Corporate Information

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2 Contents Corporate Information 2 Board of Directors Profile 3-5 Chairman s Statement 6-7 Audit Committee 8-10 Corporate Governance Additional Compliance Information 16 Statement on Internal Control Directors Report Statement by Directors 23 Statutory Declaration 23 Report of the Auditors Balance Sheets 26 Income Statements 27 Statements of Changes in Equity Cash Flow Statements Notes to the Financial Statements Analysis of Shareholdings Group s Properties 65 Notice of Annual General Meeting Statement Accompanying 68 Notice of Annual General Meeting Proxy Form Enclosed 1

3 Corporate Information DIRECTORS Tan Sri Dato HJ. Husein Bin Ahmad Non-Executive Chairman Dato Lim Kang Poh Deputy Executive Chairman Tuan Haji Md Adanan Bin Abdul Manap Deputy Chief Executive Officer Y.H. Dato Md Adnan Bin Sulaiman Executive Director Y.H. Dato Amihamzah Bin Ahmad Independent Non-Executive Director Mr. Tan En Chong Independent Non-Executive Director REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS No. 67 & 69, Jalan SBC 1 Taman Sri Batu Caves Batu Caves Selangor Darul Ehsan. Tel No. : Fax No. : REGISTRAR Sectrars Services Sdn Bhd No. 28-1, Jalan Tun Sambanthan 3 Brickfields, Kuala Lumpur. Tel No. : Fax No. : AUDIT COMMITTEE Y.H. Dato Amihamzah Bin Ahmad Chairman/Independent Non-Executive Director Mr. Tan En Chong Independent Non-Executive Director Tan Sri Dato Husein Bin Ahmad Non-Independent Non-Executive Director COMPANY SECRETARY Hoon Hui Kit (MIA 6180) AUDITORS BANKERS Malayan Banking Berhad Public Bank Berhad RHB Bank Berhad SOLICITORS Sidek Teoh Wong & Dennis TG Lee & Associates Aris Rizal Christopher Fernando & Co. STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad Stock Code: 7054 SJ Grant Thornton (Member of Grant Thornton International) Chartered Accountants Level 11, Faber Imperial Court Jalan Sultan Ismail, Kuala Lumpur Tel No. : Fax No. :

4 Directors Profile Tan Sri Dato Hj Husein Bin Ahmad Non-Executive Chairman Aged 74, was appointed to the Board on 27 October He started his career as a teacher in He was appointed as Chairman of Syarikat Kenderaaan Melayu Kelantan in He served as Deputy Chief Minister of Kelantan for 5 years between He was appointed as a Senator in 1985 before being appointed as Deputy Minister of Housing and Local Government in Since 1982, he has been the Head of Information, UMNO. He had been the Chairman Lembaga Pertanian Kemubu Negeri Kelantan (KADA) since He is currently the Non-Executive Chairman of Tasja Sdn Bhd and Husa Networks Sdn Bhd (Radio Manis fm). Tan Sri Dato Hj Husein Bin Ahmad has been re-designated as Non-Executive Chairman on 1 December Tan Sri Dato Hj Husein Bin Ahmad is a director of Utusan Melayu (Malaysia) Berhad. Tan Sri Dato Hj Husein Bin Ahmad attended all the four Board meetings held in the financial year ended 31 December Dato Lim Kang Poh Deputy Executive Chairman Aged 52, was appointed as Managing Director of Astral Asia Berhad on 27 October 1997 and he has been re-designated as Deputy Executive Chairman effective 1 December He is one of the founder members of Tasja Sdn Bhd and was appointed to the Board on 8 December Dato Lim started his career in the construction industry in He is currently the Managing Director of several other private limited companies. His experience in the construction industry has strengthened the management of the Group. Dato Lim Kang Poh is a director of Pembinaan Limbongan Setia Berhad. Dato Lim Kang Poh attended all the four Board meetings held in the financial year ended 31 December

