AnnualReport2004. Edaran Otomobil Nasional Berhad ( X) Edaran Otomobil Nasional Berhad

Transcription

1 Edaran Otomobil Nasional Berhad ( X) Edaran Otomobil Nasional Berhad ( X) AnnualReport2004 Edaran Otomobil Nasional Berhad ( X) EON Head Office Complex No. 2, Persiaran Kerjaya Taman Perindustrian Glenmarie Seksyen U Shah Alam Selangor Darul Ehsan Tel : Fax : AnnualReport2004

2 COVER RATIONALE The cover illustrates a metaphor exemplified by the abundant opportunities waiting to be realised and the new energy symbolised by the spirited gold fish, an icon of wealth and vigour. The electrifying surge into the next level portrays EON s determination, dedication and aspiration to re-define and strategically position itself in the local automotive industry. In excelling to a new level, EON is poised to realise all possibilities and exceed expectations. A Paradigm Shift is our beginning in achieving a new and dynamic business culture as well as a wider range of exciting marques. It is a reflection of our commitment to always be at the forefront of our business.

3 At A Glance EDARAN OTOMOBIL NASIONAL BERHAD (EON) IS ONE OF MALAYSIA S LEADING COMPANIES IN MOTOR VEHICLES DISTRIBUTION AND RETAILING. FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004, THE GROUP RECORDED A REVENUE OF RM3.9 BILLION WITH A PRE-TAX PROFIT OF RM300.5 MILLION. FINANCIAL CALENDAR FOR FINANCIAL YEAR ended 31 December 2004 QUARTERLY ANNOUNCEMENT OF RESULTS 20 MAY st Quarter for the three months ended 31 March AUG nd Quarter for the six months ended 30 June NOV rd Quarter for the nine months ended 30 September FEB th Quarter for the year ended 31 December 2004 DIVIDENDS 14 JUNE 2004 Payment of final dividend of 22 sen per share less income tax at 28% in respect of the year ended 31 December JULY 2004 Distribution of shares in EON Capital Berhad (ECB) by way of dividends in specie of ECB shares on the basis of 28.1 ECB shares for every 100 EON shares held and capital repayment on the basis of ECB shares for every 100 EON shares held. 8 OCT 2004 Payment of interim dividend of 10 sen per share less income tax at 28% in respect of the year ended 31 December MAY 2005 Book closure for determining the entitlement for the proposed final dividend of 18 sen per share less income tax at 28% and proposed special dividend of 84 sen per share less income tax at 28% in respect of the year ended 31 December GENERAL MEETINGS 7 APR 2004 Extraordinary General Meeting to seek shareholders approval for the Distribution of shares in EON Capital Berhad (ECB) by way of payment of dividends in specie and capital repayment. 20 MAY th Annual General Meeting. 25 AUG nd Extraordinary General Meeting to seek shareholders approval for the disposal of the entire shareholding in EONCAP Securities Sdn Bhd (formerly known as Leong & Company Sdn Bhd) and MCIC Holdings Sdn Bhd. 5 MAY 2005 Notice of 21st Annual General Meeting. 30 MAY st Annual General Meeting. 1

4 Contents 4 EON Corporate Profile 5 Awards for Types of Vehicles Distributed by The Group 8 Notice of Annual General Meeting 10 Statement Accompanying Notice of Annual General Meeting 14 Corporate Information 15 Financial Highlights 16 Five Years Group Financial Summary 17 EON s Growth Trend Company 18 EON s Growth Trend Group 19 Share Prices and Trading Volume 20 Corporate Structure 21 Organisation Structure 22 Profile of Board of Directors 30 Senior Management 34 Statement on Corporate Governance 46 Risk Management 48 Report of the Board Audit Committee 53 Additional Compliance Information 54 Statement of Internal Control 56 Chairman s Statement 64 Managing Director s Review of Operations 74 Our Commitment to Customer Service/Customer Relationship Management 78 Maximising Shareholder Value 80 Human Resource Development 82 Harnessing Information Technology 83 Statement of Occupational Safety and Health and the Environment 85 Corporate Social Responsibilities 86 Group Financial Review 90 Calendar of Major Events 96 Awards and Recognition Within Two Decades 97 Milestones Within Two Decades 99 Statement of Directors Responsibility for Preparing the Financial Statements 100 Financial Statements 164 Analysis of Shareholding 165 List of Thirty (30) Largest Shareholders 166 Properties owned by Edaran Otomobil Nasional Berhad Group 172 EON Group Branches 174 Analysis of Proton Vehicles Sales Network 175 Analysis of Non-Proton Vehicles Sales Network 176 EON List of Bumiputera Sales Dealers by State 178 EON List of Non-Bumiputera Sales Dealers by State 179 EON List of Franchise Service Dealers (FSD) by State 183 Euromobil List of Sales Dealers by State 184 Corporate Directory Proxy Form 2

5 page56 chairman s statement page64 managing director s review of operations page100 financial statements 3

6 CORPORATE PROFILE CORE VALUES Vision TO BE THE LEADING AND THE MOST INNOVATIVE AUTOMOTIVE RETAILER Mission TO PROVIDE EXCELLENT CUSTOMER SERVICE I INTEGRITY Carry out one s roles and responsibilities in an honest and sincere manner C CUSTOMER FOCUSED Create a positive experience for internal and external customers at all times L LEARNING ORGANISATION Encourage continuous learning and promote the exchange of knowledge within EON I INNOVATION Pursue new ideas to improve the quality of products and services offered P PRIDE Possess a sense of belonging and achievement of being part of the EON family DRB-HICOM GROUP CORPORATE PROFILE DRB-HICOM Berhad is one of Malaysia s leading conglomerates, playing an integral role in the nation s road to industrialisation. We are diversified yet focused, and have interests in key sectors of the economy mainly:- Automotive Manufacturing & Distribution Property & Infrastructure Services DRB-HICOM will continue to look for opportunities that will benefit the Group and the country. AUTOMOTIVE MANUFACTURING & DISTRIBUTION The Group s leadership within this sector is reflected through niche segmentation via new technology development and continued strategic alliances with renowned global names such as Mitsubishi, Isuzu, Citroen, Kawasaki, Tata, Honda and General Motors. We continuously seek new alliances to strengthen our base further and develop new business potential that will strengthen both DRB-HICOM and our partners. PROPERTY & INFRASTRUCTURE DRB-HICOM is extensively involved in retail, commercial and residential property development, and has made strong inroads in the construction sector especially in infrastructure developments. SERVICES The rapidly growing service-based industry represents new opportunities for DRB-HICOM. Our interests include IT, financial services, solid waste management, automotive services, tourism and transportation. 4

7 Awards For 2004 Homegrown Franchisor of the Year 2002 / 2003 Award by Malaysian Franchise Association Corporate Governance Merit Award by Malaysian Business Best Workplace Practices Category in the Asian Corporate Social Responsibility (CSR) Award 2004 Best Environmental Practices Award by IPRM Best Employee Relations Practices Award by IPRM Best Public Relations Practices Award by IPRM Overall Champion IPRM Kristal Awards by IPRM Anugerah Citra Wangsa Malaysia (Radio Advertisement Category) by Dewan Bahasa & Pustaka 5

8 TYPES OF VEHICLES RETAILED BY THE GROUP PERDANA SATRIA GTi ATOS LORIMAS ARENA GEN.2 GETZ

9 AUDI A6 AUDI A8 AUDI TT SANTA FE TRAJET AUDI A4 MATRIX WIRA TUCSON ISWARA WAJA

10 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Twenty-First Annual General Meeting (AGM) of the Company will be held at Glenmarie Ballroom A, The Pan Pacific Glenmarie Resort, 1, Jalan Usahawan U1/8, Seksyen U1, Shah Alam, Selangor Darul Ehsan on Monday, 30 May 2005 at 9.30 a.m. for the following purposes: 1. To receive and adopt the Reports of the Directors and Auditors and the Audited Financial Statements for the year ended 31 December (Resolution 1) 2. To declare a final dividend of 18 sen per share less 28% Malaysian Income Tax and a special dividend of 84 sen per share less 28% Malaysian Income Tax. (Resolution 2) 3. To re-elect the following Directors who retire in accordance with the Company s Articles of Association: Under Article 103 i. Y Bhg Tan Sri Saw Huat Lye (Resolution 3) ii. Y Bhg Datuk Ir (Dr) Ahmad Zaidee bin Laidin (Resolution 4) iii. Encik Wan Mat bin Wan Sulaiman (Resolution 5) iv. Y Bhg Datuk Choo Keng Kit (Resolution 6) v. Ms Vimala Menon (Resolution 7) 4. To approve the Directors fees amounting to RM574,611 for the year ended 31 December (Resolution 8) 5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 9) 6. To transact any other ordinary business for which due notice has been given. 7. As Special Business: To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions: (i) THAT subject always to the Companies Act, 1965 and the approvals of the relevant governmental and/or regulatory authorities, the Directors be and (ii) are hereby empowered, pursuant to Section 132D of the Companies Act, 1965, to issue shares in the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10 per cent of the issued share capital of the Company for the time being and that such authority shall continue to be in force until the conclusion of the next AGM of the Company. (Resolution 10) THAT subject always to the provisions of the Companies Act, 1965 ( Act ), the Memorandum & Articles of Association of the Company, the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ), the regulations, guidelines and practice notes issued from time to time by Bursa Malaysia or any other regulatory authorities, the mandate approved for renewal by the shareholders of the Company on 20 May 2004 pursuant to paragraph of the Listing Requirements of Bursa Malaysia, authorising the Company and its subsidiaries ( EON Group ) to enter into the recurrent related party transactions of a revenue or trading nature ( Recurrent Transactions ) as set out in Section of the Circular to Shareholders dated 5 May 2005 ( Circular ) with the related parties mentioned therein which are necessary for the EON Group s day-to-day operations, be and is hereby renewed AND THAT the scope of such renewed mandate be and is hereby extended to the Recurrent Transactions with new related parties as set out in Section of the Circular ( Proposal ); 8

11 AND THAT the EON Group is hereby authorised to enter into the Recurrent Transactions with the related parties therein provided that: By order of the Board (a) (b) the transactions are in the ordinary course of business on an arm s length basis and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company; and disclosure of the aggregate value of the transactions conducted during a financial year will be disclosed in the Annual Report for the said financial year with particulars of the types of the Recurrent Transactions made and the names of the related parties involved in each type of the Recurrent Transactions made and their relationship with the Company, NOOR AZWAH SAMSUDIN (LS. No ) Company Secretary Shah Alam 5 May 2005 Explanatory Notes On Special Business: (i) The effect of Resolution 10 is to allow the Directors to issue shares in the Company up to an amount not exceeding in aggregate 10 per cent of the issued share capital of the Company for the time being. AND THAT the authority conferred by such renewed mandate shall continue to be in force until: (a) (b) (c) the conclusion of the next AGM of the Company following the forthcoming AGM at which the Proposal is approved, at which time it will lapse, unless further renewed by a resolution passed at the next AGM; the expiration of the period within the next AGM of the Company after the forthcoming AGM is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by ordinary resolution passed by the shareholders in a general meeting of the Company, (ii) The effect of the Resolution 11 is to renew the mandate for the Recurrent Transactions as set out in Section of the Circular to Shareholders dated 5 May 2005 with the related parties mentioned therein and to extend the scope of the mandate to apply to Recurrent Transactions with new related parties as set out in Section of the Circular. Notes i) A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a member of the Company. ii) The instrument appointing the proxy must be deposited at the Office of the Registrars, ShareWorks Sdn Bhd, No. 23, Jalan Sri Hartamas 7, Sri Hartamas, Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting. whichever is the earlier; AND THAT the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the Proposal and the transactions authorised thereunder. (Resolution 11) 9

12 Statement Accompanying Notice of Annual General Meeting PURSUANT TO PARAGRAPH 8.28 (2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD (BURSA MALAYSIA) 4. FURTHER DETAILS OF DIRECTORS STANDING FOR RE-ELECTION Name 1. NAMES OF DIRECTORS WHO ARE STANDING FOR RE-ELECTION: Under Article 103 of the Company s Articles of Association (i) Y Bhg Tan Sri Saw Huat Lye (ii) Y Bhg Datuk Ir (Dr) Ahmad Zaidee bin Laidin (iii) Encik Wan Mat bin Wan Sulaiman (iv) Y Bhg Datuk Choo Keng Kit (v) Ms Vimala Menon Nationality Age Qualification 2. DIRECTORS ATTENDANCE OF BOARD MEETINGS FOR THE YEAR ENDED 31 DECEMBER The above information can be found in the Directors Profile section of the Annual Report. 3. PLACE, DATE AND HOUR OF THE TWENTY-FIRST ANNUAL GENERAL MEETING Place : Glenmarie Ballroom A The Pan Pacific Glenmarie Resort 1, Jalan Usahawan U1/8, Seksyen U Shah Alam, Selangor Date :Monday, 30 May 2005 Position on the Board Working Experience Time : 9.30 a.m. Occupation Any other directorships of public companies as at 31 March 2005 Securities holdings in EON and its subsidiaries Any family relationship with Director and/or major shareholder of EON Any conflict of interest with the Company List of convictions for offences within the past 10 years other than traffic offences, if any 10

13 Y Bhg Tan Sri Saw Huat Lye Malaysian 69 Bachelor of Arts (Honours) in Economics, University Malaya Advanced Management Programme, Harvard Business School, U.S.A. Independent Non-Executive Director The Malayan Home and Foreign Service Chief Executive, Malaysia Airlines Berhad Executive Director, Syed Kechik Group of Companies Executive Chairman, Malaysian Helicopter Services Berhad Y Bhg Datuk Ir (Dr) Ahmad Zaidee bin Laidin Malaysian 61 Degree of Doctor of the University by University of Stirling, U.K. The Honorary Doctor of Technology from Oxford Brookes University, U.K. Honorary Doctor of Letters from the Manchester Metropolitan University, U.K. Honorary Professor of Napier University, U.K Masters in Science in Technological Economics (Management & Industrial Science), Stirling Chartered Electrical Engineer, U.K. Registered Professional Engineer, Malaysia Fellow of Academy of Science Malaysia Fellow of Institution of Engineers Malaysia Member of Institute of Management Services, U.K. Member of Institution of Electrical Engineers, U.K. Member of World Federation of Engineering Organisations (WFEO) Honorary Fellow of Asean Federation of Engineering Organisations Independent Non-Executive Director Senior Management Analyst, Tenaga Nasional Berhad Director, Institut Latihan Sultan Ahmad Shah, Bangi Deputy General Manager Corporate Services, Management Development Services, Tenaga Nasional Berhad Director of Institut Teknologi MARA (ITM) Rector of Institut Teknologi MARA (ITM) Vice Chancellor, Universiti Teknologi MARA (UiTM) Executive Director, Naluri Berhad Naluri Berhad Shell Refining Company (FOM) Malaysia Guiness Anchor (M) Berhad None Consultant Engineer Malaysia Mining Corporation Berhad Erinco Sdn Bhd (Chairman) University Tenaga Nasional Sdn Bhd Meteor Learning Sdn Bhd None None None None None None None 11

14 Statement Accompanying Notice of Annual General Meeting 4. FURTHER DETAILS OF DIRECTORS STANDING FOR RE-ELECTION (CONT D.) Name Nationality Age Qualification Encik Wan Mat bin Wan Sulaiman Malaysian 57 Bachelor of Arts (Honours) in Economics, University Malaya Masters of Public Affairs, Southern Illinois University, U.S.A. Position on the Board Working Experience Independent Non-Executive Director Assistant Secretary, Ministry of Finance Assistant Secretary, Malaysian Centre for Development Studies, Prime Minister s Department, Kuching Assistant Federal Secretary, Prime Minister s Department, Kota Kinabalu Federal Establishment Officer, Public Services Department, Kota Kinabalu Divisional Secretary, Ministry of Public Enterprise Deputy Director, Poverty Eradication Unit, Prime Minister s Department, Kuala Lumpur State Development Officer, Prime Minister s Department, Sabah Divisional Secretary, Federal Territory Development Division, Prime Minister s Department Deputy Secretary General, Prime Minister s Department, Kuala Lumpur Secretary, Government Procurement Management Division, Ministry of Finance Deputy Secretary General, Ministry of Health Occupation None Any other directorships of public companies as at 31 March 2005 None Securities holdings in EON and its subsidiaries Any family relationship with Director and/or major shareholder of EON Any conflict of interest with the Company List of convictions for offences within the past 10 years other than traffic offences, if any None None None None 12

15 Y Bhg Datuk Choo Keng Kit Malaysian 55 Associate Member of the Malaysian Institute of Management Associate Member of the Institute of Marketing, U.K. Member of the British Institute of Management, U.K. Non-Independent Executive Director State Manager, Wilayah/Selangor, Borneo Motors (M) Sdn Bhd Deputy General Manager, Tan Chong & Sons Motor Co. Sdn Bhd General Manager, Sales, EON Berhad Ms Vimala Menon Malaysian 50 Associate Member of Institute of Chartered Accountants in England and Wales Member of Malaysian Institute of Accountant Non-Independent Executive Director Audit Senior, Hays Allan Chartered Accountants Audit Supervisor, Kassim & Chan Manager, Accounts, EON Berhad General Manager, Finance, EON Berhad Executive Director, Motor Group, EON Berhad Executive Director, Finance and Corporate Services, EON Berhad EON Bank Berhad None None Direct interest in 112,000 shares in EON None None None None None None 13

16 Corporate Information BOARD OF DIRECTORS Y Bhg Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong (Chairman) Y Bhg Datuk Adzmi bin Abdul Wahab (Managing Director) Y Bhg Dato Maznah bte Abdul Jalil Y Bhg Datuk Haji Faisal bin Siraj Mr Anthony Nightingale Puan Aziyah binti Bahauddin Y Bhg Tan Sri Saw Huat Lye Y Bhg Dato Dr M SHANmughalingam Y Bhg Datuk Ir. (Dr) Ahmad Zaidee bin Laidin Y Bhg Datuk Wan Awang bin Wan Yaacob Encik Wan Mat bin Wan Sulaiman Y Bhg Dato Khalid bin Haji Ismail Mr Rin Nan Lun Y Bhg Datuk Choo Keng Kit Ms Vimala Menon Y Bhg Datuk William Chong Wei Yoon (Alternate Director to Y Bhg Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong) Mr Fumihiko Minami (Alternate Director to Mr Rin Nan Lun) Mr Adam Keswick (Alternate Director to Mr Anthony Nightingale) COMPANY SECRETARY Puan Noor Azwah Samsudin HEAD OFFICE EON Head Office Complex No. 2, Persiaran Kerjaya, Seksyen U1 Taman Perindustrian Glenmarie Shah Alam Selangor Darul Ehsan Tel: Fax: REGISTERED OFFICE EON Head Office Complex No. 2, Persiaran Kerjaya, Seksyen U1 Taman Perindustrian Glenmarie Shah Alam Selangor Darul Ehsan Tel: Fax: SOLICITORS Anad & Noraini , Level 12 The Heritage House 33 Jalan Yap Ah Shak Kuala Lumpur Nik Saghir & Ismail 28th Floor, Menara Maybank 100 Jalan Tun Perak Kuala Lumpur Skrine & Co. Unit , 8th Floor Wisma UOA Damansara 50, Jalan Dungun Damansara Heights Kuala Lumpur BANKERS EON Bank Berhad Malayan Banking Berhad Bumiputra-Commerce Bank Berhad Standard Chartered Bank Malaysia Berhad AUDITORS PricewaterhouseCoopers 11th Floor, Wisma Sime Darby Jalan Raja Laut P.O. Box Kuala Lumpur REGISTRAR ShareWorks Sdn Bhd No. 23, Jalan Sri Hartamas 7 Taman Sri Hartamas Kuala Lumpur Tel: Fax: STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad (26 July 1990) 14

