Our Mission 1 Corporate Information 2 Profiles of Directors 3 Corporate Profile 6 Group Addresses 7 Corporate Structure 10 Group Financial Summary 12 Group Financial Highlights 14 Chairman’s Statement 15 CEO’s Review of Operations 18 Audit Committee Report 22 Statement on Corporate Governance 26 Statement on Internal Control 31 Financial Statements 32 List of Properties 87 Material Contracts 95 Recurrent Related Party Transactions of Revenue Nature 96 Statement of Directors’ Shareholdings 98 Statistics on Shareholdings 99 Notice of Annual General Meeting 102 Form of Proxy ur mission COSWAY CORPORATION BERHAD (Company No. 194949-H) To generate consistently profitable returns for our shareholders from investments in core business activities: • By providing direction, financial resources and management support for each operating unit; • Through establishing a major market presence for each activity; • Through dynamic and innovative management, teamwork and a commitment to excellence. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 1 Annual Report 2003 corporate information Auditors
Ernst & Young Chartered Accountants Level 23A, Menara Milenium Jalan Damanlela Pusat Bandar Damansara 50490 Kuala Lumpur Board Of Directors Tan Sri Dato’ Jaffar bin Abdul Chairman Dato’ Kanagalingam A/L Veluppillai Deputy Chairman Al Chuah Choong Heong Chief Executive Officer Registered Office Dato’ Ismail bin Osman Executive Director Tan Sri Dato’ Danny Tan Chee Sing Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj 11th Floor, Menara Berjaya KL Plaza, 179 Jalan Bukit Bintang 55100 Kuala Lumpur Tel Fax : 03 – 2935 8888 : 03 – 2935 8043 Principal Bankers
Robert Yong Kuen Loke Dato’ Sulaiman bin Alias Affin Bank Berhad Affin-ACF Finance Berhad Alliance Bank Malaysia Berhad AmBank Berhad AmMerchant Bank Berhad Audit Committee Chairman/Independent Non-Executive Director Tan Sri Dato’ Jaffar bin Abdul Non-Independent Non-Executive Director Robert Yong Kuen Loke Aseambankers Malaysia Berhad EON Bank Berhad Malayan Banking Berhad RHB Bank Berhad Stock Exchange Listing Independent Non-Executive Directors Dato’ Sulaiman bin Alias Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj Main Board of Kuala Lumpur Stock Exchange
Stock Short Name COSWAY (4812) Secretaries Su Swee Hong (MAICSA No. 0776729) Wong Pooi Cheong (MAICSA No. 0782043) Place Of Incorporation And Domicile Malaysia Share Registrars Berjaya Registration Services Sdn Bhd Lot C1-C3, Block C 2nd Floor, KL Plaza 179, Jalan Bukit Bintang 55100 Kuala Lumpur Tel Fax : 03 – 2145 0533 : 03 – 2145 9702 Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 2 Annual Report 2003 profiles of directors Tan Sri Dato’ Jaffar Bin Abdul 71 years of age, Malaysian Chairman (Independent/Non-Executive) He was appointed to the Board on 3 May 1990.
He joined the Police Force in 1951 and rose to become Director of the Anti-Narcotic Branch, Federal Police Headquarters in 1982. From 1982 to 1984, he was the Chief Police Officer in Johor and between 1984 to 1985, he was the Director of Management, Police Headquarters in Bukit Aman. He was also the Deputy Inspector General of the Royal Malaysian Police since 1985 before retiring from the civil service in May 1989. He is currently the Chairman of Mycom Berhad, Anson Perdana Berhad and Yinson Holdings Berhad.
He also holds directorship in Berjaya Sports Toto Berhad, Olympia Industries Berhad, Angkasa Marketing Berhad, Amalgamated Containers Berhad and several other private limited companies. Dato’ Kanagalingam a/l Veluppillai 52 years of age, Malaysian Deputy Chairman (Non-Independent/Non-Executive) He was appointed to the Board on 3 June 2002. He is a practising lawyer graduated with a Bachelor of Laws from the University of Buckingham, England in 1985. He also holds a Diploma in Management with merit from the Malaysian Institute of Management.
Prior to his current legal practice, he served several multinational and local companies in various senior management capacities including personnel management and training, wage/salary administration and industrial relations between 1973 and 1983. After obtaining his law degree, he joined the UMW Group of Companies as its Group Legal Advisor in 1985. He started his own practice in 1989 and has been conducting major litigation cases at the High Court, Court of Appeal and Federal Court of Malaysia as well as negotiating major international contracts, joint ventures and corporate agreements.
Al Chuah Choong Heong 59 years of age, Malaysian Chief Executive Officer He was appointed to the Board on 14 July 1995 and was subsequently appointed as the Chief Executive Officer on 14 September 2001. He holds a Diploma in Marketing from Australia and has vast experience in the marketing of pharmaceuticals and consumer products. He is the founder and also the Managing Director of Cosway (M) Sdn Bhd since 1979. Prior to that, he was the General Development Manager of a multi-national company, Sterling Drugs (M) Sdn Bhd and General Sales Manager of Warner Lambert (M) Sdn Bhd.
He is currently the Managing Director of Singer (Malaysia) Sdn Bhd and holds directorships in Unza Holdings Berhad, eCosway. com Sdn Bhd and various other subsidiaries in the Berjaya Group of Companies. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 3 Annual Report 2003 profiles of directors Dato’ Ismail Bin Osman 53 years of age, Malaysian Executive Director He was appointed to the Board on 14 September 2001. He graduated with a Bachelor in Electronic Engineering from Universiti Teknologi MARA in 1975.
He also holds a Master of Science in Microwave Semiconductor Electronics from the University of Kent, United Kingdom. He began his career in the telecommunications industry when he joined Jabatan Telekomunikasi Malaysia [JTM] in 1976. During his 23-year tenure with JTM, he had held various positions and was promoted to Director-General of Telecommunications in January 1999, a post he held until he retired on 1 April 1999. He then joined Berjaya Group Berhad as an Executive Director in October 1999 until his appointment to the Company. He is also a Director of MOL AccessPortal Berhad. Tan Sri Dato’ Danny Tan Chee Sing 8 years of age, Malaysian (Non-Independent/Non-Executive) He was appointed to the Board on 3 May 1990. He is a businessman and entrepreneur with extensive experience in property development, restaurant/ resort management, insurance, trading, gaming and stockbroking through his interests in various public and private companies. He is the Deputy Chairman of Berjaya Group Berhad, Berjaya Land Berhad and Dunham-Bush (Malaysia) Bhd, the Chairman and Group Chief Executive Officer of Dijaya Corporation Berhad and the Chief Executive Officer of Tropicana Golf & Country Resort Berhad and the Executive Vice-Chairman of TT Resources Bhd.
He also holds directorships in Berjaya Capital Berhad, MTD Capital Berhad, Bukit Kiara Resort Berhad, Tioman Island Resort Berhad, Berjaya General Insurance Berhad, KDE Recreation Berhad and Berjaya Golf Resort Berhad. He is the brother of Tan Sri Dato’ Seri Vincent Tan Chee Yioun, a major shareholder of the Company. Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj 53 years of age, Malaysian (Independent/Non-Executive) He was appointed to the Board on 25 May 1990 and as an Independent NonExecutive member of the Audit Committee on 10 July 2001.
He furthered his education at Aitchison College in Lahore, Pakistan. Since 1970, he has been involved in the field of business, principally in property construction and development businesses. He is also a Director of Bina Goodyear Berhad and the Deputy Chairman of Talam Corporation Berhad. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 4 Annual Report 2003 profiles of directors Robert Yong Kuen Loke 51 years of age, Malaysian (Non-Independent/Non-Executive) He was appointed to the Board on 24 January 1995.
He is a Fellow member of the Institute of Chartered Accountants (England and Wales), and a member of Malaysian Institute of Accountants and Institute of Certified Public Accountants of Singapore. He is also a Council member of Malaysian Institute of Certified Public Accountants. He has many years of working experience in the fields of accounting, audit, treasury and financial management. He started his career in London in 1973 and worked for more than five years in chartered accounting firms in London including two years with Moore Stephens & Co.
Subsequently, he served as an Audit Manager with Price Waterhouse, Singapore from 1979 to 1982. Prior to joining the Berjaya Group of Companies in 1987, he served as Group Finance Manager in UMW Holdings Berhad and as Group Treasurer in Edaran Otomobil Nasional Bhd. Currently, he is an Executive Director of Berjaya Group Berhad, Berjaya Land Berhad and Berjaya Sports Toto Berhad. He is also a Director of Berjaya Capital Berhad, Matrix International Berhad and Taiga Forest Products Ltd (Canada).
He also holds directorships in Berjaya Golf Resort Berhad and various other subsidiaries of the Berjaya Group of Companies. Dato’ Sulaiman Bin Alias 69 years of age, Malaysian (Independent/Non-Executive) He was appointed to the Board on 25 May 1990. He is a Barrister-At-Law by profession. He has vast experience in both legal practice and the broadcasting field. He was the Director of Public Affairs for Radio and Television Malaysia (RTM) from 1970 to 1973 and had also worked for the British Broadcasting Corporation London (BBC) from 1960 to 1963.
