LAPORAN TAHUNAN ANNUAL REPORT

Transcription

1 LAPORAN TAHUNAN ANNUAL REPORT

2 Contents Notice of Annual General Meeting 2 Profile of Directors 4 Corporate Information 8 Executive Chairman s Statement 9 Statement of Corporate Governance 12 Other Compliance Information 17 Audit Committee Report 18 Statement on Internal Control 22 Statement of Directors Responsibility 24 Financial Statements 25 Group Properties 62 Analysis of Shareholdings 63 Proxy Form Enclosed

3 Notice of annual general meeting NOTICE IS HEREBY GIVEN THAT the Eleventh Annual General Meeting of the Company will be held at Kelab Golf Sultan Abdul Aziz Shah, No. 1, Rumah Kelab, Jalan Kelab Golf 13/6, Shah Alam, Selangor Darul Ehsan on 20th November, 2008, Thursday at a.m. AGENDA 1. To receive and consider the Audited Financial Statements for the year ended 31st May, 2008 together with the Directors' and Auditors' Reports thereon. 2. To approve the payment of Directors' Fees of RM75, in respect of the financial year ended 31st May, (Resolution 1) (Resolution 2) 3. To re-elect the following Directors:- 3.1 Datuk Simon Shim Kong Yip who retires pursuant to Article 103 of the Company's Articles of Association and being eligible, offers himself for re-election. 3.2 Mr. Wang Hak Wong Hak Tham who retires pursuant to Article 103 of the Company's Articles of Association and being eligible, offers himself for re-election. 3.3 Dr. Dominic Er Kong Kiong who retires pursuant to Article 109 of the Company's Articles of Association and being eligible, offers himself for re-election. 3.4 Mr. On Boon Kai who retires pursuant to Article 109 of the Company's Articles of Association and being eligible, offers himself for re-election. 4. To re-appoint Messrs KPMG as Auditors of the Company and authorise the Directors to fix their remuneration. (Resolution 3) (Resolution 4) (Resolution 5) (Resolution 6) (Resolution 7) 5. As Special Business, to consider and, if thought fit, pass the following Ordinary Resolution:- Ordinary Resolution - Authority To Directors To Issue Shares (Resolution 8) "THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue shares in the Company, at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution in any one financial year does not exceed 10% of the issued capital of the Company for the time being and that the Directors be and are also empowered to obtain approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company." 6. To transact any other business of which due notice shall have been given. BY ORDER OF THE BOARD HO MENG CHAN (MACS 00574) WU SIEW HONG (MAICSA ) Secretaries Petaling Jaya Selangor Darul Ehsan 29th October, PAOS Holdings Berhad annual report 2008

4 Notice of annual general meeting (Cont d) Notes :- 1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his/her stead. Where two of more proxies are appointed, the proportions of shareholdings to be represented by each proxy must be specified in order for the appointments to be valid. If there is no indication as to how you wish your vote(s) to be cast, the proxy may vote or abstain from voting at his/her discretion. 2. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 3. The instrument appointing a proxy, in the case of an individual, shall be signed by the appointer or by his attorney duly authorised in writing, and in the case of a corporation, shall either be given under its common seal or under the hand of an officer or attorney of the corporation duly authorised. 4. The instrument appointing a proxy must be duly executed and deposited at the Registered Office of the Company at No. 308, Block A (3rd Floor), Kelana Business Centre, 97, Jalan SS7/2, Kelana Jaya, Petaling Jaya not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. EXPLANATORY NOTE ON SPECIAL BUSINESS Ordinary Resolution - Resolution On Authority To Directors To Issue Shares The effect of the resolution 8 under item 5 of the agenda, if passed, will give authority to the Directors of the Company, from the date of the above Annual General Meeting, to issue and allot shares in the Company up to and not exceeding 10% of the issued share capital of the Company for the time being, for such purposes as they consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company. annual report 2008 PAOS Holdings Berhad 3

