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Contents

Page Corporate Information Group Directory Profile of the Directors Chairman's Statement Five Years Financial Highlights of the Group Statement on Corporate Governance Report of the Audit Committee Statement of Directors' Responsibility Directors' Report Statement by Directors Statutory Declaration Report of the Auditors Balance Sheets Income Statements Statement of Changes in Equity Cash Flow Statements Notes to the Financial Statements Summary of Landed Properties and Buildings Analysis of Shareholdings Notice of Annual General Meeting Form of Proxy 2 3-5 6-8 9 - 11 12 13 - 16 17 - 20 21 22 - 25 26 26 27 28 - 29 30 31 32 - 35 36 - 56 57 - 58 59 - 60 61 - 66

2001 Annual Report

1

(Incorporated in Malaysia)

(3465-H)

Corporate Information

BOARD OF DIRECTORS Law Tiam Hock Non-Independent Non-Executive Chairman Tay Yew Keng Non-Independent Non-Executive Director Fong Heng Leong Executive Director Yusof Annuar Bin Yaacob Executive Director Tan Tien Kok Executive Director Abd Aziz Bin Attan Independent Non-Executive Director Mohd Harris Bin Pardi Independent Non-Executive Director Tan Chuan Koon @ Thuan Khoon Independent Non-Executive Director Bank Utama (Malaysia) Berhad No. 48-50, Jalan SS 15/4D, 47500 Subang Jaya Selangor Darul Ehsan AUDITORS Shamsir Jasani Grant Thornton (Member of Grant Thornton International) Chartered Accountants Level 11-1, Faber Imperial Court Jalan Sultan Ismail, 50250 Kuala Lumpur Telephone No. : 03-2692 4022 Fax No. : 03-2732 5119 Email Address : [email protected]

PRINCIPAL BANKERS Bumiputra-Commerce Bank Berhad No. 6, Jalan Tun Perak, 50050 Kuala Lumpur

HSBC Bank Malaysia Berhad No. 2, Leboh Ampang, 52100 Kuala Lumpur

AUDIT COMMITTEE Abd Aziz Bin Attan Chairman/Independent Non-Executive Director Yusof Annuar Bin Yaacob Member/Executive Director Mohd Harris Bin Pardi Member/Independent Non-Executive Director

SOLICITORS Sarbjit & Co. No. 33, Level 7, The Boulevard, Mid Valley City Lingkaran Syed Putra, 59200 Kuala Lumpur Telephone No. : 03-2283 1178 Fax No. : 03-2282 0178 Email Address : [email protected]

COMPANY SECRETARY Tan Bee Keng MAICSA 0856474 Tay,Tee & Nasir No. 6-1, Jalan Tun Sambanthan 3 Brickfields, 50470 Kuala Lumpur Telephone No. : 03-2274 0188 Fax No. : 03-2272 5129 Email Address : [email protected]

REGISTERED & CORPORATE OFFICE 2B-5, Level 5, Jalan SS 6/6, Kelana Jaya 47301 Petaling Jaya, Selangor Darul Ehsan Telephone No. : 03-7880 7539 Fax No. : 03-7880 7536 Email Address : [email protected]

STOCK EXCHANGE LISTING Main Board of Kuala Lumpur Stock Exchange

SHARE REGISTRAR Mega Corporate Services Sdn Bhd Level 11-2, Faber Imperial Court Jalan Sultan Ismail, 50250 Kuala Lumpur Telephone No. : 03-2692 4271 Fax No. : 03-2732 5388 Email Address : [email protected]

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

2

Group Directory

ELECTRONIC TRADING DIVISION

HEAD OFFICE Bangunan O'Connor 13, Jalan 223 46100 Petaling Jaya Selangor Darul Ehsan Tel : 03-7957 1818 Fax : 03-7955 8017 Website : http//:www.oconnors.com.my Penang 201 and 203, Jalan Burmah 10050 Pulau Pinang Tel : 04-228 9988 Fax : 04-229 8899 email : [email protected] Johor 58, Jalan Dian 8 Taman Munsyi lbrahim Jalan Skudai 81200 Johor Bahru Tel : 07-238 8399 Fax : 07-238 3814 email : [email protected] Perak 519 - 519A, Jalan Pasir Puteh 31650 lpoh Tel : 05-322 2111 Fax : 05-321 1294 email : [email protected] Pahang A123 (1st & 2nd Floor) Pusat Dagangan Kuantan Off Jalan Tun lsmail 25000 Kuantan Tel : 09-515 8033 Fax : 09-515 8099 email : [email protected] Sabah Ground Floor Lot 9, Block 31 Penampang New Township 7 km Jalan Penampang 88300 Kota Kinabalu Tel : 088-720 588 Fax : 088-714 677 email : [email protected] Sarawak Lot 8637 & 8638, Section 64, KTLD Jalan Simpang Tiga, Wisma Ko-Perkasa 93300 Kuching Sarawak Tel : 082-240 551 Fax : 082-240 641 email : [email protected]

ENGINEERING DIVISION

HEAD OFFICE Bangunan O'Connor 13, Jalan 223 46100 Petaling Jaya Selangor Darul Ehsan Tel : 03-7953 8400 Fax : 03-7957 7871 Website : http//:www.oce.com.my Penang 201 and 203, Jalan Burmah 10050 Pulau Pinang Tel : 04-227 7117 Fax : 04-227 1177 email : [email protected] Johor 56 Jalan Dian 8 Taman Munsyi lbrahim Jalan Skudai 81200 Johor Bahru Tel : 07-236 6733 Fax : 07-234 0733 email : [email protected] Sabah 1st Floor Lot 9, Block 31 Penampang New Township 7 km Jalan Penampang 88300 Kota Kinabalu Tel : 088-725 277 Fax : 088-725 178 email : [email protected] Sarawak 1st Floor, Lot 96 Section 63, Lorong SB Kuching Town Land District Jalan Datuk Abang Abdul Rahim SB 93450 Kuching Tel : 082-342 828 Fax : 082-342 929 email : [email protected]

