Pharmaniaga Berhad (467709-M)No.7, Lorong Keluli 1BKawasan Perindustrian Buit !a"a #elatan#es$en 7, 40000 #%a% &la'#elangor (arul )%san, Mala$sia*el + 0,-,,4- 9999 .a/ + 0,-,,41 7777(A member of UEM Group)Page 0 1 Pharmaniaga Overview Pharmaniaga Berhad is the largest integrated local healthcare public listed company in the MainBoard of Bursa Malaysia. Its core business is manufacturing generic pharmaceutical, logisticsand distribution, sales and marketing, supply medical product and services, hospital equipment.The Pharmaniaga Berhad subsidiaries companies are: iPharmaniaga ogistics !dn Bhd iiPharmaniaga Marketing !dn Bhd iiiPharmaniaga Manufacturing Berhad ivPharmaniaga "iagnostics vPharmaniaga #esearch $entre !dn Bhd vi!afire Pharmaceuticals %M& !dn Bhd viiPharmaniaga ife!cience !dn Bhd viii Pharmaniaga "iagnostics !dn Bhd i' Pharmaniaga Intermational $orporation ' PT Millennium Pharmacon International Tbk %Indonesia& 'i Pharmaniaga Pegasus %!eychelles& $o. tdCompany ProfileCompany NamePharmaniaga Berhad.Business TypeManu1a2turer, *rading 3o'4an$, (istri5utor67%olesalerProduct/ServiceMedi2al (is4osa5le 8 (e9i2es,P%ar'a2euti2al :te'Address 7,Lorong Keluli 1B,Kaw.Perindustrian Buit Page 0 - !a"a,#elatan,#es$en7Company Website http:(())).pharmaniaga.com Ownership & Capital -Year Established 199,Trade & Market -Main Market !outheast *sia*frica+ceaniaMid ,ast,astern *siaExport Percentage ,1; - 40;Factory n!ormation -"anagement Certi#cation$ I!+ -../:0...Contract "anu!acturing the latter asthe $hief ,'ecutive.+utside his professional engagements, "ato: *=man is also active in public service. 7e sits onthe boards of a number of 1overnment inked $orporations namely, ?ha=anah ;asional Berhad,the investment arm of the Malaysian 1overnment, Malaysian *irline !ystem Berhad and PA!,'press)ays Berhad. "ato: *=man also serves as a member of the Bursa Malaysia !ecuritiesMarket $onsultativePanel, the;ational $ouncil for!cientific#esearch@"evelopment, the;ational Innovation $ouncil, the !pecial Taskforce to facilitate Business %P,MA"*7& and theMalaysian ,conomic $ouncil."ato: *=man is also a "irector of !comi 1roup Berhad and the$hairman of the Motorsports *ssociation of Malaysia. 7e graduated )ith a first class 7onours"egreein,conomicsfromtheondon!chool of,conomicsandPolitical !cienceandisaMember of the Institute of $hartered *ccountants in ,ngland and responsible for determining that all maDor issues reported by the Internal *uditors, the ,'ternal*uditors andother outside advisors have beensatisfactorilyresolvedbythe Management.Binally,the *udit $ommitteeisresponsibleforassistingandreportingtotheBoardmattersdeemed critical to the organi=ation:s controlling processes and risk management activitiesincluding the implementation of the appropriate systems to manage risks.In carrying out its duties and responsibilities, the *udit $ommittee )ill have the follo)ing rights.They have e'plicit authority to investigate any matter )ithin its terms of reference and have theresources required performing its duties. They also have full, free and unrestricted access to anyinformation, records, propertiesandpersonnel of the$ompanyandof anyother companies)ithin the 1roup. +ther than that, they have direct communication channels )ith the e'ternalauditors and person carrying out the internal auditfunction or activity. 7ead of internal auditshould report directly to audit committee. They have authority to obtain independent professionalorother adviceandtoinviteoutsiders )ithrelevante'periencetoattendthe$ommittee:smeetingsand to brief the $ommittee. Binally, they have discretion to invite other "irectors andemployeesof the $ompany to any particular *udit $ommitteemeeting )ith specific relevanceand authority to convene meetings )ith e'ternal auditors, internal auditors or both, e'cluding theattendance of other directors, e'ecutive members ofthe $ommittee andemployees of thecompany, )henever deemed necessary.