Octagon

a n n u a l r e p o r t

2008

24th Floor, UBN Tower,10, Jalan P. Ramlee50250 Kuala LumpurTel . No. : 03 - 2070 2133 Fax. No. : 03 - 2070 3133

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Del ivering environmental fr iendly solut ionsin Coat ings and Clean Technology

ContentsDefinitions

2

Notice of the Ninth Annual

General Meeting

3

Statement AccompanyingNotice of the Ninth Annual

General Meeting

Corporate Information

87

Profile of Directors

9

Corporate Structure

12

Corporate Profile

Financial Highlights

16

Chairman’s Statement

18

Corporate Governance

Statement

23

Audit Committee

Report

Statement on

Internal Control

34

AdditionalComplianceInformation

36

Financial Statements

39

Information on Landed Properties

105

Analysis of Shareholdings

108

Analysis of Warrant Holdings

111

Form of Proxy

enclosed

14

30

Cover RationaleThe different Swirl green wave lines represent Octagon Consolidated Berhad’s continuous improvement on eco-friendly Coatings solutions that have met the green/environmentally friendly requirements of its customers. In addition, its CleanTech business provides sustainable energy solutions that make good economical and environmental sense. At Octagon Consolidated Berhad, we are committed to be environmentally conscious in the business that we conduct.

OCTAGON CONSOLIDATED BERHAD 497913-X

ANNUAL REPORT 2008OCTAGON CONSOLIDATED BERHAD 497913-X

ANNUAL REPORT 20082 OCTAGON CONSOLIDATED BERHAD 497913-X


ANNUAL REPORT 2008

Definitions

Except where the context otherwise requires, the following definitions shall apply throughout this Annual Report: -

ACST : Advanced Coatings and Surface Technologies Sdn. Bhd.

Act : Companies Act 1965 as amended from time to time, and any re-enactment thereof

AGM : Annual general meeting

APT : Advanced Pyrotech Sdn. Bhd.

Board : Board of directors

Bursa Securities : Bursa Malaysia Securities Berhad

DG : Durachem Guangzhou Co., Ltd.

DIHK : Durachem International (Hong Kong) Co. Limited

DJ : Durachem (Johor) Sdn. Bhd.

DP : Durachem (Pg) Sdn. Bhd.

Durachem : Durachem Sdn. Bhd.

DV : Durachem Vietnam Co., Ltd.

GET : Green Energy and Technology Sdn. Bhd.

Hexagon : Hexagon Portfolio Sdn. Bhd.

MWtE : Melaka Waste to Energy Sdn. Bhd.

Octagon or Company : Octagon Consolidated Berhad

Octagon Group or Group : Octagon and its subsidiary companies

Octagon Share(s) : Ordinary share(s) of RM0.50 each in Octagon

OICT : Octagon Industrial Coatings Technology Sdn. Bhd.

PE : Platinum Energy Sdn. Bhd.

PP : Profound Peak Sdn. Bhd.

PRC : People’s Republic of China

Premierpath : Premierpath Sdn. Bhd.

Premierpath KL : Premierpath (KL) Sdn. Bhd.

PTD : PT Durachem Indonesia

RM : Ringgit Malaysia

USA : The United States of America





ANNUAL REPORT 2008 3

Notice of the NinthAnnual General Meeting

NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting of Octagon Consolidated Berhad (“Octagon” or “the Company”) will be held at Anggerik Room, 4th Floor, Equatorial Hotel Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Wednesday, 29 April 2009 at 10.00 a.m. for the following purposes: -

AGENDA

1. To receive and adopt the Audited Financial Statements of the Company for the financial year ended 31 October 2008 together with the reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees for the financial year ended 31 October 2008.

3. To re-elect the following Directors who are retiring in accordance with the Company’s Articles of Association: -

(a) Mazlan Bin Ali (Article 81)(b) Raymond Fam Chye Soon (Article 81)

4. To appoint Messrs. Moore Stephens AC as Auditors of the Company and to authorise the Board of Directors to fix their remuneration.

Notice of Nomination pursuant to Section 172(11) of the Companies Act 1965 (a copy of which is annexed and marked “Annexure A” in the Annual Report) has been received by the Company for the nomination of Messrs. Moore Stephens AC, who have given their consent to act, for appointment as Auditors and of the intention to propose the following Ordinary Resolution:-

“THAT Messrs. Moore Stephens AC be appointed as new Auditors of the Company in place of the retiring Auditors, Messrs. Moore Stephens to hold office until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors.”

5. As Special Business

Authority to Directors to issue ordinary shares pursuant to Section 132D of the Companies Act 1965

To consider and, if thought fit, pass with or without modifications the following Ordinary Resolution: -

“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 of the Company be and are hereby authorised pursuant to Section 132D of the Companies Act 1965 to allot and issue shares in the Company from time to time 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 pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company AND FURTHER THAT the Directors are also empowered to obtain the approval from Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares to be issued.”

Resolution 1

Resolution 2

Resolution 3Resolution 4

Resolution 5

Resolution 6





ANNUAL REPORT 2008

6. As Special Business

Proposed renewal of share buy-back authority (“Proposed Share Buy-Back”)

To consider and, if thought fit, pass with or without modifications the following Ordinary Resolution: -

“THAT, subject always to the Companies Act 1965, provisions of the Company’s Memorandum and Articles of Association and the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant authority, the Company be and are hereby authorised to purchase such number of ordinary shares of RM0.50 each in the Company as may be determined by the Directors from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that the aggregate number of shares purchased pursuant to this resolution does not exceed ten per cent of the total issued and paid-up share capital of the Company at any point of time of the said purchase(s);

AND THAT an amount not exceeding the Company’s total retained profits and share premium account at the time of the purchase be allocated for the Proposed Share Buy-Back. Based on the latest audited financial statements as at 31 October 2008, the retained profits and share premium of the Company amounted to approximately RM3.772 million and RM4.157 million, respectively;

AND THAT the authority conferred by this resolution shall commence immediately upon passing of this resolution and continue to be in force until: -

(i) the conclusion of the next Annual General Meeting following the forthcoming Annual General Meeting, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed;

(ii) the expiration of the period within which the next Annual General Meeting after the date it is required to be held pursuant to Section 143(1) of the Companies Act 1965 (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act 1965); or

(iii) revoked or varied by resolution passed by the shareholders in general meeting;

whichever is the earlier.

AND THAT authority be and is hereby given to the Directors to decide in their absolute discretion to either cancel all the shares so purchased, retain all the shares as treasury shares to be either resold on Bursa Securities or distributed as dividend to the shareholders of the Company or subsequently cancelled, or retain part thereof as treasury shares and cancel the balance or in any other manner as prescribed by the Companies Act 1965 (“Act”), rules, regulations and orders made pursuant to the Act and the requirements of Bursa Securities and any other relevant authority for the time being in force AND FURTHER THAT the Directors be and are hereby authorised to take all steps and do all things as they may deem necessary or expedient in order to implement, finalise and give full effect to the Proposed Share Buy-Back with full power to assent to any conditions, modifications, variations and/or amendments as may be imposed by the relevant authorities.”

By Order of the Board,

ONG TEIK HOECompany SecretaryKuala Lumpur

3 April 2009

Notice of the NinthAnnual General Meetingcont’d

Resolution 7






Notice of the NinthAnnual General Meeting

cont’d

Notes: -

(i) A member of the Company entitled to attend and vote at the above meeting may appoint not more than 2 proxies of his/her own choice to attend and vote at the same meeting. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act 1965 shall not apply to the Company.

(ii) If a member appoints up to 2 proxies, the member must specify the proportions of his/her holding to be represented by each proxy, otherwise the appointment will be invalid. Return of a duly completed Form of Proxy will not preclude a member from attending and voting personally at the meeting.

(iii) An instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer or attorney duly authorised in that behalf.

(iv) To be valid, the duly completed Form of Proxy must be deposited at the registered office of the Company at 24th Floor, UBN Tower, 10, Jalan P. Ramlee, 50250 Kuala Lumpur, not less than 48 hours before the time set for the meeting or any adjournment thereof.

Explanatory Note on Special Business, Resolution 6Authority to Directors to issue ordinary shares pursuant to Section 132D of the Companies Act 1965

The proposed Ordinary Resolution 6, if passed, will provide the Directors of the Company, from the date of the Ninth Annual General Meeting, the authority to allot and issue shares of up to 10% of the issued share capital of the Company at the time of the issue for such purposes as they consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

Explanatory Note on Special Business, Resolution 7Proposed renewal of share buy-back authority For further information on Special Business, Ordinary Resolution 7, please refer to the Statement to Shareholders in relation to the proposed renewal of authorisation to enable the Company to purchase up to 10% of its issued and paid-up share capital pursuant to Section 67A of the Companies Act 1965 dated 3 April 2009 accompanying the Company’s Annual Report for the financial year of 2008.





ANNUAL REPORT 2008

Annexure A

23 February 2009

The Board of Directors OCTAGON CONSOLIDATED BERHAD24th Floor, UBN Tower10, Jalan P. Ramlee50250 Kuala Lumpur

Dear Sirs,

NOTICE OF NOMINATION OF AUDITORS

Pursuant to Section 172(11) of the Companies Act 1965, we, being a shareholder of the Company, hereby give notice of our intention to nominate Messrs Moore Stephens AC for appointment as new auditors of the Company to replace the retiring auditors, Messrs Moore Stephens subject to their consent to act and to propose the following motion as an ordinary resolution to be tabled at the forthcoming Annual General Meeting of the Company,:-

“THAT Messrs Moore Stephens AC be appointed as new Auditors of the Company in place of the retiring Auditors, Messrs Moore Stephens to hold office until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors.”

Yours faithfully,PREMIUM VECTOR SDN. BHD.

Lim See LengDirector

PV 52C, Rangoon Road, 10400 Penang, Malaysia.Tel: 604-2286266 Fax: 604-2289266

(Company No. 417918-U)






Statement Accompanying Notice of the Ninth Annual General Meeting

1. NAMES OF DIRECTOR STANDING FOR RE-ELECTION

The Directors standing for re-election at the Ninth AGM are as follows: -

(a) Mazlan Bin Ali(b) Raymond Fam Chye Soon

Mazlan Bin Ali and Raymond Fam Chye Soon retire by rotation pursuant to Article 81 of the Articles of Association of the Company.

2. DETAILS OF ATTENDANCE OF DIRECTORS AT THE BOARD MEETINGS

There were 7 Board meetings held during the financial year ended 31 October 2008. Details of attendance of the Directors at the meetings held during the period from 1 November 2007 to 31 October 2008 are as follows: -

Name of Directors No. of meetings attended

Mazlan Bin Ali 7 out of 7

Ong Eng Dee 7 out of 7

Siti Fatimah Binti Mohd Shariff 7 out of 7

Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil 7 out of 7

Datuk Wan Kassim Bin Ahmed 7 out of 7

Raymond Fam Chye Soon * 4 out of 4

Datuk Kwong Tse Woon @ Yan Yik Woon ** 1 out of 1 Notes: -

* Appointed on 17 March 2008.** Demised on 16 January 2008.

3. PLACE, DATE AND TIME OF AGM

The Ninth AGM of the Company will be held at Anggerik Room, 4th Floor, Equatorial Hotel Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Wednesday, 29 April 2009 at 10.00 a.m..

4. DETAILS OF DIRECTORS STANDING FOR RE-ELECTION

The shareholdings of the Directors standing for re-election in the Company based on the Register of Directors’ Shareholdings as at 10 March 2009 are as follows: -

Direct IndirectNo. of Octagon *Percentage No. of Octagon *Percentage

Director Shares held shareholdings Shares held shareholdings% %

Mazlan Bin Ali 23,145,000 13.88 - -

Raymond Fam Chye Soon 50 ^ - -

Notes: -

* Excluding treasury shares.^ Less than 0.01%.

The Directors standing for re-election do not hold any shares in the subsidiaries of the Company and do not have any conflict of interest with the Company. The other details of the Directors standing for re-election are disclosed in the Directors’ profiles.



ANNUAL REPORT 20088

Corporate Information

BOARD OF DIRECTORS

Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil Independent Non-Executive Chairman

Mazlan Bin Ali Managing Director and Chief Executive Officer

Ong Eng Dee Deputy Managing Director

Siti Fatimah Binti Mohd Shariff Executive Director

Datuk Wan Kassim Bin Ahmed Independent Non-Executive Director

Raymond Fam Chye Soon Independent Non-Executive Director

AUDIT COMMITTEE Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil Chairman

Datuk Wan Kassim Bin Ahmed Member

Raymond Fam Chye Soon Member

NOMINATION COMMITTEE Datuk Wan Kassim Bin Ahmed Chairman

Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil Member

REMUNERATION COMMITTEE Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil Chairman

Datuk Wan Kassim Bin Ahmed Member

Mazlan Bin Ali Member

DATE AND PLACE OF INCORPORATION 30 October 1999, Malaysia

COMPANY SECRETARYOng Teik Hoe (MACS 00085)

SHARE REGISTRARSymphony Share Registrars Sdn. Bhd.Level 26, Menara Multi PurposeCapital SquareNo. 8 Jalan Munshi Abdullah50100 Kuala LumpurTel. No.: 03 - 2721 2222Fax No.: 03 - 2721 2530

REGISTERED OFFICE 24th Floor, UBN Tower10, Jalan P. Ramlee50250 Kuala LumpurTel. No.: 03 - 2070 2133Fax. No.: 03 - 2070 3133www.octagon-consolidated.com

PRINCIPAL BANKERSHSBC Bank Malaysia BerhadMalayan Banking BerhadCIMB Bank BerhadRHB Bank BerhadKuwait Finance House (Malaysia) Berhad

AUDITORSMoore Stephens Chartered Accountants8A, Jalan Sri Semantan SatuDamansara Heights50490 Kuala Lumpur

STOCK ExCHANGE LISTINGMain Board of Bursa Securities




Profile of Directors

TAN SRI DATO’ NIK IBRAHIM KAMIL BIN TAN SRI NIK AHMAD KAMIL

TAN SRI DATO’ NIK IBRAHIM KAMIL BIN TAN SRI NIK AHMAD KAMIL, aged 67, a Malaysian, is the Independent Non-Executive Chairman and Senior Independent Non-Executive Director of Octagon. He was appointed to the Board of Octagon on 25 July 2000 and assumed his present position as Independent Non-Executive Chairman on 26 February 2008. He is the Chairman of the Audit Committee and the Remuneration Committee as well as a member of the Nomination Committee.

He graduated with a Bachelor of Science degree in Economics and Business Administration from Georgetown University, Washington D.C., USA in 1966. He has more than 30 years of managerial and business experience ranging from mining, petroleum, media, manufacturing, merchant banking and finance, stock broking, port management, trading to golf resort development. He commenced his career in 1966 as Assistant Company Secretary with a company principally involved in tin-mining and subsequently joined Shell Malaysia Sdn. Bhd. in 1967. In 1971, he joined The New Strait Times Press (M) Berhad (“NSTP”) as an Assistant General Manager and was with the company until 1991 where his last position held was as the Managing Director of the NSTP group. He is currently the Executive Vice Chairman of Palm Resort Berhad, a Director of Camerlin Group Berhad and the Independent and Non-Executive Chairman of OCB Berhad. He also sits on the Board of several other private limited companies.

MAZLAN BIN ALI

MAZLAN BIN ALI, aged 45, a Malaysian, is the Managing Director and Chief Executive Officer of Octagon. He was appointed to the Board of Octagon on 5 July 2000 and assumed his present position on 20 February 2004. He is the Chairman of the Group Executive Committee as well as member of the Remuneration Committee.

He graduated with a Bachelor in Business Administration (Finance) degree in 1986 and Master of Business Administration degree in 1988 from the College of Business, Idaho State University, USA. He also has a Certification in Paint and Coatings Technology from Paint Research Association, United Kingdom (“UK”). Upon completion of his studies in USA in 1988, he joined a company involved in the provision of general insurance services in the Business Development/Mass Marketing Department as an Executive. In 1989, he joined KPMG Peat Marwick Management Consultants Sdn. Bhd. as a Consulting Assistant and was involved in various aspects of management and corporate consultancy services. In 1991, he joined Commerce International Merchant Bankers Berhad (“CIMB”) in the Corporate Finance Department as an Executive where he gained experience in various aspects of corporate advisory services. In 1994, he left CIMB as an Assistant Manager and joined a company listed on the Main Board of Bursa Securities as the General Manager, Corporate Affair and Planning. In 1995, he ventured into the business of providing management, corporate and financial advisory services for public and private sectors. He was involved in various aspects of management and corporate activities and was also a corporate advisor to a company listed on the Second Board of Bursa Securities. He also sits on the Board of various subsidiaries and associated companies of Octagon and other private limited companies. He does not hold any directorship in other public companies.





ANNUAL REPORT 2008

Profile of Directorscont’d

ONG ENG DEE

ONG ENG DEE, aged 52, a Malaysian, is the Deputy Managing Director of Octagon and co-founder of the Octagon Group. He was appointed to the Board of Octagon on 5 July 2000 and assumed his current position on 20 February 2004. He is the Chairman of the Risk Management Committee and member of the Group Executive Committee.

He graduated with a Bachelor of Technology (Honours) degree majoring in Colour Chemistry and Colour Technology in 1981 from the University of Bradford, UK. During his graduate programme, he was attached to a few research laboratories in the UK as part of his fieldwork to gain experience. Upon his return to Malaysia, he was attached to several companies involved in the trading of general goods and manufacturing of paints and inks between 1982 and 1991.

