JA YA TIASA HOLDINGS BERHAD

Transcription

1 annual report 2013

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3 table of CONTENTS Financial Highlights_2 Corporate Information_4 Directors Profile_5 Key Information_10 Corporate Structure_11 Chairman s Statement_12 Corporate Social Responsibility_18 Statement on Corporate Governance_23 Statement on Risk Management and Internal Control_34 Audit Committee Report_37 Directors Responsibility Statement_41 Financial Statements_42 Analysis of Shareholdings_125 Properties owned by the Group_128 Notice of Annual General Meeting_131 Proxy Form

4 FINANCIAL HIGHLIGHTS FINANCIAL STATISTICS PERFORMANCE RM 000 RM 000 RM 000 RM 000 RM 000 Revenue 1,054,098 1,183, , , ,530 Profit Before Taxation 31, , ,042 40,036 22,854 Profit After Taxation 22, , ,706 25,075 14,596 Profit Attributable to Equity Holders 21, , ,436 24,372 13,882 EBITDA 141, , , , ,669 Equity Attributable to Equity Holders 1,708,483 1,393,248 1,248,232 1,104,037 1,077,411 CORPORATE RATIOS Net Earnings Per share (sen) Net Assets Per Share Attributable to Equity Holders (RM) Net Tangible Assets Per Share (RM) Return on Equity (%) Return on Total Assets (%) Gross Dividend (sen) Gearing Ratio (%) PROFIT/(LOSS) BEFORE TAX BY BUSINESS SEGMENTS RM 000 RM 000 RM 000 RM 000 Timber Operations and Reforestation 33,470 73,799 39,530 24,849 Oil Palm Operations (2,097) 150, ,293 17,156 Others (104) ,219 (1,969) 31, , ,042 40,036 2

5 FINANCIAL HIGHLIGHTS (cont d) Revenue (RM million) Earnings Per Share (Sen) 1,400 1,200 1,184 1, , Equity Attributable to Equity Holders (RM million) 1,800 1,600 1,400 1,200 1,077 1,104 1,248 1,393 1,708 Total Assets (RM million) 3,000 2,500 2,000 2,093 2,157 2,300 2,636 2,961 1, , , Breakdown of Revenue by Segment 2013: RM1,054 million 2012: RM1,184 million Timber Operations Oil Palm Operations Others 0.1% 0.1% 24.9% 29.7% FY 2013 FY % 70.2% 3

6 CORPORATE INFORMATION BOARD OF DIRECTORS GEN (RTD) TAN SRI ABDUL RAHMAN BIN ABDUL HAMID Independent Non-Executive Chairman DATO SRI TIONG CHIONG HOO Deputy Executive Chairman DATO WONG SIE YOUNG Chief Executive Officer DATO SRI DR. TIONG IK KING Non-Independent Non-Executive Director MR TIONG CHIONG HEE Non-Independent Non-Executive Director MR JOHN LEONG CHUNG LOONG Independent Non-Executive Director DATO WONG LEE YUN Independent Non-Executive Director DATUK TALIB BIN HAJI JAMAL Independent Non-Executive Director MDM TIONG CHOON Non-Independent Non-Executive Director COMPANY SECRETARY Ms Ngu Ung Huong MAICSA AUDITORS Ernst & Young Chartered Accountants Room , 3rd Floor Wisma Bukit Mata Kuching Jalan Tunku Abdul Rahman Kuching Tel : Fax : SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : Fax : /52 PRINCIPAL BANKERS AmBank Berhad CIMB Bank Berhad Hong Leong Bank Berhad OCBC Bank (Malaysia) Berhad RHB Bank Berhad REGISTERED OFFICE No.1-9, Pusat Suria Permata Lorong Upper Lanang 10A Sibu, Sarawak Tel : Fax : inquiry@jayatiasa.net WEBSITE STOCK EXCHANGE LISTING Main Market Bursa Malaysia Securities Berhad Stock Name: JTIASA Stock Code:

7 DIRECTORS PROFILE Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid Independent Non-Executive Chairman Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid, aged 74, was appointed to the Board on 27 March He serves as chairman of the Board and the Audit Committee. He is a graduate of the Royal Military College, Malaysia and Army Staff College, Camberlay, United Kingdom. Tan Sri was the Chief of the Malaysian Army and Defence Force between 1992 and 1994 and was the Acting Governor of Penang in From 1958 to 1994, he served in various capacities and appointments in the Malaysian Armed Forces. Presently, he is the Chairman of DVM Technology Bhd, an ICT company listed on the ACE Market and AXA Affin Life Insurance Berhad, a joint-venture company of Lembaga Tabung Angkatan Tentera. He is also the Chairman and Director of a few other multinational and private companies incorporated in Malaysia. Tan Sri has no family relationship with any Director and/or major shareholder of the Company. Dato Sri Tiong Chiong Hoo Deputy Executive Chairman Dato Sri Tiong Chiong Hoo, aged 53, was appointed Executive Director on 27 March He was re-designated as Managing Director on 26 April 1995 and subsequently as Deputy Executive Chairman on 1 January He holds a Bachelor of Law and a Bachelor of Economics degrees from Monash University, Australia and is a registered barrister. Dato Sri is a businessman with extensive experience and in-depth knowledge in timber and plantation industries. He is responsible for developing the Group s corporate/business strategy and attaining the long-term growth objectives. He is the son of Tan Sri Datuk Sir Tiong Hiew King, a major shareholder of the Company. His uncle Dato Sri Dr Tiong Ik King, sister Mdm Tiong Choon and cousin brother Mr Tiong Chiong Hee are also members of the Board. 5

8 DIRECTORS PROFILE (cont d) Dato Wong Sie Young Chief Executive Officer Dato Wong Sie Young, aged 54, was appointed Chief Executive Officer on 1 January He is the Chairman of the Risk Management Committee. He graduated with a Bachelor of Science in Electrical Engineering degree from University of Arkansas, USA in Dato Wong actively oversees the operations of the Company and the Group. He has been working with the Group for 25 years during which time he has acquired extensive experience in the running of the Group s operations. He joined the Group in 1987 and has been involved in the designing and setting up of all the timber processing plants. When the Group began diversifying into the oil palm business in 2002, he was entrusted to oversee the construction projects at the oil palm estates and was involved in the designing and construction of all the palm oil mills. He has no family relationship with any Director and/or major shareholder of the Company. Dato Sri Dr Tiong Ik King Non-Independent Non-Executive Director Dato Sri Dr Tiong Ik King, aged 63, joined the Board on 27 March He is a member of the Remuneration Committee and the Nomination Committee. Dato Sri Dr Tiong graduated with a M.B.B.S degree from the National University of Singapore in 1975 and subsequently obtained his M.R.C.P. from the Royal College of Physicians, UK in Dato Sri Dr Tiong has extensive experience in many industries including media and publishing, information technology, timber, plantation and manufacturing industries. Currently, he also serves on the Board of Media Chinese International Limited. Dato Sri Dr Tiong is the brother of Tan Sri Datuk Sir Tiong Hiew King, a major shareholder of the Company. His nephews, Dato Sri Tiong Chiong Hoo and Mr Tiong Chiong Hee and his niece Mdm Tiong Choon are also members of the Board. 6

9 DIRECTORS PROFILE (cont d) Mdm Tiong Choon Non-Independent Non-Executive Director Mdm Tiong Choon, aged 44, was appointed to the Board on 3 May She graduated with a Bachelor of Economics degree from Monash University, Australia. She has been with Rimbunan Hijau Group since 1991 and served in various managerial and senior positions. Currently, she also serves on the Board of Media Chinese International Limited. She is the daughter of Tan Sri Datuk Sir Tiong Hiew King, a major shareholder of the Company. Her uncle Dato Sri Dr Tiong Ik King, brother Dato Sri Tiong Chiong Hoo and cousin brother Mr Tiong Chiong Hee are also members of the Board. Mr Tiong Chiong Hee Non-Independent Non-Executive Director Mr Tiong Chiong Hee, aged 39, was appointed to the Board on 14 May He holds a Bachelor of Commerce degree from University of Melbourne, Australia. He is the Managing Director of Mafrica Corporation Sdn Bhd, a company with operations in logging (both in Malaysia and Overseas), oil palm plantations and aquaculture prawn farming since He is the nephew of Tan Sri Datuk Sir Tiong Hiew King, a major shareholder of the Company. His uncle Dato Sri Dr Tiong Ik King, cousin brother Dato Sri Tiong Chiong Hoo and cousin sister Mdm Tiong Choon are also members of the Board. 7