$'$'5 6ternal A2ditorsThe Board maintains a transparent and professional relationship )ith the *uditors, through the*udit $ommittee, conferred)iththeauthoritytodirectlyliaise)ithboththe,'ternal andInternal *uditors. The Board, through the *udit $ommittee, seeks the ,'ternal *uditors:professional advice in ensuring compliance )ith the provisions of the $ompanies *ct, /-25 andapplicable #eporting !tandards in Malaysia. The appointment of the ,'ternal *uditors is subDectto the approval of shareholders at the *nnual 1eneral Meeting, )hilst the Board determines theirremuneration. It is a policy of the *udit $ommittee that it meets )ith the ,'ternal *uditors atleast t)ice a year todiscuss their audit plan, audit findings andthe $ompany:s financialstatementsas)ell asanyotherissues)ithout any,'ecutive"irectorsandthemanagementpresent.Page 0 16 The role and responsibility of the e'ternal auditors are they audit plan, audit strategy and scope of)orkfortheyear.Theresultsoftheannual audit, theiraudit report andManagement lettertogether )ith Management:s response to the findings of the e'ternal auditors. They also assessedthe independenceandobDectivityof the e'ternal auditors duringtheyear andprior totheappointment ofthee'ternal auditors. The$ommitteealsoreceivedreportsfromthee'ternalauditorsontheiro)npoliciesregardingindependenceandthemeasurestakentocontrol thequality of their )ork. They deliberated and reported the results of the annual audit to the Boardand recommended to the Board the appointment and remuneration of the 1roup ,'ternal *uditor.Theyhavetomeet )iththe1roup,'ternal*uditor)ithout thepresenceofmanagement todiscuss any matters that they )ish to present.$'$'7 %ro2p "nternal A2ditThe 1roup Internal *uditors from A,M 1roup Management !dn Bhd %IA,M1MJ& continues toprovide the internal audit support function to the *udit $ommittee and the Board during the year.The internal audit function of Pharmaniaga 1roup is carried out by the 1I* of A,M1M. 1I*provides independent, obDective assurance on areas of operations revie)ed, and advice on bestpractices that )ill improve and add value to thePharmaniaga 1roup. In the year under revie),1I* carried out audit programmer )hich focused on the management of the 1roup:s significantcorporate risks and e'ecuted audit plans approved by the *udit $ommittee. In conducting theirindependent audit, 1I* placed emphasis on a risk3based auditing approach. The audit findingsand recommendations, )hich also highlighted areas of non3compliance )ith the 1roup:s policies,procedures andguidelines, )erecommunicatedtothe*udit $ommitteetoenableatimelyevaluation of the adequacy and integrity of the 1roup:s internal control system. The internal auditactivities undertaken by A,M1M are in conformance )ith the !nternational 'tandards for theProfessionalPracticeof !nternal (uditingissuedbytheInstituteof Internal *uditors. TheInternal *uditor has the responsibility for ascertaining that the ongoing processes for controllingoperations throughout the organi=ation are adequatelydesigned and are functioning in aneffectivemanner, takingintoaccount the1roup:sobDectives andpolicies intheconte't ofevolvingbusinessandregulatoryenvironment. Internal audits areconductedtoidentifyandreport risks in units under the 1roup:s maDor core activities.$'$'8 Risk Management Committee Page 0 17 The members of the *udit $ommittee are:H "atuk !ulaiman bin "aud % $hairman&H Mohamad bin *bdullah H ,meritus Prof. "ato: of key personnel. Pharmaniaga assessed the risk of an adverse effect on its business operationsarising from the above risks as lo) as the moment. 7'5 CORPORAT R!OURC!7'5'1 MarketingPharmaniaga marketing approach is driven by human behavior. The members in Pharmaniaga areconsidering as consumer too. They demand the best product from their organi=ation. In addition,they spend their time in researching )hat is the best, ho) is the best and )hen is the best for thesake of giving the best products and services to their customers or fulfill customers: needs. Pharmaniaga:s members are a)are that their action )ill affect their organi=ation reputation. Thatisthereason)hytheirdedicatedsalesteamsarenot onlykno)ledgeableinthestrategyonselling products but more important, theyset out to foster long3lasting relationships )ith)homever they come into contact )ith, be it their agents, partners, customers or consumers. They)ill not stop there, and )ant to render their )orld3class services globally and )ill continue theirefforts to make Phamarniaga a household name in every corner of the )orld. In addition, strong and motivate marketing team that has been formed is crucial in promoting andadvertisingtheir productsandservices. Pharmaniagahasthelargest salesteamamonglocalgeneric healthcare companies )hich is beneficial and relevance in persuading and urgingcustomers to make an