BRANCHES Sales & Services

BRANCHES Sales & Services

2001 Annual Report

3

(Incorporated in Malaysia)

(3465-H)

Group Directory (cont'd)

BEDDING PRODUCTS DIVISION

HEAD OFFICE Wisma King Koil 2C-5, Level 4 Jalan SS 6/6, Kelana Jaya 47301 Petaling Jaya Selangor Darul Ehsan Tel : 03-7805 4766 Fax : 03-7805 4755 Email : [email protected] Website: htpp//:www.kingkoil.com.my Penang 49-Q, Lorong Sempadan Dua 11400 Pulau Pinang Tel : 04-826 6601 Fax : 04-826 6959 Johor No. 12, Jalan Sri Plentong 2 Taman Perindustrial Sri Plentong 81750 Masai, Johor Bahru Tel : 07-386 8681 Fax : 07-386 8682 Perak 56 Lintasan Perajurit Enam Ipoh Garden East 31400 Ipoh Tel : 05-546 7321 Fax : 05-546 7330 Melaka 76A, Jalan Semabok 75050 Melaka Tel/Fax : 06-231 7907 Manufacturing Locations Lot 2137, Jalan Enggang Kampung Batu 9, Kebun Baru 42500 Teluk Panglima Garang Selangor Darul Ehsan Tel : 03-3122 1866/1867/1868/1869 Fax : 03-3122 1870 Lot 1, Lorong Perak 2 42500 Teluk Panglima Garang Selangor Darul Ehsan Tel : 03-3122 1391 Fax : 03-3122 1008

BUILDING MATERIALS TRADING DIVISION

HEAD OFFICE Wisma King Koil 2C-4, Level 3 Jalan SS 6/6, Kelana Jaya 47301 Petaling Jaya Selangor Darul Ehsan Tel : 03-7805 4748 Fax : 03-7805 4723 Email : [email protected]

BRANCHES Sales & Services

BRANCHES Sales & Services

Penang No. 40, Loh Boon Siew Road 10400 Pulau Pinang Tel : 04-229 7461 Fax : 04-229 7462 Johor 70 & 70A, Jalan Molek 2/1 Taman Molek 81100 Johor Bahru Tel : 07-353 2267 Fax : 07-353 2254

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

4

Group Directory (cont'd)

CONSUMER FOOD DIVISION

HEAD OFFICE 2C-3 Level 3 Jalan SS6/6, Kelana Jaya 47301 Petaling Jaya Selangor Darul Ehsan Tel : 03-7805 4728 Fax : 03-7805 4726 email : [email protected] Penang No. 40, Loh Boon Siew Road 10400 Penang Tel/Fax : 04-227 3806 Perak No. 54A, Laluan Tasek Timur 15 Taman Mewah Bercham 31410 Ipoh Perak Darul Ridzuan Tel : 05-547 4507 Fax : 05-547 4460 Kelantan Lot 5739 Kawasan MIEL Lundang Seksyen 25, Bandar Kota Bharu 15150 Kota Bharu Kelantan Darul Naim Tel : 09-744 2092 Fax : 09-744 8096 Johor No. 11, Jalan Bukit 5 Kawasan MIEL, Sri Alam Phase V 81750 Plentong, Johor Bahru Johor Darul Takzim Tel : 07-388 8268 Fax : 07-388 8269 Pahang Lot 95-B, Semambu Industrial Estate 25300 Kuantan Pahang Darul Makmur Tel : 09-566 0268 Fax : 09-566 0278 Manufacturing Locations Lot 509 No.19 Seduan Land District SEDC Industrial Estate Upper Lanang Road 96009 Sibu, Sarawak Tel : 084-215170 Fax : 083-215175 Lot No. 6, Jalan P/15 Kawasan Perindustrian MIEL Seksyen 10 43650 Bandar Baru Bangi Selangor Darul Ehsan Tel : 03-8926 9550 Fax : 03-8926 9504

BRANCHES Sales & Services

2001 Annual Report

5

(Incorporated in Malaysia)

(3465-H)

