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 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 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 Perindustrian Seri Kembangan, 43300 Seri Kembangan, Daerah Petaling, Selangor Darul Ehsan, 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 PT Indotech Metal Nusantara 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 PT Indotech Metal Nusantara Prodelcon Sdn Bhd Palladine Technology Pte Ltd Cabletron Cabletron Electronics Electronics (M) Sdn Bhd Palladine Technology Pte Ltd 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, Selangor Darul Ehsan, 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 Audit Committee Report 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 Non-Executive Director 6 Mr. Lim Siok Hui Chief Executive Officer 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 Audit Committee Report (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 Letter To Shareholders (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. JOTECH HOLDINGS BERHAD 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 Letter To Shareholders (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 JOTECH HOLDINGS BERHAD 334818-P Financial Highlights 19 Financial Highlights (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 Chief Executive Officer Datuk Haji Sarip bin Hamid Non-Executive Chairman Liew Cheng York Non-Independent Non-Executive Director Standing from left to right Lasa bin Mat Desa Independent Non-Executive Director Ashari bin Ayub Senior Independent Non-Executive Director Chew Siew Hong Non-Independent Non-Executive Director Ooi Boon Pin Non-Independent Non-Executive Director Lt. Jen (B) Datuk Haji Abdul Aziz bin Hasan Independent Non-Executive Director Tuan Haji Mohd Ali bin Bawal Non-Independent Non-Executive Director 21 Profile of Board of Directors 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 appointed to the Board of Directors 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 Board of Directors of Jotech on 30 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 Profile of Board of Directors (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 appointed to the Board of Directors 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 Board of Directors of Jotech on 1 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 Statement on Corporate Governance 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 Statement on Corporate Governance (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 – Independent Non-Executive Director – Independent Non-Executive Director The Committee consists entirely of Non-Executive Directors, all of whom are independent. 27 Statement on Corporate Governance (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 – Independent Non-Executive Director – – Independent Non-Executive Director Independent Non-Executive Director The committee consists entirely of independent Non-Executive Directors. JOTECH HOLDINGS BERHAD 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 Statement on Corporate Governance (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. Statement on Internal Control 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 Statement on Internal Control (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.