Board of Directors

Transcription

Board of Directors

OUR VISION
A Global and
Leading Company in Product Innovations,
Quality and Excellent Service.
C O R P O R AT E S T R AT E G I E S
REGIONAL
EXPANSION
Regional
expansion to
lower cost
structure
countries
where
customers are
based.
ONE-STOP
SOLUTION
Develop a
one-stop
solution to
service
customers.
WORLDCLASS
QUALITY
Creating a
culture of
world-class
quality
excellence.
CORE
BUSINESS
ENHANCEMENT
Enhancement
of existing core
businesses
to position
for growth.
ORGANIC
AND
INORGANIC
GROWTH
Form strategic
alliance and
merger/
acquisition for
enhancement
of technology,
product range
and market.
HUMAN
ASSET AND
TECHNOLOGY
Continuously
develop human
asset and keep
abreast with the
latest technology
to support regional
advancement and
technology
capability.
Contents
2
Corporate Information
4
Group Structure
3
5
6
Corporate Directory
Group Business Capabilities
Audit Committee Report
10
Letter to Shareholders
19
Financial Highlights
16
21
22
25
31
33
79
81
Management’s Discussion and Analysis
Board of Directors
Profile of Board of Directors
Statement on Corporate Governance
Statement on Internal Control
Financial Statements
Other Information Required by the
Listing Requirements of Bursa Securities
Statistics on Shareholdings
85
Properties of JHB Group
88
Statement Accompanying Notice of
86
Notice of Tenth Annual General Meeting
Tenth Annual General Meeting
Form of Proxy
COVER RATIONALE
The “Human Chain” for ms the concept of teamwork in Jotech, where its
people are nurtured to create a corporate family, a cohesive group and a
team united behind a common vision. Thus in equipping its people and
forging team solidarity, the Group is har nessing the key asset to create an
organisation that excels not only in manufacturing products to the industry’s
highest standards but enhancing its total value, exceeding its customer’s
and shareholders’ expectations and charting its future for further success.
Corporate Infor mation
BOARD OF DIRECTORS
• Non-Executive Chairman
Yg. Bhg. Datuk Haji Sarip
bin Hamid
• Chief Executive Officer
Lim Siok Hui
SENIOR MANAGEMENT
• Non-Independent Non-Executive Directors
Tuan Haji Mohd Ali bin Bawal
Liew Cheng York
Ooi Boon Pin
Chew Siew Hong
Jotech Holdings Berhad
Chief Executive Officer
Jotech Metal Fabrication Industries
Sdn Bhd
• Lo Li Li
Deputy Chief Executive Officer
• Ratnakumar A/L Manickam
Chief Financial Officer
• Jamil Jamingin
• Lim Siok Hui
• Raymond Fam Chye Soon
• Leong Lup Yan
Prodelcon Sdn Bhd & Multimatic
Systems Sdn Bhd
• Chang Chuen Bin
Executive Director
• Pung Kok Guan
Production Manager
• Teoh Seng Hong
Senior Engineering Manager
• Tan Chee Keong
Operations Manager – PMD
• Ooi Chee Keong
Senior Manager – Tooling
Jotech Metal Fabrication Industries
Sdn Bhd
• Ronn Chan
Executive Director
• Low Mee Chin
Head – Procurement Department
Head – Operation Department
Ashari bin Ayub
Lasa bin Mat Desa
Yg. Bhg. Lt. Jen (B) Datuk Haji Abdul
Aziz bin Hasan
GuangDong Jotech Kong Yue Precision
Industries Ltd
• Ronn Chan
Managing Director
• Cheok Kiet Guan
Assistant General Manager
• Koh Lee Huat
Palladine Technology Pte Ltd
• Bennie Tan
JP Metal Sdn Bhd
• Ronn Chan
• Lu Cheet Oei
Head – General Affair Department
Head – Laser Department
Managing Director
• Yong Kin Choon
Managing Director
• Jeffrey Chan
Executive Director – Sales & Marketing
Senior Manager – Procurement & Logistic
• Tee Ah Bee
Palladine (M) Sdn Bhd
• Andy Goh
PT Indotech Metal Nusantara
• Indra S. Susanto
Cabletron Electronics Sdn Bhd &
Cabletron (M) Sdn Bhd
• Chandran. S
Operations Manager
Human Resource & Administration
Manager
President Director
• Suwardi Hassan
Finance Manager
Head – Finance Department
Senior Manager
General Manager
• AK Lim
Senior Manager – Sales
• Steve Sia
Sales Manager
• Raymond Tan
Senior Manager – Service
PRINCIPAL BANKERS
SOLICITORS
AUDITORS
• Affin Bank Berhad
• Azam – Malek & Soh
• Russell Bedford Malaysia
• United Overseas Bank (M) Berhad
REGISTERED OFFICE
2
• Independent Non-Executive Directors
Lot 6, Jalan 6/4, Kawasan
Perindustrian Seri Kembangan,
43300 Seri Kembangan,
Daerah Petaling,
Selangor Darul Ehsan, Malaysia.
Tel: (603) 8945 4288
Fax: (603) 8945 4688
Website: www.jotech.com.my
• Teh & Lee
SHARE REGISTRAR
Symphony Share Registrars Sdn Bhd
Level 26, Menara Multi Purpose,
Capital Square,
No. 8, Jalan Munshi Abdullah,
50100 Kuala Lumpur.
Tel: (603) 2721 2222
Fax: (603) 2721 2530
• KPMG
COMPANY SECRETARIES
Ng Yim Kong
LS 0008343
Leong Lup Yan
MIA 11572
Corporate Directory
HEAD OFFICE
Jotech Holdings Berhad
Lot 6, Jalan 6/4, Kawasan
Daerah Petaling,
Selangor Darul Ehsan,
Malaysia.
Tel : (603) 8945 4288
Fax : (603) 8945 4688
Website: www.jotech.com.my
PRECISION STAMPING
Jotech Metal Fabrication
Industries Sdn Bhd
20 & 22, Jalan Masyhur 1,
Taman Perindustrian
Cemerlang,
81800 Ulu Tiram,
Johor Darul Takzim,
Malaysia.
Tel : (607) 861 6613
Fax : (607) 861 6620
JP Metal Sdn Bhd
Lot 6, Jalan 6/4,Kawasan
Daerah Petaling,
Malaysia.
Tel : (603) 8942 6371
Fax : (603) 8942 6507
GuangDong Jotech Kong Yue
Precision Industries Ltd
Kong Yue Industrial Park,
18, Kong Yue Road,
XinHui District,
Jiang Men City,
GuangDong Province,
People Republic of China.
Tel : 00 86 750 639 0222
Fax : 00 86 750 639 0111
Kawasan Industri KIIC,
Lot C-7C,
Jl. Tol Jakarta Cikampek, KM 47,
Karawang 41361Jawa Barat,
Indonesia.
Tel : 00 62 218 904587
Fax : 00 62 267 643888
Jotech Metal Fabrication Industries Sdn Bhd
SEMICONDUCTOR TOOLING &
AUTOMATION
Prodelcon Sdn Bhd
78, Lintang Bayan Lepas, Phase IV,
Kawasan Perindustrian Bayan Lepas,
11900 Pulau Pinang, Malaysia.
Tel : (604) 643 8913
Fax : (604) 643 8914
Website: www.prodelcon.com.my
JP Metal Sdn Bhd
Multimatic Systems Sdn Bhd
78, Lintang Bayan Lepas, Phase IV,
Kawasan Perindustrian Bayan Lepas,
11900 Pulau Pinang, Malaysia.
Tel : (604) 643 8913
Fax : (604) 643 8914
ELECTRONICS
GuangDong Jotech Kong Yue Precision
Industries Ltd
Prodelcon Sdn Bhd
Cabletron
Cabletron Electronics
Electronics (M) Sdn Bhd
10, Upper Aljunied Link,
# 03-07/09,
York International Industrial Building,
Singapore 367904.
Tel : (602) 6858 6166
Fax : (602) 6858 6066
Website: www.palladine.com
Palladine (M) Sdn Bhd
9, Jalan Seroja 47,
Taman Johor Jaya,
81100 Johor Bahru,
Johor.
Tel : (607) 3577 898
Fax : (607) 3544 581
Cabletron Electronics (M) Sdn Bhd
A148, A149, Jalan 3,
Kawasan Perusahaan Miel,
Sungei Lalang,
08000 Sungei Petani,
Kedah,
Malaysia.