5 Directors Profile Tuan Haji Md Adanan Bin Abdul Manap Deputy Chief Executive Officer Tuan Haji Md Adanan Bin Abdul Manap, aged 66, was appointed to the Board of Astral Asia Berhad on 3 November 1997 and has been re-designated as Executive Director effective September He is currently the Deputy Chief Executive Officer of the Company. He started his career as an Officer in the Accountant General office in In 1974, he was transferred to the Ministry of International Trade and Industry and was subsequently promoted to Executive Officer in the Public Services Department in In 1984, he was transferred to the Ministry of Finance and served as Senior Executive officer. In 1993 he joined the Ministry of Public Enterprise and retired optionally from service in Tuan Haji Md Adanan Bin Abdul Manap attended all the four Board meetings in the financial year ended 31 December Y.H. Dato Md Adnan Bin Sulaiman Executive Director Y.H. Dato Md Adnan Bin Sulaiman, aged 60, is the Executive Director of the Company and was appointed to the Board on 3 November He graduated with a Bachelor of Science (Agriculture) from University Malaya in 1974 and obtained a Masters of Science from University of Wisconsin, USA in He started his career as an Agriculture Officer with the Jabatan Pertanian Negeri Perak in He worked in various agriculture departments between before joining Jabatan Pertanian Pahang as Assistant Director in In 1991, he joined Lembaga Kemajuan Perusahaan Pertanian Negeri Pahang Group ( LKPP ) and assumed the post of Deputy General Manager before becoming General Manager of LKPP in Y.H. Dato Md Adnan is the representative from LKPP, a substantial shareholder of the Company. Y.H. Dato Md Adnan Bin Sulaiman is also a director of Kurnia Setia Berhad. Y.H. Dato Md Adnan Bin Sulaiman attended two out of the four Board meetings in the financial year ended 31 December

6 Directors Profile Y.H. Dato Amihamzah Bin Ahmad Independent Non-Executive Director Aged 59, was appointed to the board of Astral Asia Berhad on 3 November He served as Chairman of Audit Committee and Nomination Committee and is a member of Remuneration Committee. He holds a Degree in Social Science from University of Malaya. He joined the Public Service from 1983 to 1995 and served various Ministries such as Ministry of Land and Mine, Ministry of Agriculture and Ministry of Public Entrepreneur. 1996, he was elected as Member of Parliament for the Lipis Parliament Constituency and served until March He has extensive knowledge and expertise in both the land & mines and agriculture sectors, obtained though years of hand on experience. Currently, he is also the Chairman of Board of Trustees of Amanah Ikhtiar Malaysia. Y.H. Dato Amihamzah Bin Ahmad attended three out of the four Board meetings held in the financial year ended 31 December Mr Tan En Chong Independent Non-Executive Director Aged 59, was appointed to the Board of Directors on 1 July He serves as the Chairman of Remuneration Committee and also a member of Audit Committee and Remuneration Committee. He graduated with a Bachelor of Science (Hons) from Royal Holloway College, University of London. He is a Fellow of the Association of Chartered Certified Accountants and a member of the Malaysian Institute of Accountants. Upon graduation, he joined CHUBB Fire Security (UK) as Financial Assistant in He had served in various positions in construction, manufacturing, trading and property development companies. Since 1992, he has been the Financial Director of Skim Daya Properties Sdn Bhd and TM Industrial Plastic Sdn Bhd. Mr. Tan En Chong is also an Independent Non-Executive Director of TSR Capital Berhad. Mr. Tan En Chong attended three out of the four Board meetings held in the financial year ended 31 December None of the Directors has - any family relationship with any Director and/or major shareholder of the Company - any conflict of interest with the Company - any conviction for offences within the past 10 years other than traffic offences. All of the Directors are Malaysian. 5

