MAS 00519 CORPORATE ENG FINAL - ir.chartnexus.comir.chartnexus.com/mas/website_HTML/attachments/attachment_18598_1321344694.pdfRIZANI BIN HASSAN(LS 05125) COMPANY SECRETARY Kuala Lumpur,

Contents

2 Notice of Annual General Meeting

4 CHAIRMAN’S MESSAGE

6 MANAGING DIRECTOR’S STATEMENT

10 BOARD OF DIRECTORS

17 Corporate Information

20 Management Committee

23 Statement on Corporate Governance

31 Audit Committee’s Report

34 Statement on Internal Control

36 Group Structure

37 Fleet Status

38 Route Network

40 Calendar of Events

42 REVIEW OF OPERATIONS

42 Evolving the Business

46 Spreading Our Wings

50 Reaching Out to Our Passengers

56 Moving Cargo, Moving the World

60 Keeping on Flying, Safely

66 Investing in Technolgy and Quality

70 GROUP FINANCIAL HIGHLIGHTS

73 FINANCIAL STATEMENTS

146 STATISTICS ON SHAREHOLDINGS

149 LIST OF COMPANY’S PROPERTIES

156 GLOSSARY

157 FORM OF PROXY

MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 1

2 ANNUAL REPORT 2002 / 2003

Notice is hereby given that the 32nd Annual General Meeting

of Malaysian Airline System Berhad will be held at Nirwana Ballroom 1,

Lower Lobby, Mutiara Hotel Kuala Lumpur, Jalan Sultan Ismail,

50250 Kuala Lumpur on Monday, 8 September, 2003 at 10.00 a.m.

for the following purposes:-

Notice of Annual General MeetingAgenda

AS SPECIAL BUSINESS

6 To consider and, if thought fit, to pass the following Ordinary

Resolution:-

Authority to issue and allot shares

“That subject always to the Companies Act, 1965, the Articles

of Association of the Company and the approvals of the

relevant governmental/regulatory authorities, the Directors be

and are hereby authorised pursuant to Section 132D of the

Companies Act, 1965, to issue and allot shares in the Company

at any time until the conclusion of the next Annual General

Meeting and upon such terms and conditions and for such

purposes as the Directors may, in their absolute discretion,

deem fit provided that the aggregate number of shares to be

issued does not exceed ten per centum of the issued share

capital of the Company for the time being.”

RESOLUTION 10

7To transact any other ordinary business for which due notice

has been given.

RESOLUTION 11

AS ORDINARY BUSINESS

1To receive and adopt the Report of the Directors and the

Audited Accounts for the financial year ended 31 March, 2003

together with the Report of the Auditors thereon.

RESOLUTION 1

2To approve the Directors’ fees for the financial year ended

31 March, 2003.

RESOLUTION 2

3To re-elect the following Directors retiring under Article 139 of

the Company‘s Articles of Association, and who, being eligible,

offer themselves for re-election:-

(i) Tan Sri Dato’ Seri Azizan Bin Zainul Abidin RESOLUTION 3

(ii) Tan Sri Dato’ Dr. Samsudin Bin Hitam RESOLUTION 4

(iii) Dato’ Md. Nor Bin Md. Yusof RESOLUTION 5

4To re-elect the following Directors retiring under Article 137 of

the Company’s Articles of Association, and who, being eligible,

offer themselves for re-election:–

(i) Datu Hj. Salleh Bin Hj. Sulaiman RESOLUTION 6

(ii) Datuk Hj. S Abdillah @ Abdullah Bin Hassan

@ S Hassan RESOLUTION 7

(iii) Dato’ Gumuri Bin Hj. Hussain RESOLUTION 8

5To re-appoint Messrs. Ernst & Young as Auditors and to

authorise the Directors to fix their remuneration.

RESOLUTION 9

BY ORDER OF THE BOARD

RIZANI BIN HASSAN (LS 05125)COMPANY SECRETARY

Kuala Lumpur, 16 August 2003


3

Not

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of A

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Mee

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EXPLANATORY NOTES ON ITEM 6 OF THE AGENDA

Resolution pursuant to Section 132D, Companies Act, 1965.

The Ordinary Resolution proposed under item 6 of the Agenda, if passed, will

empower the Directors to issue shares in the Company up to an amount not exceeding

in total 10% of the issued share capital of the Company, subject to compliance with

the relevant regulatory requirements. The approval is sought to avoid any delay and

cost in convening a general meeting for such issuance of shares. This authority, unless

revoked or varied by the Company at a general meeting, will expire at the next Annual

General Meeting.

NOTES1 A member of the Company entitled to attend and vote at the Meeting is entitled

to appoint a proxy to attend and vote in his stead. A proxy may but need not be a

member of the Company and a member may appoint any person to be his proxy

and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply

to the Company.

2In the case of a corporate member, the instrument appointing a proxy shall be

under its Common Seal or under the hand of its officers or attorney, duly

authorised in that behalf.

3A holder may appoint more than two proxies to attend the Meeting. Where a

member appoints two or more proxies, he shall specify the proportions of his

share-holding to be represented by each proxy.

4The right of Foreigners to vote in respect of their deposited securities is subject to

Section 41 (1) (e) and Section 41 (2) of the Securities Industry (Central Depositories)

Act, 1991 and the Securities Industry (Central Depositories) (Foreign Ownership)

Regulations, 1996. The position of such Depositors in this regard will be

determined based on the General Meeting Record of Depositors. Such Depositors

whose shares exceed the Company’s foreign shareholding limit of 45% as at the

date of the General Meeting Record of Depositors may attend the above Meeting

but are not entitled to vote. Consequently, a proxy appointed by such Depositor

who is not entitled to vote will also not be entitled to vote at the above Meeting.

5The instrument appointing a proxy must be deposited at the Registered Office

of the Company at 33rd Floor, Bangunan MAS, Jalan Sultan Ismail, 50250

Kuala Lumpur, not less than 48 hours before the time for holding the Meeting

or at any adjournment thereof.

6Shareholders’ attention is hereby drawn to the Listing Requirements of the Kuala

Lumpur Stock Exchange, which allows a member of the Company who is an

authorised nominee as defined under the Securities Industry (Central Depositories)

Act, 1991, to appoint at least one (1) proxy in respect of each securities account it

holds with ordinary shares of the Company standing to the credit of the said

securities account.

List of General Meetings held during the financial year ended 31 March 2003

EXTRAORDINARY GENERAL MEETINGDate : 5 November, 2002

Time : 10.00 a.m.

Venue : Pacific Ballroom, Level 2, Pan Pacific Hotel

Jalan Putra, 50746 Kuala Lumpur

31ST ANNUAL GENERAL MEETINGDate : 30 September, 2002

Time : 10.00 a.m.

Venue : Dewan Tun Hussein Onn, Level 2

Putra World Trade Centre

41, Jalan Tun Ismail, 50480 Kuala Lumpur

DETAILS OF INDIVIDUAL DETAILS OF ATTENDANCE DIRECTORS AND OTHER

NAME OF DIRECTOR OF BOARD MEETINGS DISCLOSURE REQUIREMENTS

Tan Sri Dato’ Seri Azizan Bin Zainul Abidin Refer to page 23 of the Refer to page 10 of the (Article 139 of the Company’s Articles of Association) Annual Report Annual Report

Dato’ Md. Nor Bin Md. Yusof Refer to page 23 of the Refer to page 10 of the (Article 139 of the Company’s Articles of Association) Annual Report Annual Report

Tan Sri Dato’ Dr. Samsudin Bin Hitam Refer to page 23 of the Refer to page 11 of the (Article 139 of the Company’s Articles of Association) Annual Report Annual Report

Datu Hj. Salleh Bin Hj. Sulaiman Refer to page 23 of the Refer to page 12 of the (Article 137 of the Company’s Articles of Association) Annual Report Annual Report

Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan Refer to page 23 of the Refer to page 14 of the (Article 137 of the Company’s Articles of Association) Annual Report Annual Report

Dato’ Gumuri Bin Hj. Hussain Not applicable* Refer to page 15 of the (Article 137 of the Company’s Articles of Association) Annual Report

*Dato’ Gumuri Bin Hj. Hussain was appointed after the financial year ended 31 March 2003

Statement Accompanying the Notice of Annual General Meeting

Directors standing for re-election at the 32nd Annual General Meeting of the Company to be held at Nirwana Ballroom 1, Lower Lobby,

Mutiara Hotel Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Monday, 8 September, 2003 at 10.00 a.m. are as follows:-



Chairman’s Message

It gives me great pleasure to report that the financial year

2002/2003 closed with Malaysia Airlines chalking a profit of

RM339.1 million. This was a welcome change from the

situation of recurring losses in the past five years. Though

the profits were modest the achievement was all the more

commendable considering the uncertain economic and

political environment. While there were evidence of a

return of confidence in air travel in the first half of the

year compared to the situation immediately after the

11 September terrorist attack on the World Trade Centre,

the travel advisories issued by several governments and the

impending of war on Iraq were major obstacles to a

sustained recovery. Practically every airline was under severe

pressure posed by the reduced demand for air travel. This

depressing business environment was aggravated by the

mounting cost of operations.

For Malaysia Airlines, encumbered by a huge debt, the

situation was hardly tenable. It needed the restructuring to

put it on a firmer footing. The innovative asset unbundling

under the Widespread Asset Unbundling (WAU) scheme

resulted in separation of ownership of assets from operation.

On completion of the restructuring exercise, Malaysia Airlines

was left with a healthier balance sheet.

The innovative assetunbundling under theWAU scheme resulted inseparation of ownershipof assets from operation.On completion of therestructuring exercise,Malaysia Airlines wasleft with a healthierbalance sheet.


5

A welcome change came in the form of greater

consciousness of the urgency to strengthen the resilience

and the capacity of the Airline to respond quickly and

effectively to the challenges faced by it. The outstanding

performance of MASkargo was a happy outcome of this

new mood and spirit.

I would like to thank the staff, management, shareholders

and stakeholders for their loyalty and support in the difficult

and trying times. In the course of last year we came up with

a new and exciting advertising theme. However, the stakes

have been enormously raised by the convergence of disasters

that were visited upon us. Nevertheless, we remain

undeterred in our commitment to “go beyond expectations”

in the coming year and beyond.

Chai

rman

’s M

essa

ge

Galvanized by a renewed feeling of confidence that came

with the changes in the Board and the management,

Malaysia Airlines undertook several measures aimed at

improving its operations. The initiatives taken by various

departments had set in motion a drive targeted at enhancing

the products offered by the company, the quality of its

services and the overall reliability of the Airline.

Improvements are evident in the cabin service, and in sales,

and passenger handling. Enhanced engineering and technical

support resulted in improved reliability. There were also

notable improvements in processes and procedures that have

contributed to increased productivity and cost saving. We are

proud that once again Malaysia Airlines was the recipient of

the Skytrax Best Cabin Staff award.

Tan Sri Dato’ Seri Azizan Bin Zainul AbidinChairman



Managing Director’s Statement

The year presently under review was a defining one for Malaysia

Airlines, distinguished above all else by the major reorganisation

of the Group Corporate Structure effected by a financial

stratagem without precedent. WAU, as this was known (the

name is a happy association with our logo), connotes a

widespread asset unbundling exercise that separated balance

sheet management from the operational management. It was a

timely move, which came at a most critical juncture when the

Airline was under siege as never before in its history. It proved

regenerative – transforming the financial standing of the Group,

thereby preserving the national flag carrier – and as such

deserves to be seen as a true landmark event.