order. Marketingmi'refer totheparticular combinationof keyvariables under anorgani=ation:scontrol that can be used to affect demand and gain competitive advantage. These variables areproduct, place, promotion and price. Pharmaniaga is a medicine provider in )hich medicine is acoreproduct )hileother supplementaryservices suchas logistic, marketingor informationtechnologyareofferingvalueaddedtofulfill customers: needs. Thisisduetothefact thatcustomers are used to Dudge a performance based on the )hole value of the core product insteadPage 0 ,6 of merely concentrating on a sole product. Thus, Pharmaniaga has successfully implemented theirproduct strategy by adding value through )elcomed enhancements. !ince Pharmaniaga has its o)n logistic department thus methods and channels to deliver have tobe )ell decided. $ustomers can place their order through electrical channel since there is stablenet)ork to support and manage the customer order form. Burthermore, an alternative net)ork hasbeen designed to avoid net)ork being Dammed thus customers can make an order either throughphysical channels or electrical channels since both channels are reliable and easy to use. !uccessfulmarketingprogramsrelyon its effective communication.Promotion and educationplayimportant roles to provide related health information and advice and develop strongrelationship )ith customer through effective communication channels. Pharmaniaga hasorgani=edseveral campaigns, suchas OMesti *mbil Tahu:%M*T& and!kuad+perasi !ihat%!.+.!& to provide related health information and advice to public. *t the same time,Pharmaniaga also placed importance on corporate social responsibilities besides promotion andeducation. M*T isa communityproDected that aimstoincreasepublica)arenessto be moreproactive in understanding health issues and the basics of healthcare. The proDect mostly runs bydoing road sho) to public places, urban and suburban to reach out to the mass. The road sho)sinvolve fun activities like qui==es on healthcare topic and the distribution of leaflets. The leafletsareproduced inthree languages that areBahasa Malaysia, ,nglish and$hinese.*tthe sametime, qui==es are also done over radio station. !+! is a mobile clinic that does not only performhealth screening, but also provides resources and establishes education and a)areness for ruraland marginali=ed populations in promoting a healthy lifestyle. !+! e'tends basic healtheducation, counseling service and medical check3ups to the general public. Pharmaniagamaintainsagoodpricestrategysincethereducedpricedarereachingthefinalcustomer and not being absorbed byresellers in the marketing channel. This )ill enablePharmaniaga to gain more profits as intermediate costs could be eliminated. +n the other hand,customers can keep a)ay from bearing the higher prices as they are paying )holesaler pricesinstead of retailer prices. *s a result, customers pay less but qualities of the products are assuredand customers: satisfaction can be increased. Page 0 ,7 7'5'$ #inan+ePharmaniaga is an investment holding company. It is a public limited liability company,incorporatedanddomiciledinMalaysia andlistedonthe MainBoardof Bursa Malaysia!ecurities Berhad.The preparation of financial statements in conformity )ith the provisions of the $ompanies *ct/-25 and Binancial #eporting !tandards, the M*!B *pproved *ccounting !tandards in Malaysiarequires director to make estimate and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and e'penses during the reported period. The preparationrequires the use of certain critical accounting estimates and also requires management to e'erciseDudgment in the process of applying the organi=ation:s accounting policies.!ubsidiary companies are entities in )hich the organi=ation has the po)er to govern the financialand operating policies so as to obtain benefits from their activities, generally accompanying ashareholding of more than one half of the voting rights. The e'istence and effect of potentialvoting rights that are currently e'ercisable or convertible are considered )hen assessing )hetherthe organi=ation controls another entity. !ubsidiary companies are fully consolidated from thedate on )hich control is transferred to the organi=ation and are de3consolidated from the date thatcontrol ceases. Thepurchasemethodofaccountingisusedtoaccount fortheacquisitionofsubsidiary companies by Pharmaniaga. The