He was appointed as an Executive Director of Durachem in 1991. He also sits on the Board of various subsidiaries of Octagon and is the Managing Director of Durachem and the President Director of PTD. He does not hold any directorship in other public companies.

SITI FATIMAH BINTI MOHD SHARIFF

SITI FATIMAH BINTI MOHD SHARIFF, aged 47, a Malaysian, is an Executive Director of Octagon and was appointed to the Board of Octagon on 20 February 2004. She is a member of the Risk Management Committee and Group Executive Committee.

She graduated with a Bachelor of Science degree in finance in 1985 from the Eastern Illinois University, USA. She also has a Certification in Paint and Coatings Technology from Paint Research Association, UK. Upon completion of her studies in USA, she joined KCB Finance Berhad for 1 year in the Credit and Marketing Division prior to joining Aseamlease Berhad in 1986. In 1991, she joined Skytel Sdn. Bhd. as Finance and Administration Manager prior to joining a company listed on the Main Board of Bursa Securities in 1994 as General Manager, Finance and Administration.

In 1995, she ventured into the business of providing management, corporate and financial advisory services for the public and private sectors. She was also involved in the planning and execution of various take-overs and mergers of companies listed on Bursa Securities as well as listing of strategic companies on Bursa Securities. She is the Managing Director of GET and MWtE and also sits on the Board of other private limited companies. She does not hold any directorship in other public companies.






RAYMOND FAM CHYE SOON

RAYMOND FAM CHYE SOON, aged 46, a Malaysian, is an Independent Non-Executive Director of Octagon and was appointed to the Board of Octagon on 17 March 2008. He is a member of the Audit Committee.

He is a member of the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants. He is also a member of the Financial Planning Association of Malaysia and he has a Master in Financial Planning from University of Sunshine Coast, Australia and Corporate Finance qualification from Institute of Chartered Accountants in England and Wales (ICAEW).

He started his career with an international accounting firm, where he worked for 6 years from 1984 to 1990. He was with the Corporate Finance Department of CIMB from 1990 to 1992 and 1993 to early 1996. In between 1992 and 1993, he served as the Accounting Manager for a multinational engineering firm. In 1996, he left CIMB as the Assistant General Manager in the Corporate Finance Department and joined AIC Corporation Berhad, a listed manufacturing group. He was the Senior Vice President, Group Corporate Services from 1996 to 2002. He was later appointed the Deputy Chief Executive Officer of Jotech Holdings Berhad, a listed manufacturing company within the AIC Group from 2003 to 2006. He left Jotech Holdings Berhad in 2006 and ventured into private businesses in out of home media business, property development and construction and also the provision of consultancy services. He has extensive experience in corporate finance, banking and business knowledge from his wide and extensive experiences above. He is also an Independent Director of Kurnia Insurans (M) Bhd. and he also sits on the Board of other private limited companies.

Profile of Directorscont’d

DATUK WAN KASSIM BIN AHMED

DATUK WAN KASSIM BIN AHMED, aged 60, a Malaysian, is an Independent Non-Executive Director of Octagon and was appointed to the Board of Octagon on 25 July 2000. He is the Chairman of the Nomination Committee and a member of the Audit Committee and Remuneration Committee. He graduated with a Bachelor of Economics (Honours) degree in Accountancy from Universiti Malaya in 1973. Upon graduation, he joined Kassim Chan & Co. as Audit Senior prior to joining Koperasi Shemelin as Financial Controller in 1974. He was formerly a Council Member of Majlis Perbandaran Petaling Jaya, Selangor Darul Ehsan from 1987 to 1991 and has also served as a board member of the Malaysian Tourism Development Board for 4 years from 1991 to 1995. During his tenure as a board member of the Malaysian Tourism Development Board, he has led several promotional missions to UK and South Africa. He is currently a Director of Karambunai Corp Bhd., FACB Industries Incorporated Berhad, Petaling Tin Berhad and Hartamas Group Berhad. He also sits on the Board of other private limited companies.

None of the Directors has:-

• any family relationshipwithanyDirectorand/orsubstantial shareholder of Octagon;

• anyconflictofinterestwithOctagon;or

• any conviction for offences within the past 10years other than traffic offences.





ANNUAL REPORT 2008

Corporate Structure

HEXAGON 100%

PTD

PP100%

GET100%

MWtE70%

PE27.4%

APT100%

DURACHEM 100%

99.93%0.07%

DURACHEM (KL) SDN. BHD.

100%

DIHK80%

DG100%

DJ100%

DP100%

DV100%

CLEANTECHCOATINGS

PREMIERPATH100%

PREMIERPATH KL100%

OICT100%

ACST30%






The principal activity of Octagon is investment holding whilst the principal activities of its subsidiaries and associated companies are as follows: -

SUBSIDIARIES PRINCIPAL ACTIVITIES

ACST Suppliers, dealers and contractors for high performance coatings.

APT Design, construct and operate environmentally friendly waste tyre pyrolysis plants as well as research and commercialisation of new technologies for waste management.

DG Manufacturing and trading of customised industrial paints, inks, thinner, hardener, reducer, retarder and other related products.

DIHK Investment holding and trading of customised industrial paints, inks, thinner, hardener, reducer, retarder and other related products.

DJ Manufacturing and trading of customised industrial paints, inks, thinner, hardener, reducer, retarder and other related products.

DP Manufacturing and trading of customised industrial paints, inks, thinner, hardener, reducer, retarder and other related products.

Durachem Investment holding, manufacturing and trading of customised industrial paints, inks, thinner, hardener, reducer, retarder and other related products.

Durachem (KL) Sdn. Bhd. Dormant.

DV Dormant.

GET Design, engineer, construct, commission and operate waste to energy plants.

Hexagon Investment holding.

MWtE Destruction of waste for the generation of renewable energy and the sale of renewable energy.

OICT Investment holding.

PE Investment holding and provision of management services.

PP Investment holding, manufacturing and trading of customised paints, inks and other related products.

Premierpath Investment holding, manufacturing and trading of paints, thinners and printing materials.

Premierpath KL Manufacturing and trading of paints, thinners and printing materials.

PTD Manufacturing and trading of customised industrial paints, inks and chemical products.

Corporate Structurecont’d





ANNUAL REPORT 2008

Corporate ProfileOctagon’s Continuous Efforts of Going Green

Octagon, an investment holding company, engages in industrial coatings for, amongst others, consumer electrical and electronics products (“Coatings”) and clean technology businesses (“CleanTech”). We have been listed on the Bursa Securities since 8 November 2000.

Octagon started off in Coatings business via its investments in Durachem group of companies. Backed with Durachem’s sound technical know-how, expertise and more than 25 years of experience in Original Equipment Manufacturer (“OEM”) Coatings business, Octagon has built a strong foundation in customer loyalty. Octagon is now the market leader in Malaysia for OEM coatings of consumer electrical and electronics products and has developed a reputation for providing excellence while going extra-miles in adopting environmentally friendly processes.

Our track records are recognised with the winning of The Malaysian Brand Excellent Award from The Malaysian Trade and Industry Organisation recently, and Excellent Company from 3rd Business of the Year Award in the year of 2008 and other recognitions such as Certificate of Green Partner by Sony Japan, ISO9001 (Quality Management Systems) and ISO 14001 (Environmental Management Systems Standard).

While we are excelling in Coatings, we see ailing environmental issues arising from overwhelming wastes in the landfill left to be treated, greenhouse gas emissions, and competition for crops to be consumed as food and as feedstock for fuel. We decided to diversify into green business and offer a solution which makes good environmental and business sense.

Dedicated to being environmentally-sensitive and product excellence, we are growing our second core business, the CleanTech business in waste management and renewable energy, which comes from three separate areas – waste tyre pyrolysis, waste to energy and biofuels. We have great pleasure in introducing our new brand for the CleanTech business – ORIZON.

Orizon gives us a choice to use CleanTech for the generation of greener and cleaner energy from renewable and alternative sources, which initially will be from wastes and crops. The CleanTech under Orizon offers an environmentally sound solution to the treatment of various types of waste including, amongst others, municipal solid wastes (“MSWs”), medical wastes and industrial hazardous wastes and an answer to the rising concern on mounting waste tyres. At Octagon, we pioneer CleanTech solutions that make good business and environmental sense.

WASTE TYRE PYROLYSIS

In the year of 2005, the Group ventured into the waste tyre pyrolysis business and has secured an exclusive worldwide rights, except for Korea, to use Continuous Process Pyrolysis Technology that convert waste tyres into fuel, non-condensable flammable gas which, with sufficient quantity, can be used to generate renewable energy and other marketable commodities, such as carbon black and steel wires.