17 Financial Highlights Group Company RM 000 RM 000 RM 000 RM 000 PROFITABILITY Revenue 3,901,173 4,987,051 2,862,509 3,129,248 Profit from operations 1 293, , , ,151 Profit before tax 300, , , ,801 Profit attributable to shareholders 148, , ,105 96,962 KEY BALANCE SHEET DATA Total assets 1,468,028 32,672,661 1,379,451 2,053,876 Cash and bank balances and deposits with financial institutions 557,842 3,703, , ,266 Paid-up capital 248, , , ,714 Shareholders funds 1,165,245 2,257,662 1,094,235 1,780,256 FINANCIAL RATIOS Return on average shareholders funds (%) Return on average assets (%) SHARE INFORMATION Basic earnings per share (sen) Gross Dividend per share (sen) Net dividend payout ratio (%) at Company level Net tangible assets per share (RM) Price to earnings ratio 3 (times) Price to book multiple 3 (times) Share price closing as at 31 December Before finance cost, share of associates results and net gain on disposal of investments. 2 Excluding dividend in specie of EON Capital Berhad and Jardine Cycle & Carriage Limited shares. 3 Based on closing price as at 31 December. 15

18 Five Year Group Financial Summary RM 000 RM 000 RM 000 RM 000 RM 000 PROFITABILITY Revenue 3,901,173 4,987,051 7,427,704 7,548,331 6,361,545 Profit from operations 1 293, , , , ,878 Profit before tax 300, , , , ,907 Profit attributable to shareholders 148, , , , ,127 KEY BALANCE SHEET DATA Total assets 1,468,028 32,672,661 32,350,134 26,474,224 19,271,467 Cash and bank balances and deposits with financial institutions 557,842 3,703,815 2,838,259 2,790,057 2,529,501 Paid-up capital 248, , , , ,453 Shareholders funds 1,165,245 2,257,662 2,271,138 2,539,908 2,303,763 FINANCIAL RATIOS Return on average shareholders funds (%) Return on average assets (%) SHARE INFORMATION Basic earnings per share (sen) Gross Dividend per share (sen) Net dividend payout ratio Company level 2 (%) Net tangible assets per share (RM) Price to earnings ratio 3 (times) Price to book multiple 3 (times) Share price closing as at 31 December Before finance cost, share of associates results and net gain on disposal of investments. 2 Excluding dividend in specie of EON Capital Berhad and Jardine Cycle & Carriage Limited shares. 3 Based on closing price as at 31 December. Significant events affecting results, assets, liabilities and equity: 2004 Distribution of EON Capital Berhad (ECB) shares to shareholders. Accordingly, the results of ECB group were excluded from July Partial divestment of interest in Jardine Cycle & Cariage Limited in November Equity accounting ceased from December 2002 as the residual shareholding was reduced to 13.1%. 16

19 Five Year Group Financial Summary COMPANY 125, , ,859 72, , Units 394, , , , , ,291 Units , , , ,367 '00 '01 '02 '03 '04 '00 '01 '02 '03 '04 EON's Proton sales volume EON's market share Service throughput - branches Service throughput - FSD Revenue Profit before tax 3, ,862.5 RM Million RM Million 5, , , '00 '01 '02 '03 '04 '00 '01 '02 '03 '04 17

20 Five Year Group Financial Summary GROUP Revenue Profit before tax RM Million RM Million 4, , , , , '00 '01 '02 '03 '04 '00 '01 '02 '03 '04 Shareholders' funds Total assets 1,165.2 RM Million 19, ,468.0 RM Million 2, , , , , , ,672.7 '00 '01 '02 '03 '04 '00 '01 '02 '03 '04 Basic earnings per share Gross dividend per share sen sen '00 '01 '02 '03 '04 '00 '01 '02 '03 '04 Net tangible assets per share RM '00 '01 '02 '03 '04 18

21 Share Prices and Trading Volume on Bursa Malaysia for 2004 RM Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Highest (RM) Lowest (RM) Volume ( 000) 2004 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Highest (RM) Lowest (RM) Volume ( 000) 2,021 6,805 6,597 4,521 3,473 19,084 81,029 27,467 37,584 15,404 23,949 17,696 19

22 Corporate Structure EDARAN OTOMOBIL NASIONAL BERHAD Automotive Euromobil Sdn Bhd 100% EONMobil Sdn Bhd 100% Automotive Conversion Engineering Sdn Bhd 100% General Trading EON Trading Sdn Bhd 100% Properties EON Properties Sdn Bhd 100% Automotive Mitsubishi Motors Malaysia Sdn Bhd 48% Proton Parts Centre Sdn Bhd 40% Services SRT-EON Security Services Sdn Bhd 40% Properties Hicom Megah Sdn Bhd 36% Manufacturing Johnson Controls Automotive Holding (M) Sdn Bhd 30% 20

23 Organisation Structure Board Of Directors Audit Committee Nomination Committee Remuneration Committee Management Committee Risk Management Committee Company Secretary Internal Audit Chairman Managing Director Executive Director - Motor Group Executive Director - Finance & Corporate Services Executive Director Sales After Sales Pre - Delivery Inspection Marketing Services Finance Corporate Finance Group Finance Management Information System Customer Service & Quality Human Resource & Administration 21

24 Profile of Board of Directors Y BHG TAN SRI DATO SERI (DR) MOHD SALEH BIN SULONG Y Bhg Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong, 53, a Malaysian, is a Non-Independent Non-Executive Director and Chairman of EON Berhad. He was appointed to the Board in April 1996 and was appointed Chairman in March Tan Sri is a member of the Board Nomination Committee and Board Remuneration Committee. Tan Sri is a member of the Chartered Institute of Management Accountants, United Kingdom. He served as a senior accountant in Cycle & Carriage Bintang Berhad, Cycle & Carriage (Malaysia) Sdn Bhd and United Cycle Sdn Bhd for 10 years before his appointment as Executive Director of the Master-Carriage Group of Companies in Tan Sri is the Group Chairman of DRB-HICOM Berhad. Currently, he is also Chairman of HICOM Holdings Berhad, Gadek (Malaysia) Berhad, EON Capital Berhad, Horsedale Development Berhad and several other private limited companies in the DRB- HICOM Group. Tan Sri also serves as Chairman of Kolej Universiti Teknikal Kebangsaan Malaysia and Yayasan Budiman UiTM. In addition, he is also a member of the Board of Perbadanan Usahawan Nasional Berhad and Yayasan Kebajikan Negara. Tan Sri is a deemed major shareholder of the Company. Tan Sri is deemed interested in the recurrent related party transactions of a revenue or trading nature and hence had abstained from voting at the Annual General Meeting of the Company held on 20 May 2004 to seek shareholders approval for the renewal of mandate on recurrent transactions that are in the ordinary course of business. Y BHG DATUK ADZMI BIN ABDUL WAHAB Y Bhg Datuk Adzmi bin Abdul Wahab, 62, a Malaysian, is a Non-Independent Executive Director. He was appointed to the Board in February 1992 and was appointed Managing Director in November of the same year. He is a member of the Board Audit Committee. Datuk Adzmi holds a Bachelor of Arts (Honours) degree in Economics and a Post Graduate Diploma in Public Administration from University Malaya and a Master of Business Administration from University of Southern California, U.S.A. Datuk Adzmi served the Malaysian Administrative and Diplomatic Service in various capacities in the Ministry of Finance, Pahang Tenggara Development Authority and Prime Minister s Department from 1967 to He was Manager, Corporate Planning of HICOM Berhad from 1982 to He joined PROTON in 1985 and his last position in PROTON before joining EON was Director/Corporate General Manager, Administration & Finance Division. Datuk Adzmi is Chairman and Director of various subsidiaries and associated companies within EON Group. Datuk Adzmi also serves as Chairman of Malaysia Franchise Association since Datuk Adzmi attended all the six Board Meetings held in the financial year ended 31 December Tan Sri attended all the six Board Meetings held in the financial year ended 31 December

25 Y BHG DATO MAZNAH BTE ABDUL JALIL Y Bhg Dato Maznah bte Abdul Jalil, 51, a Malaysian, is a Non- Independent Executive Director. She was appointed to the Board in March Dato Maznah holds a Bachelor and Master degrees in Business Administration (Finance) from Northern Illinois University, U.S.A. and Central Michigan University, U.S.A. respectively. Dato Maznah is the Senior Group Director, Corporate Finance and Advisory of DRB-HICOM Berhad. She is Chairman of Uni.Asia General Insurance Berhad and Uni.Asia Life Assurance Berhad. She also serves on the Boards of Uni.Asia Capital Sdn Bhd, EON Capital Berhad, EON Bank Berhad, EON Finance Berhad, Gadek (Malaysia) Berhad, HICOM Holdings Berhad, Labuan Reinsurance (L) Ltd., Malaysian International Merchant Bankers Berhad and several private limited companies under the DRB-HICOM group. Dato Maznah is also a member of the Board of Universiti Teknologi MARA, Malaysia and member of the Board of Trustees of Malaysian AIDS Foundation in her capacity as Treasurer. Y BHG DATUK HAJI FAISAL BIN SIRAJ Y Bhg Datuk Haji Faisal bin Siraj, 59, a Malaysian, is a Non- Independent Non-Executive Director. He was appointed to the Board on 11 April 1996 and is a member of the Board Audit Committee. Datuk Haji Faisal is a Fellow of the Institute of Chartered Accountants in England and Wales, and a member of the Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants. Datuk Haji Faisal is the Senior Group Director, Financial Services & Treasury of DRB-HICOM Berhad. Prior to joining DRB-HICOM, he was with Malaysia Mining Corporation Berhad from 1976 to 1994, the last position being Executive Director. He also serves on the Boards of Gadek (Malaysia) Berhad, HICOM Holdings Berhad, Horsedale Development Berhad, Rebak Island Marina Berhad and Perak Corporation Berhad. Datuk Haji Faisal attended all the six Board Meetings held in the financial year ended 31 December Prior to joining DRB-HICOM, she was with a local merchant bank from 1979 to 1992 with exposure in various corporate advisory assignments. In 1992, she joined Master-Carriage (Malaysia) Sdn Bhd as Director, Corporate Affairs. Dato Maznah attended all the six Board Meetings held in the financial year ended 31 December

26 Profile of Board of Directors MR ANTHONY NIGHTINGALE Mr Anthony Nightingale, 57, a British national, is a Non- Independent Non-Executive Director. He was appointed to the Board in March Mr Nightingale who holds a Bachelor Degree (Honours) in Classics, Cambridge University, U.K., is the Chairman of Jardine Cycle & Carriage Limited, Jardine Motors Group Holdings Limited, Jardine Pacific Limited and MCL Land Limited. Mr Nightingale is also a Director of Jardine Matheson Limited, Jardine Matheson Holdings Limited and Cycle & Carriage Bintang Berhad. Mr Nightingale is currently on the Board of Commissioners of PT Astra International, Indonesia. He is the Chairman of the Hong Kong General Chamber of Commerce and a member of the Hong Kong Trade Development Council, the Economic and Employment Council in Hong Kong and the Greater Pearl River Delta Business Council. Mr Nightingale attended four out of six Board Meetings held in the financial year ended 31 December PUAN AZIYAH BINTI BAHAUDDIN Puan Aziyah binti Bahauddin, 54, a Malaysian, is a Non- Independent Non-Executive Director. Puan Aziyah was appointed to the Board on 30 January Puan Aziyah holds a Bachelor of Arts degree in Economics from University Malaya. She began her career in the civil service in She has been in the Ministry of Finance since service. Except for five years in the Government Procurement Management Division, the rest of her career has been with the Tax Analysis Division. Currently, she is the Under Secretary, Tax Analysis Division, Ministry of Finance. Puan Aziyah also sits on the Boards of Malaysia Thailand Joint Authority, Putrajaya Corporation, Companies Commissions of Malaysia and University College of Engineering and Technology, Malaysia. Puan Aziyah attended the entire six Board meetings held in the financial year ended 31 December

27 Y BHG TAN SRI SAW HUAT LYE Y Bhg Tan Sri Saw Huat Lye, 69, a Malaysian, is an Independent Non-Executive Director. He was appointed to the Board on 4 September 2001 and is the Chairman of the Board Audit Committee and a member of the Board Remuneration Committee. Tan Sri Saw holds a Bachelor of Arts (Honours) degree in Economics from University Malaya and attended the Advanced Management Programme of Harvard Business School, U.S.A. Tan Sri Saw Huat Lye served the Malayan Home and Foreign Service from 1958 to He was Chief Executive of Malaysia Airlines from 1971 to 1982 and Executive Chairman of Malaysian Helicopter Services Berhad from 1985 to Currently, he is the Executive Director of Naluri Berhad and a member on the Board of Shell Refining Company (FOM) Berhad and Chairman of Guiness Anchor (M) Berhad. Tan Sri Saw attended all the six Board Meetings held in the financial year ended 31 December Y BHG DATO DR M SHANMUGHALINGAM Y Bhg Dato Dr M SHAN, 65, a Malaysian, is an Independent Non-Executive Director. He was appointed to the Board on 27 August He is the Chairman of the Board Remuneration Committee and a member of the Board Nomination Committee. Dato Dr M SHAN holds a Bachelor of Arts (Honours) degree in Economics from University of Malaya, a Masters degree in Economics and Government from Harvard University, U.S.A. and a Doctorate of Philosophy in Economics and Government from Oxford University, U.K. He is a Fellow of Economic Development Institute, World Bank, U.S.A. He served in the Treasury, Ministry of Finance from 1962 to 1978, his last post being Deputy Secretary (Economic) and in PETRONAS from 1979 to 1991, his last post, General Manager. He was the Managing Director of Sri Inderajaya Sdn Bhd from 1992 to April Since May 1996, he is the Managing Director of Trilogic Sdn Bhd and sits on the advisory panels to the Malaysian Institute of Economic Research (MIER) and Asian Strategy and Leadership Institute (ASLI). He also sits on the Boards of Main Board public listed companies Delloyd Ventures Berhad, PBA Holdings Berhad and Mamee-Double Decker (M) Berhad and several unlisted companies including Trilogic Sdn Bhd, Commerce International Merchant Bankers (CIMB) (L) Ltd, CIMB Discount House Bhd, CIMB Securities Sdn Bhd and Malaysian Industrial Development Finance (MIDF) Aberdeen Asset Management Sdn Bhd. Dato Dr M SHAN attended all the six Board Meetings held in the financial year ended 31 December

28 Profile of Board of Directors Y BHG DATUK IR. (DR) AHMAD ZAIDEE BIN LAIDIN Y Bhg Datuk Ir. (Dr) Ahmad Zaidee bin Laidin, 61, a Malaysian, is an Independent Non-Executive Director. He was appointed to the Board on 4 September 2001 and is the Chairman of the Board Nomination Committee and a member of the Board Remuneration Committee. Datuk Ir. (Dr) Ahmad Zaidee holds a Masters in Science in Technological Economics (Management & Industrial Science), University of Stirling and is a registered Professional Engineer Malaysia as well as a Chartered Electrical Engineer (U.K). He is a Fellow of the Institution of Engineers, Malaysia, as well as Academy of Sciences Malaysia and is currently serving in the councils of both bodies. Internationally, he is a member of the Institution of Electrical Engineers, and the Institute of Management Services, U.K. He also served in the council of the World Federation of Engineering Organisations (WFEO). He was awarded the Degree of Doctor of the University by University of Stirling, the Honorary Doctor of Technology by Oxford Brookes University and Honorary Doctor of Letters by the Manchester Metropolitan University as well as Honorary Professor of Napier University, United Kingdom. Y BHG DATUK WAN AWANG BIN WAN YAACOB Y Bhg Datuk Wan Awang bin Wan Yaacob, 64, a Malaysian, is an Independent Non-Executive Director. He was appointed to the Board on 27 August 2001 and is a member of the Board Audit Committee. Datuk Wan Awang holds a Bachelor of Arts (Honours) degree from University Malaya and a Masters in Public Administration from the University of Southern California, U.S.A. Datuk Wan Awang served the Government for 32 years from 1964 to 1995 in various positions in the Ministry of Foreign Affairs, Public Service Department, Fisheries Department, Ministry of Defence, Ministry of Home Affairs and Ministry of Transport. His last position before his retirement was Secretary General, Ministry of Transport. He was a member of the Public Service Commission from 1996 to Datuk Wan Awang attended all the six Board Meetings held in the financial year ended 31 December Datuk Ir. (Dr) Ahmad Zaidee is the Past President of Federation of Engineering Institutions of Southeast Asia and the Pacific (FEISEAP), President of Institution of Engineers, Malaysia (IEM) and Honorary Fellow of the ASEAN Federation of Engineering Organisations. He is also a Director of Malaysia Mining Corporation Berhad, Universiti Tenaga Nasional Sdn Bhd and Meteor Learning Sdn Bhd as well as Chairman of Erinco Sdn Bhd. He was the Chairman of SIRIM Berhad until 23 February 2004 and a Director of SIRIM Berhad until 14 December Datuk Ir. (Dr) Ahmad Zaidee attended four out of six Board Meetings held in the financial year ended 31 December

29 ENCIK WAN MAT BIN WAN SULAIMAN Encik Wan Mat bin Wan Sulaiman, 57, a Malaysian, is an Independent Non-Executive Director. He was appointed to the Board on 4 September 2001 and is a member of the Board Audit Committee. Encik Wan Mat holds a Bachelor of Arts (Honours) degree in Economics from University Malaya and a Masters of Public Affairs from Southern Illinois University, U.S.A. Encik Wan Mat has held various positions while serving the government. Joining the service in 1971, he had served, among others, the Prime Minister s Department, Public Services Department, Ministry of Public Enterprise, Ministry of Finance and Ministry of Health. Encik Wan Mat attended five out of six Board Meetings held in the financial year ended 31 December Y BHG DATO KHALID BIN HAJI ISMAIL Y Bhg Dato Khalid bin Haji Ismail, 64, a Malaysian, is a Non- Independent Non-Executive Director. He was appointed to the Board on 2 January Dato Khalid holds a Bachelor of Arts (Honours) degree from University Malaya and a Masters in Public Administration from University of Southern California, U.S.A. Dato Khalid served the Government for 30 years from 1965 to 1995 in various positions in the Public Services Commission, Public Services Department, Kuala Lumpur City Hall, Prime Minister s Department and Ministry of Finance. His last position was Secretary General, Ministry of Culture, Arts and Tourism, Malaysia. He was concurrently the Commissioner of Tourism, Malaysia from 1991 to Dato Khalid bin Haji Ismail is the Group Country Chairman, Jardine Group of Companies, Malaysia since He also sits on the Boards of Malaysia Discount Berhad, Cycle & Carriage Bintang Berhad and Rangkaian Hotel Sri Malaysia Sdn Bhd. Dato Khalid attended all the six Board Meetings held in the financial year ended 31 December

30 Profile of Board of Directors MR RIN NAN LUN Mr Rin Nan Lun, 41, a Singaporean, is a Non-Independent Non- Executive Director. He was appointed to the Board on 20 November He holds a Computer Science degree from University of Southern California, U.S.A. Mr Rin Nan Lun began his career as an Analyst Programmer with IBM Singapore from 1988 until Currently, he is a Director of Kualapura (M) Sdn Bhd. He also serves on the Board of Horsedale Development Berhad. He is an Alternate Director of EON Bank Berhad, EON Finance Berhad, HICOM GAMUDA Development Sdn Bhd and Danau Permai Resort Berhad. Mr Rin is deemed interested in the Company by virtue of his indirect substantial interest in Kualapura (M) Sdn Bhd, a major shareholder of the Company. He is deemed interested in the recurrent related party transactions of a revenue or trading nature and hence had abstained from voting at the Annual General Meeting of the Company held on 20 May 2004 to seek shareholders approval for the renewal of mandate on recurrent transactions that are in the ordinary course of business. Y BHG DATUK CHOO KENG KIT Y Bhg Datuk Choo Keng Kit, 55, a Malaysian, is a Non- Independent Executive Director. He was appointed to the Board in July 1989 and is currently Executive Director, Motor Group. Datuk Choo is a member of the British Institute of Management, U.K., an Associate Member of the Institute of Marketing, U.K., and the Malaysian Institute of Management. Datuk Choo joined EON in October 1984 as General Manager, Sales and was promoted to Director/Sales Director in 1989 and subsequently, to Executive Director, Motor Group in As Executive Director, he serves on the Boards of several companies within the EON Group as well as on the Board of EON Bank Berhad. Prior to joining EON, he served Borneo Motors (M) Sdn Bhd for 13 years from 1968 and in April 1981, he joined Tan Chong & Sons Motor Co. Sdn Bhd as Deputy General Manager, Marketing. Datuk Choo attended all the six Board Meetings held in the financial year ended 31 December Mr Rin attended five out of six Board Meetings held in the financial year ended 31 December

31 MS VIMALA MENON Ms Vimala Menon, 50, a Malaysian, is a Non-Independent Executive Director. She was appointed to the Board in February 1990 and is currently Executive Director, Finance and Corporate Services. Ms Menon is an Associate Member of The Institute of Chartered Accountants in England and Wales and a member of the Malaysian Institute of Accountants. Ms Menon joined EON as Manager, Accounts in September 1984 and was promoted to General Manager, Finance in February 1989 and Executive Director, Finance & Corporate Services in As Executive Director, she serves on the Boards of several companies within the EON Group. Ms Menon attended five out of six Board Meetings held in the financial year ended 31 December Except as stated in the individual Director s Profile, none of the Directors have any family relationship with any director and/or major shareholder of the Company and have no conflict of interest with the Company and no convictions for offences within the past 10 years. 29

32 Senior Management PUAN NOOR AZWAH SAMSUDIN Company Secretary, Secretarial & Legal Puan Noor Azwah Samsudin, 34, was appointed the Company Secretary since December Prior to her appointment with EON, she has served in similar capacity in the insurance industry. Puan Noor Azwah is a graduate in Law from the University of Sheffield, U.K. and holds a Certificate in Legal Practice from the Legal Qualifying Board, Malaysia. She is also an associate member of the Institute of Company Secretaries, Malaysia. 2. MR WONG CHEONG WAH Senior Manager, Sales Mr Wong Cheong Wah, 54, joined the Company in June He holds a Bachelor of Economics (Business Administration) from University Malaya. Prior to joining the Company, he was with Malaysia International Consultants Sdn Bhd (MINCO) as Economist from 1974 to 1979, Tractors Malaysia Bhd as Market Research Executive from 1979 to 1981 and UMW as Marketing Planning Executive in 1981 before he was transferred to EON as Special Project Executive. 3. DATUK ABDUL RAZAK DAWOOD Senior Manager, After Sales YBhg Datuk Abdul Razak Dawood, 48, joined the company in August He was formerly the Senior Manager of Marketing Division from 1990 to He was also seconded to the refurbishment business at EON Motor Ria Sdn Bhd as Executive Director from 1997 to Prior to joining EON, he was attached to UMW Group in 1981 and served in various capacities including Regional Manager-Heavy Equipment Sales (East Region) and Manager-Business Development until his secondment to EON in He sits on the Board of Malaysian Industry-Government Group for High Technology and also served as an exco member from September 2003 to He is also an active member of the International Association of Business Communicators (IABC) having served in the executive council of the Malaysian Chapter from 2000 to YBhg Datuk Abdul Razak holds a Bachelor of Economics from Universiti Malaya and attended the Asian Institute of Management, Philippines. 30

33 MD RASHID ABD RAHMAN Senior Manager, Pre-Delivery Inspection (PDI) Encik Mohd Rashid Abd Rahman, 51, joined the company in 1985 as Manager PDI. He has been in the automotive industry since 1977 and has wide experience in various fields such as sales, after sales, personnel, corporate affairs and logistics. He began his career with Borneo Motors under the Inchcape Group of Companies as a Service cadet from 1977 to MS PUNG BEE TIN Senior Manager, Group Finance 6. MS TANG SAW HUA Senior Manager, Finance Ms Tang Saw Hua joined EON in 1993 as Manager, Corporate Finance and was promoted to Senior Manager, Finance in April Prior to joining EON, she has 13 years of working experience, six years with a major accounting firm and seven years heading the finance functions of a property related group and manufacturing group of companies. She is a member of The Malaysian Institute of Certified Public Accountants (MICPA) and Malaysian Institute of Accountants (MIA). Ms Pung Bee Tin joined EON in April 1993 as Senior Manager, Group Finance. She is a member of the Malaysian Institute of Accountants (MIA) and Malaysian Institute of Certified Public Accountants (MICPA). She is responsible for planning and coordinating the Group financial functions and ensuring compliance with all statutory and regulatory requirements pertaining to financial accounting and reporting and support the senior management in investors relations activities. Ms Pung began her career with a professional firm with varied exposure in the audit and taxation matters of various industries including banking and financial institutions, insurance companies, trading and investment houses. Subsequently, she joined a financial institution and was responsible for the entire operations of the finance and treasury functions and corporate finance and services. 31

34 Senior Management ENCIK HOOD ABU BAKAR Senior Manager, Management Information System Encik Hood Abu Bakar, 42, joined the Company in October He graduated Summa Cum Laude with a Bachelor of Science in Information Systems from Southeastern University, U.S.A. and also holds a Master in Business Administration from Herriot Watt University, Scotland. Prior to joining EON, he was the IT Manager of Perodua Group from 1993 to 1996, a consultant with Coopers & Lybrand Management Consultants in 1991 to 1993, a Systems Analyst with Esso Production Malaysia Inc in 1988 to 1990 and an Analyst/Programmer with Colgate Palmolive from 1986 to Encik Hood was involved in various curricular activities and was the President of the Sports Club for the past four years. He was also involved in coordinating sports activities organised by several companies in the Shah Alam community, such as Sukan 4 Penjuru and Suki games. 8. PUAN NOR ROZITA BINTI NORDIN Senior Manager, Customer Service & Quality Puan Nor Rozita binti Nordin, 45, joined the company in January Nor Rozita is also the management representative and business driver for the ISO 9001 : 2000 Quality Management Systems for the Company. Prior to her current position, Nor Rozita was Manager of Manpower Planning and Development, since January She was formerly Head of Management Training at UMBC Berhad Malaysia from 1985 to 1992, Training Executive at Harris Semiconductor in Florida, U.S.A. from 1983 to 1985 and Teaching Assistant at the Southern Illinois University, U.S.A. from 1981 to Puan Nor Rozita holds a Master of Science degree in Education Instructional Systems Design (1984), a Bachelor of Arts degree in Linguistics, and a Bachelor of Science degree in Education. She is currently working on her doctorate in Human Resources Development and Performance Management. 9. ENCIK AHMAD FAIZAL BIN DATO MAHMUD Senior Manager, Human Resources and Administration Encik Ahmad Faizal bin Dato Mahmud, 46, joined the Company in December He holds a Master in Business Administration from the University of Strathclyde, Glasgow. He began his career in Human Resource with Unilever East Asia Pacific Region based in Hong Kong in 1993 as Personnel Administration Manager where he was exposed to working at international level with other functional regional heads handling strategic manpower planning and development. After the two years assignment in Hong Kong, he returned and resumed his HR roles as a Personnel Manager and later promoted to Personnel Director in Due to acquisition of Pamol by IOI Bhd, Encik Faizal was placed as Senior Manager of Administration where he was later posted to Penang as a Group Human Resources Manager responsible for overall human resources functions. 32

35 YM TENGKU ZAINUDIN BIN TENGKU JAAFAR Senior Manager, Automotive Conversion Engineering (ACE) Sdn Bhd YM Tengku Zainudin bin Tengku Jaafar, 37, joined EON in January 1994 and holds a Degree in Industrial Engineering from the University of Miami, Florida, U.S.A. and is currently pursuing his MBA at Help College in collaboration with Stuart University, Australia. Prior to joining EON, he was an Industrial Engineer at one of PROTON s major vendors. He is currently the President of EON Sports and Recreation Club. 11. ENCIK ABD RASHID ANUAR BIN ZAKARIA Divisional Manager, EON Trading Sdn Bhd 12. MR JEFF YEE KEE LEN Chief Executive Officer, Euromobil Sdn Bhd Mr Jeff Yee Kee Len, 48, joined the EON group in January 2005 as the Chief Executive Officer of Euromobil Sdn Bhd, a wholly-owned subsidiary of EON Berhad. Prior to joining Euromobil, he has 12 years of working experience in the automotive industry in various capacities in Finance, Sales and Marketing. Mr Jeff holds a Diploma in Commerce (Financial Accounting) from Tunku Abdul Rahman College and is a finalist of the Association of Chartered Certified Accountant. Encik Abd Rashid Anuar bin Zakaria, 50, joined EON Trading in March 1994 as Divisional Manager. He is responsible for the development of new products in expanding the trading business both through the EON distribution network and external market channels. Prior to joining EON Trading, he was attached to several multinational companies dealing in fast moving consumer goods business namely Unilever, Procter & Gamble and Avon Cosmetics. Encik Abd Rashid Anuar graduated with a Bachelor of Economics from University Malaya majoring in Business Administration and Master in Business Administration from Ohio University, U.S.A. 33

36 Statement on Corporate Governance The Board of Directors is committed to applying the principles and best practices recommended by the Malaysian Code on Corporate Governance ( Code ) to improve and enhance the standards of corporate governance practised within the Group as well as to protect and enhance shareholders value and financial performance. The Board believes that effective corporate governance is premised on three important cornerstones namely, independence, accountability and transparency. 34

37 Towards achieving this, the Board not only observes the Principles of Corporate Governance and the Best Practices on Corporate Governance as set out in the Code, but has also put in place stringent parameters for adherence by the Management. The Board has adopted a Board Charter which provides amongst others guidance and clarity for directors and management with regard to the role of the Board and its committees, the requirements of the directors in carrying out their roles and in discharging their duties towards the Company as well as the Board s operating practices besides emphasising the relationship between the Board, the management and the shareholders. Set out below is a statement of how the Group has applied the principles and best practices of the Code during the financial year ended 31 December The principles of the Code enunciated in Part 1 are stated in five parts, namely: A B C D E Directors Directors Training Directors Remuneration Shareholders Accountability and Audit The Code, in mandating the compliance with the principles stated, establishes the best practices in corporate governance in Part 2 which is divided into the following parts: AA BB CC the Board of Directors Accountability and Audit Shareholders The Board of Directors confirms that the Group has applied the principles set out in Part 1 of the Code to the circumstances of the Group and has complied with the best practices set out in Part 2 of the Code throughout the financial year from 1 January 2004 to 31 December The Directors further confirm that, going forward, the Group will continually apply the said principles and practices and where deemed appropriate, enhance the application thereof in pursuit of its commitment to the highest standards of Corporate Governance. 35

38 Statement on Corporate Governance DIRECTORS Composition of the Board The Board comprises members with relevant expertise and experiences drawn from business, financial, technical and public service. The wide spectrum of skills and experiences has given them an edge and an added strength in terms of leadership and management, thus ensuring that EON Berhad and its subsidiaries is steered and guided by an accountable and competent Board. At the beginning of the financial year, the Company had sixteen (16) Directors on its Board of whom five were Independent Directors. There was a change in the Board membership whereby one director left the Board of the Company. To-date, there are fifteen (15) Directors of whom five (5) are Independent. The composition of the Board was maintained so that not less than one-third (1/3) were Independent Directors at all times. No individual or group of individuals dominated the Board s decision making powers and processes. The number of Directors reflects fairly the investment of the shareholders. During the financial year under review, four regular and two special board meetings were held. The names of the Directors in office during the year and their attendance at board meetings are as set out in the Directors Profiles from page 22 to 29. Y Bhg Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong sits as the Chairman of the Board. This is perceived as appropriate and of benefit to the Group for his experience and intimate knowledge of the Group and its workings. The Board has always ensured compliance and best practices with respect to impartiality, conflict-avoidance, shareholders and stakeholders interest and protection, and good corporate governance. The Chairman is primarily responsible for ensuring Board effectiveness and conduct whilst the Managing Director, Y Bhg Datuk Adzmi bin Abdul Wahab oversees the day-to-day running of the business including implementation of the policies and strategies adopted by the Board and clarifying matters relating to the Group s business to the Board. The Managing Director s in-depth and intimate knowledge of the Group s affairs contribute significantly towards managing the direction of the Group to achieve its goals and objectives. The Group considers that its complement of Non-Executive Directors provide an effective Board with a mix of industryspecific knowledge and broad business and commercial experience. The presence of independent non-executive Directors is particularly important in corporate accountability as they provide unbiased and independent views, advice and judgement to take into account of the interests, not only of the Group, but also of shareholders (majority and minority), employees, customers, suppliers and the many communities in which the Group conducts business. This balance enables the Board to provide clear and effective leadership to the Group and to bring informed and independent judgement to many aspects of the Group s strategies and performance so as to ensure that the highest standards of conduct and integrity are maintained. The classification for independence is in accordance with paragraph 1.01 (Definition and Interpretations of the Bursa Malaysia Listing Requirements). In accordance with the requirements of the Code, YBhg Tan Sri Saw Huat Lye is currently the Senior Independent Non- Executive Director who is available to deal with concerns affecting the Group, other than through the Chairman. Roles and Responsibilities of the Board The Board retains full and effective control of the Group. This includes responsibility for determining the Group s overall strategic direction as well as development and control of the Group. Key matters, such as approval of annual and quarterly results, acquisitions and disposals, as well as material agreements, major capital expenditures, budgets, long-term plans and succession planning for top management are reserved for the Board. These matters are set out in a formal statement in the Board Charter. The Directors are required to make written declarations and it is their responsibility to declare whether they have a potential or actual conflict of interest in any transaction. Where issues involve conflict of interest, the interested Directors abstain from discussing or voting on the matter. The Board has four regularly scheduled meetings annually. Special Board meetings for particular matters are held as necessary. In 2004, the Board held four regular meetings and 36

39 two Special Board meetings. At each regularly scheduled meeting, there was a full financial and business review and discussion, including trading performance to-date against the annual budget and financial plan previously approved by the Board for that year. The Chairman of the Company plays a pivotal role in ensuring that Directors are properly briefed on issues arising at Board meetings, so that they can make effective contributions as Board members. As part of good corporate governance, the Chairman encourages a healthy debate on issues raised at meetings, gives opportunity to Directors who wish to speak on the motions, either for or against them. Every Board resolution is then put on a vote which would reflect the collective decision of the Board, and not the views of an individual or an interested group. Minutes of every Board meeting are circulated to each Director for their perusal prior to confirmation of the minutes at the following Board meeting. Subsequently, all matters arising, deliberations and conclusions of the meetings of the Board are clearly and accurately recorded in minutes of meetings by the Company Secretary, confirmed by the Board and signed as a correct record by the Chairman. The proceedings and resolutions passed at each Board meeting are kept in the statutory register at the registered office of the Company. The consideration and approval of the Annual Management Plan (AMP) is a significant annual exercise by the Board in establishing the goals of the Group for the following year which involves an assessment of the projected performance of the Group s business. The Group AMP is revised quarterly based on the actual performance of the preceding quarters and expectations in performance of the preceding quarters and expectations in performance for the subsequent quarters. At appropriate times, the Board also considers the principal risks affecting the business of the Group and the measures that could be taken to mitigate such risks. A yearly audit planning memorandum submitted by the External Auditors of the Group to the Audit Committee sets out the Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis for the Group which indemnifies and highlights the possible options that can be implemented to mitigate the impact of any business risk. The External Auditors, also on annual basis, issue a Management Letter raising issues on risks affecting the operations of the Group. The Board, through its various committees, addresses and monitors the risks and concerns affecting the Group. Committees Specific responsibilities have been delegated to the Board Committees, all of which have written constitutions and terms of reference. These Committees have the authority to examine particular issues and report back to the Board with their recommendations. The ultimate responsibility for the final decision on all matters however, lies with the entire Board. The five principal Board Committees are as follows: 1. Board Audit Committee Please refer to the Report of the Board Audit Committee on pages 48 to Board Nomination Committee Y Bhg Datuk Ir. (Dr) Ahmad Zaidee bin Laidin, Chairman Y Bhg Dato Dr M SHANmughalingam Y Bhg Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong The members of the Nomination Committee are all Non- Executive Directors, a majority of whom are independent. The Committee meets at least once a year and is responsible for: Determining the criteria for Board membership; Identifying and recommending to the Board, candidates for directorships of the Company and its subsidiaries; Recommending to the Board on the appointment of Directors on board Committees; Ensuring that adequate training and orientation is provided to the new Directors with respect to the business, structure and management of the Group as well as the expectations of the Board; Evaluating the effectiveness of the Board and Board Committees with regard to their structure, size, balance and composition including the required mix of skills, experience and core competencies that Non-Executive Directors should bring to the Board, and contributions of each individual Director; Recommending to the Board whether Directors retiring by rotation should be put forward for re-election; Ensuring an appropriate framework and plan for Board and management succession for the Group; 37

40 Statement on Corporate Governance Evaluating and approving the appointment, promotion, transfer and dismissal of senior executive positions, except that of the Managing Director and the Executive Directors which will be decided by the Board based on the recommendation of the Committee. The Nomination Committee has developed and implemented procedures for evaluating the Board of Directors. The evaluation included the following: (i) Performance evaluation of the Board of Directors (ii) Determination of the competency profile of the Board of Directors (iii) Determination of the competency model of the new Board members (iv) Performance evaluation of the Managing Director and Executive Directors During the financial year, the Nomination Committee held one meeting which was on 13 February 2004 and all members were present at the meeting. 3. Board Remuneration Committee Y Bhg Dato Dr M SHANmughalingam, Chairman Y Bhg Tan Sri Saw Huat Lye Y Bhg Datuk Ir. (Dr) Ahmad Zaidee bin Laidin Y Bhg Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong The members of the Remuneration Committee are all Non- Executive Directors, a majority of whom are independent. The Committee meets at least once a year and is responsible for: Establishing the Managing Director and the Executive Directors goals and objectives; Reviewing the Managing Director and the Executive Directors performance against the goals and objectives set; Establishing and recommending the remuneration structure and policy for the Managing Director, Executive Directors and management; The terms of employment/contract of employment/ service, any benefit, incentive scheme entitlement; and other bonuses, fees and expenses, compensation payable on the termination of the service contract by the Company and Group and to review for changes to the policy, as necessary; Determining the remuneration of the Senior Managers and recommend the remuneration of the Managing Director and Executive Directors; Reviewing and recommending to the Board on any new employees share option scheme and/or amendments to the existing scheme; Considering other matters as referred to the Committee by the Board; During the financial year, the Remuneration Committee held two meetings i.e. on 13 February and 12 August 2004 respectively and all members were present. 4. Board Management Committee Y Bhg Datuk Adzmi bin Abdul Wahab, Chairman Y Bhg Dato Maznah bte Abdul Jalil Y Bhg Datuk Choo Keng Kit Ms Vimala Menon The Management Committee consists of the Managing Director and Executive Directors, meets on a regular basis and is responsible, within the limits of the policies determined and powers delegated by the Board, for: Formulating Company and Group policies for recommendation to, and further consideration by the Board; Acting as an advisory body to the Board on operational and management matters; Discussing and deciding upon the implementation of key policy decisions of the Board; Discussing and recommending all matters important to the strategic operations of the Company and Group; and Coordinating activities and building up synergies within the Group. During the financial year, the Management Committee formally met 10 times apart from having regular and frequent discussions amongst its members, in particular with the Chairman. 5. Board Risk Management Committee Y Bhg Datuk Adzmi bin Abdul Wahab, Chairman Y Bhg Dato Maznah bte Abdul Jalil Y Bhg Datuk Choo Keng Kit Ms Vimala Menon 38

