HUAT LAI RESOURCES BERHAD. (Incorporated in Malaysia) ( T) Annual Report

Transcription

1 HUAT LAI RESOURCES BERHAD (Incorporated in Malaysia) ( T) Annual Report 2015

2 Contents 2 Notice of Annual General Meeting 6 Corporate Information 7 Group Structure 8 Directors Profile 10 Chairman s Statement 12 Statement of Corporate Governance 19 Statement on Risk Management and Internal Control 23 Audit Committee Report 26 Additional Compliance Information 28 Five-year Financial Highlights 29 Financial Statements 127 List of Properties 128 Analysis of Shareholdings 130 Directors Interests in the Company Form of Proxy Annual Report 2015 HUAT LAI RESOURCES BERHAD 1

3 notice of annual general meeting NOTICE IS HEREBY GIVEN that the 21st Annual General Meeting of the Company will be held at the Conference Room, PT 1678, Mukim of Serkam, Merlimau, Melaka on Thursday, 26 May 2016 at 10:00 a.m. for the purpose of transacting the following business: Ordinary Business AGENDA 1. To receive the Audited Financial Statements for the year ended 31 December 2015 together with the Directors and Auditors Reports thereon. (Please refer to Explanatory Note A) 2. To approve the payment of Directors Fees amounting to RM605, for the year ended 31 December Resolution 1 3. To re-elect the following Directors who are retiring in accordance with Article 81 of the Company s Articles of Association: 3.1 Mr Lim Yaw Tin 3.2 Dato Mohd Rosli Abdul Aziz 4. To re-appoint Messrs Crowe Horwath as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. Resolution 2 Resolution 3 Resolution 4 Special Business To consider and, if thought fit, pass the following resolutions: 5. ORDINARY RESOLUTION Authority to allot and issue shares pursuant to Section 132D of the Companies Act, 1965 Resolution 5 THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to allot and issue shares in the Company at any time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the issued and paid-up share capital of the Company for the time being AND THAT the Directors be and are hereby further empowered to obtain the approval from 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. 2 HUAT LAI RESOURCES BERHAD Annual Report 2015

4 notice of annual general meeting (cont d) 6. ORDINARY RESOLUTION Proposed renewal of share buy-back authority Resolution 6 THAT subject to the provisions of the Companies Act, 1965, Articles of Association of the Company, Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) and any other relevant authorities, the Company be and is hereby authorised to purchase such number of ordinary shares of RM1.00 each in the Company ( Proposed Share Buy-back ) as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit in the interest of the Company provided that: a. the aggregate number of ordinary shares to be purchased pursuant to this resolution does not exceed 10% of the total issued and paid-up share capital of the Company at any point in time; b. the funds allocated by the Company for the Proposed Share Buy-back shall not exceed the total retained profit and/or share premium account of the Company; and c. the authority conferred by this resolution shall continue to be in force until: i. the conclusion of the next Annual General Meeting ( AGM ) of the Company at which time it shall lapse unless by a resolution passed at that meeting, the authority is renewed either unconditionally or subject to conditions; or ii. iii. the expiration of the period within which the next AGM after that date is required by law to be held; or revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting, whichever occurs first AND THAT the Directors of the Company be and are hereby authorised to deal with the shares purchased in their absolute discretion in the following manner: a. cancel all the shares so purchase; and/or b. retain the shares so purchased in treasury for distribution as dividend to the shareholders and/or resell the treasury shares on the market of Bursa Securities; and/or c. retain part thereof as treasury shares and cancel the remainder AND THAT the Directors of the Company be authorised to take all steps and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to implement, complete and give full effect to the Proposed Share Buy-back as may be agreed or allowed by any relevant authorities. Annual Report 2015 HUAT LAI RESOURCES BERHAD 3

5 notice of annual general meeting (cont d) 7. ORDINARY RESOLUTION Continuing in office as Independent Non-Executive Directors 7.1 THAT subject to the passing of Resolution 3 hereinabove, approval be and is hereby given to Dato Mohd Rosli Abdul Aziz who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than 9 years to continue to act as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting in accordance with the Malaysian Code on Corporate Governance THAT approval be and is hereby given to Ms Chin Peck Li who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than 9 years to continue to act as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting in accordance with the Malaysian Code on Corporate Governance Resolution 7 Resolution 8 Any Other Business 8. To transact any other business of the Company of which due notice shall have been given. BY ORDER OF THE BOARD ONG SOO LENG (MAICSA ) Company Secretary Melaka 28 April 2016 Notes 1. Only depositors whose names appear in the Record of Depositors as at 19 May 2016 shall be entitled to attend the 21st Annual General Meeting or appoint proxy/proxies and, in the case of a corporation, a duly authorised representative to attend and vote in his/her stead. 2. A proxy may but need not be a member of the Company and Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints 2 proxies, such appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy. 3. The instrument appointing a proxy or proxies shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if the appointer is a corporation, the instrument appointing a representative must be either under its common seal or under the hand of an officer or attorney duly authorised. 4. The duly completed proxy form must be deposited at the Company s Registered Office at PT 1678, Mukim of Serkam, Merlimau, Melaka at least 48 hours before the time fixed for holding the Meeting or any adjournment thereof. 4 HUAT LAI RESOURCES BERHAD Annual Report 2015

6 notice of annual general meeting (cont d) Explanatory Note A. The Audited Financial Statements in Agenda 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this item of the Agenda is not put forward for voting. B. Resolution 5 Ordinary resolution 5, if passed, is a renewal of the general mandate to empower the Directors to allot and issue shares of the Company up to a maximum of 10% of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. A renewal of the general mandate will provide flexibility to the Company for any possible fund raising activities including but not limited to placing of shares for the purpose of funding future investment projects, working capital and/or acquisition. As at the date of this notice, no shares in the Company has been allotted and issued pursuant to the general mandate granted to the Directors at the 20th Annual General Meeting held on 25 June 2015 and which will lapse at the conclusion of the 21st Annual General Meeting. C. Resolution 6 Further information on the Proposed Share Buy-back is set out in the Share Buy-back Statement dated 28 April 2016 which was despatched together with the Company s Annual Report D. Resolutions 7 and 8 The Board of Directors has assessed the independence of Dato Mohd Rosli Abdul Aziz and Ms Chin Peck Li and is of the view that the retention of them as Independent Non-Executive Directors of the Company is in the best interest of the Company base on the following: i. Each of them is able to exercise independent and objective judgement and have been performing their duty diligently in the best interests of the Company. ii. Each of them has fulfilled the criteria under the definition of an Independent Director as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. iii. They are able to bring to the Board a diversity in viewpoint as there is a diversity in age and culture besides different skills, experiences and backgrounds. iv. Both of them are strong individuals who demonstrate independence and independence is a result of a Director s state of mind and integrity and not dependent of years of service. Annual Report 2015 HUAT LAI RESOURCES BERHAD 5

7 CORPORATE INFORMATION BOARD OF DIRECTORS Lim Yeow Her Chairman/Managing Director Lim Yeow Kian Executive Director Datuk Lim Yeow Siong Executive Director Lim Yaw Tin Executive Director Dato Mohd Rosli Abdul Aziz Independent Non-Executive Director Chin Peck Li Independent Non-Executive Director Tan Peng Chan Independent Non-Executive Director AUDIT COMMITTEE Dato Mohd Rosli Abdul Aziz (Chairman) Chin Peck Li Tan Peng Chan BOARD NOMINATION AND REMUNERATION COMMITTEE Dato Mohd Rosli Abdul Aziz (Chairman) Chin Peck Li Tan Peng Chan COMPANY SECRETARY Ong Soo Leng (MAICSA ) AUDITORS Crowe Horwath (AF 1018) 52, Jalan Kota Laksamana 2/15 Taman Kota Laksamana, Seksyen Melaka SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya, Selangor Tel No. : Fax No. : /8152 PRINCIPAL BANKERS Malayan Banking Berhad CIMB Bank Berhad Bank Pertanian Malaysia Berhad RHB Islamic Bank Berhad HSBC Bank Malaysia Berhad Bangkok Bank Berhad AmBank (M) Berhad Bank Muamalat Malaysia Berhad STOCK EXCHANGE LISTING Main Market Bursa Malaysia Securities Berhad REGISTERED OFFICE PT 1678, Mukim Of Serkam Merlimau Melaka Tel No. : Fax No. : HUAT LAI RESOURCES BERHAD Annual Report 2015

8 group structure As At 31 March 2016 HUAT LAI RESOURCES BERHAD 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% Green Friend Fertilizer Sdn Bhd Huat Lai Paper Products Sdn Bhd Huat Lai Broiler Breeders Sdn Bhd Huat Lai Feedmill Sdn Bhd HLRB Broiler Farm Sdn Bhd HLRB Processing Sdn Bhd Titan Effort Sdn Bhd Huat Lai (G.P.S.) Farm Sdn Bhd Linggi Agriculture Sdn Bhd 100% Premier Layer Sdn Bhd 100% Titian Potensi Sdn Bhd Chuan Hong Poultry Farm Sdn Bhd 100% Chuan Hong Hatchery Sdn Bhd 59.71% TPC Plus Berhad * 100% Teck Ping Chan Agriculture Sdn Bhd 100% Mestika Arif Sdn Bhd 100% Teck Ping Chan (1976) Sdn Bhd 70% 100% PT Lestari Agribisnis Indonesia ** HLRB Food Pte Ltd # * Listed on the Main Market of Bursa Malaysia Securities Berhad ** Incorporated in the Republic of Indonesia # Incorporated in the Republic of Singapore Annual Report 2015 HUAT LAI RESOURCES BERHAD 7

