Directors’ Report & Financial Statements year ended 31 december 2003 58 annual report for the financial year ended 31 December 2003 ■ Financial Statements Directors’ Report The Directors are pleased to submit their report to the members together with the audited financial statements of the Group and Company for the financial year ended 31 December 2003. PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and provision of management services. The principal activities of the subsidiary companies are set out in Note 15 to the financial statements. There has been no significant change in these activities during the financial year. FINANCIAL RESULTS Group Company RM’000 RM’000 Net profit for the financial year 61,041 8,669 DIVIDENDS The dividends paid or declared by the Company since 31 December 2002 are as follows: In respect of the financial year ended 31 December 2002: RM’000 First and final dividend of 4 sen per share on 390,787,991 ordinary shares which excludes 38,588,000 treasury shares, less income tax of 28%, paid on 20 August 2003 11,255 The Directors now recommend the payment of a first and final gross dividend of 5 sen per share on 402,377,991 ordinary shares, which excludes the 38,588,000 treasury shares held by the Company, less 28% income tax, amounting to RM14,485,608 which, subject to the approval of members at the forthcoming Annual General Meeting of the Company. RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are shown in the financial statements. ISSUES OF SHAR ES During the financial year, the issued and paid up share capital of the Company was increased from RM429,375,991 to RM440,965,991 by the issuance of: (i) 600,000 new ordinary shares of RM1.00 each by the Company by virtue of the conversion of RM1,080,000 nominal value of 8% Irredeemable Convertible Unsecured Loan Stocks 1999/2004 (“ICULS 1999/2004”) at the conversion rate of RM1.80 nominal value of ICULS 1999/2004 for every one (1) new ordinary share in the Company. (ii) 773,000 new ordinary shares of RM1.00 each by the Company for cash by virtue of the exercise of share options pursuant to the Company’s Employee Share Option Scheme (“E SOS”) at a subscription price of RM1.30 per share. (iii) 10,217,000 new ordinary shares of RM1.00 each by the Company for cash by virtue of the allotment of shares pursuant to the Company’s Preferential Allocation of Shares at a subscription price of RM1.30 per share. The new ordinary shares issued during the year ranked pari passu in all respects with the existing ordinary shares of the Company. Pos Malaysia & Services Holdings Berhad 59 Financial Statements ■ Directors’ Report (continued) EMPLOYEE SHARE OPTION SCHEME (“ESOS”) The Company had on 24 June 2003 established and implemented the ESOS for a period of 5 years expiring on 23 June 2008. The ESOS is governed by the ESOS Bye-laws which were approved by the shareholders on 15 August 2001. Details of the ESOS are set out in Note 28(c) to the financial statements. The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders and their shareholdings pursuant to Section 169(11) of the Companies Act, 1965 except for information of employees who were granted options of 12,000 shares and above under the ESOS. Other than Director’s options disclosed in Directors’ Interests In Shares below, the list of eligible employees of the Company and its subsidiaries who were granted options of 12,000 shares and above under ESOS is as follows: Name No. of options granted Peggy Tan Guat Ngiee 30,000 S.M. Haja Alawdin Bin S Md Sulaiman 12,000 PREFERENTIAL ALLOCATION OF SHAR ES (“PAL”) The Company had on 30 June 2003 implemented the PAL for the eligible employees of the Company and its subsidiaries, as well as any other persons who, pursuant to the terms and conditions of service in Pos Malaysia Berhad (“POS”) and/or the collective arrangements entered into between POS and its various employee unions are entitled to participate in a share ownership scheme (collectively “eligible persons”). Details of the PAL are set out in Note 28(b) to the financial statements. The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders and their shareholdings pursuant to Section 169(11) of the Companies Act, 1965 except for information of eligible persons who were granted options of 12,000 shares and above under the PAL. Other than Director’s options disclosed in Directors’ Interests In Shares below, the list of eligible persons who were granted options of 12,000 shares and above under the PAL is as follows: Name No. of options granted Dato’ Abdul Malek bin Ahmad Shazili 52,000 Peggy Tan Guat Ngiee 30,000 Mohd. Mahdom bin Haji Ahmad 12,000 60 annual report for the financial year ended 31 December 2003 ■ Financial Statements Directors’ Report (continued) IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS 1999/2004 (“ICULS 1999/2004”) As at 31 December 2003, the Company has RM82,542,300 outstanding ICULS 1999/2004. The salient features of the ICULS 1999/2004 of the Company are as follows: (a) bear a fixed coupon rate of 8% per annum on the principal amount of the ICULS 1999/2004 payable annually on 31 December of each year during the five years they remain outstanding, the first payment being on 31 December 1999 and the last payment being on the maturity date of ICULS 1999/2004; (b) convertible into new ordinary shares on any market day after the date of issue and expiring on the market day preceding the maturity date at the conversion rate of RM1.80 nominal value of ICULS 1999/2004 for every one (1) new ordinary share in the Company; and (c) on the maturity date of 26 November 2004, any unconverted ICULS 1999/2004 will be automatically converted mandatorily at the conversion price which will be satisfied by the equivalent nominal value of ICULS 1999/2004 for every one (1) new ordinary share in the Company. DIRECTORS The Directors who have held office during the period since the date of the last report are as follows: Tan Sri Abdul Halim bin Ali Tan Sri Dr Samsudin bin Hitam Datuk Mohamed Adnan bin Ali Dato’ Annuar bin Maaruf Abu Huraira bin Abu Yazid Wee Hoe Soon @ Gooi Hoe Soon Dato’ Ikmal Hijaz bin Hashim (appointed on 19.12.2003) Dato’ Dr Awang Adek bin Hussin (resigned on 31.3.2004) In accordance with Article 102 of the Company’s Articles of Association, Tan Sri Abdul Halim bin Ali and Dato’ Annuar bin Maaruf retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with Article 109 of the Company’s Articles of Association, Dato’ Ikmal Hijaz bin Hashim retires at the forthcoming Annual General Meeting and, being eligible, offers himself for election. DIRECTORS’ BENEFITS During and at the end of the financial year, no other arrangements subsisted to which the Company is a party being arrangements, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate other than the Company’s Employee Share Option Scheme and Preferential Allocation of Shares (see Note 7 to the financial statements). Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’ remuneration disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except that certain Directors received remuneration as Directors of the subsidiary companies. Pos Malaysia & Services Holdings Berhad 61 Financial Statements ■ Directors’ Report (continued) DIRECTORS’ INTERESTS IN SHAR ES According to the register of Directors’ shareholdings, particulars of interests of Directors who held office at the end of the financial year in shares and options over ordinary shares in the Company are as follows: Number of ordinary shares of RM1 each As at As at 1.1.2003 Acquired Disposed 31.12.2003 Abu Huraira bin Abu Yazid 0 50,000* 0 50,000 * Acquired pursuant to the Preferential Allocation of Shares Number of options over ordinary shares of RM1 each As at As at 1.1.2003 Entitlement Exercised 31.12.2003 Abu Huraira bin Abu Yazid 0 50,000 0 50,000 Other than disclosed above, according to the register of Directors’ shareholdings, the Directors in office at the end of the financial year did not hold any interest in shares and options over shares in the Company, or shares, options over shares and debentures of its related corporations during the financial year. STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the income statements and balance sheets were made out, the Directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing-off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and (b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise.