MUAR BAN LEE GROUP BERHAD (Company No P) ANNUAL REPORT 2016

Transcription

1 MUAR BAN LEE GROUP BERHAD ANNUAL REPORT 2016

2 MUAR BAN LEE GROUP BERHAD 1 contents Notice of Annual General Meeting... 2 Statement Accompanying Notice of Annual General Meeting... 6 Corporate Information... 7 Corporate Structure... 8 Directors Profile Message From The Executive Chairman financial highlights...14 MANAGEMENT DISCUSSION & ANALYSIS...15 Statement of Corporate Governance Audit Committee Report Statement On Risk management and Internal Control Statement of Directors Responsibility on Financial Statements Corporate Social Responsibility Statement Other Disclosure Requirements Financial Statements List of Group Properties Analysis of Shareholdings Analysis of warrantholdings Proxy Form... Enclosed

3 2 MUAR BAN LEE GROUP BERHAD NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Eleventh Annual General Meeting ( 11th AGM ) of MUAR BAN LEE GROUP BERHAD ( MBL / the Company ) will be held at No. JR52, Lot 1818, Jalan Raja, Kawasan Perindustrian Bukit Pasir, Muar, Johor Darul Takzim on Tuesday, 30 May 2017 at noon to transact the following matters:- AGENDA As Ordinary Businesses 1) To receive the Audited Financial Statements for the financial year ended 31 December 2016 together with the Reports of the Directors and Auditors thereon. (Please refer to Note A) 2) To re-elect the following Directors retiring under the Article 97 of the Company s Articles of Association, and who, being eligible offer themselves for re-election: a) Tuan Hj Ismail Bin Hj Ahmad b) Chua Heok Wee (Please refer to Note B) (Resolution 1) (Resolution 2) 3) To re-appoint Dato Chua Ah Chua Eng Ka as Director of the Company. (Please refer to Note C) (Resolution 3) 4) To approve the payment of Directors fees of 288, for the financial year ended 31 December (Please refer to Note D) (Resolution 4) 5) To re-appoint Messrs. UHY as Auditors of the Company and to authorise the Directors to fix their remuneration. (Please refer to Note E) (Resolution 5) As Special Businesses To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions:- 6) Ordinary Resolution I Authority to Issue Shares THAT pursuant to Section 75 and 76 of the Companies Act 2016, and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to issue shares in the Company from time to time upon such terms and conditions and for such purposes and to such person or persons whomsoever as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution in any one financial year does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. (Please refer to Note F) (Resolution 6)

4 MUAR BAN LEE GROUP BERHAD 3 NOTICE OF ANNUAL GENERAL MEETING 7) Ordinary Resolution II Proposed Renewal of Authority for Share Buy-Back THAT subject to the Companies Act 2016 ( the Act ), rules, regulations and orders made pursuant to the Act, provisions of the Company s Memorandum and Articles of Association, the Listing Requirements of Bursa Malaysia Securities Berhad and any other relevant authorities, the Directors of the Company be hereby unconditionally and generally authorised to make purchases of ordinary shares of the Company s issued capital through Bursa Securities at anytime and upon such terms and conditions and for such purposes as the Directors may, in their discretion deem fit, subject to the following:- i. the maximum number of MBL shares which may be purchased by the Company shall not be exceed ten per centum (10%) of the issued share capital of the Company at any point of time; ii. iii. the maximum fund to be allocated by the Company for the purpose of purchasing its own shares shall not exceed the retained profits and share premium account of the Company, as at 31 December 2016; the authority conferred by this Resolution will be effective immediately upon the passing of this Resolution and will continue in force until:- a. the conclusion of the next Annual General Meeting ( AGM ) of the Company, unless by ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; b. the expiration of the period within which the next AGM is required by law to be held (unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting) but not so as to prejudice the completion of purchase(s) by the Company made before the aforesaid expiry date and, in any event, in accordance with the Listing Requirements of Bursa Securities or any other relevant authorities; iv. upon completion of the purchase(s) of the MBL Shares by the Company ( Purchase Shares ), the Purchase Shares shall be dealt with either of the following manners:- a. cancel the Purchase Shares if the Directors of the Company deem that there is excess share capital and wish to reduce the number of shares in circulation; or b. retain the Purchase Shares as treasury shares held by the Company; or c. retain part of the Purchase Shares as treasury shares and cancel the remainder; or d. resell the treasury shares on Bursa Securities in accordance with the relevant rules of Bursa Securities; or e. distribute the Purchase Shares as share dividends if the Directors of the Company wish to reward the shareholders of MBL, which will depend on the availability of, among others, retained profits, share premium and tax credits of the Company. AND THAT the Directors of the Company be and are hereby authorised to take all such actions and steps as are necessary or expedient to implement or to effect the purchase of MBL Shares. (Please refer to Note G) (Resolution 7) 8) To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016.

