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SUMMARY OF KEY MATTERS DISCUSSED AT THE FOURTEENTH ANNUAL GENERAL MEETING ("14TH AGM") OF CAN-ONE BERHAD ("CAN-ONE" OR "THE COMPANY") HELD ON THURSDAY, 26 APRIL 2018

Pursuant to Paragraph 9.21(2)(b) of the Main Market Listing Requirements, a listed issuer must publish a summary of key matter matters discussed at the annual general meeting, as soon as practicable after the conclusion of the annual general meeting.

All ordinary resolutions that were tabled at the 14th AGM were duly approved by the Shareholders through poll voting. The Shareholders also received the Audited Financial Statements of the Company and of the Group, along with the Reports of the Directors and Auditors for the financial year ended 31 December 2017.

The results of the poll, which were announced by the Scrutineer, Quantegic Services Sdn Bhd, are as follows:
14TH AGM Voted in favour Voted against Total votes casted
No. of shares % No. of shares % No. of shares %
ORDINARY BUSINESS
Ordinary Resolution 1
Declaration of a first and final single-tier dividend of 4 sen per share for the financial year ended 31 December 2017. 		126,551,508 100.000 0 0.000 126,551,508 100.000
Ordinary Resolution 2
Re-election of Director, Yeoh Jin Hoe who retires pursuant to Article 97 of the Articles of Association of the Company. 		119,840,308 99.982 21,200 0.018 119,861,508 100.000
Ordinary Resolution 3
Re-election of Director, Yeoh Jin Beng who retires pursuant to Article 97 of the Articles of Association of the Company. 		126,230,308 99.983 21,200 0.017 126,251,508 100.000
Ordinary Resolution 4
Re-election of Director, Razmi Bin Alias who retires pursuant to Article 97 of the Articles of Association of the Company. 		126,473,008 99.938 78,500 0.062 126,551,508 100.000
Ordinary Resolution 5
Re-election of Director, Foo Kee Fatt who retires pursuant to Article 101 of the Articles of Association of the Company. 		126,551,508 100.000 0 0.000 126,551,508 100.000
Ordinary Resolution 6
Re-election of Director, Chee Khay Leong who retires pursuant to Article 101 of the Articles of Association of the Company. 		124,476,208 99.983 21,200 0.017 124,497,408 100.000
Ordinary Resolution 7
Approval of the payment of Directors’ fees amounting to RM784,000 to Directors of the Company and its subsidiaries for the financial year ended 31 December 2017. 		126,541,008 99.992 10,500 0.008 126,551,508 100.000
Ordinary Resolution 8
Approval of the payment of benefits of up to RM200,000 to the Non-Executive Directors of the Company and its subsidiaries for the financial year ending 31 December 2018. 		126,551,508 100.000 0 0.000 126,551,508 100.000
Ordinary Resolution 9
Re-appointment of KPMG PLT as Auditors of the Company to hold office until the conclusion of the next AGM of the Company and to authorise the Directors to fix their remuneration. 		126,551,508 100.000 0 0.000 126,551,508 100.000
SPECIAL BUSINESS
Ordinary Resolution 10
Proposed authority to Directors to allot and issue shares pursuant to Sections 75 and 76 of the Companies Act 2016. 		126,551,508 100.000 0 0.000 126,551,508 100.000
Ordinary Resolution 11
Proposed renewal of authority for the Company to purchase its own shares. 		126,551,508 100.000 0 0.000 126,551,508 100.000
Ordinary Resolution 12
Proposed renewal of mandate for the Company and its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature. 		72,007,027 100.000 0 0.000 72,007,027 100.000
Ordinary Resolution 13
Proposed new mandate for the Company and its subsidiaries to enter into additional recurrent related party transactions of a revenue or trading nature. 		72,007,027 100.000 0 0.000 72,007,027 100.000
The Minority Shareholder Watchdog Group ("MSWG") raised the following issues via its letter dated 18 April 2018 during the 60th AGM, which were duly answered by the Group Chief Financial Officer ("CFO"):
Strategic & Financial Matters
Q1 As stated in the Management Discussion And Analysis on Page 11 of the Annual Report, one of the key reasons for the decrease of the share of equity results of the associate was due to higher pre-operating expenses in Myanmar.
  1. Could the Board share with shareholders their views/thoughts on the future prospect of the Myanmar venture?