7 Chairman s Statement Dear shareholders, On behalf of the Board of Directors of Astral Asia Berhad, I am pleased to present the Annual Report and Audited Financial Statements of Astral Asia Berhad and its subsidiaries ( the Group ) for the financial year ended 31 December Operating Results For the financial year under review, the Group recorded a 69.2 % rise in the revenue from RM46.5 million in the previous financial year to RM78.7 million, an increase of RM32.2 million. The increase in the Group s total revenue was mainly due to higher contribution from both the Plantation and Construction divisions. At the operations level, the Group registered an after tax profit of RM9.9 million for the 2008 financial year compared with RM11.0 million in the previous financial year. Dividend I am pleased to note that the Board of Directors had recommended the payment of a first and final dividend of 3.5 sen per ordinary share less tax for the 2008 financial year. Subject to the approval of the shareholders at the forthcoming Annual General Meeting, the dividend will be paid on 8 July Plantation Division The Plantation Division s revenue increased to RM37.0 million in the 2008 financial year compared with RM22.4 million in the previous financial year. The Group had recorded a higher fresh fruits bunches ( FFB ) production of 59,263 m/t, representing an increase of 39.6 % compared with the total production of 42,437 m/t in 2007 due to more efficient plantation operations. The Plantation Division s pre-tax profit had increased 89.6 % to a record level of RM 20.1 million compared with the pre-tax profit of RM10.6 million in the 2007 financial year due to buoyant crude palm oil prices and higher FFB production during the year under review. The crude palm oil realised at an average price of RM2,805 per m/t compared to RM2,462 per m/t during the previous financial year. Construction Division For the year under review, the Construction Division s revenue had increased 73.3 % to RM 41.6 million compared to RM24.0 million recorded in However, the Construction Division still recorded a loss before tax of RM0.3 million for the financial year 2008 compared to a pre-tax profit of RM6.2 million in 2007 due mainly to the additional provision for cost overrun in respect of certain sub-contract works. 6

8 Chairman s Statement Corporate Developments As mentioned in my last report, Syarikat Ladang LKPP Sdn Bhd ( SLLKPP ) had proposed to develop its existing Bukit Kuin estate measuring 1,874 acres ( the Bukit Kuin Land ) into a mixed property development to be named as Kuantan Hi-Tech Park ( KuHTP ).This project, with an estimated gross development value of RM2.8 billion would be developed over a period of 10 to 15 years. I am pleased to inform that Lembaga Kemajuan Perusahaan Pertanian Negeri Pahang ( LKPP ) had in principle endorsed this project to be part of the proposed East Coast Economic Region master plan. The Bukit Kuin Land is currently on a 90-year lease from LKPP untill year In furtherance to the above, SLLKPP had in December 2008 entered into a conditional Sale and Purchase Agreement ( SPA ) with LKPP to acquire the Bukit Kuin Land for a cash consideration of RM5.375 million and the SPA is expected to be finalised by the end of this year. The successful implementation of the KuHTP would enhance the land value of the Bukit Kuin Land and consequently will yield better returns to the shareholders of the Group in the long run. Prospects The Board of Directors and I are of the view that with the current crude palm oil prices would remain volatile but are likely to stay at above RM2,000 per m/t in the near future. Premised on this prediction, the Group is expected to maintain satisfactory performance in the 2009 financial year. Acknowledgements On behalf of the Board of Directors, I would like to express my deep appreciation to my fellow Board members, the management and staff, business associates and the shareholders for their utmost commitment, contribution and support to the Group. Tan Sri Dato Hj Husein Bin Ahmad Chairman Batu Caves Selangor Darul Ehsan 7

9 Audit Committee PRESENT MEMBERS OF THE AUDIT COMMITTEE ARE AS FOLLOWS :- Y.H. Dato Amihamzah Bin Ahmad (Chairman) Independent Non-Executive Director Mr. Tan En Chong (Member) Independent Non-Executive Director Tan Sri Dato HJ. Husein Bin Ahmad (Member) Non-Independent Non-Executive Director) (Resigned on ) (Re-appointed on ) (Re-designated as Non-Executive Director on ) The Audit Committee was formed on 12 February TERMS OF REFERENCE 1. Objectives The principal objective of the Audit Committee ( Committee ) is to assist the Board of Directors in discharging its duties and responsibilities in the area of corporate disclosure and transparency, public accountability of the Company and its subsidiaries. The Committee also endeavours to adopt practices aimed at maintaining appropriate standards of corporate responsibility and integrity to the Company s shareholders. 2. Composition The Committee comprises of three (3) members, all of whom are Non-Executive Directors and the majority of whom are Independent Directors. One (1) member of the Committee is a member of the Malaysian Institute of Accountants. The Chairman of the Committee is an Independent Director appointed by the Board. 3. Duties and Responsibilities 3.1 The duties and responsibilities: a) review the quarterly and year-end financial statements of the Group before submission to the Board ; b) review with the external auditors, their evaluation of the system of internal controls, their management letter on internal control recommendations and the management s response ; c) review the adequacy, scope, functions competency and resources of the internal audit function and that it has necessary authority to carry out its work ; d) to discuss the nature, scope and timing of the external audit plan ; and e) to review related party transactions and conflict of interest situation that may arise. 3.2 To review any letter of resignation from the external auditors of the Company and recommend the nomination of a person or persons as the external auditors and their remuneration. 8

