CONTENTS NOTICE OF ANNUAL GENERAL MEETING 2-3 NOTICE OF NOMINATION OF AUDITORS 4 CORPORATE DIRECTORY 5 PROFILE OF DIRECTORS 6-7 CORPORATE GOVERNANCE STATEMENT 8-11 STATEMENT ON INTERNAL CONTROL 12 STATEMENT OF DIRECTORS RESPONSIBILITIES 13 AUDIT COMMITTEE 14-16 CHAIAN S REVIEW 17 DIRECTOR S REPORT 18-20 STATEMENT BY DIRECTORS 21 STATUTORY DECLARATION 21 AUDITORS REPORT 22 FINANCIAL STATEMENTS 23-48 PROPERTIES HELD BY THE GROUP 49 STATEMENT OF SHAREHOLDINGS 50-52 FO OF PROXY 1
NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Forty-Fourth Annual General Meeting of CONSTRUCTION AND SUPPLIES HOUSE BERHAD will be held at Aseania Resort Langkawi, Simpang 3, Jalan Pantai Tengah, 07100 Langkawi, Kedah Darul Aman on Saturday, 28 June 2003 at 11.00 am for the following purposes:- A G E N D A 1. To receive the Directors Report and Audited Financial Statements for the financial year ended 31 December, 2002 together with the Auditors Report thereon. (Resolution 1) 2. To re-elect the following Director who is retiring in accordance with Article 107 of the Articles of Association of the Company:- (a) Mr. Darmendran Kunaretnam (Resolution 2) 3. To re-elect the following Directors who are retiring in accordance with Article 92 of the Articles of Association of the Company:- (a) (b) (c) Mr. Low Yuh Wen Encik Raja Shahrul Azman bin Raja Omar Encik Iskandar bin Sheikh Fadzir (Resolution 3) (Resolution 4) (Resolution 5) 4. To appoint Auditors and to authorise the Directors to fix their remuneration. Notice of Nomination pursuant to Section 172 (11) of the Companies Act, 1965, a copy of which is annexed on page 4 have been received by the Company for the nomination of Messrs. Ernst & Young who have given their consent to act, for appointment as Auditors and of the intention to propose the following ordinary resolution:- That Messrs. Ernst & Young be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Arthur Andersen & Co. who do not wish to seek for re-appointment as Auditors of the Company, to hold office until the conclusion of the next Annual General Meeting at a remuneration to be agreed between the Directors and the Auditors. (Resolution 6) 5. As Special Business To consider and, if thought fit, to pass the following resolution as ordinary resolution:- Ordinary Resolution - Authority to issue and allot shares That, subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant governmental/regulatory authorities, the directors be and are hereby authorised, pursuant to Section 132D of the Companies Act, 1965 to issue and allot shares in the Company at any time until the conclusion of the next Annual General Meeting 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 to be issued does not exceed 10 per centum of the issued share capital of the Company for the time being. (Resolution 7) 6. To transact any other ordinary business for which due notice has been given. By Order of the Board Chua Siew Chuan Secretary Date: 6 June, 2003 2
NOTICE OF ANNUAL GENERAL MEETING (cont d) Explanatory Note to Special Business: 1. The proposed adoption of the Ordinary Resolution is primarily to give flexibility to the Board of Directors to issue and allot shares at any time in their absolute discretion without convening a general meeting. Notes:- 1. A member entitled to attend and vote at the Meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. No person shall be appointed a proxy who is not a member of the Company and qualified to vote unless that person is an advocate, an approved company auditor or a person approved by the Registrar in a particular case. 2. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy. 3. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of some officer or attorney duly authorised. 4. The instrument appointing a proxy must be deposited at the Company s Registered Office at Aseania Resort Langkawi, Simpang 3, Jalan Pantai Tengah, 07100 Langkawi, Kedah Darul Aman not less than 48 hours before the time for holding the Meeting or any adjournment thereof. Statement accompanying the Notice of Annual General Meeting The Directors standing for re-election at the Forty-Fourth Annual General Meeting of the Company to be held at Aseania Resort Langkawi, Simpang 3, Jalan Pantai Tengah, 07100 Langkawi, Kedah Darul Aman on Saturday, 28 June 2003 at 11.00 am are as follows:- 1. Mr. Darmendran Kunaretnam (Article 107 of the Company s Articles of Association) 2. Mr. Low Yuh Wen (Article 92 of the Company s Articles of Association) 3. Encik Raja Shahrul Azman bin Raja Omar (Article 92 of the Company s Articles of Association) 4. Encik Iskandar bin Sheikh Fadzir (Article 92 of the Company s Articles of Association) Their particulars can be found on pages 6 and 7 of the Annual Report. Their shareholdings in the Company are stated on page 19 of the Annual Report. Information on Board Meetings The information on Board Meetings and attendance of the Directors is set out on page 8 of the Annual Report. 3
NOTICE OF NOMINATION OF AUDITORS DATO ABDUL AZIZ BIN HAJI SHEIKH FADZIR 7303, Jalan Nilam 3 Taman Setia Gombak, Batu 6 53100 Kuala Lumpur 6 June, 2003 The Board of Directors Construction and Supplies House Berhad Aseania Resort Langkawi Simpang 3, Jalan Pantai Tengah 07100 Langkawi Kedah Darul Aman Dear Sirs, I, the undersigned, being a registered holder of 1,000 ordinary shares of 0.50 each fully paid-up in the capital of the Company, hereby nominate Messrs. Ernst & Young for appointment as new Auditors of the Company in place of Messrs. Arthur Andersen & Co. at the forthcoming Forty-Fourth Annual General Meeting. Therefore, we propose that the following resolution be considered at the forthcoming Forty-Fourth Annual General Meeting:- That Messrs. Ernst & Young be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Arthur Andersen & Co. who do not wish to seek for re-appointment as Auditors of the Company, to hold office until the conclusion of the next Annual General Meeting at a remuneration to be agreed between the Directors and the Auditors. Yours faithfully, DATO ABDUL AZIZ BIN HAJI SHEIKH FADZIR 4