5 Profile of directors DATO' LIM TONG LIM TONG YAIM Executive Chairman/Non-Independent Director Dato' Lim Tong Lim Tong Yaim, aged 58, a Malaysian, is the Executive Chairman of Paos Holdings Berhad ("PHB") and was appointed to the Board of PHB on 2nd June, He obtained his Bachelor Degree in Malay Studies from Nanyang University, Singapore in Thereafter, he worked as a lecturer of Malay Studies in Taylor's College from 1972 to 1973, Nanyang University from 1973 to 1974 and Culin College, in Singapore from 1974 to Prior to setting up the Group's business, he served Maran Edible Oil Sdn. Bhd., a company involved in palm kernel crushing, as the Marketing Manager from 1979 to Using his knowledge and experience in the palm oil industry, he established Paos Industries Sdn. Bhd. in In its early days, the company was mainly involved in the trading of palm oil and palm oil-based products. However, instead of operating upstream, he steered the company towards the downstream of the industry, producing and being involved in the production of value-added products from oil palm, such as finished soap, animal feed, cocoa butter substitute and soap chips. Dato' Lim Tong Yong is a substantial shareholder, having a shareholding of 57,284,000 ordinary shares in PHB. He is a deemed substantial shareholder of the subsidiaries of PHB by virtue of his interest in the holding company. Dato' Lim Tong Yong is the parent of Ms. Lim Chang Ching, the Executive Director of PHB. Dato' Lim Tong Yong has no conflict of interest with PHB and has no conviction for offences within the past ten years other than traffic offences. DATUK SIMON SHIM KONG YIP Non-Independent Non-Executive Director Datuk Simon Shim, aged 51, a Malaysian, was appointed to the Board of PHB on 31st January, Datuk Simon Shim holds a Master Degree in law from University College London, London University and is a Barrister-at-law of the Lincoln's Inn, London, an Advocate and Solicitor of the High Court in Sabah and Sawarak, a Notary Public and a Justice of the Peace in Sabah. He is a Fellow of the Chartered Institute of Arbitrators and a Fellow of the Malaysian Institute of Arbitrators. He is also a member of the Malaysian Institute of Corporate Governance, a member of the Corporate Law Reform Committee and its Working Group on Corporate Governance and Shareholders' Rights. Datuk Simon Shim was appointed as Director of Hap Seng Consolidated Berhad on 16th February, 1996, the Malaysian Mosaics Berhad on 31st December, 2002, Nam Soon (Thailand) Ltd on 26th April, 2007 and Hap Seng Plantations Holdings Berhad on 9th August, 2007, all public listed companies. Datuk Simon Shim has no shareholding in PHB or its subsidiaries. Datuk Simon Shim has no family relationship with any other director or substantial shareholder of PHB, no conflict of interest with PHB and has no conviction for offences within the past ten years other than traffic offences. 4 PAOS Holdings Berhad annual report 2008

6 Profile of directors LIM CHANG CHING Non-Independent Executive Director Ms. Lim Chang Ching, aged 34, a Malaysian, was appointed to the Board of PHB on 31st January, She holds a Bachelor Degree in Business Studies (Honors) from University of Sheffield (United Kingdom) in Ms. Lim Chang Ching served as Commercial Manager of Asia Poly Industrial Sdn. Bhd. in May, 1998 to March, She then held position as a Business Development Manager in Paos Industries Sdn. Bhd. in April, 2000 to May, Subsequently, she was appointed as Business Development Director of Asia Poly Industrial Sdn. Bhd. in June, 2001 to August, She was the Chief Operating Officer of Hospital Pantai Indah Sdn. Bhd. from September, 2005 to August, Currently, she is holding directorship in various private limited companies and subsidiaries of PHB. She is also the Director of Esthetics International Group Berhad, a public listed company. Ms. Lim Chang Ching has a direct shareholding of 20,000 ordinary shares in PHB but has no interest in the shares of the subsidiaries of PHB. Ms. Lim Chang Ching is the daughter of Dato' Lim Tong Lim Tong Yaim, the Executive Chairman of PHB. Ms. Lim Chang Ching has no conflict of interest with PHB and has no conviction for offences within the past ten years other than traffic offences. WANG HAK WONG HAK THAM Independent Non-Executive Director Mr. Wang Hak Wong Hak Tham, aged 67, a Malaysian, was appointed to the Board of PHB on 2nd June, He is an Associate of Chartered Institute of Secretaries and Administrators, London and an Associate of Chartered Institute of Bankers, London. He started his career as an Officer in Malayan Banking Berhad in He served the bank until 1985 before joining Perwira Affin Bank Berhad ("PABB") as Assistant General Manager in He left PABB in 1992 to join Long Huat Berhad as Group General Manager. Later, in 1993 he rejoined PABB as the General Manager of Banking & Operations Division before he retired in Thereafter, in 1997, he was appointed to the board of Kaohsiung Timber Company Sdn. Bhd., a company involved in timber logging and resigned in early Presently, he is also the Director of Best Grade Printing Sdn. Bhd., a company involved in printing business and Woodlandor Holdings Berhad, a public listed company. Mr. Wang Hak Tham has a direct shareholding of 20,000 ordinary shares in PHB but has no interest in the shares of the subsidiaries of PHB. Mr. Wang Hak Tham has no family relationship with any other director or substantial shareholder of PHB, no conflict of interest with PHB and no conviction for offences within the past ten years other than traffic offences. annual report 2008 PAOS Holdings Berhad 5

