Looking Beyond... ANNUAL REPORT. Contact us at: PosLine

Transcription

1 POS MALAYSIA & SERVICES HOLDINGS BERHAD 491-K LAPORAN TAHUNAN 2005 ANNUAL REPORT 2005 ANNUAL REPORT Contact us at: PosLine csc@pos.com.my Telephone : Facsimile : Level 33, Menara Dayabumi, Jalan Sultan Hishamuddin, Kuala Lumpur Looking Beyond...

2 OUR VISION TO BE the reputable regional partner in mail, express delivery, logistics services and related financial solutions. OUR MISSION DEVELOP and provide quality, reliable, timely and innovative services to all our customers and partners. PROVIDE logistics and related business solutions through our competencies, systems and networks. SAFEGUARD and maximize shareholders value through prudent business decisions and sound financial management. CONSTANTLY STRIVE to be a caring corporate citizen by supporting nation building and community services. NURTURE and sustain conducive working and learning environment for our people through teamwork and shared values. COVER RATIONALE Looking Beyond Looking Beyond is the theme for this annual report. The cover design represents the beginning of many new journeys. There are boundless opportunities beyond the horizon and the children signify growth potential. Sand is a platform that allows itself to be imprinted and the footprints mark the path to excellence. As PSH progresses, it will leave memorable and positive impressions to its shareholders, customers and employees.

3 what sinside POS MALAYSIA & SERVICES HOLDINGS BERHAD (491-K) ANNUAL REPORT 2005 PG 26 chairman s statement PG 07 group structure PG 08 corporate information PG 50 operations review CONTENTS Notice of the 74th 02 Annual General Meeting Notice of Book Closure 04 for Dividend Payment Statement Accompanying 05 Notice of Annual General Meeting Group Structure 07 Corporate Information 08 Board of Directors 10 Profile of Directors 12 PSH-PMB Management 24 Chairman s Statement 26 Board of Directors 32 Pos Malaysia Berhad Corporate Structure 33 Pos Malaysia Berhad State Managers 34 Pos Malaysia Berhad Calendar of Events 36 Corporate Highlights 44 Operations Review 50 Corporate Governance Statement 64 Statement of Internal Control 71 Director s Responsibility Statement 73 Additional Compliance Information 74 Audit Committee Report 76 Financial Statements 81 Properties Owned 130 Analysis of Shareholdings 196 Form of Proxy

4 notice of 74TH ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the 74th Annual General Meeting of Pos Malaysia & Services Holdings Berhad will be held at the Legend Grand Ballroom, Level 9, The Legend Hotel, Putra Place, 100, Jalan Putra, Kuala Lumpur on Tuesday, 13th June 2006 at a.m. for the following purposes: AS ORDINARY BUSINESS: 1. To receive and adopt the Directors Report and Statement of Directors, the audited Financial Statements and the Report of the Auditors for the financial year ended 31 December (Ordinary Resolution 1) 4. To re-elect the following Directors who retire in accordance with Article 109 of the Company s Articles of Association, and being eligible, offered themselves for re-election. (a) Dato Zukri bin Samat (Ordinary Resolution 6) 2. To declare a first and final dividend and special dividend of 10 sen per share and 5 sen per share respectively less tax in respect of the financial year ended 31 December 2005 as recommended by the Directors. (Ordinary Resolution 2) (b) Datuk Nazariah binti Mohd Khalid (Ordinary Resolution 7) (c) Dato Ng Kam Cheung (Ordinary Resolution 8) 3. To re-elect the following Directors who retire in accordance with Article 102 of the Company s Articles of Association, and being eligible, offered themselves for re-election: 5. To re-appoint Messrs KPMG as auditors of the Company for the ensuing year and to authorise the Directors to fix their fees. (Ordinary Resolution 9) (a) Dato Ikmal Hijaz bin Hashim (Ordinary Resolution 3) AS SPECIAL BUSINESS: (b) Datuk Abu Huraira Bin Abu Yazid (Ordinary Resolution 4) (c) Mr. Wee Hoe Gooi Hoe Soon (Ordinary Resolution 5) To consider and, if thought fit, pass the following resolutions, with or without modifications, as ordinary resolutions: 6. Directors Fees That the payment of the Directors fees of RM194,140 for the financial year ended 31 December 2005 be approved. (Ordinary Resolution 10) 2

5 NOTICE OF 74TH ANNUAL GENERAL MEETING continued 7. Power to allot and issue shares pursuant to Section 132D of the Companies Act, be deleted in its entirety and replaced with the new Article 164 which reads as follows:- That the Directors of the Company, pursuant to Section 132D of the Companies Act 1965 be authorised, to allot and issue shares in the Company at such time until the conclusion of the next Annual General Meeting and for such consideration and such terms and conditions as they shall in their absolute discretion deem fit in accordance with the provisions of the Articles of Association of the Company provided always that the aggregate number of new shares to be issued shall not exceed ten per centum (10%) of the issued and paid-up share capital of the Company for the time being, subject always to the approvals of the regulatory authorities. (Ordinary Resolution 11) 8. To consider and, if thought fit, pass the following resolution, with or without modification, as a special resolution: Proposed Amendment to Article 164 of the Company s Articles of Association That subject always to the provisions of the Companies Act, 1965 and the Listing Requirements of Bursa Malaysia Securities Berhad, the existing Article 164 of the Articles of Association of the Company, the wordings of which are set out below:- Article The directors shall from time to time in accordance with Section 169 of the Act cause to be prepared and laid before the Company in general meeting such profit and loss account, balance sheet and reports as are referred to in that Section Provided Always that the interval between the close of the financial year of the Company and the issue of the annual audited accounts, the directors and auditors reports shall not exceed four (4) months. Article The Directors shall from time to time in accordance with the provisions of the Act, cause to be prepared profit and loss accounts, balance sheet and related reports ( these financial statements ) as are required under the Act. A copy of these financial statements shall be:- Issued to the Bursa Malaysia Securities Berhad within four (4) months from the close of a financial year of the Company; and Laid before the Company in general meeting not more than six (6) months after the close of the financial year and not less than twenty one (21) days before the date of the general meeting, be sent to every Member of the Company and to every person who is entitled to receive notice of general meetings from the Company under the provisions of the Act, or of these Articles. AND THAT the Board of Directors of the Company be and are hereby authorised to give full effect to the said amendment, alteration, modification and deletion to the Articles of Association of the Company with full powers to make or assent to any variations, modifications, and/ or amendments as may be required or imposed or permitted by the relevant authorities and to take steps and to do all acts, things and deeds as they may deem necessary to give full effect to this resolution. (Special Resolution 1) 9. To transact any other business of which due notice has been given. 3

6 notice of BOOK CLOSURE FOR DIVIDEND PAYMENT NOTICE IS HEREBY GIVEN THAT a first and final dividend and special dividend of 10 sen and 5 sen per share respectively less tax in respect of the financial year ended 31 December 2005 if approved by the shareholders at the 74 th Annual General Meeting, will be paid on 8 August 2006 to Depositors whose names appear in the Record of Depositors on 12 July Further notice is hereby given that the Register of Members will be closed from 13 July 2006 to 14 July 2006 (both dates inclusive) for the determination of first and final dividend. A Depositor shall qualify for entitlement to the dividend only in respect of: (a) shares transferred into the Depositor s securities account before 4.00 p.m. on 12 July 2006 in respect of ordinary transfers; and (b) shares bought on the Bursa Malaysia Securities Berhad on cum entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad. By Order of the Board, Sabrina Albakri Abu Bakar (LS8508) Company Secretary Kuala Lumpur 22 May 2006 Notes: 1. A member entitled to attend and vote is entitled to appoint one or more proxies to attend and vote in his stead. Where a member appoints two or more proxies to attend the Meeting, the member shall specify the proportion of his shareholdings to be represented by each proxy. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation s seal or under the hand of an officer or attorney duly authorised. 3. The instrument appointing a proxy must be deposited at the Company s Share Registrar s office at Tenaga Koperat Sdn Bhd, 20 th Floor, Plaza Permata (formerly known as IGB Plaza), Jalan Kampar, Off Jalan Tun Razak, Kuala Lumpur not less than forty eight (48) hours before the time set for the Meeting or any adjournment thereof. 4. Additional Notes on Special Business: 4.1 Resolution on Directors Fees The proposed Ordinary Resolution No. 10 is in accordance with the Company s Articles of Association and if passed, will authorize the payment of Directors fees to Directors of the Company for their services during the financial year ended 31 December Resolution Pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution No. 11 if passed, is to give the Directors of the Company flexibility to issue and allot shares for such purposes as the Directors in their absolute discretion consider to be in the interest of the Company, without having to convene a general meeting. This authority will expire at the next Annual General Meeting of the Company. 4.3 Resolution on Proposed Amendment to Article 164 of the Company s Articles of Association The proposed Special Resolution 1 is to be in line with the regulatory requirements of the Companies Act, 1965 and the Listing Requirements of Bursa Malaysia Securities Berhad. 5. The Statement accompanying this Notice of Annual General Meeting is on pages 5 and 6 of the Annual Report. 4

7 statement ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (Pursuant to Paragraph 8.28(2) of Bursa Malaysia Securities Berhad Listing Requirements) DIRECTORS SEEKING RE-ELECTION Directors seeking re-election pursuant to the Company s Articles of Association:- Article 102 Article 109 Dato Ikmal Hijaz bin Hashim Dato Zukri bin Samat Datuk Abu Huraira bin Abu Yazid Datuk Nazariah binti Mohd Khalid Mr. Wee Hoe Gooi Hoe Soon Dato Ng Kam Cheung The details of the six (6) Directors standing for re-election or re-approintment are as set out in their respective profiles which appear in the Profile of Directors on pages 12 to 22 of this Annual Report. Their securities holdings in the Company are as set out in the Analysis of Shareholdings which appear on pages 196 to 199 of this Annual Report. BOARD MEETINGS A total of 19 Board of Directors meetings were held during the financial year ended 31 December A total of 4 Board of Directors Meetings were held at Conference Room, Level 23A, Menara Asia Life, 189 Jalan Tun Razak, Kuala Lumpur, 1 Board of Directors Meeting was held at Board Room, 8 th floor, Ibu Pejabat Pos, Kompleks Dayabumi, Kuala Lumpur and the balance 14 Board of Directors Meeting were held at Conference Room, Level 33, Menara Dayabumi, Jalan Sultan Hishamuddin, Kuala Lumpur. The details of the Board of Directors Meeting are as follows:- No Date of the Meeting Time 1 Monday, 17 January a.m. 2 Friday, 4 February a.m. 3 Tuesday, 15 February p.m. 4 Friday, 25 February a.m. 5 Tuesday, 29 March p.m. 6 Tuesday, 26 April p.m. 7 Thursday, 26 May p.m. 8 Tuesday, 28 June p.m. 9 Tuesday, 5 July a.m. 10 Monday, 18 July a.m. 11 Tuesday, 26 July p.m. 12 Friday, 19 August p.m. 13 Monday, 29 August a.m. 14 Friday, 9 September p.m. 15 Tuesday, 27 September p.m. 16 Tuesday, 29 September p.m. 17 Tuesday, 25 October p.m. 18 Wednesday, 14 December a.m. 19 Thursday, 22 December p.m. 5

8 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING continued The details of the attendance of the Directors are as follows:- No Directors Attendance 1 Tan Sri Abdul Halim bin Ali (resigned w.e.f. 28 February 2005) 4/4 2 Tan Sri Adam Kadir (appointed w.e.f. 1 March 2005) 15/15 3 Datuk Mohamed Adnan bin Ali (resigned w.e.f. 11 April 2006) 18/19 4 Datuk Alias bin Ali 17/19 5 Datuk Abdul Majid bin Haji Hussein 19/19 6 Dato Zukri bin Samat (appointed w.e.f. 8 March 2006) N/A 7 Datuk Nazariah binti Mohd Khalid (appointed w.e.f. 14 April 2006) N/A 8 Dato Ng Kam Cheung (appointed w.e.f. 26 April 2006) N/A 9 Dato Ikmal Hijaz bin Hashim 18/19 10 Datuk Abu Huraira bin Abu Yazid 18/19 11 Mr. Segarajah Ratnalingam 17/19 12 Mr. Wee Hoe Gooi Hoe Soon 17/19 13 Mr. Koshy Thomas* 1/1 14 YM Tengku Zafrul bin Tengku Abdul Aziz** (ceased to be Alternate Director w.e.f. 5 May 2006) * Mr Koshy Thomas Alternate Director to Mr Segarajah Ratnalingam ** Tengku Zafrul bin Tengku Abdul Aziz Alternate Director to Mr Wee Hoe Gooi Hoe Soon. PLACE, DATE AND TIME OF THE 74 th ANNUAL GENERAL MEETING The 74 th Annual General Meeting will be held at the Legend Grand Ballroom, Level 9, The Legend Hotel, Putra Place, 100, Jalan Putra, Kuala Lumpur on Tuesday, 13 th June 2006 at a.m. 6

9 GROUP structure AS AT 31 MARCH % POS MALAYSIA BERHAD 100% DATAPOS (M) SDN BHD 100% POS LOGISTIC- FULSERVE SDN BHD 100% PSH ALLIED BERHAD 100% POSLAJU (M) SDN BHD 100% POS TAKAFUL AGENCY SDN BHD 100% PSH MERCHANDISE SDN BHD 100% VIRTUAL POS SDN BHD 55% DIGICERT SDN BHD 100% PSH CAPITAL PARTNERS SDN BHD 100% PRESTIGE FUTURE SDN BHD LEGEND 100% PSH VENTURE CAPITAL SDN BHD 100% PSH PROPERTIES SDN BHD 100% PSH MANAGEMENT SDN BHD 100% PSH EXPRESS SDN BHD (formerly known as Gerak Kawal Sdn Bhd) 100% EFFIVATION SDN BHD 100% REAL RIVIERA SDN BHD Wholly-owned Subsidiaries Sub-Subsidiaries ASSOCIATES OF PSH Transmile Group Berhad 10.6% held by PMB 6.7% held by PSH PSH Aviation Sdn Bhd (49%) ASSOCIATES OF POS MALAYSIA BERHAD (PMB) Elpos Print Sdn Bhd (40%) CEN Sdn Bhd (42.5%) RMEX Payment Services Sdn Bhd (33.3%) 7