5 4 MUAR BAN LEE GROUP BERHAD NOTICE OF ANNUAL GENERAL MEETING BY ORDER OF THE BOARD Lee Hong Lim (MIA 12949) Company Secretary Muar, Johor Darul Takzim Date: 28 April 2017 Explanatory Notes:- Note A Audited Financial Statements This Agenda item is meant for discussion only as the provision of Section340(1)(a) of the Companies Act 2016 ( the Act ) does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda is not put forward for voting. Note B Resolution 1 and 2 Tuan Hj Ismail Bin Hj Ahmad and Chua Heok Wee are standing for re-election as Directors of the Company. The Nomination Committee ( NC ) and the Board of Directors of the Company ( the Board ) have considered the assessment of the two Directors and collectively agree that they meet the criteria of character, experience, integrity, competence and time to effectively discharge their respective roles as Directors, as prescriber by Paragraph 2.20A of the Main Market Listing Requirements ( MMLR ). The Board endorsed the NC s recommendation that Tuan Hj Ismail Bin Hj Ahmad and Chua Heok Wee be re-elected as Directors of the Company. Note C Resolution 3 With the coming into force the Act on 31 January 2017, there is no age limit for directors. At the 10th AGM of the Company held on 23 May 2016, Dato Chua Ah Chua Eng Ka, who was above the age of 70, was re-appointed pursuant to Section129 of the Companies Act 1965 to hold office until the conclusion of the 11th AGM. His term of office will end at the conclusion of the 11th AGM and he has offered himself for reappointment. The proposed Ordinary Resolutions 3, if passed, will enable Dato Chua Ah Chua Eng Ka to continue to act as Directors of the Company and he shall subject to retirement by rotation at a later date. The NC and the Board have assessed the criteria and contribution of Dato Chua Ah Chua Eng Ka and collectively agree that he meet the criteria of character, experience, integrity, competence and time to effectively discharge his role as Director, as prescriber by Paragraph 2.20A of the MMLR and recommended for his re-appointment. The Board endorsed the NC s recommendation that Dato Chua Ah Chua Eng Ka be re-appointed as Director of the Company. Note D Resolution 4 Section 230(1) of the Act provides amongst others, that the fees of the Directors and any benefits payable to the Directors of a listed company shall be approved at a general meeting. In this respect, the Board wishes to seek shareholders approval for the following payments to Directors at the 11th AGM in the Resolution 4 on the payment of Directors fees of 288, for the financial year ended 31 December 2016.

6 MUAR BAN LEE GROUP BERHAD 5 NOTICE OF ANNUAL GENERAL MEETING Note E Resolution 5 The Audit Committee and the Board have considered the re-appointment of UHY as Auditors of the Company and collectively agree that UHY meets the criteria of the adequacy of experience and resources of the firm and the person assigned to the audit as prescribed by Paragraph of MMLR. Note F Resolution 6 The Ordinary Resolution 6, if passed, will renew the authority to empower the Directors of the Company to issue and allot shares up to an amount not exceeding in total ten per centum (10%) of the issued share capital of the Company from time to time and for such purpose as the Directors consider would be in the interest of the Company. The renewed mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions. This authority will, unless revoked or varied by the Company in general meeting, expire at the next Annual General Meeting of the Company. As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last AGM held on 23 May 2016 and which will lapse at the conclusion of the 11th AGM. Note G Resolution 7 The Ordinary Resolution 7, if passed, will allow the Company to purchase its own shares. The total number of shares purchased shall not exceed 10% of the issued share capital of the Company. This authority will, unless revoked or varied by the Company in general meeting, expires at the next AGM of the Company. Please refer to the Statement to Shareholders dated 28 April 2017 for further information. Notes : 1) For the purpose of determining a member who shall be entitled to attend at the AGM, the Company shall be requesting a General Meeting Record of Depositors as at 23 May Only a depositor whose name appears on the Record of Depositors as at 23 May 2017 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf. A proxy appointed to attend and vote at the meeting shall have the same rights as the member to speak at the meeting. 2) A proxy may but need not be a member of the Company and the provisions of Section 334(1) of the Companies Act 2016 shall not apply to the Company. 3) Where a member appoints two proxies, the appointment shall be invalid unless the member specifies the proportions of his holding to be represented by each proxy. 4) The instrument appointing a proxy in the case of any individual shall be signed by the appointor or his attorney duly authorised in writing and in the case of a corporation under its common seal or under the hand of an officer or attorney duly authorised. 5) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 6) The Proxy Form must be deposited at the Registered Office of the Company at 85, Muntri Street, Penang, Malaysia not less than twenty-four (24) hours before the time set for holding the Meeting or any adjournment thereof. 7) Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Securities, all the Resolutions set out in this Notice will be put to vote by poll.

