Protecting Contents While Preserving Nature. Annual Report

Transcription

1 Protecting Contents While Preserving Nature Annual Report 2010

2 CONTENTS 02 Corporate Information 03 Directors Standing for Re-election 06 Board of Directors 07 Profile of Directors 12 Chairman s Statement 16 Corporate Structure 17 Audit Committee Report 22 Statement on Internal Control 24 Statement on Corporate Governance 30 Recurrent Related Party Transactions of A Revenue Nature 32 Group Properties 34 Other Information 35 Financial Statements 103 Analysis of Shareholdings 106 Notice of Annual General Meeting Form of Proxy

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4 2 CORPORATE INFORMATION BOARD OF DIRECTORS Chan Choo Sing Chan Chor Ngiak Chan Chor Ang Chan Chow Tek Tan Kwee Kee Chew Teck Cheng Koh Kee Tee Julian Lim Wee Liang Executive Chairman Managing Director Executive Director Non-Independent and Non-Executive Director Non-Independent and Non-Executive Director Independent and Non-Executive Director Independent and Non-Executive Director Independent and Non-Executive Director AUDIT COMMITTEE Chew Teck Cheng Chairman, Independent Non-Executive Director Koh Kee Tee Independent Non-Executive Director Julian Lim Wee Liang Independent Non-Executive Director NOMINATION COMMITTEE Koh Kee Tee Chairman, Independent Non-Executive Director Chew Teck Cheng Independent Non-Executive Director Julian Lim Wee Liang Independent Non-Executive Director REMUNERATION COMMITTEE Chew Teck Cheng Chairman, Independent Non-Executive Director Koh Kee Tee Independent Non-Executive Director Julian Lim Wee Liang Independent Non-Executive Director Chan Choo Sing Non-independent Executive Director COMPANY SECRETARY Sujata Menon A/P K.R.D.S Chandran (A.A.C.S.) (LS ) PRINCIPAL PLACE OF BUSINESS Plo 7, Kawasan Perindustrian Parit Raja, Batu Pahat, Johor Darul Takzim Tel : Fax : REGISTERED OFFICE Suite 3.6, Level 3, Menara Pelangi, No. 2, Jalan Kuning, Taman Pelangi, Johor Bahru, Johor Darul Takzim Tel : Fax : REGISTRAR Securities Services (Holdings) Sdn Bhd (36869-T) Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur Tel : Fax : , AUDITORS Ernst & Young (AF: 0039) Lot 1, 6 th Floor, Menara Pertam, Jalan BBP 2, Taman Batu Berendam Putra, Batu Berendam, Melaka PRINCIPAL BANKERS HSBC Bank Malaysia Berhad ( V) CIMB Bank Berhad (13491-P) OCBC Bank (Malaysia) Berhad ( W) Malayan Banking Berhad (3813-K) SUBSIDIARY COMPANIES Harta Packaging Industries Sdn Bhd ( W) Harta Packaging Industries (Selangor) Sdn Bhd ( X) Harta Packaging Industries (Perak) Sdn Bhd ( M) Harta Packaging Industries (Malacca) Sdn Bhd ( D) Chiga Light Industries Sdn Bhd (38496-U) Harta Distribution Network Sdn Bhd ( D) K.H. Chan Trading Sdn Bhd (70773-A) Cabaran Minda Sdn Bhd ( V) Cabaran Perspektif Sdn Bhd ( K) HPI Resources (Overseas) Sdn Bhd ( T) Harta Fleksipak Sdn Bhd ( K) Harta Packaging Industries (Cambodia) Limited Trio Paper Mills Sdn Bhd (11635-W) Yuen Foong Yu Paper Manufacturing Sdn Bhd ( A) ASSOCIATE COMPANIES Harta Land Limited STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad Sector : Industrial Products Stock Short Name : HPI Stock Code : 7919 WEBSITE ADDRESS HPI Resources Berhad ( K)

5 DIRECTORS STANDING FOR RE-ELECTION 3 Directors standing for re-election at the Fourteenth Annual General Meeting of the Company to be held at The Landmark Hotel, Ground Floor, No.1, Jalan Omar, Batu Pahat, Johor on Wednesday, 27 October 2010 at a.m. Directors standing for re-election: 1. Mr. Chan Chor Ngiak 2. Mr. Chew Teck Cheng; and 3. Mdm. Tam Kwee Kee Details of attendance at Board Meetings held in the financial year ended 31 May, (Total of four meetings held) Name of Director Date of No. of meetings appointment attended CHAN CHOO SING 08/04/1997 4/4 CHAN CHOR NGIAK 08/04/1997 4/4 CHAN CHOR ANG 08/04/1997 4/4 CHAN CHOW TEK 08/04/1997 4/4 CHEW TECK CHENG 08/04/1997 4/4 TAN KWEE KEE 22/10/2005 4/4 KOH KEE TEE 22/10/2005 4/4 JULIAN LIM WEE LIANG 11/01/2008 4/4 Details of the Board Meetings held in the financial year ended 31 May, Place Date Time Corporate Office 27 July a.m. Lot 1376, GM 127, Mukim Simpang Kanan, Jalan Kluang, Batu Pahat, Johor Darul Takzim. Corporate Office 28 October a.m. Lot 1376, GM 127, Mukim Simpang Kanan, Jalan Kluang, Batu Pahat, Johor Darul Takzim. Corporate Office 20 January a.m. Lot 1376, GM 127, Mukim Simpang Kanan, Jalan Kluang, Batu Pahat, Johor Darul Takzim. Corporate Office 5 April noon Lot 1376, GM 127, Mukim Simpang Kanan, Jalan Kluang, Batu Pahat, Johor Darul Takzim. annual report 2010

6 COMPLETELY RELIABLE & TOTALLY AFFORDABLE

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8 6 BOARD OF DIRECTORS front (left to right): CHAN CHOR NGIAK Non-Independent and Managing Director CHAN CHOO SING Non-Independent and Executive Chairman CHAN CHOW TEK Non-Independent and Non-Executive Director back (left to right): TAN KWEE KEE Non-Independent and Non-Executive Director CHEW TECK CHENG Independent and Non-Executive Director JULIAN LIM WEE LIANG Independent and Non-Executive Director KOH KEE TEE Independent and Non-Executive Director CHAN CHOR ANG Non-Independent and Executive Director HPI Resources Berhad ( K)

