Scientex Berhad : Minutes of AGM 2021

SCIENTEX BERHAD

Company No. 196801000264 (7867-P)

(Incorporated in Malaysia)

Minutes of the Fifty-Third Annual General Meeting of the Company ("AGM") held virtually through live streaming from the broadcast venue at Auditorium, Bangunan Scientex, No. 9, Persiaran Selangor, Seksyen 15, 40200 Shah Alam, Selangor Darul Ehsan and via the TIIH Online website at https://tiih.online on Wednesday, 8 December 2021 at 11.30 a.m.

PRESENT	: Directors
	YBhg. Tan Sri Dato' Mohd Sheriff Bin Mohd Kassim - in the Chair
	Mr Lim Peng Jin
	Mr Lim Peng Cheong
	Mr Wong Chin Mun
	Dato' Noorizah Binti Hj Abd Hamid
	Mr Ang Kim Swee
	Shareholders, Proxies and Corporate Representatives as per attendance list.
IN ATTENDANCE	: Ms Tung Wei Yen		}	Company Secretary
	Ms Ong Ling Hui			}
BY INVITATION	: Mr Teo Swee Chua		-	Deloitte PLT
	Ms Joey Wong			-	Legal Manager
	Representatives	of	Tricor	}	Poll Administrators
	Investor & Issuing	House	}
	Services Sdn Bhd			}
	Representative	of	Asia	}	Scrutineer
	Securities Sdn Bhd		}
VIRTUAL	: https://tiih.online
MEETING
PLATFORM

1. WELCOME ADDRESS
   The emcee of the Meeting, Ms Joey Wong welcomed the participation of the attendees to the virtual AGM. It was noted that in light of COVID-19 cases being actively detected in all states and territories of Malaysia, the Company has continued to take prudent approach to safeguard the safety and health of all participants with the AGM being conducted on a virtual basis and providing remote participation and voting ("RPV") facility to all shareholders who have logged in for the Meeting. The Company acknowledged that AGMs serve as an important communication channel for shareholders. Therefore, the Company will continue to engage with shareholders through various modes including embracing technologies to enhance communication. The Meeting was conducted in line with the provisions of the Company's Constitution and in compliance with existing laws and regulatory requirements.
2. CHAIRMAN
   YBhg. Tan Sri Dato' Mohd Sheriff bin Mohd Kassim chaired the Meeting and commenced the proceedings of the AGM. He welcomed the shareholders, proxies and corporate representatives to the Meeting and introduced the members of the Board of Directors, the Company Secretary and the auditor who were seated with him at the broadcast venue.
3. QUORUM
   The Chairman called the Meeting to order at 11.30 a.m. after the Secretary confirmed the requisite quorum had logged-in at the start of the Meeting.

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Scientex Berhad

Minutes of Fifty-Third Annual General Meeting held on 8 December 2021

1. NOTICE OF MEETING AND ADMINISTRATIVE MATTERS
   The Chairman informed that all resolutions stated in the Notice of AGM would be put to vote by way of poll pursuant to Paragraph 8.29A of the Main Market Listing Requirements of Bursa Securities. The Company had appointed an independent service provider, Tricor Investor & Issuing House Services Sdn Bhd ("Tricor") as the Poll Administrator to facilitate the poll voting via the RPV facilities and Asia Securities Sdn Bhd as the independent Scrutineer to verify the poll results. The poll was conducted electronically via the RPV facilities provided by Tricor. The voting session had commenced from 11.30 a.m. until the Chairman announced the end of voting session. The Poll Administrator briefed the shareholders, proxies and corporate representatives on the online voting procedures adopted for the RPV facilities.
   The Chairman briefed the shareholders on the agendas of the Meeting. The Notice of AGM dated 9 November 2021 having been circulated to all shareholders of the Company within the statutory period was taken as read.
2. QUESTION AND ANSWER
   The Chairman highlighted that the Company had received a letter from the Minority Shareholders Watch Group ("MSWG") on 2 December 2021, seeking clarification on the Company's operational, financial and corporate governance matters. He then invited the emcee to read out the Company's reply to the pre-submitted questions received from MSWG as follows: -
   Pre-Submitted Questions by MSWG Operational & Financial Matters
   1. On 8 November 2021, Scientex's unconditional voluntary takeover offer of Daibochi Berhad had closed, however Scientex was unable to accumulate the required 90% stake to privatise Daibochi. As of now, Scientex holds 71.9% equity interest in Daibochi.
3. 1. What is Scientex's gameplan for Daibochi?
      Answer: We will continue to focus on growing the business, as well as explore various business opportunities and other options taking into account the interest of the company.
   2. When the Company launched a conditional mandatory take-over offer on Daibochi back in 2019, the plan was to maintain the listing status. But now, the Company plans to privatise Daibochi.