10 Audit Committee 4. Authority The Committee is authorised by the Board to: a) investigate any activity within the scope of the Committee s duties ; b) obtain any information it requires from any employee(s) ; c) obtain outside legal or independent professional advice ; and d) 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; and e) make recommendations for improvements of operating performance and management control. 5. Retirement and Resignation In the event of any vacancy in the Audit Committee resulting in non-compliance with the minimum requisite number of members, the said vacancy must be filled within 3 months. 6. Meetings a) The quorum for a meeting of the Audit Committee shall be two (2). b) The Secretary to the Audit Committee shall be the Company Secretary or any other person appointed by the Committee. c) During the financial year ended 31 December 2008, the Audit Committee held a total of five (5) meetings:- Name No. of Meetings Attended Y.H. Dato Amihamzah Bin Ahmad 4/5 Mr Tan En Chong 4/5 *Tan Sri Dato Husein Bin Ahmad 3/4 *Tan Sri Dato Husein Bin Ahmad resigned as an Audit Committee member on and was re-appointed on Summary of Activities of the Audit Committee During the period the Audit Committee carried out the following duties :- a) reviewed the quarterly unaudited consolidated result before recommending them to the Board for their approval and announcement ; b) reviewed the internal audit plan and internal audit reports and considered the major finding of internal auditors and management s response ; c) reviewed and discuss the internal audit function, its authorities and scope of works and the internal audit report; d) reviewed the results of the audit, the audit report and the management letter, including management s response ; e) evaluated the audit proposals for the Group; and f) evaluated the performance of the external auditors and recommended to the Board for re-appointment, if applicable. 9

11 Audit Committee 8. Internal Audit Function The internal audit function of the Group is presently outsourced to a firm of Chartered Accountants to provide the Board and the AC with assurance on the adequacy and effectiveness of the system of internal control of the Group. The internal auditors focus their review on significant and high risk areas of the Group s businesses. The internal audit function reports directly to the Audit Committee. During the financial year under review, the outsourced internal audit conducted the review on the following areas: a) Reviewed the reliability and integrity of the Group s financial statements; b) Reviewed the systems established to ensure compliance with adopted policies, procedures, laws and regulations; c) Reviewed the means of safeguarding the Group s assets and verified existence of such assets; d) Appraised the deployment of the Group s resources in an economy and efficiency manner; and e) Reviewed the Group s operations and programs to ascertain results were consistent with the Group s established objectives and goals. Based on the results of the internal audit carried out, the internal auditor had presented to the AC their observations, recommendations and follow-up actions to be taken by the Group. For the financial year ended 31 December 2008, the total costs incurred for the internal audit function were RM16,