Turnaround Faster than Forecast

The reorganisation – the result of long and meticulous

planning, I am happy to report that it is working. Recovery is

already under way – a faster turnaround than expected and

evidenced by the present financial statement, where we record

a staggering profit especially given the temper of the times.

The Group achieved a net profit after tax of RM339.1 million

for the financial year ended 31 March 2003 compared to a

net loss after tax of RM835.6 million in the last financial year.

Total revenue for the full financial year increased by RM199.2

million, while total expenditure in the same period was lower

by RM699.7 million.

The better than expected demand in our passenger and cargo

services was a key factor in the improved financial result. But

WAU also played a significant part. This came into effect on

5 November, 2002. The fourth quarter was the first time

the new cost structure was fully applied and tested.

The Group achieveda net profit after tax ofRM339.1 million for thefinancial year ended31 March 2003 comparedto a net loss after tax ofRM835.6 million in thelast financial year.


7

This achievement has to be set against an extremely difficult

period in our history when we had to cope with not one but

a series of external shocks, impossible to anticipate which

devastated the entire aviation business. Malaysia Airlines

prevailed. Several of our industry counterparts did not, including

even some of the major players. In relative terms, we came out

well ensuing from our prompt and strategic response with the

impetus coming from the bold step we took in restructuring.

Unconventional Restructuring, yet Commercially Justified

In effect, our aircraft were transferred out from our balance

sheet to PMB – Penerbangan Malaysia Berhad, an entity

set up and owned by the Minister of Finance Inc. that became

our principal shareholder and the designated Government

holding company. The aircraft fleet was leased back and

Malaysia Airlines operates the domestic sector on behalf of

PMB and continues to own and operate the international and

cargo businesses. What was most gratifying – and here we

record our appreciation of the Government’s part in all this –

was its willingness to underwrite our recovery plan.

Commitment on their side and political will make it possible.

For the benefit of the critics – and the sceptics who are always

with us – it is necessary to understand the genuine strategic

intent behind the manoeuvre. It should not be seen as a bailout

but a commercial transaction which, however unconventional, is

capable of being justified in commercial terms. First, the

rationale for separating balance sheet management from the

operations is a pragmatic division of responsibilities in line with

the different core competencies involved. Malaysia Airlines can

now concentrate on the operational side. This follows the

modern trend, towards separate autonomous business units

for greater focus and effectiveness.

There is also a strong case for more Government

participation, which brings unequalled shareholder strength

and staying power, now more than ever relevant in the

context of the volatile environment in which we operate.

This is the airline’s best guarantee of financial security. We

are strongly underwritten – and therefore no longer hostage

to market forces and the vagaries of the economic cycle.

Aviation is a special case. Its financing needs critical mass.

The provision of aircraft is capital intensive. Malaysia Airlines

currently operates 100 aircraft all told – 85 in the jet category,

of which 48 are wide bodied, punitively expensive to fund.

It is very much in the Government’s own interest to see

that the fleet is sustained. Air transport is vital to modern

economic activity. The conventional approach of business in

the past has been to rely on the so-called free market

and to allow market forces to supply the correctives to any

downturn. This just will not suffice, in today’s terms, a lesson

that was underscored in 1997, and especially for an essential

industry like ours. We have to be strategic not just reactive

and ad hoc. Connectivity is indispensable in a global society.

It is critical for the Government’s planning and policy

implementation that the air bridges remain intact. At the

same time, it is fully recognised that this comes at a price.

Man

agin

g Di

rect

or’s

Sta

tem

ent

Dato’ Md. Nor Bin Md. YusofManaging Director



Managing Director’s Statement

We saw Malaysia Airlines dominating the top league of

Skytrax’ premier survey of international airlines. We moved

ahead of our competitors to take the Award in the category

for World’s Best Cabin Crew 2002. To our delight, just before

this report goes to print, we have received the same Award

for 2003 proving our quality and sustainability.

I commend all those who contributed to this ground-breaking

achievement. It should not come as an entire surprise. This

only confirms our long held belief that the intrinsic Malaysian

grace and charm of our people is a core asset especially in a

service industry. An accolade such as this is a significant factor

in attracting business. Now we are firmly benchmarked against

the best in what may be regarded as the upper elite of the

world’s airlines. This is in line with the new Malaysia Airlines

look. A corollary of the restructuring is the need to reposition

ourselves in the external arena not just to apprise the public of

our new configuration but to project competitive advantage.

It is on this basis that WAU was presented, accepted by the

Board and implemented at the end of the third quarter. A

comprehensive exercise was undertaken to internalise what

was a brand new concept, and to secure employee buy-in at

all levels of the organisation. It was soon accompanied by a

revitalised Business Plan. We were ready to go, and here we

are. It is heartening to see signs of improvement at this early

stage of implementation.

Our Resilience and Quality Consciousness Proving to be Real Assets

It would be wrong however to allow our recovery strategy,

exciting as it is, to overshadow the other very real gains we

made in the course of the year. Malaysia Airlines’

performance was noteworthy. Our EBITDAR achieved a

21.7% margin even before the gain from the aircraft transfer.

This is better than our peers in the market and against

tremendous odds. Management has reason to be proud –

and I would personally like to congratulate them on this –

that they did not allow the pressures under which we had to

operate to diminish in any way the quality of our products or

of the high standards we have set for both our customer

services and our employee welfare. It was a real test of our

resilience and it is more than that. We were not content with

just holding operation. We were even able to excel and set

new performance records for ourselves.


9

We are Undeterred by the Daunting, Volatileand Challenging Risk Landscape

To end, I would like, although it is early days, to take a reality

check on the changes we introduced. As things turned out

and by an extraordinary turn of events, Malaysia Airlines’ new

model was to be almost instantly tested. The very day we

were going public with the restructuring, the Bali bombing

took place. No sooner was the ink dry on the contract, then

rumours of imminent war in Iraq were rife. There was a very

changed psychological climate to contend with. That new

instrument, the travel advisory, made its appearance in our

marketing scenario and crisis management entered the Board

Agenda. This was even before the Severe Acute Respiratory

Syndrome (SARS) had happened. All of these developments

were visited upon us by external forces beyond our control

but not beyond our ability to contain. Happily our new model

proved viable and feasible.

It also proved something else. There is no room for

complacency. Never has the world – and the industry, been so

unpredictable. The level of risk and uncertainty is incalculable.

Going forward undeterred we still see the reorganisation as a

chance of renewal. This will depend on our sustaining the initial

enthusiasm it received and that allows the Plan to work. Our

people have embraced it in a very positive spirit and on behalf

of management, I thank them. They are ready for change. It is

not just the system that will be tested; we will be tested.

We have also to thank our shareholders for their patience

and their staunch support in the bad times. We believe the

recovery strategy has only just began and will continue to

yield continuous improvement. We view the future with

cautious optimism – our confidence being based on the fact

that we now have a stable ownership and an eminently

pragmatic organisation in place, on which we can rely.

The verdict of history may well be that last year laid the

foundation for Malaysia Airlines, going on to achieve its

ultimate destiny in the global aviation stakes.M

anag

ing

Dire

ctor

’s S

tate

men

t



Dato’ Md. Nor Bin Md. Yusof Non-Independent and Executive Director

Dato’ Md. Nor Bin Md. Yusof, aged 55, is a Malaysian. He graduated

with a Bachelor of Commerce from the University of Otago, New

Zealand and is a qualified Chartered Accountant. He has attended

various senior management training programmes including Advanced

Management Programme at Wharton School and Banking and

Monetary Policies Programme organised by Harvard University. Prior to

Malaysia Airlines, he was appointed the advisor to the Ministry of

Finance in May, 2000 after serving the Commerce Asset Holdings

Berhad Group as a Director since 22 February, 1988. His last position

was President and Chief Executive Officer at the then Bank of

Commerce Berhad (BOC). During his tenure at BOC, Dato’ was also the

Chairman of Commerce International Merchant Bankers Berhad and a

Director on the Board of Bank of Commerce (L) Ltd., Pos Malaysia

Berhad, Cagamas Bhd., Labuan Offshore Financial Services Authority,

Financial Park (Labuan) Sdn. Bhd. and several other organisations. He

was also a member of the Executive Committee of the Association of

Banks Malaysia and the Chairman of the Banking Mediation Bureau.

He was appointed as Managing Director of Malaysian Airline System

Berhad on 14 February, 2001 and was appointed as a member of the

Board Safety and Security Committee. Currently, he also sits on the

board of Labuan Offshore Financial Services Authority. He has attended

twelve (12) out of the twelve (12) Board meetings held during the

financial year.

Tan Sri Dato’ Seri Azizan Bin Zainul AbidinNon-Independent and Non-Executive Chairman.

Tan Sri Dato’ Seri Azizan Bin Zainul Abidin, aged 68, is a Malaysian. He

graduated with a Bachelor of Arts (Hons.) from the University of

Malaya, Malaysia in 1959 and has attended courses in Development and

Administration at Oxford University, United Kingdom, The Royal College of

Defence Studies, United Kingdom and an Advanced Management

Programme at Harvard Business School, United States of America. He

was appointed Chairman of Petroliam Nasional Berhad (PETRONAS) on

10 February, 1995 after serving as President and Chief Executive of

PETRONAS from February, 1988. Prior to joining PETRONAS, he had served

in the Malaysian Civil Service for twenty-eight (28) years and had held

various positions in the civil service including Secretary to the National

Security Council, Principal Private Secretary to three (3) Prime Ministers,

Secretary-General to the Ministry of Trade and Industry and Secretary-

General to the Ministry of Home Affairs. Tan Sri Dato’ Seri Azizan is

also the President and Chief Executive of Perbadanan Putrajaya which is

involved in the planning, development and management of Putrajaya,

the new Federal Government Administrative Centre.

He was appointed as Chairman of Malaysian Airline System Berhad

on 15 February 2001. He is also Chairman of the Nomination

Committee. Currently he sits on the board of several public

companies including Petroliam Nasional Berhad, KLCC (Holdings)

Berhad, KLCC Projeks Bhd. (Formerly known as Kuala Lumpur City

Centre Berhad) and Kuala Lumpur City Park Berhad and also a trustee

of Malaysian Philharmonic Orchestra and Dewan Filharmonik

Petronas. He has attended twelve (12) out of the twelve (12) Board

meetings held during the financial year.

Board of Directors


11

Tan Sri Dato’ Dr. Samsudin Bin Hitam Non-Independent and Non-Executive Director.

Tan Sri Dato’ Dr. Samsudin Bin Hitam, aged 55,

is a Malaysian. He graduated in 1970 with a Bachelor of Arts (Hons.) in

Malay Studies from the University of Malaya, Malaysia. He later

obtained a Master of Science in Agricultural Economics and a

Doctorate in Land Resources, both from the University of Wisconsin,

United States of America in 1977 and 1986, respectively. He began his

career with the Treasury Department as Assistant Secretary,

Budget Division in 1970 and later became Assistant Director, Budget

Division in 1973. In 1980, he was promoted to Senior Assistant

Director, Budget Division. In 1986, he joined the Economic Planning

Unit (EPU) as the Secretary to the Economic Panel and was

subsequently promoted to Director of Macroeconomics in 1987. In

1992, he was appointed as Deputy General (Sectoral) of the EPU and

subsequently as Deputy Director General (Macro). In 1998, he was

appointed as the Director General of the EPU before moving back to

the Treasury in June, 2000 as the Secretary General.

He was appointed as a Director of Malaysian Airline System Berhad on

21 July, 2000. He is also a member of the Board Audit Committee and

Nomination Committee. Currently, he sits on the board of several

public companies including Petroliam Nasional Berhad, Khazanah

Nasional Berhad and Bintulu Port Holdings Berhad and Group. He is

also a member of the board of several statutory bodies including

Lembaga Hasil Dalam Negeri, Kumpulan Wang Amanah Pencen and

Bank Negara Malaysia. He has attended seven (7) out of the twelve

(12) Board meetings held during the financial year.