Currently, the Group has completed a 120 tonnes per day continuous process waste tyre pyrolysis plant in Port Klang, Malaysia which allows 24/7, 365 days/year operations, disposing up to 120 tons of used tyres a day. It is currently undergoing commercial testing and once commercialised, will be one of the biggest continuous process waste tyre pyrolysis plant in the world.

The pyrolysis process also meets the required environmental compliance standards and does not produce any pollutants.






Corporate ProfileOctagon’s Continuous Efforts of Going Green

cont’d

WASTE TO ENERGY

Waste to Energy is the process of creating energy in the form of electricity or heat from waste source. This process reduces or eliminates waste that otherwise would be compiled at greenhouse gas emitting landfills. Waste to Energy is a form of energy recovery.

Orizon’s Waste to Energy system that employs Plasma Gasification Technology is one of the most efficient and effective way to completely destroy waste, without burning, by disassociating all components (organic and inorganic) into their elemental molecular compounds for later recovery and recycling, without leaving any chances for the formation of hazardous toxic gas.

Orizon’s Waste to Energy system, of which patent application has been submitted, is capable of handling and processing different type of wastes including MSWs, medical wastes and industrial hazardous wastes.

Besides, with the reduction of emission of methane which would otherwise occur if the MSWs are disposed via conventional landfill or dumping and the avoidance of emission of carbon dioxide from power generation using fossil fuel, Orizon’s Waste to Energy plants would qualify to be part of the Clean Development Mechanism programme under the Kyoto Protocol.

BIOFUELS

The Group, via its associated company, has an ecologically clean, multi-feedstock Biodiesel production facility in Senawang, Malaysia, with an installed capacity of 200,000 metric tonnes per annum to produce Palm Methyl Ester. The Biodiesel facility, which has been granted a Special Industry status, currently utilises Crude and Refined Palm Oil as source of feedstock for the Palm Methyl Ester production and with the long term plan of complementing the Crude and Refined Palm Oil with Castor as source of feedstock for Biodiesel production.

Its Biodiesel facility is in the midst of undergoing technology upgrade through application of Hydrodynamic Cavitation Technology (“Nano Technology”) for its Biodiesel processing. The installation of the Nano Technology, which has smaller carbon footprint, will result in a more complete process reaction at a fraction of time required in conventional Biodiesel process and will produce better quality Biodiesel product.

The technology upgrade process is expected to be completed in the second half of 2009 with commercial production expected to commence in the 3rd quarter of 2009.

THE LIST DOES NOT END HERE…

Maneuvering ahead, Orizon stays committed for delivering excellence and staying focus in exploring for alternative technologies to broaden Orizon’s view and expertise.



ANNUAL REPORT 200816

Financial Highlights

REVENUE

(RM

000

)

0

20,000

40,000

60,000

80,000

100,000

120,000

2004 2005 2006 2007 2008

95,5

22

107,

119

75,1

07

75,0

37

58,3

74

PROFIT BEFORE TAXATION

(RM

000

)

0

5,000

10,000

15,000

20,000

2004 2005 2006 2007 200817

,233

13,0

74

14,3

35

18,8

19

17,0

53

PROFIT AFTER TAXATIONAND MINORITY INTEREST

(RM

000

)

0

3,000

6,000

9,000

12,000

15,000

2004 2005 2006 2007 2008

12,7

30

9,23

4

10,2

62

13,2

37

11,9

23

EARNINGS PER SHARE

(Sen

)

0

2

4

6

8

10

2004 2005 2006 2007 2008

7.97

5.54

6.48

8.04

7.68

NET ASSETS

(RM

000

)

0

30,000

60,000

90,000

120,000

150,000

2004 2005 2006 2007 2008

129,

731

133,

533

118,

376

111,

523

100,

265

NET ASSETS PER SHARE(R

M)

0

0.5

1.0

1.5

2.0

2004 2005 2006 2007 2008

0.77

0.79

0.72

0.68

1.52

CURRENT RATIO

(Tim

es)

0

2

4

6

8

1

3

5

7

2004 2005 2006 2007 2008

5.46

4.62

5.66

5.36

6.04

SHAREHOLDERS’ FUNDS/EQUITY ATTRIBUTABLE TO EQUITY

HOLDERS OF THE COMPANY

(RM

000

)

0

90,000

150,000

30,000

60,000

120,000

2004 2005 2006 2007 2008

129,

055

133,

264

111,

241

106,

323

98,7

75

NET RETURN ON SHAREHOLDERS’ FUNDS

(%)

0

9

15

3

6

12

2004 2005 2006 2007 2008

9.86

6.93

9.23

12.4

5

12.0

7



Financial year ended 31 October ***

2004 2005 2006 2007 2008

RM 000 RM 000 RM 000 RM 000 RM 000

Revenue 58,374 75,037 75,107 95,522 107,119

Profit before taxation 17,053 18,819 14,335 17,233 13,074

Profit after taxation and minority interest 11,923 13,237 10,262 12,730 9,234

Number of ordinary shares (000) 65,871 164,920 164,920 169,487 169,487

Adjusted weighted average number ofordinary shares (000)* 155,268 164,735 158,265 159,690 166,830

Earnings per share (sen)** 7.68 8.04 6.48 7.97 5.54

Net assets 100,265 111,523 118,376 129,731 133,533

Net assets per share (RM) 1.52 0.68 0.72 0.77 0.79

Current ratio (times) 6.04 5.36 5.66 5.46 4.62

Shareholders’ funds/Equity attributable toequity holders of the Company 98,775 106,323 111,241 129,055 133,264

Net return on shareholders’ funds (%) 12.07 12.45 9.23 9.86 6.93

Notes: -

* The adjusted weighted average number of shares is computed by adjusting, where relevant, for the effects of the following:-

(a) the share split of 1 existing ordinary share of RM1.00 each into 2 new Octagon Shares, implemented in the financial year ended 31 October 2005;

(b) the bonus issue of 1 new Octagon Share for every 4 existing Octagon Shares held after the share split stated in (a) above, implemented in the financial year ended 31 October 2005; and

(c) the number of shares bought back in each of the financial years, where applicable.

** Earnings per share is computed by dividing the profit after taxation and minority interest by the adjusted weighted average number of ordinary shares in issue during the year.

*** Some of the figures in the previous financial years were amended pursuant to the adoption of the new Financial Reporting Standards.

Financial Highlightscont’d



Chairman’s Statement

Dear Valued Shareholders,

INTRODUCTION

On behalf of the Board, I have great pleasure in presenting the Annual Report and the Audited Financial Statements of the Octagon Group and the Company for the financial year ended 31 October 2008.

OVERVIEW

The global economy came under severe stress in the fourth quarter as the deepening recession in the advanced economies intensified the feedback loop from the real economy to the already fragile financial sector. The dynamic interaction between firms cutting jobs, the loss of confidence and consumers holding back spending has led to severe contraction in private sector demand, accelerating the drop in global demand for goods and services and the correction in commodity prices.

Latest developments show that the impact of the global financial crisis on the global economy is far broader, closely entwined and more severe than earlier anticipated. Its depth and contagion across the global economy was unprecedented with several of the large industrial countries and a number of the regional economies having slipped into recession. While global efforts have been intensified to counter the effects of the slowdown, risks remain on the downside and recovery is likely to be slow and protracted. Under these circumstances, the Asian economies have also been adversely affected. The impact is already evident in export performance of several of the regional countries. In the Asian region, the more open economies slipped into recession while the growth of other regional economies decelerated sharply in the fourth quarter.

Being an integral part of the global economy, Malaysia has already felt the impact of the global slowdown. As exports declined, growth has increasingly relied on domestic demand, particularly private consumption and government spending.

Growth of the Malaysian economy slowed to 0.1% in the fourth quarter of 2008 as global economic conditions worsened significantly. Growth was affected by the sharply weaker external demand that has resulted in a further decline in net real exports of goods and services by 40.1%. Nevertheless, domestic demand continued to provide support to growth, driven mainly by private consumption and public spending. For the year as a whole, the Malaysian economy expanded by 4.6% as compared to 6.3% recorded in 2007.

The Malaysian manufacturing sector deteriorated by 8.8% in the fourth quarter of 2008, in particular the export-oriented industries which registered a decline of 12.3%, due to significant contraction in global demand. The annual growth for the manufacturing sector only grew 1.3% after rising 3.1% in the previous year. Production in export-oriented industries declined considerably as the electronics and electrical industry registered a sharp double digit decline of 18.3% in the fourth quarter of 2008. The decline was in tandem with the sharp contraction in global demand. Gross export for electronics and electrical products registered a contraction of 17.2% in the fourth quarter of 2008 and recorded a reduction of 3.8% for the full year of 2008. The lower demand from USA, Japan, European Union and regional countries, weaker global semiconductor prices and a broad-based decline in demand for industrial, commercial and household products are the main contributor to the contraction of growth in the electronics and electrical industry.