9 PROFILE OF DIRECTORS 7 CHAN CHOO SING (Non-Independent and Executive Chairman), a Malaysian and aged 56, was appointed to the Board of HPI on 8 April Mr. Chan started his career when he ventured into a garment business known as Chan Trading in In 1981, he founded Perusahaan Chan Choo Sing Sdn Bhd ( PCCSSB ), a Company primarily involved in the manufacturing of garments. His entrepreneurial skills and ability to recognize business and expansion opportunities have led to successful business ventures including the forming of a number of companies actively involved in the garment industry. PCCSSB and its associate companies were successfully listed on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ) on 16 August 1995 as PCCS Group Berhad ( PCCS ). He was appointed as the Group Director of PCCS in In 1990, Mr. Chan ventured into the packaging business by founding Harta Packaging Industries Sdn Bhd ( Harta ). His sharp business acumen led to successful business ventures through the acquisition of shares in Harta Packaging Industries (Perak) Sdn Bhd in 1992, Fibre Pak (Malaysia) Sdn Bhd in 1994, Harta Packaging Industries (Selangor) Sdn Bhd in 1995, Chiga Light Industries Sdn Bhd ( Chiga ) in 1997 and Harta Packaging Industries (Malacca) Sdn Bhd in Harta was successfully listed on the Second Board of Bursa Securities on 30 May 1997 as HPI Resources Berhad ( HPI ). He is also the Executive Chairman of PCCS since 21 June During the periods from 2001 to 2006, Mr. Chan was the Chairman of the Chinese Association in Parit Raja, Batu Pahat. CHAN CHOR NGIAK (Non-Independent and Managing Director), a Malaysian and aged 48, was appointed to the Board of HPI on 8 April Mr. Chan started his career in 1980 assisting his father and brothers in marketing the products of Chan Trading to local departmental stores. In 1989, he assists his brothers in exploring overseas market for PCCSSB s garment products and appointed as a Director of PCCS in He joined Harta in 1991 as Marketing Manager and during his employment with Harta, his determination and enthusiasm approach had driven Harta became a leader of packaging business in the Southern Region of Peninsular Malaysia within a short period of time. He was subsequently promoted to the position of Managing Director of HPI in May 1999, overseeing the Group s packaging business. His vast experience in marketing coupled with his good inter-personal and negotiating skills has enabled him to aggressively penetrate and secure new customers from different types of industries. Throughout his career in the industry, he has continually established connections with many business executives in the Chamber of Commerce and Associations. He is the Hononary Chairman of the Chinese Chamber of Commerce in Batu Pahat, Chairman of the Chinese Association in Parit Raja, Batu Pahat and the Vice-Chairman of the Chinese Association in Johor State and a Committee Member of Malaysian Corrugated Carton Manufacturers Association. He also sits on the board of several private limited companies. Mr. Chan also sits on the board of several private limited companies. He is a member of the Remuneration Committee of PCCS and HPI. annual report 2010

10 8 PROFILE OF DIRECTORS CHAN CHOR ANG (Non-Independent and Executive Director), a Malaysian and aged 47, was appointed to the Board of HPI on 8 April He possesses more than 25 years of experience in the textile and garment industry. He began his career with PCCSSB in the year 1981 and became the Factory Manager of Jusca Garments Sdn Bhd (one of the subsidiary of PCCS) in the year 1985 and subsequently appointed to the Board of PCCS in In 1990, he joined Harta as a Factory Manager and appointed as Maintenance Manger in His responsibilities includes organizing and managing the total maintenance and machines upkeep for the packaging companies. He has undergone various technical training programs under several expatriate Technical Advisors from Hong Kong, Taiwan and China and became instrumental in the establishment of total training programs on production management, machine maintenance and productivity enhancement in HPI. Mr. Chan Chor Ang is appointed as the General Manager of Harta Packaging Industries Sdn Bhd in November He also sits on the board of several private limited companies. CHAN CHOW TEK (Non-Independent and Non-Executive Director), a Malaysian and aged 53, was appointed to the Board of HPI on 8 April He started his career in 1973 in marketing the products of Chan Trading to local departmental stores. He joined PCCSSB as Marketing Manager in 1981 and has successfully secured the first export order for PCCSSB and has since brought PCCSSB export sales to greater success. He leads all the marketing activities in PCCSSB and has more than 30 years of experience in textile and apparel marketing and merchandising. He is responsible for the development and growth of PCCSSB s garment business. His job includes keeping abreast with the latest development in the apparel and fashion industry by frequent oversea trips to identify new and potential markets. He was appointed to the Board of PCCS as an Executive Director in He also sits on the board of several private limited companies. TAN KWEE KEE (Non-Independent and Non-Executive Director), a Malaysian and aged 52, was appointed to the Board of HPI on 22 October She is the spouse of Mr. Chan Choo Sing who is the Executive Chairman and major shareholder of HPI. She started her career by assisting her husband, Mr. Chan Choo Sing in Chan Trading in 1973 and PCCSSB in She was appointed as manufacturing director in PCCS Garments Limited (one of the subsidiary of PCCS) in year In January 2006, she is assumed the position and responsibility of PCCS s Cambodia operation as a Country General Manager. Subsequently, in January 2008 she is assigned the position of Manufacturing Director / Advisor to PCCS s garments operations. She holds no other directorships in public companies in Malaysia. HPI Resources Berhad ( K)

11 PROFILE OF DIRECTORS 9 CHEW TECK CHENG (Independent and Non-Executive Director), a Malaysian and aged 54, was appointed to the Board of HPI on 8 April He graduated with a Diploma in Commerce from Tunku Abdul Rahman College in He is an associate member of the Association of Chartered Certified Accountants in 1983 and a member of the Malaysian Institute of Accountants (Public Accountant, now Chartered Accountant) in He is also a fellow member of the Association of Chartered Certified Accountants since Mr. Chew has been practising as a public accountant, now Chartered Accountant and approved company auditor since 1986 under Messrs. T.C. Chew & Co. He was appointed to the Board of SKP Resources Berhad in December KOH KEE TEE (Independent and Non-Executive Director), a Malaysian and aged 71, was appointed to the Board of HPI on 22 October Prior to that he was elected to the Committee of Kuala Lumpur Stock Exchange (now known as Bursa Securities) in Since then, he had served more than ten years as Committee Member of Bursa Securities. He also served as a director of Securities Clearing Automated Network Services as well as member of the Board of Governors of the Research Institute of Investment Analysts Malaysia. Both are the affiliated companies of Bursa Securities. He had also served as an Executive Chairman of Pan Pacific Asia Bhd from , a company listed on the main board of Bursa Securities. Currently, he is the Head of Muar Branch of Kenanga Investment Bank Bhd, he had served as executive director for a number of private companies. He holds no other directorships in public companies in Malaysia. JULIAN LIM WEE LIANG (Independent and Non-Executive Director), a Malaysian and aged 36, was appointed to the Board of HPI on 11 Jan He graduated with a Bachelor of Accounting and Financial Management from University of Sheffield, United Kingdom in July 1996 and joined Arthur Andersen & Co (Melaka Branch) as an Audit Assistant in October He was promoted to Audit Senior in September He left Arthur Andersen & Co in January 2000 to further his studies. After completing his studies, he joined KY Siow & Co as Audit Manager in January Julian Lim Wee Liang was admitted as a member of the Association of Chartered Certified Accountants (ACCA) in April 2002 and subsequently as a member of Malaysian Institute of Accountants in July His membership with ACCA has now been transferred to Fellowship status with effect from May Notes : 1) Chan Choo Sing, Chan Chow Tek, Chan Chor Ngiak and Chan Chor Ang are siblings. Chan Choo Sing and Tan Kwee Kee are spouse. They are all substantial shareholders of HPI. 2) None of the Directors have any convictions for offences within the past ten (10) years. (other than traffic offences, if any) 3) None of the Directors have any conflict of interest with the Company. annual report 2010