10 corporate INFORMATION BOARD OF DIRECTORS Tan Sri Adam bin Kadir (Chairman / Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (Resigned w.e.f. 11 April 2006) Datuk Alias bin Ali (Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Datuk Abu Huraira bin Abu Yazid (Executive Director / Group Chief Operating Officer) Dato Zukri bin Samat (Non-Independent Non-Executive Director) (Appointed w.e.f. 8 March 2006) Datuk Nazariah binti Mohd Khalid (Independent Non-Executive Director) (Appointed w.e.f. 14 April 2006) Dato Ng Kam Cheung (Independent Non-Executive Director) (Appointed w.e.f. 26 April 2006) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Mr. Koshy Thomas (Non-Independent Non-Executive Director) (Alternate Director to Mr. Segarajah Ratnalingam) Tengku Zafrul bin Tengku Abdul Aziz (Non-Independent Non-Executive Director) (Alternate Director to Mr. Wee Hoe Gooi Hoe Soon) (Ceased to be Alternate Director w.e.f. 5 May 2006) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) COMPANY SECRETARY Pn. Sabrina Albakri Abu Bakar (LS 8508) AUDIT COMMITTEE Datuk Mohamed Adnan bin Ali (Chairman / Independent Non-Executive Director) (Resigned w.e.f. 11 April 2006) Datuk Alias bin Ali (Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Ng Kam Cheung (Independent Non-Executive Director) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) REMUNERATION COMMITTEE Tan Sri Adam bin Kadir (Chairman / Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) NOMINATING COMMITTEE Datuk Alias bin Ali (Chairman / Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (Resigned w.e.f. 11 April 2006) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) 8

11 PERFORMANCE MANAGEMENT COMMITTEE Tan Sri Adam bin Kadir (Chairman / Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Tuan Haji Nadza Abdul (Head of Corporate Planning / General Manager, Office of the MD/CEO) Puan Rugayah Yasmin bt Dato Ibrahim (Head, Human Resource and Administration) TRANSFORMATION COMMITTEE Tan Sri Adam bin Kadir (Chairman / Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (Resigned w.e.f. 11 April 2006) Dato Zukri bin Samat (Non-Independent Non-Executive Director) OPTION COMMITTEE Tan Sri Adam bin Kadir (Chairman / Independent Non-Executive Director) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) TENDER BOARD COMMITTEE Tan Sri Adam bin Kadir (Chairman / Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (Resigned w.e.f. 11 April 2006) Datuk Alias bin Ali (Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) SHARE BUY-BACK COMMITTEE Datuk Abdul Majid bin Haji Hussein (Chairman / Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (Resigned w.e.f. 11 April 2006) Datuk Alias bin Ali (Independent Non-Executive Director) Datuk Abu Huraira bin Abu Yazid (Executive Director / Group Chief Operating Officer) REGISTERED OFFICE Level 33, Menara Dayabumi Jalan Sultan Hishamuddin Kuala Lumpur Telephone : Facsimile : REGISTRAR Tenaga Koperat Sdn Bhd 20th Floor, Plaza Permata Jalan Kampar, Off Jalan Tun Razak Kuala Lumpur Telephone : Facsimile : AUDITORS KPMG Chartered Accountants PRINCIPAL BANKERS Malayan Banking Berhad Bumiputra Commerce Bank Berhad STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) 9

12 10

13 Sitting: Tan Sri Adam Kadir Chairman / Independent Non-Executive Director Standing from left to right: Datuk Abdul Majid bin Haji Hussein Independent Non-Executive Director Dato Ikmal Hijaz bin Hashim Group Managing Director / Chief Executive Officer Dato Zukri bin Samat Non-Independent Non-Executive Director (Appointed w.e.f. 8 March 2006) Datuk Alias bin Ali Independent Non-Executive Director Datuk Nazariah bt Mohd Khalid Independent Non-Executive Director (Appointed w.e.f. 14 April 2006) Dato Ng Kam Cheung Independent Non-Executive Director (Appointed w.e.f. 26 April 2006) Datuk Abu Huraira bin Abu Yazid Executive Director / Group Chief Operating Officer Mr. Wee Hoe Gooi Hoe Soon Non-Independent Non-Executive Director Mr. Segarajah Ratnalingam Non-Independent Non-Executive Director Pn. Sabrina Albakri Abu Bakar Company Secretary Not in the picture: Datuk Mohamed Adnan bin Ali Independent Non-Executive Director (Resigned w.e.f. 11 April 2006) Mr. Koshy Thomas Non-Independent Non-Executive Director (Alternate Director to Mr. Segarajah Ratnalingam) Tengku Zafrul bin Tengku Abdul Aziz Non-Independent Non-Executive Director (Alternate Director to Mr. Wee Hoe Gooi Hoe Soon) (Ceased to be Alternate Director w.e.f. 5 May 2006) board DIRECTORS OF 11

14 profile OF DIRECTORS Tan Sri Adam Kadir, is the Chairman of the Company and an Independent Non-Executive Director. He was appointed to the Board on 1 March Tan Sri Adam is also the Chairman of the Remuneration Committee, Transformation Committee, Performance Management Committee, Option Committee and Tender Board Committee. Tan Sri Adam holds Master of Laws degree in Commercial and Corporate Laws from University of London. He had earlier obtained a Master of Science from Ohio University, USA in 1973 after graduating with a Bachelor of Arts degree from the University of Malaya in He has completed an Advanced Management Course in Harvard Business School in the USA in TAN SRI ADAM KADIR Malaysian, 63 years of age Chairman Independent Non-Executive Director Tan Sri Adam began his illustrious career as a Producer in the then Ministry of Broadcasting & Information in 1967 right after his graduation. He joined the Selangor Economic Development Corporation (PKNS) as Assistant Secretary in He left to join Aseambankers in 1973 as Manager, Project Development. He moved on to PERNAS Group of Companies as General Manager and Director from 1975 to From , he became an entrepreneur with his own business enterprise called Wineka Group. He was the Chairman of Jengka Sdn Bhd, a Pahang comprehensive timber complex, from 1983 to He sat on the Board of various companies whilst an entrepreneur including PBS Multinational Merchant Bank, Malaysia General Investments Corporation Berhad, Federal Agricultural Marketing Authority (FAMA) and Lembaga Perusahaan Pertanian Pahang. He was elected a Member of Parliament (MP) in He subsequently became a Senator and President of the Senate in Between 1994 and 1996, he was President of both the International Parliamentary Union (IPU) Malaysia Chapter and Commonwealth Parliamentary Association. In 1997, he returned to Wineka Group after expiry of his term in the Senate. Tan Sri Adam does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Since the appointment of Tan Sri Adam on 1 March 2005, Tan Sri Adam attended all fifteen (15) Board of Directors meetings held subsequent to his appointment during the financial year. 12

15 PROFILE OF DIRECTORS continued Datuk Alias bin Ali, is an Independent Non-Executive Director. He was appointed to the Board on 24 June He is Chairman of the Nominating Committee and a Member of Audit Committee, the Share Buy-Back Committee and Tender Board Committee. Datuk Alias holds a Bachelor of Economics (Honours) degree from University of Malaya and a Master in Business Management from the Asian Institute of Management, Manila, Philippines. He also attended a Diploma course in Islamic Studies in 1982 at the University Kebangsaan Malaysia and a London Executive Programme in the London Business School, United Kingdom in In 1988, he attended a Diploma course in Homeopathic Medicine at the Homeopathic Medical Association of Malaysia. DATUK ALIAS BIN ALI Malaysian, 58 years of age Independent Non-Executive Director Datuk Alias has had a long and remarkable career with the Government which began soon after his graduation from the University of Malaya as an Administration Trainee Officer in the Statistic Department. He subsequently joined the Prime Minister s Department as Administration Development Officer in Whilst still with the department, he completed his Master in Business Management course and assumed the position of Head of Department (Consultancy) at the National Institute of Public Administration (INTAN) in During the next 25 years with the Government, he rose through the ranks and has held various senior positions in several Ministries. Amongst them being, Deputy Director (Operations) in Public Services Department, Secretary (Administration and Services) in the Ministry of Works and Director of Industrial Development Division in the Ministry of Trade and Industry. He moved back to the Prime Minister s Department in 1990 as Cabinet Under-Secretary. In the year 2000, he was appointed Secretary General in the Ministry of Health, a position he held until his retirement in March Datuk Alias does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Datuk Alias attended seventeen (17) out of nineteen (19) Board Meetings held during the financial year under review. Particulars of other Directorships in public companies: FIMA Corporation Berhad Integrated Rubber Corporation Berhad Mentakab Rubber Company (Malaya) Berhad Air Asia Berhad Duopharma Biotech Bhd 13

16 PROFILE OF DIRECTORS continued Datuk Abdul Majid bin Haji Hussein, is an Independent Non-Executive Director. He was appointed to the Board on 1 November He is the Chairman of the Share Buy-Back Committee and a Member of the Audit Committee, Performance Management Committee, Tender Board Committee, Transformation Committee, Remuneration Committee and Nominating Committee. Datuk Abdul Majid holds a Bachelor of Economics degree majoring in Accounting from University of Malaya. He later obtained a Master in Business Management from Asian Institute of Management, Manila. He has also completed the Advanced Management Programme at the Harvard Business School of the United States of America in year DATUK ABDUL MAJID BIN HAJI HUSSEIN Malaysian, 57 years of age Independent Non-Executive Director During his 30 years career in the civil service, he has held various positions including Assistant Secretary (Finance) in the Accountant General s Department; Lecturer/ Programme Coordinator at National Institute of Public Administrator (INTAN); Director of Planning and later served as the Deputy Director General (Administration) of Federal Agricultural Marketing Authority (FAMA); Director of Economic Research of Socio Economic Unit of the Prime Minister s Department; Senior Assistant Deputy Director (Budget Division) of the Ministry of Finance; State Financial Officer of Negeri Sembilan; Director of Services and Career Division of Public Services Department and State Secretary of Perak. Prior to his retirement in early October 2004, he was the Deputy Secretary General (Operations) in the Ministry of Finance. Datuk Abdul Majid was subsequently appointed as Non-Executive Chairman of Pos Malaysia Berhad on 1 November Datuk Abdul Majid does not have any family relationship with any director and/ or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Datuk Abdul Majid attended all nineteen (19) Board Meetings held during the financial year under review. Particulars of other Directorships in public companies: Pos Malaysia Berhad ABN Amro Bank Berhad 14

17 PROFILE OF DIRECTORS continued Dato Zukri Samat, is a Non-Independent Non-Executive Director. He was appointed to the Board on 8 March He is also a Member of the Performance Management Committee, Tender Board Committee, Remuneration Committee and Transformation Committee. Dato Zukri holds an MBA degree from the University of Hull, United Kingdom. He is currently an Executive Director, Investment of Khazanah Nasional Berhad. He joined Khazanah Nasional Berhad on 13 February Prior to that, he was with Danaharta since October 1998 as General Manager, Operations Division and was later promoted to Director of Operations on 1 August 2001, assuming direct line responsibility for all loan recovery activities of Danaharta. He was then appointed by the Ministry of Finance as the Managing Director of Danaharta on 1 July DATO ZUKRI BIN SAMAT Malaysian, 48 years of age Non-Independent Non-Executive Director Dato Zukri has extensive experience in the banking sector having served in both local and international financial institutions in various capacities. Prior to joining Danaharta, he served in Credit Agricole Indosuez Labuan as the General Manager. He also worked in Commerce International Merchant Bankers Berhad ( CIMB ) for a significant period of time; his last position being Deputy General Manager of the Capital Markets Department where he was responsible for transactions involving Private Debt Securities, project finance, corporatisation and privatisation of state-owned companies. Dato Zukri does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Dato Zukri did not attend any Board Meetings held during the financial year under review as he was appointed to the Board on 8 March

18 PROFILE OF DIRECTORS continued Datuk Nazariah binti Mohd Khalid is an Independent Non-Executive Director. She was appointed to the Board on 14 April Datuk Nazariah graduated with a B.A. (Honours) from the University of Tasmania, Australia and holds a Master of Business Administration from Michigan State University, USA. She joined the Malaysian Civil Service in 1972 and served in various capacities prior to her last position as the Director General of the Malaysian Administrative Modernisation and Management Planning Unit (MAMPU) in the Prime Minister s Department. DATUK NAZARIAH BT MOHD KHALID Malaysian, 56 years of age Independent Non-Executive Director Datuk Nazariah first served as Assistant Secretary in the Economic Division of the Ministry of Finance. She was later assigned to the Budget Division of the same Ministry, the Ministry of Works and various other divisions in the Prime Minister s Department such as the Bumiputera Contractors Coordination Service Centre (PUSAKABUMI) and the Implementation Coordination Unit (ICU). In 1988, Datuk Nazariah joined MAMPU and was attached to three divisions namely, Organisational Development, Inspectorate and Electronic Government. In 2002, Datuk Nazariah was appointed Deputy Director General ICT MAMPU before assuming her last position as the Director General of MAMPU. Datuk Nazariah does not have any family relationship with any director and/ or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. She has not been convicted of any offence within the past 10 years. Datuk Nazariah did not attend any Board Meetings held during the financial year under review as she was appointed to the Board on 14 April