Gross domestic products (“GDP”) growth in South Asia also slowed markedly in 2008 to 6.3% from 8.4% in 2007. However, growth in Sri Lanka has proven resilient in 2008 at 6.3%, primarily because of a marked rise in agricultural production and a boom in tea exports, which helped to offset slower growth in garment exports. Sri Lanka’s economy grew at a relatively rapid rate in the range of 7% to 8% a year during the last few years and the growth resulted in a correlated growth in the energy demand. Sri Lanka has no proven fossil fuel deposits at present. Sri Lanka’s primary energy supply is dominated by biomass and its contribution was 48% of the total primary energy supply in 2007.



Chairman’s Statementcont’d

FINANCIAL REVIEW

For the financial year under review, the Group recorded a higher turnover. The Group’s turnover grew from approximately RM95.522 million to approximately RM107.119 million. The RM11.597 million or 12.1% increase is mainly contributed by the increase of approximately RM19.281 million in revenue from the design and engineering works of a planned waste to energy plant undertaken by GET, offset by decrease of approximately RM7.684 million, caused mainly by the lower demand from existing customers of the Coatings division in view of the global economy slowdown. The revenue of GET is recognised based on progress of the project undertaken under the Services Agreement dated 23 October 2007 for a Sri Lankan company.

The Group recorded a marginal increase in operating profit from RM20.768 million to RM21.220 million for the financial year ended 31 October 2008. This is due to an increase of 43.6% in the contribution from the Clean Technology (“CleanTech”) division from RM6.661 million in prior year, resulted from intellectual property fees, to RM9.568 million for the financial year under review, offset by decrease of 12.1% in the contribution from Coatings division from RM14.406 million to RM12.660 million. The higher contribution from the CleanTech division is mainly contributed from the liquidated damages, obtained as a result of delay in plant completion by its turnkey contractor, recognised by APT, which has become a wholly-owned subsidiary of the Company during the financial year under review. The financial performance of the Coatings division of the Group has declined as the Group is unable to increase its existing selling price and transfer the increased cost to its customers as its indirect customers, being major brand owners, are controlling their product costing in order to maintain their competitiveness in the market in view of the overall depressed market conditions and also the intense competition faced by these customers. As a result, the margin for most of the products in the coatings industry, including the Group’s margin, has been lower than previous years.

The Group’s profit before tax has decreased by 24.1% to RM13.074 million during the financial year under review from RM17.233 million recorded for the previous financial year as a result of lower profit margin for the products in the Coatings division, share of losses incurred by a new associated company, PE, which has not commenced operations amounting to RM0.769 million and increase in the overall financing cost arising from additional bank borrowing by the Company, amounting to RM70 million, to finance, inter alia, the projects under CleanTech division. Total interest expense for the current financial year under review has increased to RM6.571 million from RM2.392 million recorded in the previous financial year. In line with the decrease in the Group’s profit before tax, the profit after taxation and minority interest also reduced by 27.5% from RM12.730 million to RM9.234 million in the financial year under review. Pursuant to the above, earnings per share for the financial year ended 31 October 2008 decreased to 5.54 sen from 7.97 sen. Overall, the financial year under review was marked by higher interest cost, increasing cost of production, lower demand and keen competition, arisen from the global economy and financial meltdown.

CORPORATE DEVELOPMENT

Coatings

The Group remained focus on maintaining its position as the market leader as a coatings provider for Original Equipment Manufacturer (“OEM”) in the consumer electrical and electronics products industry. During the financial year under review, the Group had been streamlining its Coatings business to improve efficiency of its operations. The turnover and the profit margin declined due to the lower demand by its customers.

The slowdown of the overall worldwide economy has adversely impacted export growth, especially electrical and electronics products. The overall Malaysia’s export growth of electrical and electronics products declined by 17.2% in the fourth quarter of 2008 and by 3.8% for the year 2008. The lacklustre market has affected demand as well as increase in competition in the end products market of the Group’s customers. The Group’s customers, being major brand owners, are not able to increase product pricing as a result of intense competition. Hence, the pricing as well as the margin for most of the products in the industry has been lower than previous years.




CleanTech

In view of the alarming rate of global warming and depletion of fossil fuels, the Group sees the vast potential and importance of the global inclination towards the usage of the renewable and alternative energy. The Group has made further expansion or diversification into this second core business by seizing the investment opportunities in this new market and investing in development of the renewable and alternative energy technology. The Group is now well positioned to provide clean technology solutions locally and globally. In the recent mini budget announced in March 2009, the Malaysian government has taken more steps in promoting greater use of green technology. The Board believes that this will be complementary to the CleanTech business of the Group.

On 22 October 2008, GET entered into a Supplemental Services Agreement with Colombo Renewable Energy (Private) Limited to revise certain terms of the Services Agreement dated 23 October 2007, including, inter alia, increasing the contract price to design, engineer, construct and commission a waste to energy plant in Colombo from USD115 million to USD185.5 million.

In grooming its second core business, during the financial year under review, the Company via GET diversified into Biofuels, by acquiring approximately 27.4% equity interest in PE in May 2008. PE group of companies (“PE Group”) is involved in the establishment of an integrated Biodiesel platform encompassing feedstock integration, Biodiesel processing as well as production of higher value added products. Currently, PE Group has an ecologically clean, multi-feedstock Biodiesel production facility located in Senawang, Malaysia which is currently undergoing technology upgrade with the target commercial production commencing in the 3rd quarter of 2009. With the completion of the technology upgrade, the process will be a more complete process reaction at a fraction of time required in conventional Biodiesel process and will produce better quality Biodiesel product. PE is expected to broaden the Group’s earnings base and also to complement the CleanTech business of the Group. During the year, the Company increased its shareholdings in APT and made APT a wholly-owned subsidiary of the Company. APT has the license to the worldwide patents (other than Korea) for the continuous process pyrolysis technology which converts waste tyres into fuels and saleable commodities.

Subsequent to the Heads of Agreement entered into on 2 November 2007 with K.K. Incinerator Engineering & Construction Co. Ltd, Canadian Carbon Converters LP and APT to set out their intention to jointly develop the continuous process pyrolysis technology in USA, Canada and Mexico, the Company had also been in various stages of discussions with potential local and overseas partners with a view to further expand the CleanTech business.

APT’s first waste tyre pyrolysis plant in Port Klang, Malaysia, which the Company believes to be the world’s first 120 tonnes/day continuous process pyrolysis plant, had been completed and is expected to commence commercial operations in May 2009. During the year, the Group, in collaboration with Majlis Amanah Raya, has started initialising a vendor development programme with a view to develop Bumiputera entrepreneurs in the waste tyre industry. Pursuant to the above, APT has appointed Purearth Sdn. Bhd. as its master vendor and has also entered into a supply agreement with Purearth Sdn. Bhd. for part of the supply of the shredded tyres required for the said plant. In addition, APT has another contract in place for the supply of the shredded tyres required for its operations.

Other Corporate Development

On 18 March 2009, the Company announced its intention to seek the approval of its shareholders for the renewal of authority for share buy-back of up to 10% of the issued and paid-up share capital of the Company at the forthcoming AGM.



DIVIDEND

At the Eighth AGM, the shareholders approved a final dividend payment of 4 sen per ordinary share of RM0.50 each less income tax at 26% in respect of the financial year ended 31 October 2007. This dividend was paid on 23 May 2008.

In view of the current global financial crisis, which has resulted in the overall credit crunch in the market, and the uncertainties surrounding the economy, the Board is mindful of the Group’s need to conserve cash reserves. Therefore, the Board is not recommending any dividend for the financial year ended 31 October 2008.

PROSPECTS

The impact of the current global economic crisis, which originated from the sub-prime financial turmoil in USA, has since widened and deepened. In fact, more than half of the major world economies are in recession whereas emerging economies continue to face a hostile external environment. World growth of 3.4% in 2008 is projected to fall to 0.5% in the year of 2009, its lowest rate since World War II.

The outlook for South Asian regional growth is highly uncertain because of the sustained degree of volatility and synchronised nature of the slow down across countries and because the full extent of financial disruption on both the regional and global economies remain unclear. South Asian GDP growth is projected to decline to 5.4% in 2009. Sri Lanka is expected to register a slower GDP growth of 4%.

The Malaysian GDP growth is expected to be in the range of -1% to 1% for 2009 while the Malaysia’s export growth is forecast to decline by 5% in 2009. The manufacturing sector is expected to face challenging prospects in year 2009 and is expected to registered negative growth of 5.5%.

International trends show that renewable energy resources are gaining a larger share of energy programmes, especially in Europe and USA. Various renewable energy efforts also stimulate new economic activities and the possible spin-off potential may well generate new exports and employment. For example, the Congress of USA passed the stimulus package which, amongst others, offers a bevy of benefits to power companies making green energy.