7 Profile of directors (Cont d) ALICE BOO MIAU LI Non-Independent Executive Director Ms. Alice Boo, aged 39, a Malaysian, was appointed to the Board of PHB on 17th April, She is a Fellow of The Association of Chartered Certified Accountants (FCCA). She has over 10 years of experience in the fields of auditing, accounting and corporate finance. Her previous appointments include an auditor with a major public accounting firm in Kuala Lumpur, Finance Manager and Senior Corporate Finance Manager of several Malaysian public listed companies. Ms. Alice Boo has no shareholding in PHB or its subsidiaries. Ms. Alice Boo has no family relationship with any other director or substantial shareholder of PHB, no conflict of interest with PHB and has no conviction for offences within the past ten years other than traffic offences. DR. DOMINIC ER KONG KIONG Independent Non-Executive Director Dr. Dominic Er Kong Kiong, aged 65, an Australian, was appointed to the Board of PHB on 22nd May, He obtained his Bachelor of Medicine & Surgery (MBBS) from University of Queensland, Australia in He was a member of the Royal College, Physician (MRCP) (UK) from United Kingdom in He was admitted as a Fellow of the Royal College Physician (FRCP) (London) from London College in 1987 and also a Fellow of the Academy Medicine Singapore (FAMS) from Singapore in He was also a member of the Singapore Medicine Association and Singapore Medical Council Compliants Committee in 1990 and 2000 respectively. He is currently a Consultant Renal Physician in Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital since He was a Managing Director of Gleneagles Dialysis Centre Pte. Ltd., Gleneagles Dialysis International Pte. Ltd. and Gleneagles International GP Pte. Ltd. before being appointed as General Manager of Gleneagles Hospital and Group General Manager of Parkway Group Healthcare Ltd. in Subsequently, he was appointed as Chief Executive Officer ("CEO") and Director of Asia Medic Ltd. in 2000 until During 6 years tenure as CEO of Asia Medic Ltd., Asia Medic Ltd. under went a number of restructuring exercises which includes the acquisition of majority shareholdings in subsidiary companies and divestment of its Plastic Injection Mould Company to allow the Group to focus on its core Healthcare Business. Presently, he is also Chairman of Quantum Health, an investment and consulting company with its interests predominately in the healthcare industry. Dr. Dominic Er Kong Kiong has no shareholding in PHB or its subsidiaries. Dr. Dominic Er Kong Kiong has no family relationship with any other director or substantial shareholder of PHB, no conflict of interest with PHB and has no conviction for offences within the past ten years other than traffic offences. 6 PAOS Holdings Berhad annual report 2008

8 Profile of directors (Cont d) ON BOON KAI Independent Non-Executive Director Mr. On Boon Kai, aged 60, a Malaysian, was appointed to the Board of PHB on 22nd September, He holds a Bachelor of Commerce from the Nanyang University in Singapore. He is a member of the Institute of Chartered Accountants in Australia. He obtained his professional training in Accountancy in Holmes & Harrington Chartered Accounting firm in Sydney, Australia and he was admitted as a member of the Institute in year He is also a member of the Malaysian Institute of Accountants since Mr. On Boon Kai established his own audit firm B.K. On & Co. in year 1984, which provides audit, taxation and consultancy services to clients from various industries including manufacturing, plantation and the agricultural sector and is also involved in Income Tax investigation work for the past 24 years. He is also presently a Managing Partner of audit firms Messrs. K. H. Pun & Co. in Johor Bahru and Messrs Lim Tau Lih & Co. in Malacca. Mr. On Boon Kai has a direct shareholding of 1,000,000 ordinary shares in PHB but has no interest in the shares of the subsidiaries of PHB. Mr. On Boon Kai has no family relationship with any other director or substantial shareholder of PHB, no conflict of interest with PHB and has no conviction for offences within the past ten years other than traffic offences. LEE WEE YONG Alternate Director to Datuk Simon Shim Kong Yip Mr. Lee Wee Yong, aged 60, a Malaysian, was appointed to the Board of PHB on 13th January, 2006 as the Alternate Director to David Park who resigned as director of PHB on 31st January, Mr. Lee subsequently appointed as the Alternate Director to Datuk Simon Shim Kong Yip on 31st January, He holds a Bachelor of Commerce and Administration degree from Victoria University in New Zealand and is a member of the Malaysian Institute of Accountants and New Zealand Institute of Chartered Accountants. He had worked in Mobil Oil (N.Z.) Ltd, Zip Holdings (N.Z.) Ltd, Associated Tractors Sdn. Bhd. and Asia Commercial Finance (M) Berhad. He joined Malaysian Mosaics Berhad in 1992 and has held various senior positions in the Group, including the Group Chief Financial Officer, a position he held from 1st March, 2003 to 15th December, Mr. Lee is presently the Executive Director of Malaysian Mosaics Berhad and Deputy Managing Director of Hap Seng Consolidated Berhad. He is also a Company Secretary of Malaysian Mosaics Berhad and Hap Seng Consolidated Berhad. Mr. Lee has no shareholding in PHB or its subsidiaries. Mr. Lee has no family relationship with any other director or substantial shareholder of PHB, no conflict of interest with PHB and no conviction for offences within the past ten years other than traffic offences. annual report 2008 PAOS Holdings Berhad 7

9 Corporate information BOARD OF DIRECTORS Dato' Lim Tong Lim Tong Yaim Executive Chairman, Non-Independent Executive Director Lim Chang Ching Non-Independent Executive Director Alice Boo Miau Li Non-Independent Executive Director Datuk Simon Shim Kong Yip Non-Independent Non-Executive Director Lee Wee Yong (Alternate Director to Datuk Simon Shim Kong Yip) On Boon Kai Independent Non-Executive Director Wang Hak Wong Hak Tham Independent Non-Executive Director Dr. Dominic Er Kong Kiong Independent Non-Executive Director COMPANY SECRETARIES Ho Meng Chan (MACS 00574) Wu Siew Hong (MAICSA ) REGISTERED OFFICE No. 308, Block A (3rd Floor), Kelana Business Centre, 97, Jalan SS7/2, Kelana Jaya, Petaling Jaya, Selangor Darul Ehsan. Phone No.: Fax No.: HEAD OFFICE 65, Persiaran Selangor, Section 15, Shah Alam. Phone No.: Fax No.: info@paos.com.my Website: REGISTRARS Symphony Share Registrars Sdn. Bhd. Level 26, Menara Multi Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, Kuala Lumpur. Phone No.: Fax No.: AUDITORS KPMG (Firm No. AF 0758) Chartered Accountants Level 10, KPMG Tower, 8, First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan. PRINCIPAL BANKERS CIMB Bank Berhad HSBC Bank Malaysia Berhad Public Bank Berhad RHB Bank Berhad Standard Chartered Bank Malaysia Berhad United Overseas Bank (M) Berhad STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad 8 PAOS Holdings Berhad annual report 2008