12 Corporate Governance The Board of Directors supports the objective of the Malaysian Code on Corporate Governance ( the Code ) and also acknowledges its role in protect and enhance shareholders value. The Directors believe that good corporate governance results in quantifiable long-term success and creation of long-term shareholders value. Set out below is the description of how the Company has applied the Principles of Corporate Governance as set out in the Code throughout the financial year ended 31 December SECTION A THE BOARD OF DIRECTORS Composition of the Board An experienced and effective Board consisting of members with a wide range of skill and experience from financial and business background leads and controls the Group. The directors bring depth and diverse expertise to the leadership of the Group s plantation and construction businesses. The Board continues to give close consideration to its size, composition and spread of experience and expertise. No individual or group of individuals dominates the Board s decision making processes and the number of independent directors reflects fairly the investment of the minority shareholders. This is to ensure that issues of strategy, performance and resources are fully discussed and examined to take into account long-term interest of stakeholders of the Company. The Board comprises the Non-Executive Chairman, Deputy Executive Chairman, Deputy Chief Executive Officer, one Executive Director and two Independent Non-Executive Directors. The Company complied with the Listing Requirements of Bursa Malaysia where at least one third of the Board is Independent Non-Executive Directors. Board responsibilities The responsibilities of the Board of Directors of the Company are as follows:- - Reviewing and adopting a strategic plan for the Company which will enhance the future growth and profitability of the Company; - Overseeing the conduct of the Company s business and to evaluate whether the business is being properly managed; - Identifying principal risks of the business and ensure implementation of appropriate systems to manage these risks ; and - Reviewing adequacy and integrity of the Company s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. Board Balance The roles of the Deputy Executive Chairman and Deputy Chief Executive Officer are separate with clearly defined responsibilities to ensure the balance of power and authority. The Deputy Chairman is primarily responsible for the orderly conduct and working of the Board whilst the Deputy Chief Executive Officer is responsible for the overall operations of the business and the implementation of Board strategy and policy. All the Independent Non-Executive Directors are independent of management and are free from any business or other relationship that could materially interfere with the exercise of their independent judgment. They have the calibre to ensure that the strategies proposed by the management are fully deliberated and examined in the longterm interest of the Group, as well as shareholders, employees and customers. 11

13 Corporate Governance Board Meetings and Supply of Information to the Board During the financial year ended 31 December 2008, four (4) meetings of the Board were held. Details of attendance are provided on page 68 of this Annual Report. The Deputy Chief Executive Officer of the Company undertakes the responsibility to ensure that the agenda and full set of Board papers (including qualitative information of the Company) for consideration are distributed well before each meeting of the Board to ensure that the Directors have sufficient time to study them and be properly prepared for discussion and decision making. Minutes of Board meetings are maintained. All directors of the Company whether in full Board or in their individual capacity, have access to all information within the Company and they could seek independent professional advice where necessary to discharge their duties. The Directors have access to the advice and services of the Company Secretary who is responsible for ensuring the Board meeting procedures are followed and that applicable rules and regulations are complied with. Appointment and re-election of directors In accordance with the Company s Articles of Association, at least one third of the Directors shall retire from the office every year provided always that all Directors shall retire from office at least once in every three years but shall be eligible for re-election. All directors who are appointed by the Board are subject to re-election by shareholders at the following Annual General Meeting after their appointment. Nomination Committee The Nomination Committee was established on 2 January The Nomination Committee is responsible for proposing new nominees for the Board and assessing the performance of directors on an on-going basis. The actual decision as to who shall be appointed is the responsibility of the full Board after considering the recommendations of the Nomination Committee. The Nomination Committee reviews the performance of members of the Board and assesses the effectiveness of the Board as a whole and the contribution of each individual director. The Nomination Committee will also review the required mix of skills and experience and other core competencies, which non-executive directors should bring to the Board. The Nomination Committee comprises: Chairman : Y.H. Dato Amihamzah Bin Ahmad Members : Tan Sri Dato Hj Husein Bin Ahmad Mr Tan En Chong Directors Training All directors of the company have attended the Mandatory Accreditation Programme (MAP) conducted by the Research Institute of Investment Analysts Malaysia and have fulfilled all required points under the Continuous Education Programme ( CEP ). Directors are encouraged to attend appropriate continuous training to keep abreast with new business development and changes in regulatory requirements. 12

