Corporate Information 1. Corporate Structure 4. Board of Directors Profile 5. Chairman s Statement 9. Statement of Corporate Governance 11

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1 ANNUAL REPORT 2012

2 CONTENTS Corporate Information 1 Corporate Structure 4 Board of Directors Profile 5 Chairman s Statement 9 Statement of Corporate Governance 11 Other Information 18 Report of the Audit Committee 21 Statement on Internal Control 26 Financial Statements 28 Analysis of Shareholdings 119 Notice of Annual General Meeting 122 Statement Accompanying Notice Of Annual General Meeting 124 Proxy Form enclosed

3 CORPORATE INFORMATION BOARD OF DIRECTORS Dato Bahari bin Haron Abdul Ghaffur bin Ramli Dato Yap Wee Hin Law Siew Ngoh Robert Daniel Tan Kim Leng Dato Ng Back Heang Khairudin bin Ibrahim Lim Kok Kiong Chai Ko Thing Wong Ngai Peow Aziz Yazdani bin Ahmad Khalil Hwang Seak Wai Independent Non-Executive Chairman Appointed on 24 August 2012 Independent Non-Executive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Appointed on 24 August 2012 Independent Non-Executive Director Appointed on 16 October 2012 Independent Non-Executive Director Appointed on 24 August 2012 Resigned on 12 October 2012 Independent Non-Executive Director Resigned on 17 October 2012 Independent Non-Executive Director Appointed on 24 August 2012 Resigned on 5 November 2012 AUDIT COMMITTEE Lim Kok Kiong Dato Bahari bin Haron Chai Ko Thing NOMINATION COMMITTEE Dato Bahari bin Haron Lim Kok Kiong Chai Ko Thing REMUNERATION COMMITTEE Dato Bahari bin Haron Lim Kok Kiong Chai Ko Thing Chairman Member Member Chairman Member Member Chairman Member Member 1

4 COMPANY SECRETARIES Tai Yit Chan (MAICSA ) Liew Irene (MAICSA ) REGISTERED OFFICE Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan Tel.No.: Fax.No.: WEBSITE BUSINESS ADDRESS Patimas Technology Centre, Technology Park Malaysia, Bukit Jalil, Kuala Lumpur Tel. No.: Fax. No.: Lot 4.1, 4 th Floor, Menara Lien Hoe, No. 8, Persiaran Tropicana, Tropicana Golf & Country Resort, Petaling Jaya, Selangor Tel. No.: Fax. No.: REGISTRARS Boardroom Corporate Services (KL) Sdn Bhd Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan Tel. No.: Fax. No.:

5 AUDITORS ERNST & YOUNG Chartered Accountants Level 23 A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur PRINCIPAL BANKERS Malayan Banking Berhad RHB Bank Berhad SOLICITORS Ainul Azam & Co Suite 6.01C, 6th Floor, South Block, The AmpWalk, 218, Jalan Ampang, Kuala Lumpur STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Stock Name PATIMAS Stock Code

6 CORPORATE STRUCTURE Patimas Computers Berhad Patimas Computer Services Sdn. Bhd. Patimas Computer Systems Sdn. Bhd. Patimas Computer Technology Sdn. Bhd. Patimas Computer Software Sdn. Bhd. Patimas Computer Security Sdn. Bhd. Patimas Dot Com Sdn. Bhd. Patimas Business Solutions Sdn. Bhd. Patimas Outsourcing Services Sdn. Bhd. Patimas Services Sdn. Bhd. Patimas Education Centre Sdn. Bhd. Patimas International Sdn. Bhd. Patimas-HPD Systems Sdn. Bhd. Patimas e-business Sdn. Bhd. OED Technology Sdn. Bhd. (65%) Patimas Workgroup Technology Sdn. Bhd. (60%) Sigma AIT Sdn. Bhd. (49%) Scion Global Sdn. Bhd. (45%) Dynotronic International Sdn. Bhd. (40%) As at November 2012 Unless otherwise stated, 100% owned 4