Why is there a change in Scientex's strategy?

Answer: When we acquired Daibochi in 2019, our focus was to bring together two complementary organisations and enhance their respective operating capabilities and economies of scale through synergistic and complementary product portfolios. This remains our focus today and since our acquisition of Daibochi in 2019, we have made significant progress in enhancing Daibochi's performance and operations.

However, the COVID-19 pandemic brought into focus the importance of business continuity and greater business agility to manage any potential disruption and impact to our business operations.

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Scientex Berhad

Minutes of Fifty-Third Annual General Meeting held on 8 December 2021

Hence, the privatisation exercise was intended to provide greater flexibility and autonomy to rationalise our business activities and streamline the operations of both Scientex and Daibochi to capture more market opportunities in the consumer packaging space and to capitalise on the fast- growing flexible plastic packaging industry.

2. It was mentioned at the last AGM that Scientex's Arizona plant was operating at utilisation rate of 30% in view of challenges faced during the COVID-19 pandemic.

1. Has the Group been able to ramp up the capacity utilisation of the Arizona plant? What is the current utilisation rate?
2. It was reported that Scientex had put on hold the plan for the new Lancaster facility. Is the Group keen to revisit this expansion plan?
   Answer: The utilisation rate for the Arizona plant remains at 30% due to the challenging environment from labour unavailability and supply chain disruptions due to COVID-19. We will still work towards increasing our utilisation rate.

We are monitoring the COVID-19 situation and the earlier planned expansion to Lancaster remains on hold. Our primary focus is to reinforce our existing presence in Arizona meantime.

1. Based on Scientex's disclosure in its Annual Report 2021 (AR2021), the consumer packaging segment saw the rise of several innovations e.g., flexi-ink receptive BOPP film, MOPP film, Avanti CPP film et cetera.
   Given that the consumer packaging segment faced operational challenges in FY2021 due to factors like rising material and logistic cost, will commercialisation of these innovations contribute to better financial performance of the segment in FY2022?
   Answer: Product innovation is among our key growth drivers in the packaging segment. Through innovation, we bring new and improved solutions in line with latest market requirements, to support our existing customers and expand our customer base. These efforts also strengthen our competitiveness and position in the industry.
2. The issue of properties overhang remains prevalent in the local property market. National Property Information Centre (NAPIC) revealed that as of third quarter of 2021, there were RM19.75 billion worth of completed unsold houses. States like Kuala Lumpur, Penang, Selangor and Johor recorded the highest number of unsold houses.
   Does Scientex face the issue of unsold properties, notwithstanding its primary offerings of affordable houses? What is the extent of unsold properties among Scientex's property portfolio?
   Answer: Scientex's property developments are concentrated on the affordable landed homes category where demand is robust. We have minimal unsold properties at less than 10% of our total property sales. As at FY2021, our unsold completed property units amounted to RM90.6 million, a reduction from RM92.4 million in the previous year. (Integrated Annual Report 2021, page 167).

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Scientex Berhad

Minutes of Fifty-Third Annual General Meeting held on 8 December 2021

5. In FY2021, there was an increase in the number of work-related injuries across Scientex's packaging and property division. For the packaging division, a total 94 accidents and one fatal injury were recorded (FY2020: 83 accidents, 0 fatal injury)

As for the property division, there were 35 accidents recorded as compared to 12 accidents in the previous year.

(Source: Page 69, Sustainability Report 2021).

1. What were the causes of these accidents especially the fatality that occurred at Scientex's Rawang, Selangor plant?
2. What are the prevention measures taken to ensure zero fatality and lower rate of accidents in the future?
   Answer: The incidents were due to breaches in existing safety and health protocols that were in place. We have investigated the nature of the accidents and their causes, and proposed enhanced measures on employee education and compliance.