7 6 MUAR BAN LEE GROUP BERHAD STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING Statement Accompanying Notice of The Eleventh Annual General Meeting ( 11th AGM ) pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad 1. The Directors who are standing for re-election and re-appointment a) The Directors who are standing for re-election pursuant to the Company s Articles of Association are as follows:- i) Tuan Hj Ismail Bin Hj Ahmad ii) Chua Heok Wee b) The Director who is standing for re-appointment:- i) Dato Chua Ah Chua Eng Ka Details of attendance of Board Meetings of Directors seeking re-election and re-appointment are set out on page 27 of the Annual Report. Details of the profile of Directors are standing for re-election and re-appointment are set out on page 10 to page 11 of the Annual Report while details of their interest in the securities of the Company are set out in the Directors Report on page 45 of this Annual Report. Family relationships with other directors and/or substantial shareholder of the Company are disclosed in the Directors Profile on page 11 of the Annual Report. None of the directors have any conflict of interest in the Company. None of the directors have been convicted for offences within the past ten (10) years other than minor offences, if any. 2. Authority to Issue Shares A statement relating to general mandate for issue of securities in accordance with Paragraph 6.03(3) of the MMLR. This is the renewal of the mandate obtained from the members at the last AGM held on 23 May 2016 ( the previous mandate ). The previous mandate was not utilised and accordingly no proceeds were raised. The Ordinary Resolution 6, if passed, will renew the authority to empower the Directors of the Company to issue and allot shares up to an amount not exceeding in total ten per centum (10%) of the issued share capital of the Company from time to time and for such purpose as the Directors consider would be in the interest of the Company. The renewed mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions. This authority will, unless revoked or varied by the Company in general meeting, expire at the next AGM of the Company.

8 MUAR BAN LEE GROUP BERHAD 7 CORPORATE INFOATION Board of Directors Dato Chua Ah Chua Eng Ka (Executive Chairman) Chua En Hom (Deputy Executive Chairman) Chua Eng Hui (Executive Director) Chua Heok Wee (Managing Director) Tan Sri Dato Seri Tan King Tan Khoon Hai (Executive Director/Finance Director) Teh Eng Aun (Independent Non-Executive Director) Khairilanuar Bin Tun Abdul Rahman (Senior Independent Non-Executive Director) Tuan Hj Ismail Bin Hj Ahmad (Independent Non-Executive Director) Members of Audit Committee Teh Eng Aun (Chairman) Khairilanuar Bin Tun Abdul Rahman (Member) Tuan Hj Ismail Bin Hj Ahmad (Member) Members of Remuneration Committee Tuan Hj Ismail Bin Hj Ahmad (Chairman) Khairilanuar Bin Tun Abdul Rahman (Member) Teh Eng Aun (Member) Members of Nomination Committee Khairilanuar Bin Tun Abdul Rahman (Chairman) Tuan Hj Ismail Bin Hj Ahmad (Member) Teh Eng Aun (Member) Company Secretary Lee Hong Lim (MIA No ) Registered Office No. 85, Muntri Street, Pulau Pinang. Tel. no.: Fax. no.: tcms@tcms.com.my Principal Place of Business JR52, Lot 1818, Jalan Raja, Kawasan Perindustrian Bukit Pasir, Muar, Johor Darul Takzim. Tel. no.: Fax. no.: Website: mbl@mbl.com Share Registrars Plantation Agencies Sdn Berhad 3rd Floor, Standard Chartered Bank Chambers, Lebuh Pantai, Pulau Pinang. Tel. no.: Fax. no.: general@plantationagencies.com.my Auditors UHY (AF 1411) Chartered Accountants Principal Bankers CIMB Bank Berhad HSBC Bank Malaysia Berhad Malayan Banking Berhad AmBank (M) Berhad Public Bank Berhad United Overseas Bank (Malaysia) Berhad Bank Muamalat Malaysia Berhad Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad (Listed since 28th October 2009) Stock Name: MBL Stock Code: 5152

9 8 MUAR BAN LEE GROUP BERHAD CORPORATE STRUCTURE As at 28 April 2017 MUAR BAN LEE ENGINEERING SDN BHD (MBLE) 100% P.T. SERDANG JAYA PERDANA (SJP) 51% MUAR BAN LEE TECHNOLOGY SDN BHD (MBLT) P. T. BANYUASIN NUSANTARA SEJAHTERA (BNS) 100% 33% MBL BIOTECH SDN BHD (MBLB) 30% MUAR BAN LEE GROUP BERHAD (MBL) PALM OCEAN ENGINEERING SDN BHD (POE) 50% MBL WASTE PROCESSING TECHNOLOGY SDN BHD (MBLWPT) POME TREATMENT TECHNOLOGY SDN BHD (POMETT) 95% 52.25% MBL PLANTATION SDN BHD (MBLP) 100% SOKOR GEMILANG LADANG SDN BHD (SOKOR) 100% SPA HIDAYAH ENTERPRISE SDN BHD (SPA) 100%

10 MUAR BAN LEE GROUP BERHAD 9 CORPORATE STRUCTURE The principal activities of our subsidiary and associate companies are as follows:- Name Registration no Date/ Place of incorporation Issued share capital () Equity Interest (%) Principal activities MBLE V 8 December 1987/ Malaysia MBLT T 6 September 2004/ Malaysia MBLB K 2 December 2010/ Malaysia POE X 4 November 2010/ Malaysia MBLWPT D 9 August 2010/ Malaysia MBLP K 29 February 2012/ Malaysia POMETT* V 28 March 2011/ Malaysia SOKOR X 28 July 2006/ Malaysia SPA H 18 April 2013/ Malaysia SJP AHU AH BNS AHU AH May 2009/ Indonesia 19 July 2011 / Indonesia 2,000, Manufacturing of oil seed expellers and related parts 1,000, Manufacturing of automated kernel crushing plants and related parts 100, Dormant Involved in renewable energy, palm oil mill effluent waste treatment and empty Fruit bunch composting and related activities. 100, Investment holding company 400, Investment holding company involving in agricultural industry 100, Manufacturing of machinery and equipment for waste management and power generation from palm oil waste 2,000, Cultivation of oil palm plantation Dormant IDR 30,000,000, Operating of palm kernel oil mill IDR 38,000,000, Operating of palm kernel oil mill * The total effective equity interest held by the Group is 52.25%, of which 55% is directly held by MBLWPT. At present, we are mainly involved in the following:- design and manufacture of oil seed expellers, and ancillary machinery for oil seed crushing plants; design, fabrication, installation and commissioning of oil seed crushing plants; manufacture and sale of spare parts; cultivation of oil palm plantation; and operating palm kernel oil mill.