cost of an acquisition is measured as fair value of theassets given, equityinstruments issued and liabilities incurred or assumed at the date ofe'change, plus cost directlyattributable tothe acquisition. Identifiable assets acquiredandliabilities and contingent liabilities assumed in a business combination are measured initially attheir fair value at the acquisition date, irrespective of the e'tent of any minority interest. Thee'cess of the cost of acquisition over the fair value of the organi=ation:s share of the identifiablePage 0 ,? net assets acquired at the date of acquisition is recorded as good)ill. If the cost of acquisition isless than the fair value of the net assets of the subsidiary company acquired, the difference isrecogni=ed directly in the income statement. Pharmaniaga applies a policy of treating transactions )ith minority interests as transactions )ithparties outside the organi=ation. "isposal to the minority interests result in gains and losses to theorgani=ationthat arerecordedinthe income statement. Purchases of equityfromminorityinterests result in good)ill, being the difference bet)een any consideration paid and the relevantshare acquired of the carrying value of net assets of the subsidiary company. Pharmaniaga:s shareof its associatedcompanies: post3acquisitionprofits or losses is recogni=edinthe incomestatement and its share of post3acquisition movement )ithin reserves is recogni=ed in reserves.Thecumulativepost3acquisitionmovements areadDustedagainst thecarryingamount of theinvestment. Investment in associated companies is accounted for using the equitymethodaccounting and is initially ackno)ledge as cost. The consolidated financial statements are presented in #inggit Malaysia, )hich is Pharmaniaga:sfunctional and presentation currency. Boreign currencytransactions are translated into thefunctional currency using the e'change rates prevailing at the dates of the transactions. *ssetsand liabilities for each balance sheet presented are translated at the closing rate at the date of thebalance sheet. it has theopportunitytoparticipate inthe cross3assignment e'ercise operatedby?ha=anah;asionalBerhad. Pharmaniagaemphasi=eonpeopleandtalent optimi=ationasitsbusinessnicheandcompetitiveness rely more on people than having process in place. !o, it is important to identifytalents to be sharpened, )iden and e'pand their acquired skills technically and managerially. Thisis because process can be fi'ed but these must also be fle'ible to people needs, the people )homake targets materiali=ed.In addition, Pharmaniaga focus on building its bench strength and the ability to provide differentopportunities to employees )henever they are available. Bor e'ample, Pharmaniaga believes thattalents must be all rounder and should be trained to acquire the essential skills of the ability tohave a helicopter vie) of the business. !o, it holds talent management as a top strategic priorityoftheorgani=ation. Pharmaniagaencouragesitsemployeestobuildtheirmulti3taskingskills,make them marketable )ithin and outside the organi=ation by branding one3s e'pertise as )ell asenhancing net)orking )ith as many strategic people as possible.Pharmaniagaconsiderseffectivecommunication)ithshareholdersandinvestorsase'tremelyimportant. Pharmaniaga embarks on an active Investor #elation %I#& program aimed at fosteringPage 0 44 high qualitydialogue as )ell as building credibilityandtrust )ith the broad envestmentcommunity. The Managing"irector or I#personnel is primarilyresponsible for all I#activities. Theactivities include hosting, teleconferences, responding to email or telephone enquiries, catering tonumerousrequestsforprivatemeetings)ithinvestorsandanalysts, andorgani=ingtripsforinvestors to visit the organi=ation:s )arehouse, plants and factories. Burthermore, Pharmaniagahas communicatedtoinvestors andshareholders thesolidof theBoardandmanagement, auguring)ell forthecontinuityofcurrentandfuturebusiness. Theorgani=ation is committed to maintain constructive relationship )ith shareholders in pursuing thehighest standards of corporate governance practices throughout the organi=ation, )ith fullappreciation of the impact of sound governance on long3term corporate performance and optimalshareholders value.7'5'9' "nformation !ystem >"!? Pharmaniaga has its o)n )ebsite, )hich is ))).pharmaniaga.com. This )ebsite shares businessovervie), investor