RIMBUNAN SAWIT BERHAD

Transcription

1 Rimbunan Sawit RIMBUNAN SAWIT BERHAD ( U) Sustaining Wellness ANNUAL REPORT 2014

2 Contents Vision & Mission Locations of Operations Corporate Structure Corporate Information Financial Highlights Chairman s Statement Managing Director s Review of Operations Profile of Directors Statement on Corporate Governance Report of the Audit Committee Statement on Risk Management and Internal Control Sustainability and Corporate Responsibility Financial Statements Statements of Directors Responsibilities for Preparing the Annual Financial Statements Additional Compliance Information List of Properties Owned by the Group Analysis of Shareholdings Notice of Annual General Meeting Form of Proxy

3 Vision Mission To be a leading agri-business & plantation group - To enhance stakeholders values - To provide high quality products and services to our customers - To provide job opportunities and lifelong learning opportunities at the workplace and local community 2 Annual Report 2014

4 LOCATIONS OF OPERATIONS Annual Report

5 CORPORATE STRUCTURE 100% 100% 100% 100% 100% 100% 100% 100% R.H. Plantation Sdn Bhd Timrest Sdn Bhd Woodijaya Sdn Bhd Jayamax Plantation Sdn Bhd Rimbunan Sawit Holdings Sdn Bhd 100% Nescaya Palma Sdn Bhd 100% Lumiera Enterprise Sdn Bhd Novelpac-Puncakdana Plantation Sdn Bhd Midas Plantation Sdn Bhd Formasi Abadi Sdn Bhd RIMBUNAN SAWIT BERHAD 4 Annual Report % 100% 100% 85% 85% 85% 70% 60% 60% 60% 60% RSB Palm Oil Mill Sdn Bhd Rajang Builders Sdn Bhd Rajang Agrisupplies Sdn Bhd Burung Tiong Helicopter Sdn Bhd Baram Trading Sdn Bhd PJP Pelita Biawak Plantation Sdn Bhd Pelita-Splendid Plantation Sdn Bhd PJP Pelita Ekang-Banyok Plantation Sdn Bhd PJP Pelita Lundu Plantation Sdn Bhd PJP Pelita Selangau Plantation Sdn Bhd PJP Pelita Ulu Teru Plantation Sdn Bhd

6 CORPORATE INFORMATION Share Registrar Bong Wei Leong (Chairman / Independent Director) Tiong Kiong King (Non-Independent Non-Executive Director / Vice Chairman) Tan Sri Datuk Sir Diong Hiew Tiong Hiew King (Executive Director) Tiong Chiong Ong (Managing Director) Tiong Chiong Ie (Non-Independent Non-Executive Director) Tiong Ing Ming (Independent Director) Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU IA/ Petaling Jaya Selangor Darul Ehsan Tel. No. : Fax No. : Auditors Crowe Horwath (AF : 1018) Chartered Accountants 1st Floor No.1 Lorong Pahlawan 7A2 Jalan Pahlawan Sibu, Sarawak Company Secretary Voon Jan Moi (MAICSA ) North Wing, Menara Rimbunan Hijau, 101, Pusat Suria Permata, Jalan Upper Lanang, Sibu, Sarawak. Tel. No. : Fax No. : North Wing, Menara Rimbunan Hijau, 101, Pusat Suria Permata, Jalan Upper Lanang, Sibu, Sarawak. Tel. No. : Fax No. : address : rsb@rsb.com.my Stock Exchange Listing Listed on Main Market of Bursa Malaysia Securities Berhad Stock name : RSAWIT Stock code : 5113 Principal Bankers RHB Bank Berhad Malayan Banking Berhad Bank of China (Malaysia) Berhad Hong Leong Bank Berhad CIMB Bank Berhad Public Bank Berhad Bank Pertanian Malaysia Berhad AmBank (M) Berhad Annual Report

7 FINANCIAL HIGHLIGHTS REVENUE PROFIT BEFORE TAX RM million RM million (3) 7 0 FY2010 (16 MTHS) FY2011 (12 MTHS) FY2012 (12 MTHS) FY2013 (12 MTHS) FY2014 (12 MTHS) -10 FY2010 (16 MTHS) FY2011 (12 MTHS) FY2012 (12 MTHS) FY2013 (12 MTHS) FY2014 (12 MTHS) SHAREHOLDERS FUND TOTAL ASSET RM million RM million ,800 1,600 1,612 1,568 1,614 1, ,400 1, , , FY2010 (16 MTHS) FY2011 (12 MTHS) FY2012 (12 MTHS) FY2013 (12 MTHS) FY2014 (12 MTHS) FY2010 (16 MTHS) FY2011 (12 MTHS) FY2012 (12 MTHS) FY2013 (12 MTHS) FY2014 (12 MTHS) 6 Annual Report 2014

8 CHAIRMAN S STATEMENT Bong Wei Leong Chairman, Independent Director Dear Shareholders, On behalf of the Board of Directors of Rimbunan Sawit Berhad ( RSB or Company ) and its subsidiaries ( the Group ), I am pleased to present to you the Annual Report and the Audited Financial Statements for the financial year ended 31 December FINANCIAL HIGHLIGHTS The Group recorded a revenue of RM239.7 million in 2014 which represented a decrease of 15.1% as compared to 2013 of RM282.2 million. This was mainly due to the decline in the Group s overall sales volume of Crude Palm Oil ( CPO ), in which 46,818 metric tonnes in 2014 as compared to 69,591 metric tonnes in 2013, and Palm Kernel ( PK ), in which 10,598 metric tonnes in 2014 as compared to 16,831 metric tonnes in 2013; despite the increased of average selling price per metric tonnes for both CPO and PK for 3.1% and 31.6%, respectively; from RM2,187 and RM1,228 in 2013 to RM2,256 and RM1,617 in 2014 respectively. by the increased demand from the emerging economies in levels of world s CPO had caused its prices to be traded year Despite the drop in the pricing of commodities margin of 19% in 2014, which represented an increase of 5.5% from 13.5% in The decrease in the production cost also to Annual Report t

9 CHAIRMAN S STATEMENT (CONT D) DIVIDEND for the year ended 31 December PLANTATION OPERATION REVIEW In 2014, the Group s oil palm planted area has increased to 57,182 hectares as compared to 54,659 hectares in 2013 whereas the production area was 39,122 (2014) hectares, an increase of 2,255 hectares from 2013 of 36,867 hectares. However, due to the lack of harvesters and unfavourable weather condition, it has caused the plunging in the production of fresh fruit bunch (FFB) to 436,584 metric tonnes in 2014 as compared to 479,480 metric tonnes in The Group s palm oil mill performance indicated unfavourable prospect in The productions of CPO was 43,937 metric tonnes and PK was 10,751 metric tonnes in 2014, representing a decrease of 34% and 35% respectively from To combat the mill aging factor, major overhaul in respective areas will be performed in 2015; following the operation of the Group s new palm oil mill. We will refurbish the existing mill to improve overall throughput With the introduction of many good agricultural and maintenance & gravelling, complete harvesting rounds, standard pruning, improved worker productivity and In countering the ever rising production costs, the management team of the Group is actively exploring throughout our operations. With close collaboration and cooperation of all stakeholders in the operation chain the Group will sustain and progress with improved performance. 8 Annual Report 2014

10 CHAIRMAN S STATEMENT (CONT D) Touche as consultants for the GST impact analysis and Abeam for the system changes, in order to adapt to the Furthermore, the setup of proposed new palm oil mill December The Group had spent much effort in revising the design of the mill s structure as well as to apply enhanced materials in order to improve the keeping the environment green. The brand new, rugged, 2015 barring unforeseen circumstances. Technology s advancement has pushed the Group to re-evaluate our enterprise s strategies, product and services. To be in line with globalisation, implementation of new technology throughout the Group will help achieving greater CORPORATE DEVELOPMENT In 2012, the Group introduced the usage of SAP control, along with the SAP Material Management & Sales Distribution solutions with standardize process of procurement and sales. Upon completion, the Group was able to utilize the system to synchronize all recurring processes, feeding to one master system. With the introduction of the synchronized system, it allows the business to better respond to industry and environmental changes, better operational and strategic alignment, improved information access and communication channels, improved productivity, improvement in risk management and ultimately from the top down process but also vice versa. With the implementation of the GST, effective 1st April 2015, the Group has engaged Messrs. Deloitte & commissioning of the new palm oil mill will fuel business growth for the Group in the foreseeable future. OUTLOOK AND PROSPECTS The global economic outlook remains uncertain with the recent sharp fall in the global oil prices and this has amid mounting evidence that global supplies are far outstripping demand and has had a large impact on the oil and gas sector, resulting in falling share prices for major oil companies worldwide. These factors, combined with the spill over effects of expansionary monetary policies in some developed countries have further fuelled the volatility in the major commodity prices and exchange rates. These have led to experts concern on the possibility of economic contraction in China which will inevitably exert the downward pressure on the demand for the global edible oil consumption and the prices of the crude palm oil will be affected accordingly. Annual Report