11 10 MUAR BAN LEE GROUP BERHAD DIRECTORS PROFILE Dato Chua Ah Chua Eng Ka * A Malaysian, aged 71, is the Executive Chairman of our Group and was appointed to our Board on 30 June He is the founder of our Group and has accumulated more than 43 years experience and expertise in the design and manufacture of oil seed expellers, ancillary machinery and spare parts. His vision and stewardship over the past years has taken our Group from a small scale manufacturer to our current position as one of the top manufacturers of oil seed expellers in Malaysia. He currently works together with Mr. Chua Heok Wee in the overall business operation and strategic planning. Chua En Hom A Malaysian, aged 63, is the Deputy Executive Chairman of our Group and was appointed to our Board on 30 June He has over 37 years experience in the metal engineering industry and is involved in the daily operations of our factories. He is responsible for the overall production activities in MBLE and MBLT. Chua Eng Hui A Malaysian, aged 61, is the Executive Director of our Group and was appointed to our Board on 30 June He has accumulated more than 42 years of experience in the engineering industry and is currently responsible for engineering and technical operations of our Group as well as overseeing our R&D activities. He is also responsible for the overall business operations of the oil palm plantation in SOKOR. Chua Heok Wee * A Malaysian, aged 44, is the Managing Director of our Group and was appointed to our Board on 30 June He joined as a foreman and assisted his father, Dato Chua Ah Chua Eng Ka in 1995 and was subsequently promoted to Project Manager in With more than 23 years experience in the design and manufacture of oil seed expellers, ancillary machinery and spare parts, he has steered MBLE from a small scale manufacturer to become one of the major manufacturers of oil seed expellers in Malaysia. He is responsible for the overall business planning, marketing, product development and brand building of our Group. He has participated in many international metal product trade fairs and exhibitions held overseas and locally. He was appointed as the Independent Non-Executive Director of SWS Capital Berhad on 23 December He also oversees the operation of SJP and BNS. Tan Sri Dato Seri Tan King Tan Khoon Hai A Malaysian, aged 62, is the Executive Director/ Finance Director of our Group and was appointed to our Board on 30 June He is a member of the Institute of Certified Public Accountants, Ireland and fellow member of Malaysian Association of Company Secretaries. He has over 36 years of working experience in the fields of auditing, accounting and corporate finance. He is primarily responsible for the finance department of MBL. He was the Executive Director of Pensonic Holdings Berhad from 13 September 1995 to 13 December 2003 and was re-designated as a Non-Executive Director, however, he was re-designated as Executive Director on 28 April He was appointed as the Deputy Executive Chairman of SWS Capital Berhad on 23 December 2015 and was promoted to Executive Chairman on 16 November He also sits on the board of several other private limited companies. He has no family relationship with any other Director or major shareholder of our Group. Teh Eng Aun A Malaysian, aged 66, was appointed as the Independent Non-Executive Director of our Group and Chairman of Audit Committee on 30 June He obtained his Bachelor of Commerce from the University of Newcastle, New South Wales, Australia in 1975 and practiced as a Chartered Accountant in a public accounting firm between 1981 and In 1996, he joined a stockbroking firm as a Remisier. He has over 28 years of experience in corporate consultancy, financial management and auditing. He is presently a member of the Penang Chinese Chamber of Commerce and a member of the Malaysian Institute of Accountants. He is an Independent Non-Executive Director of Wong Engineering Corporation Berhad. He has no family relationship with any other Director or major shareholder of our Group.

