2009 Annual Report

JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 (585648-T) . http://www.jaks.com.my http://www.jaks.com.my BERHAD JAKS RESOURCES Subang Permai, 526 Persiaran Lot Industrial USJ 1, Park, Sungai Penaga Selangor Darul Ehsan, 47600 Subang Jaya, 3571 : 03 - 5633 : 03 - 5633 1988 | Fax Tel Contents

2 JAKS At A Glance

4 Corporate Information

5 Corporate Structure

6 Board of Directors

9 Chairman’s Statement/Penyata Pengerusi

16 Corporate Governance Statement

22 Board Committees

26 Statement on Internal Control

28 Corporate Social Responsibility Statement

30 Directors’ Responsibility Statement

31 Financial Statements

92 Properties of the Group

94 Analysis of Shareholdings

97 Notice of Annual General Meeting

Proxy Form JAKS at a Glance

Our Vision “A Global leader in the integrated water resources management industry by providing a comprehensive range of services including designing, manufacturing, supplying and laying of pipes. ”

Emerging as Malaysia’s most progressive enterprise, the Group initially commenced operations as water supply contractors and other water related works but advanced into pipe laying and reservoir construction works. Over the years, we have built a consistent record of quality, excellence and dependability in the designing and construction of sewerage treatment facilities.

Our manufacturing operations produces mild steel pipes and other steel products and is also actively involved in infrastructural projects and trading of construction and steel related products, both locally and abroad.

Today, our extensive expertise and experience enables us to adopt and implement solutions to meet our customers’ specifi c requirements. We will use our competitive strength and continue to strive for greater growth by seizing the opportunities of tomorrow.

2 JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 JAKS at a Glance

JAKS Resources Berhad

The business of JAKS was started by our founder Datuk Ang Ken Seng in the 60’s from the humble beginning as a plumber providing services to residential premises. With the aim to be a major player in the water recticulation works, Datuk Ang later incorporated JAKS Sdn Bhd (formerly known as Ang Ken Seng & Sons Sdn Bhd) in 1987, which eventually became the core business and subsidiary of JAKS Resources Berhad (JAKS) for its listing on the Main Board of Bursa Malaysia on 1 July 2004. JAKS is a group of companies primarily engaged in the water sector involved in the water supply construction projects, manufacturing and supply of mild steel pipes and manufacturing and trading of steel pipes and steel hollow sections.

Our Mission • To provide total customer satisfaction by providing cost effective, quality products and services on a timely basis.

• To fully utilize integrated technology and information system to improve operational processes to ensure a sustainable and competitive advantage.

• To optimize shareholder wealth by continuously exploring new business opportunities while strengthening and expanding current core business with good corporate governance and prudent risk management.

• To build a dynamic, innovative and competent workforce through teamwork and commitment to excel.

• To build strategic alliances with our consultants, contractors, suppliers and other business associates for further growth and expansion.

JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 3 Corporate Information

BOARD OF DIRECTORS SECRETARIES AUDITORS

Dato’ Zolkipli Bin Abdul Leong Oi Wah (MAICSA 7023802) Baker Tilly Monteiro Heng (Independent Non-Executive Chairman) Tai Li Ching (MAICSA 7053542) 22-1, Monteiro & Heng Chambers Jalan Tun Sambanthan 3 Ang Lam Poah REGISTERED OFFICE 50470 Kuala Lumpur (Managing Director & Group Chief Executive Offi cer) 312, 3rd Floor, Block C, PRINCIPAL PLACE OF BUSINESS Kelana Square, 17, Jalan SS7/26 Dato’ Razali Merican Bin 47301 Petaling Jaya Lot 526, Persiaran Subang Permai Naina Merican Selangor Darul Ehsan Sungai Penaga Industrial Park, USJ 1 (Executive Director) Tel No : 603-7803 1126 47600 Subang Jaya Fax No : 603-7806 1387 Selangor Darul Ehsan Ang Lam Aik Tel No: 603-5633 1988 (Executive Director) REGISTRARS Fax No: 603-5633 3571 Website : www.jaks.com.my Dato’ Azman Bin Mohmood Tricor Investor Services Sdn Bhd (Independent Non-Executive Director) Level 17, The Gardens North Tower PRINCIPAL BANKERS Mid Valley City, Lingkaran Syed Putra Liew Jee Min @ Chong Jee Min 59200 Kuala Lumpur AmBank (M) Berhad (Independent Non-Executive Director) Tel No : 603-2264 3883 HSBC Bank Malaysia Berhad Fax No : 603-2282 1886 Datuk Kamarulzaman Bin Zainal STOCK EXCHANGE LISTING (Independent Non-Executive Director) Bursa Malaysia Securities Berhad Tan Sri Dato’ Seri Law Hieng Ding (Main Market) (Independent Non-Executive Director) Stock Number (4723)