9 directors profile Lim Yeow Her (Chairman/Managing Director) Non-Independent Executive Director Age 56, Malaysian Mr Lim Yeow Her has been a director of Huat Lai Resources Berhad since its incorporation on 12 November He is the Chairman and Managing Director of the Company. Mr Lim Yeow Her has more than 35 years of experience in the poultry sector. In 1979, he joined a small poultry farm located in Melaka as a farm assistant and left in 1989 to start his own family business in poultry farming. He is responsible for the planning and overseeing of the development of the poultry farms since their inception. He is also actively involved in the development and expansion of the Group and the Company. Mr Lim Yeow Her is a brother of Mr Lim Yeow Kian, Datuk Lim Yeow Siong and Mr Lim Yaw Tin and a substantial shareholder of the Company by virtue of his substantial shareholdings in Esprit Unity Sdn Bhd, the Company s holding company. Mr Lim Yeow Her does not have any conflict of interest in any business arrangement involving the Group and the Company and has not been convicted of any offences within the past ten years other than traffic offences, if any. Lim Yeow Kian Non-Independent Executive Director Age 54, Malaysian Mr Lim Yeow Kian has been a director of Huat Lai Resources Berhad since its incorporation on 12 November Mr Lim Yeow Kian has approximately 30 years of experience in poultry farming. He is currently involved in treasury functions and is principally responsible for all aspects of marketing including development of new market surveys for both local and overseas markets. With his all-round skills, he plays a major role in formulating customer support activities and strategies of the Group and the Company. Mr Lim Yeow Kian is a brother of Mr Lim Yeow Her, Datuk Lim Yeow Siong and Mr Lim Yaw Tin and a substantial shareholder of the Company by virtue of his substantial shareholdings in Esprit Unity Sdn Bhd, the Company s holding company. Mr Lim Yeow Kian does not have any conflict of interest in any business arrangement involving the Group and the Company and has not been convicted of any offences within the past ten years other than traffic offences, if any. Datuk Lim Yeow Siong Non-Independent Executive Director Age 52, Malaysian Datuk Lim Yeow Siong has been a director of Huat Lai Resources Berhad since its incorporation on 12 November Datuk Lim Yeow Siong has about 30 years of experience in poultry farming. He builds strong rapport among employees and encourages a highly motivated working environment in the Group and the Company. He is currently responsible for various aspects of the farms operations and also human resource management. Datuk Lim Yeow Siong is a brother of Mr Lim Yeow Her, Mr Lim Yeow Kian and Mr Lim Yaw Tin and a substantial shareholder of the Company by virtue of his substantial shareholdings in Esprit Unity Sdn Bhd, the Company s holding company. Datuk Lim Yeow Siong does not have any conflict of interest in any business arrangement involving the Group and the Company and has not been convicted of any offences within the past ten years other than traffic offences, if any. Lim Yaw Tin, BKT Non-Independent Executive Director Age 58, Malaysian Mr Lim Yaw Tin was appointed to the Board of Huat Lai Resources Berhad on 23 November Mr Lim Yaw Tin has about 35 years of experience in poultry farming operations having been involved in the family business of poultry farming since its inception. Currently, he is in charge of logistic and distribution of eggs to customers. Mr Lim Yaw Tin is a brother of Mr Lim Yeow Her, Mr Lim Yeow Kian and Datuk Lim Yeow Siong. Mr Lim Yaw Tin does not have any conflict of interest in any business arrangement involving the Group and the Company and has not been convicted of any offences within the past ten years other than traffic offences, if any. 8 HUAT LAI RESOURCES BERHAD Annual Report 2015