11 CHAIRMAN S STATEMENT (CONT D) OUTLOOK AND PROSPECTS (CONT D) ACKNOWLEDGEMENTS We nevertheless believe the CPO price will not vary it may be affected by factors including the global production and consumption rates of vegetable oil, biodiesel usage, crude oil price, soya bean oil prices and macro-economic conditions. Nonetheless, palm oil product is expected to grow with the expanding global population. The United States Department of Agriculture forecasts that the palm oil price is expected to improve although global oilseed crop will expand by a slower rate. Thus, this will lower the output of vegetable oils in which will sustain palm oil prices at a favourable position. The Malaysian Government has announced the implementation of higher biodiesel mandate to B7, a 7% palm oil blending, which will see nationwide consumption of palm oil biodiesel increases to 575,000 tonnes. Implying to our Group, Fresh Fruit Bunches yield will improve as our palm trees are reaching maturity and soon to be in line with the national target to increase the yield by 25% by the year Apart from that, it will also lead to higher Oil Extraction Rate to around 20.5% due to possible alternatives for our plantations such as replanting or such to ensure our growth. Best Agriculture Practices are enforced and with this, we are also not diverting away from our responsibility to all stakeholders which also include keeping ourselves close to new Researches and Developments on palm oil trees. A recent study by University Sains Malaysia reveals that palm trees upon reaching 25 years, when their oil extraction diminishes, can be converted to other means of products using sap from the palm tree trunks. This breakthrough gives us the alternatives to further tap our existing palm trees after their prime and fully utilising them to the fullest and yet being ecology friendly. It has been a very challenging year in 2014, with relatively the year. The Group managed to record a positive performance and endeavour to stay competitive despite the weak commodities market. With great respect, on behalf of RSB, I would like to express my deepest gratitude to fellow Board members who have contributed greatly to the Group with their invaluable expertise and experience. My heartiest appreciation goes to the Management and staff for their commitment and dedication throughout the Group and also to all our shareholders for their strong support. Not forgetting our customers, business associates and contributions in assuring the Group s smooth operation. Bong Wei Leong Chairman 10 Annual Report 2014

12 MANAGING DIRECTOR S REVIEW OF OPERATIONS personnel to ensure that every palm tree is healthy, receives OIL PALM PLANTATION OPERATION Tiong Chiong Ong Managing Director During the year 2014, our Group, had developed 2,892 hectares ( Ha ) of new area for oil palm plantation, while the existing planted area has expanded by 5.3% from 54,659 Ha to 57,182 Ha, as compared to the preceding year. Besides that, the Group has started scout-harvesting on area of 2,255 ha and the production area has increased from 36,867 ha in 2013, to 39,122 ha in Unfortunately, due to lack of harvesters, high workers turnover and unfavourable weather condition, fresh fruit bunch (FFB) production during the year under review had decreased by 18% to 436,584 metric tonnes, from 479,480 metric tonnes in the previous year. The unfavourable weather condition, had also caused poor result, the Group s milling activities recorded a decrease in oil extraction rate from 20.56% in 2013 to 20.03% in 2014, and in palm kernel extraction rate from 5.10% in 2013 to 4.91% in 2014, respectively. Whilst the Group s palm oil mill produced 43,937 metric tonnes of Crude Palm Oil (CPO) and 10,751 metric tonnes of Palm Kernel (PK) in 2014, which resulted in a decrease of 34% and 35% respectively from the previous year. follows: Age Hectares One year 4,595 Two years 4,889 Three years and above 44,866 Total 57,182 Immature 18,060 Mature 39,122 Total 57,182 Despite all that, the Group still emphasizes on complying with the Good Agricultural Practise set by the Group Plantation year, the Group will introduce self-monitoring system as This standardised procedure for harvesting, manuring, optimum output. For the year 2015, the Group will initiate of the continuous improvement programme. are encouraged to be covered with soft grasses for good palm growth and better fresh fruit bunch yields. Biological control by using cattle for grazing is the best method to achieve this objective. Therefore, cattle integration project under government subsidy program, is also applied to some of the Group s estates. The Group has planned to increase the grazing area next year, which are programmed for these cattle with a grazing ratio of approximately 100 herbs: 5 Ha per day. In addition, the Group also focuses on knowledge management (K-Management) and has aimed to be one of the best learning organisations. Agronomists and other internal experts have conducted numerous training sessions in the estates, in order to transfer the know-hows to the management, cadets and supervisors. This has enabled the estate management to have enhanced understanding on the principles and technical knowledge in oil palm botany, weed management, water level management, ablation, pest and diseases, and harvesting. The Group has progressively developed its in-house biotechnology and analytical lab for foliar and soil analysis. Besides that, the Group is also actively pursuing mitigation for pest and disease on oil palm. Several rounds of pest elimination campaign were programmed and carried out. Most common pests to oil palm are rat, termite, wild boar and caterpillar. In order to be an environment friendly company, biological control is introduced in some of the Subulata and Casia Cobanensis, for the purpose of reducing chemical control usage. Apart from that, good road accessibility is always vital for the group plantation, especially for transportation of materials and passage of workers. In 2014, road maintenance expenditures caused a substantial loss for the Group. In year 2015, road maintenance is programmed to be completed within the 6 months of dry period for the year. Old farm tractors are still currently being used and will eventually be replaced with lighter agricultural machines phase by production cost. The Group has started categorising for arranged and managed under the allocated estates. This is to improve the machinery maintenance so that the Annual Report

13 MANAGING DIRECTOR S REVIEW OF OPERATIONS (CONT D) In striving for revenue maximisation and minimising of cost, intensive measures have been undertaken by benchmarking good agricultural and management practices. With guidance from these practices, it is deemed to help the Group in achieving plantation s optimum potential yield. PALM OIL MILL OPERATION The RH Plantation Palm Oil Mill (RHPOM) in Miri, Sarawak, has started operation in October The Group has extended the mill s capacity to 80 tonnes per hour (TPH), and thereafter its annual capacity to 360,000 tonnes of Fresh Fruit Bunch (FFB). Clean technology is one of the main focus in mill operations, in line with the Group values. Methane capture facility has been introduced to reduce the greenhouse gas emission capturing the resulting methane biogas; which then the biogas is recycled to Gas Engine for electricity generation. In addition, polishing plant has been setup to treat the mill water meets and complies with the safety standard set by Department of Environment (DOE). Furthermore, the Group plans to invest in organic composting plant to fully utilise the by-products such as the EFB, decanter value added products such as organic fertiliser for estates, while creating an environmental friendly work stations. RHPOM continues to maintain and improve its technological minimise the oil seepage. The Group s new palm oil mill (RSB Palm Oil Mill) construction project commenced on 16th December 2013, and it is now under mechanical erection and installation stage. The RSB Palm Oil Mill (60TPH) project is a complex that focuses technology, user friendly and zero wastage management. by-product handling process that differ from conventional mills. Besides that, EFB shredder, biogas plant and organic composting plant are invested and included in the mill maintaining clean environment. This 100 million ringgit project is estimated to be ready for commissioning in the 60 tonnes per hour. DEVELOPMENT IN 2014 system with the invaluable support of an Enterprise Resource Planning (ERP) System which has been implemented in the real-time integrated business management solution that locations to manage critical business functions including purchasing, sales & distribution, human resource and effective decisions instantly. In line with the implementation of SAP, secondary integration database programmes also have been initiated. These database programmes provide basic day-to-day operation data for further analysis by relevant departments. Already rolled out and implemented secondary database programmes are, Vehicle Tracking System and Dashboard. Another important matter; RSB continues to sustain all its developed oil palm plantations on Native Customary Rights ( NCR ) land in Sarawak by bringing social and are from the indigenous community of Malaysia. There were some new projects being initiated in 2014 among the RSB Group of plantations. One being the construction of mini township at Bakong Plantation Sdn Bhd, where general car parks, petrol station and commercial shop lots are being built as part of the centralisation strategy in terms of people expertise and logistics. For continuous learning and training objective, the new generation is vital to RSB Group as we emphasise the importance of continuous growth for the Group; internally and externally, RSB offers On-the-Job Training Programme to school leavers. Here, they will receive priceless experience and knowledge shared by estate managers and staff from of skilled workers; this also helps the Group in building a stronger relationship with the local communities. As for our present staff, our Agronomy Department is constantly organising trainings on good agriculture practices, so they works closely with Open University Institution in organising leadership training programmes and corporate education. CONCLUSION 2014 had been a year full of challenges and hardship. Moving forward, in the beginning of the year 2015, we have Hijau. With the implementation of good practices in agricultural activities, human resources management, departments and parties in the organisation, the Group is and will continue to strive for higher performance. Tiong Chiong Ong Managing Director 12 Annual Report 2014