10 Executive chairman s statement FINANCIAL HIGHLIGHTS Revenue of the Group increased by 12.8% during the year to RM million from RM million recorded in the last financial year. Due to the escalating increase in crude palm oil prices during the year, the Group recorded a loss before taxation of RM12.79 million against a profit before taxation of RM2.52 million in the preceding financial year. Consequently, the Group also registered a loss after taxation of RM10.90 million compared with a profit after taxation of RM1.69 million in the preceding year. OPERATIONAL REVIEW This had been a difficult and challenging year for the Group due to the escalating increase in petroleum prices and volatile crude palm oil prices. Paos Industries Sdn. Bhd. s revenue of RM million was 39.4% higher than the revenue of RM million for the preceding year mainly due to increase in the refined oil trading segment. However, the Company registered a loss before taxation of RM0.10 million as compared to a profit before taxation of RM0.80 million for the preceding year. Premier Oil Industries Sdn. Bhd. s revenue increased 5.7% to RM million from RM million in the preceding year. The Company recorded a loss before taxation of RM11.84 million from a profit before taxation of RM1.98 million in the preceding year. CORPORATE DEVELOPMENTS ACQUISITION On 12th October, 2007, Alpine Legacy (M) Sdn. Bhd. entered into a conditional Sale & Purchase Agreement with Prestige Realty Sdn. Bhd. to acquire 3 contiguous pieces of freehold land located in Jalan Sultan, Kuala Lumpur together with the following properties for a total cash consideration of RM48.0 million:- a) a 3-storey retail podium together with a 13-storey office block known as Kompleks Selangor; b) a 16-storey hotel block (previously operated and known as Hotel Furama); & On behalf of the Board of Directors of Paos Holdings Berhad, it is my pleasure to present to you the Eleventh Annual Report and Audited Financial Statements of the Group and the Company for the financial year ended 31st May, c) a single level basement car park comprising 48 bays and 10 external cark park bays. The above acquisition was completed in end February, The rental of the retail podium and office space is currently ongoing. We intend to recommence the hotel business. Currently, we are looking into refurbishment of the existing hotel and expect the commencement date of the hotel business to be before the end of the financial year Dato Lim Tong Lim Tong Yaim Executive Chairman annual report 2008 PAOS Holdings Berhad 9

11 Executive chairman s statement (Cont d) As the above properties are located in the prime area in Jalan Sultan, Kuala Lumpur, which is also known as Chinatown and is a tourist destination, we expect this property investment division of the Group to generate positive cash flow to the Group in the future. DISPOSALS During the year under review, Paos Industries Sdn. Bhd. ( PISB ) completed the disposal of a property known as Lots 9 & 11, Jalan Utas 15/7, Section 15, Shah Alam to Percetakan Mun Sun Sdn. Bhd. for a cash consideration of RM3.50 million. This disposal contributed to a gain of approximately RM1.67 million to the Group. On 25th March, 2008, PISB also entered into a Sale and Purchase Agreement with KYS Enterprise Sdn. Bhd. ( the Purchaser ) for the disposal of a piece of leasehold industrial land and buildings in Bukit Raja, Klang, Selangor ( Property ) for a cash consideration of RM20.50 million ( Disposal ). This Disposal is subject to and conditional upon the following:- a) sub-division of the land and issuance of the individual title for the Property in the name of PISB; b) the approval of the Foreign Investment Committee, which has already been obtained on 12th September, 2008; and c) the consent of the State Authority to transfer the Property from PISB to the Purchaser. This Disposal is expected to be completed by the end of financial year 2009 and is expected to contribute positively to the results and cash flow of the Group. DIVIDENDS The Board of Directors do not recommend any dividends during the financial year ended 31st May, A final dividend of 2.5% tax exempt was paid in respect of the financial year ended 31st May, However, the Board of Directors will take into consideration the Group s funding requirements and the objective of maximising stakeholders as well as shareholders returns in recommending future dividend payments in the coming year. PROSPECTS The Group anticipates the coming year to be challenging with the uncertainties of rising petroleum prices, volatile crude palm oil prices and interest rates. However, the Group will keep pursuing its initiatives to further optimise its operations and mitigate as much as possible the impact of higher input costs. We will also strive to continue to improve returns on existing assets and efforts will continuously be made in improving productivity and cost efficiencies. 10 PAOS Holdings Berhad annual report 2008