From 1980 to 1982, he was the Chairman of the Road Transport Licensing Board, Ministry of Public Enterprise. Between 1987 and 1989, he was the Legal Secretarial and Administrative Director of the Shapadu Group of Companies. He has been a director in TTDI Development Sdn Bhd since 1980 until his retirement in November 2000. Save as disclosed, none of the Directors have:1. any family relationship with any Director and/or major shareholder of the Company; 2. any conflict of interest with the Company; and 3. any convictions for offences within the past 10 years other than traffic offences.
Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 5 Annual Report 2003 corporate profile COSWAY CORPORATION BERHAD (“Cosway Corporation”) was incorporated to acquire the entire issued share capital of Singer (Malaysia) Sdn Bhd (“Singer Malaysia”). The Company was listed on the Kuala Lumpur Stock Exchange in October 1990. Singer Malaysia has been operating in Malaysia as a branch of Singer Sewing Machine Company (“SSMC”), USA since 1906 until the incorporation of a Malaysian entity in 1983.
SSMC had its beginnings in 1851 when Mr. Isaac Merritt Singer began to manufacture and sell sewing machines and, in 1855, revolutionised sales with the hire-purchase plan. Today, Singer is a worldwide famous household brand, symbolising quality for a wide range of consumer durables. Berjaya’s participation in Singer Malaysia commenced in March 1985 with a 48% shareholding. In 1989, Berjaya made a takeover bid for SSMC Inc on the New York Stock Exchange, the holding company of SSMC.
The bid subsequently resulted in Berjaya acquiring a majority stake and management control of Singer Malaysia. Today, through the acquisitions of the Unza Group of Companies, Cosway (M) Sdn Bhd and other consumer related businesses, Cosway Corporation has established itself as a leading marketeer of a broad range of consumer products. Cosway Corporation further diversified into manufacturing when it acquired Dunham-Bush (Malaysia) Bhd, an acknowledged key player in the Global Commercial and Industrial Heating, Ventilating, Air-Conditioning and Refrigeration business.
With a total employee strength of over 6,100 the Group is currently engaged in the following core activities: • • • Marketing and selling of consumer durables under the brand name “SINGER” on cash or instalment payment terms; Manufacturing and marketing of personal care and household products; Marketing of cosmetics, toiletries, fashion jewellery, health care and other consumer products through a multi-level direct selling network and an online shopping portal known as eCosway. om; Retailing of multi-brand consumer durables on cash or equal payment terms; and Manufacturing, servicing and trading in residential air-conditioners, commercial and industrial heating, ventilating, airconditioning and refrigeration systems; Distribution, sale and rental of audio/visual home entertainment products and distribution of children’s education learning aids products; • • • On 11 September 1998, Cosway Corporation adopted its present name to reflect the Company’s long term focus in the direct selling business through its subsidiary, Cosway (M) Sdn Bhd.
Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 6 Annual Report 2003 group addresses STEPHENS PROPERTIES SDN BHD 9. 01 & 9. 02, Wisma Cosway Jalan Raja Chulan 50200 Kuala Lumpur Tel : 03 – 2148 2722 COSWAY PHILIPPINES, INC Unit-1, Building 3 Jannov Plaza 2295 Pasong Tamo Extension Makati City, The Philippines Tel : 632 – 812 8011/13 Email : [email protected] com. ph COSWAY (THAILAND) CO LTD 9th Floor, SCB Park Plaza West Tower 2 18, Ratchadapisek Road Ladyao Jatujak Bangkok 10900, Thailand Tel : 662 – 937 6177 Email : [email protected] o. th COSWAY (M) SDN BHD Brunei Branch No. C18, Simpang 88 Hau Man Yong Building, Kg. Kiulap, Jalan Gadong Bandar Sri Begawan BE1518 Brunei Darussalam Tel : 6732 – 231 886 Email : [email protected] com COSWAY (M) SDN BHD Singapore Branch No. 165, Tanjong Pagar Road #04 -16, Amara Professional Centre Singapore 088539 Tel : 02 – 6372 1598 Email : [email protected] com. sg UNZA (MALAYSIA) SDN BHD MANUFACTURING SERVICES SENDIRIAN BERHAD www. unza. com No. 7, Persiaran Subang
Permai Taman Perindustrian Subang 47610 Subang Jaya, Selangor Darul Ehsan Tel : 03 – 5631 5588 Email : [email protected] com UAA (M) SDN BHD No. 10, Jalan Subang 2 Taman Perindustrian Subang 47610 Subang Jaya, Selangor Darul Ehsan Tel : 03 – 8023 4099 Email : [email protected] com SINGER (MALAYSIA) SDN BHD www. singermsia. com. my Main Office: 2, Jalan 13/1, Section 13 46200 Petaling Jaya Selangor Darul Ehsan Tel : 03 – 7957 5658 Email : [email protected] singermsia. com. y Showrooms: Kota Kinabalu Lot 3, Jalan Limau Manis Off Jalan Lintas 88450 Inanam Kota Kinabalu, Sabah Tel : 088 – 430 889 Kuching Lot 320-323 Jalan Abell Utara 93100 Kuching, Sarawak Tel : 082 – 238 258 Regional Offices: North Region 2, Jalan Kurau Taman Chai Leng 13700 Prai, Pulau Pinang Tel : 04 – 399 0759 Email : [email protected] jaring. my Midwest Region 507, 2nd Floor Jalan Tuanku Antah 70100 Seremban Negeri Sembilan Darul Khusus Tel : 06 – 762 1525 Email : [email protected] net. my Northwest Region 42A, Lorong Taman Ipoh Satu Ipoh Garden South 31400 Ipoh Perak Darul Ridzuan Tel : 05 – 548 4878 Email : [email protected] et. my South Region 91A, Jalan Perisai Taman Sri Tebrau 80050 Johor Bahru Johor Darul Takzim Tel : 07 – 332 5368 Email : [email protected] com Northeast Region 4712-G, Jalan Sultan Yahya Petra 15150 Kota Bharu Kelantan Darul Naim Tel : 09 – 747 4661 Email : [email protected] com Mideast Region B-1827, 2nd Floor Jalan Beserah, 25300 Kuantan Pahang Darul Makmur Tel : 09 – 566 5955 Email : [email protected] net. my Sarawak Region Lot 320, 2nd Floor Jalan Abell Utara 93100 Kuching, Sarawak Tel : 082 – 248 367 Email : [email protected] net. y Sabah Region Lot 3, Jalan Cenderakasih Off Jalan Lintas 88450 Inanam Kota Kinabalu, Sabah Tel : 088 – 439 669 Email : [email protected] net. my BERJAYA HVN SDN BHD DIRECT VISION SDN BHD 89, Jalan 3/93 Taman Miharja, Cheras 55200 Kuala Lumpur Tel : 03 – 9282 6688 Email : [email protected] cc COSWAY (M) SDN BHD 2nd Floor, Wisma Cosway Jalan Raja Chulan 50200 Kuala Lumpur Tel : 03 – 2148 1077 Email : [email protected] com. my eCOSWAY. COM SDN BHD Lot 12A. 07, 12A Floor Wisma Cosway, Jalan Raja Chulan 50200 Kuala Lumpur Tel : 03 – 2145 6335 Email : [email protected] om KIMIA SUCHI SDN BHD 21, Jalan TUDM Subang New Village 40000 Shah Alam Selangor Darul Ehsan Tel : 03 – 7847 6268 Email : [email protected] po. my Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 7 Annual Report 2003 group addresses GERVAS CORPORATION SDN BHD GERVAS (B) SDN BHD No. 8, Jalan Subang 2 Taman Perindustrian Subang 47610 Subang Jaya Selangor Darul Ehsan Tel : 03 – 8023 4511 Email : [email protected] jaring. my FORMAPAC SDN BHD Lot 5755-1, Kg Bukit Angkat Sungai Chua 43000 Kajang Selangor Darul Ehsan Tel : 03 – 8739 9391 Email : [email protected] om. my UNZA INTERNATIONAL LIMITED UNZA OVERSEAS LIMITED UNZA MIDDLE EAST LIMITED Singapore #03-11 TradeMart Singapore 60 Martin Road Singapore 239065 Tel : 65 – 6732 5611 Email : [email protected] com Hong Kong Room 1905-6 19th Floor, Asian House 1 Hennessy Road Wanchai, Hong Kong Tel : 852 – 2529 1191 Email : [email protected] com Registered Office Craigmuir Chambers P O Box 71, Road Town Tortola, British Virgin Islands UNZA COMPANY PTE LTD UNZA INDOCHINA PTE LTD #03-11 TradeMart Singapore 60 Martin Road Singapore 239065 Tel : 65 – 6732 5611 Email : [email protected] om UNZA VIETNAM COMPANY LTD 7 VSIP Street 4 Vietnam Singapore Industrial Park Thuan An District Binh Duong Province S. R. Vietnam Tel : 84 – 650 – 743971 – 5 Email : [email protected] com UNZA CATHAY LIMITED UNZA (CHINA) LIMITED Room 1905-6, 19th Floor, Asian House 1 Hennessy Road Wanchai, Hong Kong Tel : 852 – 2529 1191 Email : [email protected] com DONGGUAN UNZA CONSUMER PRODUCTS LTD Si Huan Road, Zhu Shan Fu Cheng, Dongguan Guangdong, The People’s Republic of China Tel : 86 – 769 – 225 3905 Email : [email protected] com PT UNZA INDONESIA S Widjojo 8th Floor Jalan Jend Sudirman 71 Jakarta 12190, Indonesia Tel : 62 – 21 – 522 3118/3212 Email : [email protected] om UNZA (THAILAND) LTD 2533 Pricha Building 5th Floor, Sukhumvit Road Kwaeng Banchack, Khet Prakanong, Bangkok, Thailand Tel : 66 – 2 – 331 6405 Email : [email protected] com DUNHAM-BUSH (MALAYSIA) BHD www. dunham-bush. com Head Office: Lot 8, Jalan P/7, Seksyen 13 43650 Bandar Baru Bangi Selangor Darul Ehsan Tel : 03 – 8925 9688 Email : [email protected] com. my Regional Offices: Malaysia DUNHAM-BUSH SALES & SERVICES SDN BHD Lot 12, Jalan P/7, Seksyen 13 43650 Bandar Baru Bangi Selangor Darul Ehsan Tel : 03 – 8925 9688 Email : [email protected] com. y TOPAIRE SALES & SERVICES SDN BHD Lot 10, Jalan P/7, Seksyen 13 43650 Bandar Baru Bangi Selangor Darul Ehsan Tel : 03 – 8925 2022 Email : [email protected] net. my Asia Pacific DUNHAM-BUSH INTERNATIONAL PTE LTD 146B, Paya Lebar Road #05-01, Ace Building Singapore 409017 Tel : 65 – 6842 2012 Email : [email protected] singnet. com. sg DUNHAM-BUSH SALES & SERVICES (S) PTE LTD 146B, Paya Lebar Road #05-01, Ace Building Singapore 409017 Tel : 65 – 6842 2009 Email : [email protected] net. sg China DUNHAM-BUSH INTERNATIONAL LTD (Shanghai Representative Office) Room 1009A, 10th Floor, Xin Da Building No. 20, Xian Xia Road Shanghai 200336 The People’s Republic of China Tel : 86 – 21 – 6209 5248/9 Email : [email protected] sta. net. cn Middle-East (Dubai Representative Office) P. O. Box 30922 Aweer, Dubai, United Arab Emirates Tel : 971 – 4 – 333 1533 Email : [email protected] net. ae Europe DUNHAM-BUSH INTERNATIONAL (EUROPE) BV Algolweg 9-7 3821 BG Amersfoort The Netherlands Tel : 31 – 33 453 5010 Email : [email protected] com USA DUNHAM-BUSH INC 6255, South Valley Pike Mount Crawford VA 22801 P. O.