7 BOARD OF DIRECTORS PROFILE Dato' Bahari bin Haron Independent Non-Executive Director Dato' Bahari bin Haron, a Malaysian aged 64, was appointed to the Board and assumed the role of the Independent Non-Executive Chairman of Patimas on 24 August Dato Bahari is a Barrister-at-law (Inner Temple, London) and was a Magistrate of Kuala Lumpur Court from 1973 to Dato' Bahari started his own legal practice in 1974 and was actively involved in UMNO Johor. In 1982, he was elected as a Member of Parliament for Labis, Johor. He was appointed as the State Exco Member in 1989 and held the portfolio of Chairman of the State Housing and Local Government Committee. He was also involved in various business activities in the retail, property, food and manufacturing industries. He was the Director of Bank Rakyat for five years and was the Vice Chairman of Kejora (Lembaga Kemajuan Johor Tenggara) for eight years. Dato Bahari has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. Abdul Ghaffur bin Ramli Independent Non-Executive Director En. Abdul Ghaffur Bin Ramli, a Malaysian aged 59, was appointed to the Board on 29 October 1997 and subsequently as the Chairman of Patimas from 28 February 2008 to 24 August He was redesignated as an Independent and Non-Executive Director on 24 August En. Ghaffur holds a Bachelor of Science (Honours) in Electronic, Computer and Systems Engineering from Loughborough University of Technology, United Kingdom and is a Registered Professional Engineer and a Fellow of the Institution of Engineers Malaysia. He has 35 years of experience in the construction industry and currently holds controlling interests in several private companies in the business of trading and construction. En. Ghaffur has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. He attended all of the six Board meetings of the Company held in the financial period ended 31 March Dato Yap Wee Hin Non-Independent Non-Executive Director Dato Yap Wee Hin, a Malaysian aged 54, holds a Bachelor of Commerce in accounting from the Canterbury University, New Zealand and is a member of the New Zealand Society of Chartered Accountants and the Malaysian Institute of Accountants. Dato Yap was appointed to the board of Patimas on 15 July 1992 and held the position of Managing Director from October 1997 to July 2005 before assuming the Deputy Executive Chairman role. He was redesignated as Non-Independent and Non-Executive Director on 24 August

8 Dato Yap began his career in 1980 as an auditor in various international accounting firms based in New Zealand and Singapore and had since held key positions in a private company in Malaysia whose activities spanned over the cosmetics, manufacturing, property development and construction industries. His foray into the IT Industry began in 1989 when he joined Patimas Business Solutions Sdn. Bhd. and thereon, steered the Patimas Group to become a significant player in the IT industry. As one of the founding directors of Patimas, he has been involved in driving the Patimas Group in the development of innovative software solutions from the pioneering e-government flagship application, e-stockbroking to e-learning system. Patimas was amongst early developers of Intranet and Internet applications, IT outsourcing, Broadband connectivity, Managed Network Services, Interactive Voice Response Systems and wireless share prices dissemination. Dato Yap has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. He attended all of the six Board meetings of the Company held in the financial period ended 31 March Law Siew Ngoh Non-Independent Non-Executive Director Mdm Law Siew Ngoh, a Malaysian aged 51, holds a Bachelor of Economics from Universiti Kebangsaan Malaysia. She was appointed to the Board as Finance Director on 10 March 1997 before her promotion to the position of Deputy Managing Director on November 2003 and subsequently to the position of Managing Director on July She was redesignated as Non- Independent and Non-Executive Director on 24 August Mdm Law has more than 20 years of experience in the IT industry and is part of the pioneering team that built Patimas. In 1988 she joined Patimas Business Solutions Sdn. Bhd., a subsidiary of Patimas, as the Finance Manager and subsequently rose to the rank of Group Financial Controller in Throughout her career with Patimas, she has played a key role in the management of the Group s finance and business operations. Mdm. Law has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. She attended all of the six Board meetings of the Company held in the financial period ended 31 March Robert Daniel Tan Kim Leng Non-Independent Non-Executive Director Mr. Robert Daniel Tan, a Malaysian aged 55, holds a Masters of Business Administration from Southern Cross University, Australia. His directorship in Patimas was redesignated as Non- Independent and Non-Executive Director on 24 August Prior to his appointment on the board of Patimas on 14 October 1994, he was a Director of Patimas Business Solutions Sdn. Bhd., a subsidiary of Patimas, which he founded in Prior to that, he owned a company that provided various business application software for integrated accounting, payroll and stockbroking applications, which were implemented in many corporations in Malaysia and Singapore. 6

9 Mr. Tan has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. He attended five of the six Board meetings of the Company held in the financial period ended 31 March Dato Ng Back Heang Non-Independent Non-Executive Director Dato Ng Back Heang, a Malaysian aged 58, was appointed to the Board on 10 March His directorship was redesignated as Non-Independent and Non-Executive Director on 24 August Dato Ng is a member of the British Computer Society and a Fellow of the Association of International Accountants, United Kingdom. Dato Ng started his career with a ship repair and builder company in 1975 where he held various positions in the area of accounting and IT. He was the Country Manager of an established local IT company from 1984 to 1992 before joining Patimas where he held various key positions within the Group. Dato Ng has played a key role in the corporate planning and business development of Patimas since his appointment to the board of the Company. Dato Ng has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. He attended all of the six Board meetings of the Company held in the financial period ended 31 March Khairudin bin Ibrahim Independent Non-Executive Director En Khairudin bin Ibrahim, a Malaysian aged 43, was appointed to the Board on 28 November He was redesignated as Non-Independent and Non-Executive Director on 24 August He holds a degree in Accounting (Hons) from Universiti Kebangsaan Malaysia and is a member of the Malaysian Institute of Accountants (MIA) and CPA Australia. He started his career with Coopers & Lybrand and with the merged firm, PricewaterhouseCoopers. He left PricewaterhouseCoopers as Manager of Business Assurance Services Division to start his practicing career. He is a partner of Afrizan Tarmili Khairul Azhar (Chartered Accountants). He is currently a member of the Financial Statements Review Committee of the MIA. He has been involved in the Accounting and Auditing Committee of the MIA and several working groups of Malaysian Accounting Standards Board (MASB). Presently, he sits on the Issues Committee of MASB. He also sits on the board of Libra Invest Berhad and its investment committee. En. Khairudin has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. He attended all of the six Board meetings of the Company held in the financial period ended 31 March