41 The Risk Management Committee, consists of the Managing Director and Executive Directors, meets on a regular basis and is responsible, within the limits of the policies determined and powers delegated by the Board for: Aligning risk management strategies and policies with the business strategies; Ensuring completeness of risk identification and assessment; Defining risk management policies; Arbitrating risk management conflicts between functional divisions; Designating risk owners and establishing accountabilities; Monitoring the implementation of any approved risk management action plans. During the financial year, the Risk Management Committee formally met twice apart from having regular and frequent discussions amongst its members, in particular with the Chairman. Supply of Information All Directors have the same right of access to all information within the Group and the duty to make further enquiries whenever deemed necessary whether as a full Board or in their individual capacity, in furtherance of their duties. The Board is supplied in a timely fashion with information in a form and of a quality appropriate to enable it to discharge its duties. In addition to financial information, other information deemed suitable such as customer satisfaction, product and service quality, and market share are also provided. An agenda and a set of Board papers are sent to all Directors in advance prior to the meeting. The Board papers include, among others, the following: Minutes of meetings of all Board Committees; Current operating and business issues; Annual management plan, forecasts and projections; Quarterly and annual financial reports; Acquisitions and disposals of assets of substantial value; Major investment and financial decisions; Changes to management and control structure of the Group, including key policies, procedures and authority limits; Reports, advices and opinions of the external consultants/advisors as had been sought for. Minutes of every Board meeting are circulated to each Director for their perusal prior to confirmation of the minutes at the following Board meeting. The Board has access to the Company Secretary who is available to provide the Directors with the appropriate advice and services and also to ensure that the relevant procedures are followed. The Directors are constantly updated on the latest developments in the legislations as well as on statutory and regulatory requirements pertaining to their duties and responsibilities. The Board also believes in adopting a hands-on approach to the Group s business activities as part of the Board s assessment of its effectiveness, and the decision-making body of the Group. When necessary, the Directors also visit locations of business units that provide an insight on operational matters which would assist the Board to make effective decisions relating to the Group. Appointments to the Board There is a formal and transparent procedure for the appointment of new Directors to the Board, with the Board Nomination Committee making recommendations to the Board. Please refer to page 37 for details of the Nomination Committee. Following the appointment of new Directors to the Board, the Nomination Committee ensures that an induction programme is arranged, including visits to the Group s businesses and meetings with senior management as appropriate, to enable them to get a full understanding of the nature of the Group s businesses, current issues within the Group and the Corporate Strategies as well as the structure and management of the Group. DIRECTORS TRAINING All the Directors have attended the Mandatory Accreditation Programme (MAP) conducted by Research Institute of Investment Analysis Malaysia (RIIAM) as prescribed by Bursa Malaysia. They also continually attend education programs and seminars to keep abreast with developments in the market place, such as seminars accredited under Bursa Malaysia s Continuing Education Program ( CEP Program ). 39

42 Statement on Corporate Governance During the financial year ended 31 December 2004, two in-house training programmes for Directors and Senior Management of the Company were conducted and facilitated by Industry experts. These training programmes were accredited under the CEP Programme. The details of the training programmes are as follows: Date Course Title Organiser 10 July 2004 Corporate Governance Bursa Malaysia Assessment Framework Training Sdn Bhd 7 & 14 Corporate Disclosure Bursa Malaysia August 2004 Rules and Regulations Training Sdn Bhd Directors are also encouraged to attend talks, training programmes and seminars to update themselves on new developments in the business environment. In addition, seminars and conferences organised by the relevant regulatory authorities and professional bodies on, inter alia, areas relevant to the Company s operations; Directors responsibilities and corporate governance issues, as well as on changes to statutory requirements and regulatory guidelines, are informed to the Directors, for their participation. Save for Mr Anthony Nightingale, Y Bhg Datuk William Chong Wei Yoon and Mr Adam Keswick, all other Directors of the Company have attended the CEP programme whether in their capacity as a Director of the Company or other public listed companies. In addition, most of the directors of the Group s non-listed subsidiaries have attended the Corporate Directors Training Programme as recommended by the Companies Commission of Malaysia. In line with the recent amendment to Practice Note. 15/2003 which prescribed that the Board of Directors of all Public Listed Companies shall be responsible for determining the training needs of the Directors with effect from 1 January 2005, EON has initiated its own comprehensive and formal training program tailored to the needs of the Board of Directors. Retirement and Re-election In accordance with the Company s Articles of Association, all Directors who are appointed by the Board are subject to election by shareholders at the first Annual General Meeting following their appointment. Pursuant to Section 129 (2) of the Companies Act, 1965, Directors who are over the age of seventy (70) years shall retire at every annual general meeting, may offer themselves for re-appointment to hold office until the next annual general meeting. The Articles also provide that all Directors shall retire from office once in every three years but shall be eligible for re-election. At each Annual General Meeting, one-third of the remaining Directors retire and offer themselves for re-election. In practice, over a number of years, this means that every Director has stood for re-election at least once every three years. DIRECTORS REMUNERATION The objective of the Group s policy on Directors remuneration is to ensure that the Group attracts and retains Directors of the calibre needed to run the Group successfully. In the case of Executive Directors, the component parts of remuneration are structured so as to link rewards to corporate and individual performances. In the case of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the Non-Executive Director concerned. The Remuneration Committee (details of the Remuneration Committee are set out on page 38) is responsible for setting the policy framework and for making recommendations to the Board on all elements of the remuneration and other terms of employment of each Executive Director. Executive Directors abstain from the deliberations and voting decisions in respect to their remuneration. The remuneration of Non-Executive Directors is decided by the Board. The shareholders at the Annual General Meeting approve the aggregate annual directors fees for Non-Executive Directors. The Board decides the determination of the fees for each Non- Executive Director. 40

43 Details of Directors remuneration from the Group for the financial year ended 31 December 2004, distinguishing between Executive and Non-Executive Directors in aggregate, with categorisation into appropriate components and the number of Directors whose remuneration falls into each successive band of RM50,000 are set out below: Executive Non-Executive Directors Directors Total RM RM RM Directors Fees & allowances 229, , ,161 Salaries 1,751,633 1,751,633 Bonus 754, ,128 Benefits-in-kind 205,327 99, ,236 Total 2,940, ,864 3,767,158 Executive Non-Executive Directors Remuneration Directors Directors Total 0 RM50, RM50,001 RM100, RM100,001 RM150, RM400,001 RM450, RM750,001 RM800, RM800,001 RM850, RM850,001 RM900, a) Directors Fees & Meeting Allowances The shareholders at the Annual General Meeting approve the aggregate annual directors fees for Non-Executive Directors. The Board determines the fees payable to each Non-Executive Director after considering comparable organisations and the level of responsibilities undertaken by the Director. All Non-Executive Directors are paid meeting allowance to reimburse them for expenses incurred for attendance at each Board and Board Committee meeting. b) Salaries The basic salary inclusive of statutory employer contributions to the Employees Provident Fund for each Executive Director is recommended by the Remuneration Committee, taking into account the performance of the individual, the consumer price index and information from independent sources on the rates of salary for similar positions in a selected group of comparable companies. Salaries are reviewed annually. 41

44 Statement on Corporate Governance c) Bonus The Managing Director and Executive Directors are paid a contractual bonus as well as discretionary bonus in line with other employees. The criteria for the discretionary bonus is dependent on various performance measures of the Company together with an assessment of their individual performance during the period. Discretionary bonus for the Managing Director and Executive Directors is approved by the Remuneration Committee. d) Benefits-in-Kind Other customary benefits, such as car, driver, allowances, etc are made available to Directors as appropriate. e) Directors Share Options The movement in Directors share options during the year ended 31 December 2004 is set out in the Directors Report on page 105 of the Annual Report. f) Service Contract The Managing Director and two of the Executive Directors have service contracts with the Company. The notice period for termination of employment under the service contracts for the Managing Director and the Executive Director is three months. In the case of the Executive Directors who are on employment contracts, the notice period is two months. SHAREHOLDERS Dialogue between the Company and Shareholders/Investors The Board values dialogue with investors and appreciates the keen interest of shareholders and investors in the Group s performance. The Board acknowledges the need for shareholders to be informed of all material business matters affecting the Group. The Company supports the Code s principle to encourage shareholders participation. The Company s Articles of Association allows a member entitled to attend and vote to appoint a proxy to attend and vote instead of the member and also provide that a proxy need not be a member of the Company. In addition to various announcements made during the year, the timely release of financial results on a quarterly basis in line with the Bursa Malaysia Securities Berhad s ( Bursa Malaysia ) Listing Requirements provides shareholders with an overview of the Group s performance and operations. Bursa Malaysia also provides for the Company to electronically publish all its announcements including its quarterly results and Annual Report through Bursa Malaysia s internet website at Investor Relations The Executive Directors and senior management have regular dialogues with institutional investors, fund managers, analysts and research houses. Press conferences are held for analysts and investors to brief them on announcements relating to major corporate exercises and pertinent issues within the disclosure requirements of Bursa Malaysia. While the Company endeavours to provide as much information as possible to its shareholders and stakeholders, it must also be wary of the legal and regulatory framework governing the release of material and price-sensitive information. All corporate disclosures take into account the prevailing legislative restrictions and requirements as well as the investors need for timely release of price-sensitive information such as financial performance results and statements, material acquisitions, significant corporate proposals as well as other significant corporate events. In all circumstances, the Group is cautious not to provide undisclosed material information about the Group and continually stresses on the importance of timely and equal dissemination of information to shareholders and stakeholders. Annual Report The Directors believe that an important channel to reach shareholders and investors is through the Annual Report. Besides including the comprehensive financial performance and information on the business activities, the Group strives to improve the contents of the Annual Report in line with developments in corporate governance practices. The Company s Annual Report can be obtained by accessing the Company s website at The Annual General Meeting (AGM) EON encourages the exercise of voting rights and constructive dialogue between the Board the shareholders at the Annual General Meeting (AGM), whereby shareholders are given opportunity to pose their questions on proposed resolutions and the Group s operations. Notice of the AGM and annual reports are sent out to shareholders at least 21 days before the date of the meeting. 42

45 Besides the normal agenda for the AGM, the Board presents the progress and performance of the business as contained in the Annual Report and provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. All Directors are available to provide responses to questions from the shareholders during these meetings. The turnout of shareholders at EON s AGM has always been large; a total of 186 shareholders attended the AGM in 2003, while a total of about 202 shareholders attended in In addition, a press conference is held immediately after the AGM where the Chairman and the Group Managing Director answer questions from the media on the Group plans and activities. For re-election of Directors, the Board ensures that full information is disclosed through the notice of meetings regarding Directors who are retiring and who are willing to serve if re-elected. Items of special business included in the notice of the meeting will be accompanied by an explanatory statement to facilitate full understanding and evaluation of the issues involved. Shareholders can obtain up-to-date information on the Group s various activities by accessing its website. Press releases and latest quarterly results announcements of the Group can also be found on this website. Announcement of Quarterly Results for the financial year ended 31 December 2004 The Directors view the timely announcement of the quarterly financial results as vital to the dissemination of information to the shareholders and investors community. The Company has consistently announced its quarterly results before the Bursa Malaysia s deadlines as indicated below: Announcement of Quarterly Results for 2004 Date of Announcement 1st Quarter 20 May nd Quarter 27 August rd Quarter 29 November th Quarter 24 February 2005 Continuing Disclosure of Material Information EON has long observed the continuing disclosure obligation imposed upon a listed issuer by Bursa Malaysia. The Company has constantly adopted and applied the principles of best practices in Corporate Disclosure Policy and Procedures as laid down by Bursa Malaysia. The following material information and the material development thereof have been released to shareholders via Bursa Malaysia Link on a timely basis: (i) (ii) (iii) Proposed Dividends in Specie of ECB Shares; Proposed Bonus Issue; Proposed Capital Repayment of ECB Shares and Proposed Increase in Authorised Share Capital by AmMerchant Bank Berhad on 26 February 2004; Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature on 1 March 2004; Super Dealership Agreement Proton Marque Vehicles on 2 March 2004; (iv) Changes in Substantial Shareholders Interest pursuant to Form 29B of the Companies Act, 1965; 43

46 Statement on Corporate Governance (v) Proposed Disposal of the entire shareholding in Leong & Company Sdn Bhd ( L&C ) comprising 6,000,000 Ordinary Shares of RM1.00 each ( Shares ) representing 30% of the Issued and Paid-up Share Capital of L&C for a Cash Consideration of RM48,098,388 ( Proposed Disposal of L&C ); and Proposed Disposal of the entire shareholding in MCIC Holdings Sdn Bhd ( MCIC ) comprising 2,500,000 shares representing 5% of the issued and paid-up share capital of MCIC for a Cash Consideration of RM2,750,000 ( Proposed Disposal of MCIC ). (Collectively known as Proposed Disposal ) on 16 March 2004 on 16 March (vii) (viii) (ix) Edaran Otomobil Nasional Berhad ( EON or the Company ) Dividends in Specie of EON Capital Berhad ( ECB ) Shares, Capital Repayment of ECB Shares and Upliftment of Moratorium on the Shares of ECB ( Proposals ) by AmMerchant Bank Berhad on 27 April Edaran Otomobil Nasional Berhad ( EON or the Company ) Dividends in Specie of EON Capital Berhad ( ECB ) Shares, and Proposed Capital Repayment of ECB Shares ( Proposals ) by AmMerchant Bank Berhad on 13 May Ordinary Resolutions passed under Special Business at the 20th Annual General Meeting of Edaran Otomobil Nasional Berhad on 20 May (vi) A. Proposed Distribution of up to 347,270,469 Ordinary Shares of RM1.00 each ( Shares ) representing approximately 50.1% equity interest in EON Capital Berhad ( ECB ) by way of the following: (i) Proposed Payment of Dividends in Specie of up to 175,508,442 shares representing approximately 25.32% equity interest in ECB on a Basis of Entitlement to be determined ( Proposed Dividends in Specie of ECB Shares ); (x) Agreement with Audi AG on 29 May (xi) (xii) Edaran Otomobil Nasional Berhad ( EON or the Company ) Dividends in Specie of EON Capital Berhad ( ECB ) Shares, and Capital Repayment of ECB Shares ( Collectively referred to as the Distribution of ECB Shares ) by AmMerchant Bank Berhad on 18 June Article entitled DRB-HICOM Plans to Re-structure on 2 July (ii) Proposed Bonus Issue of such number of shares in EON ( Bonus Shares ) to be credited as fully paid-up and subsequently cancelled for the purpose of implementing the proposed capital repayment of ECB Shares on a basis of entitlement to be determined ( Proposed Bonus Issue ); (xiii) Proposed Disposal of the Entire Shareholding in Leong & Company Sdn Bhd ( L&C ) comprising 6,000,000 Ordinary Shares of RM1.00 each representing 30% of the Issued and Paid-up Share Capital of L&C for a cash consideration of RM48,098,388 to Malaysian International Merchant Bankers Berhad ( MIMB ) ( Proposed Disposal of L&C ) by AmMerchant Bank Berhad on 23 July (iii) Proposed Capital Repayment of the Remaining Shares in ECB not distributed pursuant to the Proposed Dividends in Specie of ECB Shares at zero subscription cost by utilising the credits arising from the cancellation of the Bonus Shares on a Basis of Entitlement to be determined ( Proposed Capital Repayment of ECB Shares ); B. Proposed Increase in the Authorised Share Capital of the Company from RM500,000,000 comprising of 500,000,000 shares to RM1,000,000,000 comprising 1,000,000,000 shares ( Proposed Increase in Authorised Share Capital ) on 7 April (xiv) Malay Mail Article Entitled EON Sets Sights on USF- HICOM on 18 August (xv) Proposed Disposal of the Entire Shareholding in Leong & Company Sdn Bhd ( L&C ) comprising 6,000,000 Ordinary Shares of RM1.00 each ( Shares ) representing 30% of the Issued and paid-up Share Capital of L&C for a Cash Consideration of RM48,098,388 to Malaysian International Merchant Bankers Berhad ( MIMB ) ( Proposed Disposal of L&C ); and 44

47 Proposed Disposal of the Entire Shareholding in MCIC Holdings Sdn Bhd ( MCIC ) comprising 2,500,000 shares representing 5% of the Issued and Paid-up Share Capital of MCIC for a Cash Consideration of RM2,750,000 to Kualapura (M) Sdn Bhd ( Kualapura ) ( Proposed Disposal of MCIC ) on 25 August (xvi) Joint Venture Agreement ( Agreement ) between Edaran Otomobil Nasional Berhad ( EON or the Company ) and Mitsubishi Corporation ( MC ) on 17 November Senior Management Personnel in Investor Relations Activities Any queries regarding the EON Group may be conveyed to: Y Bhg Tan Sri Dato Seri (Dr.) Mohd Saleh bin Sulong, Chairman Y Bhg Datuk Adzmi bin Abdul Wahab, Managing Director Y Bhg Tan Sri Saw Huat Lye, Senior Independent Non-Executive Director Puan Noor Azwah Samsudin, Company Secretary Puan Fauziah Abdul Aziz, Manager, Marketing Services Telephone number : Facsimile number : ACCOUNTABILITY AND AUDIT Financial Reporting The Directors have a responsibility to present a fair assessment of the Group s position and prospects in the quarterly reports to Bursa Malaysia and the annual report to shareholders. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. The Statement of Directors responsibility for preparing the financial statements is set out on page 99 of this annual report. Internal Control The Code requires the Board to maintain a sound system of internal control to safeguard shareholders investment and the Group s assets. Information on the Group s internal control is presented in the Statement on Internal Control laid out on pages 54 to 55. Relationship with the Auditors The Group has always maintained a close and transparent relationship with its auditors in seeking professional advice and ensuring compliance with the accounting standards in Malaysia as well as meeting the auditors professional requirements. The external auditors, Messrs. PricewaterhouseCoopers has continued to report to shareholders of the Company on its opinion which are included as part of the Group s financial reports with respect to their audit on each year s statutory financial statements. The auditors also highlight to the Board Audit Committee and Board of Directors on matters that require the Board s attention. A summary of the activities of the Board Audit Committee during the financial year, including the evaluation of independent audit process, are set out in the Audit Committee Report on pages 48 to 52 of this Annual Report. STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE This statement is made in accordance with a resolution of the Board of Directors dated 24 February Tan Sri Dato Seri (Dr) Mohd Saleh bin Sulong Chairman Datuk Adzmi bin Abdul Wahab Managing Director 45

48 EON recognises the importance of sound internal controls and risk management practices to good corporate governance. It is for this reason that it continues to embed the risk management process in the conduct of the day-today business operations to provide reasonable assurance of achieving the Group s business objectives while at the same time safeguarding and enhancing shareholders investments and the company s assets. Risk Management The main objectives of the risk management are as follows: Ensuring proper framework for identifying and managing risk exposures. Ensuring that contingency plans are in place to handle any crisis situation. Improving business performance by improving decision-making and planning. Providing a sound basis for integrated risk management and internal control as components of good corporate governance. Promoting a more innovative culture in which the taking of calculated risks in various opportunities to benefit the organisation is encouraged. Fostering an environment where staff assume responsibility for managing risks. Risk Management Framework The Group has formalised its Risk Management Framework which encompasses the following key elements:- A Risk Management Committee. This is made up of four Directors and chaired by the Managing Director. It has been established with the objective to assist the Board of Directors in their responsibilities in establishing an effective risk management system. The Committee also serves as an oversight to the Board by providing the necessary information required to understand and assess the risks. 46

49 The Risk Management Committee is guided by its Terms of Reference and the Risk Management Policy. It is assisted by a Risk Manager whose function is to facilitate the Risk Management Process. A database of all risks and its corresponding controls which have been identified has been created. The information is used to produce a detailed Risk Register, and individual risk profiles for the business and support units. Keys risks to each business and support unit s objectives are identified and scored for likelihood of the risks occurring and the magnitude of impact. A consolidated risk profile of the Group was developed which, together with a report of the key findings was discussed in the Risk Management Committee meetings in February and November 2004 before being submitted to the Audit Committee and subsequently to the Board of Directors. Risk Management Process There is in place a formal and on-going process to identify, evaluate and manage significant risks faced by the Group. This process entails the overall establishment of an appropriate framework to embed risk management in the process and activities of the Group. 47