12 Executive chairman s statement (Cont d) We also expect the financial strength of the Group to improve in the forthcoming financial year 2009 mainly due to our current ongoing efforts to mitigate the impact of higher input costs and improvements in productivity and cost efficiencies. CORPORATE SOCIAL RESPONSIBILITY The Group has always been mindful of its Corporate Social Responsibility towards the community, environment, its employees, shareholders and other stakeholders. Being in the manufacturing industry, we are fully aware of the impact our activities have on the community and environment in which we operate. We constantly evaluate and develop work processes, quality management systems conforming to ISO 9001 standards and Good Manufacturing Practices. The Group also emphasises on quality occupational health and safety in our business activities. Audits are being conducted regularly to ensure high standards of quality, safety and health are maintained. We value our employees whom we believe is fundamental to the success and growth of the Group. Towards this end, the Group provides relevant training to our employees to upgrade their skills and develop their potentials. Senior management is also heavily involved in the day to day operations. BOARD CHANGES We wish to record our appreciation to Mr. Lim Poh Seong for his contribution to the Group during his tenure as Director. We would also like to welcome Dr. Dominic Er Kong Kiong and Mr. On Boon Kai to our Board. Dr. Dominic Er Kong Kiong was appointed to the Board as an Independent Non-Executive Director on 22nd May, Mr. On Boon Kai was also appointed as an Independent Non-Executive Director on 22nd September, APPRECIATION On behalf of the Board of Directors, I would like to express my appreciation to the management and employees of the Group for their dedication and commitment. My sincere gratitude also goes to my fellow Board Members for their support during the year. We would also like to extend our heartfelt thanks to our shareholders, valued customers, suppliers, bankers and government agencies for their continued support and assistance to the Group. Dato Lim Tong Lim Tong Yaim Executive Chairman annual report 2008 PAOS Holdings Berhad 11

13 Statement of corporate governance The Board of Directors of Paos Holdings Berhad is committed to ensuring that the highest standards of corporate governance are practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders' value and the financial performance of Paos Holdings Berhad. The Board is pleased to disclose to shareholders the manner in which it has applied the principles of good corporate governance and the extent to which it has complied with the best practices set out in the Malaysian Code. These principles and best practices have been applied throughout the financial year ended 31st May, 2008 and are regularly audited and reviewed to ensure transparency and accountability. (A) BOARD OF DIRECTORS (a) The Board Composition The Board comprises the Chairman, who is an Executive Director and founder of the Group, two (2) Executive Directors and four (4) Non-Executive Directors, three (3) of whom are independent. The composition of the Board reflects that one-third (1/3) of its members are independent and this is to ensure that minority shareholders interests are represented. There is a clear division of responsibilities between the executive and non-executive functions to ensure effectiveness of the decision making process of the Board. The Independent Non-Executive Directors are committed to enhancing business integrity and independent judgement in the Board s activities. The Board members collectively have a wide range of working experiences drawn from accounting, financial, business, corporate, legal and academic backgrounds. The profiles of the Directors are provided in the Annual Report. (b) Board Meetings During the financial year ended 31st May, 2008, the Board held four (4) meetings and the details of their attendance are as follows: Name of Directors Total Meetings Attended Dato Lim Tong Lim Tong Yaim 4 out of 4 Wang Hak Wong Hak Tham 4 out of 4 Lim Chang Ching 4 out of 4 Datuk Simon Shim Kong Yip 2 out of 4 Alice Boo Miau Li 4 out of 4 Lee Wee Yong 3 out of 4 (Alternate Director to Datuk Simon Shim Kong Yip) Dr. Dominic Er Kong Kiong* On Boon Kai # Lim Poh 3 out of 3 * appointed as Director on 22nd May, 2008 # appointed as Director on 22nd September, resigned as Director on 28th April, 2008 (c) Supply of information The agenda and a full set of reports for consideration are distributed well before each meeting of the Board to provide Directors with sufficient time to study and review them. The Company Secretary is in attendance at Board meetings to ensure that Board meeting procedures are followed and applicable statutory and other regulations are complied with. Senior management staff may be invited to attend Board meetings to provide the Board with detailed explanations and clarifications on issues that are being deliberated. All Directors have also access to the advice of independent professionals, including the internal auditors. 12 PAOS Holdings Berhad annual report 2008

14 Statement of corporate governance (Cont d) (A) BOARD OF DIRECTORS (Cont d) (d) Re-Election of Directors Each Director shall retire from office at least once in every three (3) years and can offer himself for re-election. Directors who are appointed by the Board are subject to re-election at the next Annual General Meeting. (e) Directors Training All the Directors with the exception of Mr. On Boon Kai have attended and completed the Mandatory Accreditation Training Programme (MAP) prescribed by Bursa Malaysia Securities Berhad. Mr. On Boon Kai has not attended MAP as he was newly appointed to the Board. The Board encourages its Directors to attend talks, seminars, workshops and conferences to update and enhance their skills and knowledge to enable them to carry out their roles effectively as Directors in discharging their responsibilities towards corporate governance, operational and regulatory issues. During financial year ended 31st May, 2008, the courses attended by the Directors were in relation to business, accounting, tax, finance and legal. In addition, Directors education also includes briefings by the External Auditors, Internal Auditors and the Company Secretaries on the relevant updates on statutory and regulatory requirements from time to time during the Audit Committee meetings and Board meetings. (f) Board Committees The Board had established the following committees and delegated specific tasks and responsibilities to them. These committees are to report back to the Board the outcome and recommendations thereon for the Board to make final decision. The main committees that were set up are:- (i) Nomination Committee The Nomination Committee was established on 26th July, Composition Wang Hak Wong Hak Tham Dr. Dominic Er Kong Kiong* (Chairman of the Committee, Independent Non-Executive Director) (Independent Non-Executive Director) * appointed as the committee member on 29th July, 2008 Responsibilities (a) (b) (c) (d) to consider candidates for all directorships to be filled by the shareholders or the Board including considering candidates for directorships proposed by the Chief Executive, and within the bounds of practicality, by any other senior executive or any Director or shareholder. to appoint Directors to fill the seats on Board committees. to annually review the Board s required mix of skills and experience and other qualities including core competencies which Non-Executive Directors should bring to the Board. to annually assess the effectiveness of the Board as a whole and the committees of the Board and to assess the contribution of each Director. During the financial year ended 31st May, 2008, the Committee met twice on 24th July, 2007 and 12th May, 2008 for the following purposes:- (a) (b) (c) (d) to review the Board's required mix of skills, experience and other qualities; to assess the effectiveness of the Board as a whole and the committees of the Board and to assess the contribution of each Director; to consider and recommend the appointment of Dr. Dominic Er Kong Kiong as Director; and to nominate Dr. Dominic Er Kong Kiong to fill the vacancy/seat on Audit Committee. annual report 2008 PAOS Holdings Berhad 13