12 RECYCLING IS NOW SO REWARDING

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14 12 On behalf of the Board of Directors of HPI Resources Berhad, I am pleased to present the Annual Report and audited financial statements of the Company and the Group for the financial year ended 31 May 2010 ( FY 2010 ). CHAIRMAN S STATEMENT HPI Resources Berhad ( K)

15 CHAIRMAN S STATEMENT 13 FINANCIAL RESULTS I am pleased to report that FY 2010 is another record year for HPI Resources Berhad. The Group s revenue grew to a record high of RM372.4 million in FY 2010, an increase of 7.8% from RM345.4 million the previous year. The Group s profit before tax was also a record high of RM27.1 million, an increase of 18.9% from RM22.8 million previously. The higher Group revenue and profit were contributed by overall improvement in all packaging, paper milling and transportation divisions. During FY 2010, about 85% of the Group s revenue was generated in Malaysia, with the balance 15% contributed by the Cambodia operations. REVIEW OF GROUP PERFORMANCE The packaging division continued to be the main revenue generator, contributed about 88% of the Group s revenue in FY During the financial year, the management continued to focus on increasing market share and improving operational efficiencies, leading to overall higher revenue and profit for the Group. The paper milling division recorded significant increase in profit in FY 2010, in line with the significant improvement in production efficiencies. During the financial year, this division supplied about 30% of its paper production output to the packaging division, and 70% external sales. The transportation division has also grown in line with the higher business volume secured by the packaging division. This division mainly supports the packaging division by providing timely and efficient delivery of packaging products to the Group customers. annual report 2010

16 14 CHAIRMAN S STATEMENT CORPORATE DEVELOPMENT The Company had on 19 October 2009, through its subsidiary, Trio Paper Mills Sdn Bhd ( TPM ) completed the acquisition of 88,200 ordinary shares of Yuen Foong Yu Paper Manufacturing Sdn Bhd ( YFYPM ), representing 49% equity interest in YFYPM for a total cash consideration of RM599,760. Upon the acquisition, YFYPM became a whollyowned subsidiary of TPM. The Company had on 27 May 2010 completed the acquisition of 100% equity interest in Sierra Selection Sdn Bhd ( SS ), Kempas Teknik Sdn Bhd ( KT ) and Parit Raja United Transport Sdn Bhd ( PRUT ), three private limited companies incorporated in Malaysia for a total cash consideration of RM3,034,718. SS, KT and PRUT are principally engaged in the business of lorry transportation. CURRENT YEAR PROSPECT The Board will continue to focus on maximizing production and operational efficiencies and undertake strategies to sustain long-term growth and profitability of the Group. Strategies are formulated and continuously reviewed with the focus on satisfying the customers requirements, anticipating their changing needs and constantly providing good service and prompt delivery. Barring unforeseen circumstances, the Board is confident of achieving another satisfactory financial result for the coming financial year ending 31 May HPI Resources Berhad ( K)

17 CHAIRMAN S STATEMENT 15 DIVIDEND The Board is pleased to recommend for approval at the forthcoming Annual General Meeting the payment of the first and final tax exempt dividend of 5.0 sen per share in respect of the financial year ended 31 May APPRECIATION On behalf of the Board, I would like to extend our sincere appreciation to the management and staff of the Group for their continued commitment and contribution. May we continue to grow together from strength to strength and achieve greater success for the Group. I wish to extend our gratitude to our loyal shareholders, business associates and bankers for their continued support, confidence and assistance given to us. Finally, I wish to thank my fellow Board members for their counselling, contribution and support throughout the year. CHAN CHOO SING EXECUTIVE CHAIRMAN 23 September 2010 annual report 2010

18 16 CORPORATE STRUCTURE 100% Harta Packaging Industries (Malacca) Sdn Bhd Trading Converter 100% Harta Distribution Network Sdn Bhd Trading Company 100% Harta Fleksipak Sdn Bhd Hawker wrapper & paper bag 100% Harta Packaging Industries (Perak) Sdn Bhd Corrugated Board & Carton Boxes 100% Cabaran Minda Sdn Bhd Transportation 100% Harta Packaging Industries Sdn Bhd Corrugated Board & Carton Boxes 100% Harta Packaging Industries (Selangor) Sdn Bhd Corrugated Board & Carton Boxes 100% Chiga Light Industries Sdn Bhd Plastic Film Packaging Products 100% K.H.Chan Trading Sdn Bhd Transportation 100% Cabaran Perspektif Sdn Bhd Transportation 100% Kempas Teknik Snd Bhd Transportation 100% HPI Resources (Overseas) Sdn Bhd Investment Holding 100% Harta Packaging Industries (Cambodia) Limited Corrugated Carton Boxes & Plastic Film Packaging Product 49% Harta Land Limited Investment Company 100% Sierra Selection Sdn Bhd Transportation 100% Parit Raja United Transport Sdn Bhd Transportation 98.67% Trio Paper Mills Sdn Bhd Paper Mills 100% Yuen Foong Yu Paper Manufacturing Sdn Bhd Dormant HPI Resources Berhad ( K)