Box 20000 Harrisonburg VA 22801 USA Tel : 1 – 540 434 0711 Email : [email protected] com South America DUNHAM-BUSH DE MEXICO SA DE CV Praga No. 33, Col. Juarez Deleg. Cuauhtemoc DF 06600 Mexico Tel : 52 – 55 – 5208 1037/5511 4423 Email : [email protected] com. mx Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 8 Annual Report 2003 group addresses South Africa DUNHAM-BUSH INTERNATIONAL (AFRICA) (PTY) LTD Block D, Castle Walk Corporate Park C/O Nossob & Swakop Street Erasmuskloof, South Africa Tel : 27 – 12 – 347 5359 Email : [email protected] co. a Hong Kong & Macau DUNHAM-BUSH INTERNATIONAL LIMITED Room 2407, 24/F, Cheung Tat Centre 18, Cheung Lee St. , Chai Wan, Hong Kong Tel : 852 – 2331 9638 Email : [email protected] com Thailand DUNHAM-BUSH INTERNATIONAL (THAILAND) LTD 42 Tower, 10th Floor, 65, Sukhumvvit Soi 42 Sukhumvvit Road, Phrakanong Klongtoey, Bangkok 10110, Thailand Tel : 662 – 712 3156/7 Email : [email protected] co. th Factories: Malaysia DUNHAM-BUSH INDUSTRIES SDN BHD Lot 8, Jalan P/7, Seksyen 13 43650 Bandar Baru Bangi Selangor Darul Ehsan Tel : 03 – 8925 9688 Email : [email protected] com. y DUNHAM-BUSH INDUSTRIES SDN BHD Lot 5755-6, Kidamai Industrial Park Bukit Angkat, 43000 Kajang Selangor Darul Ehsan Tel : 03 – 8733 9898 Email : [email protected] com. my TOPAIRE SDN BHD Lot 14, Jalan P/7, Seksyen 13 43650 Bandar Baru Bangi Selangor Darul Ehsan Tel : 03 – 8925 9688 Email : [email protected] com. my USA HARTFORD COMPRESSORS INC 179, South Street, West Hartford CT 06110 USA Tel : 1 – 860 – 249 8671 Email : [email protected] com United Kingdom DUNHAM-BUSH LIMITED European Headquarters 8, Downley Road Havant, Hampshire England P09 2JD Tel : 44 – 2392 – 477 700 Email : [email protected] o. uk China DUNHAM-BUSH YANTAI CO LTD APEC Industrial Park Yantai, Shandong The People’s Republic of China 264002 Tel : 86 – 535 – 658 8999 Email : [email protected] ytptt. sd. cn HARTFORD COMPRESSORS YANTAI CO LTD No. 8, Yanfu Road APEC Industrial Park Yantai, Shandong The People’s Republic of China 264002 Tel : 86 – 535 – 658 8999 Email : [email protected] ytptt. sd. cn Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 9 Annual Report 2003 corporate structure of main operating companies as at 30 August 2003
COSWAY CORPORATION BERHAD 100% 100% SINGER (MALAYSIA) SDN BHD COSWAY (M) SDN BHD 100% 100% BIOFIELD SDN BHD THE CATALOG SHOP SDN BHD 100% TEGAS KINTA SDN BHD 100% 100% 82% JUARA BUDI SDN BHD COSWAY (CAYMAN) LIMITED 100% 95% STEPHENS PROPERTIES SDN BHD COSWAY PHILIPPINES, INC COSWAY (THAILAND) CO LTD KIMIA SUCHI MARKETING SDN BHD COSWIN (M) SDN BHD 100% STEPHENS PROPERTIES MANAGEMENT CORPORATION SDN BHD †† KIMIA SUCHI SDN BHD RANK DISTRIBUTORS SDN BHD eCOSWAY. COM SDN BHD BEAUTE DISTRIBUTORS SDN BHD 74% 100% 60% 60% 50% 40% 1. 01% UNZA HOLDINGS BERHAD 100% 100% 100% UNZA (MALAYSIA) SDN BHD FORMAPAC SDN BHD MANUFACTURING SERVICES SENDIRIAN BERHAD UNZA INTERNATIONAL LIMITED 100% 100% UAA (M) SDN BHD GERVAS CORPORATION SDN BHD 100% GERVAS (B) SDN BHD 50. 1% SHUBIDO PACIFIC SDN BHD 100% 100% 100% 100% 100% 70% 100% 100% 100% UNZA COMPANY PTE LTD PT UNZA INDONESIA UNZA CATHAY LIMITED UNZA (CHINA) LIMITED UNZA INDOCHINA PTE LTD UNZA MIDDLE EAST LIMITED UNZA OVERSEAS LIMITED UNZA (THAILAND) LTD 100% 100% DIRECT VISION SDN BHD BERJAYA HVN (S) PTE LTD 100% 100% DONGGUAN UNZA CONSUMER PRODUCTS LTD UNZA VIETNAM COMPANY LTD 63. 72% BERJAYA HVN SDN BHD Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 10 Annual Report 2003 corporate structure 59. 39% DUNHAM-BUSH (MALAYSIA) BHD 100% 100% 100% DUNHAM-BUSH INDUSTRIES SDN BHD DUNHAM-BUSH SALES & SERVICES SDN BHD TOPGROUP POLACEL SDN BHD DUNHAM-BUSH PARTS & SERVICES SDN BHD (formerly known as Ventiair Sdn Bhd) DUNHAM-BUSH INTERNATIONAL PTE LTD DUNHAM-BUSH INDUSTRIES DE MEXICO S. A. DE C.
V DUNHAM-BUSH INTERNATIONAL LIMITED DUNHAM-BUSH INTERNATIONAL (CAYMAN) LIMITED ANEMOSTAT TOPGROUP SDN BHD DUNHAM-BUSH TOPAIRE SDN BHD (formerly known as Topaire Sdn Bhd) TOPGROUP DATA-AIRE SDN BHD TOPAIRE SALES & SERVICES SDN BHD TOPGROUP M&E SERVICE SDN BHD DUNHAM-BUSH YANTAI CO LTD 70% TOPGROUP PARTS & SERVICES (KUANTAN) SDN BHD ** 100% 100% 100% 49% DUNHAM-BUSH INTERNATIONAL (AFRICA) (PTY) LTD DUNHAM-BUSH SALES & SERVICES (S) PTE LTD DUNHAM-BUSH INTERNATIONAL (EUROPE) BV DUNHAM-BUSH INTERNATIONAL (THAILAND) LTD 100% 100% * 100% 100% 100% DUNHAM-BUSH INDUSTRIAS S.