14 PROFILE OF DIRECTORS BONG WEI LEONG Aged 47 / Malaysian Chairman /Independent Director TIONG KIONG KING Aged 67 / Malaysian Non-Independent Non-Executive Vice Chairman Mr. Bong Wei Leong was appointed to the Board of Rimbunan Sawit Berhad ( RSB ) on 14 February 2006 and December Mr. Bong Wei Leong is a businessman. He graduated with a Bachelor of Business (Accountancy) and Bachelor of Law from Queensland University of Technology, Australia in to starting his own practice in He has more than 21 years of experience in providing auditing, accounting and taxation services to various clients. He is a member of the Malaysian Institute of Accountants and the CPA Australia. Mr. Bong also sits on the boards of a public listed company, CCK Consolidated Holdings Berhad and one (1) of the subsidiaries of RSB. Mr. Bong is the Senior Independent Director to whom concerns regarding the Company may be conveyed. He is the Chairmen of Audit Committee and Nomination Committee. He is also a member of Remuneration Committee. holds no share in RSB Group. Mr. Tiong Kiong King is a businessman and was appointed to the Board of RSB on 14 February Non-Executive Vice Chairman on 15 February He is also the Chairman of Remuneration Committee and members of Audit Committee and Nomination Committee. Mr. Tiong joined the RH Group in 1975 where he has held various positions including being a Director in one (1) of the subsidiaries of RSB since December He has more than 44 years of managerial experience in the timber industry in various capacities. Mr. Tiong also sits on the boards of Subur Tiasa Holdings Berhad, a public listed company and several private limited companies. Currently, Mr. Tiong also held key posts in several non-government organizations. Amongst others, he is the Honorary President for Sibu Chinese Chamber of Commerce and Industry, Vice President of World Federation of Fuzhou Association Limited, Chairman of Persekutuan Persatuan-Persatuan Foochow Sarawak, Vice President of the World Zhang Clan Association Limited and Vice President of Persekutuan Klan Zhang Negeri Sarawak His shareholdings in RSB Group as at 23 April 2015 are disclosed on page 137 of this annual report. Annual Report

15 PROFILE OF DIRECTOR S (CONT D) TAN SRI DATUK SIR DIONG HIEW TIONG HIEW KING Aged 80 / Malaysian Executive Director TIONG CHIONG ONG Aged 56 / Malaysian Managing Director Tan Sri Datuk Sir Diong Hiew Tiong Hiew King was appointed to the Board of Rimbunan Sawit Berhad ( RSB ) Executive Chairman on 15 February He was redesignated as Executive Director on 19 December Tan Sri Datuk Sir Tiong is a businessman with vast and extensive experience in various business sectors including media and publishing, oil and timber, tree plantation, oil palm plantation and mills. Over the years, Tan Sri Datuk Sir Tiong has started and built up the Rimbunan Hijau Group of Companies ( RH Group ). Currently, he is the Executive Chairman and Managing Director of RH various businesses in Malaysia comprising of timber harvesting, processing and manufacturing of timber products, plantations and other businesses around the world. He is the founder of an English newspaper named The National in Papua New Guinea. He is currently the President of The Chinese Language Press Institute Limited. In June 2009, he was bestowed the Knight Commander of the Most Excellent Order of the British Empire (K.B.E.), which carries the title SIR, by Queen Elizabeth II of the United Kingdom, in recognition of his contribution to commerce, community and charitable organisations. In 2010, he was awarded Malaysia Business Leadership Award The Lifetime Achievement Award by the Kuala Lumpur Malay Chamber of Commerce, in recognition of his entrepreneurship and his contribution to the country. Tan Sri Datuk Sir Tiong is the Executive Chairman of Sin Chew Media Corporation Berhad ( Sin Chew ), a wholly-owned subsidiary of Media Chinese International Limited, a company listed in Malaysia and Hong Kong. He is also the Chairman of the Board of Trustee of Yayasan Sin Chew, and currently serves as the Executive Chairman of RH Petrogas Limited, a listed company in Singapore. He also serves as a director of other private limited companies. held. His shareholdings in RSB Group as at 23 April 2015 are disclosed on page 137 of this annual report. Mr. Tiong Chiong Ong is a businessman. He was appointed to the Board of RSB on 14 February 2006 and was then appointed as Managing Director of RSB on 15 February Mr. Tiong graduated with a Bachelor of Law and Economics from Monash University, Australia in 1984 and joined RH Group in Mr. Tiong started his career as a chambering student and underwent chambering at Skrine and Co. in Kuala Lumpur for nine (9) months. He is a member of CPA Australia and is a member of the Victorian and Sarawak Bar and the Malaysian Institute of Accountants. Mr. Tiong has more than 23 years of experience in various capacities in the timber and plantation and industries. He is the Chairman of RSB Risk Management Committee. He also holds directorship in several private limited companies. Under his leadership, RSB was presented the 2012 Top Award for the Best Performing Stock in the Plantation Sector by the EDGE Billion Ringgit Club, Malaysia. In 2013, Mr. Tiong was presented the IPD HRD Leadership Award by the Institute of Professional Development, Open University Malaysia in acknowledgement and in recognition of his exemplary leadership and outstanding contribution to the promotion of Human Capital Development efforts in the plantation industry. shareholdings in RSB Group as at 23 April 2015 are disclosed on page 137 of this annual report. 14 Annual Report 2014

16 PROFILE OF DIRECTORS (CONT D) TIONG CHIONG IE Aged 44 / Malaysian Non-Independent Non-executive Director TIONG ING MING Aged 57 / Malaysian Independent Director Mr. Tiong Chiong Ie, a businessman, was appointed to the Board of RSB on 14 February He graduated with a Bachelor of Business in Information System from Monash University, Australia in Mr. Tiong joined the RH Group in 1996 and has more than 19 years of managerial experience in the timber, transportation provider and shipping industry. He is also a member of Remuneration Committee. Mr. Tiong holds directorships in Hornbilland Berhad and several private limited companies. Mr. Tiong has His shareholdings in RSB Group as at 23 April 2015 are disclosed on page 137 of this annual report. Board of Quantity Surveyors, Malaysia and a member of the Institution of Surveyors Malaysia. He was appointed to the Board of RSB on 14 February He graduated with a Bachelor of Building (Hons) from University of Melbourne, Australia in 1982 and began his Mr. Tiong is members of Audit and Nomination Committees. He also sits on the board of Subur Tiasa Holdings Berhad. His shareholdings in RSB Group as at 23 April 2015 are disclosed on page 137 of this annual report. Notes: a) Tan Sri Datuk Sir Diong Hiew Tiong Hiew King and Tiong Kiong King are brothers and is the father and uncle of Tiong Chiong Ong respectively. Both Tan Sri Datuk Sir Diong Hiew Tiong Hiew King and Tiong Kiong King, and Tiong Chiong Ong are the uncles and cousin of Tiong Chiong Ie respectively. Apart from these, the other Directors have no family relationship with each other or the major shareholders of RSB. b) None of the Directors have been convicted of offences within the past 10 years. Annual Report