Tel : (604) 448 1111
Fax : (604) 448 1110
Website: www.cabletron.com.my
Cabletron (M) Sdn Bhd
15 & 17, Jalan TPP 5/5,
Taman Perindustrian Puchong,
47100 Puchong,
Malaysia.
Tel : (603) 8060 2731
Fax : (603) 8060 3731
3
Annual Report 2004
Group Structure
4
JOTECH HOLDINGS BERHAD
334818-P
Group Business Capabilities
5
1. ROLE OF AUDIT COMMITTEE (“COMMITTEE”)
THE COMMITTEE SHALL:
• Provide assistance to the Board of Directors (“Board”) in fulfilling its fiduciary
responsibilities relating to the corporate accounting and reporting
practices of the Company and the Group.
• Monitor the Group’s business efficiency, the quality of the accounting
and audit function and strengthen the confidence of the public in the
Group’s reported results.
• Maintain, through regularly scheduled meetings, a direct line of
communication between the Board and the external auditors as well as
internal auditors.
• Avail to the external and internal auditors as a private and confidential
audience at any time they desire and request through the Committee
Chairman, with or without the prior knowledge of Management.
• Act upon the Board’s request to investigate and report on any issues or
concerns with regard to the Management of the Group.
2. TERMS OF REFERENCE
• COMPOSITION
The Committee shall be appointed by the Board from amongst its
Directors and consist of at least three and not more than five members,
the majority of whom shall be independent Directors, independent of
senior management and operating executive and unencumbered by
any relationships that might, in the opinion of the Board be considered to
be a conflict of interest.
The members of the Committee shall elect a Chairman from among their
number who shall be an independent and non-executive Director. At
least one member of the Committee must be a member of the Malaysian
Institute of Accountants (“MIA”).
Members of the Committee
(from top to bottom:)
CHAIRMAN
Encik Ashari bin Ayub
Independent
Non-Executive Director
MEMBERS
Encik Lasa bin Mat Desa
Independent
6
Mr. Lim Siok Hui
An alternate Director must not be appointed as a member of the
Committee. In the event of any vacancy in the Committee, the
Company shall fill the vacancy within three months.
The Board must review the term of office and performance of the
Committee and each of its members at least once in every three
years to determine whether such Committee and its members have
carried out their duties in accordance with their terms of reference.
• AUTHORITY
The Committee is authorised by the Board:
a) to investigate any matter within its terms of reference;
b) to have the resources which are required to perform its duties;
c) to request with full authority for and shall have
unrestricted access to any information it seeks
as relevant to its activities from any employees
of the Company or the Group and all employees
are directed to co-operate with any request
made by the Committee;
d) to have direct communication channels with
the external auditors and the Company’s
outsourced Internal Audit Services (“IAS”);
e) to seek and accept independent professional
advice and to secure the attendance of any
person with relevant experience and
expertise as it considers necessary; and
f) to be able to convene meetings with the
external auditors, excluding the attendance
of the executive members of the committee,
whenever deemed necessary.
• ATTENDANCE AND FREQUENCY OF MEETINGS
The minimum quorum for the meeting is two
members of the Committee, the majority of
members present must be independent and
non-executive Directors.
The Deputy Chief Executive Officer (“DCEO”)
and Chief Financial Officer cum Joint Company
Secretary are normally invited for attendance at
each meeting. Representatives of the external
auditors and internal auditors are also invited
from time to time to brief the Committee on related
audit matters.
A minimum of four meetings per year is planned,
although additional meetings may be called at
any time at the Committee Chairman’s discretion.
At least once a year, the Committee shall meet
with the external and internal auditors, without
the presence of any executives of the Group.
• PROCEDURES OF MEETINGS
a) The Committee Chairman shall preside at all
meetings. In his absence, Committee members
present shall elect among themselves an
independent and non-executive director to
be the chairman of the meeting.
b) The Committee Chairman may call for a
meeting upon the request of the internal or
external auditors or any Committee Member
or Company’s Non-Executive Chairman or
CEO; in order to consider any matter that
should be brought to the attention of the
Directors or shareholders.
c) The Secretary of the Committee shall draw up
the agenda for the meeting and the agenda
shall be sent to all members of the Committee
and any other persons who may be required
to attend.
d) A minimum seven days’ notice shall be given
for all meetings. Nevertheless, a shorter notice
is permitted subject to agreement by all
Committee members.
e) All decisions are determined by a majority of
votes. In case of equality of votes, the
Committee Chairman shall have a casting vote.
f) A resolution in writing signed by a majority of
the Committee members and constituting a
quorum shall be effective as a resolution
passed at a meeting of the Committee.
• MINUTES OF MEETINGS
The Company Secretary shall attend the
meetings of the Committee and minute all the
proceedings of the meetings. Minutes of meetings
are kept at the registered office of the Company.
• FUNCTIONS
The Committee shall review, appraise and report
to the Board on:
a) The discussion with the external auditors, prior
to the commencement of audit, the audit
plan which states the nature and scope of the
audit and to ensure co-ordination of audit
where more than one audit firm is involved;
b) The review with the external auditors, his
evaluation of the system of internal controls,
his management letter and management’s
response;
c) The discussion of problems and reservations
arising from the external audits, the audit
report and any matters the external auditors
may wish to discuss (in the absence of
Management, where necessary);
7
Annual Report 2004
(cont’d)
d) The assistance given by the employees of the
Group to the external and internal auditors;
e) The review of the following in respect of IAS:
• Adequacy of the scope, functions and
resources of the IAS and that it has the
necessary authority to carry out its work;
• Internal Audit programme;
• The major findings of internal audit
investigations and management’s responses,
and ensure that appropriate actions are
taken on the recommendations of the IAS;
• Co-ordination of external audit with internal
audit;
• Approval of any appointment or
termination of the IAS;
• Appraisal or assessments of the performance
of the IAS;
• Resignation of IAS, if any and provide the IAS
an opportunity to submit the reason for
resignation.
f) The review of quarterly reporting to the Bursa
Malaysia Securities Berhad (“Bursa Securities”)
and year end financial statements of the
Group before the submission to the Board,
focusing particularly on:• Changes in or implementation of major
accounting policy changes;
• Significant and unusual events; and
• Compliance with accounting standards and
other legal requirements.
g) The review of any related party transaction and
conflict of interest situation that may arise within
the Group or Company, including any transaction,
procedure or course of conduct that raises
questions of Management’s integrity;
h) The review of any letter of resignation from the
external auditors and any questions of
resignation or dismissal;
i) The review where appropriate whether there is
a reason (supported by grounds) to believe
that the Group’s external auditors is not suitable
for re-appointment;
j) The recommendation of the nomination and
appointment of external auditors as well as the
audit fees;
k) The promptly reporting to the Bursa Securities
on any matter reported by the Committee to
the Board which has not been satisfactorily
resolved resulting in a breach of the Bursa
Securities Listing Requirements;
8
l)
Any other function that may be mutually agreed
upon by the Committee and the Board, which
would be beneficial to the Company and
ensure the effective discharge of the
Committee’s duties and responsibilities.
3. MEETINGS OF THE COMMITTEE
The details of attendance at the Committee
meetings in 2004:-
1.
2.
3.
4.
5.
6.
Date of
Meeting
12/2/2004
10/3/2004
10/5/2004
12/8/2004
27/10/2004
21/12/2004*
*
Attendance by
Total Committee
Committee Members (%)
Members
Independent
Non-Independent
3
3
3
3
3
3
2
2
2
2
2
2
(100%)
(100%)
(100%)
(100%)
(100%)
(100%)
1
1
1
1
1
1
(100%)
(100%)
(100%)
(100%)
(100%)
(100%)
Prior to the commencement of this meeting, a
discussion was held between the Committee and
external auditors without the presence of any
executive of the Group
The details of attendance by individual
Committee Member in 2004:Name of
Director
1. Encik Ashari
bin Ayub
2. Encik Lasa
bin Mat Desa
3. Mr. Lim Siok Hui
Total Meetings
Attended by Directors
Percentage
Attendance
6/6
100%
6/6
100%
6/6
4. INTERNAL AUDIT FUNCTION
100%
The Committee is supported by an outsourced IAS
whose internal audit function is independent of the
activities or operations of its auditees. The
Committee is aware that this internal audit
function is essential to assist in the obtaining the
assurance it requires regarding the effectiveness of
the system of internal control. The main role of the
internal audit function is to review the
effectiveness of the system of internal control and
this is performed with impartiality, proficiency and
due professional care.