CORPORATE DIRECTORY DIRECTORS Dato Abdul Aziz bin Hj. Sheikh Fadzir ( Chairman ) ( Independent Non-Executive Director ) Juhari bin Janan ( Independent Non-Executive Director ) Darmendran Kunaretnam ( Non-Independent Non-Executive Director ) Low Yuh Wen ( Appointed on 10.8.2002 ) ( Independent Non-Executive Director ) Raja Shahrul Azman bin Raja Omar ( Appointed on 19.5.2003 ) ( Independent Non-Executive Director ) Iskandar bin Sheikh Fadzir ( Appointed on 19.5.2003 ) ( Independent Non-Executive Director ) Pius Lee Fu Min ( Resigned on 25.7.2002 ) Looi Tuck Meng ( Resigned on 19.5.2003 ) SECRETARY Ms. Chua Siew Chuan ( MAICSA 0777689 ) AUDIT COMMITTEE Dato Abdul Aziz bin Hj. Sheikh Fadzir ( Chairman ) ( Independent Non - Executive Director ) Low Yuh Wen ( Independent Non - Executive Director ) ( Appointed on 10.8.2002 ) Raja Shahrul Azman bin Raja Omar ( Independent Non - Executive Director ) ( Appointed on 19.5.2003 ) Pius Lee Fu Min ( Resigned on 25.7.2002 ) Looi Tuck Meng ( Resigned on 19.5.2003 ) REGISTERED OFFICE ASEANIA RESORT LANGKAWI Simpang 3, Jalan Pantai Tengah 07100 Langkawi Kedah Darul Aman Malaysia Telephone No : ( 04 ) 955 2020 Facsimile No : ( 04 ) 955 1550 SHARE REGISTRAR Labuan Corporate Services Sdn Bhd Level 9, Wisma Oceanic Jalan OKK Awang Besar 87007 Labuan F.T. Malaysia. Telephone No : ( 087 ) 410 748 Facsimile No : (087) 418 840 AUDITORS Arthur Andersen & Co Chartered Accountants Level 23A, Menara Milenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur BANKERS RHB Bank Berhad Hong Kong Bank Malaysia Berhad Sabah Development Bank Berhad Malayan Banking Berhad STOCK EXCHANGE Kuala Lumpur Stock Exchange Main Board 5
PROFILE OF DIRECTORS COMPOSITION OF THE BOARD OF DIRECTORS The Board presently has six (6) members and is headed by Chairman, Dato Abdul Aziz Bin Hj. Sheikh Fadzir. The profile of each Director is presented separately as shown below. PROFILE OF DIRECTORS Dato Abdul Aziz Bin Haji Sheikh Fadzir Chairman/Independent Non-Executive Malaysian Dato Abdul Aziz Bin Haji Sheikh Fadzir, aged 39, is the Independent Non-Executive Chairman of the Company and was appointed to the Board on 1 July 2000. He is also a member of the Audit Committee of the Company. He graduated from Purdue University, Indiana, United States of America in 1986 with a Bachelor of Science specialising in Accounting. He started his career in 1986 as a project co-ordinator for Pembangunan Kulim Sdn. Bhd. where he was actively involved in numerous projects which amongst others included the Taman Jati project in Kulim, Kedah. He subsequently worked in several construction and property development companies before he joined Gold Bridge Engineering & Construction Berhad in October 1989. Through his leadership and wealth of working experience amassed over the 11 years, he has been responsible for transforming Gold Bridge Engineering & Construction Berhad into one of the leading Bumiputera construction and property development company in the northern region. He is also a Director of Gold Bridge Engineering & Construction Berhad, Safeguards Corporation Berhad and Kretam Holdings Berhad. He is the brother of Iskandar bin Sheikh Fadzir. He has not been convicted for any offences within the past 10 years. Juhari Bin Janan Independent Non-Executive Malaysian Juhari Bin Janan, aged 41, is the Independent Non-Executive Director of the Company and was appointed to be the Board on 5 October 1999. He started his career in 1988 as an officer in Jabatan Penerangan Sabah and since then has worked in various department of Sabah State Government. He is currently holding key post in Majlis Belia Sabah and Sabah National Youth Association. He has no family relationship with any other director/ major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past 10 years. Darmendran Kunaretnam Non-Independent Non-Executive Malaysian Darmendran Kunaretnam, aged 41, is the Non-Independent Non-Executive Director of the Company and was appointed to the Board in on 5 October 1999. He graduated from University Kebangsaan Malaysia with a Business Degree majoring in Accounting. He is a member of the Malaysian Institute of Accountants and also the Malaysian Association of Certified Public Accountants. He started his career as a Group Manager in the Real Estate Audit Division of Arthur Andersen & Co. from 1985 to 1995. He joined Gold Bridge Engineering & Construction Berhad as the General Manager of Finance and Corporate Planning Division in 1996. He is currently an executive director of Safeguards Corporation Berhad. He has no family relationship with any other director/ major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past 10 years. Low Yuh Wen Independent Non-Executive Malaysian Low Yuh Wen, aged 38, is the Independent Non-Executive Director of the Company and was appointed on 10 August 2002. He is also a member of the Audit Committee of the Company. He has more than 10 years experience in tourism industry. He has no family relationship with any other director/ major shareholder of the Company and has no conflict of interest with the Company. 6