10 directors profile (cont d) Dato Mohd Rosli Abdul Aziz Independent Non-Executive Director Age 68, Malaysian Dato Mohd Rosli Abdul Aziz was appointed to the Board of Huat Lai Resources Berhad on 31 March He is the Chairman of the Company s Audit Committee and the Board Nomination and Remuneration Committee. Dato Mohd Rosli Abdul Aziz graduated with a Bachelor of Economics (Hon) degree from the University Malaya in 1970 and a Masters in Arts Economics from the University of Bombay and a M.Sc (Agricultural Economics) from the University of Winconsin, U.S.A. in 1973 and 1981 respectively. Dato Mohd Rosli Abdul Aziz joined one of the local banks as a Credit Officer in 1970 and was promoted to General Manager of the same bank in All in all, Dato Mohd Rosli Abdul Aziz has over 33 years of banking experience before his appointment as Director of the Company. Dato Mohd Rosli Abdul Aziz does not have any family relationship with any director or substantial shareholder of the Company. Dato Mohd Rosli Abdul Aziz also does not have any conflict of interest in any business arrangement involving the Group and the Company and has not been convicted of any offences within the past ten years other than traffic offences, if any. Chin Peck Li Independent Non-Executive Director Age 45, Malaysian Ms Chin Peck Li was appointed to the Board of Huat Lai Resources Berhad on 23 November She was also appointed a member of the Company s Audit Committee and Board Nomination and Remuneration Committee. Ms. Chin Peck Li obtained her Accountancy Degree from RMIT University, Australia in year 1992 and continued to obtain her Master of Finance (AUST) in year 1998 from the same university. She is a qualified Chartered Accountant with the Malaysian Institute of Accountants (MIA) and a member of the Australian Society of Certified Practising Accountants (ASCPA). Ms Chin Peck Li is also an Approved Tax Agent as well as Approved GST Agent. Ms. Chin Peck Li is currently the Managing Director of CPL Group of Companies which provide accounting services, tax consultancy services, GST consultancy services and corporate secretarial services. Prior to setting up CPL Group of Companies, Ms. Chin Peck Li was employed by a local university as a lecturer in accountancy from year 2008 to 2010 during which she played an active role in the campus. Prior to teaching, she worked in Messrs Price Waterhouse where she gained experience in tax planning, accountancy research and staff supervision skills. Ms. Chin Peck Li does not have any family relationship with any director or substantial shareholder of the Company. Ms. Chin Peck Li neither has any conflict of interest in any business arrangement involving the Group and the Company nor been convicted of any offences within the past ten years which may disqualify her from acting as a director. Tan Peng Chan Independent Non-Executive Director Age 68, Malaysian Mr Tan Peng Chan was appointed to the Board of Huat Lai Resources Berhad on 5 January He is a member of the Company s Audit Committee and the Board Nomination and Remuneration Committee. After completing Senior Cambridge, Mr Tan Peng Chan joined Harrison & Crossfield (subsequently known as Golden Hope Plantations Berhad) as a junior staff. He was with Harrison & Crossfield for 23 years before joining IOI Corporation Berhad. Mr Tan Peng Chan retired as a Senior General Manager after 17 years with IOI Corporation Berhad. He is currently the Planting Advisor for Duta Plantations Bhd. With 40 years of experience in the plantation industry, Mr Tan Peng Chan is now a life member of the Incorporated Society of Planters and he has obtained his MBA in Entrepreneurship from the Asia Exel University in Mr Tan Peng Chan is an uncle of Mr Lim Yeow Her, Mr Lim Yeow Kian, Datuk Lim Yeow Siong and Mr Lim Yaw Tin. Mr Tan Peng Chan does not have any conflict of interest in any business arrangement involving the Group and the Company and has not been convicted of any offences within the past ten years other than traffic offences, if any. Annual Report 2015 HUAT LAI RESOURCES BERHAD 9

11 chairman s statement On behalf of the Board of Directors, I am pleased to present the Annual Report and the Audited Financial Statements of Huat Lai Resources Berhad and its group of companies for the year ended 31 December FINANCIAL PERFORMANCE 2015 marks a new record for Huat Lai Resources Berhad as the Group achieved its best financial and operational results thus far. The Company registered a revenue of approximately RM1.412 billion for the financial year ended 31 December 2015, a significant increase of 13.23% from the preceding financial year s performance of RM1.247 billion. Consequentially, profit after tax rose to RM40.12 million as compared to RM28.83 million for the financial year ended 31 December The improved profit after tax performance was the result of major efforts made in operational streamlining, adoption of prudent cost management and continued cost reduction strategies. We are proud to report such significant growth in our integrated poultry business which has resulted in stronger cash flow. The Company s basic earning per share stood at sen per share, from sen per share in the preceding year. OPERATIONAL REVIEW AND PROSPECTS Notwithstanding the tougher than expected operating environment in connection with the currencies misalignment, subdued economic growth, sagging consumer confidence and spending, the Group managed to operate its business in accordance with its strategic direction and expansion plans on aiming to establish secure foundation while sustaining its growth potential. In order to ensure our continued competitiveness, we are constantly seeking to drive efficiency further in our integrated poultry farming division. We have invested highly in automated production facilities across our business line to increase production level to meet long term future demand. I feel pleased that our operational management team has excelled whilst taking on increased responsibilities during the year. We are constantly working to become a preferred supplier to our customers and to be a recognized industry leader by consistently providing high quality poultry products to customers. As a fully integrated company, we are able to control and inspect every phase 10 HUAT LAI RESOURCES BERHAD Annual Report 2015

12 chairman s statement (cont d) of the production process and hence to better manage our product quality and safety. Alongside these, we will continue to put our absolute focus in cost saving programme, improving working capital management and operational cash flow of the Group. Moving forward, the strength of our long term partnerships with customers and suppliers will continue to underpin the Group s strategy. Besides that, we will continue to seek out available opportunities to progressively expand the scale and scope of our operations. I believe that challenging times are likely to continue affecting the economy in 2016 and beyond. However, I am confident that the Group is well positioned to ride out all challenges ahead. APPRECIATION On behalf of the Board of Directors, I would like to express my deep and sincere gratitude to our management and staff for their continued dedication and commitment in contributing towards the success of the Group. My appreciation also goes to our customers, suppliers, business associates, financial lenders and authorities for their support and confidence in the Group. Last but not least, my heartfelt thanks and gratitude to my fellow Board members for providing valuable advice and guidance at our Board meetings and to you, the shareholders, for your continued support of Huat Lai Resources Berhad. CORPORATE SOCIAL RESPONSIBILITY The Group has always been aware of its corporate social responsibility in the community it operates in and will continue all corporate social responsibility activities carried out in the previous financial year. In recognizing the importance of such responsibilities, the Group had undertaken several activities during the financial year ended 31 December 2015:- LIM YEOW HER Chairman / Managing Director 1. Reducing our carbon footprint by recycling paper in the office and reducing energy consumption by switching off lights and electrical equipment during lunch hour. 2. Conducted in-house training programmes for the employees and sponsored the employees to attend relevant external training programmes to increase efficiency and productivity. 3. Provided adequate medical and hospitalization benefit to staff. 4. Supported the community by providing financial assistance for projects undertaken by local schools and places of worship. 5. Sponsoring of eggs to the needy and less priviledged. Annual Report 2015 HUAT LAI RESOURCES BERHAD 11

13 statement of corporate governance The Board of Directors ( the Board ) of Huat Lai Resources Berhad ( the Company ) recognises corporate governance as a form of self-regulation in ensuring operations and objectives of the Group are implemented and conducted with a view towards enhancing corporate accountability, sustainability and long terms business prosperity to safeguard the interests of the shareholders. The Board will continue to improve the effective application of the principles and recommendations as set out in the Malaysian Code on Corporate Governance 2012 ( the Code ) and is pleased to state below how the Company has applied the principles and recommendations set out in Code. 1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES Function of the Board and Management The Board has full and effective control over the business undertakings of the Company subject to the powers reserved for shareholders under the Company s Memorandum and Articles of Association, the Listing Requirements and applicable laws. This includes the approval of annual and interim results, specific items of investments and disinvestments as well as the risk management framework and internal control policies and procedures for the Company. The Executive Directors are responsible for matters which are not specifically reserved for the Board or delegated to the Board committees such as the day-to-day management of the operations of the Company. It is the role of the Management to manage the Company in accordance with the direction and delegation by the Board and the Board is focused on the Group s overall governance. Roles and responsibilities of the Board The Board s role and responsibilities are set out in the Company s Board Charter which sets out the principal role of the Board, Board Committee and Management so that there is a structured guide with regard to the various responsibilities. The Board has delegated certain responsibilities to two Board Committee namely the Audit Committee and the Nomination and Remuneration Committee which operate within clearly defined terms of reference. The Board Charter which was first adopted in year 2013 and reviewed by the Board of Directors on 25 February 2016 is available on the Company s website, Code of Conduct of Directors The Board acknowledges its leadership role in promoting and observing ethical values and conduct. The Board adopts and observes a Code of Conduct similar to the Code of Ethics for Company Directors established by the Companies of Commission of Malaysia. The Group also has a Whistle Blowing Policy which protects an employee of the Group against any detrimental action in reprisal for raising concerns of any actual or potential misconduct. Sustainable strategies The Board recognises the importance of sustainability and in driving business revenues and profits, the Group will manage risk prudently and meet the expectations of customers, shareholders, regulators, bankers and the communities in which the Group operates. 12 HUAT LAI RESOURCES BERHAD Annual Report 2015

14 statement of corporate governance (cont d) 1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (cont d) Access to information and advice The Directors have direct and unrestricted access to all information relating to the Group s business and affairs. The Board members may, either as a group or in their individual capacity, seek and obtain independent professional advice, where necessary, at the Company s expense to discharge their duties effectively. The Directors are provided with the agenda and all the relevant documents and information prior to each Board meeting to enable them to have a comprehensive understanding of the issues to be deliberated upon in order to arrive at an informed decision. Senior Management and external advisers are normally invited to attend meetings to provide insights and professional views, advice and explanation on specific items on the meeting agenda. Company Secretary The Board is supported by a Company Secretary who is a member of a professional body. The Company Secretary is responsible for ensuring the Group s adherence and compliance with the relevant statutory and regulatory requirements. The Company Secretary also organises, attends and ensures meetings of Shareholders, Board and Board Committees are properly convened and held. Statutory records and resolutions passed are kept and maintained by the Company Secretary at the Company s Registered Office. 2. STRENGTHEN COMPOSITION Nomination and Remuneration Committee The Board Nomination and Remuneration Committee ( BNRC ) comprises the following Directors, all of whom are Independent Non-Executive Directors: Dato Mohd Rosli Abdul Aziz - Chairman Chin Peck Li - Member Tan Peng Chan - Member During the financial year ended 31 December 2015, the BNRC had met to review the Executive Directors remuneration and the Directors fees, to consider the re-election of Directors who are retiring in accordance with the Company s Articles of Association and to assess the independence of Directors. Recruitment and annual assessment of Directors The Board supports non-discrimination on gender, ethnicity and age group of candidates to be appointed as Board members although the Company does not have any Boardroom diversity policy. The Board encourages a dynamic and diverse composition with skills, experience, time commitment and other qualities in meeting the future needs of the Company. Currently, the Board comprises one female director. Article 85 of the Company s Articles of Association provides that the Board shall comprise not less than 2 and not more than 9 Directors (disregarding alternate directors). The Board has 7 members comprising an Executive Chairman, 3 Executive Directors and 3 Independent Non-Executive Directors. This complies with the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) which requires one third of the Board to be Independent Directors. Annual Report 2015 HUAT LAI RESOURCES BERHAD 13