10 Lim Kok Kiong Independent Non-Executive Director Lim Kok Kiong a Malaysian aged 41, was appointed to the Board of Patimas on 24 August He is a member of Malaysian Institute of Certified Public Accountants (MICPA) and also the Malaysian Institute of Accountants (MIA). He started his career as an auditor with KPMG Peat Marwick where he also did his articleship. He was then appointed key positions in various private, listed and multinational companies, whose activities ranging from water treatment, industrial products and retailing, manufacturing of computers and peripherals and distribution and assembly of luxury cars. He has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. Chai Ko Thing Independent Non-Executive Director Chai Ko Thing, a Malaysian aged 41, was appointed to the Board of Patimas on 16 October Mr. Chai graduated with a Bachelor of Laws (LL.B) from the University of London and holds a Certificate in Legal Practice. He was called to the Malaysian Bar in 1996 and is currently a partner in a legal firm, a position he assume since His area of practice is corporate and commercial matters including corporate transactions, banking and finance, joint ventures and advisory. He has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas and has no convictions for offences. PROFILE OF ACTING GROUP CEO Jarnail Singh A/L Ram Singh, a Malaysian aged 53, was appointed as the Acting Group Chief Executive Officer of Patimas on 15 August He holds a Diploma in Computer Science and has more than 30 years experience in the ICT industry having worked in various areas from programming, systems analysis; to running various computer-based companies. He is a director of various private companies for the past 20 years and for the last 13 years; his company, Sprintz Designs Sdn Bhd, has been a business partner of Patimas. Since January 2008 till todate, Mr Jarnail Singh headed and managed the telecommunications business division for the Patimas Group. As Head of the Telecommunications group, he has grown the business to include amongst others, the supply and implementation of specialized equipment, software and services to the telecommunications industry in Malaysia and also worked closely with major Network Equipment Producers to supply solutions to telecommunications industry in Malaysia, India, and South Africa. He has no family relationship with any other Directors or major shareholders of Patimas, no conflict of interest with Patimas, save for his interest as above and has no convictions for offences. 8

11 CHAIRMAN S STATEMENT On behalf of the Board of Directors of Patimas Computers Berhad ( Patimas or the Company ) I present to you the Annual Report and the Audited Financial Statements of Patimas Group for the 15 month period ended 31 March Highlights Patimas is facing a trying time with the unresolved significant accounting and audit findings/queries ( Significant Audit Findings ) in the accounts of the Patimas Group that were recently brought to the our attention when the external auditors expressed concerns that they have not been able to obtain sufficient competent audit evidence to form an opinion for the purpose of issuance of the audited financial statements. In light of the discovery of Significant Audit Findings, the Company has on 30 July 2012 appointed PKF Advisory Sdn Bhd firm to conduct a special audit into the affairs of the Company ( special audit ) on the basis of information and records that are made available by the Board of Directors and from the Management of the Company. The Company's shares were suspended from trading on 31 July 2012 as the Board of Directors announced to Bursa on the same date that the Company was not able to issue its annual audited financial statements for period ended 31 March 2012 within the four months from the close of the financial period. Subsequently, on 10 August 2012, Messrs BDO Governance Advisory Sdn Bhd was appointed to conduct the aforesaid special audit. The Board has also removed the financial functions and authorities of the Executive Directors whom shall no longer be responsible for the financial management of the Patimas Group. In order to protect the interest of all stakeholders, the Board has on 15 August 2012 appointed Mr. Jarnail Singh Daliwal as the Acting Group Chief Executive Officer with the sole authority to oversee the day to day affairs of the Group and other operational matters. Further, following discussion with Bursa Malaysia Securities Berhad ( Bursa ), the Audit Committee was directed by Bursa to appoint an investigative auditor to conduct an investigative audit on the financial affairs of Patimas. We have on 16 October 2012 appointed UHY Advisory (KL) Sdn Bhd as the audit firm to carry out the new investigative audit. Pursuant to paragraph 8.04(3)(b) of the LR in relation to Practice Note 17, the Company has on 1 November 2012 made the First Announcement to Bursa as a PN17 Company, the prescribed criteria of which was triggered by its negative net tangible assets position as well as the expressed disclaimer of opinion by the external auditors on the Company s latest audited financial statements. In the First Announcement, the Company has indicated the status of its endeavours to formulate a regularization plan to regularize the Group s financial condition. 9