PROFILE OF DIRECTORS (cont d) Raja Shahrul Azman bin Raja Omar Independent Non-Executive Malaysian Raja Shahrul Azman bin Raja Omar, aged 43, is the Independent Non-Executive Director of the Company and was appointed to the Board on 19 May 2003. He is also a member of the Audit Committee of the Company. He graduated with a Bachelor s Degree majoring in Business Administration. Prior to his current appointment, he has several years of working experience in several public listed companies. He has no family relationship with any other director/ major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past 10 years. Iskandar bin Sheikh Fadzir Independent Non-Executive Malaysian Iskandar bin Sheikh Fadzir, aged 35, is the Independent Non-Executive Director of the Company and was appointed to the Board on 19 May 2003. He started his career several years ago in time-sharing business and subsequently ventured into the hospitality industry in Aseania Resorts Berhad and its Group of Companies. He is the brother of Dato Abdul Aziz bin Haji Sheikh Fadzir (Chairman). He has not been convicted for any offences within the past 10 years. 7
CORPORATE GOVERNANCE STATEMENT The Board of Directors of Construction and Supplies House Berhad is committed to the maintenance of high standards of corporate governance by supporting and applying the Principles and Best Practices of the Malaysian Code on Corporate Governance (the Code) pursuant to Paragraph 15.26 of the Listing Requirement of the Kuala Lumpur Stock Exchange (the Listing Requirements). Any area where the Group had not complied with is explained in this statement. 1. The Board of Directors The Board is responsible for the overall corporate governance of the Group, including its strategic direction, formulation of policies and stewardship of the Group resources. This includes key areas such as: Group s strategic action plans Financial and operating performance Acquisition and divestment Material agreements and major capital expenditure Risk management and internal control Succession planning Meetings The Board has a schedule of four regular meetings a year, and meets additionally when neccessary. In 2002, the Board held six (6) meetings; where it discussed or deliberated upon and considered a variety of matters including the Group s financial and operating results, and corporate restructuring exercise. The Board receives documents on matters requiring its consideration prior to and in advance of each meeting. This is issued in sufficient time to enable the directors to obtain further information or clarification, where necessary before the meeting. All proceedings from the Board Meetings are minuted and signed by the Chairman of the meeting. The details of each director s attendance are as follows: Name Designation Attendance of Meetings Dato Abdul Aziz Bin Haji Sheikh Fadzir (Chairman) Juhari Bin Janan Darmendran Kunaretnam Independent Non-Executive Director 6/6 Independent Non-Executive Director 3/6 Non-Independent Non-Executive Director 6/6 Low Yuh Wen Independent Non-Executive Director 3/3 Looi Tuck Meng ( Resigned on 19.5.2003 ) Executive Director 6/6 Board Committee The Board of Directors delegates certain responsibilities to the Board Committee, namely an Audit Committee. The Audit Comittee is currently carries out the functions of the Nomination and Remuneration Committee. 8
CORPORATE GOVERNANCE STATEMENT (cont d) Composition of the Board The present Board has six (6) members, all members are non-executive directors, five (5) of whom are independent. A brief profile of the Board of Directors is presented on pages 6 and 7 of this Annual Report. The Board is led by Dato Abdul Aziz bin Haji Sheikh Fadzir as Independent Non-Executive Chairman. The clear division of responsibility within the Board is to ensure a balance of power and authority and to safeguard the interests of the Group, shareholders, employees, customers, suppliers and other business associates. No individual or small group of individuals can dominate the Board s decision making. The presence of the five (5) independent directors, with their different backgrounds and expertise, complements the Board with a mix of industry-specific knowledge and broad business and commercial experience. They provide independent views, advice and judgement to take account of the interests not only of the Group, but also the public shareholders. All non-executive directors are independent of management and free from any relationship, which could interfere with their independent judgement. The Board complies with paragraph 15.02 of the Listing Requirements, which requires that at least two directors or one-third of the Board of the Company, whichever is higher, are independent directors. Supply of Information All Board members are supplied with information on a timely manner, Board papers are circulated in sufficient time to enable the directors to obtain further information or clarification, where neccessary, in order to be properly briefed before the meeting. The Board papers provide, among others, periodical financial and corporate information, significant operational, financial and corporate issues, performance of the business units and management proposals that requires Board s approval. All Directors have access to the advice and services of the Company Secretary. A procedure exists for the Board of Directors, whether as a full board or in their individual capacity, to take independent professional advice, where neccessary and in appropriate circumstances, in furtherance of their duties, at the Company s expenses. 2. Directors Remuneration During the year, there was no salaries and other emoluments paid to the directors of the Company. 