19 PROFILE OF DIRECTORS continued Dato Ng Kam Cheung, is an Independent Non-Executive Director. He was appointed to the Board on 26 April He is also a Member of the Audit Committee. Dato Ng obtained his Bachelor of Economics Degree with Honours from University of Malaya in 1973 and started his career with the Administrative and Diplomatic Service of Malaysia in the same year. DATO NG KAM CHEUNG Malaysian, 56 years of age Independent Non-Executive Director Dato Ng has served in various capacities concerned with public sector superannuation and compensation schemes in the Public Services Department. He was also a Secretary of the Teachers Provident Fund as well as Principal Assistant Secretary in the Ministry of Health. Between the years 1985 to 2003, he served in the Federal Treasury holding various positions including Senior Assistant Director of Budget in the General Services, and Trade and Communication sectors. As Deputy Director of Budget, he was responsible for the Infrastructure and Security Sector as well as for budget coordination and control. Prior to his retirement from public service in April 2006, he was the State Financial Officer for the State of Penang. Dato Ng has served on the Boards of Airod Sdn Bhd, Kejora Regional Development Authority and Penang Development Corporation. Dato Ng does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Dato Ng did not attend any Board Meetings held during the financial year under review as he was appointed to the Board on 26 April Particulars of other Directorships in public companies: PBA Holdings Bhd 17

20 PROFILE OF DIRECTORS continued Dato Ikmal Hijaz bin Hashim, is the Group Managing Director/ Chief Executive Officer. He was appointed to the Board on 19 December 2003 as Executive Director and redesignated as the Group Managing Director/ Chief Executive Officer on 13 April He is a Member of the Remuneration Committee, Performance Management Committee, Option Committee and Tender Board Committee. He holds a Bachelor of Arts (Honours) Degree from University of Malaya and also a Master of Philosophy Degree in Land Management from University of Reading, United Kingdom. DATO IKMAL HIJAZ BIN HASHIM Malaysian, 53 years of age Group Managing Director/ Chief Executive Officer Dato Ikmal began his career by serving in the Administrative and Diplomatic Service of the Government from 1976 to He then joined United Engineers (M) Berhad as the General Manager of the Malaysian-Singapore Second Crossing project. On 1 January 1993, he became the Chief Operating Officer of PLUS and was subsequently appointed as its Managing Director from 1 January 1995 to 30 June He resigned as Managing Director in 1999 but remained a Director until November Dato Ikmal was appointed as the Managing Director of Prolink Development Sdn Bhd ( Prolink ) and Acting Chairman of the Supervisory Board, Property Division of Renong Group in July In February 2000, he was appointed the President of the Property Division of the Renong Group while maintaining his position as Managing Director of Prolink. He held the position of Managing Director at Renong Berhad from 2002 until October 2003 when he subsequently joined Pos Malaysia Berhad as Chief Executive Officer. He was appointed Managing Director of Pos Malaysia Berhad on 6 December Dato Ikmal does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Dato Ikmal attended eighteen (18) out of nineteen (19) Board Meetings held during the financial year under review. Particulars of other Directorships in public companies: Pos Malaysia Berhad Faber Group Berhad 18

21 PROFILE OF DIRECTORS continued Datuk Abu Huraira bin Abu Yazid, was appointed as Non-Executive Director of the Company on 9 August On 8 October 2001, he was redesignated as Executive Director of the Company. He is also a Member of the Company s Share Buy-Back Committee and Transformation Committee. Datuk Abu is a Business Administration Graduate of University Malaya and has been in the card business for the past 20 years. He commenced his career in Maybank Berhad in 1976 and was responsible for establishing and managing its card business in This was also the first full-fledged card centre in Malaysia. DATUK ABU HURAIRA BIN ABU YAZID Malaysian, 53 years of age Executive Director / Group Chief Operating Officer Consequently, he was headhunted to set up and manage other credit card centres: The Chase Manhattan Bank Credit Card Centre (1986), Citibank Berhad Bankcard Centre (1988), Public Bank Card Services Division - last position was the General Manager of Public Bank Card Services Division (1991). On 1 August 2000, he was appointed Chief Executive Officer of Bank Simpanan Nasional and remained in that position until July Datuk Abu does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Datuk Abu attended eighteen (18) out of nineteen (19) Board Meetings held during the financial year under review. Particulars of other Directorships in public companies: Pos Malaysia Berhad Transmile Group Berhad 19

22 PROFILE OF DIRECTORS continued Mr. Segarajah Ratnalingam, is a Non-Independent Non-Executive Director. He was appointed to the Board on 26 October He is a member of the Audit Committee, the Remuneration Committee, Performance Management Committee, Transformation Committee and Option Committee. Mr. Segarajah holds a Bachelor of Economics (Honours) degree from the University of Malaya. MR. SEGARAJAH RATNALINGAM Malaysian, 53 years of age Non-Independent Non-Executive Director Mr. Segarajah began his career in the Ministry of Defence when he joined the Malaysia Administrative and Diplomatic Services upon his graduation in He served in the said Ministry for 20 years from 1975 to He was then posted to the Treasury in He is currently the Under Secretary of the Financial Management Advisory Division, Ministry of Finance. Mr. Segarajah does not have any family relationship with any director and/ or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Mr. Segarajah attended seventeen (17) out of nineteen (19) Board Meetings held during the financial year under review. Particulars of other Directorships in public companies: Mimos Berhad 20

23 PROFILE OF DIRECTORS continued Mr. Gooi Hoe Soon, is a Non-Independent Non-Executive Director. He was appointed to the Board on 18 March He is also a Member of the Audit Committee, Remuneration Committee, Nominating Committee, Performance Management Committee and Option Committee. Mr. Gooi is a member of the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants. He has more than 20 years experience in the fields of accounting and corporate finance and was finance director of several private and public listed companies. He has been instrumental in the successful implementation of several corporate exercises which include merger and acquisition and corporate debt restructuring exercises undertaken by public listed companies. MR WEE HOE GOOI HOE SOON Malaysian, 46 years of age Non-Independent Non-Executive Director He was appointed to the Board of Directors of Avenue Capital Resources Berhad on 20 October 1999 and as Group Managing Director in He is also an Executive Director of Avenue Securities Sdn Bhd. Mr. Gooi does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Mr. Gooi attended seventeen (17) out of nineteen (19) Board Meetings held during the financial year under review. Particulars of other Directorships in public companies: Avenue Capital Resources Berhad Hup Seng Industries Berhad Paos Holdings Berhad 21

24 PROFILE OF DIRECTORS continued Mr. Koshy Thomas, is a Non-Independent Non-Executive Director. He was appointed to the Board as Alternate Director to Mr Segarajah Ratnalingam on 4 February Mr. Koshy graduated in 1979 with a Bachelor of Economics Degree from the University of Malaya. He later obtained a Post Graduate Diploma in Public Management from the National Institute of Public Administration, Kuala Lumpur in He also obtained a Post Graduate Certificate in Human Services (Monitoring and Evaluation) from RMIT University in Melbourne, Australia in MR KOSHY THOMAS Malaysian, 49 years of age Non-Independent Non-Executive Director Mr. Koshy began his career soon after his graduation as Assistant Secretary (Loans and Finance Division) in the Ministry of Finance to He joined the Ministry of Agriculture as Senior Assistant Secretary (Monitoring and Evaluation Division) in In 1996, he was posted to the Ministry of Finance as Senior Assistant Secretary (Tax Analysis Division). He is currently the Principal Assistant Secretary, Head of Program Evaluation Section of the Financial Management Advisory Division, Ministry of Finance. Mr Koshy has served in various Ministries for more than 20 years and was recently awarded with the Service Excellence Award by the Prime Minister. Mr. Koshy does not have any family relationship with any director and/or substantial shareholders of Pos Malaysia & Services Holdings Berhad or any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years. Mr. Koshy attended one (1) Board Meeting held during the financial year under review. 22

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27 PSH - PMB management Dato Ikmal Hijaz bin Hashim Group Managing Director / Chief Executive Officer Datuk Abu Huraira bin Abu Yazid Group Chief Operating Officer / Executive Director 3 Haji Mohd. Derus bin Harun Chief Operating Officer, Datapos 4 Puan Rugayah Yasmin bt. Dato Ibrahim Head of Human Resource and Administration 5 Encik Muhd Firdaus bin Azharuddin Chief Operating Officer, PSH Express 6 Encik Mohd. Zarif bin Hashim Chief Operating Officer, PosMel 7 Haji Mohd Effendi bin Muhammad Acting Chief Operating Officer, PosLaju 8 YM Raja Shahreen bin Raja Othman Head of Corporate Finance 9 Puan Rohaiza Hashim Head of Corporate Communications 10 Encik Zainal bin Shahdan Head of Information & Communication Technology 12 Haji Nadza bin Abdul Head of Corporate Planning General Manager, Office of the MD/CEO Corporate Disclosure Manager 13 Encik Bahaman bin Kamaruzzaman Chief Transformation Officer 14 Puan Sabrina Albakri Abu Bakar Head of Legal and Secretarial 11 Encik Nor Hisham Mohd Yusof Chief Internal Auditor 15 Haji Ithnin Talib General Manager, Security and Investigation 16 Encik Azman Salehuddin Senior Manager, PosLogistik 25

28 chairman s STATEMENT DEAR SHAREHOLDERS, CUSTOMERS & EMPLOYEES, IT WAS A DISTINCTIVE YEAR. This phrasing is apt for the year It was another year of vital achievement for the PSH Group. As Chairman of the PSH Group, I have the pleasure to present to you the Annual Report and audited financial statements of the PSH Group for the financial year ended 31 December

29 REVENUE RM787 million FINANCIAL PERFORMANCE PERFORMANCE OF PSH SHARES In 2005, the global economy experienced a slowdown, with costs escalating, competition increasing, and fuel prices painfully rising. Against this bearish global backdrop, however, the PSH Group showed a tremendous achievement. The PSH Group revenue grew 13% from RM694 million to RM787 million, a record figure. Our profit before tax grew 37% from RM112 million to RM153 million, another record figure. Our profit after tax grew 91% from RM76 million to RM145 million, yet another record figure. Great as they may be, we must look beyond all these record financial achievements. Our loyal shareholders were amply rewarded in PSH share price recorded an exemplary performance in 2005, beginning the year as at 3 January 2005 at RM2.58 and closing the year as at 30 December 2005 at RM4.04, a record year-end high. This represents an appreciation of 57% which greatly surpassed the market performance. In contrast, the benchmark Kuala Lumpur Composite Index (KLCI) fell 0.8% in This achievement was no mean feat and the New Straits Times on 3 January 2006 proclaimed our accomplishment succinctly: The bestperforming stock among the country s top 100 most valuable stock was Pos Malaysia. We must now look at how we can do even better for 2006, to serve you our faithful shareholders, our worthy customers and our hardworking employees. 27

30 CHAIRMAN S STATEMENT continued CUSTOMER SATISFACTION INDEX MAIL RECLASSIFICATION In its effort to be a customer-centric organization, Pos Malaysia embarked on a Customer Satisfaction Index ( CSI ) survey to establish the CSI for each Strategic Business Unit, for each state and for PMB as a whole. The CSI survey was conducted by an independent researcher, and the results showed that 72% of our customers are generally satisfied with our post offices. For our mail services, the figure is even higher with 74% of our customers generally satisfied with our postal services. We have also identified several areas which you our customers told us you would like for us to improve. As we look beyond these 74% satisfied customers, we will be implementing steps in 2006 to improve these areas. For our customers as well, we announced the reclassification of mail products into Standard Mail and Non-Standard Mail, effective from 1 March The Mail Reclassification exercise enabled customers who chose to mail their letters using the Standard Mail to continue enjoying 30 sen postage, the same low rate Pos Malaysia has been offering for the past 14 years. For customers who chose to use Non-Standard Mail, which can only be processed by manual human labour and as such incur more cost, the rate is increased to 50 sen. We hope that our customers will continue to use Standard Mail, which can be processed by automated machines, to help increase our efficiency. Based on customer requests, we also deferred to 1 January 2006 the requirement for standard envelope colour and clearance zone on the envelopes to allow the customers to finish up their stock of pre-printed envelopes. Meanwhile, Pos Malaysia continued to accept other types of envelopes under Non-Standard Mail, Periodicals, and PosDokumen categories. Postcards, Aerogramme and Parcel Service are not affected by the reclassification exercise. 28

31 CHAIRMAN S STATEMENT continued VOLUNTARY SEPARATION SCHEME VARIOUS INTERNAL PROJECTS For our employees, Pos Malaysia carried out a Voluntary Separation Scheme ( VSS ) in September 2005, the first time ever in our corporate history. We gave our employees an opportunity to self-appraise and self-decide whether to continue working with Pos Malaysia or otherwise pursue different career paths elsewhere. A total of 1,388 employees, representing 9.1% of the total workforce, were selected under this scheme based on approved criteria. The total VSS cost of RM100 million will be recoverable via reduced staff cost within months. The management team has also undertaken various internal projects to ensure that Pos Malaysia will continue to be relevant in moving forward. In April 2005, the Group completed the ICT Blueprint to support its business objectives and transformation journey. The ICT Blueprint serves as the roadmap for Group s ICT capabilities to support the business strategies and objectives. In an effort to achieve operational excellence in mail services, Pos Malaysia conducted the Reconfiguration of the Mail Operation and System Study ( REMOSS ) in July The objective of the REMOSS study is to understand our customers expectations, to optimize our postal supply chain, and to develop a master plan for the postal change journey ahead. In addition to the above projects, there were 193 other initiatives that the management team has identified to be implemented in 2005 through To ensure that all these initiatives will be done in a coherent way to achieve Pos Malaysia s business strategies, we have established a Programme Management Office, which will manage the various initiatives in a unified method. 29