50 Report of the Board Audit Committee The Board of Directors is pleased to present the Report of the Board Audit Committee for the year ended 31 December COMPOSITION The composition of the Audit Committee appointed by the Board from amongst its members comprises the following five members, three of whom are Independent Directors: ensure adequate coverage over the activities of the respective business units. It met with the internal auditors to discuss the results of their examinations, management responses, follow-up action plans and their implementation status. Chairman Y Bhg Tan Sri Saw Huat Lye (Independent Non-Executive Director) The Committee reviewed and approved the external audit plans of the Company and its wholly-owned subsidiaries, and discussed results of their examinations and recommendations. Members Y Bhg Datuk Wan Awang bin Wan Yaacob (Independent Non-Executive Director) Encik Wan Mat bin Wan Sulaiman (Independent Non-Executive Director) The Committee reviewed the unaudited quarterly financial statements and audited annual financial statements of the Company and the Group and ensured that the financial reporting and disclosure requirements of the relevant authorities had been complied with prior to submission to the full Board for consideration and approval. Y Bhg Datuk Haji Faisal bin Siraj (Non-Independent Non-Executive Director) Y Bhg Datuk Adzmi bin Abdul Wahab (Managing Director) Four Audit Committee meetings were held in 2004 and details of attendence of the Committee members were as follows: Members Y Bhg Tan Sri Saw Huat Lye Y Bhg Datuk Wan Awang bin Wan Yaacob Encik Wan Mat bin Wan Sulaiman Y Bhg Datuk Haji Faisal bin Siraj Y Bhg Datuk Adzmi bin Abdul Wahab Attendance All 4 meetings All 4 meetings All 4 meetings All 4 meetings All 4 meetings ACTIVITIES OF THE BOARD AUDIT COMMITTEE During the year, the Audit Committee carried out its duties as set out in its terms of reference. In performing its functions, the Audit Committee reviewed and approved the overall scope of the internal audit plans for the Company and the Group companies to INTERNAL AUDIT FUNCTION The Audit Committee is assisted by an Internal Audit Division, which reports functionally to the Committee. The Internal Audit has established an Audit Charter, which was approved by the Audit Committee, detailing its objectives, scope and function. The Internal Audit Division s role is to provide an independent, objective assurance and consulting services designed to add value and improve the company s operations. It helps the Company accomplish its objectives by evaluating and improving the effectiveness of risks management, internal control and governance processes that includes:- i. Compliance with applicable laws, regulations, rules, directives and guidelines set up by the Management ii. Review of Business Plans and processes iii. Information Technology and system review iv. Stock and Asset Management Audit v. Special review at the request of Management vi. Review of Business Continuity Plan 48

51 Adopting a risk-based approach after evaluation and assessment of risk at Company and Divisional level, the Internal Audit Division formulated the Annual Audit Plan, which was approved by the Audit Committee, at its last meeting of the preceding year. The scope of the Internal Audit function covers the audit of all business units and operations of the Company and its subsidiaries. The Internal Audit Plan was also consistent with the Company s current business initiatives and strategies. The Plan is also aimed at contributing to the Company s internal control requirement and corporate governance processes. In this financial year, Internal Audit completed a total of 104 Audit Reports covering selected locations at Corporate Head Office, Branches and Subsidiaries. Internal Audit contributed towards ensuring both Corporate Governance and issues relating to effectiveness of internal control are properly addressed. The Internal Audit reports, which included the issues and action plans, were presented to and discussed with the Management. Internal Audit subsequently monitored the implementation of the agreed action plans to ensure full compliance. The reports together with the follow-up action plans and implementation status were presented to the Audit Committee for their deliberation and subsequent approval. As at 31 December 2004, the Internal Audit Division has 9 Auditors with various mix of expertise and experience. In order to ensure that its auditing approach is in line with current practice, the Internal Auditors are continuously being sent for various relevant courses. During the year, a number of internal control weaknesses were identified and brought to Management notice, all of which have been, or are being addressed. None of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require separate disclosure in the Group s Annual Report. TERMS OF REFERENCE OF THE BOARD AUDIT COMMITTEE Quorum The quorum for the Audit Committee meeting shall be two members and the majority of members present must be Independent Directors. Terms of Reference The Audit Committee has written terms of reference that deal with its authority and duties. Meetings and Attendance (1) The Audit Committee shall meet at least on three occasions each year and the three occasions in which they shall meet are as follows:- (a) prior to the current year s audit; (b) prior to the Board s approval of the announcement of the quarterly results to Bursa Malaysia Securities Berhad (Bursa Malaysia); and (c) prior to the approval of the financial statements by the full Board. (2) The external auditor has the right to appear and be heard at any meeting of the Audit Committee and shall appear before the Committee when required to do so by the Committee. (3) Upon the request of the external auditor, the Chairman of the Audit Committee shall convene a meeting of the Committee to consider any matter the external auditor believes should be brought to the attention of the Directors or shareholders. (4) As necessary or desirable, the Chairman may request that other directors, members of management, the internal auditor, employees and representatives of the external auditor attend at any particular Audit Committee meeting only at the Audit Committee s invitation, specific to the relevant meeting. 49

52 Report of the Board Audit Committee (5) The Company Secretary of the Company shall be present at all meetings to record minutes. (6) Minutes of all meetings shall be prepared and sent to the Audit Committee members and the Company Directors who are not members of the Audit Committee. A copy of the minutes shall be filed at the Company. Authority (1) The Audit Committee may regulate its own procedures, in particular, the calling of meetings, the notice to be given of such meetings, the voting and proceedings of such meetings, the keeping of minutes and the custody, production and inspection of such minutes. (2) The Audit Committee in performance of its duties shall, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:- (a) have the authority to investigate any matter of the Company and its subsidiaries within its terms of reference and all employees shall be directed to cooperate as requested by members of the Audit Committee; (b) be empowered to retain persons having special competence as necessary and have the resources that are required to assist the Audit Committee in fulfilling its responsibilities; (c) have full and unrestricted access to any information pertaining to the Company; (d) have direct communication channels with the external and the internal auditors at all times and the Chairman of the Audit Committee may call a meeting whenever he deems it necessary; (e) be able to obtain independent professional or other advice; and (f) be able to convene meetings with the external auditor, excluding the attendance of the executive members of the Committee whenever deemed necessary. (3) The Audit Committee shall have the power to instruct the internal auditor to carry out investigations if deemed necessary and to submit reports arising therefrom to the Audit Committee. Responsibilities The Audit Committee shall: (1) serve as a focal point for communications between noncommittee Directors, the external auditor, the internal auditor and the Company s management as their duties relate to financial accounting, reporting and controls; (2) report formally to the Board of Directors and shall assist the Board of Directors in fulfilling its fiduciary responsibilities as to accounting policies and reporting practices of the Company and the sufficiency of auditing thereto; (3) be the Board s principal agent in assuring the independence of the Company s external auditor, the integrity of management and the adequacy of disclosures to shareholders. The opportunity of the external auditor to meet with the entire Board of Directors as needed is not restricted, however; (4) have familiarity through the individual efforts of its members, with the accounting and reporting principles and practices applied by the Company in preparing its financial statements. The Audit Committee shall make or cause to be made all necessary inquiries of management and the external auditor concerning established standards of corporate conduct and performance and deviations therefrom. Scope and Functions The Audit Committee shall, amongst others, discharge the following functions:- (1) Review the audit plan with the external auditor prior to the annual audit. The scope and general extent of the external auditor s audit examination, including the engagement letter, and confirmation that management has placed no restrictions as to the scope and extent thereto. The external auditor s fees are to be arranged with management and annually summarised for the Audit Committee s review. The Audit Committee s review should entail an understanding from the external auditor of the factors considered by the external auditor in determining the audit scope including:- (a) industry and business risk characteristics of the Company; (b) external reporting requirements; (c) materiality of the various segments of the Company s consolidated and non-consolidated activities; (d) quality of accounting and his evaluation of the system of internal controls; (e) extent of involvement of internal audit in the audit examination; 50

53 (f) (g) review of the scope, nature of work and results of the internal audit procedures; and other areas to be covered during the audit engagement. (6) Review the extent of non-audit services provided by the external auditor and such other responsibilities as may be agreed to by the Audit Committee and the Board of Directors. (2) Evaluate the cooperation received by the external auditor during the audit examination, including access to all requested records, data and information; elicit the comments of management regarding the responsiveness of the external auditor to the Company s needs; inquire of the external auditor whether there have been any disagreements with management which if not satisfactorily resolved would have caused the issue of a non-standard report on the Company s financial statements. (3) Review the quarterly results, year end financial statements and press releases with management prior to them being approved by the Board of Directors focusing particularly on:- (a) changes in or implementation of major accounting policy changes; (b) significant and unusual events; and (c) compliance with accounting standards and other legal requirements. (4) Review any letter of resignation from the external auditor of the Company: Review as to whether there is reason (supported by grounds) to believe that the Company s external auditor is not suitable for reappointment; (7) Review with management and the external auditor, upon completion of the audit, the financial results of the year prior to their release to the public. This review shall encompass the following: (a) the audit report; (b) the Company s Annual Report to shareholders including the financial statements and supplemental disclosures required by generally accepted accounting principles and approved accounting standards; (c) the Corporate Governance Statement and Internal Control Statement in the Company s Annual Report to shareholders; (d) significant related party transactions that may arise within the Company or Group; (e) significant transactions not a normal part of the Company and its subsidiaries operations; (f) significant adjustments proposed by the external auditor; (g) changes, if any, during the year in the Company s accounting principles or their applications and the level of prudence applied in areas requiring judgement; (h) the coordination of the audit approach between the external and internal auditors; and (i) the effectiveness of management information and other systems of control within the Company. Recommend the nomination of a person or persons as external auditor. (8) Identify principal risks and ensure the implementation of appropriate systems to manage these risks; (5) Review with the Company s management, internal auditor and external auditor, the suitability and adequacy of accounting policies and practices, its compliance with any regulatory or other external financial reporting controls and requirements. (9) Review the adequacy and the integrity of the Company s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines; 51

54 Report of the Board Audit Committee (10) Review any related party transaction and conflict of interests situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; (11) Review the adequacy of the scope, functions and resources of the Internal Audit Division and that it has the necessary authority to carry out its work; (12) Review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; (13) Review appraisal or assessment of the performance of members of the internal audit function, approve any appointment or termination of senior staff members of the internal audit function and inform itself of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning; (14) Consider the major findings of internal investigations and management s responses; (15) Discuss with the external auditor, the quality of the financial and accounting personnel, and any relevant recommendations, which the external auditor may have, including those in the letter of comments and recommendations. Topics to be considered during this discussion include improving financial controls, the selection of accounting principles and management reporting system. Review written responses of management through letter of comments and recommendations from the external auditor; (16) Discuss with management, the scope and quality of accounting and financial reporting controls in effect; (17) Inform the Board of Directors, through minutes and special presentations as necessary, of significant developments in the course of performing the above duties; (18) Recommend to the Board of Directors any appropriate extension or changes in the duties of the Audit Committee; and (19) Where the Audit Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Bursa Malaysia s Listing Requirements, the Audit Committee must promptly report such matter to Bursa Malaysia. 52

55 Additional Compliance Information The following information is provided in conformance to the Listing Requirements of Bursa Malaysia Securities Berhad: 1. SANCTIONS AND/OR PENALTIES During the financial year, there were no sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies. 2. NON-AUDIT FEES The amount of non-audit fees paid and payable to the external auditors and their affiliated companies by the Company and its subsidiaries for the financial year ended 31 December 2004 was RM460, MATERIAL CONTRACTS Save as disclosed below, there are no material contracts including contracts relating to loans (not being contracts entered into in the ordinary course of business) of the Company and its subsidiaries, involving directors and major shareholders interests, either still subsisting at the end of the financial year or entered into since the end of the previous financial year. (i) Conditional Share Sale Agreement dated 16 March 2004 between Malaysian International Merchant Bankers Berhad and the shareholders of EONCAP Securities Sdn Bhd (formerly known as Leong & Company Sdn Bhd) ( L&C ) for the proposed acquisition of the entire equity interest in L&C for a cash consideration of RM170.0 million (for which EON s portion is RM48,098,388). (ii) Conditional Agreement dated 16 March 2004 between Kualapura (M) Sdn Bhd and the Company for the proposed disposal of EON s entire equity interest of 5.0% in MCIC Holdings Sdn Bhd for a cash consideration of RM2,750,000. (iii) Joint Venture Agreement dated 15 November 2004 between Mitsubishi Corporation and the Company for the establishment of a new joint venture company to exclusively distribute motor vehicles, vehicle components, spare parts and accessories designed and/or manufactured by Mitsubishi Motor Corporation and/or its affiliates. 4. RECURRENT RELATED PARTY TRANSACTIONS The Company had at the Annual General Meeting held on 20 May 2004 obtained the shareholders mandate for the Group to enter into recurrent transactions of a revenue or trading nature which are necessary for its day-to-day operations and are in the ordinary course of business with related parties. The said general mandate took effect from 20 May 2004 until the conclusion of the forthcoming Annual General Meeting of the Company. The Company intends to seek a renewal of the said general mandate and a proposed extension of the scope of the shareholders mandate to apply to recurrent related party transactions of a revenue or trading nature with new related parties at the forthcoming Annual General Meeting of the Company. The details of the new mandate to be sought are furnished in the Circular to Shareholders dated 5 May 2005 attached to this Annual Report. 53

56 Statement of Internal Control 1. INTRODUCTION The Board of Directors provides the following Statement of Internal Control of the Group pursuant to Paragraph (b) of the Listing Requirements of the Bursa Malaysia Securities Berhad (Bursa Malaysia) and in accordance with the Statement of Internal Control: Guidance for Directors of Public Listed Companies adopted by Bursa Malaysia. 2. BOARD RESPONSIBILITY The Board, recognising the importance of sound internal controls and risk management practices in establishing good Corporate Governance, acknowledges that it is responsible for the Group s System of Internal Controls and risk management and for reviewing the adequacy and integrity of the system. This includes reviewing financial, organisational, management information system, operational and compliance controls as well as risk management procedures. The system is designed to manage, rather than eliminate, the risk of failure to achieve corporate objectives. Accordingly, it can only provide reasonable and not absolute assurance against material misstatement or loss. 3. RISK MANAGEMENT For the financial year under review, the Group has in place an ongoing process in identifying, evaluating and managing the principal risks faced by the Group. It is for this reason that it continues to embed the risk 54

57 management process in the conduct of the day-to-day business operations to provide reasonable assurance of achieving the Group s business objectives while at the same time safeguarding and enhancing shareholders investments and the company s assets. The main objectives of the risk management are as follows: Ensuring proper framework for identifying and managing risk exposures Ensuring that contingency plans are in place to handle any crisis situation Improving business performance by improving decision making and planning Providing a sound basis for integrated risk management and internal control as components of good corporate governance Promoting a more innovative culture in which the taking of calculated risks in various opportunities to benefit the organisation is encouraged Fostering an environment where staff assume responsibility for managing risks RISK MANAGEMENT FRAMEWORK The Group has formalised its Risk Management Framework which encompasses the following key elements:- A Risk Management Committee. This is made up of four Directors and chaired by the Managing Director. It has been established with the objective to assist the Board of Directors in their responsibilities in establishing an effective risk management system. The Committee also serves as an oversight to the Board by providing the necessary information required to understand and assess the risks. The Risk Management Committee is guided by its Terms of Reference and the Risk Management Policy. It is assisted by a Risk Manager whose function is to facilitate the Risk Management Process. A database of all risks and its corresponding controls which have been identified has been created. The information is used to produce a detailed Risk Register, and individual risk profiles for the business and support units. Key risk to each business and support unit s objectives are identified and scored for likelihood of the risks occurring and the magnitude of impact. A consolidated risk profile of the Group was developed which, together with a report of the key findings, was discussed in the Risk Management Committee meetings in February and November 2004 before being submitted to the Audit Committee and subsequently to the Board of Directors. 4. KEY ELEMENTS OF INTERNAL CONTROLS The Internal Control mechanism established by the Board is embedded within the organisation structure and the procedures for planning, capital expenditure, information and reporting systems and for monitoring the Group s performances. They are as follows: (i) The organisation structure of the Group has clearly defined lines of accountability, delegation of responsibility and levels of authorisation for all aspects of the business. (ii) Management Committee meetings are held on a regular basis to identify, discuss and resolve operational, financial and key management issues. (iii) (iv) (v) (vi) (vii) (viii) (ix) Budget preparation is done by the operating units, reviewed by the Management Committee and approved by the Board. Management accounts and reports are prepared monthly for monitoring performances against budgets. Board Committees comprising Audit Committee, Nomination Committee, Remuneration Committee, Management Committee and Risk Management Committee with clearly defined terms of reference and functions have been established. Standard Operating Procedures are documented and regularly reviewed. Appointment of employees of the necessary calibre to fulfil their responsibilities and also the provision of continuous training and development of the employees. A Code of Ethics to support the business objectives. An MS ISO 9001:2000 Quality Management System which has been implemented to manage and control the quality requirement for the Company s services. 5. ASSURANCE The Audit Committee examines the effectiveness of the Group s systems of internal controls primarily through the reviews of the annual and quarterly financial statements, the Internal Audit plans and findings and the nature, scope and findings of the external audit. The Internal Audit Division reports its findings to the Audit Committee of the Company. The Division s work is in accordance with an annual audit plan approved each year by the Audit Committee, and is focused on areas of priority as identified by risk analysis. 55

58 Chairman s Statement 56

59 DEAR SHAREHOLDERS, The year under review was one of the most challenging periods in EON s corporate history. Profound changes with far-reaching implications were thrust upon the Group with the implementation of the Super Dealership Agreement (SDA) with Proton Edar Sdn Bhd (Proton Edar) coupled with intense competition in the automotive industry. YBHG TAN SRI DATO SERI (DR) MOHD SALEH BIN SULONG CHAIRMAN Navigating through the challenges of last year required much grit. It demanded a paradigm shift in all aspects of the way the Group conducted its businesses. As a result of the various initiatives implemented throughout the year, the Group has emerged as a leaner, more resilient and customer focused organisation. Our energies and resources over the past year were channelled towards positioning ourselves for future success and profitability. I am pleased to report that your Company remains profitable notwithstanding the difficult operating environment. FINANCIAL PERFORMANCE The Group recorded profit before tax (PBT) of RM300.5 million on a revenue of RM3,901.2 million for the financial year ended 31 December The 48.1% decline in PBT and 21.8% fall in revenue compared to 2003 were attributed mainly to the exclusion of the results of EON Capital Berhad (ECB) group effective July 2004 following the distribution of ECB shares to the shareholders. The distribution of ECB shares was part of the various initiatives implemented by the Group since 2002, which began with the divestment of interest in Jardine Cycle & Carriage Ltd (CCL) to unlock shareholders value and to remain focused on the Group s core automotive business. Excluding the earnings of ECB group, the Group s PBT of RM109.3 million was 15.3% lower against The decline was mainly the result of the cost of implementing the voluntary staff separation (VSS) scheme of RM13.7 million as lower earnings from vehicle sales were effectively offset by lower overheads. 57