A. DE C. V. TOP-AIRE AIR-CONDITIONING (CHINA) LIMITED DUNHAM-BUSH INC HARTFORD COMPRESSORS INC DUNHAM-BUSH (EUROPE) PLC 100% DUNHAM-BUSH LIMITED DUNHAM-BUSH AP LIMITED (formerly known as Santric Limited) 100% 100% 100% 100% 51% 86% 85% 100% 85% 60% 60% 55% Public Listed Companies † †† * This is a Co-operative Joint-Venture where the local partner enjoys a 10% profit sharing. Effective Interest. Dunham-Bush Industries de Mexico SA de CV is 99. 86% owned by Dunham-Bush (Malaysia) Bhd and the remaining 0. 14% is held by Dunham-Bush International (Cayman) Limited. f which one (1) share of one (1) peso held by Dunham-Bush de Mexico SA de CV. ** Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 11 Annual Report 2003 group financial summary Description 2003 USD’000 2003 RM’000 2002 RM’000 2001 RM’000 2000 RM’000 1999 RM’000 Revenue Profit/(Loss) Before Taxation Profit/(Loss) After Taxation Profit/(Loss)After Tax & Minority Interests Profit/(Loss) Attributable To Shareholders Share Capital Reserves Shareholders’ Equity Minority Interests Capital Funds Deferred Taxation Deferred Liabilities Current Liabilities 77,921 1,436,098 1,456,623 1,487,804 1,433,522 1,352,314 1,656 (6,761) (8,713) (8,713) 90,641 34,174 124,815 49,363 174,178 1,049 123,044 170,172 6,291 (25,692) (33,111) (33,111) 344,434 129,863 474,297 187,580 661,877 3,985 467,568 646,654 (123,684) (153,185) (146,381) (146,381) 344,434 161,718 506,152 172,629 678,781 4,038 460,636 740,605 (66,940) (89,779) (98,055) (98,055) 344,434 274,586 619,020 178,779 797,799 4,263 488,024 788,690 31,651 11,215 12,115 12,115 341,572 385,326 726,898 112,993 839,891 6,397 531,458 678,687 (7,012) (4,775) 627 627 340,264 407,050 747,314 139,875 887,189 4,224 497,540 712,403 68,443 1,780,084 1,884,060 2,078,776 2,056,433 2,101,356 Property, Plant & Equipment Intangible Assets Investment & Long Term Receivables Current Assets Total Assets Net Tangible Assets Per Share (USD/RM) Net Assets Per Share (USD/RM) Net Earnings/(Loss) Per Share (Cents/Sen) Dividend Rate (%) Dividend Amount (RM’000) 63,348 54,639 12,841 240,724 207,628 48,796 259,353 222,297 54,984 310,512 235,618 66,758 291,298 217,737 66,787 305,444 255,980 66,286 337,615 1,282,936 1,347,426 1,465,888 1,480,611 1,473,646 468,443 1,780,084 1,884,060 2,078,776 2,056,433 2,101,356 0. 20 0. 36 (0. 03) 0. 77 1. 38 (0. 10) 0. 2 1. 47 (0. 42) 1. 11 1. 80 (28. 61) 1. 49 2. 13 3. 56 3 7,378 1. 44 2. 20 0. 20 3 7,350 Note: Figures for 1989 are for the year ended 28 February; figures for 1990-2003 are for the year ended 30 April. Prior to 1990, the financial results represented that of Singer (Malaysia) Sdn Bhd. Where additional shares are issued, the earnings/(loss) per share are calculated based on a weighted average number of shares. Exchange rate: USD1. 00=RM3. 80 + Change in shareholding relates to the major change in directorate and direction of the Company. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 12
Annual Report 2003 group financial summary After Change in Shareholding + 1998 RM’000 1997 RM’000 1996 RM’000 1995 RM’000 756,251 60,221 43,902 39,623 39,623 181,598 79,259 260,857 30,956 291,813 724 123,654 581,078 997,269 79,551 99,762 93,524 724,432 997,269 0. 89 1. 44 21. 80 15 19,068 1994 RM’000 654,162 54,493 37,667 34,306 30,088 181,598 64,387 245,985 17,496 263,481 724 120,152 479,217 863,574 66,726 81,637 38,126 677,085 863,574 0. 91 1. 35 19. 00 13 16,054 1993 RM’000 607,125 90,159 60,575 60,752 60,752 150,000 74,595 224,595 1,674 226,269 582 17,311 647,931 892,093 46,038 54,064 36,880 755,111 892,093 1. 4 1. 50 33. 80 25 24,750 1992 RM’000 525,405 60,153 37,146 37,244 37,244 150,000 38,761 188,761 92 188,853 350 39,116 469,901 698,220 20,299 246 8,474 669,201 698,220 1. 26 1. 26 24. 80 23 22,425 1991 RM’000 422,838 55,032 32,932 32,932 32,932 150,000 23,942 173,942 173,942 350 2,285 366,554 543,131 12,662 58 7,943 522,468 543,131 1. 16 1. 16 25. 80 20 19,500 Before Change in Shareholding + 1990 RM’000 362,358 50,264 30,676 30,676 30,676 73,500 33,160 106,660 106,660 10,000 277,373 394,033 8,441 2,502 383,090 394,033 1. 45 1. 45 41. 0 1989 RM’000 287,237 38,489 24,226 24,226 24,226 32,500 23,139 55,639 55,639 10,000 194,398 260,037 4,773 3,584 251,680 260,037 1. 71 1. 71 74. 50 80 16,910 1,400,206 1,343,694 1,253,079 35,568 19,680 17,761 17,761 289,357 263,642 552,999 152,304 705,303 3,106 557,858 857,631 112,288 87,649 75,841 75,841 282,328 212,859 495,187 128,913 624,100 2,202 495,061 749,848 77,690 50,208 40,451 41,093 278,992 168,737 447,729 91,236 538,965 2,449 456,359 670,451 2,123,898 1,871,211 1,668,224 327,026 250,953 66,198 248,097 193,195 25,600 213,708 171,740 43,543 1,479,721 1,404,319 1,239,233 2,123,898 1,871,211 1,668,224 1. 5 1. 87 6. 20 10 20,823 1. 07 1. 75 27. 10 23 45,277 0. 99 1. 60 20. 40 15 25,204 Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 13 Annual Report 2003 group financial highlights Revenue 1,600 1,400 1,200 1,000 800 600 400 200 0 RM Million 1993 1994 1995 1996 1997 1998 1999 2000 1,253 1,344 1,400 1,352 1,434 1,488 1,457 1,436 607 654 756 2001 2002 2003 Profit/(Loss) Before Tax 120 100 80 60 40 20 0 -40 -60 -120 -160 RM Million 112 90 54 60 78 36 32 6 (7) (67) (124) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Shareholders’ Equity 00 700 600 500 400 300 200 100 0 RM Million 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 225 246 261 448 495 553 747 727 619 506 474 Total Assets 2,500 2,000 1,668 1,500 1,000 500 0 RM Million 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 892 864 997 1,871 2,124 2,101 2,056 2,079 1,884 1,780 Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 14 Annual Report 2003 chairman’s statement On behalf of the Board of Directors of Cosway Corporation Berhad (“Cosway Corporation”), I am pleased to present the Annual Report and Financial Statements for the financial year ended 30 April 2003.
Financial Results For the financial year under review, the Group recorded a consolidated revenue of RM1,436. 1 million and pre-tax profit of RM6. 3 million as compared to RM1,456. 6 million revenue and pre-tax loss of RM123. 7 million in the preceding year. The marginal decrease in revenue was mainly due to lower sales registered by the manufacturing and marketing of industrial/commercial products segment following the closure of its manufacturing facilities at Harrisonburg, USA. The turnaround in profitability was mainly due to better performance achieved by the manufacturing and marketing of personal care and household products segment.
Dividend The Board did not recommend any dividend to be paid for the financial year ended 30 April 2003. Further to the offer made by Navis Investment Partners (Asia) Limited (“Navis”) on 1 July 2002 to acquire from Cosway Corporation and other Berjaya related companies, 100% of their shares in Unza Holdings Berhad (“Unza”) at a price of RM5. 50 per share, Cosway Corporation had on 28 October 2002, announced that Tan Sri Dato’ Seri Vincent Tan Chee Yioun on 25 October 2002 received a letter from Navis stating that “in light of subsequent events, Navis wishes to withdraw its offer to acquire Unza shares at RM5. 0 each. ” Cosway Corporation also announced that it was currently in advanced discussions with Durrington Group Limited (“Durrington”), which may lead to the sale of Cosway Corporation’s shares in Unza at a tentative price of RM5. 00 per share. Durrington is a special purpose company whose members comprise principally of the current management of Unza (“Management Team”). In an announcement on 8 August 2003, the Management Team proposed to undertake a management buy-out through a conditional voluntary take-over offer (“VTO”) for the entire issued and paid-up share apital of Unza at a cash offer price of RM5. 00 per Unza share (“Offer”). A notice of conditional voluntary take-over offer (“Notice”) has been served on the Board of Directors of Unza pursuant to the Offer by Annexe Profile Sdn Bhd (“APSB”), a wholly-owned subsidiary of Kat Kiera Pte Ltd (“KKPL”) which in turn is a wholly-owned subsidiary of Durrington. The proposed VTO offers a good opportunity for Cosway Corporation to partly realise the capital accretion in its investment in Unza for a cash consideration of about RM186. 37 million.