12 MUAR BAN LEE GROUP BERHAD 11 DIRECTORS PROFILE Khairilanuar Bin Tun Abdul Rahman A Malaysian, aged 52, was appointed as the Senior Independent Non-Executive Director of our Group on 30 June He graduated from the Institute of Technology Mara in 1988 and was an entrepreneur from 1989 to 1993 dealing with electric cables and ballast. As business grew, he incorporated a private limited company and became its Executive Director in Encik Khairilanuar has been a committee member of UMNO Youth in the Kepala Batas Division since He also acts as Independent Non-Executive Director in the Boards of Farlim Group (M) Berhad (since 18 August 2011) and Unimech Group Berhad (since 1 October 2013), all of the companies are also listed on Bursa Malaysia Securities Berhad. He also sits on the board of a few private limited companies. He has no family relationship with any other Director or major shareholder of our Group. Tuan Hj Ismail Bin Hj Ahmad * A Malaysian, aged 67, was appointed as the Independent Non-Executive Director of our Group on 30 June He was the Head of POS Malaysia & Services Holdings Berhad, Bukit Pasir from 1976 to 1983 and Sungai Mati from 1983 to He was the Penghulu of Mukim Sri Menanti from 1987 to 1997 and of Mukim Tangkak from 1997 to 2000 before holding the post of Penghulu of Mukim Parit Bakar from He is also a committee member of the Anti Drug Agency. He has no family relationship with any other Director or major shareholder of our Group. ADDITIONAL INFOATION ON THE DIRECTORS (a) (b) (c) (d) Details of the directors interest in the securities of the Company are set out in the Directors Report on page 45 of this Annual Report. None of the directors have any conflict of interest in the Company. None of the directors have been convicted for offences within the past ten (10) years other than minor offences, if any. Save as disclosed below, there are no family relationships amongst the Directors and senior management staff of the Group: (i) (ii) (iii) (iv) Dato Chua Ah Chua Eng Ka, Chua En Hom and Chua Eng Hui are siblings; Chua Heok Wee is the son of Dato Chua Ah Chua Eng Ka; Chua Chang Yee and Chua Chang Huat are the sons of Chua En Hom; and Chua Yi Ting and Chua Kang Sing are daughter and son of Chua Eng Hui respectively. (e) Save for the Executive Directors, all the Non-Executive Directors satisfy the criteria of an independent director as defined under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, which include being independent of management, free from any business or other relationship which could interfere with the exercise of independent judgment, objectivity or the ability to act in the best interests of the Company, and also being independent of its major shareholders. * Directors who are standing for re-election

13 12 MUAR BAN LEE GROUP BERHAD MESSAGE FROM THE EXECUTIVE CHAIAN Dear Shareholders, on behalf of the Board of Directors, I am honoured to present to you Muar Ban Lee Group Berhad s ( MBL ) annual report for the financial year ended 31 December 2016 ( FYE2016 ). PERFOANCE REVIEW Despite the volatile and continued uncertainty in the global financial market and political environment in 2016, MBL continued to stay focus and deliver another year of strong financial results. Our Group s revenue surged to million, and profit before tax ( PBT ) advanced to million, up 192.3% and 100.8% respectively as compare with the financial year ended 2015 ( FYE2015 ). The Group s profit after tax advanced by 113.6% to million as compare with 6.36 million recorded in the previous financial year. The strong performance of the Group was mainly due to the increased in Indonesia market share by our manufacturing division in which revenue jumped to million from million in FYE2015. Secondly, full year revenue of million from the edible oil milling division was accounted in FYE2016 as compared to 2-month revenue of 6.55 million in FYE2015 recognised post acquisition of subsidiary in As a result of the strong performance, the Group s basic earnings per share increased to sen from 6.73 sen recorded in FYE2015. DIVIDENDS Backed by the encouraging results, the Group continues to reward the shareholders by distributing dividends for the FYE2016: 1. first interim single tier dividend of 2.0 sen per ordinary share, amounting to million was paid on 5 October Second interim single tier dividend of 2.0 sen per ordinary share, amounting to million was paid on 29 March CORPORATE DEVELOPMENT On 24 October 2016, the Group has entered into an agreement to subscribe newly issued shares of IDR 12,540,000,000 (equivalent to 3,931,290.00) at par value in Pt. Banyuasin Nusantara Sejahtera ( BNS ). It represents 33% of the total issued and paid-up share capital of BNS. BNS is an Indonesia company with main activities in manufacturing and trading of coconut oil, crude palm oil and palm kernel oil. On 28 March 2017, the Group has announced to Bursa on the signing of Memorandum of Understanding ( MOU ) for the disposal of entire issued and paid- up share capital of Sokor Gemilang Ladang Sdn Bhd ( SGLSB ) to Everhome International (M) Sdn Bhd ( EISB ) for a total consideration of million. Further, the Group has acquired additional 300,000 new ordinary shares of MBL Plantation Sdn. Bhd., a wholly-owned subsidiary of the company which is involving in investment holding and agriculture industry as per Bursa announcement dated 4 April During the FYE2016, the Group has repurchased a total of 334,400 MBL s shares from the open market at an average price of 0.82 per share which were financed by internally generated funds and thereafter held as treasury shares. The Group will continue to repurchase its shares whenever it deems fit.

14 MUAR BAN LEE GROUP BERHAD 13 MESSAGE FROM THE EXECUTIVE CHAIAN PROSPECTS Moving forward, our Group will remain focus in growing our clientele base while enhancing the efficiency and productivity of our core manufacturing division that has contributed 53.1% to the Group s total revenue. In view of the strong order book on hand, the Board is contemplating to set up a new factory to increase its production output to meet customers orders. As for the edible oil milling division, which has contributed positively to the Group s results, the Group is committed to increase productivity and oil yield by extensive research and development in the oil extraction and production processes. Since the edible oil, namely crude palm kernel oil ( CPKO ) is a commodity, the management will practice prudent measures to mitigate volatility and liquidity risks. With the growing global demands for edible oil, the Board remains optimistic on the performance of the edible oil milling segment. The Board will exercise vitally cautious and pragmatic moves in implementing its strategic plans to manage challenges and risks while continuing its path for expansion and diversification of business operations to ensure satisfactory performance and sustainable growth of the Group in the coming years. APPRECIATION On behalf of the Board of Directors, I would like to express my sincere thanks to all the management teams and employees for their dedication and commitment for driving the Group in achieving an outstanding performance in the financial year under reviewed. Lastly, I wish to extend my appreciation to our valued customers, shareholders, suppliers, business associates, and other stakeholders who have provided strong supports and confidence in the Group. Thank you Dato Chua Ah Chua Eng Ka Executive Chairman Date: 25 April 2017