4 JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 Corporate Structure

LOCAL 100% Surge System Sdn Bhd

98.05% JAKS Steel Industries Sdn Bhd

100% Pipe Technology System Sdn Bhd

100% Empire Deluxe Sdn Bhd

100% Wing Tiek Ductile Iron Pipe Sdn Bhd

100% JAKS Sdn Bhd

100% JAKS Power Sdn Bhd

100% JAKS Marketing Sdn Bhd

100% JAKS-KDEB Consortium Sdn Bhd

100% Integrated Pipe Industries Sdn Bhd

51% JAKS Island Circle Sdn Bhd

OVERSEAS 100% Gain World Trading Limited

100% Golden Keen Holdings Limited

• Construction • Manufacturing • Trading • Investment Holding • Property Development

JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 5 Board of Directors

DATO’ ZOLKIPLI BIN ABDUL ANG LAM POAH DATO’ RAZALI MERICAN (left) (middle) BIN NAINA MERICAN (right)

Dato’ Zolkipli Bin Abdul, a Malaysian, Ang Lam Poah, a Malaysian, aged Dato’ Razali Merican Bin Naina aged 68 was appointed to the Board 42 was appointed to the Board on 23 Merican, a Malaysian, aged 39 was on 1 May 2006. He is the Independent December 2003. He is the Managing appointed to the Board on 23 December Non-Executive Chairman of the Director and Group Chief Executive 2003. He is an Executive Director of Company and also a member of the Offi cer of the Company. He isa the Company. Audit Committee and Nomination member of the Remuneration Committee. Committee. He has been actively involved in business after the completion of his Dato’ Zolkipli is a Fellow member of He holds a Diploma in Business University degree in 1995. Since then, the Chartered Institute of Transport, Administration from Toronto School of he has acquired extensive experience Malaysia and has a Master of Arts in Business. Upon obtaining his diploma and expertise especially in water Strategic Studies from the University in 1990, he started his career in JAKS. construction and steel manufacturing. of Iowa. He was in the public service for more than 25 years and was the He has been actively involved in Dato’ Razali does not have any family Deputy Secretary General in the the day-to-day operations and relationship with any other Director and/ Ministry of Agriculture before he retired management of the water construction or major shareholder of the Company in 1997. projects undertaken by JAKS upon and has no confl ict of interest with the his graduation. Apart from the water Company. He has no convictions for Currently, Dato’ Zolkipli holds construction activities, he has also offence within the past ten years. directorships in The New Straits Times been involved in setting up companies Press (Malaysia) Berhad and TRIPLC manufacturing mild steel pipes and He has attended four out of fi ve of Berhad. manufacturing common clay bricks. the Board meetings held during the He also holds directorships in several fi nancial year ended 31 October 2009. Dato’ Zolkipli does not have any family other private limited companies. relationship with any other Director and/ or major shareholder of the Company Ang Lam Poah is the brother to the and has no confl ict of interest with the Director, Ang Lam Aik and son to Datuk Company. He has no convictions for Ang Ken Seng, a major shareholder of offence within the past ten years. the Company. Save as disclosed, he does not have any family relationship He has attended four out of fi ve of with any other Director and/or major the Board meetings held during the shareholder of the Company and fi nancial year ended 31 October 2009. has no confl ict of interest with the Company. He has no convictions for offence within the past ten years.

He attended all the Board meetings held during the fi nancial year ended 31 October 2009.

6 JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 Board of Directors (cont’d)

ANG LAM AIK DATO’ AZMAN BIN LIEW JEE MIN @ (left) MAHMOOD (middle) CHONG JEE MIN (right)