In addition to the VTO, Cosway Corporation has been invited to have a stake in Unza Group through KKPL, which will eventually be the ultimate holding company of Unza Group upon completion of the Offer, through its wholly-owned subsidiary, Noble Creation Sdn Bhd (“NCSB”) upon the Offer becoming unconditional. Accordingly, Cosway Corporation, via NCSB had on 8 August 2003 entered into a Shareholders’ Agreement with Durrington, Golden Bonanza Corporation (M) Sdn Bhd (“GB”) and KKPL to subscribe for ordinary shares of Singapore Dollar (“SGD”) 0. 0 each, (“KKPL Ordinary Shares”) equivalent to RM9. 06 million nominal value, Class A irredeemable convertible preference shares of SGD0. 10 each in KKPL (“KKPL A Shares”) equivalent to RM7. 73 million nominal value and Class B irredeemable convertible preference shares of SGD0. 10 each in KKPL (“KKPL B Shares”) equivalent to RM23. 211 million nominal value of each category representing 25% of the KKPL Ordinary Shares capital, 100% of the KKPL A Shares capital and 100% of the Cosway’s Hexagon Hi-Energy Structured Water System is a comprehensive water treatment system.
Corporate Developments Following an earlier announcement made on 21 April 2000 in relation to the joint venture (“JV”) between Cosway (M) Sdn Bhd (“Cosway Malaysia”), a wholly-owned subsidiary of Cosway Corporation and MOL. com Berhad (“MOL”) in the formation of eCosway. com Sdn Bhd (“eCosway”) with an intended capitalisation of RM8. 0 million, Cosway Corporation had on 2 July 2003 announced that having regard to the positive operational performance of eCosway thus far, the JV partners have mutually agreed to cap the capitalisation at RM5. million. Accordingly, the balance of RM3. 0 million of uncalled equity will no longer be required. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 15 Annual Report 2003 chairman’s statement KKPL B Shares capital respectively, for a total subscription amount of RM67. 8 million. The proposed investment will allow Cosway Corporation to continue to have a significant equity and economic participation in Unza via KKPL, thereby allowing Cosway Corporation to continue to benefit from the future growth of Unza Group.
The acceptance of the Offer and proposed reinvestment are subject to the approvals of the relevant authorities and shareholders of Cosway Corporation. On 28 March 2003, Cosway Corporation announced its plans to realize the whole or a significant portion of its shareholding in Dunham-Bush (Malaysia) Bhd (“DunhamBush”). Subsequently, Cosway Corporation appointed American Orient Capital Partners (Singapore) Pte Ltd as its financial adviser to work closely with the Managing Director and senior management of Dunham-Bush towards realization of the plans.
On 17 March 2003, Dunham-Bush announced that its subsidiary, Dunham-Bush Industries De Mexico S. A. De C. V. (“DBI-Mexico”) located in Mexico has ceased its Air Handling Units (“AHU”) manufacturing facilities. The Dunham-Bush Group, however, will continue its parts, services, warranty and trading activities in Mexico via its existing marketing office in Mexico City, Dunham-Bush De Mexico S. A. De C. V.. The chiller, AHU and other related air-conditioning products for trading activities would continue to be sourced from Dunham-Bush factories in Malaysia.
On 8 August 2003, Dunham-Bush announced that the Company and its 100% wholly-owned subsidiary, Dunham-Bush International (Cayman) Limited (“DB eCosway recently teamed up with Alliance Bank Malaysia in unveiling a co-branded credit card and partner merchant program. Cayman”), has entered into a Memorandum of Understanding (“MOU”) with European Industrial Acquisition Corporation LLC (“EIAC”) and Dunham-Bush (Europe) Plc (“DBE”) in relation to the grant of options to EIAC to acquire the entire 21,057,200 ordinary shares of 2. pence each representing 51% equity interest in DBE from DB-Cayman for a cash consideration of ? 1 (or about RM6. 25) and the purchase of the net inter-company debts owing by DBE and its subsidiary companies (“DBE Group”) to DunhamBush and its subsidiaries (excluding DBE Group) of about ? 1. 29 million (or about RM8. 04 million) as at 30 April 2003 for a cash consideration of ? 1 (or about RM6. 25) (“Proposed Disposal”). One of the pre-conditions of the Proposed Disposal is the discharge of a bank guarantee amounting to ? 750,000 (about RM4. 9 million), which was arranged and secured by Dunham-Bush’s corporate guarantee. The provisions of the MOU are subject to final negotiation and exchange of definitive agreements. The Proposed Disposal is an integral part of Dunham-Bush Group’s restructuring strategy to address the non-profitable divisions of the Group. During the year, Unza incorporated two new operating companies. Unza Middle East Limited, registered in the British Virgin Islands, was formed in October 2002 to spearhead the further development of our growing Middle East business.
With its operational headquarter in Dubai, the business is focused on the Gulf Co-operation Council States in Arabia and other key Middle East markets. In the same month, Unza Overseas Limited, also registered in the British Virgin Islands, was formed to better manage our growing export business to the rest of the world. Both new companies, although still small, have made an encouraging start. Unza’s Romano and Dashing are popular personal care brands for men. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 16 Annual Report 2003 chairman’s statement ut via strategically located stockists throughout the country for the convenience of its customers. This, coupled with new marketing strategies in the pipeline, the business is expected to bring in additional positive returns in the upcoming year. Other businesses in the consumer durables and home entertainment segments continued to face challenges during the year. To compete with seemingly cheaper products available in the market, the consumer durables segment undertook a series of marketing and branding campaigns to re-build and regain market leadership, which is expected to be continued in the current year.
The home entertainment segment on the other hand received a boost, thanks to the Malaysian government’s efforts in curbing piracy. SINGER’s range of sewing machines. On 26 June 2003, Unza incorporated a new wholly-owned subsidiary in Thailand, Unza (Thailand) Ltd, to better manage its business in this key ASEAN market. Utilisation of Proceeds The proceeds raised from the Special Issue and Restricted Issue by Unza pursuant to the Circular dated 13 April 2000 amounting to RM45. 07 million has been substantially utilised except for the balance of RM1. million (that was earmarked for the China operations), will be utilised for the construction of warehouse and purchase of machinery and equipment. Future Prospects The sluggish economic conditions both in the domestic and international markets continued to loom in the year 2002/2003. Following significant events such as, the Bali bombing, Iraq War and the outbreak of the Severe Acute Respiratory Syndrome (“SARS”), the Group was poised to face further challenges. Following a rationalization exercise carried out in the previous year to address the non-profitable ivisions, the air-conditioning manufacturing operations are expecting a more positive year ahead. Steps are taken to continuously research and develop high quality new products to be introduced into both the domestic and international marketplace. This factor coupled with the Group’s re-focused and streamlined marketing activities, has led to increased confidence in the products manufactured locally, in other countries. The direct selling and personal care businesses both locally and regionally, remained aggressive with consistent efforts in the introduction of new products at affordable prices and distribution strategies.
The direct selling business has an online global shopping mall to reach its customers on a worldwide basis, whereas the physical distribution is carried Dunham-Bush – Operators working on the inner fin tube machine at the Kajang factory in Malaysia. With new strategies and directions, coupled with the Malaysian Government continuously introducing steps and measures to stimulate domestic consumption, the Group is expected to perform better in the current financial year.
Appreciation On behalf of the Board, I would like to express my appreciation to the management, employees, sales agents and dealers for their commitment and dedication in their work and to all our customers, shareholders, business associates, financiers and the government authorities for their co-operation and support. I would also like to thank my fellow colleagues on the Board for their understanding and guidance in the past year and look forward to their continued support in the future. TAN SRI DATO’ JAFFAR BIN ABDUL Chairman 8 September 2003 Cosway Corporation Berhad (Co. No. 94949-H) (Incorporated in Malaysia) 17 Annual Report 2003 ceo’s review of operations The group foresee the opportunity of expanding the physical distribution network in terms of the number of stockists, to make its range of products more accessible both locally and in the Asian region as well. Coupled with eCosway’s virtual presence, backed by the continuous efforts in sourcing for quality and unique products, the prospects for the group remain encouraging. Singer (Malaysia) Sdn Bhd In the past few years, the demand for consumer durables has been relatively depressed due to several factors.
Intense price competition amongst major industry players and flooding of products brought in from China had a major impact on the industry. Hypermarkets in particular, are offering electrical products at 10% to 30% lower than the Japanese, Korean and local brands. The highly anticipated implementation of ASEAN Free Trade Area (“AFTA”) in January 2003 also affected key areas. In view of the implementation of AFTA, several Original Equipment Manufacturers (“OEM”) have opted to relocate or even ceased local production completely.
Distributors too found it more worthwhile sourcing for supplies from neighbouring countries in the ASEAN region. Cosway (M) Sdn Bhd For the financial year under review, the group recorded a pre-tax operating profit of RM40. 8 million, an increase of 122% from RM18. 4 million in the previous year. The improved result for the year, was attributed to lower losses incurred in the international operations and better results achieved by Cosway (M) Sdn Bhd (“Cosway Malaysia”) and eCosway. com Sdn Bhd (“eCosway”). Hygienic is one of Cosway’s range of personal care products.
The Malaysian operation registered a 2% increase in turnover and 7% increase in operating profit before tax. This was mainly due to aggressive new product launches. Cosway Malaysia has more than 24 years of experience in product sourcing and with the support of a global sourcing network, the company is committed to continuously develop and introduce new, exciting and competitively priced products. This factor coupled with the company’s reputation for selling quality products at affordable prices has enabled the Group to weather tough economic conditions.
The number of members in Singapore continued to grow with the new redemption centre set up in Singapore in the previous year. Members in the republic are simply attracted to the wide range of products available, which most importantly are very affordable. Our online global shopping mall eCosway, which was launched in October 2001, managed a 300% increase in revenue in the second year of operation. Thousands of products are stocked on this virtual mall and on-line sales have been brisk. eCosway also recently teamed up with Alliance Bank Malaysia in unveiling a co-branded credit card and partner merchant program.