In the recent mini budget announced in March 2009, the Malaysian government has taken steps in promoting greater use of green technology. The Energy Policy and Strategies of Sri Lanka (2008) also clearly identified the interventions required in the energy sector during the next 15 years, amongst others, increased attention to supplement energy supply with renewable energy forms.

Moving forward, the Group will continue taking measures to counter the effect of the declining margin in the Coatings division by streamlining the business and production as well as increasing its focus on higher end products. The Group is anticipating its CleanTech division to have higher contribution to the Group upon the commencement of operations of its waste tyre pyrolysis plant and biofuel plant in 2009. The Group is also in various stages of negotiations and discussions with potential partners to expand the CleanTech business locally and abroad. However, in view of the current global financial turmoil, the Group is cognisant that obtaining financing for expansion is a challenge to the Group and the Group will be mindful of the interest of its stakeholders in pursuing its expansion plans. The Group also plans to streamline its CleanTech division to improve operational efficiency. In minimising the impact of global economy slowdown towards the Group, the Board will be vigilant on the development of its business plan and strategy.

In view of the global economy and financial meltdown, 2009 and the few years to come will certainly be difficult years. In spite of the challenging economic conditions, we believe that with the expertise and experience of the management coupled with the support of our stakeholders, we will be able to sail through these challenging times.




ACKNOWLEDGEMENT

On behalf of the Board, I would like to record our sincere appreciation to the management team and all employees of the Group for their efforts and commitment throughout the year. Their continuing loyalty and dedication inspire our confidence in the future of the Group, especially during the current trying time experienced by a lot of companies throughout the world.

I would also like to express our sincere gratitude and appreciation to our valued shareholders, customers, suppliers, bankers and business associates for their continued confidence and support for the Group. The Board and management also wish to thank all the relevant regulatory authorities for their guidance and advice.

Finally, I would like to record my sincere thanks to my fellow board members for their support, commitment and contribution to the Group.

TAN SRI DATO’ NIK IBRAHIM KAMIL Independent Non-Executive Chairman




Corporate Governance Statement

The Board of Octagon is committed to ensure that a high standards of corporate governance practices are implemented throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders’ interest and value and financial performance of the Group. In this respect, the Board is pleased to present the manner in which it has applied, wherever practical and reasonable, the principles and best practices set out in the Malaysian Code on Corporate Governance (Revised 2007) (“the Code”) throughout the financial year ended 31 October 2008.

THE BOARD OF DIRECTORS

1. The Board

The Board has the overall responsibility for corporate governance of the Company including strategic planning, overseeing the Company’s business conducts, direction charting, goals setting for management and monitoring the achievement of these goals. All Board members bring an independent judgement to bear on issues of strategy, performance, resources and standards of conduct.

2. Meetings

There were 7 Board meetings held in the financial year under review in which all the members of the Board were present.

The Board meetings are held regularly, at least 4 times a year. The Board also meets on ad-hoc basis to deliberate urgent issues concerning corporate proposals or matters that require the Directors’ approval.

3. Composition of the Board and Board Balance

(a) Current Board

The current Board consists of 6 members, comprising 3 Executive Directors and 3 Independent Non-Executive Directors.

(b) Composition of the Board

For the financial year under review, all Non-Executive Directors are independent. This exceeds the best practices set out in the Code which require that at least one-third of the memberships of the Board are Independent Non-Executive Directors.

(c) Balance of the Board

The composition of the Board reflects a mix of members that possess a wide range of business, financial and technical skills. The presence of Independent Non-Executive Directors brings an additional element of balance to the Board as they provide unbiased and independent views, advice and judgement. Although all the Directors have an equal responsibility for the management of the Group, the Independent Non-Executive Directors play significant roles, acting in the best interest of the Group, its shareholders and other stakeholders, in exercising its independent judgement to bear on issues of strategy, performance, resources and standards of conduct and ensuring that the strategies proposed by the executive management are fully discussed and examined.

Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil is the Senior Independent Non-Executive Director of the Company and any concerns of the minority shareholders of Octagon in relation to the Group can be conveyed to him.



Corporate Governance Statementcont’d

4. Division of Roles and Responsibilities between the Chairman and the Managing Director/Chief Executive Officer

In accordance with the requirements of the Code, there is clear division of roles and responsibilities between the Chairman and the Managing Director/Chief Executive Officer to ensure that there is a balance of power and authority and that no one individual has unfettered power of decision.

The Chairman is primarily responsible for ensuring Board effectiveness and conduct whilst the Managing Director/Chief Executive Officer has overall responsibility over the operational and business units, organisational effectiveness and implementation of Board’s policies, directives, strategies, mandate and decisions.

5. Appointments to the Board

The Nomination Committee is responsible for making recommendations for any appointments to the Board. All decisions on appointments are made by the Board after considering the recommendations of the Nomination Committee. Further details on the Nomination Committee are set out on page 25 of this Annual Report.

6. Retirement and Re-election of Directors

In accordance with Article 81 of the Articles of Association of the Company, at least one-third of the Directors or if their number is not 3 or a multiple of 3, then the number nearest to one-third shall retire from office and be eligible for re-election every year provided always that all Directors shall retire from office at least once in every 3 years but shall be eligible for re-election.

Details of Directors seeking re-election at the forthcoming AGM are disclosed in the Statement Accompanying Notice of the Ninth AGM in this Annual Report.

7. Director’ Trainings

All Directors have attended the Mandatory Accreditation Programme conducted by Bursa Securities. All Directors are also encouraged to attend programmes and seminars to keep abreast with the relevant changes in laws and regulations and developments in the industry.

Throughout the year, the Directors also received internal updates and briefings, particularly on regulatory, industry, technology and legal developments, including information on significant changes in business risks and procedures instituted to mitigate such risks.

The Directors are responsible to determine their continuous training needs to keep abreast with the relevant regulatory and corporate governance development.

The trainings and/or briefings attended by the members of the Board for the financial year ended 31 October 2008 include, inter-alia, Financial Reporting Standards in Malaysia, the 5th National Utilities Summit 2008, accounting for construction and property development activities, changes in regulatory framework and areas relating to chemical spillage and handling.

8. Supply of Information

The Board, individually and collectively, has full and unrestricted access to all information pertaining to the Group’s businesses and affairs and is provided with timely information, including performance reports of the Group, to enable the discharge of its duties. In addition, there is a schedule of matters reserved specifically for the Board’s decision which include major investments and financial decisions, the approval of corporate exercises and acquisitions and disposals of assets that are material to the Group.

All Directors have access to the advice and service of the Company Secretary and senior management in carrying out their duties. A procedure is in place for any Directors to take independent professional advice, where necessary in the furtherance of their duties, at the Company’s expense.



9. Board Committees

The Board has delegated specific responsibilities to Board Committees which operate within clearly defined terms of reference. These committees have been established to assist the Board in the execution of its responsibilities, the details of which are set out below: -

(a) Audit Committee

The Audit Committee reviews issues of accounting policy and presentation for external financial reporting, monitors the work of the internal audit function and ensures that an objective and professional relationship is maintained with the external auditors. The Audit Committee members, comprise exclusively of Independent Non-Executive Directors, have direct communication channels with both the internal and external auditors who, in turn, have access at all times to the Chairman of the Audit Committee.

The Audit Committee report is set out on pages 30 to 33 of this Annual Report.

(b) Nomination Committee

The Nomination Committee is responsible for identifying and recommending new nominees to the Board as well as committees of the Board. All decisions on appointments are made by the Board after considering the recommendations of the Nomination Committee.

The Nomination Committee comprise exclusively of Independent Non-Executive Directors. The current members of the Nomination Committee are as follows: -

Chairman : Datuk Wan Kassim Bin Ahmed Independent Non-Executive Director

Member : Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil Independent Non-Executive Chairman

The functions of the Nomination Committee are as follows:

(i) to recommend to the Board, candidates for all directorships to be filled by shareholders or the Board;

(ii) to establish the requirements on the skills, knowledge, expertise, experience, professionalism, integrity and other areas of competencies of a director;

(iii) in the case of persons for the position of Independent Non-Executive Director, to evaluate the persons’ ability to discharge such responsibility, functions as expected from independent non-executive directors;

(iv) to recommend to the Board, Directors to fill the seats on Board committees;

(v) to consider, in making its recommendations, candidates for directorships proposed by the Chairman and, within the bounds of practicability, by any other Director or senior executive or shareholder;

(vi) to assess the effectiveness of the Board as a whole on an annual basis, the committees of the Board and the contribution of each individual Director including Independent Non-Executive Directors as well as the Chief Executive Officer. All assessments and evaluations should be documented; and

(vii) to undertake an annual review of the required mix of skills, experience and other core competencies within the Board which is necessary to enable the Company to achieve its corporate objectives.

During the financial year ended 31 October 2008, 2 meetings were held with all members present.