Profile Of The Directors

Encik Law Tiam Hock Malaysian, aged 40, has served on the Board since 17 December 1998 and is the Non-Independent Non-Executive Chairman of the Company. He is also the Chairman of the Nomination Committee and Remuneration Committee. Encik Law holds a first class honours degree in Bachelor of Accounting from University of Malaya, and is a member of the Malaysian Institute of Accountants and Institute of Taxation. A Managing Partner of Messrs TH Law & Co., a public accounting firm, since 1994, Encik Law has 16 years of experience in the areas of auditing, financial and corporate advisory and corporate finance. He was previously with Messrs Shamsir Jasani Grant Thornton, a member firm of Grant Thornton International. Encik Law also holds directorship in Prime Utilities Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Law attended all 6 Board Meetings of the Company held during the financial period ended 31 December 2001. Encik Tay Yew Keng Malaysian, aged 70, was appointed a Non-Independent Non-Executive Director of the Company on 29 November 2001. Encik Tay brings to the Group 40 years of experience in the construction, manufacturing, consumer products and trading industries. He has been the Patron and Chairman of Pusat Haemodialisis St. John Ambulance Malaysia Bacang, Melaka since 1993. In recognition of his contribution towards public service, he received the Brotherhood of St. John Ambulance, United Kingdom and was conferred the Rotary International's Paul Harris award in 1997. He does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Tay did not attend any of the Board Meetings held during the financial period ended 31 December 2001 in view of his appointment to the Board on 29 November 2001. Encik Fong Heng Leong Malaysian, aged 48, was appointed an Executive Director of the Company on 19 April 2000. Encik Fong who has responsibility for the financial management of the Group, holds a Master of Business Administration degree from Heriot-Watt University, Edinburgh, United Kingdom ("UK"). He is a member of the Association of International Accountants, UK and chartered member of The Institute of Internal Auditors Malaysia. He has more than 26 years of experience in finance and accounting, particularly in the manufacturing and trading industries. Prior to joining the Company, he was with Kaiserkorp Sdn Bhd as Manager, Finance Division. Encik Fong does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. He attended all 6 Board Meetings of the Company held during the financial period ended 31 December 2001.

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

6

Profile Of The Directors (cont'd)

Encik Yusof Annuar Bin Yaacob Malaysian, aged 36, was appointed an Executive Director of the Company on 4 April 2001. He also serves as a member of the Audit Committee. Encik Yusof who has responsibility for the Group's financial management and plays a key role in the implementation of corporate objectives, is a member of the Chartered Institute of Management Accountants, United Kingdom and the Malaysian Institute of Accountants. Prior to joining the Company, he was Executive Director of a public listed company. Encik Yusof has 14 years of experience in investment banking, financial management and accounting. He also holds directorship in General Soil Engineering Holdings Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Yusof attended 3 out of 6 Board Meetings of the Company held during the financial period ended 31 December 2001 in view of his appointment to the Board on 4 April 2001. Encik Tan Tien Kok Malaysian, aged 32, is an Executive Director of the Company. He was first appointed to the Board as Director on 17 December 1998. Encik Tan had previously served as a member of the Audit Committee. He resigned from the Audit Committee on 30 November 2001. Encik Tan is a Fellow member of the Association of Chartered Certified Accountants, United Kingdom and a member of the Malaysian Institute of Accountants. Prior to joining the Company, he has held management positions in public listed corporations and private companies. He has 9 years of experience in the areas of auditing, accounting, financial management and corporate advisory/ finance having been with Messrs BDO Binder and Malaysian International Merchant Bankers Berhad. Encik Tan also holds directorship in Jasatera Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Tan attended all 6 Board Meetings of the Company held during the financial period ended 31 December 2001. Encik Abd Aziz Bin Attan Malaysian, aged 49, was appointed an Independent Non-Executive Director of the Company on 15 December 1998. He also serves as the Chairman of the Audit Committee and is a member of the Nomination Committee and Remuneration Committee. Encik Abd Aziz holds a Diploma in Accountancy from Mara Institute of Technology, Malaysia and is a member of the Association of Chartered Certified Accountants, United Kingdom, the Malaysian Institute of Accountants and Institute of Taxation. He has 24 years of experience in finance and accounting, having held senior finance positions in several companies. His last position was Group Financial Controller of Lotan Group of Companies. He does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Abd Aziz attended all 6 Board Meetings of the Company held during the financial period ended 31 December 2001.

(3465-H)

2001 Annual Report

7

(Incorporated in Malaysia)

Profile Of The Directors (cont'd)

Encik Mohd Harris Bin Pardi Malaysian, aged 49 , was appointed an Independent Non-Executive Director of the Company on 29 November 2001. He also serves as a member of the Audit Committee. Encik Mohd Harris is an economics graduate from University of Malaya and started his working career as a member of the pioneer management team at McDonald's Malaysia. He was the Head of Corporate and Business Development at Golden Arches Restaurants Sdn Bhd. In 1994, he embarked on his own food retailing and catering business. He introduced the Burger King restaurant franchise in 1996 and became its first Managing Director. At the same time, he opened the local food-court at Suria Kuala Lumpur City Centre. He does not have any family relationship with any Director and/or major shareholder of the Company. There is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Mohd Harris did not attend any of the Board Meetings held during the financial period ended 31 December 2001 in view of his appointment to the Board on 29 November 2001.

Encik Tan Chuan Koon @ Thuan Khoon Malaysian, aged 59, was appointed an Independent Non-Executive Director of the Company on 22 February 2002. He also serves as a member of the Remuneration Committee and Nomination Committee. A Fellow of the Chartered Institute of Bankers, United Kingdom and a Senior Associate of Institut Bank-Bank Malaysia, Encik Tan has 39 years of experience in the banking industry. He began his career with HSBC Bank in 1959. During his years of service, he held various senior positions in HSBC Bank and he retired as General Manager, Finance in 1997. He was a director of HSBC Finance Berhad from 1995 until his retirement in 1997. He was previously a member of the Board of KAF Discounts Berhad from April 1998 to July 2001. He does not have any family relationship with any Director and/or major shareholder of the Company and there is no business arrangement with the Company in which he has a personal interest. He has had no convictions for offences within the past 10 years. Encik Tan did not attend any of the Board Meetings held during the financial period ended 31 December 2001 in view of his appointment to the Board on 22 February 2002.