12 Prospects The Board is in the process of evaluating the prospects of the Group in light of the investigative audit, the PN 17 status of the Group and the stiff competition prevailing in both Malaysia and overseas ICT market. At this point in time, the Board is unable to comment on the prospects of the Group, save for the data centre business division and the telecommunication business division which, in the opinion of the Board, can still be profitable with proper and efficient management. Amid a severe setback against our business performance, our main task ahead is to strive harder and emerge as a stronger business entity. Immediate emphasis is on the need for the Group to seek new revenue streams whilst improving the existing businesses. The Board is mindful of the challenges facing the Group and is working diligently to improve its performance. Appreciation On behalf of the Board, I would like to take this opportunity to thank all our valued shareholders, business partners, customers, bankers and regulatory authorities and the employees for your continuous support to the Group during these challenging times. We wish to also record our appreciation to the past directors, En Aziz Yazdani, Mr Wong Ngai Peow and Mr. Hwang Seak Wai who have resigned recently. My appreciation also goes to my fellow Board members for their invaluable guidance and advice. Dato Bahari bin Haron Chairman 10

13 STATEMENT OF CORPORATE GOVERNANCE The Board of Directors of Patimas fully appreciates the importance of adopting high standards of Corporate Governance within the Group as per the Malaysian Code on Corporate Governance (Revised 2007) ( the Code ), the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Bursa Securities Listing Requirements ) and Corporate Governance Guide: Towards Boardroom Excellence (CG Guide) in order to protect the interests of shareholders and other stakeholders. The Board is pleased to provide the following statement, which outlines the main Corporate Governance principles and practices that were in place throughout the financial period ended 31 March 2012, unless otherwise stated. Board of Directors The Board The Board assumes responsibility for effective stewardship and control of the Company. The responsibilities of the Board include setting the strategic and succession plans of the Group, monitoring performance goals, formalizing documentation on matters specifically reserved for its decision and ensuring that the Group's internal controls and reporting procedures are adequate. The Board comprises members with a wide range of business, financial, technical and public service background. With this mix of expertise and background, the Company is led and guided by an experienced and competent Board of Directors. The profiles of the Board of Directors are provided in the Annual Report on pages 5 to 8. Meetings Board meetings are held at quarterly intervals and additional meetings are held whenever necessary. The Board deliberated and considered a variety of matters inclusive of financial results, operation performance and resolutions and recorded its deliberations in terms of issues discussed and the conclusion in discharging its duties and responsibilities. During the financial period ended 31 March 2012 six board meetings were held. The information on the attendance of the members is as follows: 11

14 Members No of meetings Attendance attended En. Abdul Ghaffur bin Ramli 6/6 100% Dato Yap Wee Hin 6/6 100% Madam Law Siew Ngoh 6/6 100% Robert Daniel Tan Kim Leng 5/6 83% Dato Ng Back Heang 6/6 100% En. Aziz Yazdani bin Ahmad Khalil* 6/6 100% En. Khairudin bin Ibrahim 6/6 100% Notes: Dato Bahari bin Haron, Mr. Wong Ngai Peow*, Mr. Hwang Siak Wai* and Mr. Lim Kok Kiong did not attend any of the Board meetings as the meetings were held prior to their appointment on 24 August 2012 and likewise for Mr Chai Ko Thing, prior to his appointment on 16 October *Mr Wong Ngai Peow, En Aziz Yazdani bin Ahmad Khalil and Mr. Hwang Siak Wai resigned on 12 October October 2012 and 5 November 2012 respectively. Board Committees The Board has established various committees to assist the Board in managing the Group s businesses effectively. Each committee has its own terms of reference to govern its responsibilities and to report and propose recommendations to the Board. These committees are: Audit Committee; Remuneration Committee; Nomination Committee; and Group Risk Management Committee. The chairman of the various Committees will report to the Board the outcome and recommendations of the Committee meetings and such reports are incorporated in the minutes of the Board meetings. Board Composition and Balance During the financial period ended 31 March 2012 and up to 24 August 2012, the Board comprised seven members, four of whom are Executive Directors while the other three are Independent Non-Executive Directors. Post 24 August 2012, the number of board members increased to eleven members and none of whom were holding any executive functions. The current composition of the Board of Directors is as set out in Corporate Information section of this Annual Report. The composition of independent non-executive directors exceeds the minimum threshold prescribed by the Code and the Bursa Securities Listing Requirements. The Board is of the opinion that the composition of the Board aims to ensure that the interest of not only the Group, but also the stakeholders and the public in general are represented in all business strategies formulation and adoption. 12

15 During the period under review there is a clear division of roles of the Chairman and the Managing Director with each having his respective scope and responsibilities to ensure a balance of power and authority. The Chairman is responsible for ensuring the Board s effectiveness and orderly conduct. The Managing Director is responsible for the implementation of Board policies, making operational decisions and monitoring the day-to-day running of the business. The Executive Directors take on the primary responsibilities of managing and monitoring the Group s businesses, allocation of resources and enhancement of controls and governance. The Independent Non-Executive Directors are to deliberate and discuss policies and strategies formulated and proposed by the management with the view of the long-term interests of all stakeholders. The presence of the Independent Non-Executive Directors is essential as they provide unbiased and independent view, advice and judgment as well as to safeguard the interest of other parties such as the minority shareholders and other stakeholders. En. Abdul Ghaffur bin Ramli has been appointed as the Senior Independent Non-Executive Director to whom any concerns relating to the Company may be conveyed. Supply of Information The Directors have full and unrestricted access to all information pertaining to the Group s business and affairs, both as a full Board and in their individual capacity. They are supplied with information on financial, operational, corporate, regulatory, business developments, and audit matters for informed decision-making and effective discharge of their responsibilities. They also have access to the advice and services of the Company Secretary who ensures that Board procedures are adhered to at all times during meetings and advises the Board on matters including corporate governance issues, and Directors responsibilities in complying with relevant legislation and regulations. The Directors may, if necessary, obtain independent professional advice, at the Company s expense in furtherance of their duties. Appointments to the Board Nomination Committee The Nomination Committee is responsible for reviewing the Board structure, size and composition and making recommendations to the Board for any adjustments that are deemed necessary. The Committee is also responsible in making annual assessment on the mix of skills, experience and effectiveness of the Board and the committees of the Board. The Nomination Committee during the financial period ended 31 March 2012 comprised the following members: En. Abdul Ghaffur bin Ramli En. Aziz Yazdani bin Ahmad Khalil En. Khairudin bin Ibrahim Position Chairman Member Member The current composition of the Nomination Committee is as set out in Corporate Information section of this Annual Report. 13

16 During the financial period ended 31 March 2012 the committee has met once with all members present. The Nomination Committee during the year reviewed and assessed the mix of skills and experience and size of the Board, contribution of each director and effectiveness of the Board and Board Committees and also reviewed the retirement of directors by rotation eligible for re-election. The Nomination Committee has also assessed the character, experience and competence of the Board and Senior Management. Re-election All Directors shall submit themselves for re-election every three years in accordance with the Company s Articles of Association and regulatory requirements. Directors Training All Directors during the financial period ended 31 March 2012 have completed their Mandatory Accreditation Programme prescribed by Bursa Securities. In addition, during the financial period under review, all Directors were also advised of developments or changes to relevant laws and regulatory requirements. Management briefings during Board and Audit Committee meetings on various operational, technical and corporate matters were also aimed at ensuring that Directors are well versed with the knowledge of the Group s business and affairs in enabling them to make meaningful decisions. The Directors during the financial period ended 31 March 2012 have attended the briefings conducted by the Company Secretary pertaining to the Corporate Governance Guide and Malaysian Code on Corporate Governance 2012 issued by Securities Commission, Amendments to Bursa Listing Requirements and Corporate Disclosure Guide pursuant to Section 9 of the Capital Markets and Services Act 2001 issued by Bursa Securities Malaysia Berhad. Four of the Directors namely Abdul Ghaffur bin Ramli, Law Siew Ngoh, Dato Ng Back Heang and Khairudin bin Ibrahim have also attended a talk on the Sustainability Programme for Corporate Malaysia. The Directors have individually attended various training and seminars to strengthen their skill sets and knowledge on understanding of current issues and developments of the financial and business environment. They will continue to undergo training that may be required from time to time keeping abreast with latest changes in laws, regulations and the business environment. Remuneration Committee The Remuneration Committee is responsible to review and recommend to the Board the remuneration package of the Board. The remuneration package of the Executive Directors is based on the Group s financials and the individual s performance. 14

17 The Remuneration Committee during the financial period ended 31 March 2012 comprised the following members: En. Abdul Ghaffur bin Ramli En. Aziz Yazdani bin Ahmad Khalil En. Khairudin bin Ibrahim Dato Yap Wee Hin Position Chairman Member Member Member The current composition of the Remuneration Committee is as set out in Corporate Information section of this Annual Report. During the financial period ended 31 March 2012 the committee has met once with all members present. The Remuneration Committee shall ensure that the levels of remuneration are sufficient to attract and retain Directors to successfully manage the business of the Group. The Remuneration Committee is entrusted under its terms of reference to assist the Board, amongst others, to recommend to the Board the remuneration of the Executive Directors and in respect of Non-Executive Directors, the level of remuneration shall reflect their respective levels of experience, expertise and responsibilities. Disclosure The Company has complied with the Main Market Listing Requirements of Bursa Securities on the disclosure of Directors' remuneration in its audited financial statements as set out in Note 12. Relationship with Shareholders and Investors The Company recognises the importance of maintaining open communication with both institutional shareholders and individual investors and acknowledges that timely and equal dissemination of relevant information is provided to them. Discussions were also held from time to time by the Company with analysts/investors throughout the year. In this regard, any information provided are those within the disclosure requirements of the Bursa Securities and for additional clarification and information to assist them in matters that require their decision. The Annual General Meeting ( AGM ) is the principal forum for dialogue with shareholders to inform shareholders and investors of current developments. Notice of the AGM and the Annual Report are sent out to shareholders at least 21 days before the date of the meeting. Shareholders are encouraged to raise questions or to seek more information on the progress and performance of the Group. Where Extraordinary General Meetings ( EGM ) are held to obtain shareholders approval on certain business or corporate proposals, comprehensive circulars to shareholders would be sent within prescribed deadlines in accordance with regulatory and statutory provisions. During the AGM and EGM, the Chairman and Board members are available to respond to all shareholders queries. Shareholders and members of the public are invited to access the Company s website at and the Bursa Securities website to obtain the latest information on the Group. 15

18 Accountability and Audit The financial reporting and internal control system of the Group is overseen by the Audit Committee, which comprised three Independent Non-Executive Directors, namely: En. Khairudin bin Ibrahim En. Abdul Ghaffur bin Ramli En. Aziz Yazdani bin Ahmad Khalil Position Chairman Member Member The primary responsibilities, terms of reference and activities of the Audit Committee during the financial period ended 31 March 2012 are set out in the Audit Committee Report. The Audit Committee met six times during the financial period ended 31 March Subsequently the above Audit Committee members resigned from their posts and the following newly members were appointed: Position Mr. Lim Kok Kiong Chairman (appointed on 24 August 2012) Dato Bahari bin Haron Member (appointed on 24 August 2012) Mr. Wong Ngai Peow Member (appointed on 24 August 2012 and resigned on 12 October 2012) Mr Chai Ko Thing Member (appointed on 16 October 2012) The Internal Audit function which is outsourced to an internal auditing firm; reports directly to the Audit Committee and provides the Committee with an independent assessment of the adequacy of internal controls. Internal control deficiencies identified are discussed at the Audit Committee meetings to set appropriate corrective and preventive actions. Group Risk Management Committee The Group Risk Management Committee (GRMC) reports directly to the Audit Committee. The primary role of the committee is to oversee the management s strategy implementation including deliberation of related risks of the subsidiaries during each GRMC meeting. Financial Reporting In presenting the annual audited financial statements and the quarterly financial results, the Directors aim to ensure that the financial statements and quarterly announcements are prepared in accordance with the Companies Act, 1965 and applicable approved accounting standards so as to offer a balanced and comprehensive assessment of the Group s financial position and prospects. A Responsibility Statement by the Directors is set out in the ensuing page. 16

19 Directors Responsibility Statement The Board of Directors is responsible in ensuring financial statements prepared for each financial year which have been made out in accordance with the applicable approved accounting standards in Malaysia and give a true and fair view of the state of affairs of the Company and the Group. In the process of preparing these financial statements, and other than as disclosed in the notes to the financial statements, the Directors have reviewed the accounting policies and practices. However, due to the circumstances that have been brought to the attention of the Board after the financial year ended 31 March 2012 and pending the completion of the investigative audit into the financial affairs of the Group and the Company, the Directors are not in a position to determine whether the accounting policies and practices were consistently applied throughout the year, and in cases where judgment and estimates were made, whether they were reasonable and prudent. Additionally, although the Directors have relied on the system of internal controls to ensure that the information generated for the preparation of the financial statements from the underlying accounting records is accurate and reliable, in view of the investigative audit, the Directors are unable to form an opinion on the accuracy and reliability of such information at this point in time. Statement on Internal Control The Statement on Internal Control in pages 26 to 27 of the Annual Report sets out an overview of the system of internal control of the Group. Relationship with the Auditors The Company maintains a transparent relationship with the auditors in seeking their professional advice and towards ensuring compliance with the accounting standards. The external auditors met with the Audit Committee to present the scope of the financial audit before the commencement of audit and review the results of the said audit as well as the management letter, if any after the conclusion of the audit. Statement of Compliance In the opinion of the Board, the Company is in compliance with the Best Practices in Corporate Governance set out in the Malaysian Code on Corporate Governance. The Board will continue to promote and improve its corporate conduct within the Company and the Group. 17

20 OTHER INFORMATION Utilisation of Proceeds Raised from Corporate Proposals The Company has not raised any funds from any corporate proposals during the financial period ended 31 March Share Buy back The Company had obtained its shareholders approval at the Company s Annual General Meeting held on 17 June 2011 in respect of the share buy-back of up to 10% of the issued and paid up share capital of the Company. The Company is not seeking the renewal of the shareholders mandate on the Share Buy-Back at the Company s forthcoming AGM. There were no purchases, resale or cancellation of share undertaken by the Company during the financial period ended 31 March Options, Warrants & Convertible Securities There were no exercises of options, warrants or convertible securities during the financial period ended 31 March Sanctions and / or Penalties There were no sanctions or penalties imposed on the Company and its subsidiary companies, directors or management by the relevant regulatory bodies during the financial period ended 31 March Non Audit Fees to External Auditors The amount of non-audit fees paid to the external auditors by the Group for the financial period ended 31 March 2012 amounted to RM3, American Depository Receipt (ADR) / Global Depository Receipt (GDR) The Company did not sponsor any ADR / GDR programme during the financial period ended 31 March Profit Guarantee There was no profit guarantee given by the Company during the financial period ended 31 March