32 CHAIRMAN S STATEMENT continued CORPORATE DEVELOPMENT ACKNOWLEDGEMENTS Pos Malaysia expanded its presence in the e-payment sector with an initial acquisition of 33% equity in PosPay Exchange Sdn Bhd, an online micro-payment service provider. PosPay has been granted approval from Bank Negara Malaysia to issue electronic money for making online payments via the internet. PosPay, via its PosPay micropayment service, will complement the Group s existing e-payment channel of PosOnline. The e-payment services will cater to that customer category which prefers virtual payment rather than physical payment at our post office branches. PROSPECTS The Group s prospect for 2006 continues to look positive. The Group will carry on mitigating the keen competition faced in the business sectors in which Pos Malaysia is positioned. This is more so with the emergence of smaller local players, the existence of substitute service (such as e-transaction for bill payment business) and aggressive business strategy adopted by competitors in the courier and logistics businesses. The Group will continue to serve its customers who are now more discerning and have higher expectations. The Group s strategic thrusts in 2006 are focused on continuing the pursuance of growth, the enhancement of customer relationship, the deployment of correct basic infrastructure and the improvement of human capital. It was an exciting year, with many commendable achievements for the Group. This was only possible due to the support that the Company received from you our shareholders, customers, employees, regulators, business associates and other stakeholders. My fellow Board members join me in thanking you for your continuing support. Pos Malaysia will look beyond what we have already achieved and propel ahead on our transformation journey. We hope to achieve our greater goals of being the best postal operator in ASEAN by 2010 in terms of service quality and price-performance, and of being among the world leaders by 2020 in the distribution of physical communication and integrated logistics. Looking beyond, TAN SRI ADAM KADIR Chairman 30

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34 board OF DIRECTORS POS MALAYSIA BERHAD Sitting from left to right: Dato Ikmal Hijaz bin Hashim Managing Director / Chief Executive Officer Datuk Low Seng Kuan Director Dr. Azizah bt. Ariffin Director (Appointed w.e.f. 23 February 2006) Datuk Abu Huraira bin Abu Yazid Director Dato Krishnan Chinapan Director Datuk Abdul Majid bin Haji Hussein Chairman Not in the picture: Puan Sri Dato Aida Boey bt Abdullah Director (Resigned w.e.f. 31 December 2005) Datuk Wan Mohd. Hanafiah bin Wan Mat Saman Director (Resigned w.e.f. 23 February 2006) 32

35 CORPORATE structure POS MALAYSIA BERHAD AS AT 31 MARCH 2006 MANAGING DIRECTOR / CHIEF EXECUTIVE OFFICER Associates Subsidiaries Strategic Support Business Unit Services CEN Sdn Bhd 42.5% Datapos (M) Sdn Bhd 100% PosMel Mail Business Corporate Finance Corporate Planning Elpos Print Sdn Bhd 40% RMEX Payment Services Sdn Bhd 33.3% Digicert Sdn Bhd 55% Pos Takaful Agency Sdn Bhd 100% PosNiaga Retail Business PosLaju Courier Business Corporate Communications Information & Communication Technology Human Resources & Administration Transmile Group Bhd 10.6% Pos Logistic - Fulserve Sdn Bhd 100%% Pos Laju (M) Sdn Bhd 100% PosLogistik Logistics Business Philately Philatellic Business Security & Investigation Property, Procurement & Contract Customer Service Legal & Secretarial Virtual Pos Sdn Bhd 100%% 33

36 STATE managers POS MALAYSIA BERHAD Encik Jaafar Abdul Rahman Kedah / Perlis Encik Shahri Jikun Johor Haji Abdul Hadi Hamid Pulau Pinang Encik Ahsim Jamat Pahang Encik Mohd Azizi Mohd Sanusi Perak Encik Quek Lim Tiong Terengganu Encik Wan Sharpudin Wan Ramli Selangor Encik Anuwar Md Akhir Kelantan Haji Mohd Aziz Sulong Wilayah, Kuala Lumpur Encik Othman Abdullah Sarawak Encik Lee Pow Choy Negeri Sembilan Haji Othman Dari Sabah Haji Sazali Muhd Din Melaka 34

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38 CALENDAR OF events january january 2005 LAUNCHING OF TABUNG KEMANUSIAAN MANGSA GEMPA BUMI / TSUNAMI ACEH Pos Malaysia Berhad launched a joint effort with Mercy Malaysia to provide facilities for the public to contribute to the Tabung Kemanusiaan dan Bantuan Mangsa Tsunami Aceh from 10 January until mid February At the same ceremony, Pos Malaysia Berhad also presented a cheque of RM50,000 to the victims of earthquake/tsunami disaster in Banda Aceh through the Tabung Kemanusiaan Aceh established by Utusan Melayu (M) Berhad. POS MALAYSIA & SERVICES HOLDINGS BERHAD REACHES OUT TO THE MALAYSIAN TSUNAMI VICTIMS Pos Malaysia & Services Holdings Berhad presented a cheque of RM 100,000 to the Malaysian Tsunami Disaster Fund established by NST-Berita Harian-TV3-8TV on 13th January The Chairman of Pos Malaysia & Services Holdings Berhad, YBhg. Tan Sri Abdul Halim Ali handed over the cheque to YBhg. Tuan Syed Faisal Albar, Chief Executive Officer of the New Straits Times Press (M) Berhad at a ceremony held in Balai Berita, NST. 15 februay 2005 SENIOR EDITOR S BRIEFING & PRESS CONFERENCE ON RECLASSIFICATION OF MAIL PRODUCTS The senior editor s briefing followed by a press conference on reclassification of mail products were held on 15th February 2005 at Dewan Sri Pos. Both events were held to provide information and increase the media s understanding of the implementation of the reclassification of mail exercise. 21 march 2005 SPECIAL STAMPS TO CELEBRATE PROTON S TRANSITION INTO A NEW ERA WITH GEN.2 In collaboration with PROTON Holdings Berhad, Pos Malaysia Berhad (PMB) issued special stamps and first day cover featuring PROTON Gen.2. The special stamps and first day covers were launched by YAB Tun Dr. Mahathir Mohamad, PROTON s Advisor at the Perdana Leadership Foundation Auditorium, Putrajaya on 21st March march 2005 FAREWELL DINNER FOR TAN SRI HALIM ALI The farewell dinner for Tan Sri Halim Ali was held on 22nd March 2005 to honour and express our appreciation for his contributions as the Chairman of Pos Malaysia & Services Holdings Berhad. The event was held at Sheraton Imperial Kuala Lumpur. Over 200 guests comprising the Board of Directors and senior management of PSH and PMB gathered to bid their farewell. 36

39 9 april april 2005 TRIBUTE TO TRADITIONAL DANCES OF MALAYSIA Pos Malaysia Berhad issued special stamp and first day cover on Traditional Dance on Saturday, 9th April The special stamp and first day cover were launched by YB Dato Sri Wong Soon Koh, Minister of Urban Development And Tourism, Sarawak at Sarawak Tourism Auditorium Complex, Kuching. The beautiful stamps featured various traditional dances of Malaysia. POS MALAYSIA BERHAD HANDS OVER COLLECTION OF RM184, TO MERCY MALAYSIA S ACEH EARTHQUAKE/ TSUNAMI FUND Pos Malaysia Berhad handed over the collection of RM184, received from the public for the Aceh Tsunami victims to MERCY Malaysia at its Headquarters on 4th April april 2005 PRESS CONFERENCE ON 2ND WAVE OF RECLASSIFICATION OF MAIL PRODUCTS The press conference on the 2nd wave of reclassification of mail products was held on 28th April 2005 at Dewan Sri Pos as a follow-up to the previous press conference held on 15th February april 2005 APPRECIATION TO SONGKET Pos Malaysia Berhad, in conjunction with TV3 issued special stamps and first day cover featuring songket on 29th April The stamps and first day cover were launched by the late YABhg Datin Paduka Seri Endon Mahmood at Sri Pentas, TV3 Headquarters. 7 june 2005 POS MALAYSIA & SERVICES HOLDINGS BERHAD S AGM Pos Malaysia & Services Holdings Berhad (PSH) held its 73rd Annual General Meeting at the Legend Hotel, Kuala Lumpur on 7th June

40 CALENDAR 0F EVENTS 2005 continued 9 june 2005 STAMPS TO COMMEMORATE THE 100th ANNIVERSARY OF UNIVERSITI MALAYA Pos Malaysia Berhad launched commemorative stamps and first day cover to celebrate the 100th anniversary of Universiti Malaya. The stamps and first day cover were officially launched by Yang Berbahagia Dato Professor Dr. Hashim Yaacob, Vice Chancellor of Universiti Malaya at Dewan Tunku Canselor, Universiti Malaya. 30 june 2005 POS MALAYSIA BERHAD AND NEW STRAITS TIMES FORM A STRATEGIC PARTNERSHIP Pos Malaysia Berhad and The New Straits Times Press officially launched a strategic partnership to provide a convenient method and venue for individual public or business corporations to make classified advertisement payments placed in the New Straits Times, Berita Harian, Harian Metro and The Malay Mail at selected post offices. The partnership was sealed at a signing ceremony between the two companies held at Function Room, 5th Floor (Old Wing) NSTP Headquarters in Bangsar. The joint effort by these two Malaysian corporations commenced on 1st June july 2005 HONOURING THE 6TH CENTURY OF MALAYSIA- CHINA HISTORICAL TIE THROUGH STAMPS Tuan Yang Terutama Yang Dipertua Negeri Melaka, Tun Datuk Seri Mohd. Khalil bin Yaakob officially launched Pos Malaysia Berhad s new stamps and first day cover to commemorate the 600th anniversary of Malaysia-China relationship at the Malacca International Trade Centre, Malacca. 28 july 2005 ASEAN POSTAL ORGANISATIONS LEADERS GATHER AT THE 12TH ASEAN POSTAL BUSINESS MEETING TO CATCH UP WITH COMPETITION AND CHALLENGES YB Dato Seri Dr. Lim Keng Yaik, Minister of Energy, Water and Communications officiated the 12th ASEAN Postal Business Meeting (APBM) on 28th July 2005 at the Sultan Ballroom, Le Meridien Hotel, Kuala Lumpur. 38

41 CALENDAR 0F EVENTS 2005 continued 9 august 2005 LAUNCH OF DATAPOS 2 CENTRE & 10TH YEARS IN OPERATIONS Datapos (M) Sdn Bhd, launched its RM1 million Datapos 2 Centre on 26th August About 200 guests made up of key clients and suppliers including guests of honour Chairman of Pos Malaysia & Services Holdings Berhad Tan Sri Adam Kadir, Chairman of Pos Malaysia Berhad Datuk Abdul Majid Haji Hussein and Group Managing Director/ CEO of Pos Malaysia & Services Holdings Berhad and Pos Malaysia Berhad, Dato Ikmal Hijaz Hashim attended the company s celebration. SIGNING CEREMONY BETWEEN POS MALAYSIA BERHAD AND COURTS MAMMOTH BERHAD Pos Malaysia Berhad and Courts Mammoth Berhad launched a partnership to provide a convenient method and venue for customers to pay their monthly installments for purchases made at Courts Mammoth Berhad at post offices. The signing ceremony was held at Dewan Sri Pos, Pos Malaysia Berhad Headquarters in Dayabumi Complex on 30th June 2005.The joint effort by these two Malaysian corporations commenced on 2nd May august august 2005 THE PROMINENCE OF THE MALAY COLLEGE KUALA KANGSAR CAPTURED IN POS MALAYSIA BERHAD S STAMPS His Royal Highness Sultan Azlan Muhibbuddin Shah Ibni Almarhum Sultan Yussuf Izzuddin Shah Ghafarullahu-lah officially launched Pos Malaysia Berhad s new stamps and first day cover on 30th August 2005 to commemorate the 100th anniversary of the Malay College Kuala Kangsar (MCKK) at Hargreaves Hall, MCKK, Kuala Kangsar, Perak. 12 september 2005 POS MALAYSIA TO HELP CULTIVATE THE PASSION FOR LEARNING ENGLISH Pos Malaysia Berhad, reiterated its commitment to help students master English by adopting 2 schools under the NST School Sponsorship Programme. The schools were Sekolah Menengah Kebangsaan Beserah, Kuantan and Sekolah Menengah Tengku Mahmud Iskandar, Muar, Johor. The sponsorship enabled 100 students in both schools to use NST newspapers as an additional resource to learn English. 39

42 CALENDAR 0F EVENTS 2005 continued 10 october 2005 WORLD POSTAL DAY CELEBRATION World Postal Day Celebration was held on 10th October 2005 with the theme Reaching Everyone Everywhere. In conjunction with the event, PMB launched the Traditional Kites stamps and first day cover while post offices nationwide celebrated the day with special postal-themed activities. 21 october 2005 HANDING OVER OF CONTRIBUTIONS TO ORPHANS Pos Malaysia, through Jawatankuasa Penerapan Nilai-nilai Islam (JAPENI) donated RM5, to orphans from PEYAKIN, Kelang in a special handing over ceremony on 21st October Apart from that, JAPENI Headquarters also allocated RM5, for each state offices to organize their own buka puasa session or donation to orphans. 11 november 2005 POS MALAYSIA BERHAD AND TELEKOM PUBLICATIONS SENDIRIAN BERHAD FORM A STRATEGIC PARTNERSHIP Pos Malaysia Berhad (PMB) and Telekom Publications Sendirian Berhad (TPSB) officially signed an agreement on 11th November 2005 for PMB to distribute TPSB s directories namely Yellow Pages, Malaysia Chinese Yellow Pages, Business White Pages and Residential White Pages nationwide. The signing ceremony was held at 54th Floor, Menara TM, Jalan Pantai Baharu, Kuala Lumpur. 24 & 25 november 2005 POS MALAYSIA SPREADS AIDILFITRI AND DEEPAVALI CHEERS TO STAFF, CORPORATE CLIENTS AND MEDIA REPRESENTATIVES Pos Malaysia celebrated Hari Raya Aidilfitri and Deepavali with over 4000 staff, corporate clients and media representatives at its headquarters in Dayabumi Complex. Organised on two consecutive days, the event was held on 24th and 25th November 2005 of which the former was for corporate clients and media representatives and the latter for the management and staff of Pos Malaysia. 40