This is a brand new unique concept in network marketing that allows spending via the credit cards and at the same time, earning members an income and exciting shopping rewards at participating retailers. This program received encouraging response from the members and is expected to grow further in the current year. With the onslaught of Chinese products, Singer (Malaysia) Sdn Bhd (“Singer Malaysia”) has made earlier preparations to bring in products from China, Thailand and Indonesia. To remain a going concern, local suppliers have had to slash prices.
This development resulted in better margins for Singer Malaysia. Customers too, enjoyed the lower prices and extended warranty, some up to 3 years for certain range of products. SINGER Malaysia expanded its product range to include motorcycles. In our continued efforts to re-build our business and regain market leadership, our marketing programs have been geared towards highlighting our unique selling points that give us a clear competitive edge over our competitors. For example, our Recruitment Is The Answer (“RITA”) campaign carried out last year, successfully recruited an additional
Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 18 Annual Report 2003 ceo’s review of operations 1,500 new sales agents. As a result of our expanded sales network, our market share and selling activities have increased. Our selling activities which include group canvassing, exhibitions and house demonstrations, were conducted nationwide. In a bid to enhance the company’s image, the sales agents were equipped with a set of corporate attire, sales kit and marketing materials to support their selling activities.
In line with our strength in personalized selling, we adopted the motto, “Reaching Our Customers First Before They Patronize Competitors’ Showroom” was well received by the sales personnel. The increase in selling activities were supported by attractive internal sales promotions and overseas incentive trips for the sales personnel. Aggressive promotions included purchase with purchase, loyalty programmes, free gifts and zerointerest instalment plans generated 18% increase in sales for the year under review, bucking the downtrend in the past few years. Unza’s Safi Goat’s Milk range of skin care products was launched in February 2003.
Unza Holdings Berhad In terms of the general economic climate, the year started on a fairly upbeat note. However, with significant events such as the downturn in the US economy, Bali bombing, Iraq War and finally the outbreak of SARS epidemic, there was much to test the Group. Revenue increased by 2. 7% during the financial year to reach RM391. 4 million. Whilst Unza Malaysia continued to make steady progress, Gervas Corporation Sdn Bhd (“Gervas”) and Formapac Sdn Bhd (“Formapac”) performed well below expectations causing our total business in Malaysia to decline slightly year on year.
The poor performance of Gervas caused us to accelerate the integration of sales and distribution functions into existing Unza Malaysia operations and this, combined with the introduction of new brands and products, has been successful in stabilising the business. Formapac was directly affected by the poor Gervas business, as Gervas is its largest contract manufacturing customer. SINGER’s range of electrical products. To compete in an increasingly difficult market and a new economic environment, we are gradually shifting from the traditional to new direct marketing approaches.
Towards the end of the financial year, we expanded our range of products to include motorcycles and mobile phone prepaid reload coupons, besides the usual electrical appliances and consumer sewing machines. This approach is the first of its kind in Malaysia. To further streamline the consumer durables business, the group decided to merge a major portion of The Catalog Shop’s operations with Singer’s. Upon this consolidation, Singer Malaysia can look forward to manage its business more effectively.
With the consolidation of our operations and the introduction of integrated marketing programs to generate more sales, we are confident of an expansion in the current consumer base in both new and existing markets. Our international business managed a creditable 6. 5% growth, despite the weak economic conditions and severe impact from the SARS outbreak towards the end of the financial year. Our business in Vietnam and China were also severely affected by the emergence of high quality counterfeit products of ENCHANTEUR, which disrupted our market pricing and supply lines to the retail trade.
Our diaper distribution business, which generates low margins, also suffered a dramatic decline in sales due to our inability to price competitively, and we have now withdrawn from this business. However, against this, PT Unza Indonesia had a very good second year and our two new companies, Unza Middle East Limited and Unza Overseas Limited which handle our export business, posted good first year results. Profit before tax grew from RM44. 0 million to RM48. 2 million representing an increase of 9. 5%.
The higher increase in profits compared to sales was primarily due to greater efficiencies and lower cost of goods due to better product mix. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 19 Annual Report 2003 ceo’s review of operations Our key brands all performed satisfactorily and SAFI, our range of Malay toiletries, overtook ENCHANTEUR to become our largest brand in Malaysia. On a Group-wide basis, ENCHANTEUR, despite attacks from counterfeiters, continued to make good progress.
During the year, we also re-launched our WAY WAY concentrated detergent brand as well as our GERVENNE Royal Jelly range of facial cleansers. In China, we purchased a 235,000-square feet plot of land in the Dongguan Science Centre Park, where we intend to build a new factory in the financial year 2003/04. As part of the development, we plan to convert our China Joint-Venture Company, Dongguan Unza Consumer Products, into a wholly-owned foreign enterprise. The new rotary screw compressor manufacturing factory – Hartford Yantai, in China. The Enchanteur range by Unza. taxation of RM2. 4 million for the year under review with a sale value of RM84. 1 million. However 70% of its sales are inter-company sales to the Malaysian and China factories. Despite the reduction in sales from RM60. 2 million in the previous financial year to RM17. 7 million during the year under review due to the closure of its chiller factory in the year 2001, Dunham-Bush Inc. of Harrisonburg USA, under its re-focused activities of after sale services, warranty and parts supplies as well as the marketing of chillers and related air-conditioning products manufactured by the Malaysian factories, had reduced its losses to RM3. 8 million for the year under review compared to a loss incurred of RM5. 51 million in the previous financial year. The continued adverse economies of the USA and Latin America have resulted in the cessation of the Air Handling Units (“AHU”) plant of Dunham-Bush Industries De Mexico S. A. de C. V. However, the company will continue its parts, services, warranty and trading activities through its existing marketing office in Mexico City. A substantial provision was made for losses arising from the cessation, which resulted in a loss of RM21. 87 million including a provision for cessation costs of RM10. 8 million for the financial year under review. The results of the UK operations for the financial year ended 30 April 2003 continued to be affected by the tough market environment in the country and suffered a loss of RM2. 4 million for the year under review compared to a loss of RM1. 4 million for the previous year. In spite of the prolonged weak global economy, the group’s 55%-owned subsidiary in China, Dunham-Bush Yantai Co. Ltd. continued to be profitable, achieving a profit of RM10. 79 million compared to a profit of RM8. 55 million recorded in the previous financial year.
The new 55%-owned rotary screw compressor manufacturing factory, Hartford Yantai, which progressed satisfactorily in the set-up of the factory, sourcing of equipment and recruitment of the Dunham-Bush (Malaysia) Bhd The performance of the local industrial and commercial building sectors remained soft during the year under review and this had affected the Malaysian operations. However its export activities recorded higher sales of RM61. 4 million for the year ended 30 April 2003 compared to RM56. 7 million achieved for the previous financial year.
During the year under review, products from the Malaysian operations continued to maintain its market position in the ASEAN countries (including Taiwan and Vietnam), continental Europe, East European countries, India, Pakistan, Sri Lanka, Bangladesh, Japan, Russia, the former states of Soviet Union, Africa, South Africa, Middle-East, Mexico, Central America and Latin American countries. Since the closure of the chiller production line in Dunham-Bush Inc. in 2001, the export sales of high technology chiller products from Malaysia to USA has increased year on year. Export sales to the USA amounted to RM6. 4 million during the financial year under review, an increase of 106% over the sales of RM3. 37 million for the previous financial year. In USA, the patented screw compressors manufacturing operations remained profitable, achieving a profit before Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 20 Annual Report 2003 ceo’s review of operations necessary management staff, incurred a small pre-operating loss during the year under review. Upon the full production of rotary screw compressors in the near future, the Chinese subsidiary is expected to perform well.
Berjaya HVN Sdn Bhd For the year under review, the group achieved a higher revenue of RM24. 9 million compared to RM16. 7 million in the previous year, recording an increase of 37. 6% over the previous year. Despite the higher revenue, the group registered a lower pre-tax profit of RM0. 3 million compared to RM0. 9 million previously. The higher revenue was mainly due to the increased sales of Paramount videos. Berjaya HVN Sdn Bhd (“Berjaya HVN”) was appointed as the Paramount Home video licensee/distributor on July 2002 for Malaysia and Singapore.
The reduced pre-tax profit was mainly due to the provision of under recouped royalty, and increased marketing and financial expenses. Generally, all three operating companies within the group reported higher revenue compared to the previous year, largely due to the increased marketing activities in anticipation of a slower economic growth and lower consumer spending in the year under review. In Malaysia, the worsening video piracy situation and sluggish economic growth posed continuous challenges to the video distribution and retail businesses.
Therefore, the company had resorted to promoting its non-video product, Oregon Scientific’s educational products which are beginning to make an impact in the local educational toy sector. In Brunei Darussalam, the group’s distribution business was also affected by the sudden surge in piracy, compared to a more positive year in 2002. Our video retail arm, Direct Vision Sdn Bhd which is also a franchisee of Video Ezy continued to improve its performance. A new Video Ezy outlet was opened at Arena Green Apartments, a project developed by Berjaya Land Berhad.