15 statement of corporate governance (cont d) 2. STRENGTHEN COMPOSITION (cont d) Recruitment and annual assessment of Directors (cont d) Procedures relating to the appointment and re-election of Directors are contained in the Company s Articles of Association. One third of the Board of Directors or if their number is not three or a multiple of three, then the number nearest to one third are required to submit themselves for re-election at each annual general meeting ( AGM ) provided that all Directors shall retire from office at least once every 3 years. Newly appointed Directors will hold office until the AGM following their first appointment and shall be eligible for re-election bur shall not be taken into account in determining the number of Directors who are to retire by rotation at the AGM. Remuneration policy The current practice is for the Executive Directors to be remunerated both in cash and in kind by taking into consideration their experience, responsibilities and contributions to ensure that the Company attracts and retains directors of the quality needed to manage the business of the Group. Non-executive Directors are paid an annual fees in addition to meeting allowance. The BNRC will propose to the Board on the Directors fees payable and the ultimate decisions will be made by the Board subject to the shareholders approval at its annual general meeting. The aggregate Directors remuneration paid or payable to Directors for the financial year ended 31 December 2015 are disclosed under Note 32 of the financial statements in page 100 this Annual Report. For security and confidentially reasons, the details of the Directors remuneration are not shown with reference to the Directors individually. The Board is of the view that the transparency and accountability aspect of the corporate governance on Directors remuneration are appropriately served by the band disclosure made. 3. REINFORCE INDEPENDENCE Annual assessment of Independent Directors The concept of independence adopted by the Board is in tandem with the definition of an independent director in the MMLR. During the financial year ended 31 December 2015, none of the Independent Directors is engaged in the day-to-day management of the Company or is involved in any type of business dealings with the Company that could materially interfere with his/her unfettered and independent judgement. All the 3 Independent Directors of the Company had each provided a confirmation of their independence to the BNRC and the Board. The Board has recommended the continuation of these 3 directors as independent directors of the Company as the Board believes that they can continue acting in the best interest of the Group and bringing unbiased and professional judgement to Board deliberations. Tenure of Independent Directors The Board does not limit the tenure for Independent Directors as the Board is of the view that there are significant advantages gained from long-serving Independent Directors who possess valuable knowledge of the Group s operations. 14 HUAT LAI RESOURCES BERHAD Annual Report 2015

16 statement of corporate governance (cont d) 3. REINFORCE INDEPENDENCE (cont d) Shareholders approval for retaining Independent Directors Subject to the Board s recommendation, directors who have served as Independent Directors of the Company for an aggregate of more than 9 years will seek shareholders approval at every AGM for them to continue to act as independent directors until the conclusion of the next AGM. Dato Mohd Rosli Abdul Aziz and Ms Chin Peck Li have served the Company as independent directors for a cumulative term of more than 9 years. The BNRC and Board have assessed and determined that they remain objective and independent in expressing their views and are satisfied with the skills, contributions and independent judgement they bring to the Board. In view thereof, the Board would be seeking shareholders approval at the forthcoming 21st AGM of the Company for Dato Mohd Rosli Abdul Aziz and Ms Chin Peck Li to continue as independent directors of the Company. Separation of positions of Chairman and Managing Director Currently the functions of the Chairman and Managing Director is combined but the Board is comfortable that there is no undue risk involved since all major and significant matters were referred to the Board for consideration and approval. Moreover, the Independent Directors are able to provide an element of objectivity, independent judgement and check and balance on the Board. The Code states that the Board must comprise a majority of independent directors where the chairman is not an independent director. Although the Chairman of the Company is not an Independent Director, the 3 Independent Non-Executive Directors fairly reflects the investment in the Company by shareholders other than the major shareholder. 4. FOSTER COMMITMENT Time commitment The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company. The Board met 5 times during the financial year ended 31 December 2015 and all the Directors attended every meeting held except Mr Tan Peng Chan who attended 4 of the 5 meetings. All Directors are required to notify the Chairman before accepting any new directorships and limit his directorship of companies to a number in which he can best devote his time and effectiveness. Each Director is his own judge of his abilities and how best to manage his time effectively in the company in which he holds directorship. Training The Board acknowledges that continuous training is important to enable the Directors to effectively discharge their duties and hence will continue to undergo relevant training programmes that will aid the Directors in the discharge of their duties and responsibilities more effectively. Annual Report 2015 HUAT LAI RESOURCES BERHAD 15