(c) Remuneration Committee

The duties of the Remuneration Committee are to recommend to the Board on remuneration packages and benefits extended to the Executive Directors.

The members of the Remuneration Committee, which consist of mainly Non-Executive Directors, are: -

Chairman : Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil Independent Non-Executive Chairman

Members : Datuk Wan Kassim Bin Ahmed Independent Non-Executive Director

Mazlan Bin Ali Managing Director and Chief Executive Officer

The functions of the Remuneration Committee are as follows:-

(i) to ensure that the Executive Directors are appropriately rewarded, giving due regard to the performance of the individual Director and the performance of the Company; and

(ii) to recommend to the Board on remuneration packages and benefits extended to the Executive Directors, drawing from outside advice where necessary.

During the financial year ended 31 October 2008, 2 meetings were held with all members present.

(d) Other Committees

Other than the above, the Board is also assisted by other committees such as the Risk Management Committee. The members of these committees comprise Executive Directors of the Company and/or the senior management of the Octagon Group.

The Risk Management Committee was set up to review, assess and recommend risk management strategies and policies to the Board as well as overseeing the risk management process.

10. Director’s Remuneration

The remuneration of the Executive Directors is structured to link rewards to corporate and individual performance in order to attract, retain and motivate the Executive Directors to run the Group successfully. In the case of the Non-Executive Directors, the level of remuneration reflects the experience, expertise and level of responsibilities undertaken by the particular Non-Executive Director concerned.

The Remuneration Committee reviews and recommends to the Board the remuneration package of each of the Executive Directors. It is the responsibility of the entire Board to approve the remuneration of the Executive Directors. The determination of the remuneration of the Non-Executive Directors is a matter for the Board as a whole. None of the Executive or Non-Executive Directors participates in any way in determining his/her own individual remuneration.




Details of remuneration of the Directors’ for the financial year ended 31 October 2008 are as follows:-

Salariesand Other Other

Directors Fees Emoluments Bonuses Benefits Total

RM RM RM RM RM

Executive 111,000 700,000 180,000 106,840 1,097,840

Non-Executive 180,500 117,600 - - 298,100

Total 291,500 817,600 180,000 106,840 1,395,940

The analysis of the Directors’ remuneration based on successive bands of RM50,000 is as follows: -

No. of Directors

Executive * Non-Executive

Less than RM100,000 - 3

RM100,001 - RM150,000 - 1

RM150,001 - RM200,000 - -

RM200,001 - RM250,000 - -

RM250,001 - RM300,000 - -

RM300,001 - RM350,000 2 -

RM350,001 – RM400,000 - -

RM400,001 – RM450,000 1 - The details of the remuneration of each individual Director are not disclosed as the Board deems such information

to be private and confidential.

Note: -

* Inclusive of the remuneration of the late Chairman, Datuk Kwong Tse Woon @ Yan Yik Woon, who passed away on 16 January 2008.

SHAREHOLDERS AND INVESTORS RELATION

1. Channels of Communication

The Board and management convey information about the Company’s performance and matters affecting shareholders’ interest to the shareholders and investors through timely dissemination of information via various channels of communication which include annual reports, circulars to its shareholders, quarterly results and announcements released to Bursa Securities. The Board also provides an avenue to the shareholders of the Company to access information electronically via the Company’s website at www.octagon-consolidated.com.

2. Dialogue between the Company and Investors

In addition, the Board also values dialogue with investors and held meetings with institutional investors and analysts during the financial year ended 31 October 2008 to keep them abreast with the latest developments and performance of the Company.

Corporate Governance Statement cont’d



3. The AGM

The AGM is the principal forum for dialogue with all shareholders and the Board encourages shareholders to attend and participate in the AGM. The shareholders are provided with an opportunity to enquire about the Group’s activities and prospects as well as to communicate their expectations and concerns. Shareholders are also encouraged to participate in the question and answer session.

A copy of the Annual Report and the notice of the AGM are sent to all shareholders at least 21 days before the AGM. The notice of AGM is also published in nationally circulated daily newspaper. The Board is available to respond to the questions raised by the shareholders during the meeting and, where appropriate, the Board will provide written answers to any questions that cannot be readily answered during the AGM.

Each item of special business included in the notice of the AGM will be accompanied by a full explanation of the effects of the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. Shareholders are also informed and invited to attend any Extraordinary General Meetings (“EGMs”) through circulars and notices of the EGMs.

ACCOUNTABILITY AND AUDIT

1. Financial Reporting

The Board endeavours to present a balanced and understandable assessment of the Octagon Group’s businesses, operations, financial position and prospects in the financial reports. In this respect, it is the Board’s policy to ensure the accurate and timely dissemination of financial and corporate announcements to Bursa Securities for greater accountability and transparency.

2. Internal Control

The Board recognises the importance of sound internal control and risk management practices to good corporate governance. In this respect, the Board affirms its overall responsibility for the Octagon Group’s systems of internal control and risk management and for reviewing the adequacy and integrity of those systems.

The Group’s Statement on Internal Control set out on pages 34 and 35 of this Annual Report, reviewed by the Company’s external auditors, provides an overview of the state of internal controls within the Group.

3. Relationship with the External Auditors

The Company, through the Audit Committee, has always maintained a formal and transparent relationship with the external auditors in seeking professional advice and ensuring compliance with the approved accounting standards.

STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS The Board is responsible to prepare financial statements which have been prepared in accordance with applicable approved accounting standards and give a true and fair view of the state of affairs of the Octagon Group and the Company at the end of the financial year.

In preparing the financial statements of the Company and the Group for the financial year ended 31 October 2008, the Board has adopted and consistently applied appropriate accounting policies, made judgements and estimates that are reasonable and prudent and ensured that all applicable accounting standards have been complied with. The Board also confirms that the financial statements have been prepared on a going concern basis.

The Board is also responsible for: -

(a) ensuring that the accounting records, which disclose with reasonable accuracy the financial position of the Octagon Group and the Company, are properly kept;

(b) taking reasonable steps to safeguard the assets of the Company; and

(c) taking reasonable steps for the prevention and detection of fraud and other irregularities.





CORPORATE SOCIAL RESPONSIBILITY

Recognising that the business decisions need to be consistent with the Group’s social and environmental responsibilities, the Group embraces corporate responsibility practices and subscribe to an open and transparent business practice that is based on ethical values and respect for its employees, shareholders, the community, environment and other stakeholders.

The Group recognises people as one of its key assets. In growing its people and nurturing the successors, the Group provides various training and development opportunities to the employees. Besides furnishing in-house trainings to the employees, the Group also sends the employees to external structured training and development programmes which are deemed useful to them and equipping them with the necessary skills and expertise to enhance their efficiency and effectiveness.

The Board also believes in providing a conducive, safe and secure working environment to the employees. In addition to the continuous safety trainings to increase the safety awareness amongst the employees, especially those working in the plants, the Board also promotes friendly and healthy working environment by encouraging open communications.

The Group emphasises on ethics and safety not only in the work place but also the business that we do, including the products that we sell. For the Coatings business, our products are free of highly hazardous materials such as the mercury, cadmium, etc, which could be harmful to the environment as well as the community. The Group has also introduced water-based products. The Group’s continuous efforts of going green have received recognitions from its customers leading to the awards of, amongst others, Certificate of Green Partner by Sony Japan and Certificate of Conformity EHS Management by Pioneer Japan. Durachem is also ISO14001 (Environmental Management System Standards) certified.

The Group strongly believes in and recognises the importance of environment conservation and protection and hence has ventured into the clean technology (“CleanTech”) business in 2004. CleanTech business of the Group, under the new brand name of Orizon, comprises commercially viable projects which generates clean energy (renewable energy and/or fuels) from renewable or alternative sources such as wastes, crops and tyres using technologies and processes that are environmental friendly. The CleanTech division currently comprises 3 main businesses, namely Waste to Energy, Waste Tyre Pyrolysis and Biofuels.

The Wastes to Energy Projects involve the conversion of wastes, including municipal solid wastes, industrial and hazardous wastes and biomass from crops/plantations, to generate electrical energy using the Plasma Gasification Technology developed by GET.

The Waste Tyres Pyrolysis Projects involve the degradation of waste tyres into fuels and industrial commodity products such as carbon black and steel wire using the Continuous Pyrolysis Process Technology.

The Biofuels Projects involve the production of Biodiesel, specifically, Palm Methyl Esters utilising the Nano Technology, which has smaller carbon footprint and produce better quality Biodiesel product. The Biofuels division is operational through its associated company, PE.

The CleanTech division of Octagon not only provides solutions for the permanent and complete disposal of waste, it also provides answers to the issue of energy efficiency and depleting fossil fuels. It helps to address climate change issues by reducing the emission of greenhouse gases that would have been produced by power generation using fossil fuels or emissions from traditional landfills.

In addition, the Company has submitted application to the Malaysian Government proposing to set up vendors development programme to develop Bumiputera entrepreneurs in the waste tyres industry.