Dato’ Zaharaah Binti ShaariNon-Independent and Non-Executive Director.

Dato’ Zaharaah Binti Shaari, aged 54, is a Malaysian. She graduated

with a Bachelor of Arts (Hons.) from the University of Malaya, Malaysia

in 1971 and later obtained a Master of Science in Transport Planning

and Management from the Polytechnic of Central London, United

Kingdom. She began her career with the Ministry of Transport as

Assistant Secretary, Civil Aviation Division in 1971 and later

as Principal Assistant Secretary in Civil Aviation Development, Air

Transport and International Affairs Division. In 1974, she was promoted

to Director of the Air Transport and International Affairs Division and

subsequently to the post of Under Secretary of Aviation in the Ministry

of Transport. She was appointed as Deputy Director of Budget in the

Ministry of Finance in 1989 and subsequently as Director of Budget in

1996 before assuming her present position as Secretary-General to the

Ministry of Transport in 1999.

She was appointed as a Director of Malaysian Airline System Berhad on

1 October, 1999. She is also a member of the Board Audit Committee

and Remuneration Committee. Currently, she sits on the board of

Malaysia Airports Holdings Berhad and Penerbangan Malaysia Berhad.

She is also the Chairman of Bintulu Port Authority, Ipoh Cargo Terminal

Sdn. Bhd. and Railway Asset Corporation and Deputy-Chairman of

Johore Port and Port of Tanjung Pelepas Authority. She has attended

eight (8) out of the twelve (12) Board meetings held during the

financial year.

Dato’ N. Sadasivan a/l N. N. Pillay Director / Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan Director / Keong Choon Keat Director /

Dato’ Md. Nor Bin Md. Yusof Managing Director / Martin Gilbert Barrow Director / Tan Sri Dato’ Seri Azizan Bin Zainul Abidin Chairman /

Dato’ Zaharaah Binti Shaari Director / Datu Hj. Salleh Bin Hj. Sulaiman Director / Dato’ Gumuri Bin Hj. Hussain Director /

Dato’ Mohamed Azman Bin Yahya Director / Tan Sri Dato’ Dr. Samsudin Bin Hitam Director

Boar

d of

Dire

ctor

s

From Left to Right



Keong Choon KeatIndependent and Non-Executive Director

Keong Choon Keat, aged 59, is a Malaysian. He is a member of the

Malaysian Institute of Accountants, the Malaysian Institute of Certified

Public Accountants and is a Fellow Member of the Institute of

Chartered Accountants in England and Wales. He was attached to

Bristol Myers & Company Ltd. in Middlesex, England as an Accountant

in 1968 and left to join Malaysian Tobacco Company Bhd. as an

Accountant in 1969. From 1974 to 1999, he was attached to UMW

Holdings Bhd. where he held various management positions from

General Manager to Director Group Accounts before being promoted

to the position of Executive Director in 1988. Upon retirement in 1999,

he joined a consultancy firm providing outplacement and career

management consultancy services in Malaysia.


16 April, 2001. He is also the Chairman of the Board Audit Committee

and a member of the Remuneration Committee. He is a Director of

several public companies including JT International Berhad, Chin Teck

Plantations Berhad, Negri Sembilan Oil Palms Berhad, Pacificmas Bhd.,

The Pacific Insurance Berhad and Crest Builder Holdings Berhad. He has

attended eleven (11) out of the twelve (12) Board meetings held during

the financial year.

Datu Hj. Salleh Bin Hj. SulaimanIndependent and Non-Executive Director.

Datu Hj. Salleh Bin Hj. Sulaiman, aged 53, is a Malaysian. He graduated

with a Bachelor of Science from the University of Malaya in 1973 and

later obtained a Master of Education from the University of London,

United Kingdom in 1980. He is also a fellow of the Kennedy School of

Government, Harvard University, Cambridge, USA. He began his career in

1975 as Education Officer/Teacher. From 1977 to 2001, he had held

various positions including Vice Principal, Principal, Development Officer

in Department of Education, Senior Project Officer and Director

Entrepreneur Development Division (SEDC); General Manager, Borneo

Development Corporation Sdn. Bhd.; General Manager, Bintulu

Development Authority (BDA); Senior Assistant Director and Deputy

Director, Sarawak Foundation; Managing Director, Centre Modern

Management and subsequently to the post of Permanent Secretary of

the Ministry of Infrastructure Development and Communication before

assuming his present position as Deputy State Secretary of Sarawak.


1 October, 2002. He is also a member of the Board Audit Committee,

Board Safety and Security Committee and Nomination Committee. He

holds no other Directorships in public companies in Malaysia. He has

attended five (5) out of the five (5) Board meetings held during the

financial year since his appointment to the Board of Directors of

Malaysian Airline System Berhad.

Board of Directors


13

Martin Gilbert BarrowIndependent and Non-Executive Director

Martin Gilbert Barrow, aged 59, is British. He graduated with Oxford

and Cambridge Board Examination “A” levels in Science and

Mathematics. He subsequently attended courses in Finance and

Marketing. He joined Jardine Matheson, Hong Kong, in 1965. From

1975 to 1980, he was transferred to Japan as Managing Director of

the Group’s operations in Japan. He was promoted to the position of

President of Olayan Saudi Holding Company, the Group’s affiliate in

Saudi Arabia from 1980 to 1983. He returned to Hong Kong as

Regional Managing Director, Jardines’ operations in Hong Kong and

China, in 1983 and was appointed a Director of Jardine Matheson Ltd.

at the Group Head Office from 1989 to 2001. He was also active in

public service and was Chairman of the Hong Kong Tourist Association

from 1988 to 1996 and a member of the Aviation Advisory Board. He

retired from Jardine Matheson in June, 2001.


29 August, 2001 and is the Chairman of the Board Safety and Security

Committee. He holds no other Directorships in public companies in

Malaysia. He has attended nine (9) out of the twelve (12) Board


Dato’ N. Sadasivan a/l N. N. PillayIndependent and Non-Executive Director.

Dato’ N. Sadasivan a/l N. N. Pillay, aged 63, is a Malaysian. He

graduated in 1963 with a Bachelor of Arts (Honours) degree in

Economics from University of Malaya, Malaysia. He began his career

with the Economics Development Board, Singapore as Economist/Chief,

Industrial Facilities Division in 1963. From 1968 to 1995, he was

attached to Malaysian Industrial Development Authority (MIDA) where

he held various management positions from Director of Division to

Deputy Director – General before being promoted to the position of

Director – General in 1984. Upon retirement in 1995, he set up his

own consultancy firm, SKA Management Consultants Sdn. Bhd.


1 December, 2001. He is a member of the Board Audit Committee,

Nomination Committee and Remuneration Committee. Currently, he

sits on the board of several public companies including Chemical

Company of Malaysia Berhad, Petronas Gas Berhad, Leader Universal

Holdings Berhad, Amanah Capital Partners Berhad, APM Automotive

Holdings Berhad and Pengurusan Danaharta Nasional Berhad. He is

also a Director of Bank Negara Malaysia. He has attended eleven (11)

out of the twelve (12) Board meetings held during the financial year.

Boar

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Datuk Hj. S Abdillah @Abdullah Bin Hj. Hassan @ S Hassan Independent and Non-Executive Director

Datuk Hj. S Abdillah @ Abdullah Bin Hj. Hassan @ S Hassan aged 53, is

a Malaysian. He graduated with a Bachelor of Arts (Honours) from the

University of Malaya, Malaysia. He started his career as an Administrative

Officer, Chief Minister’s Department, Sabah Branch in 1974 and was

subsequently appointed as District Officer, Kudat in 1977. In 1980,

he was transferred to the Ministry of Culture, Youth and Sports as

Permanent Secretary. In 1984, he served as Secretary of Internal Affairs

& Research before being posted as Director of Sabah State’s Public

Service Department in 1994. Subsequently, he moved on to serve as

the Deputy State Secretary in 1996 before assuming his present position

as Permanent Secretary, Ministry of Finance, Sabah State Government.

Prior to his appointment as Director of Malaysian Airline System Berhad

on 10 March, 2003, he was the Alternate Director to Datuk Kee

Mustafa. He is also a Director of several public companies including

Sabah Development Bank Berhad, Borneo Housing Mortgage Finance

Berhad, Perbadanan Pinjaman Sabah and Progressive Insurance Berhad.

He has attended two (2) out of the eleven (11) Board meetings as

alternate to Datuk Kee Mustafa and one (1) out of one (1) Board

meeting held during the financial year since his appointment to the

Board of Directors of Malaysian Airline System Berhad.

Dato’ Mohamed Azman Bin YahyaIndependent and Non-Executive Director

Dato’ Mohamed Azman Bin Yahya, aged 39, is a Malaysian. He

graduated with a First Class Honours Degree in Economics from the

London School of Economics & Political Science of the University of

London and is a member of the Malaysian Institute of Accountants and

the Institute of Chartered Accountants in England and Wales and

fellow of the Malaysian Institute of Banks. He is the founder and Group

Chief Executive of Symphony House Berhad, a listed IT and corporate

services group. He also serves as a member of the Malaysian Steering

Committee on Bank Restructuring and sits on the advisory panels for

the Malaysian Financial Sector Masterplan, the Securities Commission

Capital Market Advisory Council and Malaysia Venture Capital

Management Berhad. He is the Chairman of Pengurusan Danaharta.


1 December, 2001. He is also the Chairman of the Remuneration

Committee. He sits on the Board of several public companies including

Sime Darby Berhad, Pharmaniaga Berhad, Island & Peninsular Berhad,

PLUS Expressway Berhad, AE Multi Holdings Berhad and Symphony

House Berhad. He has attended nine (9) out of the twelve (12) Board


Board of Directors


15

Dato’ Gumuri Bin Hj. Hussain Non-Independent and Non-Executive Director

Dato’ Gumuri Bin Hj. Hussain aged 56, is a Malaysian. He is a

member of the Malaysian Institute of Accountants, the Malaysian

Institute of Certified Public Accountants and is a Fellow Member of

the Institute of Chartered Accountants in England and Wales. He

was formerly a senior partner in PricewaterhouseCoopers Malaysia

and Deputy Chairman of its Governance Board. He had been

with PricewaterhouseCoopers and its predecessor firm, Price

Waterhouse, since 1975. He joined Penerbangan Malaysia Berhad

as the Managing Director and Chief Executive Officer on 16 August

2002 upon his retirement from PricewaterhouseCoopers.


20 May, 2003. He is a Director of a public company, Kurnia Setia Berhad.

Jusof Bin Ismail(Alternate Director to Tan Sri Dato’ Dr. Samsudin Bin Hitam)

Jusof Bin Ismail, aged 41, is a Malaysian and is an Alternate Director to

Tan Sri Dato’ Dr. Samsudin Bin Hitam. He graduated with a Bachelor of

Economics from the University of Malaya, Malaysia in 1985 and later

obtained a Diploma in Public Administration from the National Institute

of Public Administration, Kuala Lumpur, Malaysia in 1987 and a Master

of Economics at Williams College, Massachusetts, United States of

America. He began his career with the Treasury as Assistant Secretary,

Economic Division (Public Finance Section) in 1988. In 1997, he was

transferred to the Finance Division (Privatisation Section) of Treasury as

Assistant Secretary before his appointment in 2000 as Special Officer to

the Secretary General of Treasury.