Ang Lam Aik, a Malaysian aged 36, Dato’ Azman Bin Mahmood, Liew Jee Min @ Chong Jee Min, was appointed to the Board on 23 a Malaysian aged 58, was appointed to a Malaysian aged 51, was appointed December 2003. He is an Executive the Board as Director on 23 December to the Board on 23 December 2003. Director of the Company. 2003. He is an Independent Non- He is an Independent Non-Executive Executive Director of the Company and Director of the Company and the He holds a Diploma in Computer the Chairman of the Audit Committee Chairman of the Remuneration Science from Canada and has been as well as the Nomination Committee. Committee. He is also a member in involved in project management and the Audit Committee and Nomination construction related fi elds since 1995. Dato’ Azman is a member of the Institute Committee. of Chartered Accountants in England and Wales. He has vast experience Ang Lam Aik is the brother to the He holds the LLB (Hons) degree from working in a number of auditing fi rms in Managing Director, Ang Lam Poah and University of Leeds, England and was London and Johor Bahru. son to Datuk Ang Ken Seng, a major admitted as an advocate and solicitor shareholder of the Company. Save as at the High Court of Malaya in 1986. He joined Kumpulan Perangsang disclosed, he does not have any family He is a partner of the legal fi rm, J.M. Selangor Berhad in 1983 and left in relationship with any other Director and/ 1990 to become the Managing Director Chong, Vincent Chee & Co and has or major shareholder of the Company of Worldwide Holdings Berhad, a been practicing since the date of and has no confl ict of interest with the public listed company in Bursa admission. He also sits on the board Company. He has no convictions for Securities until 1996. of Lion Industries Corporation Berhad offence within the past ten years. and Autoair Holdings Berhad. Presently, Dato’ Azman is the Executive He attended all the Board meetings Chairman of Fine Access Sdn Bhd, Chong Jee Min does not have any held during the fi nancial year ended 31 a company involved with property family relationship with any other October 2009. development and the Chairman of Director and/or major shareholder of Cocoaland Holdings Berhad, a food the Company and has no confl ict of confectionary manufacturer listed on interest with the Company. He has no the Main Market of Bursa Malaysia convictions for offence within the past Securities Berhad. He is also the ten years. Director of Kumpulan Hartanah Selangor Berhad, Tabung Amanah Saham He attended all the Board meetings Selangor Bhd and Airocom Technology held during the fi nancial year ended 31 Berhad. October 2009.

Dato’ Azman does not have any family relationship with any other Director and/or major shareholder and has no confl ict of interest with the Company. He has no convictions for offence within the past ten years.

He attended all the Board meetings held during the fi nancial year ended 31 October 2009.

JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 7 Board of Directors (cont’d)

DATUK KAMARULZAMAN TAN SRI DATO’ SERI BIN ZAINAL (left) LAW HIENG DING (right)

Datuk Kamarulzaman Bin Zainal, Tan Sri Dato’ Seri Law Hieng Ding, a Malaysian, aged 53, was appointed a Malaysian, aged 74, was appointed to the Board on 31 January 2005. to the Board on 3 February 2010. He is He is an Independent Non-Executive an Independent Non-Executive Director Director of the Company as well as the of the Company. Remuneration Committee member. Tan Sri Dato’ Seri Law Hieng Ding He holds a Diploma in Mass holds a Bachelor of Commerce in Communications and Journalism, Accountancy from Nanyang University, London College of Journalism. He was . He started his career as the Executive Secretary for Malaysian senior executive in emerging private Students Union in United Kingdom and sector of in 1961 and in 1964 Eire in 1979 to 1981. he started his public service where he was the Urban District Councillor. He started his career as a reporter He has at different times held the in 1975 and in 1991 he started his post of Parliamentary Secretary for public service where he was the Press the Ministry of Housing and Local Secretary to Foreign Minister for seven Government, Malaysia (1974-1976) years and then Press Secretary to the and Ministry of Science, Technology Deputy Prime Minister for another four and the Environment, Malaysia (1976- years. He was a Director of Sistem 1987), Federal Deputy Minister (1987- Televisyen Malaysia Berhad and Media 1990) and Federal Minister (1990-2004) Prima Berhad before his retirement. for Ministry of Science, Technology and The Environment in his long political Datuk Kamarulzaman does not career. have any family relationship with the Directors and/or major shareholders of Currently he is the Independent Non- the Company and has no other confl ict Executive Director of Complete Logistic of interest with the Company. He has Services Berhad, a company listed on no convictions for offence within the the Main Market of Bursa Malaysia past ten years. Securities Berhad as well as director of Malaysia Toray Science Foundation He attended all the board meetings and Yayasan Bosama. held during the fi nancial year ended 31 October 2009. Tan Sri Dato’ Seri Law Hieng Ding does not have any family relationship with the Directors and/or major shareholders of the Company and has no other confl ict of interest with the Company. He has no convictions for offence within the past ten years.

8 JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 Chairman’s Statement

On behalf of the Board, it is my privilege to present to you JAKS Resources Berhad’s Annual Report and Financial Statements of the Group and Company for the fi nancial year ended 31 October 2009.