43 CALENDAR 0F EVENTS 2005 continued 30 november 2005 POS MALAYSIA DONATES RM20,000 TO CANCERLINK FOUNDATION Pos Malaysia donated RM20,000 to Cancerlink Foundation as a gesture of goodwill and compassion to support the effort by Cancerlink Foundation in providing better chances of recovery for cancer victims. The cheque was presented by YBhg Tan Sri Adam Kadir, Chairman of Pos Malaysia & Services Holdings Berhad to YBhg Toh Puan Datuk Dr Hajjah Aishah Ong, Patron of Cancerlink Foundation. 2 december 2005 POS MALAYSIA COMMEMORATES AWARD-WINNING BATIK DESIGNS THROUGH SPECIAL STAMPS AND FIRST DAY COVER Pos Malaysia issued new special stamps and first day cover on Malaysia Batik on Friday, 2nd December The stamps were launched by the Prime Minister of Malaysia, Yang Amat Berhormat, Datuk Seri Abdullah Hj Ahmad Badawi, at the Esplanade, KLCC. 10 december 2005 POS MALAYSIA LAUNCHED THE 11TH ASEAN SUMMIT STAMPS DURING OPENING OF EABEX 05 Pos Malaysia produced a set of commemorative stamps in conjunction with the 11th ASEAN Summit which was held in Kuala Lumpur from 12-14th December YAB Dato Seri Abdullah Ahmad Badawi, Prime Minister of Malaysia launched the ASEAN stamps during the Official Opening of the East Asia Business Exhibition (EABEX) 2005 on 10 December 2005 at Kuala Lumpur Convention Center (KLCC). 41

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46 CORPORATE highlights SHARE PRICE VS COMPOSITE INDEX 5.0 1, Price (RM) Composite Index Composite Index Share Price Jan 2001 Jan 2002 Jan 2003 Jan 2004 Jan 2005 Dec Lowest Highest

47 CORPORATE HIGHLIGHTS continued REVENUE RM Million The Group recorded operating revenue of RM787.0 million in 2005, an increase of RM92.7 million or 13.3% from the previous year. The increase is mainly attributed to higher contribution from PosMel by RM80.1 million or 18.2% in line with the growth in mail volume and the impact of mail reclassification. PROFIT BEFORE TAXATION RM Million Profit before taxation of RM152.9 million for the financial year ended 2005 reflected a significant increase of RM41.0 million or 36.6% over the RM111.9 million recorded in the year This mainly resulted from the significant improvement in revenue in 2005 by RM92.7 million as compared to previous year. SHAREHOLDERS FUND RM Million ,064 1,106 1,171 1,333 1, Shareholders' fund grew by RM239.4 million or 18.0% to RM1,572.5 million mainly due to higher profit for the year of RM145.4 million and the gain on disposal of treasury shares of RM33.7 million. 45

48 CORPORATE HIGHLIGHTS continued TOTAL TANGIBLE ASSET 2,500 2,000 2,006 RM Million 1,500 1, ,549 1,539 1,657 1, Total tangible asset increased by RM271.9 million or 15.7% to RM2,005.9 million in 2005, mainly attributed to the increase in cash and cash equivalents by RM285.3 million on the back of positive results posted by the Group in 2005 and the proceeds from the disposal of treasury shares of RM114.4 million. EARNINGS PER SHARE (BASIC) sen Earnings per share increased by 58.7% to sen in 2005, consistent with the increase in profit after taxation by RM69.2 million or 90.0% to RM145.4 million in DIVIDEND PER SHARE Sen Dividend for 2005 comprise of a first and final dividend of 10 sen per ordinary share and a special dividend of 5 sen per ordinary share. Even excluding the special dividend proposed for the year ended 2005, the Group continues its commitment to distribute higher dividend to the shareholders compared to the previous years. 46

49 CORPORATE HIGHLIGHTS continued NET TANGIBLE ASSETS PER SHARE RM Net tangible assets per share improved by 7.1% to RM3.07 per share, in line with the increase in shareholders' fund by RM239.4 million to RM1,572.5 million in PROFITABILITY ANALYSIS 900 RM Million Revenue 400 Profit from operation 300 Profit before taxation Profit after taxation The Group recorded significant improvement of RM92.7 million or 13.3% in operating revenue in 2005 compared to previous year, in line with the growth in mail volume and the impact of mail reclassification. With the concerted efforts in reviewing the current operations and better monitoring of cost, the Group has posted higher profit from operations of RM102.7 million representing a 75.0% increase from the previous year. Both the improvement in revenue and profit from operations have contributed to the increase in profit before taxation and profit after taxation by 36.6% and 90.8% respectively as compared to previous year. 47

50 CORPORATE HIGHLIGHTS continued REVENUE PER EMPLOYEE & MANPOWER COST PER EMPLOYEE RM Million Revenue per employee Manpower cost 0 per employee Revenue per employee has improved by 9.7% on the back of higher operating revenue by 13.3% in 2005 as compared to previous year. The manpower cost per employee in turn has increase slightly by 1.0%, mainly due to performance bonus paid out to deserving staff who contributed towards transforming the Group into a better organization. REVENUE PER SBU 69% PosMel 16% PosLaju 13% PosNiaga 1% PosLogistik 1% Philately The main revenue contribution is PosMel which contributed 69% of the Group's total revenue. This is higher than last year's contribution of 64% of the Group revenue, mainly attributed to growth in mail volume and the impact of mail reclassification. BREAKDOWN OF COST 63% Staff Costs 6% Rental, Communication & Utilities 12% Transportation 5% Maintenance & Supplies 6% Depreciation Expenses 7% Other Operating Expenses 1% Raw Materials & Consumable The biggest component of cost is staff related cost which is 63% of total operating costs. This is lower than last year's contribution of 64.5% of the operating costs, mainly attributed to higher transportation cost and other operating cost. 48

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52 GROUP MANAGING DIRECTOR / CHIEF EXECUTIVE OFFICER S operations review PosDokumen offers cost effective means for customers to mail heavy documents weighing up to 2kg. Customers may also send small commercial or product samples using this service as long as the samples are sent in sealed envelopes. MAIL VOLUME TREND billion POSMEL The overall mail volume continues its increasing trend, growing by 2% in 2005 to 1.28 billion items. PosEkspres PosEkspres remains a favourite item among customers. This prepaid express envelope recorded a healthy growth of 7% despite strong competition from courier companies. Encouraged by the response, Pos Malaysia planned to make PosEkspres envelopes available at selected hypermarkets, petrol stations and convenience stores. Customers can drop their PosEkspres envelopes at special street posting boxes easily identified by their yellow colour. Business Mail Business mail remains the main driver for volume growth, which grew by 2.8%. Consumers at large still prefer to receive notices, financial statements and bills in print forms rather than electronic forms. Hence, more and more businesses are taking advantage of this consumer behaviour to advertise and promote their products through the mail. To further cater to the needs of our business customers, a new service known as PosDokumen was introduced. Parcel Parcel volume also recorded encouraging growth in 2005 with volume increased by 19%. To further enhance the service, Pos Malaysia has established a separate parcel network independent of its letter mail network. ICT system that includes track and trace capability is being installed and it would be ready by July Night delivery runs are also in the pipeline. With the strong commitment to our customers, Pos Malaysia expects to increase its market share in domestic parcel market. 50

53 GROUP MD / CEO S OPERATIONS REVIEW continued Advertising Mail (Admail) The volume of advertising mail tripled in This was made possible due to the trust given by several hypermarkets, a renowned household brand and many more commercial brands. Creative Mail / Direct Mail Marketing To enhance letters as an advertising medium, Pos Malaysia introduced creative mail as a subset of its direct mail marketing services. This would refresh if not revolutionize how mail is being perceived. Businesses would be able to promote their products in envelopes or cards of various different sizes and colours. There is no limit to creativity. Ms Connie Wong Ria Apt Ms Connie Wong Ms Connie Wong Bayan Baru Ria Apt Ria Apt 1200 Penang Bayan Baru Bayan Baru 1200 Penang 1200 Penang The quality of human capital was further enhanced by the Voluntary Separation Scheme (VSS) that the Company implemented in Post-VSS, the emphasis was on payfor-performance scheme. Team-based and individual Key Performance Indicators (KPIs) are being implemented throughout our operational network. In 2006, a new incentive payout scheme would be put in place that would see good performance be rewarded on a quarterly basis. Long Term Improvement Programme Further to Reclassification of Mail Products in 2005, Pos Malaysia is embarking on network reconfiguration project to align Malaysia s postal service to international standards. Central to this programme is the installation of more letter sorting machines and development of national address database system. This would subsequently lead to the consolidation of mail processing centers and improve delivery standards. With that, Pos Malaysia would be able to focus more on the first mile as well as last mile of the mail value chain where customers are our priority. Operational Improvements Apart from product innovation, our commitment to customers is also backed by our on-going operational improvement initiatives. To this end a lot of emphasis has been given on two key aspects of our operation; process and human capital. To improve work efficiency in mail processing, night working shifts were restructured and introduced at major hubs and at the same time, mail process flows were streamlined. Physical improvements were also carried out at 41 delivery branches to facilitate work efficiency. POSNIAGA PosNiaga s retail network offers customers a wide variety of postal and agency services on behalf of third parties. Its services are mainly delivered over-the-counter at the post offices. PosNiaga s growth strategy is to leverage on its extensive retail presence countrywide. In an effort to satisfy the evolving needs of our customers, PosNiaga continued to review its product portfolio and introduce new products and services to its customers. 51

54 GROUP MD / CEO S OPERATIONS REVIEW continued Performance Review In 2005 PosNiaga recorded growth in both the number of transactions handled and commission earned from its agency services. Operating revenue stood at RM95 million or 7% increase from revenue achieved in 2004 of RM89 million. A total of 94 million transactions were processed during the year, an increase of 4% compared to 90 million transactions handled in For many years, the existence of our post offices has been vital for other Strategic Business Units (SBUs) of the Group, namely PosMel and PosLaju. Postal products such as stamps, Pos Daftar, Pos Ekspres and philatelic items are sold at the counters. The post office outlets also served as the acceptance points for PosLaju courier items posted by on-demand customers for domestic and international destinations. Business Review During the year, PosNiaga continue to expand its agency services and introduced more value-added products and services to provide a one-stop service for its customers. In a significant move beginning January 2005, JPJ have introduced the issuance of electronic cover notes for the renewal of motor insurance. Besides insurance companies, JPJ have approved PosNiaga as one of its agents that can issue e-cover notes at the counters. Our post office outlets continue to provide convenience to customers for renewal and purchase of motor vehicle insurance. During the year, an additional six (6) insurance companies namely Takaful Malaysia, MAA, Tahan Insurance, Berjaya Insurance, Allianz General Insurance and Pacific Insurance have appointed PosNiaga as agent. In total, PosNiaga now acts as agent for 12 insurance companies in providing this service. During the year PosNiaga also secured an additional 3 new Pusat Zakat, namely Pusat Zakat Johor, Pusat Zakat Wilayah and Pusat Zakat Kedah for zakat collection, bringing the total number of Pusat Zakat secured to 11 out of 13 states. Operations Update Retail network There were 17 new agencies secured during the year bringing the total number to 125 agencies to date. In 2005, a total of 10 new post offices and 23 new Pos Mini outlets were opened covering both urban and rural areas. Our post offices continue to provide strategic support to Jabatan Pengangkutan Jalan(JPJ) for the renewal of driving license and road-tax services. These services have been extended to additional 96 post offices in 2005, bringing the total number of post offices offering JPJ services to 488 outlets. PosNiaga s Network Reach Post Offices 663 Pos Mini 247 Postal Agents 315 Stamp vendors 4,695 Mobile Post Offices 5 Post Offices that can handle JPJ transaction 488 Post Offices with extended services until 10 pm 15 52

55 GROUP MD / CEO S OPERATIONS REVIEW continued Customer Service Several ininitiatives were undertaken to improve our customer service. They are as follows :- The number of post offices with extended business hours were increased from 13 to 15 outlets during the year. The Queue Management System (QMS) was installed at additional 123 post offices, bringing the total post offices with QMS to 189. The number of computerized Pos Mini also increased from 75 to 126 and this would enhance internal controls on Pos Mini s operations. In addition to over-the-counter cash payment, customers will soon be able to make certain bill payments using their credit cards at selected post office outlets and through PosOnline ( our internet payment website. PosNiaga will continue to recruit more agencies to join our PosOnline as another channel for customers to transact their bill payments. Under the Ninth Malaysia Plan, the insurance industry is expected to grow by 6% for the next 5 years. Insurance companies could capitalize on PosNiaga s extensive network to offer their insurance products and services at our outlets as part of its efforts to improve customer service. Outlook For 2006 PosNiaga s objective is to pursue business growth by providing multi-channel payment options and capitalizing on its extensive network to introduce new products and services that have potential to generate high return. For operations, the focus will be on five key areas affecting operational efficiency, namely in our improved operating structure, staff development, compliance to controls and procedures, customer centric culture and image improvement. In pursuing our revenue generation activities and achieving operational efficiency, the management would be monitoring the risk management issues arising from these activities. Backed by its core agency services and good prospects for growth in the payment services sector, PosNiaga is well positioned to be among the major payment service provider for the future. 53