19 AUDIT COMMITTEE REPORT 17 Membership The present members of the Committee comprise :- Mr. Chew Teck Cheng Mr. Koh Kee Tee Mr. Julian Lim Wee Liang Chairman, Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Term of Reference The Audit Committee was established on 10 April 1997 to act as a Committee of the Board of Directors, with the terms of reference as set out on pages 18 to 21 of the Annual Report. Meetings The Audit Committee convened four (4) meetings during the financial year. Details of attendance at Audit Committee Meetings are as follows: Chew Teck Cheng 4/4 Koh Kee Tee 4/4 Julian Lim wee Liang 4/4 The other Directors and the Company Secretary were present by invitation in the meetings. Representative of the external auditors, the Head of Internal Audit as well as the Group General Manager and Manager of Accounts and Finance also attended the meetings upon invitation. Summary of Activities During the Financial Year The Audit Committee carried out its duties in accordance with the terms of reference during the year. The main activities undertaken by the Audit Committee were as follows :- Reviewed the external auditors scope of work and audit plan for the year. Prior to the audit commencement, representatives from the external auditors presented their audit strategy and plan. Reviewed with the external auditors the results of the audit, the audit report and management letter. Reviewed the quarterly unaudited financial results announcement before recommending them for the Board s approval. The review and discussion were conducted with Group General Manager and Manager of Accounts and Finance. Reviewed the related party transactions entered into by the Group. annual report 2010

20 18 AUDIT COMMITTEE REPORT Internal Audit Function The Group has also established the Internal Audit function in order to assist the Audit Committee in discharging their duties in regards to the adequacy and integrity of the system of internal control. The Internal Audit function oversees few major areas as follows: Perform review of operational compliance with the established internal control procedure and the risk profiles of the major business units of the Group. Conduct investigations on specific areas or issues directed by the Audit Committee. Review the risk management processes. Audit plan for the Group is presented to the Audit Committee for approval. All adverse findings and weaknesses noted during the audit fieldwork are forwarded to the management for its attention and further actions. The reports on the audit findings are reported to the Audit Committee on a quarterly basis. In this regards, the Board is pleased to report that there were no significant adverse findings during the financial year ended 31 May 2010 that adversely affected the Group s reputation or financial position. The total costs incurred for the internal audit function of the Group for the financial year was RM77,741. TERMS OF REFERENCE OF AUDIT COMMITTEE 1. Composition of members The Board shall elect the Audit Committee members from amongst themselves, comprising no fewer than three (3) directors, where all shall be non-executive directors, with a majority of them being independent directors. The term of office of the Audit Committee is 2 years and may be re-nominated and appointed by the Board of Directors. In this respect, the Board adopts the definition of independent director as defined under the Listing Requirements of Bursa Malaysia Securities Berhad. At least one member of the Audit Committee must be:- (a) a member of the Malaysian Institute of Accountant ( MIA ); or (b) if he is not a member of MIA, he must have at least 3 years of working experience and: i. he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act 1967; or ii. he must be a member of one of the associations of the accountants specified in Part II of the First Schedule of the Accountants Act 1967; or (c) fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad. No alternate director of the Board shall be appointed as a member of the Audit Committee. Retirement and resignation If a member of the Audit Committee resigns, dies, or for any reason ceases to be a member with the result that the number of members is reduced below three (3), the Board shall within three (3) months of the event appoint such number of the new members as may be required to fill the vacancy. HPI Resources Berhad ( K)

21 AUDIT COMMITTEE REPORT Chairman The Chairman of the Audit Committee, elected from amongst the Audit Committee members, shall be an independent director. The Chairman of the Audit Committee shall be approved by the Board of Directors. 3. Secretary The Secretary of the Audit Committee shall be the Company Secretary. The Secretary shall be responsible for drawing up the agenda with concurrence of the Chairman and circulating it, supported by explanatory documentation to members of the Audit Committee prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Audit Committee, circulating them to members of the Audit Committee and to the other members of the Board of Directors and for following up outstanding matters. 4. Meetings The Audit Committee meetings shall be conducted at least four (4) times annually, or more frequently as circumstances dictate. In addition, the Chairman may call for additional meetings at any time at the Chairman s discretion. In the absence of the Chairman, the other independent director shall be the Chairman for that meeting. The members of the Audit Committee, Group General Manager, Manager of Accounts and Finance, and the head of internal audit will normally be in attendance at the meetings. Representatives of the external auditors are to be in attendance at meeting where matters relating to the audit of the statutory accounts and/or external auditors are to be discussed. Other directors, officers and employees of the Company and/or Group may be invited to attend, except for those portions of the meetings where their presence is considered inappropriate, as determined by the Audit Committee. However, at least twice a year the Audit Committee shall meet with the external auditors without any executive board member present. Minutes of each meeting shall be kept and distributed to each member of the Audit Committee and also to the other members of the Board of Directors. The Audit Committee Chairman shall report on each meeting to the Board of Directors. 5. Quorum The quorum for the Audit Committee meeting shall be the majority of members present whom must be independent directors. annual report 2010

22 20 AUDIT COMMITTEE REPORT 6. Reporting The Audit Committee shall report to the Board of Directors, either formally in writing, or verbally, as it considers appropriate on the matters within its terms of reference at least once a year, but more frequently if it so wishes. The Audit Committee shall report to the Board of Directors on any specific matters referred to it by the Board for investigation and report. 7. Objectives The principal objectives of the Audit Committee is to assist the Board of Directors in discharging its statutory duties and responsibilities relating to accounting and reporting practices of the holding company and each of its subsidiaries. In addition, the Audit Committee shall: evaluate the quality of the audits performed by the internal and external auditors; provide assurance that the financial information presented by management is relevant, reliable and timely; oversee compliance with laws and regulations and observance of a proper code of conduct; and determine the quality, adequacy and effectiveness of the Group's control environment. 8. Authority The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the expense of the Company, (a) authorise to investigate any activity within its terms of reference. All employees shall be directed to co-operate as requested by members of the Audit Committee. (b) have full and unlimited/unrestricted access to all information and documents/resources which are required to perform its duties as well as to the internal and external auditors and senior management of the Company and Group. (c) obtain, at the expense of the Company, other independent professional advice or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary. (d) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary. (e) be able to make relevant reports when necessary to the relevant authorities if a breach of the Listing Requirements occurred. HPI Resources Berhad ( K)

23 AUDIT COMMITTEE REPORT Duties and Responsibilities The duties and responsibilities of the Audit Committee are as follows:- To review the maintenance and control of an effective accounting system; To review the Group s public accountability and compliance with the law; To ensure an internal audit function which is independent of the activities it audits is established; To ensure the internal audit function to report directly to the Audit Committee; To ensure the adequacy of internal and external audit procedures; To evaluate the quality of external auditors and make recommendations concerning their appointment and remuneration and to consider the nomination of a person or persons as external auditors; To provide liaison between the external auditors, the management and the Board of Directors and also to review the assistance given by the management to the external auditors; To review the findings of the internal and external auditors; To review the quarterly results and financial statements and annual report prior to submission to the Board of Directors; To monitor any related party transactions that may arise within the Group and to report, if any, transactions between the Group and any related party outside the Group which are not based on arms-length terms and on terms which are disadvantageous to the Group; To report its findings on the financial and management performance, and other material matters to the Board of Directors; To act in line with the directions of the Board of Directors; and To consider and examine such other matters as the Audit Committee considers appropriate annual report 2010