17 statement of corporate governance (cont d) 4. FOSTER COMMITMENT (cont d) Training (cont d) During the financial year ended 31 December 2015, the Directors assessed and identified their own training needs and had attended the following training programmes: Director Lim Yeow Her Lim Yeow Kian Datuk Lim Yeow Siong Lim Yaw Tin Tan Peng Chan Chin Peck Li Training Stepping into the world of directorship 2016 Budget outlook Stepping into the world of directorship 2016 Budget outlook 2016 Budget outlook 2016 Budget outlook Understanding and awareness of Goods and Services Tax (GST) in Malaysia GST for accounting treatment & effective implementation process Audit Series : Workshop 1 Auditing of inventories production costs GST for property developers GST in Malaysia National tax conference 2015 Updates of company secretarial practices & related issues National tax seminars budget seminar : summary & highlights for corporate accounts Dato Mohd Rosli Abdul Aziz did not attend any training during the financial year ended 31 December 2015 as the seminar that Dato Mohd Rosli supposed to attend was postponed to a date when he was in overseas. 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING Directors responsibility statement The financial statements are drawn up in accordance with the International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2015 and of their financial performance and cash flows for the financial year ended on that date. The Directors are satisfied that in preparing the financial statements of the Group and of the Company for the financial year ended 31 December 2015: appropriate accounting policies were adopted and applied consistently; judgment and estimates were prudently and reasonably made; all applicable accounting standards were complied; and the financial statements were prepared on the going concern basis. The Directors have also ensured that proper accounting records kept disclose with reasonable accuracy the financial position of the Group and Company and which enable the Directors to ensure that the financial statements comply with the Companies Act, 1965 and MASB approved accounting standards. Other than the above, the Directors have an overall responsibility for taking steps that are reasonably available to them to safeguard the assets of the Group and Company and to detect and prevent fraud and other irregularities. 16 HUAT LAI RESOURCES BERHAD Annual Report 2015

18 statement of corporate governance (cont d) 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING (cont d) Suitability and independence of External Auditors The External Auditors have confirmed that they were, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. The External Auditors attended all the Audit Committee Meetings held during the financial year ended 31 December 2015 and were also available at the Company s AGM to answer any enquiries on the conduct of the statutory audit and the preparation and contents of their audit report. 6. RECOGNISE AND MANAGE RISKS Framework to manage risks The Board recognises the importance of risks management for the Group to achieve its objectives within an acceptable risk profile and to safeguard shareholders investment and the Group s assets. An overview of the Company s risks management is set out in the Statement on Risk Management and Internal Control on pages 19 to 22 of this Annual Report. Internal audit function The Company has outsourced its internal audit function to a professional services firm. In order to act independently from the management, the internal audit function will report directly to the Audit Committee and assist the Board in monitoring and reviewing the effectiveness of the risk management, internal control and governance processes within the Group. The scope of the internal audit function covers the audits of all units and operations of the Group. The details of internal audit functions of the Group are disclosed in the Statement on Risk Management and Internal Control on pages 19 to 22 of this Annual Report. 7. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE Corporate disclosure policy The Company is committed in providing clear, accurate and timely disclosure of all material information pertaining to its performance and operations to its shareholders and the general public. Although the Company does not have any corporate disclosure policies and procedures, all disclosure requirements as set out in the MMLR are complied with at all times. Dissemination of information Printed Circular to Shareholders and Annual Report are sent to shareholders. These Circular and Annual Report could also be accessed by the shareholders and the investing public electronically through Bursa Securities and the Company s website at and respectively. Announcements and quarterly results of the Company and Group are also accessible through these same websites. Annual Report 2015 HUAT LAI RESOURCES BERHAD 17

19 statement of corporate governance (cont d) 8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS Shareholders participation at general meeting The Company s AGM remains the principal forum for dialogue and interaction with shareholders during which the shareholders may seek clarifications and comment on the Group s businesses and financial performance. Poll voting The Board is of the opinion that the number of shareholders and the level of attendance at the Company s general meetings do not warrant the introduction of poll voting for all resolutions. However, the Board notes that poll voting may be mandated by the regulators for resolutions relating to defined situations and in such circumstances, poll voting will be carried out. This Statement is made in accordance with a resolution of the Board of Directors dated 11 April HUAT LAI RESOURCES BERHAD Annual Report 2015

20 statement on risk management and internal control Pursuant to paragraph 15.26(b) and Practice Note 9 of the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) for the Main Market and as guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers ( the Guidelines ), the Board of Directors ( the Board ) of Huat Lai Resources Berhad ( the Company ) (collectively with its subsidiaries, the Group ) is pleased to include a statement on the state of the Group s system of risk management and internal control for the financial year ended 31 December 2015 in this Annual Report. RESPONSIBILITY The Board acknowledges its overall responsibility for maintaining a good risk management practices, reviewing and overseeing the effectiveness and adequacy of the Group s risk management and internal controls system implemented by management. The Board has delegated these aforementioned responsibilities to the Audit Committee whereby the Audit Committee is assigned with the duty, through its terms of reference and the Risk Management Framework approved by the Board, to provide assurance to the Board on the effectiveness of risk management and internal control systems of the Group. Through the Audit Committee, the Board is kept informed of all significant control issues brought to the attention of the Audit Committee by the Management, the internal audit function and the external auditors. The Board confirms that these processes have been in place for the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report of the Company. Due to the inherent limitations in any risk management and internal control system, such system put into effect by the Management by its nature is designed to manage, rather than to eliminate, the risk of failure to achieve the Group s business objectives and can only provide reasonable and not absolute assurance against material misstatement, error or loss. RISK MANAGEMENT SYSTEM The Board recognize risk management as an integral part of system of internal control and good management practice in pursuit of its strategic objectives. The Board maintains an on-going commitment for identifying, evaluating and managing significant risks faced by the Group systematically during the financial year under review. The Board had put in place a structured Risk Management Framework ( RM Framework ), as the governance structure and processes for the risk management on enterprise wide, in order to embed the risk management practice into all level of the Group and to manage key business risks faced by the Group adequately and effectively as second line-of-defense. The duties for the identification, evaluation and management of the key business risk are delegated to the Risk Management Committee ( RMC ), made up of heads of departments led by Group Managing Director. The RM Framework established lays down the risk management s objectives and processes established by the Board with proper governance structure of the risk management activities of the Group established as follows: The Board Audit Committee Internal Audit Function Risk Management Committee ( RMC ) Annual Report 2015 HUAT LAI RESOURCES BERHAD 19