56 GROUP MD / CEO S OPERATIONS REVIEW continued POSLAJU PosLaju, the national courier arm of Pos Malaysia operates from its network of 35 PosLaju centres and further supported by 656 post offices and 80 mini post outlets throughout the country. It recorded an increase of 2.5% in revenue from its contract customers and a 1.8% increase in revenue from the merchandise handled compared to the previous year. The growth, albeit small, affirms PosLaju s great potential in providing specialized services that meet the demands of its diversified customers. Among the strategies undertaken by PosLaju in 2005 was by offering value added services such as the VIP service which is focused at increasing customers satisfaction level. One such project was the special service to package highly sensitive, fragile and security items carried out for the Metrology Corporation Malaysia Sdn Bhd, the Ministry of Health and Lembaga Peperiksaan Malaysia. In the year 2005, the Universal Postal Union (UPU) recognized EMS Poslaju s performance and awarded the certification for the Bronze Level. End 2005 saw PosLaju embarking on an exercise to expand its global service network to 30 new lanes, bringing its total international delivery service destinations (known as Expedited Mail Services) to 92 countries across the globe. The expansion was a part of PosLaju s strategy to become a more competitive and service-driven national courier company in keeping up with the rapid growth of globalization. In its efforts to increase efficient and reliable deliveries, PosLaju invested in product innovations to upgrade and facilitate its delivery operations. These product innovations such as conveyer systems, sorting racks, security pannier boxes, special security containers, roll cages and an upgraded track and trace system along with the realignment of process flow and Standard Operating Procedures have resulted in a speedier operating structure and minimum human error in the sorting of document and parcels and in delivery. In line with its enterprise-wide customer-focused policy, PosLaju continued offering after sales services to its customers. The company carried out a money-back guarantee scheme for deliveries that were delayed, lost or damaged. Contract customers who were concerned about sending valuable items domestically also had the option to insure the items with a minimum premium. Initiatives in 2006 Several initiatives will be carried out by PosLaju in 2006 in order to become a more service-driven national courier company: Forming a strategic business partnership with agents and mini post operators to strengthen its network nationwide Introduction of new products such as saver boxes ( 3 sizes), PosLaju Pack Envelopes and Tube, insurance (on demand and contract) and PosLaju Express freight to further enhance its services Further expand its network strength by opening up more PosLaju centres; in Sitiawan and Klang by the first quarter and five more throughout 2006 Continuously identify and focus on new market segments which will generate higher revenue such as those involved in automotive parts, electronics, manufacturing and pharmaceuticals Enhance advertising and promotional efforts through electronic and print media particularly on new products Actively participate in major exhibitions and road shows Provide integrated marketing service to corporate clients through enhanced role of Key Account Managers Developing a new Track and Trace System, Pos Integrated Track and Trace Information System (PITTIS) for PosLaju and to be extended to other premier products at the later stage. 54

57 GROUP MD / CEO S OPERATIONS REVIEW continued POSLOGISTIK After one year operating as a strategic business unit, Poslogistik managed to make headway in the extremely competitive logistics business. In line with the aim to diversify revenue stream by handling more logistics job for non-postal items, considerable efforts were thus expanded to secure external clients. As a result, Poslogistik managed to secure commercial distribution contracts with several manufacturers to distribute products such as cosmetics, automotive parts, electronics and consumer goods. However, there is still much room for improvement as revenue from commercial distribution in 2005 represented only 7% of the total revenue from external clients. Air cargo service with consistent daily loads to East Malaysia was the biggest contributor with almost 90% of external clients revenue. Overall in 2005, revenue from external clients surpassed the internally generated revenue from services provided to other business units within the Group such as Posmel and Poslaju which amounted to only RM5.5 million. The range of services offered by Poslogistik amongst others include door to door delivery and distribution, inbound and outbound logistics including custom clearance, freight forwarding, air cargo (via Transmile), transshipment and warehousing. To promote these services, the Group s extensive network throughout Malaysia, large fleet of vehicles and experienced personnel in route planning and management will continue to be our main selling points. However, going forward, our mission is to move up the supply chain management and be a niche third party logistics (3PL) service provider by This is crucial as the trucking and distribution business is anticipated to be more competitive and profit margin from this segment will be further squeezed by the rising fuel cost. Other challenges will be in the form of international logistics service providers and freight forwarders who have already established and expanded their presence in Malaysia by providing value-added services. Challenges aside, there are also opportunities as the economic activities of the country and region is forecasted to continue to grow. Poslogistik will prepare itself by enhancing warehouse services to achieve faster turnaround time and better service levels. It is also looking at establishing working relationship with reputable international logistics providers as a starting point for regional expansion. Profitability and utilization of resources is also hoped to be improved through the use of Activity- Based Costing. 55

58 GROUP MD / CEO S OPERATIONS REVIEW continued PHILATELY Stamp Issues In 2005 Pos Malaysia Berhad offered 17 issues of commemorative and special stamps and philately items to stamp collectors. The issues ranged from various themes including Rare Flowers Series II, Traditional Dance, Protected Mammals Series III, Traditional Kites, MCKK 100th Anniversary and 11th ASEAN Summit. In May, the long-awaited National Definitive Series featuring Birds of Malaysia was issued. Special Miniature Sheets with Overprint was also issued in April (Migratory Birds issue) in conjunction with Pos Malaysia s participation in the International World Stamp Exhibition Pacific Explorer, Sydney Australia; in August (Protected Mammals Series III issue) for the Taipei 2005, Taiwan and in December for the Stamp Week 2005 featuring Malaysia Batik. The commemorative issue on the 600th Anniversary Malaysia-China Relationship and the special issues on Songket and Malaysia Batik were amongst the best received issues during the year. Standing Order Deposit Account (SODA) A total of 1,079 new stamp collectors joined as Standing Order Deposit Account (SODA) members in The new addition has increased the total number of SODA members to date to 54, % of the new SODA accounts were opened at post office counters, 26% at Philately Counters and 11% opened through the post. Local Market The local collectors interest was still influenced by the themes of the stamp issued. The most popular was flora and fauna, although some commemorative stamps were found to be in high demands depending on the events commemorated. In 2005, Pos Malaysia organized many events to promote stamp collecting as a hobby at schools and public places such as at shopping complexes, government offices, local fairs and expos. The promotions, aimed at enhancing awareness of stamp collecting were targeted at different levels of society ranging from school children to career people and even housewives. Overseas Market The stamp issues are promoted in the overseas market through six international stamp dealers based in United Kingdom, Australia, Thailand, Germany, Japan and Taiwan. The Way Forward Several strategies have been identified to enhance interest in stamps and philatelic products as well as to increase the number of SODA members in 2006: Ensure the quality of issues Working with the local printer on the possibility of producing corporate stamps and personalized stamps. Issuance of stamps using special printing techniques such as embossing, elliptical perforation and hologram effect. 56

59 GROUP MD / CEO S OPERATIONS REVIEW continued Introduce exciting issues Issuance of special issue stamps that will include popular themes such as Wild Duck Series, Fresh Water Fish Series III, Rare Fruits Series III and Malaysian Festivals. Collaboration with Brunei to produce a special Joint- Issue Stamp. Issuance of commemorative issues consisting of 50th Anniversary of Dewan Bahasa and Pustaka and XVIII FIGO World Congress of Gynecology and Obstetrics. Increase sales and promote SODA membership Continue to enhance marketing and promotions at schools, shopping complexes, government agencies, post offices and local expos. HUMAN RESOURCE Employee Development Human Capital continued to be the main focus for year Recognizing that employee excellence is essential to achieve sustainable growth, PSH Group continued to develop its employees through aggressive training programs that focus on enhancing employees skill sets and knowledge base as well as inculcating positive work attitude and change of mindset. The objective of the programs organized was aimed at making the company more customer-centric. The Group spent approximately RM5 million on employees training and development. The Group initiated a succession planning program whereby a pool of high potential employees were identified and developed to assume positions of higher responsibilities. A company-wide Training Needs Analysis will also be initiated in 2006 to address issues pertaining to competencies and productivity. Employee Relations Several major events were organized by the Group throughout the year to foster close relationship between Management and employees. The 2005 Sports Carnival was held in Johor with participation from more than 1,000 employees from all over Malaysia. Among the highlights of the event was an all-male netball match between Senior Management and other employees. A thanksgiving session (Majlis Kesyukuran) for Pos Malaysia Berhad was held simultaneously throughout Malaysia, at head office and state management offices, to give thanks for the achievement of excellent business results the preceding year. A fire drill exercise was carried out at the Company s headquarters to prepare the employees on evacuation procedures in case of an emergency. Towards the end of the year, employees were feted at the Hari Raya Aidil Fitri and Deepavali gathering hosted by the Chairman of PSH, Tan Sri Adam Kadir, the Chairman of PMB, Datuk Abdul Majid Hussein, Group MD/CEO of PSH Dato Ikmal Hijaz Hashim, and other Directors. The Group continued to provide relief aids to employees in A total of RM261,612 was spent from the Staff Welfare Fund throughout the year, whereby 406 employees/ dependants received financial aids for various compassionate reasons such as death, disability, calamity, and medical aids, and incentives for employees children who excelled in their studies. 57

60 GROUP MD / CEO S OPERATIONS REVIEW continued A Voluntary Separation Scheme (VSS) was carried out at Pos Malaysia Berhad in September 2005 with the aim of providing an avenue for the employees to self-appraise themselves and decide on the future of their career whether to continue working with Pos Malaysia or otherwise. The scheme was offered to all employees, Executives and Non- Executives who have served a minimum of 6 months. A budget of RM100 million was allocated for this purpose. A total of 1,388 employees (9.1% of the total workforce) were selected under this scheme based on approved criteria. In an effort to strengthen the harmonious relationship between Management and the Unions, several meetings, both formal and informal, were held in 2005 to discuss and resolve issues involving the Union members. Management took extra effort to ensure that all matters concerning the Union members were effectively resolved. Negotiations for the fifth Collective Agreement commenced towards the end of 2005 and the Collective Agreement is expected to be finalized by the first quarter of Projects A KPI-based Performance Management System was implemented in 2005 at the Senior Management level to build clear links between performance and rewards. A task force will be set up in 2006 to identify key performance indicators for staff at all levels. An incentive plan will also be drawn up in order to attract, retain and harness the best talents within the Group. Hewitt Associates and Watson Wyatt (M) Sdn Bhd undertook projects to review the remuneration package for the Group, which are at the final stage of completion. The proposed remuneration package and projects involving employees career development plan and Productivity-Linked Compensation (PLC) schemes for the Group will be implemented in Disciplinary cases for 2005 have reduced significantly by 25%, in comparison to the previous year. The total staff strength for the Group in December 2005 was 15,334 out of which 1.33% comprised of Executives and the remaining 98.67% comprised of Non-Executives. The Human Resource Information System (HRIS) is an important tool that can function to support the Group with information needed not only to make strategic decision on the workforce and contribute to bottom-line success, but also to manage all information related to training, competencies and performance. Efforts are being taken to ensure that the Group s HRIS is fully updated and completed for an efficient and effective administration of human resource functions. 58

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62 GROUP MD / CEO S OPERATIONS REVIEW continued Customer Service Centre, Subang Jaya The Customer Service Centre (CSC) had shown encouraging development since commencing operations in Subang Jaya a year ago. The CSC, which was established with the objective of being a medium for information reference and intermediary between the customers and postal services, had been well received by the customers of Pos Malaysia. Throughout this period, CSC received 117,796 constructive feedbacks from customers of Pos Malaysia, of which 95.3% was received via PosLine and the remaining through various other channels such as , facsimiles, letters and direct feedbacks to CSC. Overall, CSC received 63% (74,098) enquiries from customers requesting for the status of mail delivery (PosLaju, Pos Daftar and Pos Ekspres), second delivery, proof of delivery receipt and re-tour. Meanwhile, 36.5% (43,092) enquiries were pertaining to general enquiries, post codes and postal tariffs and the balance 0.5% (603) were complaints regarding postal services. The main complaints by customers were in respect of non-receipt of posted items, wrongful delivery, late delivery and unprofessional staff. Number Percentage Complaints handled via IMS by CSC % Complaints handled via IMS by CSU/PLC % Complaints handled manually by CSU/PLC 1, % Total Complaints 2, % Arising from the above, in 2006, CSC plans to continue its efforts to increase exposure and encourage the usage of IMS amongst CSU staff at state level and at PLC through training /re-training programs, by updating IMS users and continuous monitoring of IMS usage. For 2006, through concerted efforts in handling complaints via online channel by all CSUs, CSC targets to enhance the efficiency in handling customer complaints by increasing the percentage of complaints handled within the stipulated time frame in order to help improve and maintain relations and good image of postal services to the customers. The online Integrated Issue Management System (IMS) has been extended to the entire Customer Service Unit (CSU) in state offices and PosLaju Centres (PLC), however the level of usage is still unsatisfactory. The schedule below shows the total IMS usage in handling complaints by CSC and PLC in comparison to manual handling. 60

63 GROUP MD / CEO S OPERATIONS REVIEW continued PROPERTY INFORMATION & COMMUNICATION TECHNOLOGY The Property Unit is responsible for ensuring all facilities and working space provided for each SBU are sufficient and comfortable. The Property Unit is also involved in the purchasing of land and buildings, rental of office space and the upgrading of all post office network, mail centres and PosLaju centres. For the year 2005, this unit handled 27 renovations and upgrading projects, out of which 11 were for PosNiaga, 7 for PosMel, 4 for PosLaju and 5 for the Property Unit. In 2006, the Property Unit plans to strategize to ensure that all projects adhere to the planning schedule, which is more systematic. Upgrading works at the post offices, mail centres and PosLaju centres are for the convenience of both the customers and staff of Pos Malaysia. A total of 57 new projects will be carried out in 2006, which includes completion of projects undertaken in The Information and Communication Technology (ICT) continued to be one of the engines for growth for Pos Malaysia. Being a physical communications services provider, Pos Malaysia has never put aside on the importance of ICT. In 2005, the ICT Department embarked on 5 major projects/ initiatives to ensure that all products and services are backed by a strong ICT infrastructure. In April 2005, the Group completed the ICT Blueprint to support its business objectives and transformation journey. The ICT Blueprint serves as the roadmap for Group s ICT capabilities to support the business strategies and objectives. The unit aims to ensure that all renovations and upgrading projects are completed on time according to the Planning Schedule set and meet the expectation of the SBUs. The Property Unit endeavours to ensure that all projects follow the priority set and ensure that all allocation are fully utilized. 61

64 GROUP MD / CEO S OPERATIONS REVIEW continued a. Enterprise Information System Strategic Plan (EISSP) In April 2005, the Group launched the EISSP project to review, plan and define Pos Malaysia s 5-year ICT Master Blueprint. The ICT Blueprint serves as the roadmap for the Group s ICT capabilities to support the Group s business strategies and objectives and transformation journey. The project also forms part of Pos Malaysia s strategic objectives for the conception of Target Operating Model (TOM) deliverable. b. Network upgrade to VSAT The year 2005 saw Pos Malaysia upgrading its network from dial-up to VSAT (Very Small Aperture Terminal) satellite. With the upgrading exercise, Pos Malaysia continues with its commitment to provide an efficient and effective service, particularly at some of the remote areas. c. Upgrading of Network Security As ICT infrastructures are always exposed to all kinds of threats and risks, the ICT Department has reviewed and upgraded the security features of the Group s network and infrastructure. This was to ensure that the network, as well as the system, is easily accessed by unauthorized parties. The upgraded system will also provide adequate and reliable network services to all business applications in a cost effective manner. d. Merging of PMB and PSH web site In 2005, the ICT Department has successfully merged the PSH and PMB website. The main objective for the merging the two websites is to provide a single view of the PSH group, as well as provide consistency and accuracy of information to all stakeholders. e. PMB Intranet The PMB intranet portal was established to provide easy communication and dissemination of information to all employees. Further development and enhancement of the portal will be carried out in 2006 to incorporate other functions and features of the portal. 62