21 Variation of Results There is a variance of more than 10% between the Profit after Tax and Minority Interest stated in the Unaudited 5th Quarter Results for the period ended 31 March 2012 announced on 29 May 2012 and the Audited Financial Statements (AFS) A reconciliation of the variance between Unaudited 5th Quarter Results and the AFS 2012 is set out as below: The variance between Net Loss of the Unaudited 5th Quarter Results and the AFS for the financial period ended 31 March 2012 is 285%. Below is the reconciliation on the Net Loss of the Unaudited 5th Quarter Results and the AFS for the financial period ended 31 March 2012: The above audited results have to be read in conjunction with the full set of the Audited Financial Statements for the financial period ended 31 March Explanatory notes: (a) & (b) (c) (d) The Company decided to reverse the above mentioned revenue and cost because the external auditors were unable to obtain sufficient appropriate audit evidence to satisfy themselves as to the veracity of the related sale and purchase transactions with a group of customers and suppliers. The Company has on prudent basis made a further provision for doubtful debts as their recoverability are in doubt. The Company has on prudent basis written off the above software development expenditure as it is uncertain if they can generate future economic benefits. 19

22 (e) (f) Due to the reversal of revenue mentioned in (a) above, it has rendered significant uncertainty on the group's future revenue projection and hence the entire goodwill is impaired. This cost has been accrued as it relates to financial period ended 31 March Further, in view of the developments in significant accounting and audit findings, and pending the completion of the investigative audit, an opinion cannot be formed at this juncture whether adjustments are necessary to the audited results for the financial period ended 31 March 2012 and hence if there will be any material variation against the said audited results. Material Contracts involving Directors and major shareholders Subject to the findings of the investigative audit and save for such disclosure made in the financial statements, there were no material contracts entered into by the Company and its subsidiary companies involving Directors and major shareholders interests either still subsisting at the end of the financial period ended 31 March 2012 or entered into since the end of the previous financial year. Recurrent related party transactions of revenue nature Subject to the findings of the investigative audit and save for such disclosure made in the financial statements, there were no recurrent related party transactions of revenue nature during the financial period ended 31 March Contracts relating to loans There were no contracts relating to loans by the Company involving Directors and major shareholders interests during the financial period ended 31 March Corporate Social Responsibility (CSR) Statement The Group views the CSR as a continuing commitment by business entities to behave ethically and carry out the social and environmental responsibilities. With such belief, the Group is committed and uses its best endeavours on ongoing basis, to integrate CSR practices into its day-to-day business operations i.e. offering graduate placement programs and reducing wastages in its daily workflow. 20

23 REPORT OF THE AUDIT COMMITTEE Constitution The Audit Committee of Patimas had been established since Composition The composition of the Audit Committee throughout the financial period ended 31 March 2012 and up to 24 August 2012 is as follows: En. Khairudin bin Ibrahim (Chairman); En. Abdul Ghaffur bin Ramli; and En. Aziz Yazdani bin Ahmad Khalil. Subsequently on 24 August 2012, the above Audit Committee members resigned from their posts and the following new members were appointed: Mr. Lim Kok Kiong (Chairman); Dato Bahari bin Haron; and Mr. Wong Ngai Peow. Mr Wong Ngai Peow subsequently resigned on 12 October A new director, Mr Chai Ko Thing was appointed to the Board and the Audit Committee on 16 October Secretary The Company Secretary of Patimas acts as the Secretary to the Audit Committee. Meetings The Audit Committee met six times during the financial period ended 31 March All meetings to review the quarterly results and annual financial statements are held prior to such quarterly results and annual financial statements being presented to the Board for approval. After each Audit Committee meeting, the Audit Committee reported to and updated the Board on significant issues and concerns discussed during the Audit Committee meetings and where appropriate, made the necessary recommendations to the Board. The information on the attendance of the members during the financial period ended 31 March 2012 is as follows: 21

24 Members No of meetings attended Attendance En. Khairudin bin Ibrahim 6/6 100% En. Abdul Ghaffur bin Ramli 6/6 100% En. Aziz Yazdani bin Ahmad Khalil 6/6 100% Note: Mr. Lim Kok Kiong, Dato Bahari bin Haron, Mr. Wong Ngai Peow and Mr. Chai Ko Thing did not attend any of the Audit Committee meetings as the meetings were held prior to their date of appointment. The Audit Committee also met with the External Auditors during the financial period ended 31 March 2012 i.e. on 26 April 2011 and 28 February 2012 without the presence of the Executive Directors, Management or employees to make enquiries in relation to management s co-operation in financial reporting and the state of affairs of the Internal control system of the Company. Summary of Activities during the Financial Period ended 31 March 2012 The Audit Committee carried out the following activities during the financial period ended 31 March 2012: Reviewed the Quarterly Results and the Annual Audited Financial Statements to ensure adherence to legal and regulatory reporting requirements and appropriate resolution of all accounting matters requiring significant judgment; Reviewed and deliberated on the internal auditors audit findings and recommendations and the Group Risk Management Committee s reports and updates; Deliberated the financial reporting issues pursuant to the introduction of new accounting standards and additional statutory/regulatory disclosure requirements Reviewed with the external auditors and discussed the overall annual audit plan, nature and scope of the audit and the significant changes in accounting and auditing issues; Reviewed and deliberated the significant risk areas, internal control and financial matters coming to the attention of the external auditors in the course of their work; Reviewed and approved the annual internal audit plan of the Group including its audit strategy, scope, functions, competency, resource requirements and the necessary authority to carry out its work. Internal Audit Function The Internal Audit function is outsourced to an internal auditing firm and the cost incurred for the internal audit function for the financial period ended 31 March 2012 was RM76,