Following a review by the management on the requirement of internal audit function, it was approved by the
Committee and the Board that the internal audit function would be more cost effective if it is outsourced and
Russell Bedford Malaysia was appointed as the company’s internal audit service provider as they are an
independent and effective unit capable of undertaking the task.
5. ACTIVITIES DURING THE YEAR
The Committee met at scheduled times; with due notices of meetings issued, and with agendas planned and
itemised so that issues raised in the audit reports by the IAS or in respect of financial statements were
deliberated and discussed in a focused and detailed manner.
The Committee has reviewed annual Internal Audit work-plans and reports to ensure the scope of work and
conclusions of reports are adequate to assist the Committee to appraise and report to the Board on the
financial affairs of the Group.
The Committee also reviewed with the external auditors on audit strategy and plan for the statutory audit of
the Group financial statements for the year ended 31 December 2004.
During the financial year, the IAS presented the Internal Audit Reports on the subsidiary companies
incorporating therein the internal audit findings, internal audit recommendations and management’s
responses to the Committee. In its undertaking of each audit, the IAS reviewed the internal controls system
and performed relevant compliance audit procedures of the auditee.
The Committee through the IAS had carried out the above functions in the areas as follows:-
a) Reviewed the accounting and internal controls systems of the company and its major subsidiaries to ensure
effectiveness and reliability in the preparation of financial statements. The systems documentation and risks
profiling had also been reviewed and updated to ensure completeness and effective functioning of all
required internal controls.
b) Reviewed the presentation of the financial statements of the Group with the external auditors to ensure
adequacy of disclosure of information essential to a fair and full presentation of the financial affairs of the
Group for recommendation to the Board for approval.
c) Reviewed the adequacy and effectiveness of the Management’s responses to the findings of IAS and
external auditors and authorise the management to implement the recommendations proposed by IAS
and external auditors through the Management Letters raised.
d) Reviewed the computer software licensing of the companies within the Group to ensure that the software
program in custody / purchased are original, authentically licensed and conform to Copyright Act 1987
and Trade Description Act 1972 Rules and Regulation.
e) Reviewed the operating / business licenses issued by the respective Municipal Councils, Ministry of
International Trade and Industry and Royal Malaysian Custom for all the manufacturing companies within
the Group to ensure compliance with the relevant statutory Rules and Regulations.
f) Reviewed the inter-company transactions and any related / interested party transactions that may arise
within the Company and the Group to ensure compliance with Malaysian Accounting Standards Board,
Bursa Securities Revamped Listing Requirements and other relevant statutory authorities and to ensure
that such transactions are:• Undertaken in the ordinary course of business;
• Carried out at arm’s length and based on normal commercial terms consistent with the Group’s usual
business practices and policies;
• On terms not more favourable to the related parties than those generally available to the public; and
• Not detrimental to the minority shareholders of the Company.
9
Letter To Shareholders
Datuk Haji Sarip bin Hamid, Chairman
Dear Fellow Shareholders,
On behalf of our fellow Board members,
we have great pleasure to present to you
the 2004 Annual Report and Audited
Financial Statements for the financial
year ended 31 December 2004.
10
Lim Siok Hui, Chief Executive Officer
The global economic landscape has shifted to a fast
changing mode these days. At the macro level, the
phenomenal rise in major commodities prices like
steel, metals and crude oil in Year 2004 coupled with
China factor continues to curtail the demand from
and growth prospect of domestic businesses
especially for companies engaged in metal-related
products. The continuous rise in metal costs had
greatly challenged the way the Group does
its business, as the core
business is principally
the supply of precision
stamped metal parts
and toolings.
11
Annual Report 2004
(cont’d)
With such challenging business environment
backdrop for Year 2004, the Group was put to a
severe test this year and managed to stand up to the
tests and survived the onslaught of challenges faced.
Since the past two years, the Group had been
focusing on building higher technical capabilities,
expanding higher value added products base and
these strategies have helped bolster the Group to
overcome the fierce adversities faced particularly in
Year 2004.
As the Group continued to explore into downstream
activities which include expanding into finished
products through our distribution and marketing
channels to ensure a sustainable growth in business
over the medium to longer term, an inevitable
internal reorganisation was carried out on the
Electronics Division, particularly Cabletron group of
companies in the Year 2004 as it discovered major
discrepancies from the Group’s practices. Due to a
lengthy reorganisation process in the management
and the factory operations, the performance of
Cabletron group was greatly affected. Nevertheless,
with teamwork, determination and hard work, Jotech
took over the operations of the group in middle of
October, 2004 and had since led Cabletron group to
a new chapter of effective management of the
group’s business and operations by integrity,
transparency & teamwork. We are pleased to share
with you that Cabletron group has shown tremendous
improvement since and the manufacturing plant has
been accredited with ISO 9002 in January 2005 for its
established and organised operational processes.
The Cabletron group and its reorganisation
activities have cost the Group’s performance to
suffer a substantial decline in profit in Year 2004.
Nevertheless, we are optimistic that with strategic
plans being put in place in Year 2005, the business
and operations of Cabletron group will improve
and we target to turnaround Cabletron group by
this year.
Putting aside the reorganisation losses suffered by
the Cabletron group in Year 2004, the Group did
reasonably well in Year 2004 by registering a
second consecutive year of about 34% growth in
12
turnover from RM117.9 million in FY2003 to RM158.0
million in FY2004. Overall performance of the core
Divisions
was
encouraging
taking
into
consideration of the highly competitive business
condition coupled with the sharp rise in metal
prices in Year 2004. Precision Stamping Division
continued to be the growth driver for the Group in
revenue and profit, contributing 65% of the
Group’s revenue and 75% PATMI of the Group
(excluding losses of other divisions). Semiconductor
Division’s performance is still commendable as
poor visibility of orders which resulted in volatility of
orders, challenging lead time and thin margins
continued to undermine the semiconductor
industry business in Year 2004.
Although there were many adversities encountered in
Year 2004, we are pleased to highlight that there is
a great sense of unity being forged in the Group.
We gained a greater sense of satisfaction and
confidence and this would form a stronger
foundation especially this year where we need to
rebuild our financial performance record and to
spur a concerted effort to strive for continuous
success in the coming years. We would like to
dedicate this 2004 annual report to recognise our
team of committed and loyal staff who are the
greatest asset of our Group.
FINANCIAL HIGHLIGHTS
Jotech Group of Companies in the Year 2004,
registered a turnover of RM158.0 million and profit
after tax and minority interest (“PATMI”) of RM1.6
million compared to RM117.9 million turnover and
RM8.3 million PATMI posted last year.
Shareholders’ funds increased from RM75.6 million
to RM76.0 million as at 31 December 2004. Net
tangible assets (“NTA”) rose from RM64.3 million to
RM68.7 million and with the share capital
increased from RM41.7 million as at 31 December
2004 to RM64.6 million by the end of 2004, the NTA
per share stood at RM1.54 and RM1.06
respectively.
334818-P
DIVIDEND
Your Board recognise that one of the primary goals of the Company is to reward our shareholders, the
Board is pleased to recommend a first and final dividend of 3 sen (2003 : 7 sen tax exempt dividend) per
share, comprising 2% less tax per ordinary share and 1% tax exempt dividend per ordinary share
amounting to RM1.9 million (2003 : RM2.8 million) for the financial year 2004. This represents an
approximate yield of about 2% based on the average share price of about RM1.50 for year 2004. We seek
your favourable consideration and approval on the proposed dividend in the forthcoming AGM.
STRATEGIC DIRECTION
In our journey to achieve Jotech’s vision, the management in 2004 continued to build on its Electronics
Division to prepare the Group for a sustainable growth in business and earnings base with marketable
products.
We will continue to leverage new technologies to redefine new products and markets to offer more
innovative, higher value added products whilst ensuring excellent service to our customers. The Precision
Stamping Division is expanding on higher precision and bigger size metal parts for Plasma and LCD TVs,
surgical equipment, consumer electronics, automation products and automotive parts. Semiconductor
Division will continue to focus on high volume precision machining parts for the Photonics and microwave
applications products while Electronics Division will enhance the range of product offerings especially
the higher end digital display products to capture the wave of upgrading the flat display products.
On our group’s greatest asset, we are committed to nurture and retain our valued employees through
continuous training and upgrading of skills, providing good working environment, encouraging teamwork
and offering appropriate incentives for a mutually beneficial long term relationship.
LOOKING FORWARD
With a GDP growth of 5.7% envisaged for Malaysian economy in 2005 and having strategic products and
services which have strong growth potentials, we expect the Group of Companies to recover from its
2004 weak performances and record a much improved performance for 2005.
Our immediate focus for the Precision Stamping Division is to strengthen and ramp up the China plant to
realise its full potential in capturing vast opportunities in the fast growing China market. We also seek to
expand the customer base of this Division from the current predominantly audio-visual product
customers to the automotive sector, office automation and other industries. Our Indonesian plant have
been strategically positioned to capture the growing opportunities in the automotive sector there.
The Semiconductor Tooling and Automation Division will continue to expand its precision machining
services for the photonic & microwave industries. Automation systems and conversion kits developed by
Multimatic Systems Sdn Bhd, a wholly-owned subsidiary will also be the focus of this Division.
Electronics Division’s main focus is to contribute positively to the earnings of our Group this year.
Palladine Technologies Pte Ltd, a product development and marketing company for digital display
13
(cont’d)
products, will continue to expand its range of LCD and Plasma TV products. We will intensify the
marketing effort this year to expand the market base to ride on the wave of growing demand for these
products in the worldwide market, particularly, in Europe countries. Cabletron group will also expand its
product range to target a wider scope of customers and fulfill the customers’ ever-growing preference
for choices on each product offered. We will also expand our market base to Asean and third world
countries where potential is big for these affordably priced products.
Your Group will continue to manage cost well through economies of scale production, manufacturing
excellence and effective utilisation of manpower, to maintain our competitiveness and attain business
growth for financial year 2005.
ACKNOWLEDGEMENTS
We, on behalf of the Board members of Jotech, would like to sincerely thank all our esteemed
customers, business associates, partners and bankers for their strong support to Jotech. We owe our
success to their invaluable support and look forward to a closer and greater mutually beneficial
business relationship in the coming years.
We, once again would like to thank all our staff, on whom our success depends upon, for their
dedication and loyalty shown to Jotech.
Appreciations are also due to the Bursa Malaysia Securities Berhad, Securities Commission, Bank
Negara Malaysia, Foreign Investment Committee, Ministry of International Trade and Industry as well as
Federal and State Authorities and other governmental authorities for their help, guidance and support.
A big thank you to our loyal shareholders. We reaffirm our commitment of further enhancing your
shareholders’ value.
Our personal thanks to our fellow Board members for their commitment and continued support and
contribution to Jotech.
14
Semicon Tooling & Automation
Electronics
Precision Metal Stamping
Management’s Discussion And Analysis
HIGHLIGHTS
• Revenue continued to register a second consecutive year of about 34% growth from RM117.9 million in
FY2003 to RM158.0 million in FY2004.
• Group EBITDA however declined from RM21.8 million to RM11.8 million and PBT decreased from RM10.9
million to an operating loss of RM0.3 million mainly due to EBITDA losses of RM5.8 million and operating loss
of RM7.0 million incurred by the Cabletron group of companies of the Electronics Division. Arising therefrom,
PATMI for FY2004 was also down from RM8.3 million to RM1.6 million and this translated to a decline in return
on capital employed from 11% to 2%.
• Earnings per share decreased from 20.72 sen to 2.45 sen in FY2004.
• The company maintained its commitment to ensure a satisfactory return to shareholders by proposing a first
and final dividend pay-out for FY2004 of 3% per ordinary share comprising 2% less tax per ordinary share and
1% tax exempt dividend per ordinary share. The proposed dividend represents a yield of about 2% based
on Jotech’s average share price of about RM1.50 for FY2004.
• Financial reserves of the Group continued to grow as shareholders’ funds increased from RM75.6 million
to RM76.0 million as at 31 December 2004. Net tangible assets (“NTA”) rose from RM64.3 million to RM68.7
million and with the share capital increase from RM41.7 million to RM64.6 million by the end of 2004, the
NTA per share stood at RM1.54 and RM1.06 as at the end of FY2003 and 2004 respectively.
• Cash reserves and short term funds placement remained positive at RM15.3 million compared to RM32.2
million at the end of 2003. The funds had been channeled mainly for business expansion in 2004 to yield a
better return in the coming years.
• The group invested approximately RM11.2 million in FY2004 for machinery and capacity expansion and
for higher value added equipment to cater for new products like the Photonics and Microwave, automotive
parts and also LCD/TV covers and frames.
• The segmental analysis of Revenue and EBITDA contribution by the respective Divisions of the Group are as
follows:-
REVENUE
Precision Stamping
Semiconductor Tooling & Automation
Electronics
Investment Holdings
EBITDA
Precision Stamping
Semiconductor Tooling & Automation
Electronics
Investment Holdings
16
2004
RM’million
2003
RM’million
103.1
20.6
34.3
-
75.4
28.6
14.0
-
13.5
5.4
(5.8)
(1.3)
11.5
7.4
1.8
1.1
• With the execution of the strategic plans in phases to provide higher value-added products as well as
focusing into growth potential products, Precision Stamping Division continued to post an increase of RM2.0
million EBITDA from FY2003. This Division remained as the main contributor to the Group’s EBITDA. Despite
a lackluster outlook on the Semiconductor Industry, the Semiconductor Tooling and Automation Division
continued to focus in the machining services for Photonics and Microwave products and posted a
commendable performance for FY2004. The Electronics Division incurred substantial losses in FY2004
due to reorganisation activities carried out on the Cabletron group of companies. Nevertheless, the
performance of this Division had since Q4’04 registered an improvement and is expected to turnaround
in FY2005. As the Investment Holding had deployed its financial resources to fund expansion in
businesses of its subsidiaries, the operating losses mainly relate to interest cost incurred for FY2004.
DIVISIONAL PERFORMANCE
Precision Stamping Division
Precision Stamping Division continued to be the main growth driver for the Group’s revenue and
earnings. In spite of the challenging environment faced by this Division as the metal prices continue to
move upwards, this Division has again demonstrated strong commitment and resourcefulness in
penetrating into emerging and higher value-added products to achieve its growth target. It had
successfully positioned itself as a leading precision stamping service provider and diversify its customer
base into automotive and medical industries to ensure sustainable growth in business in the next few
years.
The Division consist of 4 subsidiaries with 2 plants located in Malaysia, 1 in Indonesia and 1 in China. The
Malaysian plants contributed about 83% of revenue and 93% of PATMI of this division whilst the balance
was mainly from the Indonesian plant. China plant incurred gestation losses for its first full year of
operations.
The growth drivers for this Division rest on the higher value added products and services of its Johor plant,
and the potential opportunities for the Indonesia plant especially for 2005. It had since 2001 doubled its
capacity to meet a growing demand for such services, mostly for prototype development and market
testing for new product.
This Division, through its Johor plant exhibited its reputation as a progressive precision metal stamper in its
successful supply of precision metal frames and back panel for Plasma and LCD TVs which has huge
potential in the global marketplace. This successful mission will provide the Division impetus growth and
credibility as a leader in this field.
Semiconductor Tooling & Automation Division
Semiconductor Tooling & Automation Division is the next core division of Jotech. The once lucrative
semiconductor tooling business had since 2001 turned into a highly competitive priced product. The
excess capacity scenario was still prevalent in this industry although market has slowly improved since
2003.
Two subsidiaries were grouped under this Division and both companies are based in Penang. Prodelcon
Sdn Bhd (“Prodelcon”) provides semiconductor tooling and high precision machining expertise whilst
Multimatic Systems Sdn Bhd (“MMS”) develops and supplies automation system and equipment for
semiconductor IC assembly for end of line processes. The former contributed about 93% of revenue and
91% of PATMI of the Division. This was mainly due to customers in the IC assembly industry today are still
very cautious in investing in new capacities and some new packages have employed non-moulding
processes to cut cost.
