Board and its minutes tabled and noted by the Board of Directors. The books containing the minutes of proceedings of any meeting of the Audit Committee shall be kept by the Company at the registered office or the principal office of the Company, and shall be open for inspection of any member of the Audit Committee and the Board. During the financial year under review, the Audit Committee held five (5) meetings and the details of the attendance are as follows:

Members Meeting Attendance

Faidzan bin Hassan 3/5

Soo Pow Min 5/5

Khoo Chuin Yuen 5/5

5 Summary of Activities of the Audit Committee The Audit Committee had carried out the following activities during the financial year under review in discharging their duties and responsibilities:

Reviewed and assessed the adequacy of the scope and functions of the Internal Audit Plan.

Reviewed the External Audit Plan for the Company and the Group presented by the external auditors, with the external auditors to ensure the audit scope and activities is adequately covered.



Reviewed quarterly and annual financial reports for the Company and the Group prior to submission to the Board for consideration and approval.

Reviewed and approved the proposed final audit fees for the external auditors and internal auditors in respect of their audit of the Company and the Group.

Considered the reappointment of the external auditors.

Met with the external auditors to discuss various issues on the Company, excluding the attendance of the executive members of the Board and management.

Reviewed related party transactions, if any, for compliance with the Listing Requirements.

6 Internal Audit Activities In discharging its duties, the Audit Committee is supported by an internal audit function which is outsourced to an independent internal audit service company (“Internal Auditor”), who undertakes the necessary activities to enable the Audit Committee to discharge its functions effectively. The Internal Auditor is independent of the activities audited by the external auditors. The Audit Committee has full access to the Internal Auditor and received reports on all audits performed. During the financial year under review, the internal audit has conducted various assignments on a quarterly basis and made recommendations in improving the system of internal controls to the Audit Committee. The areas internal audit covered were billing, collection and receivables, inventory, marketing, sales, customer services and call centre service. The cost incurred by the Group for the internal audit function during the financial year ended 30 June 2014 amounted to RM58,900.

Statement on Risk Management and Internal Control


The Code requires listed companies to maintain a sound system of internal controls to safeguard shareholders’ investments and the Group’s assets. The Board is pleased to include a statement on the state of the Group’s risk management and internal control during the financial year under review. The statement is prepared in accordance with the Listing Requirements and released Statement on Risk Management & Internal Control : Guidelines for Directors of Listed Issuers. Board Responsibility The Board acknowledges its overall responsibility for reviewing the adequacy and integrity of the Group’s system of internal controls, identifying principal risks and establishing an appropriate control environment and framework to manage risks. However, the effectiveness of the Group’s system of internal control is designed to manage rather than to eliminate the risk of failure to achieve business objectives. Accordingly, the Group’s system of internal control can only provide reasonable but not absolute assurance against material misstatement or loss. The Board either directly or via the Audit Committee, have an on-going process for identifying, evaluating and managing the significant risks of the Group with the management. The Board is in the midst of defining the appropriate process and personnel to provide assurance to the Board on the effectiveness and adequacy of risk management and internal control system. Such personnel shall be at a senior position. Audit Committee The Audit Committee reviews the adequacy and effectiveness of the Group’s systems of internal control as well as reviewing issues identified by the internal auditors. The Audit Committee also ensures that there is continuous effort by management to address and resolve areas where control weaknesses exist. The Audit Committee reviews the quarterly results of the Group and recommends adoption of such results to the Board before announcement to Bursa Securities is made. Internal Audit The Group outsources the internal audit function to an external firm. The firm is appointed by and reports directly to the Audit Committee. Its role is to provide the Audit Committee with regular assurance on the continuity, integrity and effectiveness of the internal control system through regular monitoring and review of the internal control framework and management processes. The internal audit firm prepares audit plans for presentation to the Audit Committee for approval wherein the scope of work encompasses management and operational audit of functions in the Group.

Statement on Risk Management and Internal Control


During the financial year under review, the internal audit has conducted various assignments on a quarterly basis and made recommendations in improving the system of internal controls to the Audit Committee. The areas internal audit covered were fixed assets management and monitoring, billing, collection process, payment process, inventory, corporate governance and risk management. Other Key Internal Control Elements

The Board meets on a regular basis to review the performance and operations of the Group.

The Group has in place an organisational structure that is aligned to business and operational requirements, with clearly defined lines of accountability.

Active involvement by the Managing Director and Chief Executive Officer in the day-to-day business operations of the Group including weekly operational and management meetings to identify, discuss and resolve business and operational issues.