He was appointed as an Alternate Director to Tan Sri Dato’

Dr. Samsudin Bin Hitam on 28 August, 2000. He has not attended

the Board meetings held during the financial year on behalf of

Tan Sri Dato’ Dr. Samsudin Bin Hitam.Re

view

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Prior to his appointment as Alternate Director to Datu Hj. Salleh Bin Hj.

Sulaiman on 6 January, 2003, he was the Alternate Director to

Datu Dr. Hatta Solhi. He is also a Director of several public companies

including Cahya Mata Sarawak Berhad, Sarawak Enterprise Corporation

Berhad and Group and Rashid Hussain Berhad. He has attended one

(1) out of the nine (9) Board meetings held during the financial year

as alternate to Datu Dr. Hatta Bin Solhi.

Abdul Rahman Bin Abdul Ghani(Alternate Director to Datuk Abdillah @

Abdullah Bin Hassan @ S Hassan)

Abdul Rahman Bin Abdul Ghani, aged 52, is a Malaysian and is an

Alternate Director to Datuk Abdillah @ Abdullah Bin Hassan @ S

Hassan. He graduated with a Bachelor of Arts from the University of

Queensland, Australia in 1977. He began his career in the civil service

as Penolong Penguasa Kastam at the Royal Customs and Excise

Department in 1977 and thereafter served in the State Civil Service

including statutory bodies and agencies during the last 23 years,

holding various senior positions. His last position before joining Warisan

Harta Sabah Sdn. Bhd., a wholly owned investment holding company

of the State Government of Sabah as Chief Executive Officer with

effect from 17 April, 2000 was as Government Printer at the Sabah

Government Printing Department.

He was appointed as an Alternate Director to Datuk Abdillah @

Abdullah Bin Hassan @ S Hassan on 11 July, 2003. He is also a Director

of a public company, Borneo Housing Mortgage Finance Berhad.

Datuk Wan Abdul Kadir Bin Wan Yubi @Datuk Wan Ali Tuanku Yubi (Alternate Director to Datu Hj. Salleh Bin Hj. Sulaiman)

Datuk Wan Abdul Kadir Bin Wan Yubi @ Datuk Wan Ali Tuanku Yubi

aged 53, is a Malaysian and is an Alternate Director to Datu Hj. Salleh

Bin Hj. Sulaiman. He graduated with a Bachelor of Economics degree

from the University of Malaya, Malaysia in 1973 and later obtained a

Master of Education from the University of Birmingham in 1982. He

started his career as an Education Officer at the Department of

Education, Sarawak, a Federal Service appointment, in 1974 and was

subsequently appointed Senior Education Officer. In 1984, he was

transferred to the State Financial Secretary’s Office, Sarawak as

Principal Assistant Secretary (Contracts). In 1987, he served as Resident,

Limbang Division in Sarawak for a year before being posted as

Permanent Secretary to the Ministry of Land Development in 1988

where he held the position for four and a half years. Subsequently, he

moved on to serve as the General Manager of Land Custody and

Development Authority in 1992 and was transferred back to the State

Civil Service as the Deputy State Financial Secretary in 1994. He was

promoted to the position of State Financial Secretary in 1995 where he

held the post for almost six (6) years before opting for early retirement

from the State Civil Service in November, 2000. He was a former

Director of Borneo Housing Mortgage Finance Berhad, Malaysian

International Shipping Corporation Bhd., Amanah Saham Sarawak Bhd.

and Sarawak Oil Palms Bhd. Datuk Wan Ali is currently the Chief

Executive Officer and Director of Sarawak Enterprise Corporation

Berhad, a company listed on the First Board of the Kuala Lumpur Stock

Exchange.

None of the Directors has any family relationship with any Director and/or major shareholders nor conflict of interest with MalaysianAirline System Berhad.

None of the Directors has been convicted for any offences (other than traffic offences, if any).

Board of Directors


17

Corporate InformationAs at 15 July 2003

Board of Directors

Tan Sri Dato’ Seri Azizan Bin Zainul Abidin(Chairman)(Non-Independent and Non-Executive Chairman)

Dato’ Md. Nor Bin Md. Yusof(Managing Director)(Non-Independent and Executive Director)

Tan Sri Dato’ Dr. Samsudin Bin Hitam(Non-Independent and Non-Executive Director)

Dato’ Zaharaah Binti Shaari(Non-Independent and Non-Executive Director)

Datu Hj. Salleh Bin Hj. Sulaiman(Independent and Non-Executive Director)

Keong Choon Keat(Independent and Non-Executive Director)

Martin Gilbert Barrow(Independent and Non-Executive Director)

Dato’ N. Sadasivan a/l N. N. Pillay(Independent and Non-Executive Director)

Dato’ Mohamed Azman Bin Yahya(Independent and Non-Executive Director)

Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan(Independent and Non-Executive Director)

Dato’ Gumuri Bin Hj. Hussain(Non-Independent and Non-Executive Director)

Datuk Wan Abdul Kadir Bin Wan Yubi @ Datuk Wan Ali Tuanku Yubi(Alternate Director to Datu Haji Salleh Haji Sulaiman)

Jusof Bin Ismail(Alternate Director toTan Sri Dato’ Dr. Samsudin Bin Hitam)

Abdul Rahman Bin Abdul Ghani(Alternate Director toDatuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan)

Senior Management Listing

Corporate Services Division

Dr. Mohamadon Bin AbdullahSenior General Manager, Corporate Services

Dr. Wafi Nazrin Bin Abdul HamidGeneral Manager, Corporate Services

Adnan Bin ShahbudinAssistant General Manager, Safety & Security

Mariah Binti Sheikh HussienAssistant General Manager, Corporate Services

Zawiah Binti Mat ArufAssistant General Manager, Corporate Communications

Sales, Distribution & Marketing Division

Dato’ Ahmad Fuaad Bin Mohd DahalanSenior General Manager, Sales, Distribution & Marketing

Dato’ Abdul Rashid Khan Bin Abdul Rahim KhanGeneral Manager, Sales – West

Danny KondicGeneral Manager, Sales – East

Dato’ Shamin Ahmad Bin Mohamad IshaqGeneral Manager, Sales Planning

Dato’ Tuan Ibrahim Bin Tengku AbdullahRegional General Manager, Middle East

Azlan Bin HussainRegional Assistant General Manager, Australia/New Zealand

Md Saat Bin A SamadAssistant General Manager, Distribution

Corp

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Corporate InformationAs at 15 July 2003

Iszham Bin IdrisAssistant General Manager, Maintenance Support

Nizuyir Bin BuyongAssistant General Manager, Ground Support Services

Wan Abdul Rahim Bin Hj Wan IshakAssistant General Manager, Maintenance Operations

Yusop Bin JaridiAssistant General Manager, Airport Services

Flight Operations Division

Dato’ Captain Mohd Nawawi Bin AwangSenior General Manager, Flight Operations

Captain Mohd Azharuddin Bin OsmanGeneral Manager, Flight Operations (Operations & Development)

Shulhameed Bin MaricanGeneral Manager, Flight Operations (Services & Infrastructure)

Kamal Azran Bin AdamAssistant General Manager, Manpower (Planning & Productivity)

Captain Ooi Teow SiewAssistant General Manager, Quality Assurance, Project & Processes

Finance Division

Low Chee TengChief Financial Officer

Mohd Sukri Bin HusinGeneral Manager, Group Reporting, Control & Budget

Khoo Ewe PhungGeneral Manager, Accounting Services

Ahmad Ramzi Bin Muhamad BukhariAssistant General Manager, Treasury and Investment

Heng Geok ChinAssistant General Manager, Financial Accounting

Phang Pow IngAssistant General Manager, Sales Management & Planning

Azmil Hisham Bin Abd RahmanAssistant General Manager, Product Developments & Services

Raja Noor Diana Binti Raja Zainal Karib ShahAssistant General Manager, Marketing Support

Suhaila Binti Hj ShamsuddinAssistant General Manager, Customer Management & Service Quality

Shauqi Bin AhmadArea Manager, Sabah & Brunei

Network & Revenue Management Divison

Paul A. MooneySenior General Manager, Network & Revenue Management

Dr. Mohd Amin Bin Mohd Yassin KhanGeneral Manager, Network Planning & Revenue Management

Kym Joylene ClarkeAssistant General Manager, Revenue Management

Liow Ngit SingAssistant General Manager, Operations Planning

Mohd Razali Bin HarunAssistant General Manager, Aircraft Trading

Technical & Ground Operations Division

Tajuden Bin Abu BakarSenior General Manager, Technical & Ground Operations

Mohd Roslan Bin IsmailGeneral Manager, Engineering & Maintenance

Abdullah Bin MudaAssistant General Manager, Flight Management

Hayati Binti Dato’ AliAssistant General Manager, Ground Handling Management


19

Josephine Liew Lup FoongHead of Finance – Sales, Distribution & Marketing Division

Md Yasin Bin BachikAssistant General Manager, Passenger Revenue ReportingManagement/Projects

Subramaniam a/l MunusamyAssistant General Manager, Financial Services

Yoon Chooi WanAssistant General Manager, Financial Systems

Zabariah Binti Md IbrahimHead of Finance – Technical & Ground Operations Division

Cargo Division

Ong Jyh JongSenior General Manager, Cargo

IT Planning & Services

Marzida Binti Mohd NoorSenior General Manager, IT Planning & Services

Project Management & Assurance Division

Mohd. Nadziruddin Bin Mohd. BasriGeneral Manager, Project Management & Assurance

Ahmad Muzzaffar Bin Ahmad MustaphaAssistant General Manager, Centralised Procurement

Ahmad Shamsuddin Bin MuhiyuddinAssistant General Manager, Property Maintenance

Mohamad Fadzil Bin Mohamad AriffAssistant General Manager, Property Development

Internal Audit Department

Shahnaz Al Sadat Binti Tan Sri Sheikh Abdul MohsienGeneral Manager, Internal Audit

Human Resource Division

Mohamed Yusof Bin Ahmad MuhaiyuddinGeneral Manager, Human Resources Management

Company Secretary

Rizani Bin Hassan LS 05125

Registered Office

33rd Floor, Bangunan MASJalan Sultan Ismail50250 Kuala LumpurMalaysiaTel : 603 2161 0555Fax : 603 2161 3472 (Main)Fax : 603 2162 8305 (Company Secretary)Website : malaysia-airlines.com

Share Registration Office

Malaysian Share Registration Services Sdn. Bhd.7th Floor, Exchange SquareBukit Kewangan, 50250 Kuala LumpurMalaysiaTel : 603 2026 8099Fax : 603 2026 3736

Auditors

Messrs. Ernst & YoungLevel 23A, Menara MileniumJalan Damansara, Pusat Bandar DamansaraDamansara Heights, 50490 Kuala LumpurMalaysiaTel : 603 2087 7000Fax : 603 2095 9076 (Main)Fax : 603 2095 9078 (Audit)

Listing

Kuala Lumpur Stock Exchange

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Dato’ Ahmad Fuaad Bin Mohd DahalanSenior General Manager, Sales, Distribution and Marketing

Dato’ Ahmad Fuaad Bin Mohd Dahalan graduated from the University

of Malaya with a Bachelor of Arts (Hons) in 1973. He joined the

Ministry of Foreign Affairs in April 1973.

He started his career with Malaysia Airlines in July 1973. Some of his

major assignments include postings to Tokyo, Jakarta, Manila and Paris

as Area Manager. He was appointed Regional Manager, Sarawak in

1984 and Regional Manager Peninsular Malaysia and Singapore in

1987. He was based in Los Angeles in 1990 as Vice-President, Americas

before moving to London in 1997 as Vice-President, United Kingdom

and Europe.