17
Management’s Discussion And Analysis
(cont’d)
Prodelcon had during the most recent downturn, expanded in new product capabilities by providing high
precision machining of the components for photonics and microwave transmissions primarily used for
broadband and telecommunication industries. The foresight had begun to pay off as businesses secured has
utilised close to 90% of our capacity and having to operate on a “24x7” level.
MMS builds upon its past successes in designing, developing, manufacturing and marketing its own design
automation system such as laser marking system, epoxy dispensing, automold conversion kit and inspection
system as well as leverage on Prodelcon’s tooling expertise, has successfully developed a double and four
chases automold systems. It also has recently secured a reputable MNC order for its trim and form automation
systems.
Electronics Division
The Electronics Division was established to spearhead its downstream activity to identify and market end
products in the marketplace. This fits in to the Group’s longer term plan to grow from a component
manufacturer into the end product market. Jotech sees a good fit in this Division as it has identified
competitive products, in particular, the high-end display market such as large screen Plasma and LCD TV
products for its marketing channels.
This Division consist of four main subsidiaries with Palladine Technology Pte Ltd (“PTPL”) based in Singapore,
Palladine (M) Sdn Bhd based in Johor and Cabletron Electronics Sdn Bhd based in Sungai Petani whilst its
marketing arm Cabletron (M) Sdn Bhd is based in Selangor. PTPL’s principal activities are product
development, distribution and marketing of Plasma LCD display solutions whilst Cabletron is involved in product
development, manufacturing and distribution of competitive priced household electrical products.
The key initiatives for this Division for 2005, after the reorganisation of Cabletron group of companies in 2004, is
to expand its products range and intensify marketing activities to widen the market and customer bases,
locally and overseas. With the AFTA implementation, it provides the Division better access for its affordable and
competitive priced products to the growing markets like Thailand, Indonesia, Vietnam and Philippines. As the
demand for Plasma & LCD TV products are expected to grow continually in the coming years, this augurs well
for this Division to tap into the vast business opportunities worldwide.
2005 Outlook
As market consensus and global economy forecast a deceleration in growth for 2005, the Group maintained
a positive outlook for its businesses to grow in 2005, albeit at a slower rate. With concerted effort from all
levels of management and staff and as strategic plans continue to be put in place especially for the
Electronics Division, the Group’s performance for 2005 should improve vastly.
18
334818-P
19
(cont’d)
Group Quarterly Performance and Financial Calendar
Financial Performance
Revenue
(Loss)/ Profit Before Tax
(Loss)/ Profit After Tax & Minority Interests
Earnings Per Share (sen)
Announcement of Results
Quarter 1
RM’000
Quarter 2
RM’000
Quarter 3
RM’000
Quarter 4
RM’000
33,280
(475)
(184)
(0.44)
42,515
(543)
15
0.04
43,604
644
1,068
1.65
38,608
39
667
1.03
11/5/2004
12/8/2004
Quarter 1
Financial Calendar
Final dividend of 3 sen
• Announced
• Entitlement date
• Payable
• Subject to Shareholders’ approval
Quarter 2
7/2/2005
26/5/2005
Issue of Financial Year 2004 Annual Report
Revenue
(Loss)/ Profit Before Tax
Profit After Tax & Minority Interests
Earnings Per Share (sen)
Property, Plant & Equipment
Cash Reserves & Short Term Investment
Total Assets
Shareholders’ Funds
Long Term Debts
Long Term Debts/
Shareholders’ Funds (Times)
Pre-Tax Profit/Revenue
Pre-Tax Profit/Equity
Pre-Tax Profit/Total Assets
Pre-Tax Profit/Shareholders’ Funds
Quarter 3
7/2/2005
Quarter 4
1/8/2005
15/8/2005
4/5/2005
Annual General Meeting
(RM’000)
AUDITED
27/10/2004
26/5/2005
2000
107,582
12,125
9,496
18.31*#
36,581
19,587
92,553
63,476
6,030
0.10
11.27%
30.31%
13.10%
19.72%
2001
Year Ended 31 December
2002
2003
87,898
3,990
3,033
5.05*
44,875
16,980
94,913
64,504
8,066
87,627
4,557
3,323
5.54*
42,432
65,757
143,292
66,628
48,741
117,953
10,998
8,338
13.81*#
67,841
32,330
167,932
75,556
43,199
0.13
4.54%
9.97%
4.20%
6.18%
0.73
5.20%
11.39%
3.18%
6.84%
0.57
9.32%
26.38%
6.55%
14.56%
2004
158,007
(335)
1,566
2.45#
73,923
15,246
175,798
76,032
47,811
0.63
NA
NA
NA
NA
* Adjusted by Bonus issue of 20,037,000 and 21,532,500 which were allotted on 24 May 2000 and 5 August 2004
respectively.
# Based on year 2000, 2003 and 2004 reinstated weighted average share capital in issue of 51,870,000; 60,356,000
and 63,882,000 respectively.
20
Board of Directors
Seated from left to right
Lim Siok Hui
Datuk Haji Sarip bin Hamid
Non-Executive Chairman
Liew Cheng York
Non-Independent
Standing from left to right
Lasa bin Mat Desa
Independent
Ashari bin Ayub
Senior Independent
Chew Siew Hong
Non-Independent
Ooi Boon Pin
Non-Independent
Lt. Jen (B) Datuk Haji Abdul Aziz
bin Hasan
Independent
Tuan Haji Mohd Ali bin Bawal
Non-Independent
21
YG. BHG. DATUK HAJI SARIP BIN HAMID
YG. BHG. DATUK HAJI SARIP BIN HAMID
Malaysian, Aged 57
Datuk Haji Sarip Bin Hamid was
appointed to the Board of Directors
of Jotech on 30 April 1997 and
subsequently as Executive Chairman
on 20 October 1999. He was
redesignated as the Non-Executive
Chairman on 11 November 2002. He
graduated with a Bachelor of
Economics degree from the
University of Malaya in 1974, a
Masters of Business Management
degree from the Asian Institute of
Management, Manila, the Philippines
in 1979 and a Post-Graduate Diploma
in Islamic Studies from the Universiti
Kebangsaan Malaysia in 1985.
He has more than 30 years of
i n v a l u a b l e managerial and
entrepreneurial e x p e r i e n c e i n
business ranging from banking,
manufacturing, trading, import and
export, property development and
th e a u t o m o b i l e i n d u s t r y . H e
commenced his career as a
teacher in 1966. He worked at Bank
Bumiputra Malaysia Berhad as an
Accountant from 1974 to 1980 and
Patco Malaysia Berhad, a
manufacturer and assembler of airconditioners for motor vehicles from
1980 to 1986 as a Director and
22
General Manager. He left Patco
Malaysia Berhad in 1986 to join Asteria
Sdn Bhd, an investment holding
company and then the holding
company of AIC Corporation Berhad
(“AIC”) as the Executive Chairman.
He was appointed as the Chairman
of AIC in 1990 and later became
the Executive Chairman at the time
of its listing on the Bursa Securities in
1994. He was redesignated as the
Non-Executive Chairman of AIC on
11 November 2002. He was a board
member of Kumpulan Wang
Simpanan Pekerja from 1986 to 1988
and p r e s e n t l y , h e a l s o h o l d s
c h a i r m a n s h i p i n AV Ve n t u r e s
Corporation Berhad (Formerly known
as Autoindustries Ventures Berhad).
He also sits on the board of several
other private companies.
the field of metal stamping, having
worked with Japanese and Hong
Kong metal stamping companies.
He started his career in 1970 as a
supervisor in Alloy Industries (S) Pte.
Ltd., a company involved in trading
and manufacturing of aluminium
cans, and was promoted to Factory
Manager in 1972. He was
subsequently appointed as Director
in 1974. He joined Intergrate (S) Pte.
Ltd., a metal stamping company
specialising in tools and dies, as its
Managing Director in 1989.
LIEW CHENG YORK
LIEW CHENG YORK
Malaysian, Aged 42
LIM SIOK HUI
LIM SIOK HUI
Singaporean, Age 55
Lim Siok Hui was appointed to the
Board of Directors of Jotech on 7
August 1995. He was appointed as
the Chief Executive Officer on 11
November 2002. He has been the
Managing Director of Jotech Metal
Fabrication Industries Sdn Bhd
(“JoMetal”) since 1994. He has
more than 33 years of experience in
Liew Cheng York was appointed to
the Board of Directors of Jotech on
7 August 1995. She has been the
Executive Director of Jotech Metal
Fabrication Industries Sdn Bhd
(“JoMetal”) since its incorporation.