24 22 STATEMENT ON INTERNAL CONTROL INTRODUCTION It is the requirement of the Malaysian Code on Corporate Governance that the Board of Directors should maintain a sound system of internal control to safeguard shareholders investments and the Group s assets. The Board is committed to the Listing Requirements of Bursa Malaysia Securities Berhad and Statement on Internal Control: Guidance for Directors of Public Listed Companies, and is pleased to set out below its Statement on Internal Control which outlines the nature and scope of internal control of the Group during the year. BOARD RESPONSIBILITY The Board acknowledges its responsibility for maintaining a sound system of internal control and for reviewing its adequacy and integrity, including financial and operational controls, compliance with relevant law and regulations, and risk management to safeguard shareholders investments and the Group s assets. Due to the limitations that are inherent in any system of internal control, the Group s system of internal control is designed to manage, rather than eliminate the risk of failure to achieve corporate objectives. Accordingly, it only provides reasonable but not absolute assurance against material misstatement or loss. This denotes that the control systems has been designed and implemented to manage the likelihood and consequences of risk to acceptable levels, and within cost levels appropriate to the significance of the risk being managed. CONTROL ENVIRONMENT AND STRUCTURE The Board put in place within the Group an adequate and conducive control environment for it to accomplish its business objectives. The Group s internal control system encompasses the Board and its various Board Committees with its specific terms of reference, executive management that is accountable for all its actions and also various monitoring and review procedures that is embedded in the Group s processes. Both the Board and the management strive to enhance, implement and review the internal control system regularly to manage those risks that could affect the Group s continued growth and financial viability effectively. The key elements of the Group s internal control system are described below: The Group has a well-defined organisational structure that is aligned to its business and operation requirement. Clearly defined lines of accountability, delegation of responsibility and level of authorisation for all aspects of the business have been laid down and communicated throughout the Group. Authority charts are established within the Group to provide a functional framework of authority in approving revenue and capital expenditure. The Group s performance is monitored through an integrated budgeting system which requires all material variances to be identified, discussed and resolved by management on a scheduled and ad-hoc basis. The Board reviews the Group s financial and operational performance quarterly, which analyses the Group performance with comparison against previous quarter and previous corresponding quarter. Adequate procedures manuals equipped for management and staff are developed to foster long-lasting and harmonious working relationship among the employees and set out the rules and regulations to be adhered by all employees in performing their duties. These manuals are regularly reviewed to incorporate the changes that will enhance working efficiency. HPI Resources Berhad ( K)

25 STATEMENT ON INTERNAL CONTROL 23 A series of orientation programs are made compulsory for every new employee in cultivating long-lasting and harmonious working relationship among employees. Programmes such as Environmental Management System (EMS) Awareness Program, Waste Management System Program, Safety and Emergency Briefing, and Disaster Recovery Team are conducted to assist in maintaining a safe working environment for all employees besides acting as a guideline to protect the Group s assets. Regular audits are conducted by internal auditors to monitor compliance with established internal controls procedures and the risk profiles of the major business units of the Group, whilst the statutory audit of the financial statements are conducted by the external auditors and they report their findings to the Audit Committee. Annual surveillance audit are conducted by assessors of the ISO certification body as specified by ISO 9001:2008 Quality Management System on certain subsidiaries. This ensures that internal procedures and standard operating procedures had been properly implemented and documented. RISK MANAGEMENT The Board recognises that risk management is an integral part of the Group s business operations and that the identification and management of risks will affect the achievement of the Group s business objectives. To this end the Board has formalised for the Group a Risk Management Policy and Risk Management Framework. During the financial year, the Board has continued its on-going process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives and has taken into account the guidance of the Malaysian Code on Corporate Governance. The Corporate Risk Profiling Exercise is being continually updated to re-affirm existing risks, identify new risk which may impact the key business processes; evaluate current controls and determine appropriate management action plans to manage the said risks. INTERNAL AUDIT FUNCTION The Group Internal Audit Division performed regular and systematic review of internal control system of the Group and its subsidiaries. The Audit Committee acknowledges that an independent and adequately resourced internal audit function is required to provide assurance on the effectiveness of the system of the internal control in addressing the risks identified. The Group Internal Audit Division reports directly to the Audit Committee on a quarterly basis. The Audit Committee is chaired by an Independent Non-Executive Director and its members comprise of Non- Executive Directors. The Group Internal Audit Division primarily acts as an assurance unit highlighting significant audit findings, areas for improvement, management comment on the audit findings and subsequently monitors the implementation of its recommended corrective actions. In discharging its responsibilities, the Group Internal Audit Division develops a riskbased plan to cover key operational and financial activities that are significant to the overall performance of the Group. CONCLUSION For the financial year under review the Board is of the opinion that the existing system of internal control is adequate to achieve the Group s business objectives so as to safeguard shareholders investment and the Group s assets. The Board will continuously assess the adequacy of the Group s system of internal control and make improvements and enhancement to the system as and when necessary. annual report 2010

26 24 STATEMENT ON CORPORATE GOVERNANCE The Board of Directors ( the Board ) appreciates the importance of adopting high standards of corporate governance within the Group. The Board views corporate governance as synonymous with four key concepts; namely transparency, accountability, integrity and corporate performance. As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely the form. The Board is thus fully committed to the maintenance of high standards of corporate governance by supporting and implementing the prescriptions of the principles and best practices as set out in Parts 1 and 2 of the Malaysian Code of Corporate Governance ( the Code ) respectively. The Board is pleased to provide the following statement, which outlines the main corporate governance practices that were in place throughout the financial year unless otherwise stated. Principles Statement The following statement sets out how the Company has applied the Principles in Part I of the Code. A. DIRECTORS The Board The Group acknowledges the pivotal role played by the Board in stewardship of its direction and operations, and ultimately the enhancement of long-term shareholders value. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals. Matters which require Board s decision are deliberated during Board meetings, which includes the overall Group strategy and direction, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financial matters. The Board also reviews the financial and operating performance of the Group. Meetings The Board ordinarily meets at least four (4) times a year at quarterly intervals with additional meetings convened when urgent and important decisions need to be taken between the scheduled meetings. During the year ended 31 May 2010, the Board met on four (4) occasions; where it deliberated upon and considered a variety of matters including the Group s financial results, financing structures, major investments and strategic decisions and business plan and direction of the Group. The Board receives documents on matters requiring its consideration prior to and in advance of each meeting. The Board papers are comprehensive and encompass both quantitative and qualitative factors so that informed decisions are made. All proceedings from Board meetings are minuted and signed by the Chairman of the meeting. HPI Resources Berhad ( K)