3. Shareholders The company recognises the importance of communicating with its shareholders and investors. Announcements and release of financial results on a quarterly basis provides the shareholders and the investing public with an overview of the Group s performance and operations. Other announcements in relation to corporate restructuring exercise are made on regular basis to keep the shareholders and the investing public inform of the status and development of the said exercise. The Annual General Meeting (AGM) is the principal forum for dialogue with shareholders. Notice of the AGM and the annual report are sent to shareholders at least 21 days before the date of the meeting. At the AGM, the shareholders are encouraged to ask questions both about the resolutions being proposed or about the Group s operations in general. Members of the Board as well as, the Auditors of the Company are present to answer questions on the Group s operations fielded by the reporters. 4. Accountability and Audit Financial Reporting In presenting the annual report, annual financial statements and quarterly announcements to shareholders, the directors aim to present a balanced and understandable assessment of the Group s position and prospects. The Board is assisted by the Audit Committee in scrutinising these reports. The Statement by Directors Pursuant to Section 169 of the Companies Act, 1965 is set out on page 21 of this annual report. 9
CORPORATE GOVERNANCE STATEMENT (cont d) Internal Control Internal control is an integral self-regulatory mechanism in enhancing corporate governance. The Board of Directors acknowledges their responsibilities for the Group s system of internal control to enhance shareholders value. They are also responsible for taking reasonable steps to safeguard the Company s assets, to prevent and detect fraud as well as other irregularities. Relationship with Auditors The role of the Audit Committee in relation to the external auditors is stated in the Audit Committee Reports set out on pages 14 to 16 of this Annual Report. Statement of Compliance with the Best Practices of the Code The Group which is currently an affected listed issuer will be setting up a Nomination and Remuneration Committee. Currently the function of such committees are being carried out by the Audit Committee. The Audit Committee currently relies on the external auditors for the assessment, evaluation and recommendation of the system of internal control as most business units are inactive. 5. Utilisation of Proceeds The Company did not raise funds through any corporate proposal during the financial year ended 31 December 2002. 6. Share Buy-back The Company did not carry out any share buyback during the financial year ended 31 December 2002. 7. Options, Warrants or Convertable Securities The Company did not issue any options, warrants or convertable securities during the financial year ended 31 December 2002. 8. American Depository Receipt (ADR) or Global Depository Receipt (GDR) Programme The Company did not sponsor any ADR or GDR Programme during the financial year ended 31 December 2002. 9. Sanctions / Penalties Imposed The Company did not receive any reprimands from the KLSE. 10. Non-audit Fees The amount of non-audit fee paid to the external auditors by the Group and the Company for the financial year ended 31 December 2002 amounted to 357,300 and 357,300 respectively. 11. Profit Estimate, Forecast or Projection There is no material variance between the result for the financial year and the unaudited result previously announced. The Company did not make or release any profit estimate, forecast or projection for the financial year ended 31 December 2002. 10
CORPORATE GOVERNANCE STATEMENT (cont d) 12. Profit Guarantees There were no profit guarantees given by the Company during the financial year ended 31 December 2002. 13. Material Contracts There are no material contracts entered into by the Company and its Subsidiaries which involve Directors and substantial shareholders during the financial year under review. 14. Contracts Relating to Loans There were no contracts relating to loan entered into by the Company and its Subsidiaries which involve Directors and substantial shareholders during the financial year ended 31 December 2002. 15. Revaluation of Landed Properties The Company did not adopt any revaluation policy on landed properties except as disclosed in Note 10 to the financial statement. 11
STATEMENT ON INTERNAL CONTROL Introduction Persuant to paragraph 15.27 (b) of the Kuala Lumpur Stock Exchange ( KLSE ) Listing Requirements, the Board of Directors of Construction And Supplies House Berhad ( the Group ) is pleased to provide the following statement on internal control of the Group, which has been prepared in accordance with the Statement on Internal Control Guidance for Directors of Public Listed Companies issued by the KLSE. Responsibilities for Internal Control The Board of Directors of the Group recognises that it is responsible for the Group s system of internal control and for reviewing its adequacy and integrity. The system of internal control can only provide reasonable but not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the risk of failure to achieve business objectives. Key Elements of Internal Control The following key elements of the system of internal control are present in the Group :- Strategic Business Direction and Risk Management The Group s business objectives are communicated throughout the organisation through its business and restructuring plans, budgets and regular interactions between the Directors with management and other employees. The Board believes that these communications are essential to ensure that key principal risks that impact on the Group s business objectives and future prospect are appropriately managed at all levels of the Group. Throughout the financial year under review, the Board has evaluated