10 DIRECTORS PROFILE (cont d) Mr John Leong Chung Loong Independent Non-Executive Director Mr John Leong Chung Loong, aged 66, was appointed to the Board on 28 March He serves as the Chairman of the Remuneration Committee and is a member of the Audit Committee and Nomination Committee. He holds a Bachelor of Economics degree majoring in Accounting from Sydney University, NSW, Australia. He is an Approved Company Auditor and a member of several professional bodies, including the Australian Society of Certified Practising Accountants, Malaysian Institute of Accountants, Malaysian Institute of Certified Public Accountants and Malaysian Institute of Taxation (Associate). He started his career as an Accountant in Tractors Malaysia Berhad, Sandakan Branch in 1972 and left in 1973 to join John Liaw & Co as an audit manager. He was a Partner of Liaw, Leong, Wong & Co from 1986 to 1997 and a Partner of Ernst & Young from 1997 to He has no family relationship with any Director and/or major shareholder of the Company. Dato Wong Lee Yun Independent Non-Executive Director Dato Wong Lee Yun, aged 60, was appointed to the Board on 21 June She is a member of the Audit Committee. She is a Certified Public Accountant by profession. She has extensive experience in investment banking, finance and strategic planning for large investment projects, as well as acquisition of strategic businesses. She was a Corporate Finance Manager at Permata Chartered Merchant Bank and Vice President at Chase Manhattan Bank. From 1991 to 1996, she was Director of Finance and Strategy for the Renong Group of Companies. She became the Chief Executive of Jaya Tiasa Holdings Berhad from 1997 to She was also a Director of Sin Chew Media Corporation Bhd from 2004 to early Currently, she is a Shareholder cum Executive Director of MyBiz Solutions Sdn Bhd, a company providing Total Spend Management solutions to major corporations in Malaysia. In addition, she holds directorship in several private limited companies. She has no family relationship with any Director and/or major shareholder of the Company. 8

11 DIRECTORS PROFILE (cont d) Datuk Talib Bin Haji Jamal Independent Non-Executive Director Datuk Talib Bin Haji Jamal, aged 61, was appointed to the Board on 12 November He is the Chairman of the Nomination Committee and is a member of the Audit Committee and Remuneration Committee. Datuk Talib holds a Master of Science in Mechanical Engineering from Cranfield Institute of Technology, England, United Kingdom. Datuk Talib has served in various senior capacities and positions in the Police Diraja Malaysia for more than 30 years. He was the Commissioner of Police, Sarawak from 2004 until his retirement in November He was the Director of Police Cooperatives for 10 years and the Director of Bank Kerjasama Rakyat for 2 years. Datuk Talib has no family relationship with any Director and/or major shareholder of the Company. None of the Directors has: Any conviction for offences within the past 10 years other than traffic offences. Entered into any transaction whether directly or indirectly which has a conflict of interest with the Company. All the Directors of the Company are Malaysians. 9