This new outlet would be a test case to see the effectiveness of bringing the stores to the doorsteps of the customers. Apart from popular movie titles, Berjaya HVN is also promoting the Oregon Scientific range of educational products. In Singapore, the distribution business also faced a challenging year as a result of the Iraq war and the outbreak of SARS in the region. Nevertheless, HVN Singapore reported an increase in sales as compared to the previous year. The increase was largely due to the additional Paramount label secured during the year.
Meanwhile, the company was appointed by Vivendi Universal to distribute educational PC games. We see the distribution of educational PC games a complement to our existing distribution of educational video titles like Barney and Sesame Street in Singapore. Since May 2003, the Government of Malaysia has carried out “Ops Tulen”, followed by the enforcement of the hologram sticker, which came into effect on 15 July 2003 to contain piracy in the country. The constant crackdown by the authorities on illegal traders and suppliers of pirated VCD/ DVDs had paid off and benefited the video industry.
Barring unforeseen circumstances, with the continuous efforts by the Malaysian Government to curb video piracy and the company’s proactive measures to encourage demand, the HVN group would be able to improve on the current performance in the coming year. AL CHUAH CHOONG HEONG Chief Executive Officer 8 September 2003 Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 21 Annual Report 2003 audit committee report The Board of Directors of Cosway Corporation Berhad is pleased to present the report of the Audit Committee for the financial year ended 30 April 2003.
AUDIT COMMITTEE MEMBERS AND MEETING ATTENDANCES The members of the Audit Committee comprises the following:Tan Sri Dato’ Jaffar bin Abdul – Chairman/Independent Non-Executive Director Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj – Independent Non-Executive Director Dato’ Sulaiman bin Alias – Independent Non-Executive Director Robert Yong Kuen Loke – Non-Independent Non-Executive Director The Audit Committee held five (5) meetings during the financial year ended 30 April 2003. The details of attendance of the Audit Committee members are as follows:Name Tan Sri Dato’ Jaffar bin Abdul Y.
A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj Dato’ Sulaiman bin Alias Robert Yong Kuen Loke 4/5 4/5 4/5 Attendance 4/5 The Group Internal Audit General Manager and the Senior General Manager of Group Accounts and Budgets were also invited to attend the audit committee meetings. The Chief Executive Officer and the external auditors were also invited to attend two of these meetings. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE The activities undertaken by the Audit Committee during the financial year ended 30 April 2003 included the following:1.
Reviewed the quarterly and year-to-date unaudited financial results before submission to the Board for consideration and approval; 2. 3. 4. Reviewed the external auditors’ audit report, management letter and responses thereto; Reviewed the external auditors’ nature and scope of the audit before commencement of the audit; Reviewed the internal audit reports presented and considered the major findings of internal audit in the Group’s operating subsidiaries and associated companies through the review of internal audit reports tabled and management responses thereof and ensuring significant findings are adequately addressed by management; 5. . Reported to the Board on its activities and significant findings and results; Reviewed the Circular to Shareholders in relation to recurrent related party transactions. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 22 Annual Report 2003 audit committee report SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION The primary function of Internal Audit Department is to assist the Audit Committee in discharging its duties and responsibilities.
Their role is to provide the Committee with independent and objective reports on the effectiveness of the system of controls and the extent of compliance with established policies, procedures and guidelines of the operating units within the Group and thereafter highlight weaknesses (if any) and provide suitable recommendations for improvements. Throughout the financial year ended 30 April 2003, operational and compliance audits, investigations, and follow-up audits were carried out on the activities of various operational units within the Group.
Internal audits were carried out throughout the year on Singer (Malaysia) Sdn Bhd (“Singer”) and The Catalog Shop Sdn Bhd (“Catalog Shop”) outlets. A total of 145 audits including handover (63), complete (37), assessment (20), specific (21) and investigation (4) audits were completed. Specific audits were also carried out on Singer’s operations including purchasing, parts & service and cooperative sales. Weaknesses in credit verification, collection, management control reports, payment to suppliers and stocks were highlighted for the Management’s attention.
Findings on cash management, stocks and debtors were also noted on the other operating units involved in direct selling and trading of consumer products, audio and video products, manufacturing and trading of washing detergents and rental of properties owned. Audit reports covering the Group’s various divisions and operating units were presented to the Committee during the financial year under review. TERMS OF REFERENCE OF THE AUDIT COMMITTEE 1. Membership The Audit Committee hall be appointed by the Board from amongst the Directors and shall consist of not less than three members, a majority of whom shall be Independent Directors and at least one member of the Committee must be a member of the Malaysian Institute of Accountants or possesses such other qualifications and/or experience as approved by the Kuala Lumpur Stock Exchange (“KLSE”). A quorum shall consist of two members and a majority of the members present must be Independent Directors.
If a member of the Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced to below three, the Board of Directors shall, within three months of that event, appoint such number of new members as may be required to make up the minimum number of three members. 2. Chairman The Chairman of the Committee shall be an Independent Director appointed by the Board. He shall report on each meeting of the Committee to the Board. . Secretary The Company Secretary shall be the Secretary of the Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to the Committee members prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Committee and circulating them to the Committee members and to the other members of the Board. Cosway Corporation Berhad Co. No. 194949-H) (Incorporated in Malaysia) 23 Annual Report 2003 audit committee report 4. Frequency of Meetings Meetings shall be held not less than four times a year and will normally be attended by the Director charged with the responsibilities of the Group’s finance and Head of Internal Audit. The presence of external auditors will be requested if required and the external auditors may also request a meeting if they consider it necessary. 5.
Authority The Committee is authorised by the Board to investigate any activity within its terms of reference and shall have unrestricted access to both the internal and external auditors and to all employees of the Group. The Committee is also authorised by the Board to obtain external legal or other independent professional advice as necessary. The Committee is also authorised to convene meetings with the external auditors excluding the attendance of the executive members of the Committee, whenever deemed necessary. 6.
Duties The duties of the Committee shall be:(a) To review and recommend the appointment of external auditors, the audit fee and any questions of resignation or dismissal including the nomination of person or persons as external auditors; (b) To discuss with the external auditors where necessary, on the nature and scope of audit and to ensure coordination of audit where more than one audit firm is involved; (c) To review the quarterly results and year-end financial statements prior to the approval by the Board, focusing on:going concern assumption compliance with accounting standards and regulatory requirements any changes in accounting policies and practices significant issues arising from the audit major judgemental areas (d) To prepare the Audit Committee Report at the end of each financial year; (e) To discuss problems and reservations arising from the interim and final external audits, and any matters the external auditors may wish to discuss (in the absence of management, where necessary); (f) To review the external auditors’ management letter and management’s response; (g) To review any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course f conduct that raises questions of management integrity; (h) To do the following in relation to the internal audit function:review the adequacy of scope, functions and resources of the internal audit department and that it has the necessary authority to carry out its work; review internal audit programme; ensure coordination of external audit with internal audit; Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 24 Annual Report 2003 audit committee report – consider the major findings of internal audit investigations and management’s response, and ensure that appropriate actions are taken on the recommendations of the internal audit function; – eview any appraisal or assessment of the performance of the staff of the internal audit function; approve any appointment or termination of senior staff member of the internal audit function; keep itself informed of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his/her reason for resignation; – to monitor related party transactions entered into by the Company and its subsidiaries, and to ensure that the Directors report such transactions annually to shareholders via the annual report; – to review and monitor the effectiveness of internal control systems and to evaluate the systems with the external auditors; (i) To carry out such other responsibilities, functions or assignments as may be defined jointly by the Audit Committee and the Board of Directors from time to time; (j) In compliance with Paragraph 15. 7 of the KLSE’s Listing Requirements, where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements, the Committee must promptly report such matter to KLSE. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 25 Annual Report 2003 statement on corporate governance The Malaysian Code on Corporate Governance (“Code”), introduced in March 2000, sets out the principles and best practices that companies may apply in the direction and management of their business and affairs towards achieving the ultimate objective of maximising shareholder value. The principles and est practices of the Code were incorporated into the Listing Requirements of the Kuala Lumpur Stock Exchange in January 2001 and listed companies are required to disclose the extent of compliance with the Code or in areas where there are deviations, the alternative measures undertaken. Set out below is a description of how the Group has applied the key principles and the extent of its compliance with the best practices during the financial year ended 30 April 2003. (A) Directors (i) The Board The Board has overall responsibility for the strategic direction and control of the Group. The Board meets regularly on a quarterly basis with additional meetings being convened as and when necessary. For the financial year ended 30 April 2003, the Board met six (6) times.
The record of attendance for the Directors who held office during the said financial year is set out below:Directors Tan Sri Dato’ Jaffar bin Abdul Dato’ Kanagalingam A/L Veluppillai Chuah Choong Heong Dato’ Ismail bin Osman Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj Tan Sri Dato’ Tan Chee Sing Robert Yong Kuen Loke Dato’ Sulaiman bin Alias (ii) Board Balance There are presently eight (8) Board members in Cosway Corporation Berhad comprising:The Chairman (Independent Non-Executive Director) The Chief Executive Officer One Executive Director Three Non-Independent Non-Executive Directors Two Independent Non-Executive Directors 5/6 3/6 5/6 3/6 Attendance 5/6 5/6 5/6 5/6
The Board includes members with a wide range of knowledge and experience in the fields of finance, sales and marketing, security, information technology, law, property investment and development which are relevant to the business operations of the Group. The Directors’ profiles are set out on Pages 3 to 5 of the Annual Report. The composition of the Board is broadly balanced to reflect the interests of major shareholders, management and minority shareholders. There is a clearly accepted division of responsibilities between the Chairman and Chief Executive Officer to ensure a balance of power and authority. The Chairman is responsible for ensuring Board effectiveness and standards of conduct.