15 14 MUAR BAN LEE GROUP BERHAD FINANCIAL HIGHLIGHTS FINANCIAL YEAR ENDEd Revenue ('000) 179,833 61,520 46,319 50,335 78,799 Profit before taxation ('000) 16,472 8,202 4,862 7,540 17,334 Profit after taxation ('000) 13,581 6,908 3,885 6,283 16,385 Net Profit attributable to Owner of the Company ('000) 11,918 6,179 4,068 6,306 16,415 Net tangible assets ('000) 94,076 81,628 78,235 81,449 81,584 Earning per share (sen) Net tangible assets per share () Gross Dividend per share (sen) Revenue ( 000) Profit After Taxation ( 000) 179,833 16,385 13,581 78,799 50,335 46,319 61,520 6,283 6,908 3, Net Tangible Assets Per Share () Earning Per Share (sen)

16 MUAR BAN LEE GROUP BERHAD 15 MANAGEMENT DISCUSSION & ANALYSIS INTRODUCTION MBL is renowned as one of the world-leading palm oil machinery manufacturers specialise in oil seed crushing machinery. The Company provides "One Stop Service" in setting up Palm Kernel Crushing Plants from Plant Design and Fabrication to Installation and Commissioning. With our in-depth knowledge of the industry, our expertise and technical know-how, MBL have successfully completed hundreds of oil seed crushing plants for major plantations and oil mills throughout and retaining the world. With over 30 years of hands-on experience in the industry, an international presence in over 25 countries and an unblemished track record, MBL's excellent reputation constantly attract new customers while we also able to gain the loyalty of existing customers by providing quality post-project maintenance and service. To continue maintaining a cutting edge in the industry MBL also works in tandem with oil mill consultants by sharing market and technical information. MBL invests in advanced technology to develop Palm Kernel Oil Expellers, Copra Oil Expellers, and more to match the growing demands of both local and global palm oil industries. MBL is also an accomplished "design and build" contractor for palm oil mills and palm oil waste treatments plants with many successfully completed turnkey projects for the local and international palm oil industries. With the acquisition of a subsidiary, PT. Serdang Jaya Perdana and an associate, PT. Banyuasin Nusantara Sejahtera, the Group had diversified its operating segment into edible oil milling industry. Market and competition, including demand, capacity, and price competition Palm oil production is vital for the economy of Malaysia. Being one of the biggest producers and exporters of palm oil and palm oil products, Malaysia currently accounts for 39% of world palm oil production and 44% of world exports. Malaysia also accounts for 12% and 27% of the world s total production and exports of oils and fats that produced in the country. The competitiveness of palm oil implies that it will remain as a source for sustainable and renewable raw material profitable for producers and attractive to users. Along with the growing of global need for oils and fats sustainability, it implies that palm oil prices need no longer be subject to very low prices, perhaps, the demand dynamics (shortage) suggest upside trends on palm oil prices. Thus, the future direction of the Malaysian palm oil industry is strongly dependent on the trade relations it shares with buyers around the world. Malaysia as a country relies on market expansion as most of its production is used for export purposes. With such shared future, Malaysia has to advocate the trade with a win-win formula to attract more usage of palm oil in formulations of new and established food and non-food applications. Product technology relating to the entity's products The Group constantly strives to enhance its manufacturing efficiency to remain competitive and empowering our customers profitability by providing total solutions including consultation, turnkey project, technical supports and after sales services to maximise the value of their investments. With the continuous improvements and enhancements of our products through Research & Development, designs and engineering, the Group s brand names are reckoned as the market leader where its products are reliable, proven and costs effective. The establishment of 3 servicing offices in Indonesia has further enhanced the Group after sales service through prompt and responsive actions. The Group will focus on strengthening its brand names by active exposures in Palm Oil related international exhibitions, summits, forums and etc.