17 CORPORATE GOVERNANCE STATEMENT INTRODUCTION The Board of Directors ( Board ) of Rimbunan Sawit Berhad ( RSB or the Company ) recognises Corporate Governance as being vital and important to the success of RSB and its Group of Companies ( Group ) business. They are unreservedly committed to applying the principles necessary to ensure that the principles of good governance are practised in all of its business dealings in respect of its shareholders and relevant stakeholders. This Corporate Governance Statement sets out how the Company has applied the eight (8) Principles as outlined in under review, the non-observation, including the reasons thereof and, where appropriate, the alternative practice, if any, is mentioned in this Statement. 1. Establish clear roles and responsibilities of the Board and Management All Board members acting on behalf of the Company are aware of their duties and responsibilities as Board members and the various legislations and regulations affecting their conduct and that the principles and practices of good Corporate Governance are applied in all their dealings in respect, and on behalf of the Company. (a) reviewing and adopting a strategic plan for the Company, including the sustainability of the Group s businesses; (b) overseeing the conduct of the Group s businesses and assessing whether the businesses are being properly managed; (c) identifying principal business risks of all aspects of the Group s business and ensure the implementation of appropriate internal controls system and mitigating measures to effectively monitor and manage the risks; programmes in place to provide for the orderly succession of senior management; (e) overseeing the development and implementation of a shareholder communications policy; and Group. To assist in the discharge its responsibilities and facilitating its ongoing oversight of the Group, the Board has established Board Committees, namely the Audit Committee, Nomination Committee, Remuneration Committee approved by the Board and report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board. 16 Annual Report 2014

18 CORPORATE GOVERNANCE STATEMENT (CONT D) 1. Establish clear roles and responsibilities of the Board and Management (cont d) (i) Board Charter To enhance accountability, the Board has established clear functions reserved for the Board and those delegated to Management. There is a formal schedule of matters reserved to the Board for its deliberation and decision to ensure the direction and control of the Company are in its hands. Generally, key matters of policies. Such delineation of roles is clearly set out in the Board Charter ( the Charter ), which serves as a reference point for Board activities. The Charter provides guidance for Directors and Management regarding Directors in carrying out their stewardship role and in discharging their duties towards the Company as well as boardroom activities. The Charter is made available on the Company s website to be in line with Recommendation 1.7 of the Code and will be periodically reviewed and updated to ensure it remains consistent with the Board s objective and responsibilities. The Board is committed to conducting its business in accordance with the upmost standards of business ethics and complying with the law, rules and regulations. The Directors are mindful that a strong business an excellent culture of corporate governance. The Board is guided by the Directors Code of Conduct in business standards, honesty and integrity and to apply these values to all aspects of the Group s business and professional practice and act in good faith in the best interests of the Group and its shareholders. This Code of Conduct is also made available on the Company s website. The Board also encourages its employees and associates to raise genuine concerns about possible improprieties disclose any improper conduct or other malpractices within the Group in an appropriate way. The Whistleblowing Policy adopted by the Company provides and facilitates a mechanism for any employee and associate to report concerns about any suspected and/or known misconduct, wrongdoings, corruption, fraud, waste and/or abuse. The Group Managing Director is the conduit between the Board and the Management in ensuring the success of the Company s governance and management functions. The Group Managing Director implements the policies, strategies and decisions adopted by the Board. All Board authorities conferred on the Management is delegated through the Group Managing Director and this will be considered as the Group Managing Director s authority and accountability as far as the Board is concerned. (ii) Sustainability of Business The Board is mindful of the importance of business sustainability and, in conducting the Group s business, the impact on the environmental, social and governance aspects is taken into consideration. The Group also embraces sustainability in its operations and supply chain, through its own actions as well as in partnership with its stakeholders, including suppliers, customers and other organizations. Company s strategies on promoting sustainability has been formulated and documented. pages 37 to 42 of this Annual Report. Annual Report

19 CORPORATE GOVERNANCE STATEMENT (CONT D) 1. Establish clear roles and responsibilities of the Board and Management (cont d) (iii) Access to Information and Advice Procedures to allow Directors to access to information and advice is in place. Directors are supplied with and audit matters for decisions to be made on an informed basis and effective discharge of the Board s responsibilities. All Directors are provided with the performance and progress reports on a timely basis prior to the scheduled Board and Board Committee meetings, to facilitate decision making by the Board and to deal with matters arising from such meetings. Senior Management of the Group and external advisers are invited to attend items on the meeting agenda. Besides direct access to Management, Directors may obtain independent professional advice at the Company s expense, if considered necessary, in accordance with established procedures as set out in the Board Charter in furtherance of their duties. Directors have unrestricted access to the advice and services of the Company Secretary to enable them to discharge their duties effectively. The Board is regularly updated and advised by the Company Secretaries implications of any changes therein to the Company and Directors in relation to their duties and responsibilities. (iv) Company Secretary The Company Secretary is the member of the Malaysian Association of Institute of Chartered Secretaries and Administrators (MAICSA). She is competent in carrying out her work and plays supporting and advisory Code of Corporate Governance. She ensures adherence and compliance to the procedures and regulatory kept and updated. 2. Strengthen Composition of the Board Directors, two (2) Non-Independent Non-Executive Directors, one (1) Executive Director and one (1) Managing Director. supervise the RSB Group s business activities. The current mix of skills and experiences are vital for the effectiveness annual report. 18 Annual Report 2014

20 CORPORATE GOVERNANCE STATEMENT (CONT D) 2. Strengthen Composition of the Board (cont d) The following Board Committees have been established to assist the Board in discharging its duties: i) Audit Committee The Audit Committee, formed on 2 March 2006, reviews issues of accounting policy and presentation for the in-house internal auditors, ensures that an objective and professional relationship is maintained with the Further details can be found in the Report of the Audit Committee as set out on pages 29 to 33 of this annual report. ii) Nomination Committee The Board has on 7 April 2006 set up a Nomination Committee. The members of the Nomination Committee, all of whom are non-executive Directors and a majority of whom are independent, are as follows: Chairman : Bong Wei Leong (Senior Independent Director) Members : Tiong Kiong King (Non-Independent Non-Executive Vice Chairman) Tiong Ing Ming (Independent Director) The Board has adopted terms of reference for the Nomination Committee, which cover, inter-alia, selecting, assessing and recommending to the Board the candidature of Directors, appointment of Directors to Board assessment of the independent directors, reviewing of succession plans for the Board and senior management, formalising the policies for Board and workforce diversity and reviewing the training needs for Directors. The Board has yet to adopt gender and workforce diversity policy and targets. Nevertheless, the Board will continue to monitor and review the Board size and composition from time to time and ensure that women candidates are sought in the recruitment exercise. The evaluation of candidates suitability is solely based on their competency, character, time commitment, integrity, contribution and experience in meeting the needs of the Company, including, where appropriate, the ability of the candidates to act as Independent Directors, as the case may be. The Board will consider the diversity policy for the workforce. involves selection and assessment of candidates for directorships proposed by the Group Managing Director and within the bounds of practicality, by any other senior executive or any director or shareholder, interviewing or meeting up with candidates, deliberation by the Nomination Committee and recommendations by the Nomination Committee to the Board. In reviewing and recommending to the Board any new Director appointments, the Nomination Committee considers: (a) the candidate s independence, in the case of the appointment of an Independent Director; appointed to any of the Board Committees); (c) the candidate s age, credentials, skills, knowledge, expertise, experience, professionalism, integrity, capabilities and such other relevant factors as may be determined by the Nomination Committee which would contribute to the Board s collective skills; and (d) any competing time commitments, if the candidate has multiple board representations. Annual Report

21 CORPORATE GOVERNANCE STATEMENT (CONT D) 2. Strengthen Composition of the Board (cont d) ii) Nomination Committee (cont d) The new Directors will undergo an induction programme, which includes vision and mission of the Company, corporate strategy, visits to the RSB Group s business, and meetings with Senior Management, as appropriate, to facilitate the new Directors understanding of the RSB Group. The Company Secretary will ensure that all appointments of new Director are properly carried out and all legal and regulatory obligations are met. The Board through the Nomination Committee conducted an annual assessment of the performance of the Board, as a whole, Board Committees and individual Directors, based on a self-assessment and peer approach. Directors, the Board considered and approved the recommendations made by the Nomination Committee on the re-election and re-appointment of Directors at the Company s forthcoming Annual General Meeting. The Nomination Committee shall assess the independence of all Independent Directors annually and report to the Board. All assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions shall be properly documented. The Nomination Committee has developed criteria for use in the recruitment and annual assessment of Directors. In evaluating the suitability of candidates, the Nomination Committee considers, inter-alia, the competency, experience, commitment (including time commitment), contribution and integrity of the candidates, and additionally in the case of candidates proposed for appointment as Independent Directors, the candidates independence. discussion and decision making. There is appropriate mix of skills, experience and core competencies in the composition of the Board and that the Board has an appropriate number of Independent Directors. The committed to discharge their roles. The Nomination Committee recognizes the importance of the roles the Nomination Committee plays not only in the selection and assessment of Directors but also in other aspects of corporate governance which the iii) Remuneration Committee The Remuneration Committee was established on 7 April 2006 and is principally responsible for setting the remuneration structure and policy for Executive Directors and recommending to the Board the remuneration of Directors so as to ensure that the Company is able to attract and retain its Directors needed to run the Group successfully. The components of Directors remuneration are structured so as to link rewards to corporate and individual performance in the case of Executive Directors. In the case of Independent Directors, the level of Director concerned. The members of the Remuneration Committee, the majority of whom are non-executive, are as follows: Chairman : Tiong Kiong King (Non-Independent Non-Executive Vice Chairman) Members : Tiong Chiong Ie (Non-Independent Non-Executive Director) Bong Wei Leong (Independent Director) 20 Annual Report 2014