She started her career in Compact
Metal (S) Pte. Ltd., a manufacturer
of window and door frames for
buildings. In 1998, she joined Abis
Electronics (S) Pte. Ltd., a company
principally involved in metal
stamping as Administrative Manager
and left to set up JoMetal in 1989.
OOI BOON PIN
CHEW SIEW HONG
Malaysian, Aged 61
TUAN HAJI MOHD ALI BIN BAWAL
Malaysian, Aged 56
Chew Siew Hong was appointed
to the Board of Directors of
Jotech on 30 April 1997. He
graduated with a Bachelor
degree in Mechanical Engineering
from National Cheng Kung University,
Taiwan in 1973. In th e s a m e y e a r,
h e j o i n e d Lindeteves - Jacoberg
(M) Sdn Bhd, a company principally
involved in trading, as a sales
Haji Mohd Ali Bin Bawal was
of Jotech on 6 December 1995. He
has more than 33 years of invaluable
managerial and entrepreneurial
experience in businesses ranging
from plantation management,
property development, manufacturing
and trading. He graduated with
a diploma in Plantation Industries
Management from the MARA
Institute of Technology in 1970 and
a Masters of Business Administration
degree from the Oklahoma City
University, United States of America
in 1990. Prior to his appointment
to the Board of Directors of Jotech,
he worked as Manager with
Kumpulan Guthrie Berhad, a group
of companies which is involved in
the plantation industry, from 1968
to 1987 and as the Managing
Director with Hamodal Sdn Bhd, a
property investment company, in
1990. He is the Executive Director of
AIC, a position he has held since
1990. He also holds directorship in
several other private companies.
OOI BOON PIN
Malaysian, Aged 47
Ooi Boon Pin was appointed to the
April 1997. He has been a
Managing Director of Prodelcon
since 1985. He graduated with an
honours degree in Manufacturing
Technology from the National
Institute for Higher Education
(University of Limerick), Ireland in
1981. In 1978, he joined Analog
Devices B.V., Ireland, a company
involved in design and wafer
fabrication, assembly and test of
semiconductors, as a Product
Development Engineer and later as
Process Engineer in the assembly
department. Upon his return to
Malaysia in 1981, he joined MicroMachining Sdn Bhd, as Quality
Assurance Engineer where he was
in charge of quality assurance in
tool room and lead frame stamping
facility. He later assumed the
position of Project Engineering
Manager and was responsible for the
development of new tools designs
and end-of-line assembly equipment
from design to manufacturing. He
later set up Prodelcon together with
Chew Siew Hong in 1985.
CHEW SIEW HONG
executive and was in charge of
the engineering division. In 1978,
he joined Micro-Machining Sdn
Bhd, a company principally
involved in the manufacture of
automation system and precision
tools as a Sales Engineer and was
later promoted to Sales Manager,
where he was responsible for the
sales department. He later set up
Prodelcon Sdn Bhd (“Prodelcon”)
together with Ooi Boon Pin in 1985
and held the position as Executive
Director of Prodelcon until he
retired in 2001.
TUAN HAJI MOHD ALI BIN BAWAL
23
Annual Report 2004
(cont’d)
LASA BIN MAT DESA P.J.K.,
Malaysian, Aged 62
ASHARI BIN AYUB
Lasa Bin Mat Desa is an independent
Director of Jotech. He was appointed
to the Board of Directors of Jotech
on 9 June 2000. He obtained an
L.L.B degree from the University of
Melbourne, Australia in 1990. He
was formerly attached to the Royal
Customs and Excise Department,
Malaysia, which he joined as
assistant superintendent of customs,
ASHARI BIN AYUB
Malaysian, Aged 62
Ashari Bin Ayub is an independent
Director of Jotech. He was
of Jotech on 9 June 2000. He is a
member of the Malaysian Institute
of Certified Public Accountants and
the Malaysian Institute of Accountants.
He has been a senior partner in
Coopers & Lybrand since 1974 until his
retirement in 1994. He joined several
other private companies subsequent
to his retirement. He is currently a
director of several listed companies
such as AV Ventures Corporation
Berhad
(Formerly
known
as
Autoindustries Ventures Berhad),
BCB Berhad, Metrod Malaysia
Berhad and Ranhill Utilities Berhad
and he also sits on the Board of
several other private companies.
YG. BHG. LT. JEN (B) DATUK HAJI
ABDUL AZIZ BIN HASAN
Malaysian, Aged 59
LASA BIN MAT DESA
for 35 years and retired in 1998 as
the State Director of Customs,
Johor, a position which he held from
July 1992 to January 1998. He has
served the various branches of the
Royal
Customs
and
Excise
department and is well-versed with
the custom laws and procedures
and has vast experience in
enforcement work and in the field of
administration. Presently, he is the
Managing Partner of a customs and
management consultancy firm which
he joined in 1998.
ADDITIONAL INFORMATION
Family relationship with any Director and/ or major shareholder
• There is no family relationship among the Directors
24
YG. BHG. LT. JEN (B) DATUK HAJI
ABDUL AZIZ BIN HASAN
Lt. Jen (B) Datuk Haji Abdul Aziz Bin
Hasan is an independent Director
of Jotech. He was appointed to the
August 2001. He obtained his
Masters in Business Administration
from the National University of
Malaysia in 1986. He was formerly
attached to the Royal Malaysian
Army where he has served for 37
years until retirement as the Deputy
Chief of Army in March 2001. He
had held various command and
staff appointments at different
levels of command. Datuk Haji
Abdul Aziz is a Director of Tien Wah
Press Holdings Bhd and Tenggara
Oil Berhad. He also sits on the board
of several other private companies.
Conviction for offences (within the past 10 years, other than traffic offences)
• None of the Directors have any conviction for offences other than
traffic offences, if any
Conflict of interest with the Group
• None of the Directors have any conflict of interest with the Group
The Board of Directors fully appreciates the importance of adopting high standards of corporate governance
within the Group and strives to maintain as well as continuously enhance the management of the Group with
integrity, transparency and accountability. The Board also supports the principles of self-regulation and
prudent management of shareholders’ funds to safeguard and enhance shareholders’ investment and value
as well as protect the interest of minority shareholders.
In compliance with the Revamped Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa
Securities”), the Board is pleased to report that the Company has applied the Principles and explained the
state of compliance in accordance with the Best Practice provisions of the Malaysian Code of Corporate
Governance (“the Code”).
PRINCIPLES STATEMENT
The following statement sets out how the Company has applied the principles in Part 1 of the Code.
A. Board of Directors
I) The Board
The Board acknowledges its fundamental role to chart and monitor the Group’s directions and
operations with the ultimate objective of enhancement of long-term shareholders’ value. To fulfil this
role, the Board reserves appropriate strategic, organisational and financial matters for its collective
decision.
Meetings
The Board meets at least four times a year at quarterly intervals with additional meetings convened as
necessary. During the year ended 31 December 2004, the Board had met on a total of seven occasions,
where it deliberated upon and considered a variety of matters including the Group’s financial and
operational performance, budgets, outlook of each division, reorganisation of an investee and
strategic decisions as well as the business plans and direction of the Group.
All Directors’ meetings are preceded with a formal agenda. Members of the Board are provided with
documents on information requiring its consideration before each meeting so that informed decisions
are made. All proceedings from the Board meetings are minuted by the Company Secretary.
The attendance of the Board meetings by the Directors for the year 2004 is presented in the statement
accompanying the notice of annual general meeting.
Board Committees
The Board has delegated specific responsibilities to five Board Committees, namely Audit Committee,
Nomination Committee, Remuneration Committee, Management Committee and Executive Share
Option Scheme (“ESOS”) Committee in order to enhance business, operational and administration
efficiency as well as efficacy.
All committees have written terms of reference approved by the Board. The members of the
committees appointed the Chairmen of the various committees. These committees have the authority
to examine particular issues and report to the Board with recommendations. The ultimate responsibility
for the final decision on all matters, however, lies with the entire Board.