15 Statement of corporate governance (Cont d) (A) BOARD OF DIRECTORS (Cont d) (f) Board Committees (Cont d) (ii) Remuneration Committee The Remuneration Committee was established on 26th July, Composition Dr. Dominic Er Kong Kiong* Dato Lim Tong Lim Tong Yaim Datuk Simon Shim Kong Yip Wang Hak Wong Hak Tham (Chairman of the Committee, Independent Non-Executive Director) (Executive Chairman) (Non-Independent Non-Executive Director) (Independent Non-Executive Director) * appointed as the committee member on 29th July, 2008 Responsibilities (a) to review the annual remuneration packages of each individual Director (both Executive and Non-Executive) such that the levels of remuneration are sufficient to attract and retain the Directors needed to run the Company successfully. (b) to recommend to the Board the remuneration packages of the Directors (both Executive and Non-Executive) of the Company. (c) to review the remuneration packages of senior management and employees of the Company. During the financial year ended 31st May, 2008, the Committee met once on 24th July, 2007 to consider and recommend the payment of Directors Fees for the year ended 31st May, (iii) Audit Committee The composition, term of reference and other related report on Audit Committee are presented on pages 18 to 21 of the Annual Report. (iv) Employees' Share Option Scheme ( ESOS ) Committee The committee was established on 8th January, Composition Alice Boo Miau Li Wang Hak Wong Hak Tham (Executive Director) (Independent Non-Executive Director) The Committee s responsibility is to implement and administer the Company s ESOS (the Scheme) introduced during the year. The Committee administers the Scheme in such manner as it shall in its discretion deem fit, including such powers and duties conferred upon it under the Bye-Laws of the Scheme. The Committee ensures that the Scheme is administered in accordance with the Bye-Laws. The Committee meets as and when is required. (v) Investment Committee The Investment Committee was established on 29th October, Composition Dato Lim Tong Lim Tong Yaim Datuk Simon Shim Kong Yip Alice Boo Miau Li Wang Hak Wong Hak Tham (Executive Chairman) (Non-Independent Non-Executive Director) (Executive Director) (Independent Non-Executive Director) 14 PAOS Holdings Berhad annual report 2008

16 Statement of corporate governance (Cont d) (A) BOARD OF DIRECTORS (Cont d) (f) Board Committees (Cont d) (v) Investment Committee (Cont d) Responsibilities (a) (b) (c) (d) (e) (f) to report appropriately to the Board of Directors. to develop procedures and guidelines for the investment of available funds. to make recommendation with respect to asset allocations principles for investment portfolio and investment policy. to keep under review the investments and to recommend such sales and reinvestments. to act in an advisory capacity when the Board decides on amount to be invested. to generally meet when necessary. (B) DIRECTORS' REMUNERATION Details of the Directors remuneration for the financial year ended 31st May, 2008 are as follows:- (a) The aggregate remuneration (within the Group) of the Directors of the Company is as follows:- GROUP 2008 RM Executive Directors - Salaries and other emoluments 1,105,461 - Fees - Benefit-in-kind Non-Executive Directors - Salaries and other emoluments 23,500 - Fees 75,000 - Benefit-in-kind (b) The number of Directors of the Company whose total remuneration falls within the following bands are: Executive Directors RM450,000 - RM500,000 1 RM300,000 - RM350,000 1 RM200,000 - RM250,000 1 Non-Executive Directors Below RM50, (C) SHAREHOLDERS (a) Relationship with Individual Shareholders and Investors The Board acknowledges the importance of regular communication with shareholders and investors via the annual reports, circular to shareholders, quarterly financial reports and the various announcements made during the year, through which shareholders and investors can have an overview of the Group s performance and operation. The Company encourages direct dialogue with individual shareholders and investors especially during Annual General Meeting ( AGM ). annual report 2008 PAOS Holdings Berhad 15