  2. What is the current status of the Myanmar venture and what would be the expected share of revenue contributed by the venture?
A1
  1. The Associate is in the midst of setting up a can manufacturing plant and a corrugated cartons manufacturing plant in Myanmar. Upon receiving the necessary investment permits in 2015, the Associate acquired two (2) pieces of industrial land in Thilawa Special Economic Zone and commenced construction work in 2017. The new plants are expected to commence operations in 2018.

  2. As a green field project, the Associate anticipates the new plants to contribute positive results within five (5) years from commencement of operations. The Associate intends to ride on the existing customer base in Malaysia and Vietnam to kick start its operations in Myanmar. Demand for tin cans, aluminium cans and corrugated carton boxes are anticipated to increase when the growth momentum in Myanmar gathers pace.
Q2 On Page 11 of the Annual Report, it was stated in the Management Discussion And Analysis that the profit before taxation (“PBT”) of Food Products division had contracted by RM18.5 million to RM45.3 million in FYE 2017 despite the division generating higher revenue of RM754.2 million. What measures have been taken by the management to counter the challenging operating environment and when would the division resume its growth in PBT again?
A2 The main cause of the decrease in PBT of the Food Products division was mainly due to:
  • Increased cost of the raw material, sugar - mainly due to the differential pricing of local sugar versus world sugar.

  • foreign exchange losses - mainly due to strengthening of United States Dollar (“USD”) over Ringgit Malaysia (“RM”) and the inability to hedge its USD open position when Bank Negara Malaysia changed its policy to only allow settlement of sales/purchases from local companies which are denominated in foreign currencies, to be made in RM.
Barring any unforeseen circumstances, the current year growth should be back on track.
Q3 On Page 44 of the Annual Report, the consolidated statement of financial position recorded that the trade receivables of the Group had increased by 32.1% from RM276.7 million in FYE 2016 to RM365.6 million in FYE 2017.
  1. What were the reasons for the growth in trade receivables to outpace the revenue growth rate of 22.4% for the FYE 2017?

  2. We refer to Note 27.4, Page 103 of the Annual Report where it was stated advances to subsidiaries amounting up to RM927,000 have been impaired. What was the reason for the impairment? Are the subsidiaries wholly-owned by the Company?
A3
  1. Please refer to the breakdown of the trade and other receivables on Page 81, Note 9.

    The actual increase in trade debtors in FYE 2017 was 25.6% as compared to FYE 2016 and the balance of the increase was from Other Debtors. Other Debtors increased mainly due to amount receivable from the sale of a property, and prepayment for raw material and property, plant & equipment.

    Nevertheless, the Management will continue to monitor the account receivables closely and ensure the credit control policy is effectively carried out.

  2. The impaired amount was for a wholly-owned subsidiary, Sanjung Nuri Sdn Bhd mainly due to negative shareholder’s funds. The impairment was made in FYE 2014 with RM60,000 reversal this year.
Q4 On Page 45 of the Annual Report, the consolidated statement of financial position recorded substantial increase in the Group’s ‘Other Operating Expenses’ as well as ‘Other Operating Income’ compared to FYE 2016. What are the components of the ‘Other Operating Expenses’ and ‘Other Operating Income’?
A4 'Other Operating Expenses' comprised realised and unrealised foreign exchange loss, bank charges and commission, property, plant & equipment written off and miscellaneous expenses.

'Other Operating Income' comprised gain on disposal of property, plant & equipment, compensation from customer, sales of scrap, insurance claims, rental income and other income.
Q5 We refer to Note 20 on Page 89 of the Annual Report where the net foreign exchange loss increased substantially from RM0.5 million in FYE 2016 to RM10.5 million in FYE 2017. What measures are being taken by the Management to mitigate net foreign exchange loss?
A5 The foreign exchange losses were mainly due to strengthening of USD over RM and the inability to hedge its USD open position when Bank Negara Malaysia changed its policy to only allow settlement of sales/purchases from local companies which are denominated in foreign currencies, to be made in RM.