25 The activities of the Internal Audit Function during the financial year were as follows: (a) developed the internal audit plan for financial period ended 31 March 2012; (b) execution of the approved internal audit plan; (c) presentation of the internal audit findings at the quarterly Audit Committee meetings; and (d) conducted follow up reviews to ensure that action plans are properly and appropriately implemented by Management The terms of reference of the Audit Committee are set out below: TERMS OF REFERENCE OF THE AUDIT COMMITTEE 1. Objectives The Audit Committee shall assist the Board of Directors ( Board ) of Patimas in: i) overseeing the financial reporting and complying with the applicable Financial Reporting standards, the provisions of the Companies Act 1965 and disclosure requirements administered by relevant accounting bodies, Bursa Malaysia Securities Berhad ( Bursa Securities ), Companies Commission of Malaysia and any other laws and regulations as amended from time to time; and ii) assessing the internal and external audit processes including issues pertaining to the system of internal control and risk management within the Group. 2. Composition The Audit Committee is to be appointed by the Board from among themselves as follows: i) a minimum of three (3) members none of whom shall be Executive; ii) iii) iv) a majority shall be Independent Non-Executive Directors; all members must be financially literate and at least one (1) member must be a member of Malaysian Institute of Accountants or a person who fulfils the requirements prescribed or approved by Bursa Securities; all members shall hold office only for so long as they serve as directors of the Company; v) no alternate director shall be appointed as a member; vi) vii) in any event of any vacancies resulting in non compliance of the minimum of three (3) members, the Board shall upon the recommendation of the Nomination Committee, appoint such number of directors to fulfill such vacancy within three (3) months of the event; the term of office and performance of the Committee shall be reviewed by the Board at least once in every three (3) years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference. 23

26 3. Duties and functions In discharging its duties, the Committee shall undertake the following: i) consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal for recommendation to the Board; ii) iii) iv) review with the external auditor before the audit commences, the audit plan, areas and scope of the audit and ensure co-ordination where more than one audit firm is involved; review with the external auditor, their evaluation of the system of internal controls and audit findings; review the quarterly and year-end financial statements of the Company and Group and thereafter recommend them to the Board for approval, focusing particularly on:- any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumption; compliance with the applicable Financial Reporting Standards and other legal requirements; significant and unusual events; v) review and report the assistance given by the Company's or Group's officers to the external auditors and the overall conduct of the audit; vi) vii) viii) ix) review the audit report with the external auditors; discuss problems and reservations arising from the interim and final audits and any matter the auditor may wish to discuss (in the absence of management where necessary); review the external auditor's management letter and management's response; appoint internal auditors who will report functionally directly to the Audit Committee and review their performance on an annual basis. The Internal Audit function shall be responsible for the regular review and/or appraisal of the effectiveness of the risk management, internal control, and governance processes within the Company; x) review the following of the internal audit function: the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work; ensure the internal audit function is independent of the activities it audit; the internal audit programme and results of the internal audit process and where necessary, ensure that appropriate action is taken by management on the recommendations of the internal audit function; 24

27 xi) xii) xiii) consider any related party transactions that may arise within the Company or Group; consider the major findings of internal investigations and management's response; consider other areas as defined by the Board. The Chairman of the Committee shall engage on a continuous basis with Senior Management, such as the Chairman of the Board of Directors, Managing Director, Financial Controller, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Group. 4. Meeting Procedures and Quorum i) The Audit Committee shall meet at least four times a year and such additional meetings, as the Chairman shall decide in order to fulfill its duties. ii) iii) iv) At least twice annually, the Audit Committee shall meet with the external auditor, internal auditors or both without executive Board members and employees present. The Chairman may call a meeting of the Audit Committee if a request is made by any committee member, the Company's Managing Director, or the internal or external auditors. The Company Secretary or other appropriate senior official shall act as secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to committee members prior to each meeting. v) The Secretary shall also be responsible for keeping the minutes of Audit Committee and circulating them to committee members and to the other members of the Board of Directors. vi) A quorum shall consist of a majority of independent committee members. 5. Authority i) The Audit Committee is authorised by the Board to review any activity of the Company and of the Group within its Terms of Reference. It is authorised to seek any information it requires from any director or member of management and all employees are directed to co-operate with any request made by the Audit Committee. ii) The Audit Committee is authorised by the Board to obtain independent legal or other professional advice if it considers necessary. 25