He returned to Kuala Lumpur in June 2001 to take up his present

position of Senior General Manager, Sales, Distribution and Marketing.

Low Chee TengChief Financial Officer

Low Chee Teng joined Malaysia Airlines as an Accountant in 1977.

Since then and until his current appointment as Chief Financial Officer

in September 2002, he has 25 years of in-depth experience in the

company’s financial matters. He holds a Bachelor of Commerce &

Administration from the Victoria University of Wellington, New Zealand

and a Master of Business Administration (MBA) with Distinction from

the International Management Centre, UK. He is a member of the

Malaysian Institute of Accountants and Institute of Chartered

Accountants of New Zealand.

Marzida Binti Mohd NoorSenior General Manager, IT Planning and Services

Marzida Binti Mohd Noor, Senior General Manager IT Planning and

Services holds a Bachelor of Science (Decision Sciences), Indiana

University, Bloomington, Indiana, USA and M.Sc in Management

Information System, United States International University, California,

USA. Prior to joining Malaysia Airlines, she was attached to KPMG from

1989 to 1992 as an IT Management Consultant. She joined Malaysia

Airlines in 1992 as Business Information Controller and was promoted to

Manager IT Management Unit in 1996. In 1998, she was promoted to

Vice President IT Planning and was the Programme Director for the

Malaysia Airlines Year 2000 Project. She was seconded to Trifiniti

Networks Sdn. Bhd. as co-Project Manager from mid 2000 to March

2001. In June 2001, she was given the task to head the IT Division in

Malaysia Airlines, as Senior General Manager IT Planning and Services.

Dr. Mohamadon Bin AbdullahSenior General Manager, Corporate Services

Dr. Mohamadon Bin Abdullah joined Malaysia Airlines in 1972 as

Management Trainee after graduating from the University of Malaya.

His first substantive appointment was in the Human Resources

Division as a Human Resources Executive. In the last 30 years with

the airline, he has served in the Human Resources Division which

included Industrial Relations, Training & Development and

Management Development. He subsequently served in the

Engineering, Passenger Sales, Cargo, Customer Services and Flight

Operations Divisions and his last appointment was Senior Vice

President Flight Operations before undertaking his current position

as Senior General Manager, Corporate Services effective June 2001.

Management CommitteeAs at 15 July 2003


21

Dato’ Capt Mohd. Nawawi Bin AwangSenior General Manager, Flight Operations

Dato’ Capt. Mohd. Nawawi Bin Awang started his flying career with

the Royal Malaysian Air Force in 1970 and joined Malaysia Airlines in

1975. He flew various types of aircraft whilst in service with the RMAF

and Malaysia Airlines, and is currently rated on B747-400 aircraft and

has clocked more than 15,000 flying hours. Prior to his appointment as

Senior General Manager Flight Operations (SGMFO) in June 2001, he

was Vice President Flight Operations since 1996. Dato’ Capt Nawawi

is a member of the UK Chartered Institute of Transport and holds an

MBA from the University of Strathclyde, Scotland.

Ong Jyh JongSenior General Manager, Cargo

Ong Jyh Jong joined Malaysia Airlines in 1984 having graduated with a

Bachelor of Social Science (Hons) from the National University of

Malaysia. He has served in various capacities including District Manager

Phuket, Manager South Australia, Agency Sales Manager and General

Manager Cargo Sales. In 1996 he left Malaysia Airlines to pursue other

business ventures in the cargo industry and rejoined Malaysia Airlines in

January 2001. He was instrumental in introducing freighter services to

Malaysia Airlines and was responsible in developing various world class

initiatives and joint ventures with other airlines. He is currently serving

as an Advisor to Air Cargo Europe and is a regular guest speaker at

major international logistics conferences.

Paul A. MooneySenior General Manager, Network and Revenue Management

Paul A. Mooney graduated with a Bachelor of Science (Aeronautics

(Hons)) and an Associate’s Degree in Aviation Management (Hons),

Saint Louis University, U.S.A. Prior to joining Malaysia Airlines he was

with Qantas Airways gaining experience in sales, revenue planning,

route marketing, revenue management and strategic development of

airline alliance activity. He was appointed as Senior General Manager

Network and Revenue Management of Malaysia Airlines on 2 July 2001.

Tajuden Bin Abu BakarSenior General Manager, Technical and Ground Operations

Tajuden Bin Abu Bakar joined Malaysia Airlines as a licensed aircraft

maintenance engineer in 1976 and had been actively involved in

various fields of aviation technology including aircraft engineering and

maintenance, aircraft production, joint venture project management

and operations management. He also holds a Master’s Degree in

Engineering Business Management from the University of Warwick,

U.K., and was the Vice President of Engineering and Maintenance

before taking up the post of Senior General Manager for Technical

and Ground Operations in 2001.

Man

agem

ent C

omm

ittee

Standing from Left to Right

Seated from Left to Right

Mohd Nadziruddin Bin Mohd Basri / Ong Jyh Jong / Dato’ Capt Mohd. Nawawi Bin Awang / Paul A. Mooney /Tajuden Bin Abu Bakar / Rizani Bin Hassan / Mohamed Yusof Bin Ahmad Muhaiyuddin / Low Chee Teng

Marzida Binti Mohd Noor / Dr. Mohamadon Bin Abdullah / Dato’ Md. Nor Bin Md. Yusof /Dato’ Ahmad Fuaad Bin Mohd Dahalan / Shahnaz Al Sadat



Management CommitteeAs at 15 July 2003

Shahnaz Al Sadat Binti Tan Sri Sheikh Abdul MohsienGeneral Manager, Internal Audit

Shahnaz Al Sadat Binti Tan Sri Sheikh Abdul Mohsien holds a LL.B

(Hons) from the University of Nottingham, United Kingdom and is a

Certified Public Accountant (“CPA”) with the Malaysian Institute of

Certified Public Accountant (“MICPA”). She is also a Certified Internal

Auditor (“CIA”), with the Institute of Internal Auditors Inc. (“IIA”),

USA. She has over 12 years experience in accounting, auditing and

consultancy. She also had a hand in commercial experience when she

served as the Financial Controller for a Group of Companies that

include a public listed company. She has been with Malaysia Airlines

since September, 2001 as the head of the Internal Audit Department.

She is currently an active member of Institute of Internal Auditors

Malaysia (“IIAM”) and is a member of the Professional Practices

Committee of IIAM.

Rizani Bin HassanCompany Secretary

Rizani Bin Hassan graduated from MARA Institute of Technology (ITM)

in 1984 with a Degree in Law. He was appointed as Legal Officer with

the Legal Unit of the Government Statutory Body. In 1991, he left the

Government Service to join a medium-sized, private law firm as an

advocate and solicitor. He joined the airline in 1994 as Legal Corporate

Counsel and thereafter as General Counsel, and Company Secretary

in 2002. He is also Secretary to the Management Committee.

Mohd Nadziruddin Bin Mohd BasriGeneral Manager, Project Management and Assurance

Mohd Nadziruddin Bin Mohd Basri graduated with a Bachelor of

Economics from the London School of Economics and is a Fellow

Member of The Association of Chartered Certified Accountants

(ACCA). Prior to joining Malaysia Airlines, he was a Senior Manager

with the Assurance and Business Advisory Division of Ernst & Young,

Kuala Lumpur. He was seconded to the Company in July 2001 to assist

management with the turnaround initiatives before joining as a

permanent staff in April 2003.

Mohamed Yusof Bin Ahmad MuhaiyuddinGeneral Manager Human Resources Management

Mohamed Yusof Bin Ahmad Muhaiyuddin became the airline’s

General Manager Human Resources Management in December 2000.

He obtained a Bachelor of Science (Geology) from Indiana University,

Bloomington Indiana, USA. He started his career as a Geologist with

Esso Production Malaysia in 1979, and moved to human resources in

1987. Since then he has held various positions in human resources

management in Esso, UMW and Kumpulan Guthrie. His last position

was in Bank Negara Malaysia as Assistant Governor (Human

Resources Management).


23

Malaysia Airlines Board of Directors has considered the manner it hasapplied the Principles of the Malaysian Code on Corporate Governance(”the Code”) and the extent to which it has complied with the BestPractices of the Code, the analysis of which is reported in this Statement.

The Board of Directors is committed to adopt the highest standards ofcorporate governance practices in all the Group’s activities around theworld. To this end and in line with the Group’s objective of exceedingbest practices in the industry, every effort has been made to evaluate andapply the relevant Best Practices of the Code for the Group.

ABoard’s Execution of Responsibilities

The Board’s main responsibility is to lead and control the Company in aneffective manner. The Board assures its effectiveness of leadership and itsdischarge of responsibilities as illustrated below:

1 Board Meetings & Attendance

There were 12 Board meetings held in this financial year. The Boardplanned and met every month except in June and December, 2002.

There were two additional Special Board Meetings held during theyear with specific strategic agenda. Prior to each Board meeting,each director received an agenda and a full set of Board Papers foreach agenda item.

2 Board’s Responsibilities

The Board’s principal focus is the overall strategic direction,development and control of Malaysia Airlines Group. Key matters,such as approval of business plans, budgets, major capitalexpenditure, assets’ acquisition and disposal, key human resourcepolicies, approval of annual and interim results, successionplanning for the Senior Management and enhancement of safetyand security measures are reserved for the Board. The Board’sauthority is defined and communicated through the ApprovingAuthority Manual.

In each of its regularly scheduled meeting, the Board reviews themonthly operational and financial performance of the Group. TheBoard receives quantitative and qualitative information relating tothe Group’s performance. The Board is responsible to identifyprincipal risks and provides direction on the appropriate policies,procedures and systems to address the risks. In this regard, the

Statement on Corporate Governance

Stat

emen

t on

Corp

orat

e G

over

nanc

eThe attendance history of each director is as follows:

NO. OF MEETINGSNAME OF DIRECTORS HELD* ATTENDED

Tan Sri Dato’ Seri Azizan Bin Zainul Abidin (Chairman) 12 12Dato’ Md. Nor Bin Md. Yusof (Managing Director) 12 12Tan Sri Dato’ Dr. Samsudin Bin Hitam 12 7Dato’ Zaharaah Binti Shaari 12 8Keong Choon Keat 12 11Martin Gilbert Barrow 12 9Dato’ N. Sadasivan a/l N.N. Pillay 12 11Dato’ Mohamed Azman Bin Yahya 12 9Datu Hj. Salleh Bin Hj. Sulaiman (appointed on 1 October, 2002) 5 5Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan (appointed on 10 March, 2003) 2 2Datuk Kee Mustafa (resigned on 25 February, 2003) 11 5Datu Dr. Hatta Solhi (resigned on 30 September, 2002) 7 6

* No of meetings held are applicable meetings for each director and varied based on their dates of appointment




BEstablishing a Structure for ContinuouslyEffective Board

In executing the responsibilities, the Board’s structure is important toassure its continuous effectiveness. The current structure in place isshown below.

1 Achieving Board Balance

Board Composition

As at the end of the financial year, the Board of Malaysia Airlinescomprises ten (10) members with the following composition:

CATEGORY NO.

Non-Executive Chairman 1Executive Director 1Non- Independent & Non-Executive Directors 2Independent Directors 6

Board is also responsible for reviewing the adequacy and theintegrity of the Group’s internal control system includingmanagement information system and compliance.