27 STATEMENT ON CORPORATE GOVERNANCE 25 All Directors have complied with the minimum attendance at Board meetings as stipulated by the Listing Requirements of Bursa Malaysia Securities Berhad during the financial year. Details of each existing Director s meeting attendances are as follow: Name Attendance Chan Choo Sing Executive Chairman 4/4 Chan Chor Ngiak Managing Director 4/4 Chan Chor Ang Executive Director 4/4 Chan Chow Tek Non-Executive Director 4/4 Tan Kwee Kee Non-Executive Director 4/4 Chew Teck Cheng Independent, Non-Executive Director 4/4 Koh Kee Tee Independent, Non-Executive Director 4/4 Julian Lim Wee Liang Independent, Non-Executive Director 4/4 Board Committees The Board of Directors delegates certain responsibilities to the Board Committees namely, the Audit Committee, Nomination Committee and Remuneration Committee in order to enhance business and operational efficiency as well as efficacy. All Committees have written terms of reference, and operating procedures, and the Board receives reports of their proceedings and deliberations. The Chairman of the various committees will report to the Board the outcome of the Committee meetings and such reports are incorporated in the minutes of the Board meetings. Board Balance As at the date of this statement, the Board consists of eight (8) members comprising three (3) independent nonexecutive Directors, two (2) non-executive Director and three (3) executive Directors. A brief profile of each Director is presented on pages 7 to 9 of this Annual Report. The concept of independence adopted by the Board is in tandem with the definition of an independent Director in Section 1.01 of the Listing Requirements of Bursa Malaysia Securities Berhad. The key elements for fulfilling the criteria are the appointment of an independent Director who is not a member of management (a non-executive Director) and who is free of any relationship which could interfere with the exercise of independent judgement or the ability to act in the best interests of the Company. The Board complies with paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad, which requires that at least two (2) Directors or one-third (1/3) of Board, whichever is the higher, are independent Directors. The Directors, with their different backgrounds and specialisations, collectively bring with them a wide range of experience and expertise in areas such as finance, legal, marketing and operations. The executive Directors in particular are responsible for implementing the policies and decisions of the Board, overseeing the operations as well as coordinating the development and implementation of business and corporate strategies. The independent non-executive Directors bring to bear objective and independent judgement to the decision making of the Board and provide a capable check and balance for the executive Directors. The non-executive Directors contribute significantly in areas such as policy and strategy, performance monitoring, allocation of resources as well as improving governance and controls. Together with the executive Directors who have in-depth knowledge of the business, the Board is constituted of individuals who are committed to business integrity and professionalism in all its activities. annual report 2010

28 26 STATEMENT ON CORPORATE GOVERNANCE There is a clear division of responsibilities at the head of the company to ensure a balance of authority and power. Mr. Chan Choo Sing as the Executive Chairman leads the Board and Mr. Chan Chor Ngiak, the Group Managing Director, leads the executive management of the company. The roles of the Chairman and the Group Managing Director are clearly defined with their individual position descriptions. The Chairman is responsible for running the Board and ensures that all Directors receive sufficient relevant information on financial and non-financial matters to enable them to participate actively in Board decisions. The Group Managing Director is responsible for the day-to-day management of the business as well as the implementation of Board s policies and decisions. The Board is satisfied that the current Board composition fairly reflects the investment of minority shareholders in the Company. Supply of Information The Chairman ensures that all Directors have full and timely access to information with Board papers distributed in advance of meetings. Every Director has also unhindered access to the advice and services of the Company Secretary in carrying out their duties. The Board believes that the current Company Secretary is capable of carrying out her duties to ensure the effective functioning of the Board while terms of appointment permit her removal and appointment only by the Board as a whole. Prior to the meetings of the Board and the Board Committees, Board papers which include the agenda and reports relevant to the issues of the meetings covering the areas of strategic, financial, operational and regulatory compliance matters, were circulated to all the Directors. These Board papers are issued at least five (5) working days in advance to enable the Directors to obtain further explanation, where necessary before the meeting. The Directors meet, review and approve all corporate announcements, including the announcement of the quarterly financial results, prior to releasing them to Bursa Malaysia Securities Berhad. The Board of Directors can take independent professional advice, where necessary and in appropriate circumstances, in furtherance of their duties, at the Company s expense. Appointment to the Board Nomination Committee The Nomination Committee comprised the following members during the year : Mr. Koh Kee Tee Mr. Chew Teck Cheng Mr. Julian Lim Wee Liang - Chairman, Independent Non-Executive Director - Independent Non-Executive Director - Independent Non-Executive Director The Committee consists entirely of non-executive Directors, all of whom are independent. The Nomination Committee is responsible for making recommendations to the Board as to the appointment of new Directors. The Committee also keeps under review the Board structure, size and composition. The Nomination Committee systematically assessed the effectiveness of the Board, its Committees and the contribution of each individual Director on an annual basis. HPI Resources Berhad ( K)

29 STATEMENT ON CORPORATE GOVERNANCE 27 Directors Training All Directors have attended and successfully completed the Mandatory Accreditation Programme (MAP) conducted by the Bursatra Sdn Bhd, the training arm of Bursa Securities. Directors are also aware of their duty to attend continuous education programmes. The Directors have attended seminars to keep themselves updated on the expectations of their roles and other market developments. During the financial year 2010, the seminars attended were National Tax Conference 2010 which was conducted by Chartered Tax Institution of Malaysa, Board Effectiveness: Redefining The Roles & Functions Of An Independent Director and Board Effectiveness: Understanding The Roles & Functions Of The Nominating & Remuneration Committees which were conducted by Bursatra Sdn Bhd. Re-election The Articles of Association provide that at least one-third (1/3) of the Board or the number nearest to one-third (1/3), are subject to retirement by rotation at each Annual General Meeting provided always that all Directors shall retire from office once at least in each three (3) years. The Directors to retire at each year are the Directors who have been longest in office since their appointment or re-election. A retiring Director is eligible for re-election. This provide an opportunity for the shareholders to renew their mandates. The election of each Director is voted on separately. To assist shareholders in their decision, sufficient information such as personal profile, meetings attendance and shareholdings in the Company can be obtained from the Annual Report. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129 (6) of the Companies Act B. DIRECTORS REMUNERATION Remuneration Committee The Remuneration Committee comprised the following members during the financial year : Mr. Chew Teck Cheng Mr. Chan Choo Sing Mr. Koh Kee Tee Mr. Julian Lim Wee Liang - Chairman, Independent Non-Executive Director - Non-Independent Executive Director - Independent Non-Executive Director - Independent Non-Executive Director The Remuneration Committee is responsible for recommending the remuneration framework for Directors as well as the remuneration packages of executive Directors to the Board. None of the executive Directors shall participate in any way in determining their individual remuneration. The Board as a whole determines the remuneration of non-executive Directors with individual Directors abstaining from decisions in respect of their individual remuneration. The policy practiced on Directors remuneration by the Remuneration Committee is to provide the remuneration packages necessary to attract, retain and motivate Directors of the quality required to manage the business of the Company and to align the interest of the Directors with those of the shareholders. annual report 2010