12 KEY INFORMATION Forest Concessions Gross Area: 713,211 hectares (1,760,535 acres) Extraction Quota: 94,500m3 monthly Main Species: Meranti, Kapor, Keruing, Selangan Batu, Jelutong, Melapi, Mersawa, Nyatoh, Arau, Penyau, Bindang and MLH (mixed light hardwood). Oil Palm Plantation Total Land Area: 83,480 hectares Estimated Plantable Area: 70,900 hectares Planted Area*: 63,574 hectares Matured Area*: 55,438 hectares Reforestation Total Land Area: 235,859 hectares Estimated Plantable Area: 141,308 hectares Planted Area*: 30,978 hectares ANNUAL PRODUCTION CAPACITY Timber Products Jaya Tiasa Plywood Sdn Bhd Rimbunan Hijau Plywood Sdn Bhd Jaya Tiasa Timber Products Sdn Bhd Total Annual Production Capacity Plywood 180, , , ,000M3 Rotary Veneer 324, ,000M3 Sawntimber 72,000 26,400 14, ,800M3 Blockboard _ 12,000 _ 12,000M3 Film-Overlay Plywood _ 6,000 _ 6,000M3 Sliced-Veneer 6,000,000 6,000,000M2 Crude Palm Oil JT Oil Palm Development 486,000MT Sdn Bhd Maujaya Sdn Bhd 324,000MT Notes: * As at 30 September 2013 M3 cubic metre M2 square metre MT metric tonnes 10

13 CORPORATE STRUCTURE Timber Division Jaya Tiasa Plywood Sdn Bhd 100% Jaya Tiasa Timber Products Sdn Bhd 100% Rimbunan Hijau Plywood Sdn Bhd 100% Jaras Sdn Bhd 100% Sericahaya Sdn Bhd 88.9% Curiah Sdn Bhd 88.9% Jaya Tiasa Forest Plantation Sdn Bhd 100% Oil Palm Division Simalau Plantation Sdn Bhd 100% Hariyama Sdn Bhd 100% Eastern Eden Sdn Bhd 100% Poh Zhen Sdn Bhd 100% Erajaya Synergy Sdn Bhd 100% JT Oil Palm Development Sdn Bhd 100% Maujaya Sdn Bhd 100% Maxiwealth Holdings Sdn Bhd 100% Private Flight Opera ons Marke ng and Trading Research and Development Jaya Tiasa Aviation Sdn Bhd 100% Guanaco Sdn Bhd 100% Hak Jaya Sdn Bhd 100% Kunari Timber Sdn Bhd 100% Mafrica Trading Sdn Bhd 40% Jaya Tiasa R&D Sdn Bhd 100% Non-Trading or Dormant Eastern Timber Ltd 100% Atlantic Timber Holdings Limited 100% Pacific Timber Holdings Limited 100% Atlantic Evergreen Holdings 100% Jaya Tiasa Aquaculture Sdn Bhd 100% Mantan Sdn Bhd 100% Multi Greenview Sdn Bhd 100% Western Timber Resources Limited 100% 11

14 CHAIRMAN S STATEMENT Dear fellow shareholders, On behalf of the Board of Directors of Jaya Tiasa Holdings Berhad, I am pleased to present to you the Annual Report and Audited Financial Statement of the Group for the Financial Year Ended 30 June GLOBAL ECONOMY OVERVIEW Looking back, 2012 has been a weak year for economic growth in most developed countries. In US, an earlier fiscal cliff was merely averted but not resolved as the concerns about the debt ceiling quagmire again threatens to rile global markets. Unemployment rate albeit improving is still high, and the housing start has been slow. Europe, on the other hand, remains vulnerable and was trapped in vicious cycle of high unemployment, financial fragility, heightened sovereign risks, fiscal austerity and low growth. Fiscal and monetary policies has had mixed success so far in calming financial markets and even less so in strengthening economic growth and job creation. In Asia, China s economic growth slowed for a few consecutive quarters amid a transition that has seen the country s new leadership seeking to rebalance its economy. This had had a negative impact on housing and construction activities. India fared even worse and has suffered the brunt of economic challenges with high inflation and a sharply weaker Rupee as growth slowed to 5.0% in the fiscal year ended March 2013 from 6.5% in the previous year. Fortunately, these factors have not dented India s demand for timber. While emerging economies have benefited from the US Federal Reserve s quantitative easing, expectation of tapering by the US government is having the opposite effect recently. It is apparent the global economy has yet to shake off the fallout of the financial crises. According to IMF, global economy growth dropped to 3.1 % in 2012 as compared to 3.9% the year before, and the trend will probably continue. Geopolitical instability such as the Arab Spring and the Syria conflict added to worries about the global economy over the past year. Such uncertainties may continue to affect global trade and foreign direct investments. The flicker of hope in a global recovery may be dimmed further by consumer deleveraging and flagging demand in emerging markets. On the domestic front, Malaysia has so far held up relatively well as political risk subsided after the General Election GDP growth was registered at 5.6% in 2012 and at 4.2% in 1H13, owing much to government s commitment on the implementation of projects under the Economic Transformation Program (ETP). Ringgit was stable throughout the past year. As highlighted in ITTO report, the recent weakening in RM against USD favors the timber industry. 12