The Management has managed to change all its purchases and sales from local companies which are denominated in foreign currencies into RM to mitigate this exposure.
Corporate Governance
Q1 MSWG is promoting corporate governance best practices in PLCs. In this regard, we hope the Board could address the following:

Question 1:

We noted from the Company’s website on 18 April 2018 that there was no publication of the “Key Matters Discussed” at the Company’s 13th Annual General Meeting held on 27 April 2017 as required under Chapter 9, Paragraph 9.21(2) of the Main Market Listing Requirements of Bursa Malaysia (“MMLR”).

Why has the Company not complied with the MMLR?
A1 The "Summary of Key Matters" discussed at the AGM in 2017 has been posted in the Company’s website.
Q2 Practice 4.3 of Malaysian Code on Corporate Governance 2017 (“MCCG”)

The Company on page 12 of the Corporate Governance ("CG") Report - Disclosure on MCCG stated that it has adopted Practice 4.3 - Step Up. However, in its Corporate Governance Overview Statement on page 25 of the Annual Report, it stated that “If the Board continues to retain the Independent Director after the twelfth (12th) year, the Board must seek shareholders’ approval annually though a two (2)-tier voting process.”

This is contrary to Step Up 4.3 of the MCCG which does not provide for any extension of tenure beyond the 9-year tenure of INEDS.

We hope the Board would take note of this.
A2 We take note of the above and have modified our CG Report accordingly.

We would like to stress that none of the members in the current Board has exceeded the 9-year tenure.
Q3 Practice 4.5 of MCCG

We noted the Company has no plan to implement a gender diversity policy, as stated on page 26 of the Annual Report, Practice 4.5 of the MCCG requires the Board to disclose in its annual report the company’s policies on gender diversity, its targets and measures to meet those targets.
A3 We are of the view that the selection of a candidate for the Board should be dependent on the candidate’s skills, expertise, experience, integrity, character, commitment and other qualities in meeting the requirements of the Company, regardless of gender.

Female representation is to be considered when suitable candidates are identified underpinned by the overriding primary aim of selecting the best candidate to support the Group’s objectives.
Q4 Practice 12.3 of MCCG

The Company has on Page 37 of its CGR stated that it had applied Practice 12.3 of MCCG. Practice 12.3 refers to facilitating or providing a platform for shareholders to vote remotely without being physically present at the Company’s AGM. Based on the Company’s explanation stated on the application of Practice 12.3, we wish to highlight that the Company has not correctly applied the Practice.

We hope the Board would take note of this.
A4 We took note of your comments but we would like to stress that we hold our AGMs in venue which is easily accessible and at reasonable hours. Shareholders who do not intend to attend the meeting are encouraged to vote via their proxies. Nevertheless, the Company will explore the use of technology to facilitate voting in absentia and/or remote shareholders’ participation at general meetings after taking into consideration, the accuracy and stability of such technologies, applicable laws and regulations, and resources required in relation to the benefits.
Other questions raised from the floor which were duly answered by the Board and Group CFO were as follows:
Q1 Reference is made to the 5-year Financial Highlights in the Annual Report 2017. Return on equity (“ROE”) has been on the decline each year from 15.13% in 2013 to 8.01% in 2017. What is the cause? Is it due to higher capital expenditure?
A1 The reduction was due to enlargement of the denominator attributable to the enlarged capital base. The Group reported a lower profit in FYE 2017 due to the surge in the prices of raw material, sugar and also foreign currency exchange ("FOREX") losses.
Q2 Does the Management have a guideline on what constitutes a satisfactory ROE? Based on ROE of 8.01%, does the Company have enough internally generated funds for capital expenditure?
A2 Presently, the Company does not a formal or written guideline on ROE. An acceptable level would be 10%. 2017 was an exceptional year for the Group for the reasons mentioned earlier. The price of the raw material, tin plate had also increased.

Hopefully, with the strengthening of RM against USD in 2018 and the drop in prices of sugar and tin plate, the Group can achieve a better result and correspondingly, a higher ROE.
Q3 The profits were down due to the squeeze in margins. Because of the drop in the share price of the Company, the dividend yield is currently about 1.5% based on the proposed dividend payment of 4 Sen per share. This is very low.