60 Chairman s Statement The VSS exercise resulted from a realignment of the organisation structure to conform to the current business conditions and is expected to improve earnings and productivity of the Group going forward. DIVIDENDS As demonstrated in previous years, your Company believes in sharing its success with the shareholders. The Board of Directors is pleased to recommend a final dividend of 18 sen per share less 28% tax and a special dividend of 84 sen per share less 28% tax in respect of the financial year ended 31 December Subject to the approval of shareholders at the forthcoming Annual General Meeting, the proposed dividend will be paid on 22 June Together with the interim dividend of 10 sen per share less 28% tax paid in June 2004, total cash dividends for the year would amount to RM1.12 per share less 28% tax against RM0.42 per share less 28% tax paid in the previous financial year. EON ranked among the top dividend paying public listed companies in Malaysia. The proposed dividend payment for 2004 is part of EON s ongoing efforts to enhance shareholders returns and thus, reinforces the Company s policy of rewarding shareholders and ensuring steady returns on their investments. Apart from cash dividends, your Company has also distributed its shares in CCL and ECB totaling RM1.1 billion (net of tax) to shareholders in the past two years. I am proud to say that your Company ranked among the top dividend paying public listed companies in Malaysia. SUPER DEALERSHIP AGREEMENT (SDA) Like all enduring organisations, EON has had to evolve and adapt to the new operating conditions. To recapitulate, the chronology of events affecting EON s business was started in March 2003, when your Company came to an agreement with Perusahaan Otomobil Nasional Berhad (PROTON) on a new distribution arrangement for Proton vehicles. Arising from this, EON entered into a Memorandum of Agreement (MOA) with Proton Edar Sdn Bhd (Proton Edar), a wholly-owned subsidiary of PROTON responsible for the distribution of Proton cars. This paved the way for the signing of the SDA on 2 March The salient terms of the Agreement are as follows: (1) EON is appointed as a Super Dealer effective 1 April 2003 to 30 September 2009; (2) EON may maintain its existing network of sales branches and sales dealers dedicated to the sale of Proton marque vehicles throughout Malaysia; 58

61 (3) EON shall be allocated not less than 100,000 units of Proton vehicles annually, subject to PROTON s production plan; (4) EON is allowed to distribute vehicles of other marques under separate legal entities and on separate premises; (5) EON shall maintain a network of service centres to undertake the after sales and service of both the Proton and non-proton vehicles. 70% of the service bays at these service centres shall be dedicated for the servicing of Proton vehicles. The SDA cleared the uncertainties faced by EON for the past few years. It spelled out a new relationship between EON and Proton Edar. More significantly, it has opened windows of opportunity for EON as it is now allowed to pursue multi-brand business. A more robust business model is required to maintain the Group s competitiveness and ensure its long-term growth and prospects. A PARADIGM SHIFT Against the backdrop of the dynamic changes in the automotive industry landscape, the Board of Directors decided that a more robust business model is required to maintain the Group s competitiveness and ensure its long-term growth and prospects. The Group embarked on several key initiatives to diversify its business portfolio with increased contributions from multi-brand business, used car sales, fleet sales and management, and after sales services. 59

62 Chairman s Statement EON conducted a series of change management programme to ensure employees understand changing business conditions and the processes. The Group has successfully added several new multi-brand businesses to its stable. The first agreement that paved the way for EON as a multi-brand distributor was signed on 4 December 2002, for the import and distribution of Audi passenger cars by its wholly-owned subsidiary, Euromobil Sdn Bhd. Subsequently, on 12 December 2003, another wholly-owned subsidiary, EONMobil Sdn Bhd, entered into an agreement with Hyundai-Sime Darby Motors Sdn Bhd (HSDM) for its appointment as a mega vehicle sales dealer for the promotion and sale of Inokom/Hyundai range of vehicles. More recently, on 15 November 2004, EON reached an agreement with Mitsubishi Corporation (MC) to establish a joint-venture company in which EON has a 48% stake to exclusively distribute Mitsubishi motor vehicles, spare parts and accessories. In tandem with the organisational changes, the Company conducted a series of change management programme to ensure employees understand changing business conditions and the processes taking place as well as the important role they play towards the achievement of corporate goals and aspirations. These programmes are also aimed at equipping the employees with the right mindset and necessary skills to lead EON into a new chapter of its development. 60

63 AWARDS AND RECOGNITION The year began on an auspicious note when the Company was named the Homegrown Franchisor of the Year 2002/2003 by the Malaysian Franchise Association. EON has helped to grow a significant number of new start-up businesses under its established brand name. To-date, EON has a network of 201 franchise service dealers. EON s commitment to the nation and society does not end with the above. Much importance is placed on various stakeholders. In ensuring that the shareholder s value are protected and enhanced, EON conscientiously applies the principles and best practices of good corporate governance. In recognition of this continuous effort, EON was awarded with a Merit Award by the Malaysian Business for Corporate Governance. In ensuring that the shareholder s value are protected and enhanced, EON conscientiously applies the principles and best practices of good corporate governance. Our human resource is the driving force towards achieving EON s vision and mission. Recognising the important role they play, EON ensures that their welfare are taken care of. Emerging as one of the runners up in the Best Workplace Practices category in the Asian Corporate Social Responsibility (CSR) Awards 2004 is testament to EON s commitment. The year ended with five more awards presented by the Institute of Public Relations Malaysia (IPRM) with the Company bagging the IPRM Kristal Awards for Best Environmental Practices, Best Employee Relations Practices, Best Public Relations Practices, the Overall IPRM Kristal Award and a commendation for image building as well as the Anugerah Citra Wangsa Malaysia (Radio Advertisement Category) from Dewan Bahasa & Pustaka. PROSPECTS The Malaysian government expects growth prospects in 2005 to remain favourable after recording a growth of 7.1% in The Malaysian Automotive Association (MAA) predicts the passenger car market to further expand to 384,000 units in 2005 from a record 380,568 units achieved in Growth is expected to be spurred by new model launches, attractive financing packages and a positive economic outlook. However, the operating environment will be challenging and margins will continue to come under increasing pressure from intense competition. The anticipated easing in production and supply constraints as well as new model launches from PROTON are expected to enhance EON s Proton sales in Our multi-brand business is also set to pick up. Sales of Inokom/Hyundai cars are projected to grow as the network of 20 branches nationwide are fully operational whilst Audi sales are forecasted to improve with the launch of the Audi Hangar in August 2004 and the expansion of the retail network to Johor Bahru, Prai and Kuching. The joint venture with MC which is expected to commence operations in mid-2005 will strengthen the multi-brand business. 61

64 Chairman s Statement The Group s strategy is to continue with its efforts to secure more multi-brand businesses to remain a dominant player in the automotive industry. As a result of the ongoing profit improvement initiatives and enhanced processes, Group earnings are expected to improve in Going forward, the Group s strategy is to continue with its efforts to secure more multi-brand businesses to remain a dominant player in the automotive industry. I remain optimistic about EON s future. EON has the resources and capabilities to provide a solid foundation to build multibrand business. APPRECIATION In a year of great transition, we appreciate the hard work and dedication of management and staff. They performed with great professionalism, rising to the challenges of change. Special mention must be made one of our greatest assets our customers who have remained loyal despite the challenges and constraints faced by EON during the year. To our principals, Proton Edar, Audi AG and HSDM, we thank you for your commitment and we look forward to enhancing our strategic alliances. We are also fortunate that we have a strong support team comprising dealers, suppliers, contractors and various government authorities. 62

65 To our shareholders, your continuous support has been invaluable. I am confident that with your continued support, EON will rise to the challenges as it moves into a new chapter in its corporate history. On behalf of the Board, I wish to thank Encik Ahmad Othman Yahaya who ceased to be a director of the Company effective 18 February 2005 for his contribution and services during his tenure at the Board. Thank you. TAN SRI DATO SERI (DR) MOHD SALEH BIN SULONG CHAIRMAN 63

66 Managing Director s Review of Operations 64

67 DEAR SHAREHOLDERS, The year under review marked EON s twentieth anniversary as one of the key players in Malaysia s automotive industry. As a Company set up by the Government in 1984 to spearhead the distribution of the national car, EON has helped grow the fledgeling national car industry, propelling the Proton brand to be the household name it enjoys today. Y BHG DATUK ADZMI BIN ABDUL WAHAB MANAGING DIRECTOR 2004 also marked the start of a fresh chapter in EON s corporate history. For almost 20 years, we have built our business as a distributor of Proton cars. The signing of the Super Dealership Agreement (SDA) defined a new relationship between EON and the principal, Proton Edar Sdn Bhd and paved the way for the Group to reinvent itself to be a multi-brand distributor/retailer. The Group has embarked on various initiatives to transform its business portfolio with increased contributions from multi-brand business, used car sales, corporate fleet management and after sales services. The Group is at a critical cross roads faced with great opportunities to successfully transform itself into a flexible and customer-focused organisation with a strong brand image. EON s set of core values which focuses on integrity, customer service, learning, innovation and pride will set the foundation required to propel the Group towards achieving its vision and mission. In this exciting time, I would like you to join us in a common quest to steer EON to new and greater heights. It is a challenging journey, but one well within our means to achieve the vision of being the leading and most innovative multi-brand automotive retailer in the country. Accelerated Business Transformation The landscape of the Malaysian automotive industry has undergone rapid and significant changes over the last few years. The consumers today have become increasingly demanding as they are presented with more choices and competitive prices following the liberalisation of the Malaysian automotive market. To respond to the realities and challenges of the new market place, the Group has embarked on various initiatives to transform its business portfolio with increased contributions from multi-brand business, used car sales, corporate fleet management and after sales services. Equally important is the transformation of EON into a customer-focused organisation with a strong brand image. The Board sees the successful execution of these initiatives as key to the Group s continued growth and profitability. 65

68 Managing Director s Review of Operations Our employees have fully embraced the paradigm shift demanded of them in adapting to the new challenges. Among the various initiatives introduced during the year was the service profitability improvement plan, which encompasses a comprehensive programme designed to improve service standards and operational efficiencies to enhance customer experience and encourage repeat business. The plan also addresses key growth and profit levers, and we are already seeing results through improved demand for EON s collision repair business. A dedicated Corporate Fleet Management Department was set up to raise EON s presence in the fleet sales and fleet management business. Innovative fleet programmes integrating sales, after sales services and other value-added services were developed to provide end-to-end fleet solutions to corporate customers. New emphasis is given to customer relationship management (CRM) with several CRM initiatives implemented during the year. These include the upgrading of our Customer Communications Centre, a lynchpin in our effort to better serve customers and the development of an Enhanced Datamart (Data warehouse) which houses data from various business divisions pertaining to sales and customers. The establishment of the Data warehouse has facilitated target marketing activities which allows us to customise products and services to meet the requirements of selected customer segments. Change Management Programme Successful execution of the above initiatives will be a significant challenge and we need to change our mindset and the way we organise and work. 66

69 A series of workshops and programmes were conducted for all levels of staff to ensure that the workforce understood the objectives of the initiatives, aspirations for the Group, and the important roles they play. The workshops also served to familiarise staff with external benchmarks and best industry practices which are vital tools to update and develop new standard operating procedures in line with EON s new business initiatives. The workshops were also tailored to equip line managers with appropriate skills, knowledge and right attitude to manage the change process. It is heartening to note that our employees have fully embraced the paradigm shift demanded of them in adapting to the new challenges. Our people will remain as one of the prime factors of success moving forward. REVIEW OF OPERATIONS Group The Group recorded profit before tax (PBT) of RM300.5 million for the financial year ended 31 December 2004, a decline of 48.1% against 2003 due mainly to the exclusion of the results of EON Capital Berhad (ECB) Group effective July Excluding the earnings of ECB group, the Group s PBT of RM109.3 million was 15.3% lower from the cost of implementing the voluntary staff separation (VSS) scheme of RM13.7 million. EON Berhad The Company s pre-tax profit of RM170.7 million was 29.5% higher compared to RM131.8 million recorded in This was largely attributable to the gain on disposal of investment in EONCAP Securities Sdn Bhd (formerly known as Leong & Company Sdn Bhd) of RM35.1 million, higher dividend income from subsidiaries and associates as well as the successful implementation of various cost reduction measures which mitigated the effects of lower earnings from vehicle sales and after sales services. 67

70 Managing Director s Review of Operations The Group recorded profit before tax (PBT) of RM300.5 million for the financial year ended 31 December Vehicle Sales The strong economic performance, attractive financing packages as well as new model launches contributed to the 19% increase in total industry volume for passenger cars to a record 380,568 units. This was led by the non-national car segment, which registered a growth of 68.7%. The national car segment grew at a slower rate of 10.2%, resulting in a corresponding drop in its market share to 79.0% from 85.0% in Proton s market share was reduced from 49.0% to 44.0% in 2004 despite a 7.3% increase in Proton sales volume. Against this scenario, EON s new car sales volume declined by 5.4% to 68,224 units. The decline was mainly due to production and supply constraints as well as the increasingly competitive market forces. The Company sold 25,328 units of the Iswara model in 2004, representing 37.1% of the total Proton cars sold by the Company, overtaking Proton Wira as the most popular car among buyers. Sales of Wira and Waja accounted for 20,569 units and 15,838 units respectively. Demand for the flagship Proton Perdana increased by 30.5% in 2004, with 3,427 units sold. The Company only commenced sales of the Gen.2 model in May 2004 which registered sales of 2,412 units for the year. Used car sales registered 3,680 units in 2004, up by 93% from 1,906 units recorded in 2003 reflecting the Company s increasing focus on used car sales. 68

71 EON will continuously improve its nationwide sales network of 55 branches and 120 sales dealers to better serve customers. After Sales Services EON s after sales network currently comprises 39 service branches, 201 Franchise Service Dealers (FSD), 78 parts dealers and 16 fleet owners. Total service throughput for 2004 stood at 702,158 units of which branches accounted for 339,867 units or 48% while FSDs registered throughput of 362,291 units. Collision repairs throughput at branches grew by 20.4% to 8,855 units from 7,353 units in Concerted efforts are being made to boost after sales activities. Concerted efforts are being made to boost after sales activities. In line with the initiatives to diversify EON s earnings base with increased contribution from after sales services, a total of 35 new FSD were appointed in 2004 and efforts are being stepped up to increase the number of FSD. In addition, a series of aggressive advertising and promotional campaigns were launched, packaged with innovative value-added services. Strategic alliances were forged with selected insurance companies to enhance the collision repair business at EON s workshops. Continuous efforts are made to improve customer-facing functions through training and motivation programmes. 69

72 Managing Director s Review of Operations EON s wholly-owned subsidiary, Euromobil, is committed to capture a bigger slice of the luxury car market by building the Audi brand presence, opening of more outlets to improve market reach as well as enhancing its product range. Euromobil Sdn Bhd (Euromobil) The launch of the Audi Hangar in August 2004 reflects Euromobil s commitment towards building the Audi brand in Malaysia and showcases the company s emphasis on enhancing customer experience. The world class flagship facility, located on a 3.3 acre site at Temasya Glenmarie in Shah Alam, is the largest Audi showroom, parts and service centre in the South East Asia region and is equipped with the latest after sales facilities and state-of-the-art technology to meet the most exacting demands of customers. In its initial year of operation, the company sold a total of 105 units of Audi cars. It recorded revenue of RM20.9 million and losses of RM6.1 million in The losses were attributable to start-up operating costs as well as investments to build the Audi brand. Moving forward, Euromobil is committed to capture a bigger slice of the luxury car market by building the Audi brand presence, opening of more outlets to improve market reach as well as enhancing its product range. EONMobil Sdn Bhd (EONMobil) Following the appointment of EONMobil as the mega vehicle sales dealer by Hyundai-Sime Darby Motors Sdn Bhd in December 2003, sales of Hyundai/Inokom vehicles have taken off with a total of 2,227 units sold in The Company recorded revenue and profit before tax of RM98.6 million and RM2.2 million respectively. EONMobil s sales network of 20 branches to-date was set up progressively during the year. 70

73 EON Trading Sdn Bhd (ETSB) ETSB s core business is the marketing and trading of car accessories and car care products. For the year 2004, the company reported a loss before tax of RM0.8 million on a revenue of RM4.5 million as opposed to a pre-tax profit of RM4.0 million and revenue of RM28.3 million in The operations of ETSB were affected by the terms of the SDA that prohibit EON and its subsidiaries to market spare parts, car accessories and consumables not authorised by PROTON within the distribution network of EON. ETSB has identified and is developing several new businesses to cushion the reduction in its existing businesses. Automotive Conversion Engineering Sdn Bhd (ACE) ACE which is principally involved in the conversion and modification of Proton vehicles into Executive models posted a higher revenue of RM13.6 million in 2004, compared to RM6.3 million recorded in Accordingly, profit before tax rose to RM5.0 million from RM0.7 million in The improved financial performance was attributed to higher conversion volume of 310 units against 173 units in Proton Parts Centre Sdn Bhd (PPC) PPC which is primarily involved in the warehousing and distribution of motor vehicle spare parts recorded revenue and pre-tax profit of RM214.1 million and RM37.4 million in 2004 compared to RM194.9 million and RM34.4 million recorded in 2003 respectively. The company s parts sales in the domestic market were adversely affected by the influx of spurious parts at lower prices. Despite this, the company s revenue and pre-tax earnings were higher due to the increase in export sales. 71

74 Managing Director s Review of Operations Johnson Controls Automotive Holding (M) Sdn Bhd The company s main activities are the assembling and manufacturing of car seats, seat paddings, steering wheels and car interior parts. For the financial year 2004, revenue fell by 10.3% to RM88.6 million, due primarily to the loss of the Proton Gen.2 business for seats, door trims and headlining. Moreover, the launch of Gen.2 model also resulted in a drop in Proton Wira sales volume, for which the company has been supplying the aforementioned items. As a result of the proactive measures taken by the company to improve product design and quality, the company has since, successfully secured the Gen.2 business. Consequently, the company is expected to supply 60% of Gen.2 model seats volume from January

75 SRT-EON Security Services Sdn Bhd (SRT-EON) A security services provider, SRT-EON recorded revenue of RM31.0 million in 2004, marginally higher than RM30.2 million recorded in Profit before tax increased to RM1.5 million, compared to RM1.2 million registered in While its principal activity remains the provision of guard services, the company is tapping the potential of technology such as a central monitoring system to widen its business base. Securing Our Future In our effort to ensure that EON remains a dominant player in the automotive industry, we have identified several key strategies that will be given high priority as we move into the new financial year. Our energies will be channelled towards building our multi-brand business as well as increasing revenue from after sales services, used car sales and fleet sales and management. Emphasis will also be given on CRM initiatives to transform the company into a customer-centric organisation. We need to move swiftly to meet the dynamic changes in the market place and the aggressive competition that has become more intense with market liberalisation. As such, we have to embrace change and be proactive to face new possibilities and prospects. Our goal is to make EON the dealer of choice among customers. To this end, we need to collectively draw on all our efforts and determination to make our journey a success. Our goal is to make EON the dealer of choice among customers. With that, I would like to express my gratitude to our customers for their loyal support, the management and staff for their hard work and to offer encouragement for their ongoing efforts in EON. On behalf of the Company, let me also thank the Board of Directors and our shareholders for their invaluable support and guidance through all our endeavours. DATUK ADZMI BIN ABDUL WAHAB MANAGING DIRECTOR 73

76 Our Commitment to Customer Service/Customer Relationship Management PUTTING CUSTOMERS FIRST TODAY S DISCERNING CUSTOMER EXPECTS MORE AND EON IS GEARING ITSELF TOWARDS PROVIDING THE BEST POSSIBLE CUSTOMER EXPERIENCE. WE ARE CONVICTED THAT A HOLISTIC APPROACH TO MEETING CUSTOMER NEEDS AND A CONSISTENCY IN HIGH-QUALITY CUSTOMER EXPERIENCES WILL HELP REINFORCE EON S BRAND AND REPUTATION, WHICH IN TURN WILL LOCK IN CUSTOMERS AND ENSURE REPEAT BUSINESS. As EON embarks on its business transformation programme, several key customer relationship management (CRM) initiatives and development of expanding and improving network of sales and after sales throughout the country to better serve our valuable customers at a cost of hundreds of millions of ringgit, continue to be implemented to ensure increased customer satisfaction, greater brand awareness and continued profitability. In fact, we would like to think that the evolution at EON is translating into a group-wide customer service revolution. One-stop Support. At EON, all innovation is driven by the desire to meet customer needs. Our Onestop Centre was set up to meet individual customers motoring needs from insurance and financing to trade-ins and used car sales, among others. In August 2004, a dedicated Corporate Fleet Management Division supported by streamlined processes and attractive customer value propositions, came into being. By offering corporate customers a seamless array of innovative multibrand and attractive end-to-end fleet solutions that exceed their expectations, EON aims to capture a bigger slice of this market segment. EON s corporate customers can expect customised financing and insurance as well as fleet maintenance, fleet management and fleet disposal packages. Value added services such as road tax and insurance renewals, towing and breakdown assistance, credit facilities, priority servicing, pick-up and delivery services, and even the provision of courtesy cars, have become the norm. Customer Communications Centre. A great deal of energy and time has been invested in upgrading EON s Customer Communications Centre (CCC) which serves as a platform for customers to communicate breakdowns, accidents, concerns and enquiries on a 24/7 basis. The upgraded CCC allows customers to have consistent value-added experiences regardless of the communication method they chose. Be it via telephone, fax, or even by walking into the CCC in the wee hours of the morning, customers can be assured of a quick and effective response. The CCC also facilitates faster response to customer enquiries through easy access to product information and customer contact history. In June 2004, the CCC was further upgraded to serve EONMobil customers in addition to the existing PROTON and Euromobil customers. 74