65 GROUP MD / CEO S OPERATIONS REVIEW continued In its effort to further strengthen the Group s ICT infrastructure, the ICT Department has identified 6 initiatives to be implemented in a. Pos Pantas In enhancing the service level of counter services, the Point-of-Sales system will be replaced with a new system, Pos Pantas. The system once implemented will enable Pos Malaysia to provide more comprehensive and flexible counter services and products. b. Track and trace The existing track and trace system will be replaced with a new system, Pos Malaysia Integrated Track and Trace Information System (PITTIS). The system will be implemented in phases where the first phase is expected to be implemented at all PosLaju Centres by August 2006, while the full system is targeted to be implemented in d. Implementation of ICT asset management In 2006, the ICT Department will be implementing ICT asset management with its main objective being to ensure proper control and maintenance of ICT asset are practiced within the Group. The asset management exercise will involve both hardware and software. e. Disaster Recovery Facility (DRF) As part of the overall business continuity plan, the ICT Department will be launching its DRF in This DRF speaks volumes for Group s commitment to continually improve its products and service offerings to cater to the changing needs of customers. f. ICT Policy and Procedures As part of the ICT quality assurance and governance compliance, the ICT Department will be developing and enforcing various polices and procedures for the Group s ICT operation. This is to ensure that proper control and risks mitigation are in place. c. Enterprise Application Integration (EAI) As part of the blueprint initiatives developed in 2005, the ICT Department will establish the EAI to ensure that all applications can be integrated without any major modifications and problems to the applications. 63

66 CORPORATE governance statement THE BOARD OF DIRECTORS of Pos Malaysia & Services Holdings Berhad fully subscribes to and supports the principles as outlined in Part 1 of the Malaysian Code on Corporate Governance ( Code ). The Board is committed to ensure that the highest standard of corporate governance is practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and the financial performance of the Group. As such the Board is pleased to state that the Group has complied with all of the best practices of Part 2 of the Code. A. BOARD OF DIRECTORS 1. Composition The Board currently consists of eleven (11) members including one (1) alternate director, comprising the Group Managing Director / Chief Executive Officer, an Executive Director, four (4) Non-Independent Non- Executive Directors and five (5) Independent Non- Executive Directors including the Chairman. The number of Independent Directors is in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad ( the Listing Requirements ) which requires one third of the Board to comprise Independent Directors. On 8 March 2006, the Board had appointed Dato Zukri bin Samat as its Non-Independent, Non-Executive Director. On 11 April 2006, Datuk Mohamed Adnan bin Ali, an Independent Non-Executive Director of the Company resigned as a Director. Subsequently Datuk Nazariah bt. Mohd Khalid and Dato Ng Kam Cheung have been appointed Independent, Non-Executive Directors of the Company on 14 April 2006 and 26 April 2006 respectively. On 5 May 2006, Y.M. Tengku Zafrul bin Tengku Abdul Aziz ceased to be the Alternate Director to Mr. Wee Hoe Gooi Hoe Soon. The Board members varied skill and breadth of experience, details as outlined in the Profile of Directors herewith, are relevant for the effective management of the Group s business. The Chairman is primarily responsible for ensuring the effectiveness and conduct of the Board whilst both the Group Managing Director and Executive Director will ensure that Board policies and decisions are implemented accordingly. The Independent Directors shall fulfill their role by exercising independent judgment and positive participation in the deliberations of the Board. They shall also play the pivotal role in provision of unbiased and independent views, advice and judgment as well as safeguard the interests of other parties such as minority shareholders and the community. 2. Board Meetings During the year ended 31 December 2005, nineteen (19) Board Meetings were held. The record of attendance of the Board Members is disclosed in the Profile of Directors and Statement Accompanying Notice of Annual General Meeting herewith. 64

67 CORPORATE GOVERNANCE STATEMENT continued 3. Supply of Information All Directors are provided with an agenda together with Board papers and supporting documents detailing each item on the agenda prior to Board meetings. The Board papers are issued in advance to enable the Directors to obtain further information, where necessary, in order to be properly briefed before the meetings. In addition, there are matters reserved specifically for the Board s decision, including the approval of corporate plans and annual budgets, acquisitions and disposals of undertakings and properties of a substantial value, major investments and financial decisions and changes to the management and control structure within the Group, including key policies and procedures and delegated authority limits. The Directors have access to all information within the Company whether as a full board or in their individual capacity, to the extent that the information required is pertinent to the discharge of their duties as directors and is for the benefit of the Company. All Directors have access to the advice and services of the Company Secretary and may seek independent professional advice should the need arise. 4. Re-election of Directors In accordance with the Company s Articles of Association, all Directors shall retire from office at least once in each three years and at least one-third of the number of directors is subject to retirement by rotation at each Annual General Meeting ( AGM ) but shall be eligible to offer themselves for re-election. 5. Directors Training All of the Directors of the Company, where applicable, have attended the Mandatory Accreditation Programme and have fulfilled the 72 Continuing Education Programme (CEP) points as prescribed by the Listing Requirements. In Year 2006, the Board shall be setting relevant training programmes for its members, to enable the Directors to effectively discharge their duties. 6. Board Committees The following Board Committees have been established to assist the Board in the execution of its responsibilities: 6.1 Audit Committee Please refer to the Audit Committee Report on pages 76 to 79 of this Annual Report. 6.2 Remuneration Committee Members Tan Sri Adam Kadir (Chairman/Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Details of the Directors seeking re-election such as their age, qualification, working experience, other directorships of public companies and position in the Company are disclosed in the Statement Accompanying the Notice of Annual General Meeting and Profile of Directors. Key Responsibilities To assess and recommend remuneration policies and practices extended to Directors, senior management staff and the overall human resources development plan. 65

68 CORPORATE GOVERNANCE STATEMENT continued 6.3 Nominating Committee Members Datuk Alias bin Ali (Chairman/Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (resigned w.e.f. 11 April 2006) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Key Responsibilities Propose new nominees for the Board and to fill seats on board committees. Review the Board s required mix of skills and experience and other qualities, including core competencies which non-executive directors should bring to the Board. Assess the effectiveness of the Board as a whole and the committees of the Board, and the contribution of each individual director. 6.4 Option Committee Members Tan Sri Adam Kadir (Chairman/Independent Non-Executive Director) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Key Responsibilities Administer the Company s Employees Share Option Scheme ( ESOS ) in accordance with the objectives and regulations as stated in the ESOS Bye-Laws. Recommend to establish, amend and revoke any rules or arrangement relating to the ESOS. 66

69 CORPORATE GOVERNANCE STATEMENT continued 6.5 Share Buy-Back Committee Members Datuk Abdul Majid bin Haji Hussein (Chairman/Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (resigned w.e.f. 11 April 2006) Datuk Alias bin Ali (Independent Non-Executive Director) Datuk Abu Huraira bin Abu Yazid (Executive Director / Group Chief Operating Officer) Key Responsibilities Monitor the share buy-back exercise from the report of the status of the exercise prepared by the Management after every purchase and at the end of each month. Ensure that the internal controls are strictly followed by Management. Grant the mandate to an Executive Director or authorized personnel to execute the acquisition of the shares based on a limit set per day. 6.6 Performance Management Committee Members Tan Sri Adam Kadir (Chairman/Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) Dato Ikmal Hijaz bin Hashim (Group Managing Director / Chief Executive Officer) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Tuan Haji Nadza Abdul* (Head of Corporate Planning/General Manager, Office of MD/CEO) Puan Rugayah Yasmin bt Dato Ibrahim* (Head, Human Resources and Administration) (* Members of Management) Key Responsibilities To implement the performance management for the PSH Group in accordance with the guidelines issued by the Putrajaya Committee on GLC High Performance (PCG). 67

70 CORPORATE GOVERNANCE STATEMENT continued 6.7 Transformation Committee Members Tan Sri Adam Kadir (Chairman/Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (resigned w.e.f. 11 April 2006) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) Mr. Segarajah Ratnalingam (Non-Independent Non-Executive Director) Key Responsibilities To operationalize the transformation of the PSH Group as mandated and envisaged in the GLC Transformation Manual. 6.8 Tender Board Committee Members Tan Sri Adam Kadir (Chairman/Independent Non-Executive Director) Datuk Mohamed Adnan bin Ali (Independent Non-Executive Director) (resigned w.e.f. 11 April 2006) Datuk Alias bin Ali (Independent Non-Executive Director) Datuk Abdul Majid bin Haji Hussein (Independent Non-Executive Director) Dato Zukri bin Samat (Non-Independent Non-Executive Director) Key Responsibilities To review the recommendation of the Tender Committee and where appropriate, authorize all procurement of goods, works and services for the Company which value is within the limits authorized in the Discretionary Authority Limit. B. DIRECTORS REMUNERATION The fees payable to non-executive Directors are determined by the Board as a whole and any increase shall be subject to the approval by the shareholders at the AGM. The Company reimburses reasonable expenses incurred by the Directors in the course of their duties as Directors. The Board through the Remuneration Committee ensures that the level of remuneration to the Executive Directors are sufficient to attract and retain the Directors to manage the Company successfully. 68

71 CORPORATE GOVERNANCE STATEMENT continued Details of the Directors Remuneration of the Company for the financial year ended 31 December 2005 are as follows:- Category Salaries (Director) Fees & Bonus Allowance Total RM 000 RM 000 RM 000 RM 000 Executive Non-Executive Total The number of Directors whose total remuneration during the financial year fall within the following bands are: Range of Remuneration Number of Directors Executive Non-Executive Below RM50,000 7 RM50,001 RM100,000 1 RM100,001 RM250,000 1 RM250,001 RM300,000 RM300,001 RM350,000 RM350,001 RM400,000 RM400,001 RM450,000 RM450,001 RM500,000 RM500,001 RM550,000 RM550,001 RM600,000 1 C. RELATIONSHIP WITH INVESTOR AND SHAREHOLDERS 1. Investor Relations and Shareholder Communication The Board acknowledges the importance of communication with investors. Major developments and events are duly and promptly announced via appropriate communications channels through timely dissemination of information which provides shareholders with an overview of the Group s performance and operations. This includes the distribution of annual reports, quarterly announcements, relevant circular and press releases. In addition, the Company conducts briefings and dialogues with financial analysts to keep potential investors informed of the activities of the Group. 69

72 CORPORATE GOVERNANCE STATEMENT continued During the financial year under review, the shareholders and the public could convey their concerns and queries to the Senior Independent Non-Executive Director, Datuk Mohamed Adnan bin Ali, who is the Investor Relations Representative of the Board, at Pursuant to the resignation of Datuk Mohamed Adnan bin Ali on 11 April 2006, Datuk Alias bin Ali has been appointed by the Board to be the new Senior Independent Non-Executive Director of the Company. 2. General Meetings General meetings serve as the principal forum for communicating with the shareholders of the Company. At the AGM, shareholders have direct access to the Board and are given the opportunity to raise questions or seek further information. Members of the Board, Senior Management of the Company as well as the external auditors of the Company are present to respond accordingly. D. ACCOUNTABILITY AND AUDIT 1. Financial Reporting The Company s financial statements are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. In presenting the annual financial statements and quarterly announcement of results to shareholders, the Board aims to present a balanced and understandable assessment of the Group s position and prospects. In this regard, the Board also ensures that the Company has used acceptable accounting policies for its financial statements, consistently applied and supported by reasonable and prudent judgment and estimates. The Audit Committee assists the Board by reviewing the disclosed information to ensure completeness, accuracy and validity prior to release to the Bursa Malaysia Securities Berhad. 2. Internal Control The Board has overall responsibility for maintaining a sound system of internal control to provide reasonable assurance of the effectiveness of the Group s business operations and risk management. The Group s Statement of Internal Control is set out on page 71 of this Annual Report. 3. Relationship with Auditors The Company through the Audit Committee has an appropriate and transparent relationship with the external auditors. In the course of audit of the Group s operations, the external auditors have highlighted to the Audit Committee and the Board, matters that require the Board s attention. The external auditors presented their audit plan and report on their findings pertaining to their annual audit to the Audit Committee. The report of the Audit Committee is set out on page 76 of this Annual Report. (This Statement is made in accordance with a resolution of the Board of Directors dated 27 February 2006 and 10 April 2006) 70

73 STATEMENT OF INTERNAL control INTRODUCTION THE BOARD OF DIRECTORS ( the Board ) as guided by the Bursa Malaysia Securities Berhad s Statement of Internal Control - Guidance for Directors of Public Listed Companies is pleased to provide the following Director s Statement of Internal Control which outlines the nature and scope of internal control of the Group during the financial year. RESPONSIBILITY The Board is responsible for ensuring that a sound system of internal control to safeguard shareholders interest and Company s assets is maintained. The Board affirms its overall responsibility for the Group s system of internal control which includes the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity. As there are limitations that are inherent in any system of internal control, this system is designed to manage rather than eliminate risks that may hinder the achievement of the Group s business objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or loss. The system of internal control covers all aspects of the business including strategic, financial, operational, compliance controls and risk management procedures. RISK MANAGEMENT FRAMEWORK Policy The Board subscribes to the fact that an effective risk management practice is a critical component of a sound system of internal control. Accordingly, the Board confirms that there is in place a formal and on-going process to identify, evaluate and manage significant risks faced by the Group that may impede the achievement of the Group s objective throughout the year. Management is responsible for creating a risk-aware culture and for building the necessary knowledge for risk management. They also have the responsibility for managing risks and internal controls associated with the operations and ensuring compliance with the applicable laws and regulations. Among measures taken are: Briefing sessions by Management with key personnel within the Group of their responsibilities on risk and control process. Establishment of the Risk Management Committee and Risk Working Groups to oversee the implementation of the Risk Management Framework During the financial year ended 31 December 2005, the Board approved the Risk Management Policy to be adopted by the group on 26 April The Risk Management Committee had convened a meeting on 13 May 2005 to discuss and update the Corporate Risk Register on any new and potential risk to the Group. The Corporate Risk Register was subsequently reviewed by the Audit Committee on 19 August 2005 and approved by the Board on 29 August

