RESEARCH METHOD AND DATA COLLECTION FINDINGS AND DISCUSSION Background of the Company

The 2015 International Conference of Management Sciences ICoMS 2015, April 23, UMY, Indonesia | 165 However the status Halal can be revoked if the comp anies do not fulfill JAKIM’s requirement. Under the governance of halal compliance, Trade Description Act 2011 is precisely explained about the monitoring the falsification of signage and image of Islam in the premises that do not being granted Halal Certificate from JAKIM.

4. ISLAMIC FINANCE

The main principle of Islamic finance, consequently, it is not consists of prohibition Riba, which is no receipt of interest. Besides, prohibition of activities of elements of Gharar uncertainty where are excessive of speculation is prohibited. It is based on Islamic norms such as morality, fairness, reasonableness and justice. Islamic finance also involved a willingness to share the consequences participants may reap gains as well as bear losses according to a pre-determined ratio. Therefore, an honest intention to take responsibility is the cornerstone of any Islamic business deal. Under the regulation of Islamic finance in Malaysia, there are several authorities body how are responsible and accountable to manage as well as to monitor the whole activities of business. In general, there are different sectors under the Halal industry are regulated by separated authority bodies. Similarly, the Islamic banking and financial sectors are also regulated by the different regulators with the different acts and regulations which are Bank Negara Malaysia controls the Islamic banks and takaful providers and Securities Commission Malaysia SC controls the Islamic capital Market. These regulations are to enhance the efficiency of the Islamic capital market, the SC issue list of Shariah compliance securities that can be used by investors as a guide for their investment. Shariah Advisory Council is the highest body for compliance. Shariah Governance SG is a means of corporate governance to unsure the compliance of business entities with Shariah. The SG is different from the traditional corporate governance CG in a way that the compliance with Shariah principle becomes the main objective of the governance in SG. The effective SG can improve the credibility of halal market participants and protect all stakeholders that are directly and indirectly connected with the industry. There are two main documents in Halal sectors which are Bank Negara Shariah Framework issued by BNM and Manual Prosedur Persijilan Halal 201 issued by JAKIM. Bank Negara plays an important role to set policies and supervise the Islamic Banking and takaful institution. There are two main levels of SG adopted by BNM. The first level is positioned at the central level of Bank Negara with the establishment of Shariah Advisory Council this aspect has been endosed in IBA 1983 and Takaful Act 1984. The second level is applied in individual Islamic banking institution. The SG of the individual Islamic banks and takaful is recognized through IBA 1983, Takaful Act 1984 and Bank Negara Shariah Governance Framework. However, Bank Negara Shariah Governance Framework provides more comprehensive aspect of SG that should be followed by these institutions.

5. RESEARCH METHOD AND DATA COLLECTION

This study analysis is primarily based on a case study of one of company that is listed on Bursa Malaysia Berhad. The study focuses on whether the company had meet the criteria of halal products certification and also whether the c ompany’s financing is in compliance with the Shariah principle. The study focuses on Chemical Company of Malaysia Berhad CCM as the unit of analysis. Analysis is based on annual report year 2013 of CCM. This study also uses publicly available information, particularly from CCM website to examine the details and background of the products and its financing.