17 Statement of corporate governance (Cont d) (C) SHAREHOLDERS (Cont d) (b) AGM The AGM provides an opportunity for the shareholders to seek and clarify any issues and to have a better understanding of the Group s performance. During the AGM, they have direct access to the Board of Directors and are given opportunity to ask questions during the question and answer session prior to adoption of the Company s audited financial statements. They are encouraged to ask questions about the resolutions being proposed and the Group s operation in general. (D) ACCOUNTABILITY AND AUDIT (a) Financial Reporting The financial statements are prepared in accordance with the requirements of the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, The Board is responsible to ensure that the financial statements of the Group and the Company give a true and fair view of the state of affairs of the Group and the Company. (b) Internal Controls The Statement on Internal Control furnished on pages 22 to 23 of the Annual Report provides an overview of the state of internal controls within the Group. (c) Relationship with the Auditors The Company maintains a close and transparent professional relationship with the external auditors, Messrs KPMG. The external auditors were present at meetings that deliberate on the Company s annual audited financial results, as well as during reviews of the Company s and Group s accounting policies. (E) STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE The Company is committed to achieving high standards of corporate governance throughout the Group and to the highest level of integrity and ethical standards in all its business dealings. The Board considers that it has complied throughout the financial year with the Best Practices as set out in the Code. This Statement is made in accordance with the resolution of the Board of Directors on 29th September, PAOS Holdings Berhad annual report 2008

18 Other compliance information 1) UTILISATION OF PROCEEDS During the financial year ended 31st May, 2008, the Company did not raise any proceed from any corporate proposal. 2) SHARE BUY-BACK During the financial year ended 31st May, 2008, the Company did not enter into any share-buy-back transaction. 3) OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES The Company has not issued any options, warrants or convertible securities during the financial year ended 31st May, ) AMERICAN DEPOSITORY RECEIPT / GLOBAL DEPOSITORY RECEIPT The Company does not sponsor any ADR or GDR programmes. 5) SANCTIONS AND/OR PENALTIES There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year ended 31st May, ) NON-AUDIT FEES During the financial year ended 31st May, 2008, non-audit fees paid to the external auditors by the Company amounted to RM7, for reviewing the Statement on Internal Control. 7) VARIATION IN RESULTS The Company did not release any profit estimate, forecast or projection for the financial year. There is no significant variance between results for the financial year and the unaudited results previously released by the Company. 8) PROFIT GUARANTEE There is no profit guarantee in respect of the Company during the financial year ended 31st May, ) REVALUATION POLICY ON LANDED PROPERTIES The Group does not adopt a policy of regular revaluation of its properties. 10) MATERIAL CONTRACTS The Company and its subsidiaries do not have any material contracts involving the interest of its Directors and/or major shareholders. 11) MATERIAL CONTRACTS RELATING TO LOANS The Company and its subsidiaries do not have any material contracts relating to loans involving the interest of its Directors and/or major shareholders. 12) RECURRENT RELATED PARTY TRANSACTION The Company did not enter into any recurrent related party transaction during the financial year ended 31st May, annual report 2008 PAOS Holdings Berhad 17

19 Audit committee report COMPOSITION OF MEMBERS The Audit Committee appointed by the Board of Directors comprises of:- On Boon Kai Wang Hak Wong Hak Tham Dr. Dominic Er Kong Kiong (Chairman of the Committee, Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) TERMS OF REFERENCE Objectives The objectives of the Audit Committee are to comply with the Bursa Securities Listing Requirements and the Malaysian Code on Corporate Governance and to relieve the full Board of Directors from detailed involvement in the review of the results of internal and external audit activities and ensure that audit findings are brought up to the highest level for consideration. Members a) The Audit Committee shall be appointed by the Board from amongst the Directors of the Company and shall consist of not less than three (3) members. All members of the Audit Committee must be Non-Executive Directors, with a majority of them being Independent Directors. At least one member of the Audit Committee:- i) must be a member of the Malaysian Institute of Accountants; or ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least three years' working experience and :- (aa) he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act, 1967; or (bb) 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; or iii) fulfils such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad. b) No alternate Director shall be appointed as a member of the Audit Committee. c) The members of the Audit Committee shall elect a Chairman from among their numbers who shall be an Independent Director. Functions The functions of the Audit Committee shall be a) to review the following and report the same to the Board of Directors:- i) with the external auditors, the audit plan; ii) iii) iv) with the external auditors, the evaluation of the system of internal controls; with the external auditors, the audit report; the assistance given by the employees of the Company to the external auditors; v) the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; 18 PAOS Holdings Berhad annual report 2008

20 Audit committee report (Cont d) TERMS OF REFERENCE (Cont d) Functions (Cont d) a) to review the following and report the same to the Board of Directors:- (Cont d) vi) vii) 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; the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:- (aa) changes in or implementation of major accounting policy changes; (bb) significant and unusual events; (cc) compliance with accounting standards and other legal requirements; and (dd) going concern assumption. viii) 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; ix) any letter of resignation from the external auditors of the Company; x) whether there is reason (supported by grounds) to believe that the Company's external auditors are not suitable for re-appointment; xi) xii) the external auditors' management letter and management's response; and the list of eligible employee and the allocation of Employees' Share Option Scheme (ESOS) to be offered to them. b) to do the following, in relation to the internal audit function:- i) review any appraisal or assessment of the performance of members of the internal audit function; ii) iii) approve any appointment or termination of senior staff members of the internal audit function; and take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. c) to consider:- i) the major findings of internal investigations and management's response; ii) iii) other topics as defined by the Board; and the nomination of a person or persons as external auditors together with such other functions as may be agreed by the Audit Committee and the Board of Directors. d) to discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss (in the absence of management where necessary). annual report 2008 PAOS Holdings Berhad 19