77 The newly integrated CCC also allows us to monitor our performance and benchmark ourselves against world class standards. Our responsiveness and contact management capabilities are continually being measured and monitored, with the results taken into consideration as one of the key performance indicators of relevant staff. Training and development programmes for CCC staff help ensure that the level of services provided meets customer expectations. Enhanced Datamart. The development of EON s Enhanced Datamart (Datahouse), which houses data from the various business divisions pertaining to sales and customers, is a key CRM initiative. Business intelligence is applied to perform analysis, understand and anticipate trends and patterns and help us take remedial action while developing customer-centric strategies. Target Marketing. The establishment of the Datahouse in turn, has facilitated the development of target marketing initiatives. Targeting both sales and after sales customers, this CRM initiative allows strategic business units within the Group to customise products and services to meet the specific requirements of selected customer segments. It also allows EON to measure and monitor the effectiveness of its promotional packages. A total of 10 sales and four after sales initiatives have been identified for implementation in After Sales Service. In ensuring customers needs are met, EON is looking to grow its after sales network currently comprising 39 service branches, 201 franchise service dealers (FSDs), 78 parts dealers and 16 fleet owners nationwide. Our focus on customer convenience and enhanced after sales activities will ramp up in the coming financial year via aggressive advertising and promotional campaigns and the bundling of innovated value-added services. The After Sales Division too, is looking to forge strong alliances with selected insurance companies to get a head-start in the collision repair business. 75

78 Our Commitment to Customer Service/Customer Relationship Management Measuring Customer Satisfaction. Ultimately, the main arbiter of customer satisfaction is the customer. Rightly so, today s customers are more demanding and vocal. During the year, EON intensified efforts to improve the monitoring and measuring of key performance indicators in relation to customer services. We actively pursued efforts to obtain feedback from randomly selected customers on the quality of services provided by both sales and after sales personnel. We also obtained feedback through focus group discussions (FGDs), surveys and our customer satisfaction index (CSI). This feedback was subsequently consolidated and channelled to the respective divisional heads for follow-up action. All these initiatives have gone a long way in helping us to customise products and services to meet customer needs and wants. Based on feedback, the percentage of compliments and appreciation received from customers has increased to 27% in 2004, compared to 20% the previous year. Conversely, the number of complaints in the area of service recovery has fallen significantly to 37% in 2004, from 43% in The results are indeed gratifying and suggest that our efforts to improve customer satisfaction are bearing fruit. Service Profitability Improvement. Another CRM initiative is the service profitability improvement plan. Incorporating a comprehensive programme aimed at improving service standards and operational efficiencies, it enhances the customer experience, encourages repeat business and addresses key growth and profit levers. As a result, there has been increased throughput of profitable repairs and higher demand for EON s collision repair business. In moving towards a more customer-centric mindset and in ensuring that EON remains the customer s preferred choice, we are providing customers with service level agreements (SLAs) that outline best-in-class service levels. In this increasingly competitive environment, the quality of the services we provide, will ultimately determine if customers stay or go. Multi-brand Dealership. With the signing of the Super Dealership Agreement (SDA), we are now both a super dealer of Proton vehicles and a multibrand dealer. With our customer base of 1.7 million, an extensive nationwide sales and after sales service network, our established backroom infrastructure support and a pool of experienced staff and established standard operating procedures, we believe we are in an ideal position to better serve customers, both old and new. Customers can expect more from us as we strive to be the dealer of choice through expanding the product and service offerings at our current franchises through up, down and cross-sales, and through increasing the number of marques in our portfolio. Ultimately, we want to offer total comfort, convenience and satisfaction by being one-stop car supermarket that meets our customers motoring needs. People Development. As the winds of change blow through EON, we are going all out to enhance the competencies and mindset of our human capital. We understand that our success in developing a customer-centric organisation will make us more competitive and attractive. To this end, EON has been conducting a series of training workshops and programmes for all levels of staff. The business transformations taking place are communicated to staff while they are educated on the important roles they in turn play in identifying key processes, improving productivity and setting new benchmarks. At our in-house Akademi Saga, training efforts too have been intensified. Staff with leadership potential are identified, nurtured, placed on a steep learning curve and given the necessary exposure to prepare them to propel EON into the front ranks of the multibrand automotive business. In EON, we believe highly trained and developed manpower can provide excellent customer service. Technology Enhancements. Our multi-brand and customer-centric strategies call for the deployment of technology in a big way. By facilitating online linkages to our various principals, effective control at front-end offices and more accurate diagnosis of vehicle problems, we are able to respond to our customers more efficiently and promptly. The implementation of an interactive voice response (IVR) system at our CCC enables customers to leave voice messages for follow-up calls and prompt action. The Prospect Management System allows 76

79 staff to follow-up on prospective new business or clients while a data warehousing capability allows follow-up on cross-selling activities and other value added services. Elsewhere, a comprehensive customer repository base allows for customer profiling, personalised campaigns and target marketing, while our recently launched E-Insurance system helps improve customers registration processing time and reduces overhead costs. Health, Safety and Environment. Customers, staff and contractors to all our sites can rest assured that their safety is of paramount importance to us. EON s commitment to ensuring all operations are conducted in a safe and environmentally responsible manner has paid off with the Group achieving the magical number zero in lost workdays owing to accidents. In fact, the year under review saw EON winning the Kristal Award from the Institute of Public Relations Malaysia for Best Environmental Practices. ISO 9001:2000. Quality is an integral part of ensuring customer satisfaction and at EON, the quest for quality excellence is a continual journey. To this end, the Group has subscribed to the internationally recognised ISO quality standards. In July 2004, EON was audited by SIRIM and retained its ISO 9001:2000 accreditation. The year also saw EON commencing the ISO certification process for its subsidiaries, Euromobil Sdn Bhd and ACE Sdn Bhd. With documentation works already well underway, both companies are expected to gain ISO 9001:2000 certification in As we go into high gear in implementing a holistic set of quality customer-centric initiatives, we will undoubtedly begin to accelerate towards realising our vision of being Malaysia s most innovative multi-brand automotive distributor/retailer. 77

80 Maximising Shareholder Value At EON, we have determined that one of the best governing objectives is the maximisation of shareholder value, while simultaneously focusing on meeting customer needs. The task of maximising shareholder value demands a continual focus on corporate strategies that will provide the optimum return to shareholders. As such, any company pursuing this course of action must immerse itself in the unenviable position of setting and assessing benchmarks so that it operates in the best manner possible. We have continuously been reviewing our practices, systems and beliefs to transform ourselves into an organisation that lives up to such governing objective of maximising shareholder value. This has ultimately translated into a host of benefits for our shareholders, amongst which, our long history of handsome dividend payouts is the most impressive. Incorporated on 16 May 1984 in Malaysia as a private limited company, EON was converted into a public company on 15 April 1990 and subsequently listed on the Main Board of Bursa Malaysia (then known as the Kuala Lumpur Sock Exchange) on 26 July Since EON s listing, the Company has worked hard to consistently pay attractive dividends to our shareholders. In 1991, our shareholders received a dividend of 10% amounting to RM12.0 million. The dividend rate doubled to 20% in the following year and about RM36.0 million was paid out to shareholders. Over the years, we have distributed cash dividends on a progressively increasing basis up to a high of 65% by This rate was maintained for a good four years until 2002, whereby, shareholders also enjoyed a windfall of 425% amounting to almost RM1.0 billion of special dividends, in addition to the normal annual dividends. This was followed by another 78

81 distribution of a special dividend of 14% amounting to approximately RM33.4 million in For the year under review, a special dividend of 84% amounting to about RM209.2 million is proposed for shareholders approval at this Annual General Meeting. Cumulatively, a total cash dividend of approximately RM2.7 billion (gross) has been distributed to shareholders since EON s listing. The consistent and high payouts have ranked EON as one of the highest dividend paying public listed companies in Malaysia. In addition to the cash dividends, EON also distributed shares in Jardine Cycle & Carriage Limited (CCL) and EON Capital Berhad (ECB) to the shareholders in 2003 and 2004 respectively. These initiatives were consistent with our efforts to unlock shareholder value and return surplus capital through various means, including divesting investments that did not form part of the core automotive business. Taking into consideration the distribution of cash dividends and shares in CCL and ECB, EON has returned approximately RM4.2 billion to our shareholders over the past 15 years. As we focus on our mission of providing excellent customer service and our vision of being the leading and the most innovative automotive distributor/retailer, enhancing shareholder value will continue to be a key governing objective. We envisage that as we strive to meet this underlying objective, this will translate into higher overall productivity, and enhanced customer service both of which will create the momentum within EON to propel EON to greater heights. 79

82 Human Resource Development As the driving force towards achieving EON s vision and mission, our employees must be instilled with appropriate work ethics, attitudes and the right mindset as well as the necessary skills and knowledge to cope with the new demands of their jobs. In this regard, the Group s human resource development s objective is to continuously provide the right skills and knowledge, while enhancing leadership and Amid the challenging environment in 2004, training remained a priority. A total of RM2.2 million was invested in staff training with a total of 219 internal and 74 external training programmes conducted during the year. The training programmes were tailored to match the Group s corporate direction to be a multi-brand distributor/retailer with emphasis on customer relationship management. As an employer that places a premium on learning and development, employees are encouraged to enhance their academic qualifications and equip themselves for career progression within the organisation. Under the Educational Assistance Programme introduced in 1993, all confirmed employees are eligible to apply for financial assistance to pursue further studies on a part-time basis. To-date, a total of 43 employees have benefited from the scheme by enrolling in various programmes at Certificate, Diploma, Degree and Masters levels. management capabilities. 80

83 Customised technical training programmes which focused on various technical subjects such as electrical, engine and fuel systems and manual/automatic transmission system are designed and conducted to enhance the efficiency and productivity of technical staff. During the year under review, a total of 2,253 participants from EON service centres and franchise service dealers attended courses at Akademi Saga, a training school for technical staff. Since its opening, Akademi Saga has established a firm reputation for the quality and range of its training programmes. In 2004, the technical training courses also attracted 168 participants from various ministries as well as private enterprises. Recognising that EON s success depends on its employees, the Group continues to foster a conducive working environment that nurtures employees capabilities and skills to achieve corporate and individual goals. Programmes are in place to identify high potentials for succession planning. To this end, EON s Performance Management System has been strengthened to address key skills, knowledge and behaviours expected from all employees. It enables the Company to identify competencies gap so that appropriate trainings and development programmes can be conducted to close the gap. EON s core values which focus on integrity, customerfocused, learning organisation, innovation and pride or ICLIP underscore the importance of creating a positive experience for internal and external customers, and encourage continuous learning so as to add value to one s work and promote personal development while nurturing a sense of belonging of being part of the EON s family. The Management also enjoys a good relationship with the four in-house unions where formal and informal dialogue sessions are being held regularly. Cohesiveness and a spirit of esprit de corps are key factors of success navigating through these trying times. The bonds already established with staff are continuously renewed and strengthened through social gatherings on festive occasions, sports and other recreational activities. During the year under review, 192 employees received the 10-year Service Awards, while another 20 were duly acknowledged for their 20 years of service with EON. In due recognition of the importance EON places on its human resources, it was awarded the Best Employee Relations Practices 2004 Award ( Better Trained, Better Performance ) by the Institute of Public Relations Malaysia. EON will continue to motivate and inspire its human resources to maintain an edge in today s competitive environment. 81

84 Harnessing Information Technology Information Technology (IT) plays a vital role in EON s continuous effort to improve the quality of its services and enhance customer experience. In the past 5 years, the Company has invested RM35.9 million in developing, implementing and improving the various IT systems. Today, the IT system in EON is an on-line real-time fully integrated system based on the latest SAP R/3 system with applications that support various e-business systems, its business partners (including all dealers and suppliers), several government bodies and financial institutions. EON s IT Division continues to provide a range of comprehensive solutions to support the Group s new business direction, improve customer service, boost productivity and enhance cost-efficient operations. During the year, all IT systems in both the sales and after sales service divisions were upgraded to support the Group s multi-brand strategy. These include the establishment of online linkages to the various principals, allowing for more effective control at the front-line service. It also facilitates more accurate diagnosis of vehicle problems, while serving customers more efficiently. EON s call centre was further upgraded with the implementation of an interactive voice response (IVR) system which enables customers to leave voice messages for follow-up calls. Operating round the clock, all calls to the centre are closely monitored in accordance to ISO 9000 guidelines. Another IT initiative was the implementation of a data warehousing system that facilitates the extraction of customers data for monitoring and analysis to better target customers for cross-selling activities and other value added services. The year under review also saw the launch of the E- Insurance System which helps improve registration processing time and reduces overheads. The IT Division also successfully rolled-out the Franchise Service Dealer Management System (FSDMS) in With this system in place, customer and vehicle service data can be tracked for follow-up and other value-added services. 82

85 Statement of Occupational Safety and Health and the Environment Edaran Otomobil Nasional Berhad (EON) ensures the safety and health of its employees while they are at work by complying with the standards laid down in the Malaysian Occupational Safety and Health Act, 1994 as well as the Environment Quality Act, The Company places great importance on these issues and has developed internal policies and guidelines that set out requirements ensuring workplaces are safe and free from health risks. These requirements also outline the duties of different groups of people who play a role in workplace health and safety. At EON, the Safety and Health Committees, senior management and line management ensure conformance to the standards prescribed in law as well as Company operating procedures. In addition, line management has been given the additional responsibility of ensuring safety and health at their respective departments, branches, parts and service centres and its subsidiaries. The Managing Director has the overall responsibility in coordinating and monitoring Occupational Safety and Health at EON. He is advised and assisted by safety & health committee members and safety officers from the Safety and Health Department set up in accordance with the Safety and Health Committee Regulations The Company provides for the following:- first aid, sanitary, welfare and personal facilities, and health services; safety materials, personal protective equipment, devices and special clothing for employees where applicable; information, training and supervision to ensure the safety and health of employees in the work place. The Company requires that each employee be made aware of every known or foreseeable hazard in the area where he or she works; a Safety and Health Committee or representative with information considered necessary in identifying existing or potential hazards; air quality monitoring programmes; constant review of work practices in respect to occupational safety and health; 83

86 Statement of Occupational Safety and Health and the Environment a statement of the employer s safety and health policy, and any other material; safety and health records in the prescribed manner; the Safety and Health Committee or representative with a copy of any written directions or reports from a safety officer, and post them for the information of all employees; that every employee is made aware of every known or foreseeable safety or health hazard in the work area, including bomb threats, threats of violence, noise hazards, radiation hazards, airborne contaminants, drug abuse and other workplace hazards; prescribed standards relating to fire safety and emergency measures; investigate, record and report all known accidents, occupational diseases and other hazardous occurrences; that every employee or visitor knows how to use protective clothing or equipment required in the work areas to be occupied or visited. Employees are responsible for taking all reasonable and necessary precautions to ensure their own safety and health and that of anyone affected by their work. Employees undertake to:- comply with employer regulations and standards prescribed in law on procedures and instructions concerning safety and health while performing their duties; cooperate with employer in implementing safety and health programmes and activities; report any hazard or accident in the work place to the employer; and use safety materials, equipment, devices and/or clothing either furnished by EON or prescribed by regulation. All hazardous work and all work undertaken by contractors at EON s premises are controlled by a permit-to-work. OCCUPATIONAL SAFETY AND HEALTH To achieve long-term zero injury and illness goals, the Company s on-going objective is to continuously improve its injury and illness rates over the previous year. The occupational accidents with lost workdays for the Company had been maintained at zero for two consecutive years. Commuting accidents with lost workdays were reduced to one in 2004 as opposed to three in To ensure the risks are controlled and actions are taken for non-compliance, the Safety & Health Department also conducted intensive audit at all EON s branches and departments on a yearly basis in addition to quarterly inspections conducted by the branches. In order to promote fire safety awareness, two seminars and exhibitions had been conducted during the year. The seminars and exhibitions had received good response from the participants. During the year, EON provides every employee with a Safety Pocket Book to promote and ensure compliance with safety procedures in the Company. ENVIRONMENT With increasing emphasis in Malaysia and worldwide on environmental issues, EON has embarked on a proper environmental management system via the Environmental Management System (EMS) set-up according to ISO standards and has continuously improved its performance. Good environment practices in conformance to the standards set by the Department of Environment are high on the agenda at EON. We ensure all our operations comply with environmental legal requirements toward preserving the environment. EON ensures that all scheduled wastes are properly managed and disposed off. Furthermore, EON also ensures that effluent and air discharge comply with the regulatory standard through proper system maintenance and improvement. Consequently, in recognition of its efforts in preserving the environment, EON has been awarded the Kristal Award for Best Environmental Practices from IPRM. 84

87 Corporate Social Responsibilities SHARING OUR SUCCESS In line with our operating philosophy of putting people first, EON has a tradition of sharing its success with the community. A significant corporate sponsorship project is the annual contribution of RM1.0 million to the Badminton Association of Malaysia in support of its efforts to nurture a new generation of badminton players. EON is also touching the lives of Malaysians in more direct ways. We have not forgotten the less fortunate among us, lending our support to many charitable and worthy causes. In the recent Tsunami disaster that struck parts of West Malaysia where lives and properties were destroyed, EON has contributed a sum of RM120,000 to the victims to help rebuild their lives again. Other regular recipients in our corporate sponsorship programmes are orphanages from all over the country. Through our sponsorship programmes, EON earns its place in the fabric of Malaysian society, gaining the respect and trust of the communities we take pride in serving. 85

88 Group Financial Review Operating revenue The Group recorded revenue of RM3,901.2 million for the year ended 31 December 2004, 21.8% lower compared to RM4,987.1 million in 2003 due substantially to the exclusion of EON Capital (ECB) group results from July 2004 following the distribution of ECB shares to the shareholders. Excluding the revenue of ECB group of RM925.7 million, Group s revenue of RM2,975.5 million was 4.8% lower. This was mainly attributable to the decline in Proton new car sales which fell by 5.4% to 68,224 units from 72,092 units in Vehicle sales The Company s Proton sales were affected by production and supply constraints as well as the competitive market forces. As a result, revenue from new Proton cars of RM2,566.3 million was 8.9% lower than RM2,817.7 million recorded in The decline in Proton sales was partly offset by sales of the non-proton marques. Sales of Inokom/Hyundai cars stood at 2,227 units with revenue of RM97.0 million while sales of Audi cars was 105 units with revenue of RM12.4 million in their first full year operation. Revenue from used car sales of RM91.1 million was 34.7% higher compared to 2003 of RM67.6 million on the back of a 75% surge in sales volume to 3,937 units (2003: 2,250 units). However, lower average revenue per car of RM21,800 (2003: RM30,000) partly offset the increase in revenue from higher sales volume. Revenue from vehicle sales which accounted for 71% of Group revenue in 2004 fell by 4.1% to RM2,766.8 million. After sales Service throughput at EON s service centres of 339,867 units was 15.8% lower than 403,859 units recorded in 2003 due mainly to lower warranty jobs as new car sales fell. Parts sales were also affected by lower throughput, increased competition as well as influx of imitation parts in the market. Consequently, after sales revenue of RM213.7 million was 12.1% lower against Group Revenue Proton car Non-Proton car Used car After sales EON Capital group 66% 3% 2% 5% 24% 86