Corporate Governance Matters1. Non-auditfees

	FY2021	FY2020
Audit fees	RM1,026,000	RM966,000
Non-audit fees	RM1,502,000	RM463,000
Total audit and non-audit fees	RM2,528,000	RM1,429,000
Source: Annual Reports 2020 - 2021

In FY2021, Scientex paid RM1.5 million non-audit fee to Deloitte PLT and its affiliates, which is higher than the audit fee incurred during the year (page 107 of AR2021) for services related to tax compliance and advisory services, sustainability and integrated reporting services, and due diligence in relation to corporate exercises.

As for FY2020, Scientex incurred non-audit fees of RM463,000 against audit fees of RM966,000 (page 114 of AR2020).

1. Are the non-audit services provided in FY2021 recurring in nature?
2. Does the Company have a policy on percentage of non-audit fees paid to its external auditor compared to audit fees paid? What is Scientex's policy in relation to non-audit fees and audit fees? Is there a cap as to the percentage of non-audit fees to audit fees (or total fees) paid to external auditor and its affiliates?
   Answer: The details for the non-audit fees for FY2021 are as follows:

Types of services	RM'000
Advisory for tax audit	600
Annual tax compliance and transfer pricing documentation	390
Country-by-Country Reporting (CbCR) filing	145
Integrated and sustainability reporting and other advisory	367

We do not have policy or cap for non-audit and audit fees.

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Scientex Berhad

Minutes of Fifty-Third Annual General Meeting held on 8 December 2021

1. Scientex's managing director/chief executive officer Mr. Lim Peng Jin received total remuneration of RM11.7 million in FY2021, of which approximately 43% (or RM5.02 million) were bonuses, allowances and other emoluments (page 98 of AR2021).
   What is the breakdown of the bonuses, allowances and other emoluments received by Mr. Lim?
   Answer: The amount relates to performance bonus.
2. During the financial year, the internal auditors had reviewed and audited the information technology system, quality assurance, inventory and fixed assets, receivables cycle, scheduled waste management and worker's accommodation of certain key business units (page 105 of AR2021).
3. 1. How many audit cycles were conducted, and how many reports were published during FY2021?
   2. What were the main recommendations by internal auditors based on their audits?

Answer: There were 14 audits conducted in FY2021. Reports were published for all audits conducted with additional reports on follow up implementation of past audit recommendations.

Based on the audit conducted, the Group's controls were found to be in place. The auditors' recommendations include policies and procedures to improve and enhance on waste management. Furthermore, additional improvements to safeguard assets of the company that are proposed include but are not limited to insurance, better maintenance, and storage practices.

On behalf of the Company, the emcee thanked MSWG for raising the questions in the interest of all shareholders. Following the pre-submitted questions by MSWG, the Managing Director/ Chief Executive Officer, Mr Lim Peng Jin addressed the queries and comments from the shareholders as follows: -

1. Based on our initial review, two subsidiary companies of the Group might be subjected to "Cukai Makmur" in FY2022. However, the Group has reinvestment allowances this year and last year. The Group's effective tax rate in FY2021 was around 19%. For FY2022, with the reinvestment allowances, the Group's effective tax rate is expected to be lower than the statutory tax rate of 24% but higher than the prior year's effective tax rate.

The pages 56 and 57 of the Integrated Annual Report 2021 (IAR 2021) of the Company details the Group's plan and roadmap on how to achieve the goals set for FY2023. Our drivers of growth are Capacity, Efficiency, Product value. For packaging division, in the past few years, the Group has been working to expand based on market trend. We have expanded capacity and capability in our plants in Ipoh, Klang and building a new robotic stretch film plant in Shah Alam. We expect to commission the stretch film machines mid next year. Expansions are also ongoing as planned at the Group's plants in Port Klang, Rawang and Melaka. Notwithstanding that the Group faces challenges in the market, eg the current material and logistic challenges, the Group is confident that it will have the capacity and capability to meet the target volumes when market improves. For property division, we have raised our target to 8,000 affordable homes. The map on page 17 of the IAR 2021 shows the expansion of our land bank to 30 in the current year. With the expansion in land bank, the Group target to launch 7,000 unit in FY2022 and 8,000 units affordable homes annually FY2023 onwards.