In support of its execution of responsibilities, the Board establishedsub-committees with specified terms of references outlining theirresponsibilities. Four (4) key sub-committees that have beenestablished are:

a Board Audit Committee (”BAC”)b Nomination Committee (“NC”)c Remuneration Committee (“RC”)d Board Safety and Security Committee (“BSSC”)

The authority of BAC is described in the Audit Committee’s Reportas set out on pages 31 to 33. The authority of NC and RC aredescribed in B2 and B3 below. The BSSC is established tospecifically address safety and security risks.

The memberships of each of the sub-committees are summarised as follows:

NAME OF DIRECTORS BAC NC RC BSSC (1)

Tan Sri Dato’ Seri Azizan Bin Zainul Abidin CDato’ Md. Nor Bin Md. Yusof MTan Sri Dato’ Dr. Samsudin Bin Hitam M MDato’ Zaharaah Binti Shaari M MDatu Hj. Salleh Bin Hj. Sulaiman M M MKeong Choon Keat C MMartin Gilbert Barrow CDato’ N. Sadasivan a/l N.N. Pillay M M MDato’ Mohamed Azman Bin Yahya M C

C: ChairmanM: Member(1) Members include relevant Senior Management.

Each director has full access to all information within the Group collectively or individually. They are entitled and have direct access to the advice andservices of the Group’s Company Secretary.


25

There is a clear division of responsibilities between the Chairmanof the Board and the Managing Director.

The Independent Directors constitute more than one-third (1/3) ofthe Board. The Group considers that its complement of non-executive directors provides for an effective Board with a mix ofrelated industry-specific knowledge and broad government,business and commercial experience. The Directors’ profiles areset out in pages 10 to 16 of this annual report.

All independent non-executive directors are independent ofmanagement and free from any relationship, which couldinterfere with their independent judgement. They arecooperatively working with the Executive Director in the interestof the Group by providing objective and independent judgement.

The Board is satisfied that the Independent Directors representthe interests of public shareholders. Dato’ N. Sadasivan a/l N.N.Pillay is the Senior Independent Non-Executive Director towhom concerns may be conveyed where it could beinappropriate for the concerns to be dealt with by theChairman or the Managing Director.

Board’s Overall Structure and Size

The Board believes that the current size and structure satisfy therequirement to fairly reflect the investment of the shareholdersand that it enables the Board to provide clear and effectiveleadership to the Group.

2 Ensuring Board’s Continuous Effectiveness

A Structure to Evaluate the Board’s Effectiveness

A Nomination Committee was established on 1 December, 2001.The Committee’s membership shall comprise exclusively of non-executive directors, a majority of which is independent. Thepresent membership of the Committee is as shown in A.1 of thisStatement.

The Nomination Committee is authorised to:

(a) annually review the required mix of skills and experienceand other qualities, including core competencies whichnon-executive and executive directors should have;

(b) assess on an annual basis, the effectiveness of the Board asa whole, the committees of the Board and for assessing thecontribution of each individual Director.

(c) make recommendations to Board on Directorship’sCandidates and Board Committees’ Nominees.

In the financial year, the Nomination Committee has held one (1)meeting on 10 March, 2003 to deliberate and make recommendationto the Board of Directors on the nomination of Datuk Hj S Abdillah@ Abdullah Bin Hassan as a Board member in place of Datuk KeeMustafa who resigned on 25 February, 2003. At the said meeting,the Committee also reviewed the Board composition to ensure agood balance of skills and experience amongst its members.

Provision of Directors’ Continuous Education

All the Directors have attended and successfully completed theMandatory Accreditation Programme conducted by the ResearchInstitute of Investment Analysts Malaysia, an affiliate of the KualaLumpur Stock Exchange (KLSE).

In the current year, external speakers were invited as part of theannual Strategic Planning session to share and update the Boardof Directors on industry specific information and development.

The Directors were also invited to the Malaysia Airlines WorldwideBusiness Forum 2003 organised by Sales, Distribution & MarketingDivision where the Regional and Area Management were updatedon the latest development of the Group and as a knowledgesharing session.

3 Determination of Directors’ Remuneration

A Remuneration Committee was established on 1 December,2001. The Committee’s membership shall comprise wholly ormainly non-executive directors. The present membership of theCommittee is as shown in A.1 of this Statement.

The Committee is authorised to review, assess and recommend tothe Board of Directors the remuneration packages of the directorsin all forms, with other independent professional advice or outsideadvice as necessary.

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CContinuous Communication with Shareholders

It is the Board’s responsibility to establish a communication programmewith its shareholders.

1 Dialogue with Investors

Immediately upon announcement of the Group’s quarterly results,briefings with the analysts and the media were held. TheManaging Director and Senior Management were present at thebriefings to clarify and explain on any issues raised by the analystsand the media.

Special briefings were also held for the analysts and the media onany special development of the Group after the necessaryapprovals were obtained and where applicable, the prescribedannouncements to the KLSE were made.

The Managing Director and Senior Management also held briefingswith institutional investors when required.

2 AGM

The Annual General Meeting (“AGM”) is the principal forum fordialogue with shareholders. Notice of the AGM and annualreports are sent out to shareholders at least 21 days before thedate of the meeting.

The Board takes the opportunity in the AGM to present theprogress and performance of the Group and providesopportunities for shareholders to raise questions pertaining to theGroup’s activities. An explanatory statement to facilitateshareholders’ full understanding and evaluation of the issuesinvolved will accompany items of special business included in thenotice of the meeting.

All directors are available to provide responses to questions fromthe shareholders during the meeting.

The Remuneration Committee met one (1) time during thefinancial year to discuss on the remuneration package of thedirectors.

The Executive Director’s remuneration comprises basic salary andother emoluments. Other customary benefits to the Group aremade available as appropriate. Any salary reviews will take intoaccount market rates and the performance of the individual andthe Group.

The non-executive Directors’ remuneration comprises fees andallowances. Their determination is balanced with their expectedroles and responsibilities including any additional work andcontribution required.

The details of the total remuneration during the financial yeardisclosed by category of Directors are as follows:

BASICSALARY &

OTHEREMOLUMENTS BENEFITS TOTAL

(RM) (RM) (RM)

ExecutiveDirector 1,000,000 1,000 1,001,000Non-ExecutiveDirectors 412,900 — 412,900

Total 1,412,900 1,000 1,413,900

The Board opts not to disclose the remuneration by individualdirector as suggested by the Best Practice of the Code. At thisjuncture, the Board believes that the information will not addsignificantly to the understanding and evaluation of the Group’sgovernance.

4 Re-election of Directors

In accordance with the Company’s Articles of Association, alldirectors who are appointed by the Board are subject to electionby shareholders at the first opportunity after their appointmentand are subject to re-election at least once every three (3) years.



27

DAccountability & Audit

1 Financial Reporting

The Board ensures that the Group’s quarterly reports to KLSE andthe annual report to shareholders present a fair assessment of theGroup’s position and prospects.

The Board Audit Committee assists the Board in scrutinisinginformation for disclosure in such reports and the overall qualityof the Group’s financial reporting.

2 Statement of Directors Responsibility in Relation to theFinancial Statements

In the preparation of the financial statements as set out in page91 to 145 of this annual report the Directors consider that:

— The Group has used appropriate accounting policies andare consistently applied;

— Reasonable and prudent judgement and estimates weremade; and

— All applicable approved accounting standards in Malaysiahave been followed.

The Directors are responsible for ensuring that the Companymaintains accounting records that disclose with reasonableaccuracy the financial position of the Group and the Company,and which enable them to ensure that the financial statementscomply with the Companies Act, 1965.

The Statement by Directors’ pursuant to Section 169 of theCompanies Act 1965 is set out on page 88 of this annual report.

3 Internal Control

The report on the Group’s internal control is presented in theStatement on Internal Control laid out on pages 34 to 35 of thisannual report.

4 Relationship with Auditor

An appropriate relationship with the Group’s auditors ismaintained through the Board Audit Committee. The role,authority and responsibilities of the Committee are presented inthe Board Audit Committee’s Report set out on pages 31 to 33 ofthis annual report.

The Group has always maintained a close and transparentrelationship with its auditors in seeking professional advice andensuring compliance with the relevant accounting standards.

This Statement is made in accordance with the resolution of theBoard of Directors dated 30 June, 2003.

EAdditional Compliance Information

The following information is provided in compliance with Paragraph 9.25of the Kuala Lumpur Stock Exchange (KLSE) Listing Requirements:-

1 Variation of Results

The Group registered a favourable variance of RM244.9 millionagainst the forecast profit of RM94.2 million as disclosed in therestructuring exercise. This improvement was due to better thanexpected passenger demand towards the end of the year 2002and the first two months of year 2003.

2 Imposition of Sanctions/Penalties

There were no sanctions and/or penalties (that were made public)imposed on the Company and its subsidiaries, directors ormanagement by the relevant regulatory bodies during thefinancial year.

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finance leases, loan agreements or operating leasesentered into by Malaysia Airlines (Encumbered AircraftAssets) and certain payments which Malaysia Airlinesreceives in respect of its aircraft assets, and in relationto specifically identified liabilities of Malaysia Airlineswhich are unbundled. This agreement provides PMBwith an option to purchase the Encumbered AircraftAssets becoming unencumbered to Malaysia Airlines,upon which such aircraft will be leased back toMalaysia Airlines on the same terms as the leasebackagreements for the Unencumbered Aircraft Assetsreferred to under paragraph 3(iv)(d).

(c) Agreement for Domestic Business Unbundling which setout the terms and arrangements under which MalaysiaAirlines agrees to pay PMB the revenue generated fromthe Domestic Business and PMB agrees to pay MalaysiaAirlines expenditure incurred by Malaysia Airlines inrespect of the Domestic Business. Included in thisagreement are the details of the cost allocation of bothvariable and fixed costs/overheads of Malaysia Airlines tothe Domestic Business, including costs of operating andmanaging the Domestic Business. This agreement alsosets out the terms and arrangements under whichMalaysia Airlines will operate the Domestic Business.

(d) Aircraft and Engines Purchase Agreement which setsout the terms and arrangements under whichMalaysia Airlines agrees to sell and transfer title totwenty four (24) aircraft and eight (8) spare enginesowned by Malaysia Airlines (Unencumbered AircraftAssets), to PMB, in consideration of PMB’s obligationto pay Malaysia Airlines certain payments under theAgreement For Aircraft and Finance AgreementsUnbundling. The signing of the leaseback agreementsfor the Unencumbered Aircraft Assets is a conditionprecedent to the Proposed WAU.

(e) Common Terms Agreement which sets out thecommon terms, conditions and provisions that areincorporated by reference into each of the Agreementfor Aircraft and Finance Agreements Unbundling, theAgreement for Domestic Business Unbundling, theGovernance Agreement and the WAU Agreement.Included in this agreement is a description of events ofdefault which apply to the said agreements.

3 Material Contracts

Save as disclosed below, there are no other material contractsentered into by the Company or its subsidiaries, involving directorsand major shareholders interests during the financial year :-

(i) Supplemental Agreement dated 28 May, 2002 betweenthe Company and Aircraft Business Malaysia Sdn. Bhd.(“ABM”), a wholly-owned subsidiary of the Minister ofFinance, Incorporated, to amend certain clauses stated inthe Master Aircraft Purchase Agreement dated 5 February,2002 between the aforesaid parties.

(ii) Eight (8) Operating Lease Agreements, one (1) of which isdated 6 June, 2002 and seven (7) of which are dated 28May, 2002, between the Company and Aircraft BusinessMalaysia Sdn. Bhd. (“ABM”), a wholly-owned subsidiary ofthe Minister of Finance, Incorporated, in relation to thelease of the eight (8) aircraft for a lease period of notexceeding 12 years.