resources, photo gallery, ne)sletter, online catalogue and ans)er to frequentlyasked questions. In addition, shareholders can receive up3to3date information through the)ebsite. * dedicated e3mail address is also available at )masterRpharmaniaga.com. It provideda contact point for shareholders or customers on any issues concern. Burthermore, theorgani=ation )ebsite provides an e'cellent medium of communication and source of informationto shareholders and the general public regarding to the annual report and media briefings. Besidesthat, the organi=ation )ebsite consists of latest financial results, investor presentation and ne)sreleases besides the avenue for up3to3date information of the organi=ation. Pharmaniaga is an organi=ation that applying online ordering. This ordering method is easy for itscustomerstopurchaseproductsnecessary.,3orderingenablescustomersordertheirproductsonline )ithout visiting the outlets. $ustomers are order products online thus the organi=ation:semployees )ill process the order as soon as possible so that the products can deliver to customerson time. Page 0 4> In addition,Pharmaniagaapplies severalelectronicallypaymentmethod,such ascreditcard,cash transfer and debit card. These payment methods are an easy )ay for those customers )hopurchase e'pensive products and services.Pharmaniaganeedstoprescribemedicationthat generateshigher returnstotheorgani=ationcompared to over3the3counter products that provide smaller profit margin. The organi=ation alsoinvest into I$T to address the geographical and regional divide in the pharmaceutical businessand being a leading pharmaceutical organi=ation in the nation requires focus on peoplemanagement for leadership accountability. 7'7 !UMMAR/ O# "NTRNA0 #ACTOR!Integration of manufacturing, marketing, logistics, medical planning, equipping and distribution,informationtechnologyandresearchanddevelopment aremeetingcustomers: e'pectancyore'ceed their e'pectation. Pharmaniaga is able to control its production so that the organi=ationcan fulfilled customers: demand )ithout any products shortage. The organi=ation emphasi=ed onbetterqualityoflifethusprovidingproductsandservicesinanaffordablelevel.*saresult,different field in the organi=ation is responsible to achieve their mission and vision as )ell asobDectives.In addition, Pharmaniaga is emphasi=ing in delivering value to its customers via superior qualityproducts and services )hich is stated as the mission. It puts a lot efforts and guidelines to achievethe desiredmission. This is provenbyGualityManagement !ystemis maintainingat thee'cellent level )ithout any deviation in production of quality products. The organi=ation GualityManagement !ystemiscertifiedtotheI!+/--.standard, )hichistheessenceofeffectivequality management. Pharmaniaga is gro)ing rapidly in domestic as )ell as international market in )hich it has beeninternationallyrecogni=edas ahealthcaresolutions provider. Theorgani=ationfullyappliedcreativity and innovation into its marketing strategy )hich enable them to become a potentialmarket leader. Thisisbecausethe organi=ationunderstandsthatdifferentpeopletend toholddifferent perception and belief in decision making.7o)ever, Pharmaniaga has its o)n )eakness that is it has to cover maintenance and operationcosts. The organi=ationhas toplanandlaunchedfor relevant strategies tomake surethatPage 0 46 ma'imum capacities can be operated )ithout )asting its organi=ation resources. In addition, theorgani=ation has to plan the budget for the maintenance costs since profitability is affected."#A! ta*le "nternal #a+tors 3eight Rating 3eighted!+oreComments/ 0 8 4 5!trengths Eertical integration../5 4.. ..2 Improve productivity eadership of topmanagement../. 4.. ..4 $onstruct organi=ationreputation Potential andtrained sales teams../. 8.. ..8 Increase organi=ationmarket share Products quality ../5 4.5 ..295 !atisfied customers needs Internationaloriented...5 4.. ..0 arger pharmaceuticalindustry 3eakenesses Maintenance costs ../5 8.5 ..505 Planned for maintenancebudget Binancial position ...5 0.5 ../05 *dvance budgeted for ne)products line Process orientedoperational ...5 8.. ../5 !lo) on processing aproduct Pool of talents../. 4.. ..4 ack of medicalkno)ledge Marketing strategy../. 8.8 ..88 More on persuadingTotal !cores /... 8.9.5Page 0 47 8'; ANA0/!"! O# !TRAT%"C #ACTOR! >!3OT?8'1 !"TUAT"ONA0 ANA0/!"!!