Would the Company consider some corporate exercise to reduce its gearing ratio, such as bonus issue with warrants to reward shareholders? The warrants when exercised can bring in capital for future expansion and the Board can consider payment of higher dividends. The Company should also consider dividend re-investment plan.
A3 We appreciate your views and take cognisance of your suggestions.
Q4 The Company’s ROE has been on a decline over the past few years. In my opinion, if you refer to Page 44, this is more of a capital allocation issue. You pay low dividend and there is no share buy-back.

Investment in associate, Kian Joo Can Factory Berhad ("KJCF") as at 31 December 2017 was RM515 million comprising about 60% of total non-current assets while its contribution to profit was RM28.9 million over. Without KJCF, Can-One’s net profit was RM30 million, which was even higher.

Can-One’s exposure to KJCF depressed Can-One’s valuation.
A4 Can-One’s investment in associate was at a cost of RM242 million. For equity accounting, the Group’s share of profit from KJCF is annually taken in. Hence, the investment in associate has ballooned to RM500 over million. It will continue to increase unless the associate make losses or Can-One disposes off certain portion of its equity in the associate.
Q5 Is it necessary for Can-One to control KJCF or can Can-One spin off the associate like UMW Holdings Bhd divesting UMW Oil & Gas Bhd. so that it would not drag down the Company? By disposing KJCF, Can-One would be able to derive a huge profit, pare down its debts and pay higher dividends to its shareholders. It is unusual for a food products company to trade at a 40% discount of its net tangible assets (“NTA”).

Is it possible to consider a dividend-in-specie of KJCF shares?
A5 KJCF is the largest tin can and aluminium can manufacturer in Malaysia controlling about 60% of the local market. It is also in the midst of developing certain plastic packing material. KJCF is indeed very important to us.

We take note of your suggestion on the dividend-in-specie.
Q6 Still on the subject of ROE, there are 2 ways: Assuming the business remains status quo and last year’s earning is 33 sen per share, if Can-One declares more dividend, the NTA could be reduced.

Another way is to use the spare cash of RM99.5 million if it is not pledged to banks for e.g. RM10 million, to buy back the Company’s own shares to support the share price. Currently, the share price is trading at RM2.53 per share, the lowest for the past 5 years. Can-One can sell when the market sentiment and its share price improve. This is not manipulating the share price but merely to support the Company’s shares price since you are confident in your Company’s shares and prospects.

How much of the available cash is pledged to banks?

Can the Management consider the above?
A6 Until December 2017, Can-One had cash pledged to bank. However, currently there is no more pledge.

We take note of your suggestion but we are conserving cash for working capital, paring down borrowings and seeking opportunities in the market. A bit of sacrifice now by shareholders of the Company will give better returns in the future.
Q7 Can-One is better managed than other companies in Bursa Malaysia which have an average ROE of 10%. However, a more acceptable ROE for Can-One is probably 12% in order to raise the profile of Can-One.
A7 We take note of your comment.
Q8 The increase in the prices of materials and the lower profit contribution from KJCF have been cited for the drop in profit of the Group. However, from the consolidated P&L account, it was apparent that a significant portion of profit was utilised for interest payment to banks. The loans and borrowings of the Group were high at RM250 million. Since the Company has cash balance of RM95 million, is there any thought by the Management to pare down its borrowings?
A8 A lot of the trade debtors settled their debts owing to the Group at the end of December 2017 which explained for the huge cash reserve in the profit and loss account. However, we cannot use all of it to pare down borrowing as a portion of the cash reserve is needed for working capital.

We will nevertheless attempt to minimise borrowings as much as possible in order to reduce interest expenses.
Q9 What is the point of obtaining a renewal of mandate for the Share Buy-Back when the Company did not purchase any of its own shares despite the approval granted by shareholders at the AGM in 2017?
A9 With the approval in hand, the Company can purchase its own shares at any time without having to convene a general meeting for that purpose. Hence, the recurring resolution for Share Buy-Back each year.
  2017