74 STATEMENT OF INTERNAL CONTROL continued CONTROL ENVIRONMENT The control environment sets the tone of the organisation and influencing the control consciousness of its people. It is the foundation for all components of internal control, providing discipline and structure. Control environment factors include the integrity, ethical values and competence of the people; management s philosophy and operating style; the way the management assigns authority and responsibility, organise and develops its people; and the attention and direction provided by the Board of Directors. The Group is committed in ensuring that a proper control environment is maintained. Among the measures taken are regular internal audit visits to appraise and review the systems of internal controls to ensure that these controls are effective and working as intended. OTHER KEY ELEMENTS OF INTERNAL CONTROL The other key elements of the Group s internal control systems are described below: The roles and responsibilities, in respect of Risk Management; of the Board of Directors, Risk Management Committee, Business Units and certain offices are defined in the Risk Management Policy. The lines of responsibility and frequency of reporting of risks, are also defined in the Risk Management Policy. Operating policies and procedures, which incorporate regulatory and internal requirements, are prescribed in Operating Procedures and Circulars. The documents are updated as and when necessary to meet the continually changing operational needs. The Board meets at least quarterly to review the Group s operational and financial performance against approved budget, approve quarterly report to Bursa Malaysia and deliberate on issues that require the Board s approval. In addition, the Board is also updated on the changes in the business environment that may adversely affect business performance and relevant actions taken. The Audit Committee, together with the Internal Audit Department provides an independent assessment on the adequacy, efficiency and effectiveness of the Group s internal control system and advises management on areas that require improvement. The monitoring, review and reporting arrangements in place give reasonable assurance that the structure of controls and its operations are appropriate to the Group s operations and that risks are at an acceptable level throughout the Group s business. However, the arrangements do not eliminate the possibility of human error or deliberate circumvention of control procedures by employees. The Board believes that the development of the system of internal control is an ongoing process and has taken steps throughout the year to improve its internal control system and will continue to do so. WEAKNESS IN INTERNAL CONTROL THAT RESULT IN MATERIAL LOSSES There were no material losses or material fraud incurred during the current financial year as a result of weaknesses in internal controls. Management continues to take measures to improve and strengthen the internal control environment. (This Statement is made in accordance with the resolution of the Board of Directors dated 27 February 2006). 72

75 directors RESPONSIBILITY STATEMENT Pursuant to Paragraph 15.27(a) of the Listing Requirements of the Bursa Malaysia Securities Berhad, the Board of Directors is required to include a statement in the Company s Annual Report explaining its responsibility for preparing the annual audited financial statements. In preparing the financial statements of the Company and the Group for the financial year ended 31 December 2005, the Directors are satisfied that the Company and the Group have used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Directors are also satisfied that all applicable approved accounting standards have been followed in compliance with the provisions of the Companies Act, The Directors are responsible for ensuring that the Company and companies within the Group keep accounting records which disclose with reasonable accuracy the financial position of the Company and of the Group. In addition, the Directors are responsible to take such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. (This Statement is made in accordance with a resolution of the Board of Directors dated 26 February 2006). 73

76 additional COMPLIANCE INFORMATION 1. Utilisation of Proceeds During the financial year ended 31 December 2005, there were no proceeds raised by the Company from any corporate proposals. 2. Share buy-back/ Resale of Treasury Shares 2.1 Share Buy-Back The Company did not exercise any share buy back during the financial year ended 31 December Resale of Treasury Shares During the financial period ended 31 December 2001, the Company repurchased 38,588,000 of its issued shares from the open market. The average price paid for the shares repurchased was RM2.20 per share. The repurchase transactions were financed by internally generated funds. The repurchased shares are held as treasury shares and carried at cost. The Company resold 2,000,000 of its treasury shares in the financial year ended 31 December During the financial year ended 31 December 2005, the Company resold the remaining 36,588,000 of its treasury shares. Details relating to the resale of treasury shares during the year are as follows: No. of Gross treasury Highest Lowest Average consideration shares price price price received Month sold (RM) (RM) (RM) (RM) January 1,450, ,895,116 February 2,823, ,998,662 March 867, ,604,752 May 4,000, ,489,200 June 27,447, ,417,101 Total 36,588, ,404,831 74

77 ADDITIONAL COMPLIANCE INFORMATION continued 3. Options, warrants or convertible securities 6. Variation in results Employee Share Options Scheme The Company had on 24 June 2003 established and implemented the ESOS for a period of 5 years expiring 23 June The ESOS in governed by the ESOS Bye -laws which were approved by the shareholders on 15 August Subsequent amendments to the ESOS Bye-laws were approved by the shareholders on 16 December On 26 January 2005, the Company issued an additional ESOS expiring on 23 June The additional ESOS is governed by the amended ESOS Bye-laws which were approved by the shareholders on 16 December The detail of the ESOS are disclosed in page 114 of the financial statements. Warrants During the financial year, the Company did not issue or exercise any warrants or convertible securities 4. American Depository Receipt (ADR)/Global Depository Receipt (GDR) During the financial year ended 31 December 2005, the Company did not sponsor any ADR or GDR. 5. Sanctions and/or Penalties During the financial year ended 31 December 2005, there were no sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies. There is no variance in the Company s audited financial results for the financial year ended 31 December 2005 from the unaudited results as previously announced. The Company has not released or announced any estimate profit, financial forecast and projection in the financial year ended 31 December Profit Guarantee During the financial year ended 31 December 2005, the Company did not give any profit guarantee. 8. Material contracts There were no material contracts entered into by the Company and its subsidiaries involving the directors and substantial shareholders, either still subsisting at the end of the financial year ended 31 December 2005 or entered into since the end of the previous financial year. 9. Revaluation policy During the financial year ended 31 December 2005, the Company did not have any revaluation policy on landed properties. 10. Status of Corporate Proposals In relation to the acquisition of the entire equity interest in PMB, the subject draft lease agreements of the procurement of ownership for all types of subject properties by PMB including those land categorized as federal reserve land with the Federal Land Commissioner have been finalised, pending some actions which need to be undertaken. 11. Non-audit fees Non-audit fees payable to the external auditors, Messrs KPMG and its affiliate for the financial year ended 31 December 2005 amounted to RM170,

78 audit COMMITTEE REPORT THE BOARD OF DIRECTORS of Pos Malaysia & Services Holdings Berhad is pleased to present the report on the Audit Committee of the Board for the year ended 31st December MEMBERS AND MEETINGS The Audit Committee during the year comprised the Directors listed below. The Committee had five (5) meetings during the financial year. Details of the members and the attendance of the meetings are as follows: Members a) Datuk Mohamed Adnan bin Ali * Chairman (Independent Non-Executive Director) (resigned w.e.f. 11 April 2006) b) Datuk Alias bin Ali Member (Independent Non-Executive Director) c) Datuk Abdul Majid bin Haji Hussein Member (Independent Non-Executive Director) d) Mr. Segarajah Ratnalingam Member (Non-Independent Non-Executive Director) * Following the resignation of Datuk Mohamed Adnan bin Ali on 11 April 2006, two (2) new members were appointed on the Audit Committee on 4 May 2006, namely:- (i) Dato Ng Kam Cheung (Independent Non-Executive Director); and (ii) Mr. Wee Hoe Gooi Hoe Soon (Non-Independent Non-Executive Director) Attendance of Meetings Members Total a) Datuk Mohamed Adnan bin Ali (resigned w.e.f. 11 April 2006) 5/5 b) Datuk Alias bin Ali 4/5 c) Datuk Abdul Majid bin Haji Hussein 5/5 d) Mr. Segarajah Ratnalingam 4/5 Dato Ng Kam Cheung and Mr. Wee Hoe Gooi Hoe Soon did not attend any Audit Committee meetings held during the financial year ended 31 December 2005 as they were not members of the Audit Committee during the said period. 76

79 AUDIT COMMITTEE REPORT continued ACTIVITIES OF THE COMMITTEE DURING THE YEAR During the year, the Audit Committee carried out its duties as set out in the terms of reference. The main issues discussed by the Audit Committee were as follows:- Review of the audit plans for the year 2005 to ensure adequate scope and coverage over the activities of the Group; Review of the audit reports for the Group and Company prepared by the internal and external auditors and consideration of the major findings by the auditors and management s responses thereto. The review included a meeting with the external auditors without the presence of the management of the company to deliberate on the audit issues; review of the quarterly and annual reports of the Group and the Company prior to submission to the Board of Directors for consideration and approval; review of the related party transactions entered into by the Group and the Company and the disclosure of such transactions in the annual report of the Company; review of the performance of external auditors and made recommendations to the Board on their appointment, scope of work and audit fees; review of the Risk Management Scorecard prepared by management and recommendation for Board approval; review of the verification of the Employees Share Option Scheme ( ESOS ) conducted by the Internal Audit Department. The Audit Committee is satisfied that the allocation of such options over ordinary shares pursuant to the company s ESOS during the financial year ended 31 December 2005, has complied with the criteria set out in the ESOS Bye-Laws. INTERNAL AUDIT FUNCTION The Group has an Internal Audit Department whose principal responsibility is to undertake regular and systematic reviews of the systems of controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Group and Company. The Audit Committee approves the internal audit plan prior to the commencement of a new financial year. The scope of the internal audit covers the audits of all units and operations, including subsidiaries. Throughout the financial year, audit assignments and follow-ups were carried out on units of operations and subsidiaries. These were carried out in accordance with the annual audit plan or as special ad-hoc audits at management s request. The resulting reports of the audits undertaken were presented to the Audit Committee and forwarded to the parties concerned for their attention and necessary action. The Management is responsible for ensuring that corrective actions on reported weaknesses and suggested improvements as recommended are taken within the required timeframe. 77

80 AUDIT COMMITTEE REPORT continued TERMS OF REFERENCE The terms of reference of the Committee are as follows:- 1. Composition of Committee A. The Committee shall be appointed by the Board of Directors amongst the Directors of the Company which fulfils the following requirements:- a) The Committee shall consists of not less than three members; b) A majority of the Committee must be Independent Directors; c) At least one member of the Committee: i. Must be a member of the Malaysian Institute of Accountants; or ii. If he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years working experience and: He must have passed the examination specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or He must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act B. The members of the Committee shall elect a Chairman from among themselves who shall be an Independent Director. C. No Alternate Director should be appointed as a member of the Committee. D. In the event of any vacancy in the Committee resulting in the non-compliance of the listing requirement of the Exchange pertaining to composition of audit committee, the Board of Directors shall within three months of that event fill the vacancy. 2. Meetings Meetings shall be held not less than four (4) times a year and, in addition to members of the Committee, will normally be attended by the Managing Director / Chief Executive Officer, Chief Financial Officer and Chief Internal Auditor. Other members of the Board, senior management and external auditors representatives may attend the meetings upon invitation of the Committee. The auditors, both internal and external, may request a meeting if they consider that one is necessary. The quorum shall be two (2) members, a majority of whom must be independent Directors. Minutes of each meeting shall be kept and distributed to each member of the Committee and of the Board. The Chairman of the Committee shall report on each meeting to the Board. The Secretary to the Committee shall be the Group Secretary. 3. Rights and 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. to have full and unrestricted access to information pertaining to the Group and the Company. to have direct communication channels with the internal and external auditors to be able to obtain independent professional or other advice and to have resources in order to perform its duties as set out in its terms of reference. Notwithstanding anything to the contrary, the Committee does not have executive powers and shall report to the Board of Directors on matters considered and its recommendation thereon, pertaining to the Group and the Company. 78

81 AUDIT COMMITTEE REPORT continued 4. Responsibility Where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactory resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad, the Committee has the responsibility to promptly report such matter to Bursa Malaysia Securities Berhad. 5. Review of the Committee The performance of the Committee and each of the members shall be reviewed by the Board of Directors at least once every three (3) years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference in Corporate Governance Statement. 6. Duties and Functions The duties and functions of the Committee are as follows:- to consider the appointment, resignation and dismissal of external auditors and the audit fees; to review the nature and scope of the audit with the internal and external auditors before the audit commences; to review the quarterly and annual financial statements of the Group and the Company focusing on the matters set out below, and thereafter to submit them to the Board:- any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumption; compliance with accounting standards and regulatory requirements. to discuss problems and reservations arising from the interim and final audits, and any matter the external auditors may wish to discuss; to review the audit reports prepared by the internal and external auditors, the major findings and management s responses thereto; to review the adequacy of the scope; functions and resources of the internal audit department and whether it has the necessary authority to carry out its work; to consider the report, major findings and management s response thereto on any internal investigations carried out by the internal auditors; to review the evaluation of the systems of internal control with the auditors; to review the assistance given by the Group s and the Company s employees to the auditors; to review related party transactions entered into by the Group and the Company to ensure that such transactions are undertaken on the Group s normal commercial terms and that the internal control procedures with regards to such transactions are sufficient; to oversee the Risk Management Process; to verify the allocation of options during the year pursuant to the Employees Share Option Scheme; to review any appraisal or assessment of the performance of executives in the internal audit department; and any such other functions as may be agreed to by the Committee and the Board. (This Statement is made in accordance with a resolution of the Board of Directors dated 27 February 2006) 79

82 80

83 Directors Report 82 Statement by Directors 86 Statutory Declaration 86 Report of the Auditors 87 Balance Sheets 88 financial STATEMENTS Income Statements 90 Statement of Changes in Equity 91 Cash Flow Statements 93 Notes to the Financial Statements 95 81