He has authority over the agenda for each Board meeting to ensure that all Directors are provided with relevant information on a timely basis. The general agenda may include minutes of previous meetings of the Board and its sub-committees, quarterly financial results of the Group, issues requiring the Board’s deliberation and Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 26 Annual Report 2003 statement on corporate governance approval, reports or briefings on operational and financial issues of major subsidiaries and other ad-hoc reportings. The Chief Executive Officer has overall responsibility for the Group’s business operations, organisational effectiveness and the implementation of Board policies and decisions.
The presence of three independent non-executive directors fulfil a pivotal role in corporate accountability as they provide unbiased and independent views, advice and judgement. Tan Sri Dato’ Jaffar bin Abdul has been identified as the Senior Independent Non-Executive Director of the Board to whom concerns may be conveyed. (iii) Supply of Information The Directors have full and timely access to information concerning the Company and the Group. The Directors are provided with the relevant agenda and Board papers in sufficient time prior to Board meetings to enable them to obtain further explanation and clarification to facilitate informed decision-making.
The Board papers include reports on the Group’s financial, operational and corporate developments. The Directors have access to the advice and services of the Company Secretary and the senior Management staff in the Group and may obtain independent professional advice at the Company’s expense in furtherance of their duties. (iv) Appointment to the Board The Nomination Committee was formed in December 2001 and comprises the following members:Tan Sri Dato’ Jaffar bin Abdul Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj Robert Yong Kuen Loke Independent/Non-Executive Non-Independent/Non-Executive Independent/Non-Executive
The Committee is empowered by its terms of reference to perform the following primary functions:a) b) c) Recommend new nominations to the Board; Recommend to the Board, Directors to fill the seats on Board Committees; Review annually the required mix of skills and experience and other qualities including core competencies which the Non-Executive Directors should bring to the Board. (v) Directors’ Training All Directors have attended and completed the Mandatory Accreditation Programme (“MAP”) conducted by the Research Institute of Investment Analysts Malaysia (RIIAM), an affiliate company of the Kuala Lumpur Stock Exchange (“KLSE”). The Directors will continue to undergo other relevant training programmes to further enhance their skills and knowledge as well as the latest statutory and/or regulatory requirements on a continuous basis in compliance with Practice Note No. 15/2003 of the KLSE Listing Requirements on the Continuing Education Programme. vi) Re-election of Directors Any Director appointed during the year is required under the Company’s Articles of Association, to retire and seek election by shareholders at the following Annual General Meeting (“AGM”) immediately after their appointment. The Articles also require that one-third of the Directors including the Managing Director, if any, to retire by rotation and seek re-election at each AGM and that each Director shall submit himself for re-election once every three years. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965. Cosway Corporation Berhad (Co. No. 94949-H) (Incorporated in Malaysia) 27 Annual Report 2003 statement on corporate governance (B) Directors’ Remuneration i) Remuneration Committee The Remuneration Committee was formed in December 2001 and comprise the following members:Tan Sri Dato’ Jaffar bin Abdul Y. A. M. Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj Robert Yong Kuen Loke Independent/Non-Executive Non-Independent/Non-Executive Independent/Non-Executive The primary function of the Remuneration Committee is to set up the policy framework and to make recommendations to the Board on all elements of the remuneration package and other terms of employment.
NonExecutive Directors’ Remuneration will be a matter to be decided by the Board as a whole with the Director concerned abstaining from deliberations and voting on decision in respect of his individual remuneration. (ii) Details of the Directors’ Remuneration The Directors are satisfied that the current level of remuneration are in line with the responsibilities expected in the Group. The aggregate Directors’ remuneration paid or payable to all Directors of the Company by the Group and categorised into appropriate components for the financial year are as follows:> RM’000 Salaries and other BenefitsBonus 433 433 in-kind 39 10 49 > Fees Executive Non-Executive 35 35 emoluments 1,517 36 1,553 Total 1,989 81 2,070
The number of Directors of the Company who served during the financial year and whose total remuneration from the Group falling within the respective band are as follows:Number of Directors Executive Below RM50,000 RM50,001 – RM100,000 RM300,001 – RM350,000 RM1,600,001 – RM1,650,000 1 1 2 Non-Executive 2 1 3 Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 28 Annual Report 2003 statement on corporate governance (C) Relations with Shareholders and Investors The Company recognises the importance of keeping shareholders and investors informed of the Group’s business and corporate developments. Such information is disseminated via the Company’s annual reports, circulars to shareholders, quarterly financial results and the various announcements made from time to time. The Group maintains a website at www. berjaya. c which shareholders as well as members of the public are invited to access for the latest information on the Group. Alternatively, they may obtain the Company’s latest announcements via the Kuala Lumpur Stock Exchange website at www. klse. com. my. The Annual General Meeting (“AGM”) remains the principal forum for dialogue with shareholders where they may seek clarifications on the Group’s businesses. Shareholders are encouraged to meet and communicate with the Board at the AGM and to vote on all resolutions. (D) Accountability and Audit (i) Financial Reporting The Directors aim to provide a balanced and meaningful assessment of the Group’s financial performance and prospects, primarily through the annual report and quarterly financial statements.
The Directors are also responsible for ensuring the annual financial statements are prepared in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysia. A statement by the Directors of their responsibilities in the preparation of financial statements is set out in the ensuing section. (ii) Statement of Directors’ Responsibility in respect of the Financial Statements Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group and of the results and cash flows of the Company and of the Group for that period.
In preparing those financial statements, the Directors are required to:• • select suitable accounting policies and then apply them consistently; state whether applicable accounting standards have been followed, subject to any material departures being disclosed and explained in the financial statements; • • make judgements and estimates that are reasonable and prudent; and prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Director are responsible for keeping accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 1965.
The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 29 Annual Report 2003 statement on corporate governance (iii) Internal Control The Board acknowledges that it is responsible for maintaining a sound system of internal controls, which provides reasonable assessment of effective and efficient operations, internal financial controls and compliance with laws and regulations as well as with internal procedures and guidelines. A Statement on Internal Control of the Group is set out on Page 31 of the Annual Report. iv) Relationship with the auditors Through the Audit Committee, the Company has established a transparent and appropriate relationship with the Group’s auditors, both internal and external. From time to time, the auditors highlighted to the Audit Committee and the Board on matters that require the Board’s attention. (E) Other Information Sanctions and/or Penalties Imposed On 16 August 2002, the Company was fined RM15,000 by the Kuala Lumpur Stock Exchange for a delay of 10 market days in releasing the Group’s unaudited financial results for the fourth quarter ended 30 April 2001. Cosway Corporation Berhad (Co. No. 194949-H) (Incorporated in Malaysia) 30 Annual Report 2003 statement on nternal control The Board of Directors of Cosway Corporation Berhad (“Cosway” or “the Group”) recognises that it is responsible for the Group’s system of internal control and for reviewing its adequacy and integrity. Notwithstanding, such a system 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. The Board’s primary objective and direction in managing the Group’s principal business risks are to enhance the Group’s ability to achieve its business objectives, which are in tandem with the Group’s Mission.
In order to measure the achievement of the business objectives, the Board monitors the Group’s performance and profitability at its Board meetings and provides feedback to the Executive Directors. The Chief Executive Officer (“CEO”) and senior management team are assigned with the responsibility of managing the Group. They are accountable for the conduct and performance of their businesses within the agreed business strategies. Through their review of performance and operations reports, as well as by attending management meetings, the CEO and senior management teams monitor the day-to-day affairs of the Group. Other than through the above meetings and reports, the CEO and senior management also regularly meet with the heads of departments and subsidiaries to address any matters arising.
Significant issues are brought to the attention of the CEO, who in turn, will direct these matters, if necessary, to the Board for its attention. In respect of the Group’s two listed subsidiaries, Unza Holdings Berhad (“Unza”) and Dunham-Bush (Malaysia) Bhd (“DBush”), the Board has representatives on the Boards of Unza and DBush respectively, to serve the Group’s interest. The Board has assigned the Audit Committee with the duty of reviewing and monitoring the effectiveness of the Group’s system of internal control. The Audit Committee receives reports from both the internal and external auditors. The Internal Audit function furnishes the Audit Committee with reports from visits conducted at various operating units.
The external auditors provide assurance in the form of their annual statutory audit of the financial statements. Further, any areas for improvement identified during the course of the statutory audit by the external auditors are brought to the attention of the Audit Committee through management letters, or are articulated at Audit Committee meetings. The Board reviews the minutes of the Audit Committee’s meetings. The Report of the Audit Committee is set out on Pages 22 to 25 of the Annual Report. The Group has an extensive system of internal control that enables the management to ensure that established policies, guidelines and procedures are followed and complied with.
Some key features of Cosway’s system of internal control include: • • • • • • • Annual budgeting process Monitoring mechanisms in the form of comprehensive management reports and scheduled management meetings Clear organisation structure with defined reporting lines and appropriate degrees of empowerment Monetary limits to authority to minimise risks of unauthorised transactions Capable workforce with clear job descriptions, and continuous training efforts Policies and Procedures which set out the expected standards for operations Independent assurance on the system of internal control from regular internal audit visits In line with the Malaysian Code of Corporate Governance, and as part of the