and managed the key principal risks faced by the Group through the monitoring of the Group s operations and corporate exercise at its Board meetings. Organisational Structure and Corporate Culture The current organisational structure enables a clear reporting line from employee level up to the Board. The Directors and management team are actively involved in managing the day-to-day affairs of the Group. They attend scheduled meetings, which are held at both management and operational levels to deliberate and resolve business and operational matters. Their active involvement ensure that the Board is well informed and updated on the significant matters of the Group. Formal Definition of Employees Roles and Responsibilities The roles, responsibilities and delegation authority are clearly defined. These ensure proper documentation and auditable trail of accountability. Audit Committee The Board has empowered the Audit Committee with the duty of reviewing and monitoring the effectiveness of the Group s system of internal control. As the group currently has only one operating unit, the Audit Committee is assisted by the external auditor in their review and monitoring of the Group s system of internal control. At this juncture, the Board is of the view that the internal control system that has been in place throughout the Group to the best of their knowledge is sufficient to safeguard shareholders investment and the Group s assets. The Board remains committed towards operating a sound system of internal control and therefore recognises that the system must continuously evolve to support the growth of the Group. As such the Board, in striving for continuous improvement, will put in place appropriate action plans, when necessary, to further enhance the Group s system of internal control in particular following the completion of the Corporate Restructuring Exercise currently undertaken by the Group. 12
STATEMENT OF DIRECTORS RESPONSIBILITIES STATEMENT OF DIRECTORS RESPONSIBILITIES IN RESPECT OF THE AUDITED FINANCIAL STATEMENT The Directors are required by the Companies Act, 1965 ( the Act ) to prepare financial statements for each financial year as to give a true and fair view of the financial position of the Group and of the Company and the results and cash flows of the Group and of the Company for the financial year then ended. During the preparation of the financial statements, the Directors have ensured that: the financial statements have been prepared in accordance with applicable approved accounting standards in Malaysia; the accounting and other records and the registers required by the Act are properly kept and disclosed with reasonable accuracy the financial position of the Group and of the Company which enable them to ensure the financial statements comply with the Act; appropriate accounting policies are adopted and applied consistently; and reasonable judgements and estimates that are prudent and reasonable have been made. The Directors have general responsibility for taking such steps as are reasonable open to them to safeguard the assets of the Group and of the Company and to prevent and detect fraud and other irregularities. STATEMENT OF REVALUATION POLICY The Company did not adopt any revaluation policy on landed properties except as disclosed in Note 10 to the financial statement. 13
AUDIT COMMITTEE TES OF REFERENCE 1. Membership The present members of the Audit Committee of the Company are:- Name Designation (a) Dato Abdul Aziz bin Haji Sheikh Fadzir (Chairman) Independent Non-Executive Director (b) Low Yuh Wen Independent Non-Executive Director (c) Raja Shahrul Azman bin Raja Omar Independent Non-Executive Director 2. Composition of members The Board shall elect the Audit Committee members from amongst themselves, comprising no fewer than three (3) directors, where the majority shall be independent directors. The term of office of the audit committee is three (3) years and may be re-nominated and appointed by the Board of Directors. In this respect, the Board adopts the definition of independent director as defined under the Kuala Lumpur Stock Exchange ( KLSE ) Listing Requirements. At least one member of the Audit Committee must be:- (a) (b) a member of the Malaysian Institute of Accountant ( MIA ); or if he is not a member of MIA, he must have at least 3 years of working experience and: i. he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or ii. he must be a member of one of the associations of the accountants specified in Part II of the First Schedule of the Accountants Act 1967; or (c) fulfils such other requirements as prescribed by the Exchange. No alternate director of the Board shall be appointed as a member of the Audit Committee. Retirement and resignation If a member of the Audit Committee resigns, dies, or for any reason ceases to be a member with the result that the number of members is reduced below three (3), the Board shall within three (3) months of the event appoint such number of the new members as may be required to fill the vacancy. 3. Chairman The Chairman of the Audit Committee, elected from amongst the Audit Committee members, shall be an independent director. The Chairman of the Committee shall be approved by the Board of Directors. 4. Secretary The Secretary of the Audit Committee shall be the Company Secretary. The Secretary shall be responsible for drawing up the agenda with concurrence of the Chairman and circulating it, supported by explanatory documentation to members of the Audit Committee prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Audit Committee, circulating them to members of the Audit Committee and to the other members of the Board of Directors and for following up outstanding matters. 5. Meetings The Audit Committee meetings shall be conducted at least twice (2) annually, or more frequently as circumstances dictate. In addition, the Chairman may call for additional meetings at any time at the Chairman s discretion. In the absence of the Chairman, the other independent director shall be the Chairman for that meeting. 14