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

8

Chairman's Statement

INTRODUCTION 2001 was a year in which your Company took steps to diversify from the traditional telecommunications related businesses to a broader brand management and manufacturing base. Your Company also took the opportunity to dispose off some low yielding assets in an effort to release capital to our other more profitable businesses. Despite the continued tough operating environment, your Company achieved revenue growth of 9% over the fifteenmonth period to RM413 million and a net profit after tax of RM7.5 million, an improvement of 21% over the previous year. THE PERIOD UNDER REVIEW Our financial period began with the completion of two major acquisitions, the Kaiserkorp group of companies ("Kaiserkorp") and Agrow Malaysia group of companies ("Agrow"). We have added bedding products, sanitary ware and other related hardware products to our stable of businesses. The businesses not only provide us with a strong and stable manufacturing base but also allow us to leverage on the strong brands that come with the acquisitions, which include such well known names such as "Kingkoil", "Wondercoil", "Johnson Suisse", "Inax", "Geberit" and "Ezy-Locks". Our brands command the highest brand recognition in their respective markets as well as significant market share. Your Company is also proud that our manufacturing capability especially in the bedding division is one of the most competitive in the industry relative to the high quality of our products. Contributions from Kaiserkorp and Agrow were significant in light of the deterioration of the earnings of O'Connor's Trading Sdn Bhd ("OCT"). It was a difficult year for OCT brought about by an overhang of old models of mobile phones, aggressive price under-cutting by parallel importers and the loss of the Nokia and Ericsson distributorships. A combination of stock write-downs, higher provisions for doubtful debts and a voluntary separation scheme instituted by management during 2001 caused OCT to suffer a loss before taxation of RM5.7 million for the 12 month period ended 30 September 2001. It should be noted that while the loss is primarily attributable to "oneoff" items, nevertheless this does not mask the fact that OCT has lost market share in the trading of mobile phones. The deterioration in market share, losses and a change in the regulatory environment has resulted in OCT instituting certain practices such as "just-in-time" inventory controls. OCT has launched new initiatives in an effort to re-position the business as an independent importer of multi-brand mobile phones, which include "Nokia", "Ericsson", "Sagem" and "Motorola". Your Company believes these measures coupled with strict cost control policies will turnaround the performance of OCT in the next financial year. The engineering division continued to perform well as capital expenditure of telecommunication companies remains high.The division has positioned itself as a total solutions provider and as such has been able to expand its business to include the telecommunication needs of a wide variety of companies. As part of the continuing review of our businesses, your Company has taken steps to rationalize the operations by disposing off assets that are low yielding and that do not fit our present business emphasis. Therefore, your Company disposed off our interest in the two companies that owned properties sited on Vega Square Shopping Complex and our interest in a company licensed to undertake money lending.The disposals released RM12 million to finance our working capital requirements and removed approximately RM18 million of bank borrowings from the balance sheet. NEW ACQUISITIONS 2001 also witnessed your Company entering the food industry with the acquisition of Ibufood group of companies, Biz-Allianz International (M) Sdn Bhd and Selera Citarasa Sdn Bhd (collectively known as "Ibufood Group").These companies are primarily involved in the manufacture, distribution and trading of instant noodles under the brand name "Indomie", "Ibumie" and "Rindumie". The acquisition of dominant brands remains a cornerstone of your Company's business emphasis and this is reflected in the "Indomie" brand that commands approximately 80% of the "dry" instant noodle market.The acquisition of a business with high brand recognition, strong cash flows and a recession proof profile augurs well for your Company. I am pleased to report that the Ibufood Group acquisitions have been completed and this will have a positive contribution to the results for the year ending 2002.

2001 Annual Report

9

(Incorporated in Malaysia)

(3465-H)

Chairman's Statement (cont'd)

BONDS ISSUE In an effort to match our asset and liability profile as well as to take advantage of the prevailing low interest rate environment, your Company decided to undertake the payment for the consideration of the Ibufood Group acquisition and certain capital expenditure via a Serial Bonds Issue. The bonds were rated A2 by Rating Agency Malaysia ("RAM") and this is a testament to the strong business model that exist within the Group as well as a highly focused management team.While your Company does not envisage any new debt raising exercise in the near term, the rating by RAM provides us with a benchmark that we hope will allow us to go back to the private debt securities market if an opportunity for an acquisition or further expansion arises. KUMPULAN O'CONNOR'S (MALAYSIA) SDN BHD I wish to take this opportunity to inform shareholders of the existing dispute arising from a Shareholders' Agreement entered in 1997 between your Company and the minority shareholder of Kumpulan O'Connor's (Malaysia) Sdn Bhd. As part of the recent corporate exercise, we had discovered that the Conditions Precedent arising from the Shareholders' Agreement had yet to be fulfilled.We sought the advice of the regulatory bodies that in turn advised us that we were required to hold an Extraordinary General Meeting ("EGM") to seek your approval for the Shareholders' Agreement. The dispute arose as the minority shareholder sought the Courts to declare that the Shareholders' Agreement is legally binding and that the Conditions Precedent have been fulfilled. I wish to stress that the dispute has no overall impact in the running of Kumpulan O'Connor's (Malaysia) Sdn Bhd, which is being managed by a professional team. It is my belief that the dispute will be resolved quickly and to the satisfaction of all parties concerned. DIVIDENDS The Board of Directors is pleased to recommend a first and final gross dividend of 4% per share less Malaysian Income Tax at 28% for the financial period ended 31 December 2001. PROSPECTS Your Company now has the right mix of business activities coupled with strong identifiable brands to make further in-roads in their respective areas of expertise. The telecommunication related businesses especially the trading of mobile phones have shown a quick turnaround, benefiting from the measures instituted by the management team. The engineering division remains highly focused on high margin telecommunication work, which is expected to remain buoyant in the near future. The rationalization of the telecommunication industry is expected to create new opportunities that we are hoping to exploit. An area where your Company has a significant competitive advantage is the out-sourcing of engineering and maintenance needs. We believe it is imperative that the telecommunication division exploits these trends in the industry in an effort to remain as a leader in their field. The prospects for our bedding division remain bright with a pick up in demand for residential housing. As the economy continues its recovery, we are hopeful that demand for our products remains buoyant and this is already reflected in recent months. Furthermore, the Government's infrastructure program especially those related to hospitals, universities, training schools and prisons will ensure that a wide variety of our products will be utilized. The sanitary and hardware division is also a prime beneficiary of the Government's expenditure on infrastructure. An area where the division is seeking to expand its presence is in maintenance work for Government buildings such as hospitals and prisons. Not only will we install our products but also provide long term maintenance work that will ensure a steady stream of recurring income. Presently, we are working with a number of Government bodies and departments on a number of innovations which we believe will provide the Government with a more efficient and cost effective approach to some of its building requirements. With the expected completion of a new manufacturing plant by the end of this second quarter, the Ibufood Group would have achieved a significant milestone in its manufacturing capabilities by being able to produce up to 24 million packets of instant noodles per month. I am excited with the potential of the "Indomie", "Ibumie" and "Rindumie" brands especially in the export markets including Brunei and South Africa. The food division is also launching a number of new initiatives that include the production of mayonnaise under the brand name "Telly".The mayonnaise market in Malaysia is significant and is presently dominated by foreign brands with little competition from domestic producers.