30 28 STATEMENT ON CORPORATE GOVERNANCE Directors Remuneration Details of the remuneration for the Directors during the year are as follow: Aggregate remuneration of directors categorized into appropriate components: Salary and Benefit in other emoluments Fees Kind Total RM 000 RM 000 RM 000 RM 000 Executive Directors 1, ,996 Non-Executive Directors The number of directors of the Company whose total remuneration fall within the following bands: Range of remuneration Number of Directors Executive Non-Executive Below RM50,000-4 RM50,001 to RM100, RM100,001 to RM150, RM150,001 to RM200, RM200,001 to RM250, RM250,001 to RM300, RM300,001 to RM350, RM350,001 to RM400,000-1 RM400,001 to RM450, Details of the remuneration of each director are not disclosed due to security reasons. C. SHAREHOLDERS The Company recognizes the importance of communicating with its shareholders and does this through the Annual Report, Annual General Meetings and Extraordinary General Meetings. The policy of the Company is to maintain an active dialogue with its shareholders with the intention of giving shareholders a clear and complete picture of the Company s performance and position as possible. The Company will use the General Meetings as means of communicating with shareholders. The Board encourages full participation by the shareholders at every General Meeting. Every opportunity is given to the shareholders to make enquiries and seek clarification in the business and performance of the Group. Members of the Board will answer questions raised at the Meeting. Where it is not possible to provide immediate answers, the Chairman will undertake to furnish the shareholders with a written answer after the General Meeting. HPI Resources Berhad ( K)

31 STATEMENT ON CORPORATE GOVERNANCE 29 D. ACCOUNTABILITY AND AUDIT Financial Reporting The Board aims to provide and present a balanced and meaningful assessment of the Group s financial performance and prospects at the end of the financial year, primarily through the annual financial statements, quarterly announcement of results to shareholders as well as the Chairman s statement and review of operations in the Annual Report. The Board is assisted by the Audit Committee to oversee the Group s financial reporting processes and the quality of its financial reporting. Directors Responsibility Statement in respect of the preparation of the Audited Financial Statements The Board is responsible for ensuring that the financial statements of the Group give a true and fair view of the state of affairs of the Group and of the Company as at the end of the accounting year and the results of their operations and cash flows for the year then ended. In preparing the financial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and provisions of the Companies Act, 1965 have been complied with. The Directors have also have selected and applied consistently suitable accounting policies and made reasonable and prudent judgements and estimates. The Directors have a general responsibility for taking reasonable steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Internal Controls The statement on Internal Control furnished on page 22 and 23 of the Annual Report provides an overview of the state of internal controls within the Group. Relationship with the Auditors The Company maintains a professional and transparent relationship with the auditors in seeking their professional advice and towards ensuring compliance with the accounting standards. Key features underlying the relationship of the Audit Committee with the external auditors are included in the Audit Committee s terms of reference as detailed on pages 17 to 21 of the Annual Report. A summary of the activities of the Audit Committee during the year, including the evaluation of the independent audit processes, are set out in the Audit Committee Report on pages 17 to 21 of the Annual Report. annual report 2010

32 30 RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE NATURE The breakdown of the aggregate value of transactions conducted pursuant to the shareholders mandate during the financial year ended 31st May 2010 are as follow : Name of Related Party Type of Recurrent Related Relationship RM 000 Party Transaction Perusahaan Chan Choo Sing Sales of corrugated carton boxes by Harta Packaging * 90 Sdn Bhd (PCCSSB) Industries Sdn Bhd (HPISB) and Harta Packaging Industries (Malacca) Sdn Bhd (HPIM) Sale of polybags and related packaging material by 77 Chiga Light Industires Sdn Bhd (Chiga) Transport charges received by KH Chan Trading 10 Sdn Bhd (KHC), Cabaran Minda Sdn Bhd (CM) and Cabaran Perspektif Sdn Bhd (CP) Provision of security guard and insurance 35 services by KHC PCCS Garments Limited, Sales of corrugated carton boxes and plastic film * 3,626 Global Apparels Limited, packaging by Harta Packaging Industries JIT Textiles Limited, (Cambodia) Limited [HPICL] JIT Embroidery Limited and Beauty Silk Screen Limited Mega Labels & Stickers Purchase of stickers and labels by HPISB, Chiga, * 575 Sdn Bhd (Mega) Harta Packaging Industries (Perak) Sdn Bhd (HP) and Harta Distribution Network Sdn Bhd (HDN) Provision of transport by CP and CM 2 Sale of polybags and related packaging material 7 by Chiga Keza Sdn Bhd (Keza) Provision of transport, security guard and * 2 insurance services by KHC Rental of factory premises from Harta Fleksipak 36 Sdn Bhd (HF) Sale of polybags and related packaging material 2 by Chiga HPI Resources Berhad ( K)

33 RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE NATURE 31 Name of Related Party Type of Recurrent Related Relationship RM 000 Party Transaction Beauty Electronic Provision of transport, security guard and * 2 Embroidering Centre insurance services by KHC Sdn Bhd (BEEC) Rental of factory premises from HPISB 108 Sale of polybags and related packaging material 8 by Chiga Mohita Jaya Sdn Bhd (Mohita) Provision of insurance services ** 196 Total 4,776 * These are wholly owned subsidiaries of PCCS Group Berhad (PCCS) in which the following Directors of HPI have interest as at 31 May 2010 :- Direct Indirect Interest No. of PCCS shares % No. of PCCS shares % Chan Choo Sing 2,597, ,320, Chan Chow Tek 2,960, ,000, Chan Chor Ngiak 319, ,001, Chan Chor Ang 809, ,040, Tan Kwee Kee 2,822, ,096, ** Chan Chor Ang is a Director and major shareholders in both HPI and Mohita. Chan Chor Ang hold 25% of equity interest in Mohita. Chan Choo Sing, Chan Chow Tek, and Chan Chor Ngiak are Directors of HPI and major shareholders of Mohita. annual report 2010

