The Board is pleased to report the Company's application of the underlying principles set out in the Malaysian Code on Corporate Governance (Revised 2007) ("the Code") and the extent to which the Company has complied with the Code throughout the financial year ended 30 June 2009.

The Group is led by an effective Board which comprises members of caliber from a diverse blend of professional backgrounds with a wide range of business and financial experience, supported by Independent Directors who are able to bring independent judgement on issues of strategy, performance, resources and standards of conduct.
                           
The Board has formal terms of reference to guide the Directors in the discharge of their responsibility. The Board has the overall responsibility in leading and determining the Group's strategic direction. It oversees the conduct of the Group's businesses, ensuring appropriate control system is in place as well as regularly reviewing such system to ensure its adequacy and integrity. The Board is also responsible for succession planning, including appointing and fixing the remuneration of and, where appropriate, replacing Senior Management.

The Board currently has nine members including one Alternate Director, of whom two are Executive Directors and four out of the six Non-Executive Directors (including the Chairman) are independent. There is a clear division of responsibility between the Chairman and the Managing Director to ensure that there is a balance of power and authority.

The Chairman has never held any executive position in the Group. The Chairman is primarily responsible for ensuring Board effectiveness and conduct whilst the Managing Director is responsible for the day-to-day conduct of the Group's business including the implementation of business plans and strategies approved by the Board and communicating matters to the Board.

The Chairman of the Board, Tan Sri Saw Huat Lye, is the designated Senior Independent Non-Executive Director, to whom concerns pertaining to the Group may be conveyed.

The Board has a balance composition with adequate Board independence that reflects the interest of minority shareholders and provides an effective check and balance. Although all Directors have an equal responsibility for the Group's operations, the role of these Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by the executive management are fully discussed and examined with due regard to risk management. The decisions are arrived at after taking into account the long term interests, not only of the shareholders, but also of employees, customers, suppliers, and the many communities in which the Group conducts its business.

The Directors of the Group adhere to the Code of Ethics established by the Companies Commission of Malaysia for Company Directors. The Code of Ethics sets out the principles in relation to sincerity, integrity, responsibility and corporate social responsibility.

The Board meets on a quarterly basis, and additional meetings are convened as and when necessary. During the financial year ended 30 June 2009, four Board meetings were held and all the Directors attended the said meetings.

At the quarterly Board meetings, the Board reviews the business performance of the Group and discusses major operational and financial issues. There is a schedule of matters reserved specifically for the Board's decision including the approval of quarterly financial statements, the annual strategy plan, major acquisitions or disposal of a business or assets, appointment of Board / Board Committee members, declaration of dividends, related party transactions, changes to management and control structure of the Group, key policies, procedures and authority limits and such other relevant matters significantly affecting the Group's operations.

The Directors are provided with the notice, setting out the agenda items and supplied with comprehensive Management reports or information on a timely basis for their perusal prior to the Board meeting to enable them to effectively discharge their duties and responsibilities. In addition to financial information, the Management reports include other information such as:

• Productivity and product quality measures
• Marketing and sales activities
• Market share and market trends
• Developments on human resource
• Environmental and industry issues

Where necessary, Senior Management will be invited to attend Board meetings to provide additional information and clarify any issues raised by the Directors relating to any relevant business tabled at Board meetings. All issues discussed and all decisions made during the Board Meeting will be properly recorded by the Company Secretaries.

The Board is regularly updated and kept informed of the latest developments in the legislations and regulatory framework affecting the Group. All members of the Board have unrestricted and constant access to and interaction with the Senior Management. All Directors have access to the advice and services of the Company Secretaries.

The Board has also approved a procedure for Directors, whether as a full Board or in their individual capacity, to obtain independent professional advice at the Company's expense, where necessary, to enable them to discharge their responsibilities.

The Board has delegated specific responsibilities to Board Committees as well as various sub-committees to assist the Board in the running of the Group. The functions and terms of reference of the Board Committees as well as authority delegated by the Board to these Committees have been clearly defined by the Board.

There are four Board Committees namely the Nomination Committee, Remuneration Committee, Executive Committee and Audit Committee. These Committees examine specific issues and report to the Board with their recommendations. The ultimate responsibility for decision-making lies with the Board.