22 CORPORATE GOVERNANCE STATEMENT (CONT D) 2. Strengthen Composition of the Board (cont d) iii) Remuneration Committee (cont d) The Board has adopted the Directors Remuneration Policies and Procedures, summarised as follows: needed to run the Company successfully, taking into consideration all relevant factors including the function, workload and responsibilities involved, but without paying more than is necessary to achieve this goal. (b) The level of remuneration for the Group Managing Director ( GMD ) and Executive Directors are determined by the Remuneration Committee after giving due consideration to the compensation levels for comparable positions among other similar Malaysian public listed companies. (c) No Director other than the GMD and Executive Directors shall have a service contract with the Company. responsibility and commitment that goes with Board membership. The Remuneration Committee recommends to the Board the remuneration package of the Directors. The fees for Non-Executive Directors are determined by the Board as a whole. Each individual Director abstained from the Board discussion and decision on his based on the performance of the Directors and the Directors Remuneration Policies and Procedures. The Board is of the opinion that matters pertaining to Directors remuneration are of a personal nature. in aggregate and analysed into bands of RM50,000, were as follows: Executive Directors (RM) Non-Executive Directors (RM) Fee 57, ,600 Salary 2,160,000 - Bonus 540,000 - Allowances 1,600 7,000 Executive Directors (No.) Non-Executive Directors (No.) RM1,550,000 to RM1,600, RM1,350,000 to RM1,400, RM100,001 to RM150,000-1 RM50,000 and below - 3 iv) Risk Management Committee monitoring, managing and mitigating the risks associated with the RSB Group s business with a view to the long Committee has met four (4) times. Annual Report

23 CORPORATE GOVERNANCE STATEMENT (CONT D) 2. Strengthen Composition of the Board (cont d) iv) Risk Management Committee (cont d) The composition of the Risk Management Committee are as follows: Chairman : Tiong Chiong Ong Members : Robert Ling Tong Ung Syed Abdullah bin Syd. Hashim Chan Geh Ming Setia ak Uliek Timothy Tiong Ing Zun The main features of the risk management framework are as follows: can impede RSB s ability to achieve its objectives; (c) To enforce and monitor closely all the control measures to ensure compliance by the respective estate management; (d) To conduct periodic review of the progress and communicate material risks to the Board via the Audit and Risk Management Committee; (e) To maximize yield per hectare; (g) To ensure that human resource are trained, disciplined and dedicated; (h) To ensure compliance of provisions under Occupational, Health & Safety Act/Pesticide Acts as well as (i) To manage fraud risk. 3. Reinforce Independence of the Board The Board recognises the importance of ensuring a balance of power and authority between the Chairman and the Group Managing Director with a clear division of responsibility between the running of the Board and the Company s business respectively. The positions of Chairman (i.e. Non-Executive Chairman) and Group Managing composition and size of the Board is such that it facilitates the making of informed and critical decisions. Company are held by an Independent Director and Managing Director respectively. Their roles and responsibilities governance process and acts as a facilitator at Board meetings to ensure that contributions from Directors are forthcoming on matters being deliberated and that no Board member dominates discussion. As to the Managing Director, supported by Executive Director, he implements the Group s strategies, policies and decision adopted by the Board, oversees the operations and business development of the Group, provides effective leadership and ensure high management competency. 22 Annual Report 2014

24 CORPORATE GOVERNANCE STATEMENT (CONT D) 3. Reinforce Independence of the Board (cont d) The Independent Directors bring to bear objective and independent views, advice and judgment on interests, not only of the Group, but also of shareholders, employees, customers, suppliers and the communities in which the Group conducts its business. Independent Directors are essential for protecting the interests of shareholders impartiality. Board Charter. The Board through the Nomination Committee has assessed the Independent Director and is the best interest of the Company. The Board therefore believes that balance of power and authority exists within The tenure of an Independent Director shall not exceed a cumulative term of nine (9) years. However, upon completion of the nine (9) years, the Independent Director may continue to serve the Board subject to the Director s re-designation as a Non-Independent Director. In the event the Director is to retain as an Independent Leong and Mr. Tiong Ing Ming have served as Independent Directors of the Company for a consecutive term of more than nine (9) years. However, the Board concurred that their independence as Independent Directors Nomination Committee: able to offer impartial judgement and advice to the Board; (b) They remain independent and vocal, actively participated in deliberations and exercised independent judgement at Board and Board Committee meetings without compromising operational consideration. Hence, provide a check and balance to operational management; and (c) They continue to exercise independent and objective judgement in carrying out their duties as Independent Directors and they provide guidance, unbiased and independent views to many aspects of the Company and the Group s strategy so as to safeguard the interests of minority shareholders. Their long tenure as parties. Having considered the above, the Board had recommended both Mr. Bong Wei Leong and Mr. Tiong Ing Ming to be retained as Independent Directors of the Company and such proposal shall be tabled for shareholders approval at the forthcoming Annual General Meeting. 4. Foster Commitment of Directors i) Time commitment and meetings this commitment from Directors at the time of their appointment. Each Director is expected to commit time Board and Board Committees. The Board acknowledges that its Directors may be invited to become directors of other companies and that exposure to other organisation can broaden the experience and knowledge of its Directors which may bring performance and contributions as a member of the Board. Annual Report

25 CORPORATE GOVERNANCE STATEMENT (CONT D) 4. Foster Commitment of Directors (cont d) i) Time commitment and meetings (cont d) include the indication of time that will be spent on the new appointment. and responsibilities as Directors of the Company. This is evidenced by their attendance at the meetings of the The Board ordinarily meets at least four (4) times a year, scheduled well in advance to facilitate the Directors in planning their meeting schedule for the year. Additional meetings are convened when urgent and important decisions need to be made between scheduled meetings. Board and Board Committees papers, which are prepared by Management, provide the relevant facts and analysis for the convenience of Directors. The meeting agenda, the relevant reports and Board papers are furnished to Directors and Board Committees details of attendance of each Director are set out below: Numbers of meetings attended Tan Sri Datuk Sir Diong Hiew Tiong Hiew King 3 out of 5 Tiong Kiong King 5 out of 5 Tiong Chiong Ong 5 out of 5 Tiong Chiong Ie 3 out of 5 Bong Wei Leong 5 out of 5 Tiong Ing Ming 5 out of 5 All proceedings, matters arising, deliberations in terms of the issue discussed, and recommendations made by the Board Committees at the committees meetings are recorded in the minutes by the Company Secretary, meetings were attended by the Company Secretary. Upon invitation, Management representatives were present at the Board Committees meetings to provide additional insight into matters to be discussed during ii) Directors Training the Company is listed on the Main Market of Bursa Securities on 28 June The Board acknowledges that continuous training and education are vital for the Board members to gain insight into the state of economy, technological advances, regulatory updates and management strategies. Directors are encouraged to attend continuous education programmes to further enhance their skills and knowledge, where relevant. 24 Annual Report 2014

26 CORPORATE GOVERNANCE STATEMENT (CONT D) 4. Foster Commitment of Directors (cont d) ii) Directors Training (cont d) Board meetings by the Company Secretaries. All Directors will continue to attend relevant training as may be and to keep abreast with regulatory and corporate governance developments in the marketplace. The Board has assessed the training needs of the Directors. Generally, all Directors must attend at least two (2) appropriate training programmes conducted by external experts and the descriptions of the training/seminar are set out below: Title of training/seminar Number of day(s) spent Transfer pricing development in Malaysia 1 MIA International Accountants Conference prospering the rakyat 1 Positioning growth through innovation and talent management strategies 1 Quantity Surveying International Convention 2014 Wind of Chance 2 Board Chairman Series : The role of the Chairman 1 time to time for the Board s reference and brief the Board on these updates, where applicable. The Senior Manager (Group Accounts) and External Auditors also briefed the Board members on any changes to the review. as well as the review of the Group s operations and performance in the Annual Report, where relevant. accounting standards to give a true and fair view of the state of affairs of the Group and of the Company as at comprising exclusively Non-Executive Directors, the majority of whom are independent, with Mr. Bong Wei Leong as the Audit Committee Chairman. The composition of the Audit Committee, including its roles and responsibilities, are set out in the Audit Committee Report on pages 29 to 33 of this Annual Report. One of the key responsibilities non-audit services permitted to be provided by the external auditors, does not impair the auditors objective, judgment and independence. Annual Report

27 CORPORATE GOVERNANCE STATEMENT (CONT D) The Board has also adopted an External Auditors Policy for the Audit Committee to assess the suitability and independence of external auditors. The External Auditors Policy has outlined the criteria and procedures for the engagement, assessment and monitoring of external auditors. The Audit Committee is responsible for reviewing, assessing and monitoring the performance, suitability and independence of the external auditors, on an annual basis. Audit Committee had assessed the suitability and independence of the external auditors based on the External Auditors Policy and recommended their re-appointment for the ensuing year. presence of the other Directors and employees of the Group. 6. Recognise and manage risks of the Group The Board acknowledges its responsibility for the RSB Group s system of risk management and internal control, which is designed to identify, evaluate and manage the risks of the businesses of the RSB Group, in pursuit of its and compliance aspects, particularly to safeguard the RSB Group s assets and hence shareholders investments. The system of internal control, by its nature, can only provide reasonable but not absolute assurance against misstatement or loss. In executing the responsibility for the internal control system, the Board via the internal auditors and Risk system of risk management and internal control. The effectiveness of the RSB Group s system of risk management and internal control is reviewed on a regular basis by the Internal Auditors and Risk Management Committee. Further details of the state of the risk management and system of internal control of the RSB Group are presented on pages 34 to 36 of this annual report. RSB has its in-house internal audit function which is independent of the activities its audit. The Internal Audit Manager report directly to the Audit Committee. Further details of the internal audit function are outlined on pages 33 and 35 of this Annual Report. 7. Ensure timely and high quality disclosure i) Corporate Disclosure Policy and Procedures The Board is committed to ensuring that communications to the investing public regarding the business, statements and, where necessary other presentation materials presented at the Company s general meetings, including material and price-sensitive information, are disseminated and publicly released via Bursa LINK on a timely basis to ensure effective dissemination of information relating to the Group. 26 Annual Report 2014

28 CORPORATE GOVERNANCE STATEMENT (CONT D) 7. Ensure timely and high quality disclosure (cont d) i) Corporate Disclosure Policy and Procedures (cont d) The Board places importance in ensuring disclosures made to shareholders and investors are comprehensive, accurate and on a timely and even basis as they are critical towards building and maintaining corporate and Procedures to set out the policies and procedures for disclosure of material information of the Group applicable to all employees and Directors of the Group as well as those authorised to speak on their behalf. ii) Leverage on Information Technology In addition, the Company also put in place electronic facility to enable communication with shareholders via its website Shareholders can access to and obtain all information on RSB Group by accessing this website. All announcements made by the Company and information that are relevant to the shareholders and investors are available in this website. 8. Strengthen relationship between the Company and its shareholders i) Shareholder participation at general meeting The general meeting, which is the principal forum for shareholder dialogue, allows shareholders to review the At the general meeting, shareholders participate in deliberating resolutions being proposed or on the with responses from the Board, Senior Management and external auditors. The notice of general meeting is circulated within the prescribed period before the date of the meeting to enable shareholders to go through the Annual Report, circular and papers supporting the resolutions proposed. Special business transacted at the general meeting are accompanying with the explanatory notes to facilitate full understanding of the notice of the general meeting was put to vote by show of hands and the outcome of the general meeting will be announced to Bursa Securities immediately. ii) Poll voting The shareholders were informed of their rights to demand a poll vote at the commencement of the general meetings. Shareholders are encouraged to participate through proxy voting should they be unable to attend in person. The Chairman will declare the outcome of each resolution after proposal and secondment are done by the shareholders. The Board is of the view that with the current level of shareholders attendance at general out electronic polling at its general meetings if need to. Annual Report

29 CORPORATE GOVERNANCE STATEMENT (CONT D) 8. Strengthen relationship between the Company and its shareholders (cont d) iii) Communication and proactive engagement with shareholders and prospective investors The Board recognises the importance of being transparent and accountable to the Company s shareholders and prospective investors. The various channels of communications are through meetings with institutional relevant announcements and circulars, when necessary, the Annual and Extraordinary General Meetings and through the Group s website at where shareholders and prospective investors can access share prices of the Company. To maintain a high level of transparency and to effectively address any issues or concerns, the Group has a dedicated electronic mail, i.e. rsb@rsb.com.my to which stakeholders can direct and read out during the last annual general meeting. The Company will consider to put in place a proactive investment relations programme later. COMPLIANCE STATEMENT With the introduction of the new Code, the Board remains committed to inculcating good corporate governance for the Group. The Group has complied with the Code except for those disclosed in this statement. The Group will continue to endeavour to comply with all the key principles and recommendations of the Code in its effort to observe high standards of transparency, accountability and integrity. STATEMENT ON NOMINATION COMMITTEE ACTIVITIES i Board as well as their time commitment and Board balance ii) Evaluated the performance and effectiveness of the Board including contributions of each individual director as well as the Senior Manager (Group Accounts) and the independence of the Independent Directors iii) Evaluated the performance and effectiveness of the Board Committees iv) Assessed and recommended to the Board, Directors who are due for retirement by rotation pursuant to the Company s Articles of Association, for continuation in service as Directors v) Assessed and recommended the re-appointment of the Director pursuant to Section 129 of the Companies Act, 1965 vi) Assessed and recommended to the Board the training needs of the Directors vii) Deliberated and recommended to the Board to develop, maintain and review the criteria for recruitment process and annual assessment of Directors, criteria to assess Independent Directors viii) Discussed to formalise a policy on Board and workforce diversity This Statement is made in accordance with the resolution of the Board of Directors dated 17 April Annual Report 2014

30 REPORT OF THE AUDIT COMMITTEE COMPOSITION OF THE AUDIT COMMITTEE The Audit Committee ( the Committee ) of Rimbunan Sawit Berhad ( RSB or the Company ) was established on 2 March 2006 and comprises the following members: Chairman : Bong Wei Leong (Independent Director) Members : Tiong Kiong King (Non-Independent Non-Executive Director) Tiong Ing Ming (Independent Director) Mr. Bong Wei Leong is a member of the Malaysian Institute of Accountants, one of the associations of accountants literate. SUMMARY OF THE TERMS OF REFERENCE (1) Membership The Committee shall be appointed by the Board of Directors from amongst their number and shall consist of not less than three (3) members. All members of the Committee must be non-executive directors, with a majority of them being independent directors. No alternate director shall be appointed as a member of the Audit Committee. At least one (1) member of the Committee: the Accountants Act 1967; or Securities ). If membership of the Committee for any reason falls below three (3) members, the Board of Directors shall, within Board of Directors at least once every three (3) years to determine whether the Audit Committee and its members have carried out their duties in accordance with their terms of reference. (2) Chairman The Chairman of the Committee shall be elected from amongst their number who shall be an independent director appointed by the Board of Directors. In the absence of the Chairman of the Committee, members present at the meeting shall elect one (1) of them to chair the meeting. (3) Secretary The Secretary to the Committee shall be any one (1) of the joint company secretaries. In the absence of the Secretary at the meeting, the members present at the meeting shall elect any other person as the secretary of the meeting. (4) Quorum in the case of a meeting of committee, in addition to the members present at the meeting, any member in Annual Report