21 Audit committee report (Cont d) TERMS OF REFERENCE (Cont d) Authority The Audit Committee shall have the authority to : a) investigate any matter within its terms of reference; b) have the resources which are required to perform its duties; c) have full and unrestricted access to any information pertaining to the Company; d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; e) obtain independent professional or other advice; and f) convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company, whenever deemed necessary. However, the committee should meet with the external auditors without Executive Board members present at least twice a year. Meetings and Reporting Procedures a) The agenda for Audit Committee meetings shall be circulated at least five (5) days before each meeting. b) The Audit Committee shall meet as the Chairman deems necessary but not less than four (4) times a year. c) The Chairman shall be entitled, where deemed appropriate, to invite any person(s) to meetings of the Audit Committee. d) The Chairman should engage on a continuous basis with senior management, such as the chairman, the chief executive officer, the finance director, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Company. e) In order to form a quorum in respect of a meeting of the Audit Committee, the majority of members of the Audit Committee present at the meeting must be Independent Directors. f) The Secretary is responsible for sending out notices of meetings, preparing and keeping minutes of meetings and circulating the minutes of meetings to all members of the Board. During the financial year ended 31st May, 2008, the Committee met four (4) times. The number of meetings attended by each member is as follows:- Name Total Meetings Attended On Boon Kai* Wang Hak Wong Hak Tham 4 out of 4 Dr. Dominic Er Kong Lim Poh Seong # 3 out of 3 Alice Boo Miau Li < 4 out of 4 * appointed as audit committee member on 22nd September, appointed as audit committee member on 22nd May, 2008 # resigned as audit committee member on 28th April, 2008 < resigned as audit committee member on 10th July, PAOS Holdings Berhad annual report 2008

22 Audit committee report (Cont d) TERMS OF REFERENCE (Cont d) Activities Undertaken The Committee has during the financial year ended 31st May, 2008 carried out the following :- (a) reviewed the unaudited quarterly results and audited financial statements of the Company and the Group and recommended the same to the Board for approval prior to the announcement to Bursa Malaysia Securities Berhad; (b) reviewed with the external auditors the results of the audit, the audit report and the management letters, management's responses and the recommendations arising from their findings; (c) (d) reviewed the Internal Audit Reports presented by the internal auditors on findings and recommendation with regards to system and control weaknesses noted in the course of their audit and management's responses thereto and ensuring material findings are adequately addressed by management; and reviewed the Statement on Internal Control. Internal Audit Function During the financial year ended 31st May, 2008, the internal auditors, Messrs Audex Governance Sdn. Bhd. carried out its duties to assess the adequacy and effectiveness of the Company system of internal controls and presented the Internal Audit Reports on the findings and recommendations to the Audit Committee on a quarterly basis. Statement by the Audit Committee The Committee confirms that the allocation of options offered by the Company to eligible employees of the Group complies with the Bye-Law of the Company's Employees' Share Option Scheme. This report is made in accordance with the resolution of the Board of Directors on 29th September, annual report 2008 PAOS Holdings Berhad 21

23 Statement on internal control for the year ended 31 May 2008 INTRODUCTION Pursuant to paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad ("Bursa Securities"), the Board of Directors ("the Board") of Paos Holdings Berhad ("PHB" or "the Group") is pleased to provide the following Statement on Internal Control of the Group as guided by the Bursa Securities's Statement on Internal Control: Guidance for Directors of Public Listed Companies ("the Guidance") which outlines the nature and state of the internal controls of the Group during the financial year. BOARD RESPONSIBILITY The Board acknowledges that it is ultimately responsible to establish and maintain the Group's systems of internal control and to review the adequacy and integrity of the internal control systems to ensure that shareholders' interests and the Group's assets are safeguarded. Nonetheless, there are inherent limitations to any system of internal control. Management can only put into effect an internal control system to manage rather than eliminate all the risks that may impede the achievement of the Group's business objectives or goals. Therefore, the internal control systems can only provide reasonable and not absolute assurance against material misstatement or loss. In addition, in devising internal control procedures, due consideration is given to the cost of implementation as compared to the expected benefits to be derived from the implementation of the internal controls. RISK MANAGEMENT The Board acknowledges that the Group's business activities involve operational and business risks and key management staff and head of departments are delegated with the responsibility to manage identified risks. Managing the significant risks is an ongoing process undertaken at each subsidiaries. During the year under review, this process was exercised through periodic management meetings held to communicate and deliberate on key issues and risks amongst management team members and where appropriate, controls were devised and implemented. Significant risks identified were escalated to the Board for their attention at their scheduled meetings. In addition, the Risk Management Committee which comprises senior management and the Executive Directors will meet to review the risk profile of the Group on a yearly basis. INTERNAL CONTROL MECHANISM The Board is conscious of the fact that the systems of internal control and risk management practices must continuously evolve to support the Group's operations and changing business environment. As such, reviews of control procedures will be carried out continuously to ensure the ongoing adequacy and effectiveness of the systems of internal control. The Audit Committee's terms of reference are used as a guide for the Audit Committee to carry out their duties. In addition, an outsourced internal audit function was appointed to review the adequacy and effectiveness of the Group's internal control system. During the financial year ended 31st May, 2008, the outsourced internal audit function conducted independent reviews in accordance with the internal audit plan approved by the Audit Committee. The results of internal audit review together with recommendations for improvement are presented to the Audit Committee at their quarterly meetings. 22 PAOS Holdings Berhad annual report 2008