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

10

Chairman's Statement (cont'd)

I would like to also take this opportunity to explain your Company's strategic outlook.While the businesses that we are presently involved in appear to be disparate, the cornerstone of our emphasis is value added creation revolving around key brands. With the coming of the Asean Free Trade Zone and eventually WTO, the success of any business is dependent on quality, price and branding in order to be able to continue to sell within the domestic market as well as to take the opportunity to enter export markets. All of our efforts in all our businesses are subject to a very simple measure, the business must be able to provide a return on equity that is significantly higher than our peers. This we achieve by producing quality products at competitive prices while the brands ensure eventual premium pricing. I am confident that the businesses within the Group will continue to show robust growth over the coming years. Your Company has taken numerous measures to comply with regulations as set out by the Kuala Lumpur Stock Exchange ("KLSE") and other regulatory authorities in a timely manner.The Memorandum and Articles of Association are being amended to comply with KLSE guidelines that are being put forward to you at the coming Annual General Meeting. Your Company is presently looking at a number of proposals to increase the total issued and paid-up share capital from 42,500,000 shares to a minimum of 60,000,000 shares as stipulated by the KLSE before 31 December 2002.We will ensure that measures we take will be in the best interest of our shareholders and the Company. APPRECIATION On behalf of the Board of Directors, I would like to thank Tan Sri Zulkifli Bin Mahmood, Encik Lim Boon Hiong and Encik Yeang Kok Kheang for their invaluable contribution to the Group. To the management and staff, I would like to offer my thanks for their contribution during the past year. I would also like to offer my thanks and gratitude to the regulatory bodies and Government agencies for their continued support and guidance. My unreserved appreciation goes out to our shareholders who have displayed a strong sense of confidence in the Company.

LAW TIAM HOCK Chairman

2001 Annual Report

11

(Incorporated in Malaysia)

(3465-H)

Five (5) Years Financial Highlights of The Group

30 September / 31 December

1997 30.09.97 RM'000 Group Income Statement Turnover Profit Before Taxation Taxation Profit After Taxation Minority Interest Profit After Taxation and Minority Interest Consolidated Balance Sheet Fixed Assets Investments Intangible Assets Net Current Assets 50,509 1,990 45 56,580 109,124 Financed By Shareholders' Funds Minority Interest Deferred Taxation Long Term Bank Borrowing Finance Creditors 110,944 (1,820) 109,124 126,289 53,314 (1,996) 177,607 132,345 51,268 (1,724) 200 182,089 137,284 52,691 1,266 18,010 1,238 210,489 144,768 51,360 2,639 3,882 651 203,300 48,773 1,475 5 127,354 177,607 50,944 31,179 105 99,861 182,089 99,625 31,325 22,253 57,286 210,489 96,344 1,552 22,153 83,251 203,300 264,377 20,229 (5,953) 14,276 14,276 197,578 19,916 (3,581) 16,335 (648) 15,687 234,774 14,491 (595) 13,896 (4,831) 9,065 380,787 17,193 (5,401) 11,792 (5,608) 6,184 413,770 16,326 (6,537 ) 9,789 (2,293 ) 7,496 1998 30.09.98 RM'000 1999 30.09.99 RM'000 2000 30.09.00 RM'000 2001 31.12.01 RM'000

Number of Shares Issued and Fully Paid-Up Earnings per Share Gross Net Dividend Gross Net Tangible Assets per Share

(`000)

42,500

42,500

42,500

42,500

42,500

(Sen) (Sen)

47.6 33.6

45.3 36.9

22.7 21.3

27.3 14.6

33.0 17.6

(%) (RM)

19.72 2.61

1.00 2.97

4.00 3.11

4.00 2.71

4.00 2.88

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

12

Statement on Corporate Governance

OCB BERHAD applies good corporate governance by having in place processes and management structures to direct and manage the business and affairs of the Company and its subsidiary companies ("the Group") towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long-term shareholders' value. In preparing this report, the Board of Directors ("Board") has considered the manner in which the Malaysian Code on Corporate Governance's ("Code") Principles have been applied and the extent of compliance with the Best Practices therein.