(iii) Eight (8) Supplemental Agreements dated 30 July, 2002between the Company and Aircraft Business Malaysia Sdn.Bhd. (“ABM”), a wholly-owned subsidiary of the Ministerof Finance, Incorporated, to amend the terms of rentalrate/formula stated in the Operating Lease Agreementsbetween the aforesaid parties referred to in paragraph (ii)above.

(iv) Several Agreements dated 30 July, 2002 between theCompany and Penerbangan Malaysia Berhad (“PMB”) such as:

(a) Widespread Asset Unbundling (“WAU”) Agreementwhich describes the general structure of the Agreementfor Aircraft and Finance Agreements Unbundling, theAgreement for Domestic Business Unbundling, theCommon Terms Agreement, the GovernanceAgreement and the Aircraft and Engines PurchaseAgreement.

(b) Agreement for Aircraft and Finance AgreementsUnbundling which sets out the terms andarrangements under which PMB and MalaysiaAirlines must make payments to each other, inrelation to the aircraft assets which are subject to



29

(f) Governance Agreement which constitutes anagreement between Malaysia Airlines, as the AssetOperator and PMB, Aircraft Business Malaysia Sdn.Bhd. and Assets Global Network Sdn. Bhd. (AssetOwners) to comply with the corporate and contractualgovernance code in relation to the conduct betweenMalaysia Airlines and the Asset Owners on mattersreferred to in the Agreement for Aircraft and FinanceAgreements Unbundling, the Agreement for DomesticBusiness Unbundling, the Governance Agreement, theAircraft and Engines Purchase Agreement and theWAU Agreement.

(v) Supplemental Agreement dated 11 October, 2002 betweenMalaysia Airlines and PMB, to amend certain provisions ofthe Agreement for Aircraft and Finance AgreementsUnbundling and the Agreement for Domestic BusinessUnbundling.

(vi) Supplemental Agreement dated 11 October, 2002 betweenMalaysia Airlines and PMB, to amend certain provisions ofthe Aircraft and Engines Purchase Agreement.

(vii) Conditional Share Sale Agreement dated 30 July, 2002between the Company and Gubahan Saujana Sdn. Bhd.,LSG Asia GmbH and Fahim Sdn. Bhd. for proposed disposalof 54,600,000 ordinary shares of RM1/- each and 700,000redeemable preference shares of RM0.01 each to be issued,both aggregating 70% of the enlarged issued capital inMAS Catering Sdn. Bhd. for a total cash consideration ofRM175,000,000/-.

(viii) The Lease Agreement dated 6 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of twentyfour (24) aircraft sold by Malaysia Airlines to PMB under theAircraft and Engines Purchase Agreement, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(ix) The Lease Agreement dated 6 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of eight (8)spare engines sold by Malaysia Airlines to PMB under theAircraft and Engines Purchase Agreement, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(x) The Lease Agreement dated 12 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(xi) The Lease Agreement dated 20 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(xii) The Lease Agreement dated 3 December, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(xiii) The Lease Agreement dated 13 December, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(xiv) The Lease Agreement dated 20 December, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.

(xv) The Lease Agreement dated 8 January, 2003 between MalaysiaAirlines and PMB in relation to the lease of one (1) aircraft soldby Malaysia Airlines to PMB pursuant to the Agreement forAircraft and Finance Agreements Unbundling referred to inparagraph 3(iv)(b) above, for a period which expires on 30September, 2005 or such other later date agreed by the parties.

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Statement on Corporate GovernanceStatement on Corporate Governance

4 Utilisation of Proceeds from Redeemable ConvertiblePreference Shares

The proceeds raised from the Redeemable Convertible PreferenceShares issued in financial year ended 2002 has been fully utilisedas at financial year ended 2003.

5 Non-audit fees

The amount of non-audit fees paid and payable to the externalauditors by the Group for the financial year ended 31 March,2003 is RM3.054 million.

6 Revaluation Policy on Landed Properties

Revaluation of landed properties will only be undertaken by theCompany upon the approval of the Board of Directors of theCompany or should there be an intended sale or the marketvalues were materially changed.

7 Profit Guarantee

The Company did not give any profit guarantee during thefinancial year.

8 Share Buyback

There is no share buyback during the financial year.

9 American Depository Receipt (“ADR”) or GlobalDepository Receipt (“GDR”) Programme(as at 31 March, 2003)

The Company did not sponsor any ADR or GDR programme duringthe financial year.

(xvi) The Lease Agreement dated 24 January, 2003 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later date agreedby the parties.

(xvii) Reimbursement Agreement (In Respect of KLIA Buildings)dated 26 March, 2003 between Malaysia Airlines and AssetsGlobal Network Sdn. Bhd. (“AGN”), a wholly-ownedsubsidiary of the Minister of Finance, Incorporated in relationto the reimbursement of RM1,010,600,000 by AGN toMalaysia Airlines in respect of the Buildings and Infrastructureerected by Malaysia Airlines in KLIA.

(xviii) Sub-Lease Agreement (In Respect of KLIA Buildings) dated 26March, 2003 between Malaysia Airlines and Assets GlobalNetwork Sdn. Bhd. (“AGN”), a wholly-owned subsidiary ofthe Minister of Finance, Incorporated in relation to the sub-lease of the land together with the Buildings andInfrastructure erected by Malaysia Airlines in KLIA for fifty-seven (57) years at a yearly rental payable by Malaysia Airlinesto AGN and contained in a Rent Schedule appended to theSub-Lease Agreement.

(xix) Reimbursement Agreement (In Respect of Subang Lands)dated 26 March, 2003 between the Company and AssetsGlobal Network Sdn. Bhd. (“AGN”), a wholly-ownedsubsidiary of the Minister of Finance, Incorporated inrelation to the reimbursement of RM233,000,000 by AGN toMalaysia Airlines in respect of the Buildings and Infrastructureerected by Malaysia Airlines on Subang Lands. ThisAgreement has been executed but completion is subject tothe approval of the Application for Surrender and Re-alienation of the Lands into four (4) separate portions or unitswith separate documents of title.


31

AEstablishment

The Board Audit Committee was established in 1992 as a sub-committeeof the Board. The Committee’s term of reference had been approved, bythe Board.

BMembership and Composition

The terms of reference provide for the Board to elect the Board AuditCommittee members from amongst themselves, comprising no fewer thanthree (3) directors, the majority of whom they shall be independentdirectors. The term of office of the board audit committee members isthree years and may be re-nominated and appointed by the Board ofDirectors. The Board of Directors will review the performance of theBoard Audit Committee and its members at least once every three years.

The present members of the Committee are:

NAME OF DIRECTORS CLASSIFICATION

Keong Choon Keat * Independent Non-Executive Director

Datu Hj. Salleh Bin Hj. Sulaiman Independent(appointed on 1 October, 2002) Non-Executive Director

Tan Sri Dato’ Dr. Samsudin Bin Hitam Non-Independent Non-Executive Director

Dato’ Zaharaah Binti Shaari Non-IndependentNon-Executive Director

Dato’ N. Sadasivan a/l N.N. Pillay Independent Non-Executive Director

* Chairman

The Chairman of the Board Audit Committee is a member of MalaysianInstitute of Accountants. The Directors’ profiles are set out in pages 10to 16 in the Annual Report.

CMeetings

The Board Audit Committee meetings shall be conducted at least four(4) times annually, or more frequently as circumstances dictate.

In this financial year, the Committee had nine meetings. The attendancehistory of each member is as follows:

NO. OF MEETINGSNAME OF DIRECTORS HELD* ATTENDED

Keong Choon Keat 9 9Tan Sri Dato’ Dr. Samsudin Bin Hitam 9 3Dato’ Zaharaah Binti Shaari 9 6Datu Hj. Salleh Bin Hj. Sulaiman 4 4Dato’ N. Sadasivan a/l N.N. Pillay 9 9

* Number of meetings held are applicable meetings for each director and varied

based on their dates of appointment

The Senior Management’s representatives, General Manager of InternalAudit and External Auditors’ representatives attend the meetings whenappropriate. Minutes of each meeting are kept and distributed to eachmember of the Board Audit Committee and also to the other membersof the Board of Directors. The Board Audit Committee Chairman reportson each meeting to the Board of Directors.

DObjectives

The principal objectives of the Board Audit Committee are to assist theBoard of Directors in discharging its statutory duties and responsibilitiesrelating to accounting and reporting practices of the holding companyand each of its subsidiaries. In addition, the Board Audit Committee shall:— evaluate the quality of the audits performed by the internal and

external auditors;— provide assurance that the financial information presented by

management is relevant, reliable and timely;— oversee compliance with relevant laws and regulations and

observance of a proper code of conduct; and— determine the quality, adequacy and effectiveness of the Group’s

internal control environment.

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Audit Committee’s Report

— the adequacy of the scope, functions and resources of theinternal audit functions and that it has the necessary authority tocarry out its work;

— the internal audit programme, processes, results of the audit andwhether or not appropriate action is taken on the recommendationsof the internal audit function;

— the quarterly results and year end financial statements prior toapproval by the Board of Directors on:-i) major accounting policy changes.ii) significant and unusual events.iii) compliance with accounting standards and other legal

requirements; and— To monitor any related party transactions that may arise within

the Group and to report, if any, transactions between the Groupand any related party outside the Group which are not based onarms-length terms and which are disadvantageous to the Group.

GActivities in this Financial Year

In this financial year, apart from reviewing the quarterly announcements andannual financial statements, the BAC undertook the following activities:-— Review of the external and internal audits’ plans and budgets;— Review of the external and internal audits’ reports and subsequent

follow up of outstanding issues;— Review of identified key processes requiring internal control

enhancements with Management; and — Review of the relevant related party transactions.

EAuthority

The Board Audit Committee shall, in accordance with a procedure to bedetermined by the Board of Directors and at the expense of the Company,

(a) investigate any activity within its terms of reference. All employeesshall be directed to cooperate as requested by members of theBoard Audit Committee.

(b) have full and unlimited/unrestricted access to all information anddocuments/resources which are required to perform its duties as wellas to the internal and external auditors and senior management ofthe Company and Group.

(c) obtain independent professional advice or other advice and tosecure the attendance of outsiders with relevant experience andexpertise if it considers necessary.

(d) be able to convene meetings with the auditors, external orinternal, without the attendance of the Executive Director,whenever deemed necessary; and

(e) be able to make relevant reports when necessary to the relevantauthorities if a breach of the Listing Requirements has occurred.

FDuties and Responsibilities

The duties and responsibilities of the Board Audit Committee are toreview and report to the Board of Directors as follows:— with the external auditors, the audit plan;— with the external auditors, the evaluation of the system of internal

controls;— with the external auditors, the audit report;— the quality of external auditors and make recommendations concerning

their appointment, termination and remuneration and to consider thenomination of a person or persons as external auditors;

— the liaison between the external auditors, the management and theBoard of Directors and also the assistance given by management tothe external auditors;


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HInternal Audit Function

The Group has an established internal audit function which reports tothe Board Audit Committee. The function has an approved Charter thatprovides for its independence in the review of the internal control systemof the Group. In ensuring effectiveness of the internal control system, thefunction also partners with the Senior Management of the Group inenhancing internal control for high-risk areas.

The General Manager of Internal Audit Department is a Certified InternalAuditor (CIA) and Malaysia Airlines is a Corporate Member of Institute ofInternal Auditors Malaysia. The function strives to adopt establishedstandards of auditing to maintain its proficiency and ensuring its dueprofessional care.

The Board Audit Committee approves the Annual Internal Audit Plan.The risk-based plan is developed to cover key operational and financialactivities that are significant to the overall performance of the Group ona cyclical basis.