AUDIT COMMITTEE (cont d) The members of the Audit Committee, Manager (Corporate Affairs) and Finance Manager will normally be in attendance at the meetings. Representatives of the external auditors are to be in attendance at meeting where matters relating to the audit of the statutory accounts and/or external auditors are to be discussed. Other directors, officers and employees of the Company and/or Group may be invited to attend, except for those portions of the meetings where their presence is considered inappropriate, as determined by the Audit Committee. However, at least once a year the Audit Committee shall meet with the external auditors without any executive board member present. Minutes of each meeting shall be kept and distributed to each member of the Audit Committee and also to the other members of the Board of Directors. The Audit Committee Chairman shall report on each meeting to the Board of Directors. There were six (6) meetings held for the year 2002 and the attendance of the audit committee members is as follow: Committee Members Attendance 6. Quorum Dato Abdul Aziz Bin Haji Sheikh Fadzir 6/6 Low Yuh Wen 3/3 Looi Tuck Meng ( Resigned on 19.5.2003 ) 6/6 The quorum for the Audit Committee meeting shall be the majority of members present whom must be independent directors. 7. Reporting The Audit Committee shall report to the Board of Directors, either formally in writing, or verbally, as it considers appropriate on the matters within its terms of reference at least once a year, but more frequently if it so wishes. The Audit Committee shall report to the Board of Directors on any specific matters referred to it by the Board for investigation and report. 8. Objectives The principal objectives of the Audit Committee is to assist the Board of Directors in discharging its statutory duties and responsibilities relating to accounting and reporting practices of the holding company and each of its subsidiaries. In addition, the Audit Committee shall: evaluate the quality of the audits performed by the internal and external auditors; provide assurance that the financial information presented by management is relevant, reliable and timely; oversee compliance with laws and regulations and observance of a proper code of conduct; and determine the quality, adequacy and effectiveness of the Group s control environment. 9. Authority The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the expense of the Company, (a) (b) authorise to investigate any activity within its terms of reference. All employees shall be directed to cooperate as requested by members of the Audit Committee. have full and unlimited/unrestricted access to all information and documents/resources which are required to perform its duties as well as to the internal and external auditors and senior management of the Company and Group. 15
AUDIT COMMITTEE (cont d) (c) (d) (e) obtain, at the expense of the Company, other independent professional advice or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary. be able to convene meetings with the external auditors, without the attendance of the executive members of the Audit Committee, whenever deemed necessary. be able to make relevant reports when necessary to the relevant authorities if a breach of the Listing Requirements occurred. 10. Duties and Responsibilities The duties and responsibilities of the Audit Committee are as follows:- (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) To review the maintenance and control of an effective accounting system; To review the Group s public accountability and compliance with the law; To ensure the adequacy of external audit procedures; To evaluate the quality of external auditors and make recommendations concerning their appointment and remuneration and to consider the nomination of a person or persons as external auditors; To provide liaison between the external auditors, the management and the Board of Directors and also to review the assistance given by the management to the external auditors; To review the findings of the external auditors; To review the quarterly results and financial statements and annual report prior to submission to the Board of Directors; To monitor any related party transactions that may arise within the Group and to report, if any, transactions between the Group and any related party outside the Group which are not based on armslength terms and on terms which are disadvantageous to the Group; To report its findings on the financial and management performance, and other material matters to the Board of Directors; To act in line with the directions of the Board of Directors; To consider and examine such other matters as the Audit Committee considers appropriate; To consider and propose new nominees to the Board and its committee; and To consider and recommend to the Board remuneration packages and benefit extended to the Directors. ACTIVITIES 1. Reviewing the External Auditor s scope of work and audit plan of the Group for the financial year ended 31 December, 2002. 2. Reviewing the audited accounts for the financial year ended 31 December, 2002 and the unaudited quarterly financial results announcements of the Group prior to the Board of Directors approval. 16