25
(cont’d)
• Management Committee (“Maco”)
The Maco included four Board members, all of whom assume full time function in the Company and
/ or its subsidiaries as follows:-
Chairman
Lim Siok Hui
Members
Liew Cheng York
Ooi Boon Pin
Chew Siew Hong
The function of the Maco is to assist the Board in attending and expediting all operational matters of
the Group assigned by the Board so that such matters are attended by the Board through the Maco
on a more frequent and timely manner. The Maco, which consists of other senior management
members beside the four Board members, meets bi-monthly or sooner where necessary to discuss the
results, budget achievement, operational performance, business developments and strategies,
investment proposals as well as major capital expenditure of each subsidiary and to deliberate on
recommendations to enhance the Group’s operations. The Maco undertakes the recommendation
of succession plans for senior executives and management level, whilst succession to the Board is
proposed to the Nomination Committee for evaluation and recommendation to the Board for
approval. To this intent, there are senior management personnel being groomed to understudy the
incumbent Directors at both subsidiary and company level.
• ESOS Committee
The ESOS Committee comprises four Board members as follows:Chairman
Ashari Bin Ayub
Members
Liew Cheng York
Ooi Boon Pin
Lasa Bin Mat Desa
ESOS Committee was formed primarily to establish and administer the ESOS. The Committee met from
time to time at the discretion of the Chairman or the Board. During the year ended 31 December
2004, the Committee met once to review the ESOS for eligible employees for approval of the Board.
• Audit Committee
The Audit Committee Report is presented separately in this annual report.
• Nomination Committee and Remuneration Committee
Reports of the Nomination and Remuneration Committees are set out below.
II) Board Balance
26
The Board currently has nine members, comprising one Non-Independent Non-Executive Chairman, one
Chief Executive Officer (“CEO”), four Non-Independent Non-Executive Directors and three Independent
Non-Executive Directors. A brief description of the background of each Director is presented on pages
21 to 24 of this annual report.
The Directors, with their different background and specialisations, bring a wide range of business,
technical and financial experience relevant to an expanding Group. The CEO is responsible for
implementing the policies and decisions of the Board, overseeing the operations as well as co-ordinating
the development and implementation of business and corporate strategies. The Non-Independent NonExecutive Directors contribute significantly in areas such as policy and strategy, performance
monitoring, allocation of resources as well as improving governance and controls. The Independent
Non-Executive Directors bring to bear objective and independent judgement to the decision making of
the Board and provide a capable check and balance for the Directors.
There is a clear division of responsibilities at the head of the Company to ensure a balance of authority
and power. The Board is led by Yg. Bhg. Datuk Haji Sarip Bin Hamid as the Non-Independent NonExecutive Chairman. He is responsible for running the Board and ensures that all Directors receive
sufficient relevant information on financial and operational matters to enable them to participate
actively in Board discussions and decisions. On the other hand, the executive management of the
Company is led by the CEO, Mr. Lim Siok Hui. He is responsible for the day to day management of the
business as well as the implementation of Boards’ policies and decisions.
En. Ashari Bin Ayub acts as the Senior Independent Non-Executive Director. Any concerns regarding the
Group may be conveyed to him.
The Board is satisfied that the current Board composition fairly reflects the interests of minority
shareholders in the Company.
III) Supply of Information
The Board recognises that the decision-making process is highly dependent on the strength of
information furnished.
The Chairman ensures that all Directors have full and unrestricted access to timely information, necessary
in the furtherance of their duties. Every Director also has unhindered access to the advice and services
of the Company Secretary and where required and in appropriate circumstances, take independent
professional advice at the Company’s expense.
Prior to the meetings of the Board and the Board Committees, the requisite Board papers which include
the agenda and reports relevant to the agenda of the meetings covering the areas of strategic,
financial, operational and regulatory compliance matters will be circulated to all the Directors.
In addition, there is a schedule of matters reserved specifically for the Board’s decision, including the
approval of corporate plans and budgets, acquisition and disposal of assets that are material to the
Group, major investments, changes to management and control structure of the Group, including key
policies, procedure and authority limits.
IV) Appointments to the Board
• Nomination Committee
The Nomination Committee comprises three Board members as follows:Chairman
Lasa bin Mat Desa
Members
Ashari bin Ayub
Lt. Jen (B) Datuk Haji
Abdul Aziz bin Hasan
–
Independent Non-Executive Director
–
–
The Committee consists entirely of Non-Executive Directors, all of whom are independent.
27
(cont’d)
The primary objectives of the Nomination Committee are to evaluate the suitability of candidates
and make recommendations to the Board on all new Board appointments. The Committee is also
empowered to assess the effectiveness of the Board as a whole on an annual basis.
The Nomination Committee met once since the date of our last report on 14 April 2004. The meeting
was attended by all members of the Committee.
• Appointment Process
The Board, through the Nomination Committee’s appraisal, believes that the current composition of
the Board brings the required mix of skills and core competencies required and its size and
composition appropriate to ensure the effective functioning of the Board.
The Board appoints its members through a formal and transparent selection process approved by the
Board. New appointees will be considered and evaluated by the Nomination Committee. The
Committee will then recommend the candidates to be approved and appointed by the Board. The
Company Secretary will ensure that all appointments are properly made, that all information
necessary is obtained, as well as all legal and regulatory obligations are met.
• Directors’ Training
The Board, through the Nomination Committee, ensures that the Board has an appropriate balance
of expertise and ability. The senior management organises orientation program for new Board
members. These include visits to major subsidiaries and meeting with key senior executives. All
Directors have attended and successfully completed the Mandatory Accreditation Programme
(MAP) conducted by the Research Institute of Investment Analysis Malaysia (RIIAM). The Directors will
continue to receive trainings from time to time particularly on new laws and regulations to further
enhance their skills and knowledge where relevant.
Since 2003, all Directors have attended trainings as part of the Continuing Education Programme
(“CEP”).
V) Re-election
In accordance with the Articles of Association, one third of the Board is subject to retirement by rotation
at each Annual General Meeting. The Directors to retire in each year are the Directors who have been
longest in office since their appointment or re-appointment. A retiring Director is eligible for re-appointment.
The Articles of Association also provide that the CEO who shall be elected from amongst the Board
members shall also retire once at least in each three years and shall be eligible for re-election. These
provide an opportunity for the shareholders to renew the mandates. The election of each Director is
voted on separately. To assist shareholders in their decision, sufficient information such as personal profile,
meetings attendance and the shareholdings in the Group of each Director standing for election are
furnished in a separate statement accompanying the notice of annual general meeting.
B. Directors’ Remuneration
Remuneration Committee
The Remuneration Committee comprises three Board members as follows:Chairman
Lt. Jen. (B) Datuk Haji
Abdul Aziz bin Hassan
Members
Lasa bin Mat Desa
Ashari bin Ayub
28
–
–
–
The committee consists entirely of independent Non-Executive Directors.
334818-P
The Remuneration Committee is responsible for recommending to the Board a remuneration framework for
Directors with the objective to provide the remuneration packages necessary to attract, retain and
motivate Directors of the quality required to manage the business and to align the interest of the Directors
with those of the shareholders. In framing the Directors’ remuneration policy, the Remuneration Committee
consults and receives advice from external consultants. Information prepared by independent consultants
on the remuneration practices of comparable companies are taken into consideration in determining the
remuneration packages.
None of the other Directors participated in any way in determining their individual remuneration. The Board
as a whole determines the remuneration of Non-Executive Directors with individual Directors abstaining from
decisions in respect of their individual remuneration.
The Remuneration Committee met once since the date of our last report on 14 April 2004. The meeting was
attended by all members of the Committee.
Details of the Directors’ Remuneration
The aggregate remuneration of the Directors categorised into the appropriate components is as follows:Amount in RM’000
Salaries and other emoluments
Fees
Executive
Director of
the Company
409
18
Executive Directors
of subsidiaries who
are Non-Executive
Directors of the
Company
542
54
Non-Executive
Directors of
the Company
17
90
The remuneration paid to the Directors within the following bands is summarised as follows:Executive
Director of
the Company
Less than RM50,000
RM200,001 to RM250,000
RM350,001 to RM400,000
RM400,001 to RM450,000
1
Executive Directors
of subsidiaries who
are Non-Executive
Directors of the
Company
1
1
-
Non-Executive
Directors of
the Company
6
-
The disclosure of Directors’ remuneration is made in accordance with Appendix 9C, Part A, item 10 of the
Listing Requirements of the Bursa Securities. This method of disclosure represents a deviation from the Best
Practice set out in the Code, which suggests separate disclosure of each Director’s remuneration. The Board
of Directors is of the opinion that separate disclosure would impinge upon the Directors’ right of privacy and
would not add significantly to the understanding of shareholders and other interested investors in this area.