Details of the responsibilities and activities of these Committees are set out below.

The Code endorses as good practice, a formal procedure for appointments to the Board, with a Nomination Committee to make recommendations to the Board and assessing Directors on an on-going basis. The Code, however, states that this procedure may be performed by the Board as a whole, although as a matter of good practice, it recommends that this responsibility be delegated to a committee.

All Directors were previously involved in the process of assessing existing Directors and identifying, nominating, recruiting, appointing and orientating new Directors but the Board had reviewed this position and set up a Nomination Committee on 28 May 2001. The Nomination Committee comprises entirely of Non-Executive Directors with the majority being Independent, as follows:

• Tan Sri Saw Huat Lye (Chairman, Senior Independent Non-Executive Director)
• Dato' Jaffar Indot (Independent Non-Executive Director)
• David Neill Moore (Non-Independent Non-Executive Director)
• Dr Leslie Buckley (Non-Independent Non-Executive Director)
• Sreesanthan Eliathamby (Independent Non-Executive Director) (Appointed on 26 November 2008)

The Nomination Committee is responsible for proposing and recommending suitable candidates to the Board and to fill the seats on Board committees. The Nomination Committee will review the composition and effectiveness of the Board and the Board Committees in terms of the required mix of skills, expertise, attributes and core competencies of the Directors as well as the contribution of each individual Director on a yearly basis.

The salient terms of reference of the Nomination Committee are set out below:

In discharging the above responsibilities, the Nomination Committee needs to report the following to the Board of Directors:

The Nomination Committee, pursuant to its recent annual review, was satisfied that the current size and composition of the Board is appropriate and wellbalanced with the right mix of skills and experience and the Board has adequate independent element that reflects the interest of minority shareholders and provides an effective check and balance. The Nomination Committee was also satisfied that the Board comprises individuals of caliber credibility with necessary skills and qualifications which will enable the Board discharge its responsibility effectively.

Meetings of the Nomination Committee are held as and when required, and at least once a year. During the financial year ended 30 June 2009, one meeting was held and the details of attendance of the members of the Nomination Committee are as follows:

Note 1 : No meeting was held from the date of his appointment to 30 June 2009.

In accordance with Article 96 of the Company's Articles of Association ("Articles"), any new Director appointed by the Board shall hold office only until the next Annual General Meeting of the Company and shall be eligible for re-election.

Article 89 of the Articles provides that one-third of the Directors shall retire from office by rotation at each Annual General Meeting and all Directors, including the Managing Director, shall retire from office at least once every three years but shall be eligible for re-election.

Pursuant to Section 129 of the Companies Act, 1965, Directors who are of the age of 70 and above shall retire at every Annual General Meeting and may offer themselves for re-appointment to hold office until the next Annual General Meeting.

The Nomination Committee reviews and assesses annually the re-election / re-appointment of retiring Directors who seek re-election / re-appointment at the Company's Annual General Meeting. The Nomination Committee will thereupon submit its recommendation on the proposed re-election / reappointment of Directors to the Board for consideration before tabling the same for shareholders' approval.

As an integral element of the process of appointing new Directors, the Nomination Committee will ensure that an induction session is arranged for new Directors to enable them to have a full understanding of the nature of the businesses, current issues within the Group and corporate strategies as well as the structure and management of the Group. Directors will also receive such further training that may be required from time to time to keep them abreast with relevant changes in laws and regulations, and the business environment.

All Directors have completed the Mandatory Accreditation Programme and fulfilled the Continuing Education Programme requirements as prescribed by the Listing Requirements of Bursa Securities.

The Board has taken the onus to review, evaluate and determine the training needs of the Directors. During the financial year ended 30 June 2009, an inhouse training programme which covered the following topics, was organised for the Company's Directors:

• Evaluating the performance of the Board
• Irrespective of deluge of regulatory requirements, corporations continue to fail, why?
• Economic uncertainty and its impact on Malaysian businesses.

During the said financial year, some of the Directors have also attended training programmes, seminars and conferences organised by the relevant regulatory authorities and professional bodies in areas of leadership, corporate governance, changes to the statutory requirements and regulatory guidelines and other areas relevant to the Industry.

The Board will on a continuous basis, evaluate and determine the training needs of the Directors.