34 32 GROUP PROPERTIES AS AT 31 MAY, 2010 No. Location Description Tenure Land Area Age of Net Book Date of (building area) Building Value Acquistion/ sq.ft No. of year (RM'000) Revaluation* Harta Packaging Industries Sdn. Bhd. 1 Plo 7, Kawasan Perindustrian Parit Raja, Single Storey Leasehold expiring 94, , Batu Pahat, Johor. Industrial Building (28,800) 2 Plo 9, Kawasan Perindustrian Parit Raja, Leasehold expiring Batu Pahat, Johor. Factory and , , * 2 Storey (52,320) Plo 9, Kawasan Perindustrian Parit Raja, Office Building Leasehold expiring Batu Pahat, Johor Plo 12, Kawasan Perindustrian Parit Raja, Single Storey Leasehold expiring 102, , * Batu Pahat, Johor. Store Building (48,000) 4 Plo 15, Kawasan Perindustrian Parit Raja, Single Storey Leasehold expiring 102, , * Batu Pahat, Johor. Store Building (48,000) 5 Plo 16, Kawasan Perindustrian Parit Raja, Warehouse Leasehold expiring 40, , Batu Pahat, Johor (25,600) 6 Plo 11, Kawasan Perindustrian Parit Raja, Warehouse Leasehold expiring 87, , Batu Pahat, Johor (60,000) 7 Plo 32, Kawasan Perindustrian Parit Raja, Single Storey Leasehold expiring 142, , * Batu Pahat, Johor. Factory Building (77,600) Harta Fleksipak Sdn. Bhd. 8 Plo 5, Kawasan Perindustrian Parit Raja, Single Storey Leasehold expiring 94, , Batu Pahat, Johor. Industrial Building (28,800) Harta Packaging Industries (Selangor) Sdn. Bhd. 9 No. 2, Jalan Dataran 3/2, Taman Kempas, Single Storey Freehold 4, * Johor Bahru, Johor. Terrace Workshop (5,309) No. 4, Jalan Dataran 3/2, Taman Kempas, Single Storey Freehold 3, * Johor Bahru, Johor. Terrace Workshop (4,352) 11 Lot A, Jalan Sungai Jati, Double Storey Office Freehold 202, , Klang, Selangor. cum Single Storey (128,338) Factory HPI Resources Berhad ( K)

35 GROUP PROPERTIES AS AT 31 MAY, No. Location Description Tenure Land Area Age of Net Book Date of (building area) Building Value Acquistion/ sq.ft No. of year (RM'000) Revaluation* Harta Packaging Industries (Malacca) Sdn. Bhd. 12 PT 3836 & 3837, Taman Tasik Utama, Factory and Leasehold expiring 72, , Fasa 1, Ayer Keroh, Melaka. 2 Storey (39,134) Office Building Harta Packaging Industries (Perak) Sdn. Bhd. 13 Plot 658, Kawasan Perusahaan Parit Buntar, Factory and Double Leasehold expiring 130, , Parit Buntar, Perak. Storey Office Buidling (85,514) K.H.Chan Trading Sdn Bhd 14 HS(D) 6849, Lot 1498, MK Simpang Kanan, Vacant Freehold 5,334 N/A Batu Pahat. 15 Block 5, JC 2, Jalan Parit Raja, Batu Pahat, Workshop Freehold 202, Johor. (6,000) Trio Paper Mills Sdn Bhd 16 No. 395, Jalan Tasek, Simpang Ampat, Single Storey Freehold 773, , Seberang Perai Selatan. Industrial Building (120,670) 17 Lot 387, Mukim 2, Vacant Freehold 36,834 N/A Daerah Seberang Perai Selatan, Negeri Pulau Pinang. 4, Lot 1332 & 1341, Mukim 15, Vacant Freehold 481,588 N/A Seberang Perai Selatan, Negeri Pulau Pinang. Yuen Foong Yu Paper Manufacturing Sdn Bhd 18 Lot 100 & Lot 388, Mukim 2, Vacant Freehold 179,389 N/A Daerah Seberang Perai Selatan, Negeri Pulau Pinang. Harta Packaging Industries (Cambodia) Limited 19 No. 4 Road, Srok Ang Snoul, Three Storey Office Leasehold expiring 581, , Kandal Province, Cambodia. cum Single Storey (54,982) Factory annual report 2010

36 34 OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD Share Buy-backs During the financial year, the Company did not enter into share buy-back transactions. Options, Warrants or Convertible Securities The Company has not issued any options, warrants or convertible securities during the financial year. American Depository Receipts ( ADR ) or Global Depository Receipt ( GDR ) Programme During the financial year, the Company did not sponsor any ADR or GDR programme. Imposition of Sanctions and Penalties There were no sanctions or penalties imposed on the Company and its subsidiaries. Directors or management by the relevant regulatory bodies during the financial year. Non-Audit Feeds The amount of non-audit fees paid to the external auditors by the Group and by the Company for the financial year ended 31 May 2010 amounted to RM97,000 and RM15,000 respectively. Material Contracts Involving Director and Substantial Shareholders There were no material contracts involving Directors or major shareholders Interest that are still subsiting at the end of financial year or since then. For information on recurrent related party transactions of revenue nature, please refer to page 30 to 31 of the Annual Report. Profit Estimated, Forecast or Projection The Company did not issue any profit estimate, forecast or projection for the financial year ended 31 May There were no variances of 10% or more between the results for the financial year ended 31 May 2010 and the unaudited results previously announced. Profit Guarantee During the financial year, there were no profit guarantees given by the Company. Utilisation of Proceeds There were no proceeds arising from the corporate exercise during the financial year. Revaluation Policy On Landed Properties The Company do not have a revaluation policy on its landed properties. Corporate Social Responsibility (CSR) The Bursa Malaysia CSR Framework was launched in the year 2006 to provide a basic set of guidelines for Malaysia public listed companies to assist them in the practice of CSR. CSR is defined as open and transparent business practices that are based on ethical values and respect for the community, employees, the environment, shareholders and the other stakeholders. It is designed to deliver sustainable values to society at large. The Group is committed to conduct its business activities in a socially, economically and environmentally sustainable manner and this is embodied in its Corporate Vision and Mission Statement. We draw our employees from society and so everything we do with our employees need to be socially responsible, whether we are dealing with basic human rights or gender issues. Employees are expected to maintain the highest standards of integrity in all business relationships and dealings, and the Group is equaled, responsible and committed for the standard in its compliance with all applicable legal and regulatory requirements. We are also committed to ensure a healthy and safe work environment for the well being of our employees. HPI Resources Berhad ( K)

37 FINANCIAL STATEMENTS 36 Directors' Report 40 Statement by Directors 40 Statutory Declaration 41 Independent Auditors Report 43 Income Statements 44 Balance Sheets 46 Consolidated Statement of Changes in Equity 47 Company Statement of Changes in Equity 48 Cash Flow Statements 50 Notes to the Financial Statements