14 Corporate Governance SECTION B DIRECTORS REMUNERATION Remuneration Policy and Procedures The Code states that remuneration for Directors should be determined so as to ensure that the Company attracts and retains the Directors needed to manage the Company successfully. In Astral Asia Berhad, the remuneration for Executive Directors is structured so as to link reward to corporate and individual performance. In the case of Non-Executive Directors, the quantum of remuneration reflects the level of experience and responsibilities undertaken by them during the period under review. The aggregate Directors remuneration paid or payable or otherwise made available to all Directors of the Company during the financial year are as shown as below:- Category Fees Salary and Benefits Other Emoluments In Kind (RM) (RM) (RM) Executive Directors 181, ,000 - Non-Executive Directors 49, The number of Directors of the Company whose total remuneration fall within the following bands : Executive Directors Remuneration Number Below RM50,000 1 RM50,001 - RM100,000 2 RM450,001 - RM500,000 1 Non Executive Directors Remuneration Number Less than RM50,000 3 The remuneration of the Directors of the Company includes the remuneration and fees paid by subsidiaries of the Company. Remuneration Committee The Remuneration Committee was established on 2 January The Remuneration Committee reviews the performance of the Executive Directors and furnishes recommendations to the Board on specific adjustments in remuneration, including reward payments commensurate with the respective contributions of the Executive Directors for the year. In the case of Non-Executive Directors, the Board as a whole will determine the remuneration package. The level of remuneration reflects the level of experience and responsibilities undertaken and the individuals concerned are abstained from discussion and decision making. The Remuneration Committee comprises: Chairman : Mr Tan En Chong Members : Tan Sri Dato Hj Husein Bin Ahmad Y.H. Dato Amihamzah Bin Ahmad 13

15 Corporate Governance SECTION C SHAREHOLDERS Dialogue with investors and shareholders The Company recognises the importance of keeping the shareholders and investors informed of the Group s business and corporate developments. Such information is disseminated via the Company s annual report, circular to the shareholders and the announcements made from time to time. Shareholders may obtain the Company s latest announcements via the Bursa Malaysia website. All shareholders including private investors have an opportunity to participate in discussion with the Board on matters relating to the Company s operation and performance at the Company s annual general meeting. It is the principal forum for dialogue with shareholders. The management will take note of the shareholders suggestions and comments for consideration. SECTION D ACCOUNTABILITY AND AUDIT Directors Responsibility Statements The Directors are required by the Companies Act 1965 to prepare financial statements for each financial year which give a true and fair view of the state of affair of the Company and the Group as at the end of the financial year and of the results of the Company and the Group for the year ended. The Directors consider that in preparing the financial statements, the Group has used appropriate accounting policies, consistently applied and supported by reasonable prudent judgments and estimates, and that all applicable standards have been followed. The Directors have responsibility for ensuring that the Company and the Group keep accounting records which disclose with reasonable accuracy the financial position of the Company and the Group and which enable them to ensure that the financial statements comply with the Companies Act, The Directors have general responsibility for taking reasonable steps to safeguard the assets of the company and the Group as well as to detect and prevent frauds and irregularities, if any. Financial Reporting The Directors are responsible for the preparation of the annual audited accounts and the Board ensures that the accounts and other financial reports of the Company are prepared in accordance with Approved Accounting Standards and present a balanced and comprehensive assessment of the Company s position and prospects, to all the shareholders. The Company s Annual Report and quarterly announcements of results gives an updated financial performance of the Company periodically. 14

16 Corporate Governance Audit Committee The Audit Committee comprises two Independent Non-Executive Directors and one Non-Executive Chairman. The composition and Terms of Reference of the Audit Committee are also provided in this report. The Audit Committee has explicit authority from the Board to investigate any matter and is given full responsibility within its term of reference and necessary resources which it needs to do so and has full access to information of the Group. The Audit Committee also meets once a year with the external auditors and the internal auditors without the presence of the Executive Board members. Internal Control The Directors recognise their responsibility for the maintenance of a sound system of internal control, covering not only financial controls but also compliance controls including risk assessment framework and control activities covering information and communication, and reviewing its effectiveness. As with any such system, controls can only provide reasonable but not absolute assurance against material misstatements or loss. The Group is continuously looking into the adequacy and integrity of its system of internal controls. Internal Audit The Directors have out-sourced the internal audit function to a firm of Chartered Accountants, which is independent and audit work will be conducted with impartiality proficiency and due professional care. Relationship with external auditors The Board ensures that there is transparent arrangement for the achievement of objectives and maintenance of professional relationship with external auditors. 15