The Board of Directors

The Board plays a primary role in corporate governance by setting out the strategic direction of the Group, formulation of policies and overseeing and monitoring the investments and business of the Group.

Composition The Board currently has eight (8) members, comprising the Non-Independent Non-Executive Chairman, three (3) Executive Directors, one (1) Non-Independent Non-Executive Director and three (3) Independent Non-Executive Directors. The present Directors bring a wide range of business management and financial experience required for the effective management of a large and expanding group. A brief profile of each Director is presented on pages 6 to 8 of this Annual Report. There is clear segregation of responsibilities between the Chairman and the Executive Directors to ensure a balance of power and authority. The Chairman is responsible for ensuring the efficiency and effectiveness of the Board functions whilst the Executive Directors have overall responsibility for the operating units, organisational effectiveness and implementation of the Board's policies and decisions.The Independent Non-Executive Directors play a pivotal role in corporate accountability, as they provide unbiased and independent view, advice and judgement to the Board.

Board Meetings The Board meets on a scheduled basis, at least four (4) times a year, with additional meetings convened when necessary. During the fifteen-month financial period ended 31 December 2001, six (6) Board meetings were held. Details on attendance of the Directors at the Board meetings can be found in their respective profiles set out on pages 6 to 8.

Supply of Information Scheduled Board meetings are structured on a pre-set agenda. All Directors are provided with reports and other relevant information on a timely manner, covering various aspects of the Group's operations and performance. At each of the scheduled meetings, the Board considers the financial statements and results of the Group for the period ended for each quarter, the performance of the business of the Group, policies and strategic issues affecting the Group's business. In addition, there is a schedule of matters reserved specifically for the Board's decision, including the approval of corporate plans and annual budgets, acquisitions and disposals of undertakings and properties, major investments, changes to control structure within the Group, including key policies and strategies and delegated authority limits. Directors may obtain independent professional advice in furtherance of their duties, at the Company's expense. All Directors have full access to the advice and services of senior management and the Company Secretary. Appointment and Re-election of Directors The Nomination Committee recommends the appointment of new Directors to the Board.The appointment of any additional Director is made as and when it is deemed necessary by the existing Board with due consideration given to the mix of expertise and experience required for an effective Board.

(3465-H) (Incorporated in Malaysia)

2001 Annual Report

13

Statement on Corporate Governance (cont'd)

In accordance with the Company's existing Articles of Association, all Directors except a Managing Director, shall retire from office by rotation once at least in each three years, but shall be eligible for re-election. In compliance with the Kuala Lumpur Stock Exchange's ("KLSE") new Listing Requirements which came into force on 1 June 2001, the Managing Director will now also be required to submit himself for re-election by rotation. The proposed new Articles of Association to be tabled for adoption at the coming Annual General Meeting provides for all Directors to submit themselves for re-election at least once every two (2) years. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.

Directors' Training All the Directors have attended and completed the Mandatory Accreditation Programme conducted by the Research Institute of Investment Analysts Malaysia, an affiliate company of the KLSE.

Directors' Remuneration The details of the remuneration of the Directors for the fifteen-month financial period under review are as follows :Category Fees Salaries Bonus Others Total (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) Executive Directors 685 34 80 799 Non-Executive Directors 39 39

Benefits-in-kind (RM'000)

The number of Directors whose total remuneration falls within the following bands are :-

Number of Directors Range of Remuneration Below RM50,000 RM 50,001 to RM 100,000 RM100,001 to RM 150,000 RM150,001 to RM 200,000 RM200,001 to RM 250,000 RM250,001 to RM 300,000 Executive 1 2 1 Non-Executive 6 -

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

14

Statement on Corporate Governance (cont'd)

Board Committees A number of standing Board Committees have been established to assist the Board in the execution of its responsibilities.The Committees do not have executive powers but report to the Board on all matters considered and their recommendations thereon.The terms of reference of each committee have been approved by the Board and, where applicable, comply with the recommendations of the Code. a. Audit Committee The Audit Committee reviews issues of accounting policies and presentation for external financial reporting, monitors the work of the internal audit function and ensures an objective and professional relationship is maintained with the external auditors. The report of the Audit Committee is set out on pages 17 to 20. b. Nomination Committee The Nomination Committee is responsible for making recommendations to the Board on all new Board appointments and Board Committee appointments and for annually assessing the Directors as to their skills and experience and other qualities. The members of the Nomination Committee are as follows:Law Tiam Hock (Non-Independent Non-Executive Chairman) Abd Aziz Bin Attan (Independent Non-Executive Director) Tan Chuan Koon @ Thuan Khoon (Independent Non-Executive Director) Chairman Member Member

c. Remuneration Committee The Remuneration Committee is responsible for making recommendations to the Board on the framework of the Directors' remuneration and the remuneration packages for all the Directors. The Board as a whole determines the remuneration of the Non-Executive Directors and Executive Directors and the individuals concerned will abstain from the discussion of their own remuneration. The members of the Remuneration Committee are as follows:Law Tiam Hock (Non-Independent Non-Executive Chairman) Abd Aziz Bin Attan (Independent Non-Executive Director) Tan Chuan Koon @ Thuan Khoon (Independent Non-Executive Director) Chairman Member Member

Investors Relations and Shareholder Communication The Board acknowledges the need for shareholders to be informed of all material business matters affecting the Group. In addition to the various announcements made during the fifteen-month financial period, the timely release of financial results on a quarterly basis provides shareholders and the investing public with an overview of the Group's performance and operations. In addition, the Board encourages full participation by shareholders at every Annual General Meeting and Extraordinary General Meeting of the Company, and opportunity is given to the shareholders to put questions and seek clarification on the Group's business activities, financial performance and position. The Board has appointed Encik Abd Aziz Bin Attan, a Senior Independent Non-Executive Director, to whom all concerns may be conveyed.