21 statement on risk management and internal control (cont d) RISK MANAGEMENT SYSTEM (cont d) Clear roles and responsibilities of the Board, the Audit Committee, RMC, operation management (as risk owners), key risk officer and internal audit function are defined in the RM Framework. The RMC is chaired by Group Managing Director and guided by formal terms of reference embodied in the RM Framework. Systematic risk management process is stipulated in the RM Framework, whereby each step of the risk identification, risk assessment, control identification, risk treatment and control activities are laid down for application by the RMC and the operation management. Risk assessment, at gross and residual level, are guided by the likelihood rating and impact rating established by the Board that are stipulated in the RM Framework. Based on the risk management process, a key risk profile of the Group was compiled by the RMC, with relevant key risks identified rated based on the agreed upon risk rating. The key risk profile is used for the identification of high residual risks which are above the risk appetite of the Group that require the Management and the Board s immediate attention and risk treatment as well as for future risk monitoring. As first-line-of-defense, respective heads of departments/divisions (i.e. risk owners) are responsible for managing the risks under their responsibilities. Risk owners are responsible to ensure that business processes under their responsibilities are operating effectively and efficiently by way of maintaining effective internal controls and executing risk and control procedures. The monitoring of the risk management by the Group is enhanced by the internal audits carried out by the internal audit function with specific audit objectives and business risks identified for each internal audit cycle based on the internal plan approved by the Audit Committee. The above process has been practiced by the Group for the financial year under review and up to the date of approval of this statement. INTERNAL CONTROL SYSTEM The key elements of the Group s internal control systems are described below: Board of Directors/Board Committees Board Committees i.e. Audit Committee and Nomination and Remuneration Committee have been established to carry out duties and responsibilities delegated by the Board and are governed by written terms of reference. The Board conducts quarterly reviews of the Group s performance and financial positions at its meetings to ensure that the Group s overall objectives are achieved. Organisation Structure and Authorisation Procedures The Group has a formal organization structure in place to ensure appropriate level of authorities and responsibilities are delegated accordingly to competent staffs in achieving operational effectiveness and efficiency. 20 HUAT LAI RESOURCES BERHAD Annual Report 2015

22 statement on risk management and internal control (cont d) INTERNAL CONTROL SYSTEM (cont d) Policies and Procedures Documented policies and procedures are in place and are regularly reviewed and updated to ensure that it maintains its effectiveness and continues to support the Group s business activities at all times as the Group continues to grow. Human Resource Policy Guidelines on human resource management are in place to ensure the Group s ability to operate in an effective and efficient manner by employing and retaining adequately competent employees who possess the necessary knowledge, skill and experience in carrying out their duties and responsibilities effectively and efficiently. Information and Communication Information critical to the achievement of the Group s business objectives are provided by the Senior Management to the Board. This allows matters that require the Board s attention to be highlighted for review, deliberation and decision making on a timely basis. At operational level, clear reporting lines are established across the Group and operation reports are prepared for dissemination to relevant personnel for effective communication of critical Information throughout the Group for timely decision making and execution in pursuit of the business objectives. Biosecurity and Disease Control Good farm management practices and biosecurity & disease controls to mitigate biosecurity and disease threats are incorporated into policies and procedures adopted by the farms, the production chain and distribution process. INTERNAL AUDIT FUNCTION The Audit Committee and Board currently obtain assurance on the adequacy and effectiveness of the internal control system through independent review performed by the internal audit function which is outsourced to a professional services firm. The outsourced internal audit function reports directly to the Audit Committee. During the financial year, the internal audit function conducted reviews in accordance with the risk based internal audit plan approved by the Audit Committee. The findings of the internal audit review carried out including recommended corrective actions were presented to the Audit Committee. Based on the internal audit review conducted, none of the weaknesses noted have resulted in any material losses, contingencies or uncertainties that would require a separate disclosure in this annual report. The cost incurred in outsourcing the internal audit function during the year ended 31 December 2015 amounted to approximately RM18, ASSURANCE PROVIDED BY MANAGING DIRECTOR In line with the Guidelines, the Group Managing Director, being highest ranking executive in the Company and the person primarily responsible for the management of the financial affairs of the Company have provided assurance to the Board that the Group s risk management and internal control systems have operated adequately and effectively, in all material aspects, to meet the Group s objectives during the financial year under review. Annual Report 2015 HUAT LAI RESOURCES BERHAD 21