29
Annual Report 2004
(cont’d)
C. Shareholders
Dialogue between the Company and Investors
The Group values dialogue with investors. The Company communicates with its investors during the annual
general meeting, extraordinary general meeting and analyst meetings, with the intention of giving the
investors a clear and complete picture of the Group’ performance and position. Regular discussions were
held between the senior management and shareholders, investment analysts and investors throughout the
year. Presentations based on permissible disclosures are made to explain the Group’s performance and major
development program. Quarterly analyst briefings were held after the announcement of the quarterly results.
Annual General Meeting
At the Company’s annual general meeting, shareholders have direct access to the Board and are
encouraged to participate in the open question and answer session. Members of the Board and the
external auditor of the Company are present to answer questions raised during the meeting. The Chairman
and members of the Board held a press conference immediately after the annual general meeting where
questions on the Group’s activities and performance from reporters were addressed.
D. Accountability and Audit
I) Financial Reporting
The Board aims to provide and present a balanced and meaningful assessment of the Group’s financial
performance and prospects at the end of the financial year, primarily through the annual financial
statements, quarterly results announcements to Bursa Securities as well as the letter to shareholders
jointly addressed by the Chairman and CEO in the annual report. The Board is assisted by the Audit
Committee to oversee the Group’s financial reporting processes and the quality of its financial
reporting.
Statement of Directors’ responsibility in respect of the preparation of the audited financial statements
The Board is responsible for ensuring that the financial statements of the Group give a true and fair view
of the state of affairs of the Group and of the Company as at the end of the accounting period and of
the results of the operations and cash flows for the period then ended. The Directors have ensured the
financial statements are drawn up to comply with applicable approved accounting standards in
Malaysia and the provisions of the Companies Act, 1965.
In preparing the financial statement, the Directors have selected and applied consistently suitable
accounting policies and made reasonable and prudent judgments and estimates. The Directors also
have a general responsibility for taking such steps as are reasonable to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
II) State of Internal Controls
The Statement on Internal Control furnished on pages 31 to 32 of the annual report provides an
overview on the state of internal controls within the Group.
III) Relationships with the Auditors
The Audit Committee has always maintained a transparent relationship with the external auditors. The role
of the Audit Committee in relation to the external auditors is described in the Audit Committee report
in this annual report.
30
The above Statement is made in accordance with the resolution of the Board of Directors dated 23 March
2005.
INTRODUCTION
The Board, pursuant to Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”) and in
adopting the Malaysian Code on Corporate Governance’s Principles and Best Practices (“the Code”), is
pleased to provide the following statement regarding the state of internal control of the Group for the financial
year under review. This statement is guided by the Statement on Internal Control : Guidance for Directors of
Public Listed Companies issued by The Institute Of Internal Auditors Malaysia (“the Internal Control Guidance”).
BOARD’S RESPONSIBILITIES
The Board acknowledges its overall responsibility for the Group’s systems on internal control and risk
management which include the establishment of an appropriate control environment and framework as well
as reviewing the adequacy and integrity of the systems. It should be noted, however, that such systems are
designed to manage rather than eliminate the risk of fraud and failure to achieve business objectives. In
addition, it should be noted that these systems can only provide reasonable but not absolute assurance against
material misstatement or loss.
The Group has in place an on-going process for identifying, evaluating and managing significant risks faced by
the Group throughout the year up to the date of approval of the annual report and financial statements. This
process is regularly reviewed by the management and reported to the Board as and when required and it
accords with the Internal Control Guidance.
As part of the review of internal control system carried out for the major subsidiaries in the Electronics Division
acquired in late 2003, the Group has undertaken a comprehensive review of the operations and business
transactions. This review has resulted in the streamlining of the selling and purchasing arrangements with key
customers and suppliers in addition to measures taken to improve the factory production and operating
processes. Various allowances and write-offs amounting to RM3 million have been accounted for in the current
year financial statements. An ongoing evaluation of risks and implementation of appropriate internal control
system as practised by the existing core businesses are being undertaken to strengthen the internal control
systems of these subsidiaries in the Electronics Division.
The key features of the internal control systems are described under the following headings.
RISK MANAGEMENT FRAMEWORK
The management has formulated a risk management framework for the Group. The framework of the risk
management encompasses the following key elements:
• Risk-profiling update for the Group’s core subsidiaries at least once every six months with the aim of
identifying the key risks of the subsidiaries and the processes to manage these risks and development of
action plans to deal with any unacceptable residual risks.
• Risks identified and proposed action plans were discussed in the Divisional Management Committees
meetings to validate and confirm the strategic and operational risks facing the Group’s core business
divisions and the actions required to deal with risks. The respective companies’ management and staff
execute the confirmed action plans and reinforced the existing control practices particularly on
segregation of responsibilities and their accountabilities in their day-to-day operations.
• A database of risks and controls which consist of detailed risk register and individual risk profiles was
maintained by the respective companies in the Group. Key risks identified to each company’s objectives
are aligned to the Division’s and Group’s strategic objectives. These risks were measured in relation to their
likelihood of occurrence and the magnitude of impact.
31
(cont’d)
• Organisational Structure
STRATEGIC DIRECTION AND PLANNING
• Performance Management Framework
All the above-mentioned initiatives would ensure that
the Group has in place a formalised ongoing process
to identify and manage the significant risks to ensure
the achievement of business objectives.
We considered the risk profile of the Group in
formulating our strategies and plans which were
approved and adopted by the Board. The strategies
and plans are monitored and revised as the need
arises.
INTERNAL AUDIT FUNCTION
The internal audit function was outsourced to an
independent audit firm, Russell Bedford Malaysia.
Russell Bedford reports directly and provides
assistance to the Audit Committee (“AC”) and Board
in obtaining an independent assurance they require
regarding the effectiveness of the systems of internal
control.
The Group has a defined organisational structure
with lines of accountability including a written
terms of reference (“TOR”) that sets out the
authority delegated to the Board Committees and
Management Committees. The TOR is reviewed
and approved by the Board annually.
Management reports are presented to the Board
and the Management Committee as and when
required to facilitate the review of financial and
operational performance of the business divisions.
The review encompasses areas such as financial
and operational key performance indicators,
variances between budget and operating results
and compliance with laws and regulations.
There is also a budgeting process where annual
budgets would be prepared and proposed by the
business divisions’ management each year. The
budgets are then subject to review by the
Management Committee chaired by the CEO
before being presented to the Board for approval.
The internal audit function’s principal responsibility is
to undertake regular and systematic reviews of the
systems of internal controls so as to provide
reasonable assurance that such systems operate
satisfactorily and effectively in the Group and report
to the AC on a quarterly basis. Internal audit annual
work plan and audit programs are presented to the
AC each year for approval.
• Operational Policies and Procedures
• Board Meetings
BOARD’S CONCLUSION
OTHER KEY ELEMENTS OF INTERNAL CONTROL
32
Board’s decision until a satisfactory conclusion is
arrived at.
The formalised assessment takes into account all
significant aspects of internal control, which
encompass the establishment of an appropriate
control environment and framework, as well as
reviewing the adequacy and integrity of the internal
control.
The Board meets on a quarterly basis and has a
formal agenda of matters for discussion. The
Chief Executive Officer (“CEO”) and senior
management lead the presentation and briefing
to the Board based on the Board papers
circulated prior to the meeting. In arriving at any
decision, a recommendation by the management
followed by a thorough deliberation and question
and answer session is a prerequisite. In addition,
the Board is kept updated on the progress of the
The documented policies and procedures form an
integral part of the internal control system to
safeguard the Group’s assets against material
losses and ensure complete, timely and accurate
financial information. The documents consist of
manual and handbooks that are revised as and
when required to meet operational needs.
Based on the above, the Board is pleased to disclose
that the Group’s internal control systems are
sufficiently in line with the Code and the Internal
Control Guidance.
The external auditors have reviewed this Statement on
Internal Control, dated 27 April 2005 and reported to
the Board that the statement appropriately reflects
the process adopted by the Board.

Board of Directors

Transcription

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