17 16 MUAR BAN LEE GROUP BERHAD MANAGEMENT DISCUSSION & ANALYSIS Supply availability and cost The principal activities of the Group mainly engage in manufacturing of automated and unautomated oil seed expeller and related parts. As per company policies, the raw materials are acquired from several local and foreign suppliers. This to ensure the company always have the bargaining power to negotiate with the suppliers to ensure lower price can be obtained. The cost is mainly consisting of direct labour cost and conversion cost from raw materials to finish goods. Financial Performance of Financial Year 2016 and Financial Year 2015 Revenue & Segment Result GROUP FYE 2016 FYE 2015 Variance % Revenue 180,561 62, % Less: revenue from Discontinued Operation (728) (1,102) (34%) Revenue from Continuing Operations 179,833 61, % Cost of Sales (142,241) (35,685) 299% Gross Profit 37,592 25,835 46% Other operating income 2,364 3,094 (24%) Distribution and administration expenses (22,889) (19,915) 15% Profit from operation 17,067 9,014 89% Finance cost (938) (811) 16% Share of results of associate 343 N/A Profit before tax 16,472 8, % Taxation (2,653) (1,294) 105% Profit for the continuing operations 13,819 6, % Loss from discontinued operations, net of tax (237) (551) (57%) Profit for the financial year 13,582 6, % The consolidated revenue of million increased by 192% as compared to the preceding year of 61.5 million, mainly due to 81% increase in manufacturing segment in the current financial year. For manufacturing segment the improvement was attributable to the Group success in conquering higher Indonesia market share. As for edible oil milling segment, the surge in revenue was due to full year results accounted in the current year as compared with 2-month revenue recognised post-acquisition of a subsidiary in 2015.

18 MUAR BAN LEE GROUP BERHAD 17 MANAGEMENT DISCUSSION & ANALYSIS Breakdown of revenue by business segment: GROUP FYE 2016 FYE 2015 Variance % Manufacturing 95,402 52,692 81% Trading and service 12,646 2, % Edible oil milling 71,785 6, % Plantation (Discontiued Operations) 728 1,102 (34%) Total Revenue 180,561 62, % Export Sales 93% 81% Local Sales 7% 19% 100% 100% Share of Associate s profit On 24 October 2016, the Group has entered into an agreement to subscribe newly issued shares of IDR 12,540,000,000 (equivalent to 3,931,290.00) at par value in Pt. Banyuasin Nusantara Sejahtera ( BNS ). It represents 33% of the total issued and paid-up share capital of BNS. BNS is an Indonesia company with main activities in manufacturing and trading of coconut oil, crude palm oil and palm kernel oil. The share of profit from the Group s associated companies for the current financial year of 0.3 million was mainly due to the proportionate result of BNS for the financial year ended 2016 as the transfer transaction are deemed to be completed in October Finance costs The Group s finance costs for the year 2016 was 0.9 million compared to 0.8 million of the immediate preceding year. The finance costs were incurred mainly due to banker acceptance drawdown by the Manufacturing Division. Profit attributable to equity holders of the Company The profit attributable to equity holders of the Company was 11.9 million for 2016, an increased of 5.7 million from 6.2 million in Gearing ratio A lower gearing ratio means greater financial stability. The Group s funding requirements and liquidity risk are managed with the objective of meeting business obligations on a timely basis. The Group finances its liquidity through internally generated cash flows and minimises liquidity risk by keeping committed credit lines available. The gearing ratio of the Group as at 31 December 2016 was 6.5% compared with 7.3% as at 31 December There are no significant changes in gearing ratio. Hence, the Group s liquidity in 2016 remains healthy.

19 18 MUAR BAN LEE GROUP BERHAD MANAGEMENT DISCUSSION & ANALYSIS Financial & Operational Risks To counter on the escalating costs, the Group is direct sourcing its inputs from manufacturers and also actively procuring for alternative supplies from both local and overseas markets. The Group is monitoring collections on weekly basis to mitigate the credit risks by exchanging of creditability information with stakeholders like suppliers, bankers and business associates and performing credit evaluations on both new & existing customers requiring credit terms. As for currency risk, the Group s policy is to hedge the foreign currency when liability arises. Dividends The Company has declared and paid the first interim dividend of 2.0 sen per share for the financial year ended 31 December 2016 to holders of ordinary shares on 5 October In addition, the Company paid the second interim dividend of 2.0 sen on 29 March Prospects The Group is committed to provide unparalleled services and quality products to our clients in order to maintain MBL s position as the market leader in the oil seed crushing industry. In view of the strong order book on hand, the Board is contemplating to set up a new factory to increase its production output to meet customers orders. As for edible oil milling division, the Group will focus to increase the productivity and oil yield. The Board believes that the edible oil milling division will contribute positively to the Group s results. Despite that, the Group also plans to set up a service centre in Indonesia for spare parts processing purposes. The Group s core business is not expected to be significantly affected by a drastic change in global economic conditions. The Group will continue to seek for investment opportunities in the related downstream industry especially oil milling industry. Barring any unforeseen circumstances, the Board of Directors is of the view that the Group will register satisfactory results for the coming financial year.