2001 Annual Report

15

(Incorporated in Malaysia)

(3465-H)

Statement on Corporate Governance (cont'd)

Accountability and Audit

Financial Reporting In presenting the annual financial statements and quarterly announcements of results to shareholders, the Directors take responsibility to present a balanced and understandable assessment of the Group's financial position and performance and prospects.The Audit Committee assists the Board by scrutinizing the information to be disclosed, to ensure accuracy and adequacy. A statement by Directors of their responsibilities in preparing the financial statements is set out on page 21 of this Annual Report. Internal Controls The Board acknowledges its responsibility for the Group's internal controls system covering not only financial controls but also controls relating to operational, compliance and risk management.The system of internal controls involves each business unit and its management, including the Board, and is designed to meet the business units' particular needs and to manage the risks to which they are exposed. The system, by its nature, can only provide reasonable and not absolute assurance against material misstatement or loss.The concept of reasonable assurance take cognizance the cost and benefit analysis whereby the cost of control procedures is not to exceed benefits. The Board recognizes that risks cannot be completely eliminated. As such, the systems, processes and procedures being put in place are aimed at minimizing and managing them. Ongoing reviews are continuously carried out to ensure the effectiveness, adequacy and integrity of the system of internal controls in safeguarding the Group's assets. Relationship with the Auditors The role of the Audit Committee in relation to the external auditors is stated on pages 17 to 20.

Other Information

Material Contracts There were no material contracts of the Company and its subsidiaries, involving Directors' and/or major shareholders' interests either still subsisting at the end of the fifteen-month financial period ended 31 December 2001 or entered into since the end of the said financial period. Share Buybacks During the fifteen-month financial period under review, there was no share buyback by the Company. Options, Warrants or Convertible Securities No options, warrants or convertible securities were issued by the Company during the fifteen-month financial period. Imposition of Sanctions/Penalties There were no public sanctions and/or penalties imposed on the Company and its subsidiary companies, Directors or management by the relevant regulatory bodies from 1 October 2000 to 26 April 2002. Profit Guarantees During the fifteen-month financial period, there were no profit guarantees given by the Company. American Depository Receipt ("ADR") or Global Depository Receipt ("GDR") Programme During the fifteen-month financial period, the Company did not sponsor any ADR or GDR programme.

2001 Annual Report

(Incorporated in Malaysia)

(3465-H)

16

Report of The Audit Committee

The Board of Directors of OCB Berhad ("OCB" or "the Company") is pleased to present the report of the Audit Committee of the Board for the fifteen-month financial period ended 31 December 2001. The Audit Committee was established in 1994.

MEMBERS AND MEETINGS The members of the Audit Committee comprised the Directors listed below. The Audit Committee met six (6) times during the period ended 31 December 2001 :-

Composition Of The Audit Committee Abd Aziz Bin Attan (Chairman / Independent Non-Executive Director) Tan Sri Zulkifli Bin Mahmood * (Member / Independent Non-Executive Director) Tan Tien Kok ** (Member / Executive Director) Yusof Annuar Bin Yaacob *** (Member / Executive Director) Mohd Harris Bin Pardi **** (Member / Independent Non-Executive Director) * ** *** ****

Resigned as member on 6 February 2002 Resigned as member on 30 November 2001 Appointed as member on 30 November 2001 Appointed as member on 6 February 2002

Attendance At The Audit Committee Meetings All six (6) meetings

All six (6) meetings

All six (6) meetings

Nil

Nil

TERMS OF REFERENCE OF THE AUDIT COMMITTEE The Terms of Reference of the Audit Committee are as follows :1. 1.1 Membership The Audit Committee shall be appointed by the Board of Directors from amongst its members (excluding alternate directors) which shall fulfill the following requirements :(a) (b) (c) the Audit Committee must be composed of no fewer than three (3) members; a majority of the Audit Committee must be Independent Directors; and at least one member of the Audit Committee :(i) (ii) must be a member of the Malaysian Institute of Accountants ("MIA"); or if he is not a member of the MIA, he must have at least three (3) years' working experience and:(aa) (bb) 1.2 1.3 he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967.

(3465-H) (Incorporated in Malaysia)

In the event of any vacancy arising in the Audit Committee resulting in non-compliance in its composition, such vacancy must be filled within three (3) months. The term of office and performance of the Audit Committee and each of its members must be reviewed by the Board at least once every two (2) years.

2001 Annual Report

17

Report of The Audit Committee (cont'd)

2. 2.1 Chairman The members of the Audit Committee shall elect a Chairman from amongst their number who must be an Independent Director.

3. 3.1

Secretary The Company Secretary(s) of the Company shall be the Secretary(s) of the Audit Committee.