31 REPORT OF THE AUDIT COMMITTEE (CONT D) (5) Meetings and Minutes The Committee shall hold at least four (4) meetings a year. Additional meeting may be held as and when Audit Manager, Senior Manager (Group Accounts) are normally invited to attend the meetings. Other members of the Board of Directors, employees and representative of External Auditors shall attend the meetings upon the invitation of the Committee. Notice of any meeting of the Committee may be given by telephone or facsimile. Notice of meeting and board papers shall be given to all members of the Committee at least 14 days and seven (7) days respectively before the date of meeting. Minutes of each meeting shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting and shall be accepted as prima facie evidence without further proof of the facts stated therein. Such minutes of meetings shall be kept by the secretary and distributed to each member of the Committee. A resolution in writing signed by all Committee members shall be deemed to have been passed at a meeting held on the date on which it was signed by the last member. (6) Authority The Committee is authorised by the Board of Directors to: (a) investigate any activity/matter within its terms of reference and shall have unrestricted access to all employees of the Company and the Group; (b) have the resources in order to perform its duties as set out in its terms of reference; (c) have full and unrestricted access to any information pertaining to the Company and the Group; (d) have direct communication channels with the external auditors and internal auditors or person(s) carrying out the internal audit function or activity; (e) obtain external legal or other independent professional advice as necessary; and (f) convene meetings with the external auditors and internal auditors or person(s) carrying out the internal audit function or activity or both, excluding the attendance of other Directors and employees of the Company and the Group at least twice (2) a year. Notwithstanding anything to the contrary herein before stated, the Committee does not have executive powers and shall report to the Board of Directors on matters considered and its recommendations thereon, pertaining to the Company and the Group. (7) Responsibility Where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily the Committee has the responsibility to promptly report such matter to Bursa Securities. 30 Annual Report 2014

32 REPORT OF THE AUDIT COMMITTEE (CONT D) (8) Functions and Duties The duties of the Committee are to: (a) consider the nomination, appointment, re-appointment, resignation and dismissal of External Auditors, the (b) review the nature and scope of audit plans prepared by External Auditors and Internal Auditors or person(s) carrying out the internal audit function or activity before the audit commence, and ensure co-ordination responses thereto; may wish to bring up; the matters set out below, before submission to the Board of Directors for approval: (f) Review the internal audit programme, processes, the results of the internal audit programme and to consider carried out by the internal auditors and ensure that appropriate action is taken by the Management in respect of the audit observations and the Committee s recommendations; (g) review the auditors evaluation of the systems of internal controls; whether it has the necessary authority to carry out its work; (i) review any appraisal or assessment of the performance of the members of the internal audit function; (j) approve any appointment or termination of senior staff members of the internal audit function; (k) be informed of any resignation of the internal audit staff members and to provide the resigning staff member an opportunity to submit his or her reasons for resigning; (l) review the assistance given by the Company s and the Group s employees to the External Auditors and Internal Auditors or person(s) carrying out the internal audit function or activity; integrity; (n) review whether there is reason (supported by grounds) to believe that the Group s External Auditors is not suitable for re-appointment; (o) to establish and review policies and procedures to assess the suitability and independence of External Auditors; and (p) perform such other functions as may be agreed to by the Committee and the Board of Directors. Annual Report

33 REPORT OF THE AUDIT COMMITTEE (CONT D) MEETINGS AND ATTENDANCE attendance of each of the Committee members are outlined as follows: Numbers of meetings attended Bong Wei Leong 6 out of 6 Tiong Kiong King 5 out of 6 Tiong Ing Ming 6 out of 6 All proceedings, matters arising, deliberations, in terms of the issue discussed, and resolutions at the Committee Chairman of the Committee or Chairman of the meeting and reported to the Board of Directors at the Board meetings. All Committee meetings were attended by the Company Secretaries. Upon invitation, the Internal Audit Manager, Senior Manager (Group Accounts) and Senior Operation Manager were present at the Committee meetings to provide additional insight into matters to be discussed during the Committee meetings. TRAINING Title of training/seminar Number of day(s) spent Positioning growth through innovation and talent management strategies 1 Quantity Surveying International Convention 2014 Wind of Chance 2 Board Chairman Series : The role of the Chairman 1 SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE discharge of its functions and duties: (a) reviewed and approved the audit plans including scope and coverage of audit of the RSB Group with the internal and external auditors; recommendations made by the internal and external auditors, and Management s responses thereof; standards as well as the Group s performance, prior to submission to the Board of Directors for consideration and approval; integrity, prior to submission to the Board of Directors for consideration and approval; 32 Annual Report 2014

34 REPORT OF THE AUDIT COMMITTEE (CONT D) SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE (CONT D) (f) met with the internal and external auditors twice without the presence of the other Directors and employees of RSB Group; (g) assessed the independence and suitability of external auditors and recommended to the Board of Directors their re-appointment as external auditors and their fees; (h) reviewed the draft Statement on Risk Management and Internal Control and draft Report of the Audit Committee prior to recommending to the Board of Directors for approval; (j) reviewed the report on the recurrent related party transactions of a revenue or trading nature ( RRPTs ) entered into by the RSB Group pursuant to the shareholder mandate obtained at the general meetings; and (k) reviewed the draft Circular to Shareholders in relations to the proposed shareholders mandate for the RRPTs and recommended to the Board of Directors for approval. INTERNAL AUDIT FUNCTION RSB Group has an in-house internal audit function to assist the Audit Committee in the discharge of its duties and and governance processes so as to provide reasonable independent assurance that such systems continue to operate satisfactorily and effectively. The Group internal audit function adopts a risk-based auditing approach in planning and conducting audits by focusing on key risk areas. The internal audit function is independent of the activities it audits, and is responsible for the regular review and/or appraisal of the internal control, management and governance processes within the RSB Group. It operates and performs in accordance to the principles of the Internal Audit Charter. The internal audit reports were deliberated by the Audit Committee and recommendations were duly acted upon by the Management. Currently, the Internal Audit Manager reports directly to the Audit Committee on the activities carried out by the internal audit department based on the annual audit plan duly approved by the Audit Committee. activities: within the RSB Group. RM440, This Report is made in accordance with the resolution of the Board of Directors dated 17 April Annual Report

35 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTRODUCTION The Board is committed to maintaining a sound system of risk management and internal control and good corporate governance practices in the Group as set out in this Statement on Risk Management and Internal Control made in compliance with Paragraph (b) Berhad ( Bursa Securities ) and guided by the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers. BOARD S RESPONSIBILITY The Board acknowledges its responsibility for the Group s system of risk management and internal control (the system ), which includes the establishment of an appropriate control environment and framework as well safeguard shareholders investment and Group s assets. effectiveness of the Group s risk management and internal control system which has been embedded in all aspects of the Group s activities and reviews the processes, responsibilities and assesses for reasonable assurance that risks have been managed within the Group s risk appetite and tolerable ranges. In view of the limitations inherent in any system of risk management and internal control, the Group s system by its nature can only reduce rather than eliminate the risk of failure to achieve the Group s business and corporate objectives. Accordingly, the systems can only provide a reasonable but not absolute assurance against material misstatement or loss. RISK MANAGEMENT FRAMEWORK The Board subscribes to the fact that an effective risk management practice is vital to the success of the Group s business. In view of this, there is a formal process risks faced by the Group in its achievement of the business objectives. The Board has, through its Audit Committee ( AC ) and Risk Management Committee ( RMC ), established a risk management and control framework implemented Group s key processes. Management is responsible for identifying, evaluating, monitoring and reporting of risks and internal control as well as providing assurance to the Board that it has done so in accordance with the policies adopted by the Board. Further independent assurance is provided by the Internal Audit function, which operates across the Group. RISK MANAGEMENT FUNCTION The Risk Management Committee carried out its duties in accordance with its term of reference during principally develops, executes and maintains the risk management system to ensure that the Group s corporate objectives and strategies are achieved within the acceptable risk appetite of the Group. Its including non-compliance with applicable laws, rules, regulations and guidelines, changes to internal controls and management information systems, and output from monitoring processes. The Board has received assurance from the Managing Director ( MD ) that the Group s risk management and effectively, in all material aspects, based on the risk management and internal control framework of the Group. 34 Annual Report 2014

36 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT D) The principal responsibilities of the Risk Management Committee includes:- and report on all material business risks; mitigation of material business risks; and compliance with relevant laws, licensing and The Group will continue to monitor all major risks affecting the Group and take the necessary measures to mitigate the risk management and internal control system of the Group. INTERNAL AUDIT FUNCTION The Board has established the Audit Committee to evaluate the internal audit function and assessing its effectiveness in the discharge of its responsibilities. The Internal Audit Department is responsible for undertaking regular and systematic review of the Group s operations and system of internal controls based on annual audit plans approved by the Audit Committee. level and actions are agreed in response to the Internal Audit Function s recommendations. The progress of implementation of the agreed actions is reviewed and up reviews. The Audit Committee reviews all internal audit and effectiveness of the internal controls. The Audit deliberations and recommendations. CONTROL ENVIRONMENT AND ACTIVITIES The Group s corporate culture is embedded in its core values of integrity, commitment, loyalty, excellence in execution, speed or timeliness, innovativeness and cost the business objectives, risk management and internal control system. The Audit Committee, which is chaired by an Independent Director, is tasked by the Board with the duty of reviewing and monitoring the effectiveness of the Group s system of internal control with the assistance of the in-house Internal Audit ( IA ) department. deliberate the internal audit reports prepared by IA Group s system of internal control. These reports are prepared based on the annual audit plan which has been approved by the Audit Committee. Policies and procedures have been established for key business processes and support functions. The Group has procedures and rules relating to the delegation and segregation of duties. Annual business plans and operating budgets are prepared by business and operating units, and are approved by the Board. Actual performance and an ongoing basis. Annual Report