Periodic review of management accounts by key personnel including the Managing Director and Chief Executive Officer. The management accounts are also presented to the Board and Audit Committee during the respective meetings.

Review of the Statement by External Auditors The external auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report of the Group for the year ended 30 June 2014 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and effectiveness of the risk management and internal control system. Conclusion For the financial year under review, there were no significant internal control deficiencies or material weaknesses resulting in material losses or contingencies requiring disclosure in the Annual Report. The Board is of the view that the existing system of the internal control is adequate. Nevertheless, the Board recognises that the development of internal control system is an ongoing process. Therefore, in striving for continuous improvement, the Board will continue to take appropriate action plans to further enhance the Group’s system of internal control.

Statement of Directors’ Responsibility


The Directors are required to take reasonable steps in ensuring that the financial statements of the Group are properly drawn up in accordance with the provisions of the Companies Act, 1965, applicable financial reporting standards and approved accounting standards in Malaysia so to give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year and of the results and the cash flows of the Group and the Company for that year then ended. The Directors consider that in preparing the financial statements for the financial year ended 30 June 2014:

the Group and the Company have adopted the appropriate accounting policies and applied them consistently;

reasonable and prudent judgements and estimates have been made; and

all applicable approved accounting standards in Malaysia have been followed. The Directors are also responsible for ensuring that the Group and the Company maintain accounting records that disclose with reasonable accuracy at any time of the financial position of the Group and of the Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965. The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities and material misstatements. Such systems, by their nature, can only provide reasonable and not absolute assurance against material misstatement, loss or fraud.

Other Compliance Disclosures


1 Share Buyback The Company did not enter into any share buyback transactions during the financial year under review. 2 Options, Warrants or Convertible Securities There were no options, warrants or convertible securities were issued during the financial year under review. 3 Depository Receipt Programme The Company did not sponsor or participate in any depository receipt programme during the financial year under review. 4 Imposition of Sanctions and/or Penalties On 18 July 2014, Bursa Securities has publicly reprimanded the Company for failing to ensure that XOX’s announcement dated 30 August 2013 on the fourth quarterly report for the financial year ended (FYE) 30 June 2013 (4th QR 2013) took into account the adjustments as stated in the Company’s announcement dated 8 November 2013 (other than the adjustment in respect of the credit note from a trade creditor amounting to RM10 million which was received subsequent to the 4th QR 2013). The failure to take into account the adjustment was in contravention of Rule 9.16(1)(a) of the Listing Requirements where a listed issuer must ensure that each announcement made is factual, clear, unambiguous, accurate, succinct and contains sufficient information to enable investors to make informed investment decisions. The public reprimand was imposed pursuant to Rule 16.19(1) of the Listing Requirements after taking into consideration all facts and circumstances of the matter and upon completion of due process. 5 Non-Audit Fee Paid to External Auditors There was no non-audit fee paid to the external auditors of the Company and the Group for the financial year under review. 6 Profit Guarantee The Company does not provide any profit guarantees during the financial year under review. 7 Material Contracts and Contracts Relating to Loan There were no material contracts or contracts relating to loan entered into by the Company and its subsidiaries involving the interests of the Directors’ and major shareholders’ during the financial year under review.

Other Compliance Disclosures


8 Status of Utilisation of Proceeds On 25 November 2013, it was announced that the Company proposed to implement a private placement of up to 30,200,000 new ordinary shares of RM0.10 each, representing not more than 10% of the issued and paid-up share capital of the Company to investors to be identified. The private placement was subsequently completed on 24 February 2014, following the listing and quotation of 30,000,000 new shares on the ACE Market of Bursa Securities. The proceeds of RM3,120,000 raised from this private placement exercise was fully utilised during the financial year as follows:

Purpose Proposed Utilisation

(RM'000) Actual Utilisation

(RM'000) Repayment of trade creditor 1,510 1,510

Selling & marketing expenses 1,430 1,430 Private placement expenses 180 180

3,120 3,120

9 Variance in Results There were no significant variance between the results for the financial year and the unaudited results previously announced on 29 August 2014. The Company did not release any profit estimate, forecast or projection for the financial year. 10 Material Properties The Group does not own any properties during the financial year under review. 11 Recurrent Related Party Transactions of a Revenue and Trading Nature (“RRPT”) There was no material RRPT during the financial year under review.

xox

Documents

director soo

x annual report

xox bhd

chief executive officer

audit committee report

contents corporate information

enclosed corporate information

corporate governance