CHAIAN S REVIEW FINANCIAL OVERVIEW The Group recorded a loss before taxation of 9.1 million for the current financial year 2002, a reduction of approximately 9% as compared to the preceding year of 10 million. The reduction was mainly attributed to the higher provision for doubtful debts was made in the last financial year 2001. The loss before taxation recorded for the current financial year was mainly attributed to interest expense of 8.9 million. CORPORATE DEVELOPMENT The restructuring scheme which is set out in note 25 to the financial statements has been approved by Securities Commission ( SC ) on 30 December 2002 subject to conditions. Currently, Dato Musa bin Haji Sheikh Fadzir being the promoter of the Corporate Restructuring Excercise together with the Company are working towards meeting the conditions as set out by SC. Barring any unforeseen circumstances and subject to timingly resolution of the SC s conditions, your Board of Directors expect that the restructuring scheme will be completed by fourth quarter of 2003. ACKNOWLEDGEMENT On behalf of the Board of Directors, I wish to welcome Raja Shahrul Azman bin Raja Omar and Iskandar bin Sheikh Fadzir to our Board and I also wish to thank Pius Lee Fu Min and Looi Tuck Meng for their dedication towards the Company during their tenure as well as to our business associates and bankers for their continued assistance and support. I would like to take this opportunity to record my sincere appreciation to our shareholders for their continued support. DATO ABDUL AZIZ BIN HAJI SHEIKH FADZIR Chairman 17
DIRECTORS REPORT The directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December, 2002. PRINCIPAL ACTIVITIES The principal activities of the Company are those of investment holding and provision of management services. The principal activities of the subsidiaries are described in Note 12 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS Group Company Loss after taxation (9,336,917) (9,277,182) There were no material transfers to or from reserves or provisions during the financial year. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. DIVIDEND No dividend has been paid or declared by the Company since the end of the previous financial year. DIRECTORS The names of the directors of the Company in office since the date of the last report and at the date of this report are: Dato Abdul Aziz bin Hj. Sheik Fadzir Darmendran Kuneratnam Looi Tuck Meng Juhari bin Janan Loh Yuh Wen ( appointed on 10.8.2002 ) Pius Lee Fu Min ( resigned on 25.7.2002 ) DIRECTORS BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive any benefits (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 6 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member or with a company in which he has a substantial financial interest. 18
DIRECTORS REPORT(cont d) DIRECTORS INTERESTS According to the register of directors shareholdings, the interest of directors in office at the end of the financial year in shares of the Company during the financial year were as follows: The Company Number of Ordinary Shares of 0.50 each 1 January, 31 December, 2002 Bought Sold 2002 Direct interest Dato Abdul Aziz bin Hj. Sheik Fadzir 1,000 - - 1,000 Juhari bin Janan 1,000 - - 1,000 Looi Tuck Meng 1,000 - - 1,000 Darmendran Kuneratnam 1,000 - - 1,000 Loh Yuh Wen - 1,000-1,000 OTHER STATUTORY INFOATION (a) Before income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) (ii) the amounts written off as bad debts or provided for as doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and the values attributed to current assets in the financial statements of the Group and of the Company misleading. (c) (d) (e) At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. As at the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability in respect of the Group or of the Company which has arisen since the end of the financial year. 19
DIRECTORS REPORT(cont d) (f) In the opinion of the directors: (i) (ii) As at 31 December 2002, the current liabilities of the Group and of the Company exceeded their current assets by 119,194,921 and 124,595,242 respectively and reflect shareholders deficit of 121,650,994 and 126,534,282 respectively. In the opinion of the directors, the Group and the Company will not be able to meet their obligations when they fall due unless the completion and implementation of the Group's restructuring scheme in Note 25 to the financial statements is successful; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. RESTRUCTURING EXERCISE The restructuring exercise is as disclosed in Note 25 to the financial statements. AUDITORS Our auditors, Arthur Andersen & Co. retire and do not seek re-appointment. A resolution to appoint Ernst & Young will be proposed at the forthcoming Annual General Meeting. Signed on behalf of the Board in accordance with a resolution of the directors DATO ABDUL AZIZ BIN HJ. SHEIKH FADZIR LOOI TUCK MENG Kuala Lumpur, Malaysia Date: 28 April, 2003 20
STATEMENT BY DIRECTORS We, DATO' ABDUL AZIZ BIN HJ. SHEIKH FADZIR and LOOI TUCK MENG, being two of the directors of CONSTRUCTION AND SUPPLIES HOUSE BERHAD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 23 to 48 are drawn up in accordance with applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December, 2002 and of the results and the cash flows of the Group and of the Company for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors DATO ABDUL AZIZ BIN HJ. SHEIKH FADZIR LOOI TUCK MENG Kuala Lumpur Date: 28 April, 2003 STATUTORY DECLARATION I, LOOI TUCK MENG, being the Director primarily responsible for the financial management of CONSTRUCTION AND SUPPLIES HOUSE BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 23 to 48, are in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the ) abovenamed LOOI TUCK MENG ) at Kuala Lumpur in Federal Territory ) LOOI TUCK MENG on 28 April, 2003 ) Before me: Commissioner for Oaths 21