FINANCIAL REVIEW OPERATION REVIEW

For the fi nancial year ended 31 October The construction division doubled 2009, the Group recorded a higher its revenue to RM153.3 million in revenue of RM278.1 million, an increase the fi nancial year under review and (“BOT”) Basis and a Memorandum of of 19% on the turnover of the previous achieved profi t before tax of RM7.2 Understanding was signed on 13 May fi nancial year. The increase was mainly million. This was possible as there 2009 to this effect. Negotiations for the attributable to the higher recognition of were higher recognition of works done Principle Agreement, which sets out the works done for certain projects in the for certain projects and a number common principles for all the project construction division. of construction contracts with fairer agreements have completed and the margins were completed in the year Principle Agreement was signed on 10 Whilst there were more activities in under review. The construction division July 2009. the market during the year to allow has been busy with the RM317 million the construction division to improve project for the construction of the Following this, negotiations for the its revenue and profi ts, it was not Beaufort Water Treatment Plant and Power Purchase Agreement (“PPA”) suffi cient to mitigate the losses of the pipe laying project in Sabah which is and BOT contract has commenced manufacturing division that continues scheduled for completion in the current while a Coal Supply Agreement has to be affected by the competitive year. On board for the construction been negotiated and initialed, subject market, weakened selling price for division is the irrigation dam project in to fi nal inputs from the BOT Contract the steel related products and lower Besut, Terengganu valued at RM333 negotiations, with the Vietnam Coal margins; thereby affected the overall million. and Minerals Group to supply local coal performance of the Group. On a year- for this project. In the meantime, the to-year comparison, the Group incurred The manufacturing division turned Board is exploring various investments a loss before tax of RM2.4 million for in lower revenue as compared with and funding options, including joint- the current fi nancial year as compared previous year as market competition venture arrangements to undertake the to previous fi nancial year profi t before stiffened on declining steel prices both project. tax of RM7.2 million. in the domestic and export markets. This division had also to bear the brunt On 3 March 2010, the Company DIVIDEND of higher raw material and operating announced its fi rst foray into a large costs which affected the performance scale property development. JAKS The Board is not recommending any of the division. Island Circle Sdn Bhd, a 51% owned dividends to be paid out for the fi nancial subsidiary entered into an agreement year ended 31 October 2009. As to the coal-fi red power plants in Hai with Star Publications (M) Berhad to Duong Province in Northern Vietnam, jointly develop a mixed residential the Board is pleased to announce that and commercial development project the progress has been on schedule. in the strategically located Section 13 The Ministry of Industry and Trade of in Petaling Jaya. Construction on this Vietnam has approved that the project development project with an estimated be carried out on a Build-Own-Transfer gross development value of RM370

JAKS RESOURCES BERHAD (585648-T) Annual Report 2009 9 Chairman’s Statement (cont’d)

million will commence in the current the proposal to undertake a private Status of attainment of Certifi cate year. Apart from the development placement of new ordinary shares of of Fitness for Corporate Debt income, JAKS will also reap from the RM1.00 each in JAKS of up to 10% of Restructuring Scheme (“CDRS”) construction work to be undertaken the issued and paid-up share capital of on this project and increase the order the Company together with detachable As part of the CDRS implemented for book for the construction division. warrants on the basis of up to one (1) the listing of the Company in 2004, Warrant for every one (1) Placement JAKS was required by the Securities With the implementation of Share subscribed (“Proposed Private Commission to obtain the Certifi cate construction works on the Pahang- Placement”). of Fitness from the local authorities for Selangor Raw Water Transfer project the properties that it owned in Subang by the Federal Government in mid- Assuming the maximum placement Jaya and Meru. The Board is pleased 2009, JAKS has also actively with size of 48,219,717 Shares and an to inform that the certifi cate of fi tness its consortium member bid for the indicative issue price of RM1.00 per has been issued for both the mentioned pipe segment of the project available Placement Share with up to one (1) properties. for tender. The entire inter-state Warrant, a total of up to RM48.2 million water transfer project and Langat 2 will be raised from the Proposed PROSPECTS OF JAKS project has been estimated to cost Private Placement. The proceeds shall GROUP more than RM8 billion. The Group be utilised by the Group for working has the expertise, experience and capital, business expansion, settlement Whilst the Board is aware of the global track record on construction of water of bank borrowings and and/or other economic uncertainties, it is of the infrastructures and the Board believes investments. view that the prospect of the Group is that JAKS stands a good chance in its positive going forward as it is expected bid. If successful, this will put JAKS On 24 December 2009, Bursa to benefi t from the stimulus packages in a strong position for similar works Securities approved the application and major projects to be implemented for the Selangor portion of the inter- for the Proposed Private Placement in Malaysia and in the Asean region, state water project as well as for other and the Ministry of International Trade particularly in Vietnam which is one of projects to be initiated by Pengurusan and Industry had vide its letter dated the fastest growing economies in Asia Aset Air Berhad. 29 December 2009, approved the in recent years. same. The fi nal approval obtained was CORPORATE DEVELOPMENT from the shareholders of JAKS at the The strategy to foray into the Extraordinary General Meeting held on construction of energy infrastructures Private Placement 3 February 2010. in Vietnam is to safeguard against the existing cyclical businesses of steel As an appropriate mean to meet the JAKS is now in discussions with pipe production and construction Group’s funding requirements, JAKS potential investors to subscribe to the of water infrastructures. The Board on 11 November 2009 announced private placement. believes that the medium to long-

10 JAKS RESOURCES BERHAD (585648-T) Annual Report 2009