37 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT D) INFORMATION AND COMMUNICATION PROCESSES reviewed on a regular basis. The Group has in place a Management Information System that captures, compiles, analyses and reports relevant data, which enables management to make business decisions in an accurate and timely manner. MONITORING AND REVIEW The monitoring, review and reporting procedures and systems in place give reasonable assurance that the controls ups reviews were also carried out to determine the status of implementation of agreed corrective actions based on and operating satisfactorily and there were no material control failures or adverse compliance events that have directly resulted in any material loss to the Group. system in response to change in the operating environment. This Statement is made in accordance with the resolution of the Board of Directors dated 17 April Annual Report 2014

38 SUSTAINABILITY & CORPORATE RESPONSIBILITY INTRODUCTION Rimbunan Sawit Berhad (RSB), a reputable and a prominent member of the oil palm industry, recognizes acting responsibly and sustainably creates value for the Company, its employees, customers, community and environment as a whole. Sustainability and Corporate Social Responsibility (CSR) to society has always been part of RSB s business In 2014, RSB continues to build sustainable practices in every aspect of the Group s business and in achieving excellence in its CSR activities. (A) MARKETPLACE RSB upholds its integrity in the Marketplace by focusing on the following areas: Quality Product and Services Plantation Palm Oil Mill continues to maintain the ISO 9001 accreditation to ensure its products meet the highest available global standards. The Group constantly implements continuous improvement on its business processes through its yearly assessment of contractors, consultants and service providers to ensure prompt delivery of resources by vendors and ensuring enhance our Group s performance. Stakeholders Engagement Enhancing stakeholder value has always been the core interest of the Group and consider our associates, investors, analysts, customers, partners and communities as our primary stakeholders. We recognize the importance of maintaining transparency and accountability to them. We are committed in cultivating the best practices in compliance with all laws and regulations and maintaining the highest Corporate Governance standards. Updated investor relations information is available in the Company s website. Corporate Governance In conformity with the MCCG 2012 highest corporate governance standards, we have implemented the world class SAP system which maintains a single database to preserve the originality and integrity of our information and data sources. Transactions are processed end-to-end hence eliminating data inconsistencies between subsystems and providing information in a more reliable and accessible manner. RSB leverages technology, such as the centralized GIS database system for better operational planning and Annual Report

39 SUSTAINABILITY & CORPORATE RESPONSIBILITY (CONT D) B) ENVIRONMENT We have initiated a host of conservation efforts to meet the challenges and pressures of environmental CSR behaviour faced by members of the oil palm industry. Environmental Conservation Practices practices like zero-carbon emission during replanting, zero wastage mill management concepts and the reduction these practices contribute towards greater environmental friendliness of palm oil production and sustainability of the palm oil industry in the long run. Good agronomic practices are always followed in our fertilizer application whereby empty fruit bunches (EFB) methane gas (greenhouse gas) or biogas, which is recycled to gas engine for electricity generation. Bio-Diversity Projects In managing pest and weed control, we have introduced biological and livestock management programmes which include livestock projects and the erection of roosting posts for barn owls in our estates to minimize environmental impact caused by hazardous chemicals and pesticides. Livestock management improves soil and vegetation cover and plant, as well as, animal bio-diversity to reduce environment impact. Grazing animals can improve plant species composition by removing biomass, controlling shrub growth and dispersing seeds through their hoofs and manure and hence, reducing the use of chemical and pesticides for weeding and manuring. Waste Handling & Recycling RSB cares for the environment sustainability by promoting efforts in waste handling and recycling. To better utilise energy from waste material and biomass, we plan either to set up a pellet plant to recycle the empty fruit bunches (EFB) and produce pellets to be used as biomass for steam boiler or to invest in an organic composting plant to soil fertility. 38 Annual Report 2014

40 SUSTAINABILITY & CORPORATE RESPONSIBILITY (CONT D) C) COMMUNITY opportunities and bringing lasting and positive change. These have included funding and other resources towards enhancing the social well-being of the community. Contributions to NCR Community RSB continues to undertake the development of Native Customary Rights ( NCR ) on oil palm plantations land education, infrastructure, cultural and social development initiatives. The Group offers career opportunities to local villagers, through employment, internships, contract works, on-thejob training for youths and education opportunities with universities and institutes of higher learning. Volunteerism & Donations RSB supported fund-raising, donation drives, and made various contributions to charitable organisations and orphanages during the Christmas, Gawai and Hari Raya celebrations. unity within the community. We also made donations to schools, especially those in the vicinity of the estates, and contributed used personal computers in encouraging digital literacy in education. We also organised a Blood Donation Campaign and Health Screening to create awareness on the importance of a healthy lifestyle as promoted by the Ministry of Health, Sarawak. Among highlights were school performances to promote the talents of secondary school students and RSB s exhibits showcasing the career opportunities in the estates and palm oil mills along with a brief overview of the industry. D) WORKFORCE Human Capital The Group encourages lifelong learning opportunities and provides in-house training and external courses to enhance employees knowledge and core competencies. Various professional and career enrichment programmes are held including On-the-Job Training to train school leavers to become Field Conductors; Safety & Health workshops to raise awareness and address occupational health issues and Soft Skills training to uplift managers and executives management capabilities. Familiarisation visits to estates and palm oil mills were organised for new recruits to introduce them to the plantation industry. Various workshops and consultations were organized to prepare the Company for the smooth implementation of the new tax regime in Annual Report

41 SUSTAINABILITY & CORPORATE RESPONSIBILITY (CONT D) D) WORKPLACE (CONT D) Workforce Diversity The Group recognizes diversity of employees in terms of race, colour, gender, sexual orientation, age, language, religion, and national or social origin is vital to organization s smooth operations and business sustainability. We are strictly against sexual harassment and discrimination in the workplace. Thus, the Group is dedicated in providing together in harmony to achieve corporate objective and sustainable growth. Healthy Lifestyle Awareness Programme In line with efforts to promote wellness and a healthy lifestyle, various activities were organized in the estates for staff and foreign workers, such as football matches to provide social, recreational and sporting opportunities aimed at fostering interaction amongst the generational work forces. RSB Club actively promoted wellness and exercise schemes through gym activities, aerobics, bowling and table tennis to create healthcare awareness who were then encouraged to join the Weight Loss Campaign. Work-life Balance Living exercises. Work-life balance includes bi-monthly mass exercise get-together which has served as a sporting, social event for employees; shorter lunch breaks with the introduction of package lunch online orders; and special staff price health food promotions. These are some measures undertaken to help its employees to stay healthy and living a work-life balance lifestyle. Social Gatherings Annual dinners and festive gatherings are held to bring the RSB family together in efforts to strengthen friendships and promote closer ties in a caring work environment and culture. In the beginning of 2015, RSB proudly moved into the Menara Rimbunan Hijau, the new, iconic landmark building the impact on the environmental and to foster a greater sense of well-being among its employees. 40 Annual Report 2014

42 SUSTAINABILITY & CORPORATE RESPONSIBILITY (CONT D) MARKETPLACE ENVIRONMENT COMMUNITY Annual Report

43 SUSTAINABILITY & CORPORATE RESPONSIBILITY (CONT D) WORKPLACE Human Capital Social Gatherings Healthy Lifestyle Awareness Programme Work-life Balance Living 42 Annual Report 2014

44 Financial Statements DIRECTORS REPORT 44 STATEMENT BY DIRECTORS 48 STATUTORY DECLARATION 48 INDEPENDENT AUDITORS REPORT 49 STATEMENTS OF FINANCIAL POSITION 51 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 53 STATEMENTS OF CHANGES IN EQUITY 54 STATEMENTS OF CASH FLOWS 58 NOTES TO THE FINANCIAL STATEMENTS 61