89 Operating costs Group s total operating costs of RM3,638.1 million in 2004 was 19.2% lower than RM4,504.0 million incurred in 2003 due largely to the exclusion of ECB group from July Excluding ECB group, Group s operating costs amounted to RM2,934.5 million, 4.3% lower than RM3,064.8 million in Increase/(decrease) RM million RM million RM million % Cost of sales 2, ,873.2 (127.1) 4.4% Overheads (16.9) 8.8% VSS cost Operating cost (excluding ECB group) 2, ,064.8 (130.3) 4.3% Operating costs of ECB group ,439.2 (735.6) 51.1% Total operating costs 3, ,504.0 (865.9) 19.2% Cost of sales was lower in line with the reduction in revenue. Overheads was also lower by 8.8% as the Group took proactive measures to closely monitor and control overheads in view of the difficult operating conditions. These resulted in significantly lower advertising expenses, personnel cost and general administrative expenses which partly offset higher overheads incurred by Euromobil and EONMobil of RM9.1M (2003: RM3.3M) and RM3.5M (2003: Nil) respectively in their first full year of operations. Amongst the key initiatives implemented during the year was the voluntary staff separation (VSS) exercise to realign the organisation structure to conform to current business conditions. The exercise, completed in January 2005 at a cost of RM13.7 million, is expected to improve earnings and productivity of the Group going forward. Finance cost Finance cost of RM31.9 million was primarily in respect of the borrowings of ECB group comprising bonds with nominal amount of RM300 million issued in December 2002 and the subordinated notes of RM855 million issued in January Excluding ECB group, the finance cost of the Group stood at only RM165,000 which was in respect of finance leases for the purchases of computer equipment. Share of results of associates Share of results of associates of RM20.2 million, contributed primarily from Proton Parts Centre Sdn Bhd and Johnson Controls Automotive Holding (M) Sdn Bhd, was close to that achieved in Net gain on disposal of investments The Group recorded gains of RM18.5 million from the disposal of investments in EONCAP Securities Sdn Bhd (formerly known as Leong & Company Sdn Bhd) and MCIC Holdings Sdn Bhd during the year. 87

90 Group Financial Review Profit attributable to shareholders The Group s profit before tax of RM300.5 million was 48.1% lower against 2003 of RM579.7 million due mainly to the exclusion of ECB group results from July Excluding the results of ECB group, Group s profit before tax was 15.3% lower at RM109.3 million. The decline was mainly the result of the cost of implementing the VSS exercise as lower earnings from vehicle sales were effectively offset by lower overheads. Accordingly, profit attributable to shareholders was lower at RM148.0 million (2003: RM262.4 million) and earnings per share at 60 sen (2003: 111 sen). Excluding the results of ECB group, profit attributable to shareholders was RM81.5 million (2003: RM98.0 million) and earnings per share was 33 sen (2003: 42 sen). The chart below shows the income distribution of the Group in Distribution of Income Operating costs Staff cost Tax Minority interests Profit attributable to shareholders 86% 6% 2% 2% 4% Assets Total assets of the Group stood at RM1,468.0 million as at 31 December 2004, 5.8% higher compared to RM1,386.9 million as at 31 December 2003 (adjusted to exclude assets of the banking group of RM31,285.7 million). The increase was attributable to profits retained (net of dividends paid) by the Group during the year. Cash and cash equivalents which constituted a substantial 38% of the Group s total assets stood at RM557.8 million as at end of 2004, up by 35.5% from RM411.6 million (excluding ECB group) as at end of The increase was mainly attributable to the net cash flow from its operations of RM113.3 million, proceeds from disposal of investments of RM50.9 million and proceeds from issuance of shares under the Company s Employees Share Option Scheme of RM26.2 million partly offset by net dividends paid of RM57.3 million. Property, plant and equipment which comprised mainly land and buildings used as showrooms and workshops was maintained at about RM306.8 million. Inventories were lower at RM211.5 million (2003: RM357.9 million) as Proton vehicle stocks were lower due to production and supply constraints from Proton Edar. Receivables, which comprised substantially of amounts due from dealers, increased from RM145.3 million to RM257.3 million as at 31 December 2004 arising from higher sales to dealers towards the end of the year. 88

91 Investments of RM125.7 million was lower (2003: RM167.7 million) subsequent to the disposal of investments in EONCAP Securities Sdn Bhd (formerly known as Leong & Company Sdn Bhd) and MCIC Holdings Sdn Bhd. An analysis of Group assets by major categories is shown in the table below. Group Assets (RM' million) Cash and cash equivalents Property, plant and equipment Inventories Receivables Investments Deferred tax assets Shareholders funds Group s shareholders funds stood at RM1,165.2 million as at 31 December 2004, lower than RM2,257.7 million as at 31 December 2003 due mainly to the distribution of ECB shares to the shareholders. Accordingly, net tangible assets per share also registered a decrease to RM4.68 from RM9.23 as at 31 December The Group s funding requirements were derived from internal sources. Shareholders' funds Shareholders' funds Current liabilities Non-current liabilities 80% 19% 1% 89

92 Calendar of Major Events JANUARY 12 January 2004 Appreciation Dinner for Y Bhg Datuk Adzmi Abdul Wahab for being awarded the CEO of the Year (2003). FEBRUARY February 2004 Sahabat EON supported the V-Sixers Annual Get-together in Penang. A total of 45 Proton Perdana V6 travelled from Shah Alam to Penang. MARCH 2 March 2004 The official signing ceremony of Super Dealership Agreement between Proton Edar Sdn Bhd and EON Berhad was represented by its Directors, YBhg Datuk Maruan Mohd Said and Cik Nik Salina whilst EON Berhad was represented by the Managing Director, YBhg Datuk Adzmi Abdul Wahab and Executive Director, Motor Group, YBhg Datuk Choo Keng Kit. 90

93 APRIL 5 April 2004 EON was listed in the Malaysian Book of Records for having the Largest Service Centre/Most Number of Showrooms/Most Number of Service Centres/Most Number of Cars Sold. 7 April 2004 Extraordinary General Meeting held at Pan Pacific Glenmarie Resort April 2004 EON participated in Minggu Amanah Saham Malaysia 2004 at Dewan Milenium, Kepala Batas, Penang which was officiated by the Prime Minister, YAB Dato Seri Abdullah Ahmad Badawi. EON took four booths and displayed one unit of Proton GEN.2 and one unit of Audi A4. MAY 8 May staff participated in the Perhimpunan Perpaduan Sempena Hari Pekerja 2004 held at Stadium Putra, Kompleks Sukan Negara, Bukit Jalil, Kuala Lumpur. JUNE 25 June 2004 Executive Director, Motor Group, YBhg Datuk Choo Keng Kit presented a cheque of RM20,000 to Tabung Amanah Perwira dan Pertahanan Negara which was under the patronage of the Prime Minister, YAB Dato Seri Abdullah Ahmad Badawi held at Sunway Lagoon Resort Hotel, Petaling Jaya. 16 June 2004 EON was presented with a Merit Award for Corporate Governance 2003 on June 25 June, 2004 at Nikko Hotel Kuala Lumpur. 91

94 Calendar of Major Events AUGUST 6 August 2004 Memorandum of Understanding on the strategic alliance between UNI.ASIA and EON Berhad was executed. 8 August 2004 EON sponsored 1 unit of Proton Waja to the winner of the Malay Mail Big Walk held at Dataran Merdeka, Kuala Lumpur. 9 August 2004 Audi A8 Launch Press Preview held at Carcosa Seri Negara, Kuala Lumpur. 11 August 2004 Launch of Audi Hangar by Minister of Science, Technology & Innovations, YB Datuk Dr Jamaludin Jarjis. 92

95 22 September 2004 Memorandum of Understanding on the strategic alliance between MNI Berhad and EON Berhad was executed. SEPTEMBER OCTOBER 11 October 2004 Launch of Kempen Keselamatan Jalan Raya Bersama by Deputy Transportation Minister 1, YB Datuk Douglas Uggah Embas held at EON Head Office Complex. It was jointly organised between Sahabat EON, Real Rewards, AIG and Puspakom in conjunction with the Balik Kampung campaign with the caption of Have a Real Safe Journey. 19 October 2004 Memorandums of Understanding on strategic alliance between EON Berhad and Berjaya General Insurance Berhad (BGI), Mitsui Sumitomo Insurance (M) Berhad (MSI), Tokio Marine Insurans Malaysia Berhad (TMI) and Takaful Ikhlas Sdn Bhd (TISB) were executed. 93

96 Calendar of Major Events NOVEMBER 6 November 2004 Memorandums of Understanding on strategic alliance between EON Berhad and Malaysian Assurance Alliance Berhad, Kurnia Insurans (M) Berhad and Multi-Purpose Insurans Berhad were executed. 7 November 2004 Hosted Majlis Kasih Ramadhan berbuka puasa with 400 orphans and senior citizens in collaboration with Yayasan Seni Karya Prihatin Malaysia. 29 November and 20 Years Service Awards Dinner in collaboration with the 20th Anniversary Celebration held at Sunway Lagoon Resort Hotel. 30 November 2004 EON received the Environmental Practices and Employee Relations Practices Awards from Duli Yang Teramat Mulia Raja Dr Nazrin Shah ibni Sultan Azlan Muhibbuddin Shah at the Anugerah Kristal 2004 organised by Institute of Public Relations Malaysia held at Shangri-La Hotel, Kuala Lumpur. 94

97 JANUARY January 2005 EON sponsored a unit of Proton Iswara Aeroback 1.35 for the Festival Pelancongan Negeri Melaka January 2005 EON won the Anugerah Citra Wangsa Malaysia (Radio Advertisement Category) organised by Dewan Bahasa & Pustaka. 3 March 2005 EON bagged the merit award in the 2005 Chinese New Year Greeting Advertisement Award Presentation organised by China Press/Nanyang Siang Pau. 95

98 Awards and Recognition Within Two Decades 1991 World Executive Digest and AIM Award for Marketing Management 1993 Finalist London International Awards for Proton Wira launch commercial 1995 Finalist London International Awards for Flying Ribbon Hari Raya TV Commercial Finalist London International Awards for Proton Perdana launch advertisement Mid Summer Awards (Bronze) for Chinese New Year (Arowana) advertisement Finalist Award for AME International Advertising/ Marketing Effectiveness Competition organised by the New York Festival Television Awards (Finalist for Best Automotive) for Iswara advertisement Television Awards (Finalist for Best Animation) for Chinese New Year Arowana Television Awards (Finalist for Best Jingle) for Iswara advertisement Television Awards (Finalist for Best Jingle Proud of my Proton) for television commercial Television Awards, Statue Award for Best Animation Proton Wira Launch advertisement Television Awards, Statue Award for Best Animation Hari Raya Flying Ribbon advertisement 1996 Television Awards, Statue Award for Best Automotive Proton Wira 1.8 Rally Television Awards, Statue Award for Best TV Commercial for Deepavali (Peacock) Television Awards (Finalist for Statue Award for Best Soundtrack) EON Wira 1.8 Advertisement Television Awards (Finalist for Proton Wira New Look Advertisement) New York Festivals [Finalist for Proton Wira New Look (Best Automotive)] 1997 Most Television Awards (Statue Award for 1995 & 1996) Award for Distinction Creative 27 New York for Best Corporate TV Commercial Title: Elements 1998 Listed in Malaysian Book of Records for winning the most Television Statue Awards 1999 Franchisor of the Year Award and Malaysian Franchise Association for Exemplary franchise standard 2002 Highest contribution of Excise Duties by Royal Custom and Excise Department in conjunction with World Customs Day PERT captured World Rally Championship Award for Distinction Creative 31 Nien Chinese New Year Award for Distinction Creative 31 Playful Boy Hadiah Penghargaan for Anugerah Citra Iklan 2002 for EON Corporate Television Commercial (Northpole Conquered) by Dewan Bahasa and Pustaka Television Awards (Finalist Playful Boy) Television Awards (Finalist Nien) Logo New York for Rally of Malaysia 2000 Advertisement 2003 Overall IPRM Kristal Award, Most PR Savvy CEO, Best Consumer Relations Award MS ISO 9001:2000 for pre-sales, sales and after sales of motor vehicles by SIRIM Berhad and endorsed by the United Kingdom Accreditation System (UKAS) Awarded Superbrand Status Y Bhg Datuk Adzmi Abdul Wahab was conferred Malaysia s CEO of the Year by AMEX and Business Times Listed in Malaysia Book of Records in four categories namely: Most Number of Showrooms, Most Number of Service Centres, Largest Service Centre and Most Number of Cars Sold 2004 Homegrown Franchisor of the Year 2002/2003 by Malaysian Franchise Association Corporate Governance Merit Award by the Malaysian Business Best Workplace Practices Category in the Asian Corporate Social Responsibility (CSR) Award Best Environmental Practices Award by Institute of Public Relations Malaysia (IPRM) Best Employee Relations Practices Award by IPRM Best Public Relations Practices Award by IPRM Overall Champion IPRM Kristal Awards Commendation for image building 96

99 Milestones Within Two Decades 1979 Tun Dr Mahathir Mohamad requested for a feasibility study to be conducted for a Malaysian manufactured car 1980 Cabinet approved the establishment of Heavy Industries Corporation (Hicom) of Malaysia 1981 Tun Dr Mahathir Mohamad proposed the joint production of a Malaysian car to Mr Yohei Mimura, President of Mitsubishi Corporation 1982 Tun Dr Mahathir Mohamad viewed the first sketch of the proposed national car and subsequently followed by a full-scale clay model presentation at Sultan Abdul Aziz Shah Airport, Subang Cabinet approved the National Car Project and Tun Dr Mahathir officially announced that the joint venture negotiations were in progress Hicom and Mitsubishi Corporation signed Letter of Intent and the Shah Alam land acquisition deal for Hicom s Batu Tiga Industrial Estate was concluded 1984 Edaran Otomobil Nasional Sdn Bhd (EON) was incorporated as the sole national distributor of Proton cars Saga was chosen as the official name of Proton s first model The late Tan Sri Jamil Jan and Tan Sri Eric Chia were the first appointed Chairman and Managing Director of EON respectively EON opened public bookings for Proton Sagas 1985 EON organised a pre-launch Sagarama, a road tour of two Saga 1.5S cars throughout Malaysia 1988 Production of Proton s 100,000th car Proton Saga won two gold and one silver awards at the British International Motor Show 1990 The first unit of EON s Proton stretched Limousine was presented to Tun Dr Mahathir Mohamad Production of the 200,000th Saga EON shares began trading on Bursa Malaysia Securities Berhad Launch of EON s new corporate logo 1992 Proton Saga Iswara was officially launched by Tun Dr Mahathir Mohamad at Dataran Merdeka Kong Ming Bank Berhad was officially known as EON Bank Berhad Datuk Adzmi Abdul Wahab was appointed Managing Director of EON Berhad 1993 Launch of the Proton Wira Aeroback by the then Finance Minister, Dato Seri Anwar Ibrahim Memorandum of Agreement between EON and Proton with Mr David Brown was signed to establish Proton Cars Europe Ltd to market Proton cars in Europe 1994 Tun Dr Mahathir Mohamad presented a Proton Limousine to the then President of Philippines, TYT Fidel Ramos Proton and EON donated RM10.0 million each to Low Cost Housing Project Dato Seri Najib Razak presented a Proton Limousine to President of Indonesia, TYT Suharto EON Head Office in Glenmarie, Shah Alam was officiated by Tun Dr Mahathir Mohamad. A mock-key to the 521,000th customer was presented and the 24- hour Service Centre was officially open Memorandum of Understanding between EON, EON Trading and Citra Lamtorogung Pesada to export Proton cars to Indonesia was signed 97

100 Milestones Within Two Decades 1995 EON launched Proton Perdana, an instant seller in the 2000cc category 1997 Launch of EON s official homepage EON dropped a Proton Wira in the North Pole to prove strength and prowess of the Malaysian car 1998 Mr Yeoh Eng Keat drove home RM10,000 richer in his brand new Proton for being the one millionth customer Tun Dr Mahathir Mohamad officially launched the Perdana V6 and Satria GTi at National Stadium, Bukit Jalil EON Merdeka Proton Drive longest line up of 2,713 Proton cars crossing the Penang Bridge led by Tun Dr Mahathir Mohamad 1999 EON was awarded Franchisor of the Year Award by Malaysian Franchise Association for its Exemplary franchise standards EON&U magazine was introduced to enhance customer loyalty initiatives EON launched affinity card programme Sahabat EON to offer customer convenience to Proton car owners encountering breakdowns and accidents Proton Waja was launched Distributorship Agreement with TD Cars (M) Sdn Bhd was signed at Putrajaya 2000 Sahabat EON was launched by YB Dato Seri Dr Ling Liong Sik, then the Minister of Transport. Subscription for the program exceeded 200,000 mark A glossy customer relationship magazine that educates, enlightens and entertains, EON&U magazine, was launched Launch of the classic TD EON Autofair recorded a runaway success of more than 1,100 cars sold in one weekend Membership for Sahabat EON rose to 123,298 as at 31 December 2001 from 9,910 in 2000 when it was launched 2002 EON won an award for its contribution to excise duties which exceeded RM7.2 billion since its inception by the Royal Customs and Excise Department in conjunction with World Customs Day EON Sales and Service Dealers adopted new standards whereby long-term partners were entitled to credit facilities, support and training PERT taking on the World s Best Malaysian Team captures World Rally Championship 2002 EON posted the highest group pre-tax profit of RM905.9 million for the financial year ended 2002 EON unlocked its shareholders value with special dividend of 450 sen The official signing ceremony between Euromobil Sdn Bhd, a wholly-owned subsidiary of EON with Audi A.G. for the distribution and after sales service of their vehicles in Malaysia 2003 EON participated in the 13th Non-Aligned Movement (NAM) Summit in Kuala Lumpur. 130 Proton Perdana V6 Executive Special Edition Sedans were handed over to Wisma Putra EON bagged three IPRM Kristal Awards for Overall Crystal Award, Most PR Savvy CEO and Best Consumer Relations EON was awarded MS ISO 9001:2000 certification for pre-sales, sales and after sales of motor vehicles by SIRIM Berhad and endorsed by the United Kingdom Accreditations System (UKAS) EON was awarded the Superbrands Status Datuk Adzmi Abdul Wahab was awarded the Malaysia s CEO of the Year which was organised by AMEX and Business Times Return of the Rings marked a grand launch of Audi in Malaysia Hyundai marque was added to EON s portfolio 98

101 Statement of Directors Responsibility for Preparing the Financial Statements The Directors are required by the Companies Act, 1965 ("the Act") to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Company and the Group at the end of the financial year and of the results and cash flows of the Company and the Group for the financial year. As required by the Act and the Listing Requirements of the Bursa Malaysia Securities Berhad, the financial statements have been prepared in accordance with the applicable approved accounting standards In preparing the financial statements for the year ended 31 December 2004 set out on pages 100 to 163, the Directors have: adopted appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates; ensured that all applicable accounting standards have been followed; and prepared financial statements on the going concern basis as the Directors have a reasonable expectation, having made enquiries that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The Directors have responsibility for ensuring that the Company and the Group keep accounting records that disclose with reasonable accuracy the financial position of the Company and the Group that enable them to ensure that the financial statements comply with the Act. The Directors have overall responsibility for taking 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 24 February in Malaysia and the provisions of the Act. 99

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103 FINANCIAL STATEMENTS 102 Directors Report 108 Statement by Directors 108 Statutory Declaration 109 Report of the Auditors 110 Income Statements 111 Balance Sheets 113 Consolidated Statement of Changes in Equity 115 Company Statement of Changes in Equity 116 Cash Flow Statements 118 Notes to the Financial Statements