4. 4.1

Meetings Meetings shall be held not less than four (4) times a year, although additional meeting may be called at any time at the discretion of the Chairman of the Audit Committee. An agenda shall be sent to all members of the Audit Committee and any person who may be required/invited to attend. All meetings to review the quarterly results and annual financial statements, shall be held prior to such quarterly results and annual financial statements being presented to the Board for approval. A quorum in respect of a meeting of the Audit Committee shall not be less than two (2) members, the majority of whom must be Independent Directors. Notwithstanding paragraph 4.1 above, any member of the Audit Committee, the External Auditors or the Internal Auditors may request and the Chairman of the Audit Committee shall convene a meeting of the Committee to consider the matters brought to its attention. Other Directors and employees may attend any particular Audit Committee meeting only at the invitation of the Audit Committee, specific to the relevant meeting. The Audit Committee may establish any regulation from time to time to govern its administration.

4.2 4.3

4.4 4.5

5. 5.1

Authority All employees are directed to cooperate with any request by the Audit Committee and the Audit Committee shall:(a) (b) (c) (d) have authority to investigate any matter within its Terms of Reference; have the resources which are required to perform its duties; have full and unrestricted access to any information pertaining to the Company and Group; have direct communication channels with the External Auditors and person(s) carrying out the internal audit function or activity (if any); be able to obtain independent professional or other advice; and be able to convene meetings with the External Auditors, excluding the attendance of the executive members of the Company, whenever deemed necessary.

(e) (f)

6. 6.1

Duties and Responsibilities The Audit Committee is responsible to the Board of Directors for the following in its role to ensure proper management of assets, liabilities, revenue and expenses of the Company and Group and compliance with statutory obligations:(a) (b) to discuss and review with the External Auditors the audit plan before the audit commences; to review with the External Auditors their evaluation of the system of internal controls; to review with the External Auditors the audit report and to discuss problems and reservations arising from the interim and final audits, management letter and management's response and any matters the External Auditors may wish to discuss; to review the assistance given by the Company's employees to the External Auditors;

(Incorporated in Malaysia)

(3465-H)

(c)

(d)

2001 Annual Report

18

Report of The Audit Committee (cont'd)

(e) to review the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work; to review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; to review the quarterly results and year end financial statements prior to the approval of the Board, focusing particularly on:(i) changes in or implementation of major accounting policy changes; (ii) significant and unusual events; and (iii) compliance with accounting standards and other legal requirements. to review any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; to review any letter of resignation from the External Auditors of the Company or Group; to review whether there is any reason (supported by grounds) to believe that the Company's External Auditors are not suitable for re-appointment; to recommend to the Board of Directors the nomination of a person or persons as External Auditors; to make recommendations to the Board of Directors on any appropriate issues and findings in the course of performing its duties;

(f)

(g)

(h)

(i) (j)

(k) (l)

(m) to promptly report to the Kuala Lumpur Stock Exchange ("KLSE") on any matter reported by it to the Board of Directors which has not been satisfactorily resolved resulting in a breach of the KLSE Listing Requirements; and (n) to carry out any other function that may be mutually agreed upon by the Audit Committee and the Board which would be beneficial to the Company and ensure the effective discharge of the Audit Committee's duties and responsibilities.

7. 7.1

Minutes The Audit Committee shall cause minutes to be duly entered in the books provided for the purpose of all resolutions and proceedings of all meetings of the Committee. Such minutes shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting and if so signed, shall be conclusive evidence without any further proof of the facts thereon stated. Minutes of each meeting shall be distributed to all attendees at the meetings and members of the Audit Committee. The Secretary(s) shall circulate the minutes of the Audit Committee meetings to all members of the Board. A summary of significant matters and resolutions will be reported to the Board by the Audit Committee. The books containing the minutes of proceedings of any meeting of the Audit Committee shall be kept by the Company at the registered office of the Company, and shall be open to the inspection of any member of the Audit Committee and the Board.

7.2 7.3 7.4

ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL PERIOD UNDER REVIEW In line with the Terms of Reference of the Audit Committee, the following activities were carried out by the Audit Committee during the fifteen-month period ended 31 December 2001 in the discharge of its functions and duties :(3465-H) (Incorporated in Malaysia)

(a)

review of the audit plans for the financial period for the Company and the Group, prepared by both the internal and external auditors; review of the audit reports for the Company and Group prepared by the internal and external auditors and consideration of the major findings by the auditors and management's responses thereto;

(b)

2001 Annual Report

19

Report of The Audit Committee (cont'd)

(c) review of the quarterly and annual financial statements of the Group and of the Company prior to submission to the Board for consideration and approval; review of related party transactions entered into by the Company and the Group to ensure that all such transactions are reported in the annual financial statements of the Group and of the Company; consideration and recommendation to the Board for approval of the audit fees payable to the external auditors ; and recommendation to management on improvement in internal control procedures and risk management.

(d)

(e) (f)

INTERNAL AUDIT FUNCTIONS The Company has an Internal Audit Department whose principal responsibility is to undertake regular and systematic reviews of the systems of financial and management controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Company and the Group. The attainment of such objectives involves the following activities being carried out by the Department :(a) reviewing and appraising the soundness, adequacy and application of accounting, financial and other controls and promoting effective control in the Company and the Group at reasonable costs; ascertaining the extent of compliance with established policies, procedures and statutory requirements; ascertaining the extent to which the Company's and the Group's assets are accounted for and safeguarded from losses of all kinds; appraising the reliability and usefulness of information developed within the Company and the Group for management; recommending improvements to the existing systems of controls; carrying out audit work in liaison with the external auditors to maximize the use of resources and for effective coverage of audit risks; and carrying out investigations and special reviews requested by management and/or the Audit Committee of the Company.

(b) (c)

(d) (e) (f)

(g)

(Incorporated in Malaysia)

(3465-H)

2001 Annual Report

20

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