This corporate governance statement is made in accordance with the resolution of the Board dated 18 March 2009.



Audit Committee Report

MEMBERS AND MEETINGS

The current members of the Audit Committee are as follows: -

Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil ChairmanIndependent Non-Executive Chairman Datuk Wan Kassim Bin Ahmed MemberIndependent Non-Executive Director Raymond Fam Chye Soon MemberIndependent Non-Executive Director

The details of attendance of the members at the meetings held during the financial year ended 31 October 2008 are as follows: -

Name No. of Meetings Attended

Tan Sri Dato’ Nik Ibrahim Kamil Bin Tan Sri Nik Ahmad Kamil 7 out of 7

Datuk Wan Kassim Bin Ahmed 7 out of 7

Raymond Fam Chye Soon* 5 out of 5

Mazlan Bin Ali** 1 out of 1

Datuk Kwong Tse Woon @ Yan Yik Woon*** n/a

Notes: -

* Appointed on 17 March 2008.** Resigned on 19 December 2007.*** Appointed on 19 December 2007 and demised on 16 January 2008.n/a Not applicable.

TERMS OF REFERENCE

Composition

The Audit Committee shall be appointed by the Board from amongst its Directors and shall fulfil the following requirements: -

(a) The Audit Committee shall be composed of no fewer than 3 members;(b) All the Audit Committee members must be Non-Executive Directors, with a majority of them being Independent

Directors;(c) At least 1 member of the Audit Committee: -

(i) must be a member of the Malaysian Institute of Accountants; (ii) if he/she is not a member of the Malaysian Institute of Accountants, he/she must have at least 3 years’ working

experience and: -(aa) he/she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act

1967; or(bb) he/she must be a member of one of the associations of accountants specified in Part II of the 1st Schedule

of the Accountants Act 1967; or(iii) fulfils such other requirements as prescribed or approved by Bursa Securities.

In the event of any vacancy in the Audit Committee resulting in the non-compliance of the requirements of (a) to (c) above, the Board shall appoint such number of new members to fill the vacancy within 3 months. No Alternate Director shall be appointed as a member of the Audit Committee.

The members of the Audit Committee shall elect a Chairman from their members who shall be an Independent Director.



Audit Committee Reportcont’d

The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Board at least once in every 3 years to determine whether the Audit Committee and its members have carried out their duties in accordance with their terms of reference.

Authorities

The Audit Committee shall, wherever necessary and reasonable for the performance of its duties, and at the cost of the Company: -

(a) have authority to investigate any matter within its terms of reference;(b) have the resources which are required to perform its duties;(c) have full and unrestricted access to any information pertaining to the Company;(d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function

or activity;(e) be able to obtain independent professional or other advice; and(f) be able to convene meetings with external auditors, internal auditors or both, excluding the attendance of the other

Directors and employees of the Company, whenever deemed necessary.

Functions

The functions of the Audit Committee shall, amongst others, include the following: -

(a) to review the following and to report the same to the Board: -(i) with the external auditor, the audit plan encompassing the nature and scope of the audit before the audit

commences;(ii) with the external auditor, his evaluation of the system of internal controls;(iii) with the external auditor, his audit report;(iv) the assistance given by the employees of the Company to the external auditor;(v) the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has

the necessary authority to carry out its work;(vi) the internal audit programme, processes, the results of the internal audit programme, processes or investigation

undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

(vii) the quarterly results and year end financial statements of the Octagon Group, prior to the approval by the Board focusing particularly on: -(aa) changes in or implementation of major accounting policy changes;(bb) significant and unusual events or adjustments;(cc) going concern assumption;(dd) compliance with accounting standards and other legal requirements;

(viii) any related party transaction and conflict of interest situation that may arise within the Octagon Group including any transaction, procedure or course of conduct that raises questions of management integrity;

(ix) any letter of resignation from the external auditors of the Company and any question of resignation or dismissal; and

(x) whether there is reason (supported by grounds) to believe that the Company’s external auditor is not suitable for re-appointment;

(b) to ensure coordination of audit where more than one external audit firm is involved;(c) to consider the appointment of the external auditors and the audit fee;(d) to discuss problems and reservations arising from the interim and final audits, and any matter the external auditor

may wish to discuss (in the absence of management where necessary);(e) to review the external auditor’s management letter and management’s response;(f) to review any appraisal of the performance of members of the internal audit function, approve any appointment or

termination of senior staff members of the internal audit function, and inform itself of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning;

(g) to consider the major findings of internal investigations and management’s responses; and (h) to consider other areas as and when instructed by the Board.




Meetings The Audit Committee shall meet at least 4 times a year with additional meetings as the Chairman of the Audit Committee shall decide in order to discharge its duties. However, at least once a year, the Audit Committee shall meet with the external auditors without the presence of executive Board members. In addition, the Chairman of the Audit Committee may call for a meeting of the Audit Committee if a request is made by any member of the Audit Committee or the Board, or the internal or external auditors. A quorum shall consist of a majority of Independent Directors.

The Company Secretary shall act as secretary of the Audit Committee and shall be responsible, together with the Chairman of the Audit Committee, for drawing up the agenda for meeting and circulating it, supported by explanatory documentation to members of the Audit Committee prior to each meeting. The Company Secretary shall also be responsible for keeping the minutes of the Audit Committee and circulating them to the Audit Committee members and to the other members of the Board, where applicable.

The Company shall ensure that the attendance of the other Directors and employees of the Company at any particular Audit Committee meeting is only at the Audit Committee’s invitation and is specific to the relevant meeting.

The Audit Committee shall regulate its own procedure, in particular, the calling of meetings, the notice to be given of such meetings, the voting and proceeding of such meetings, the keeping of minutes and the custody, production and inspection of such minutes.

Circular resolution in writing signed or approved by letter by all the members of the Audit Committee, who may at the time be present in Malaysia or otherwise, shall be valid and effectual as if it had been passed at an Audit Committee meeting of the Company duly called and constituted. Any such resolution may consist of several documents in like form each signed by 1 or more members of the Audit Committee.

Where the Audit Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in breach of the requirements of Bursa Securities, the Audit Committee shall promptly report such matter to Bursa Securities.

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR ENDED 31 OCTOBER 2008

The activities of the Audit Committee during the financial year ended 31 October 2008 included, amongst others, the following: -

(a) the review of and discussion with the external auditors on the audited financial statements of the Octagon Group for the financial year ended 31 October 2007 and recommendation of the same to the Board for approval;

(b) the review of the quarterly financial results of the Octagon Group and recommendation of the same to the Board for approval and subsequent release of announcements to Bursa Securities;

(c) the review of the internal audit reports for the Octagon Group and the actions taken by management in response to the audit findings;

(d) the review of the related party transactions entered into by the Octagon Group with parties connected to the Directors or substantial shareholders of Octagon and the review of the procedures established to ensure that the related party transactions are not more favourable to the related parties than those generally available to the public and are not detrimental to the shareholders nor disadvantageous to the Octagon Group and the minority shareholders of Octagon, and the relevant announcements to Bursa Securities;

(e) the review of the audit plans for the year prepared by the auditors;(f) the review of and discussion with the external auditors on the audit strategy and scope for the statutory audit for the

financial year ended 31 October 2008; (g) the review of the circular to shareholders in respect of the proposed renewal of shareholders’ mandate and statement

of share buy back; (h) the review of corporate exercises, including financing facilities, proposed and/or undertaken by the Octagon Group;

and(i) the Chairman of the Audit Committee has also engaged on a continuous basis with senior management in order to

be kept informed of matters affecting the Company.



INTERNAL AUDIT

The Audit Committee has been assisted by the internal audit team, which provides the Audit Committee with independent and objective reports on the state of internal control and compliance to policies and procedures. The internal audit team is also involved in the review of risk records to ensure risk areas have been adequately covered.

The activities of the internal audit team includes: -

(a) review and appraise the soundness, adequacy and application of accounting, financial and other controls;(b) ascertain the extent of compliance with established policies and procedures;(c) ascertain the extent to which the Group’s assets are accounted for and safeguarded from losses of all kinds; (d) recommend improvements to the operations, processes and control systems in the Group; and(e) perform follow-up review on previous audit report to ensure appropriate actions implemented to address audit

findings.

In addition, the internal auditors also review the recurrent related party transactions on a monthly basis to ensure that such transactions are made on normal commercial terms that are not more favourable to the related parties than those generally available to the public and that the transactions are not detrimental to the Group or its minority shareholders.

The Company recognises the need for change and appreciates effective system of internal controls. In order to enhance the impartiality, integrity, proficiency, efficiency and transparency of internal audit function, the Company has outsourced the internal audit function to an external service provider in January 2009.

The Statement on Internal Control is set out on pages 34 and 35 of the Annual Report.


Documents

Octagon