6. FINDINGS AND DISCUSSION Background of the Company

CCM has had significant corporate presence in Malaysia and has since grown to a responsible and independent Malaysian company to further enhancing quality of life for all. CCM aspires to contribute significantly to the domestic and global Halal industries through its three Divisions by continually expanding its market presence which is currently in more than 30 countries. Listed on the Main Board of Bursa Malaysia with good returns to shareholders’ values, their vision is to provide innovative science and technology based solutions to their consumers. CCM Group offers a wide range products and services to the chemicals, healthcare and agricultural industries. CCM Group integrated approach to business make us a unique “one-stop” agency.  Chemical products and applications  Fertilizers and technical advisory services  Pharmaceuticals and healthcare products and services Halal Initiatives of CCM Chemical Company Malaysia Berhad CCM became the first pharmaceutical company to obtain the renowned ‘Halal Malaysia’ certification of its range of health supplements under the brands CHAMPS, Flavettes, Provition and Naturalle in 1999. This accomplishment is certainly a significant milestone to be proud of as the halal certification manifests the high The 2015 International Conference of Management Sciences ICoMS 2015, April 23, UMY, Indonesia | 166 safety, efficacy, quality and hygiene aspects of CCM’s products. The vision and mission of Chemical Company Malaysia Berhad CCM is to perform the fardh kifayah collective obligationduty by making available halal products to consumers for worldwide. Besides to enhance quality of life, CCM provide products that are consistently of high standard and quality. CCM becomes the largest Good Manufacturing Practice GMP where the pharmaceutical certified manufacturer in Malaysia with an expanded range of halal certified products of more than 100 including over-the-counter OTC products. It’s the business expansion over the past years have also allowed CCM to provide a wide range of health supplements. CCM’s has been advocating the halal concepts. The company has apply the halal concepts consistently, particularly in the company’s Chemicals Division. The division is the first ISO certified chemical manufacturer to obtain the halal certification in 2004 for its liquid Chloride PAC and Ferric Chloride which are supplied to numerous industries like water treatment, oleochemicals including edible oil, food and beverages in Malaysia and the international market. In April 2010, additional products of Calcium Nitrate and Nitric acid were also certificated halal by JAKIM. Though currently halal certification is not extended to the fertilizer products, CCM Fertilizer Division’s products which are mineral based comply with the halal standards of hygiene and quality and are safe for use as plant nutrients. CCM Fertilizers Divisions is the only compound fertilized manufacturer in Malaysia to have received both SIRIM MS49 and MS ISO 9001 quality awards. CCM intends to play an important role in developing the Halal Standards for its various manufactured products, collaborating closely with key Halal industry organizations such as JAKIM Department of Islamic Development Malaysia, HDC Halal Industry Development Corporation, the Department of Standards Malaysia, SIRIM, World Halal Forum WHF and International Halal Integrity IHI Alliance. CCM believes that these standards will assist in alleviating the challenges that come with the expanding Halal industry albeit the different regulatory requirements in registering products in various countries. With CCM Halal Policy as the guiding principle and the strong commitment from the top management via CCM Halal Council and its employees, CCM is focused towards strengthening its Halal integrity, together with continuous capacity building and intensive marketing activities to become the Halal Supplier of Choice worldwide. Figure 2 shows the CCM Halal Council and Halal Commit tees. The Council’s main focus is to strategise, plan, control, develop policiesguidelines and provide leadership to drive, strengthen and promote halal initiatives of CCM. The Halal Council is chaired by the company’s Group Managing Director. Members of the Council are consist of Muslim senior manager from each of the company’s division. The halal initiates of CCM is strengthen by Halal Committees, which exist in Pharmaceutical Division, Chemical Division and Fertilizers Division. Differ from Halal Council that focus on strategic level, Halal Committees focus more on operational level. The Committees role is to ensure that the operations of each divisions will always comply with the requirement of authorized Islamic certification bodies and other related regulatory bodies. Figure 2: CCM Halal Council and Halal Committees Source: CCM Halal Initiatives Booklet Financing of CCM Based on CCM’s financial statements, the liabilities of the company can be divided into non-current unsecured financing and current unsecured financing. Table 1 shows CCM Group’s loans and borrowings for the year 2012 and 2013. The 2015 International Conference of Management Sciences ICoMS 2015, April 23, UMY, Indonesia | 167 Table 1: CCM Group Interest Bearing Loans and Borrowings 2013 2012 Non-current-unsecured Sukuk musyarakah Term loan 100,000 280,000 120,000 430,000 380,000 550,000 Current-unsecured Banker’s acceptance Term loan Revolving credit and trade facilities Term loan and trade facilities 73,725 150,000 96, 675 49,234 88,560 - 124,130 80,953 369,634 293,643 Based on the above table, it can be observed that CCM has issued an Islamic security, sukuk. This indicates that beside being a halal certified company, the company also use sukuk as one of its financing instrument. Sukuk Musyarakah was issued by the company on 8 August 2011, where CCM issued RM120, 000 nominal amount of 5 year fixed rate unsecured and unrated sukuk at 4.35 per annum. MIDF Amanah Investment Berhad MIDF Investment has been mandated as the Principal Adviser and Lead Arranger for the Proposed Sukuk Issuance. The proceeds of the Sukuk Issuance is to be utilized to refinance wholly CCM’s existing bridging facility of RM120.0 million with MIDF Investment. The purpose of the bridging facility is to partly finance up to RM120.0 million of CCMs upcoming RM150.0 million Sinking Fund Account commitment in respect of its existing RM500.0 million Musyarakah Commercial PapersMedium Term Notes Programme. Some of significant covenants of the USM are as follows: a Financial covenants The company shall maintain the following ratios throughout the tenure of the USM: i. The finance to equity ratio of not more than 1.5 times. ii. The profitinterest cover ratio of at least 2 times. b Negative covenants The company will not, without written consent from the trustee first, had and obtained for the followings: i. Create or permit to subsist any security interest over any of its present of future assets, other than permitted by the financing document and trust deed. ii. Reduce its authorized and issued shares save and except for any decrease in its issued capital resulting from purchase or cancellation of its own shares pursuant to section 67A of the Companies Act 1965. iii. Add, delete, vary or amend its Memorandum or Articles of Association on in manner inconsistent of the Financing Document other than those permitted by the Financial Documents and Trustee Deed. iv. Dispose any assets in excess of 25 of the Group’s net assets as reflected in the latest consolidated annual audited financial statement in any financial year other than those permitted by the Financing Document and Trustee Deed. v. Undertake or acquire any other business or subsidiaries where such undertaking or acquisition would have a material adverse effect. vi. Use the proceeds other than those permitted by the Financing Document and Trustee Deed. However, other financing liabilities of CCM have no sufficient information whether or not the instruments are Islamic financing. The company should disclose the types of loans and trade facilities in the annual report, so that the shareholders and investors could make an informed decisions.

7. SUMMARY