AUDITORS REPORT To the Shareholders of CONSTRUCTION AND SUPPLIES HOUSE BERHAD We have audited the financial statements set out on pages 23 to 48. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of: (i) (ii) the financial position of the Group and of the Company as at 31 December, 2002 and of the results and the cash flows of the Group and of the Company for the year then ended; and the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidatied financial stratements and did not include any comment made under Section 174 (3) of the Act. Without qualifying our opinion, we draw attention Note 24 to the financial statements. The financial statements of the Group and of the Company have been prepared on a going concern basis, which contemplates the realisation of assets and liquidation of liabilities in the normal course of business. As at 31 December, 2002, the Group's and the Company's shareholders' deficit was 121,650,994 and 126,534,282 respectively and the net current liabilities was 119,194,921 and 124,595,242 respectively. The ability of the Group and of the Company to continue as going concerns is dependent on the timely successful implementation of the restructuring scheme as elaborated in Note 25 to the financial statements, achieving future profitable operations and generating adequate cash flows from their operating activities. The financial statements of the Group and the Company do not include any adjustments relating to the amounts and classification of assets and liabilities that might be necessary should the Group and the Company be unable to continue as going concerns or any adjustments arising upon the implementation of the restructuring scheme. Arthur Andersen & Co. No. AF 0103 Chartered Accountants George Koshy No. 1846/07/03(J) Partner of the Firm Kuala Lumpur, Malaysia Date: 28 April, 2003 22
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER, 2002 Note 2002 2001 Revenue 3 3,416,390 4,319,349 Cost of sales 4 (2,548,389) (3,587,648) Gross profit 868,001 731,701 Other operating income 64,424 21,453 Administrative expenses (691,454) (1,022,249) Other operating expenses (421,163) (342,451) Loss from operations 5 (180,192) (611,546) Finance cost 7 (8,946,260) (9,388,505) Loss before taxation (9,126,452) (10,000,051) Taxation 8 (136,283) (78,831) Loss after taxation (9,262,735) (10,078,882) Minority interest 21 (74,182) 42,743 Net loss for the year (9,336,917) (10,036,139) Loss per share (sen) 9 6 7 The accompanying notes are an integral part of the financial statements. 23
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER, 2002 NON-CURRENT ASSETS Note 2002 2001 Property, plant and equipment 10 1,911,810 2,255,615 Goodwill on consolidation 11 332,821 366,103 CURRENT ASSETS 2,244,631 2,621,718 Inventories 13 6,026,934 6,110,778 Trade receivables 14 841,846 816,127 Other receivables 15 5,970,228 4,792,138 Marketable securities 16 5,930 9,123 Cash and bank balances 184,974 64,051 CURRENT LIABILITIES 13,029,912 11,792,217 Short term borrowings 17 102,669,067 95,221,622 Trade payables 18 96,324 67,027 Other payables 19 27,363,550 24,516,790 Taxation 2,095,892 2,223,442 132,224,833 122,028,881 NET CURRENT LIABILITIES (119,194,921) (110,236,664) (116,950,290) (107,614,946) REPRESENTED BY: Share capital 20 76,297,072 76,297,072 Reserves (197,948,066) (188,611,149) Shareholders deficit (121,650,994) (112,314,077) Minority interest 21 4,700,704 4,699,131 (116,950,290) (107,614,946) The accompanying notes are an integral part of the financial statements. 24
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER, 2002 Reserves Non-distributable Share Share Capital Accumulated capital premium reserve losses Total At 1 January, 2001 76,297,072 91,504,654 11,866,332 (281,945,996) (102,277,938) Net loss for the year - - - (10,036,139) (10,036,139) At 31 December, 2001 76,297,072 91,504,654 11,866,332 (291,982,135) (112,314,077) Net loss for the year - - - (9,336,917) (9,336,917) At 31 December, 2002 76,297,072 91,504,654 11,866,332 (301,319,052) (121,650,994) The accompanying notes are an integral part of the financial statements. 25
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER, 2002 CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001 Loss before taxation (9,126,452) (10,000,051) Adjustment for: Amortisation of goodwill 33,282 33,282 Depreciation 344,905 373,217 Gain on disposal of property, plant and equipment - (7,800) Impairment loss on marketable securities 3,193 - Interest expense 8,946,260 9,369,566 Provision for doubtful debts 4,574 155,176 Write back of inventories (120,844) (38,415) Operating profit / (loss) before working capital changes 84,918 (115,025) (Increase)/ decrease in receivables (1,144,001) 546,198 Decrease/ (increase) in inventories 204,688 (126,976) Increase in payables 1,453,948 553,143 Cash flow generated from operations 599,553 857,340 Interest paid (3,673) (108,155) Taxation paid (328,215) (67,451) Net cash flow generated from operating activities 267,665 681,734 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment - 46,800 Purchase of property, plant and equipment (1,100) - Net cash flow (used in)/ generated from investing activities (1,100) 46,800 NET INCREASE IN CASH AND CASH EQUIVALENTS 266,565 728,534 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR (81,591) (810,125) CASH AND CASH EQUIVALENTS AT THE END OF YEAR 184,974 (81,591) Cash and cash equivalents comprise: Cash and bank balances 184,974 64,051 Bank overdraft - (145,642) 184,974 (81,591) The accompanying notes are an integral part of the financial statements. 26