20 MUAR BAN LEE GROUP BERHAD 19 STATEMENT OF CORPORATE GOVERNANCE The Board of Directors ( the Board ) of Muar Ban Lee Group Berhad ( MBL or the Company ) observes Malaysian Code on Corporate Governance 2012 ( MCCG 2012 / the Code ) and ensures that the highest standards of corporate governance are practiced throughout the Company and its subsidiaries ( the Group ) as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and the financial performance of the Group. This corporate governance statement ( Statement ) sets out how the Company has applied the 8 Principles ( Principles ) of the Code and observed the 26 Recommendations supporting the Principles during the financial year under review following the release of the MCCG 2012 by the Securities Commission in late March Where a specific Recommendation of the MCCG 2012 has not been observed during the financial year under review, the non-observation, including the reasons thereof and, where appropriate, the alternative practice, if any, is mentioned in this Statement. PRINCIPLE 1 ESTABLISH CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD AND MANAGEMENT The Board recognizes the key role it plays in charting the strategic direction of the Group and the major responsibilities of the Board are outlined in the Board Charter of the Company. In 2016, the Board has discharged its key fiduciary duties and leadership functions and responsibilities, as follows: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Reviewing, evaluating, adopting and approved strategic plans and policies for the Group, addressing the sustainability of the Group s business; Overseeing and monitoring the conduct of the Group s business and financial performance and major capital commitments of the Company and the Group; Evaluating whether or not its businesses of the Group are being properly managed; Review financial results of the Company and the Group, monitor compliance with applicable accounting standards and integrity and adequacy of financial information disclosure; Identify principal business risks faced by the Group and ensuring the implementation of appropriate risk management system and internal control to manage these risks and mitigating measures to address such risk; Review, evaluate and approve any major corporate proposals, new business ventures or joint venture, material acquisition and disposal of undertakings and assets of the Group; Develop a corporate code of ethics and conduct to address, amongst others, any conflicts of interest relating directors, major shareholders and/or management; Establishing and overseeing succession programme for the Company and the Group ensuring that all candidates appointed to senior management positions are of sufficient calibre, including having in place a process to provide for the orderly succession of senior management personnel and members of the Board; Establishing, overseeing and implementing corporate communication policies with shareholders and investors, other key stakeholders and public; Reviewing the adequacy and integrity of the Group s internal control and management information systems; and Key matters reserved for the Board s approval include the overall strategic direction of the Group, annual operating and capital expenditure budget, dividend policy, expansion of core business, structure and capital e.g. issuance of new securities and ensuring that there is a sound system of internal control and risk management in place. To assist in the discharge of its stewardship role, the Board has established Board Committees, namely the Audit Committee, Nomination Committee and Remuneration Committee, to examine specific issues within their respective terms of reference as approved by the Board and report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board.

21 20 MUAR BAN LEE GROUP BERHAD STATEMENT OF CORPORATE GOVERNANCE From the clear function reserved for the Board as above, the Board also establish those responsibilities and functions delegated to Executive Chairman and Managing Director as clearly stated in the Board Charter. For the day-to-day operations, the Board has delegated its authorities and responsibilities to the management team led by the Managing Director. The management team is responsible for the implementation of business plans and strategies, policies and decisions approved by the Board, managing the daily conduct of the business and affairs; and communicating matters to the Board. (i) The Board and Board Balance The Board has overall responsibility for strategic planning and direction, setting the corporate goals, organising resources, monitoring the achievement of goals and identifying critical business risks. The Board assume full responsibility for the overall performance of the Group by providing leadership and direction as well as management supervision. It also lays down the appropriate policies for managing the related risks to ensure that good internal control is in place for operational efficiency and effectiveness of the Group. The Board consists of eight (8) members comprising five (5) executive directors, and three (3) non-executive directors. Three of the eight directors are Independent Non-Executive Directors. The Board has complied with Paragraph 15.02(1) of the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) that at least two or one-third of the Board, whichever is the higher is represented by Independent Non-Executive Directors who are independent of management, thereby ensuring independence in the Board deliberations and decision-making. Given the scope of responsibilities for managing the Group s business operations, the Board considers its current composition and size are adequate. Whilst the Board acknowledges that the general call and support for gender diversity in a board s composition, the Board believes that appointment of board members, regardless of gender, should be based on experience, character, integrity and competence as these are the essential criteria for an effective Board. The profile of the Directors is set out in this Annual Report. The Company is led by a dynamic and experienced Board, with high personal integrity, business acumen and management skills, which is primarily entrusted with the responsibility of charting the direction of the Group. The Directors combined in them have expertise and experience in various fields. Their expertise, experience and background result in thorough examination and deliberations of the various issues and matters affecting the Group. There is a clear division of responsibility between the Executive Chairman and the Managing Director to ensure balance of power and authority, such that no one individual has unfettered powers of decision making. The Executive Chairman is responsible for the overall strategic direction of the Group and the leadership of the Board is to ensure Board effectiveness, corporate affairs, and implementation of Board policies and decision of the Group. While the Managing Director is responsible for the overall performance of the Group operations, organization effectiveness and financial performance including the Group s day-to-day activities in achieving corporate and business objective. From the support of fellow Executive Directors and management team, the Managing Director is implements the Group s strategies, policies and decision adopted by the Board and oversees the operations and business development of the Group. The Independent Non-Executive Directors are not employees and do not take in the daily management and the day-to-day operations of the Group. However, they bring an outside perspective and assist to develop proposals on strategy, assess the performance of the management in achieving goals and objectives and monitor the risk profile of the Group s business. They provide independent views, advice and judgment and take into account the interests of the Group and the various parties involved which include shareholders, employees, customers, suppliers and other communities in which the Group conducts its business, and their presence brings an additional element of balance on the Board. Key matters reserved for the Board s approval include the overall strategic direction of the Group, annual operating and capital expenditure budget, dividend policy, expansion of core business, structure and capital e.g. issuance of new securities and ensuring that there is a sound system of internal control and risk management in place.