The risk areas are classified against the following objectives:— Revenue Protection and Enhancement— Expenditure Containment— Human Resources Management— Operational Efficiency at Multi-location— Information System Integrity

The function also includes audits on an ad-hoc basis based on specialrequests either by Board of Directors or Senior Management.Additionally, the Internal Audit works closely with the External Auditorsto resolve any control issues raised by them and to assist in ensuringappropriate management actions are taken.

In this financial year, Internal Audit undertook 31 audit assignmentscovering selected locations at Corporate Headquarters and Stationsworldwide for both passenger and cargo business. It also coordinatedthe follow-up review on the implementation status of the recommendedactions based on External Auditor’s Memorandum on Internal Controland previously issued internal audit reports. It also project-managedinternal control enhancements initiatives in the organisation. The AuditCommittee receives regular reports from the General Manager ofInternal Audit on the results of audits performed and progress of theinternal control projects.

The Board Audit Committee reviews and approves the Internal AuditDepartment’s annual budget to ensure that the function is adequatelyresourced. As at the end of the financial year, the Department consistsof 33 auditors of varying levels with approximately 55,000 availableman-hours per annum.

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ii) Integrated business planning and budget process driven by thecommercial objectives. In December 2002, enhancement of theprocess was made by assigning a single driver focusing onrevenue targets and aligning the operational budgets towardsachieving the targets;

iii) The establishment of a Management Committee comprising theSenior Management with responsibilities that include theexecution of the following controls:

a. Monthly performance review of actual performanceagainst expectations and budget

b. Quality assurance on key information and performancereports to Board of Directors

c. Partnership with Board Audit Committee and Internal Auditto address any internal control issues

iv) Clear definition of responsibilities and authority throughApproving Authority Manual (“AAM”). The consolidated AAMapproved by the Board is continuously reviewed to be updatedand enhanced;

v) Procedures with embedded internal control are documented inseries of Standard Operating Manuals. Structure for organisation-wide control and custodian of the Manuals has been established.Continuous efforts are undertaken to ensure the alignment,standardisation and comprehensiveness of these manuals. Theobjectives of these efforts are to improve communication on keyinternal control procedures including authorisation, accountability,monitoring and reconciliation processes;

vi) Continuous education to employees on the importance ofgovernance, risk management and internal control as part of theirdevelopment programme;

vii) The Internal Audit Department, reporting to the Board AuditCommittee performs systematic reviews of key processes relatingto high-risk areas and assesses the effectiveness of internal controlincluding compliance. Areas for improvement and proposedrecommendations are highlighted to Senior Management andBoard Audit Committee with a periodic follow-up review onactions taken;

AThe Board’s and Management’s Responsibility

As stated in the Statement on Corporate Governance, the Board ofDirectors has an overall responsibility for the Group’s system of internalcontrol including the review of its effectiveness.

The Board recognises the importance of maintaining a sound system ofinternal control to safeguard shareholders’ investments and the Group’sassets. In executing this responsibility, the Board has instituted an internalcontrol system, details of which are set out below. Further, the Board hasinitiated steps to formalise a risk management framework to identify thekey significant risks, to evaluate the impact and to set the policies relatingto the risks and the relevant control thereof.

The Management is responsible to implement the Board’s policies on risksand control.

BMalaysia Airlines Internal Control Processes

The Board and Management of Malaysia Airlines are committed inimplementing an internal control system to manage risks that mayaffect the Group’s continuous growth and financial viability.

As such, continuous actions are being taken to improve the policies,processes, people and structure as key elements of internal control. Thiscontinuous improvement is not only to enhance the management ofexisting risks but also to anticipate and manage potential risksconsidering the changes in the risk profile experienced by the industryand the Group.

Key elements of Malaysia Airlines internal control system including theprocesses in place to review its adequacy, are:

i) An organisation structure that is aligned to businessand operations requirement headed by accountable DivisionalHeads;


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viii) The Board Audit Committee, on behalf of the Board, regularlyreviews with Senior Management internal control issues identifiedin reports prepared by the internal auditor and external auditorand the related measures taken. Internal auditors also assist theBoard Audit Committee in the periodic review of measures takento address external auditors’ concerns on internal control. Thescope of this review includes any significant internal controlaspects of issues identified in the financial statements as disclosedin this annual report;

ix) In its monthly meeting, the Board of Directors reviews theoperational and financial performance of the Group. The scope ofthis review also covers any significant internal control aspects ofissues identified in the monthly performance reports and thisinclude any areas disclosed in this annual report;

x) The Senior Management has continued the initiative to formalise arisk management framework in the organisation with the followingobjectives:

a. To systemise a continuous process for identifying,evaluating and managing the significant risks faced by thecompany;

b. To provide a platform for communication of risk andcontrol profile between Senior Management and Board ofDirectors;

c. To inculcate an organisation-wide culture of risk awarenessand management; and

d. To establish a documented process of control monitoringand improvement plans

A Risk Management Coordination Unit was formed in this financialyear to facilitate the development of the risk management frameworkorganisation-wide.

Malaysia Airlines Risk Management Framework and MalaysiaAirlines Risk Model have been formulated. The Framework andModel are being operationalised organisation-wide on aprogressive basis with the objective to draw up the Corporate RiskProfile and the related risk management policies. It is envisagedthat the profile will be documented and monitored through theCorporate Risk Scorecard, which has been obtained. Continuousefforts are being made to integrate the results progressively intothe monthly reports to Board of Directors.

CDesign of Internal Control System

The Board and the Senior Management endeavour to maintainan adequate system of internal control organisation-wide with consistentintegrity designed to manage rather than eliminate risk.

However, it is recognised that the evaluation and implementation of thesystem will only provide reasonable assurance of the Group achieving itsobjective. The system will not provide absolute assurance against anymaterial loss occurrence.

Malaysia Airlines Internal Control System is not applicable to itsassociated companies as they fall within their majority shareholders’control. Notwithstanding this, Malaysia Airlines interest is served throughrepresentation on the Board of the respective associated companies andreceipt and review of management account and enquiries thereon.These representations also provide the Board with information for timelydecision-making on the continuity of the Group’s investments based onthe performance of the associated companies.

The Board confirms that the system of internal control with the keyelements highlighted above is in place during the financial year, exceptwhere it is stated otherwise.

The system is subject to regular reviews by the Board.

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Group Structure1 August 2003

100%

MAS Catering Sdn Bhd

49%

Aerofine Meat Sdn Bhd

100%

Malaysia Airlines Cargo Sdn Bhd

100%

MAS Aerotechnologies Sdn Bhd

100%

Syarikat Pengangkutan Senai Sdn Bhd

80%

Abacus Distribution Systems (Malaysia)

Sdn Bhd

51%

Aerokleen Services Sdn Bhd

100%

MAS Golden Holidays Sdn Bhd

100%

Pengangkutan Kargo Udara MAS

Sdn Bhd

56.7%

Macnet CCN (M) Sdn Bhd

100%

Aircraft Engine Repair and Overhaul (M)

Sdn Bhd

100%

MAS Hotels And Boutiques Sdn Bhd

25%

Signforce Sdn Bhd

100%

MAS Academy Sdn Bhd

100%

MAS Properties Sdn Bhd

100%

MAS Wings of Gold Sdn Bhd

100%

Tiara Malaysia Airlines Sdn Bhd

100%

Kelas Services Sdn Bhd

100%

MIR Technologies Sdn Bhd

60%

MAS Catering (Sarawak) Sdn Bhd

100%

Sepang Berhad

100%

Malaysia Airlines Capital (L) Limited

Investment in Associates

30%

Honeywell Aerospace Services Sdn Bhd

30%

GE Engine Services Malaysia Sdn Bhd

33.33%

Asian Frequent Flyer Pte Ltd

49%

Hamilton Sundstrand Customer Support

Centre (M) Sdn Bhd

23.53%

Pan Asia Pacific Aviation Services Limited

20%

Taj Madras Flight Kitchen Limited


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Fleet StatusAs at 31 March 2003

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AS AT 31 MARCH 2003NO. OF AIRCRAFTIN MALAYSIA AIRLINESOPERATION AVERAGE AGE

AS AT 31 MARCH 2002NO. OF AIRCRAFTIN MALAYSIA AIRLINESOPERATION AVERAGE AGE

MALAYSIA AIRLINES OWNED AIRCRAFT

B747-4H6P — — 14 6.3

B747-4H6C 1 13.8 2 12.6

B747-3H6C — — 1 15.7

B777-200 — — 2 4.6

B747-236 Frt (MASkargo) — — 2 20.0

A330-300 — — 9 6.8

B737-700 (BBJ) — — 1 1.6

B737-400 — — 35 8.6

F50 — — 10 12.0

DHC6 — — 5 15.9

TOTAL AIRCRAFT 1 13.8 81 9.2

LEASED AIRCRAFT

B747-4H6P 17 — 1 —

B747-200 Frt (MASkargo) 4 — 2 —

B777-200 15 — 11 —

A330-300 9 — — —

A330-200 2 — — —

B737-400 37 — 4 —

F50 10 — — —

DHC6 5 — 1 —

TOTAL LEASED AIRCRAFT 99 — 19 —

SYSTEM WIDE 100 13.8 100 9.2



Route Network

DOMESTIC NETWORK


39

Kuching77 times per week from Kuala Lumpur

Hanoi5 times per week from Kuala Lumpur

INTERNATIONAL NETWORK

Rout

e N

etw

ork

*To be launched



Calendar of Events

27 March 2002

Tan Sri Azizan opened the Malaysia Airlines Worldwide

Business Forum 2002 at Malaysia Airlines Academy.

18 June 2002

Malaysia Airlines received the Skytrax’s World’s Best Cabin Staff

Award 2002.

30 July 2002

Dato’ Md Nor announced the reorganisation of the Group

Corporate Structure where the reorganisation involves a

landmark plan to restructure the company’s business model,

designed to fast-track the national carrier’s return to

profitability by unbundling assets.

09 August 2002

Malaysia Airlines Golden Lounge at KLIA was awarded the

World’s 3rd Best Airline Lounge 2002.

03 September 2002

Tan Sri Azizan launched the second phase of MAS Gemilang

campaign at Malaysia Airlines Academy.

2002

1

3

2

4

5


41

Cale

ndar

of E

vent

s1

5

2

6

3

7

01 October 2002

Malaysia Airlines celebrated its 30th Anniversary of its

establishment.

10 January 2003

Penerbangan Malaysia Berhad (PMB), the holding company of

Malaysia Airlines, signed a Memorandum of Understanding

(MoU) with Airbus to acquire six Airbus A380-800 passenger

aircraft for delivery scheduled to commence in 2007.

March 2003

Malaysia Airlines was voted one of the top five airlines in the

“Airline Of The Year 2003” award in an international airline

survey conducted by Skytrax Research of London. It was also

voted 2nd position in the international airline ranking for the

“Best Economy 2003” and 3rd position for Asia’s “Best Airline

2003” award.

06 March 2003

Malaysia Airlines launched the Worldwide Reservations

Conference at Malaysia Airlines Academy from 6-7 March

2003.

29 March 2003

Tan Sri Azizan flagged off Malaysia Airlines International Travel

Hunt 2003 which was held from 29-31 March 2003.

The hunt was from Malaysia Airlines Academy to Bukit Merah

Laketown Resort, Perak

2003

7

9

8

6

10


MAS 00519 CORPORATE ENG FINAL - ir.chartnexus.comir.chartnexus.com/mas/website_HTML/attachments/attachment_18598_1321344694.pdfRIZANI BIN HASSAN(LS 05125) COMPANY SECRETARY Kuala Lumpur,

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