15 CHAIRMAN S STATEMENT (cont d) GROUP PERFORMANCE REVIEW In FY2013, demand for our timber products was sustained as total exports sales increased by 7% in US Dollar. Logs contributed 38% of the total Group s revenue in US Dollar, and this is followed by plywood division at 30%. While the performance from timber sector has remained stable, our palm oil business encountered major headwinds as FFB and CPO prices fell sharply in the past year. Even though the matured hectares expanded by 28% YoY to 48,005 hectares and FFB production increased by 31% YoY to 664,633 MT, our Oil Palm Sector suffered a pre-tax loss. The average selling price per MT was RM423 and RM2,280 for FFB and CPO respectively, a 28% and 23% YoY contraction from the previous RM590 and RM2,975. FFB yield was not at the optimum level as more young trees enter maturity. We expect the harvest yields to improve and we will continue to put in the necessary efforts to improve efficiency and productivity. Also, our CPO mill capacity has been increased to 150MT per hour with an additional CPO mill now commissioned at the end of FY2013. CPO price has stayed in the range of RM2,200-2,400 per MT since the beginning of 2013, and there has been little sign of sustained price upward trend in spite of the normalized CPO inventory in the country. Mixed views from the recent Palm Oil Convention 2013 showed there is no general consensus on how the industry will fare in the year ahead. A growing supply from Indonesia due to an aggressive expansion in cultivation, a moderate growth in oleo-chemical demands, and subdued demand from bio fuels all contributed to a bearish sentiment and a clouded outlook. FINANCIAL PERFORMANCE The Group recorded RM1.05 billions in revenue, a 4% slight increase over the annualized revenue of RM1.01 billions in the previous year. Lower selling prices together with higher operating costs for oil palm led to an erosion in profit after tax to RM22.3 million from the annualized profit after tax of RM146.3 millions attained in the preceding year, an 85% decrease. As a result, earning per share was down to 2.18 sen. Shareholders funds improved to RM1,708 million compared to RM1,393 million achieved in the preceding Financial Year, largely due to the issuance of shares. Net tangible assets per share stood at RM1.66 for the Year Ended 30 June DIVIDEND As part of our commitment to enhancing shareholder value, the Board of Directors stayed true to its dividend policy of paying out not less than 20% of its net profit, subject to not compromising the Group s ability to support its pursuit for long term growth. Notwithstanding the weaker result, the Board of Directors has recommended a gross dividend of 1 sen per share representing about 43% of after tax profit in respect of the Financial Year Ended 30 June 2013 for approval by the shareholders at the forthcoming Annual General Meeting to be held on 28 November Log Export by Destination % 19% REVIEW OF OPERATIONS Logging The logging division contributed about 38% of the total Group s revenue. Apart from the unfavorable weather conditions as well as the impoundment of the Bakun hydroelectric dam which continued to impede the transportation of logs for processing mills and exports, scarcity of log supply had made our logging operation a bigger challenge. As a result, our log production reduced by 7% in terms of volume compared to the last Financial Year. Average export price for logs stabilized at USD220 per m3 largely due to the tightening log supply and the continuing sustained demand from India and Taiwan. 62% Taiwan China/Hong long India Japan Asean Korea 8% 7% 3% 13

16 CHAIRMAN S STATEMENT (cont d) Log Production (m 3 ) Log Sales (m 3 ) 1,400, ,000 1,200, ,000 1,000, , , , ,000 1,144,629 1,059, , , , , , , , , India remained the largest log export market for the group with sales accounting for 62% of the Group s total log export sales in US Dollars. In spite of the economic slowdown and the sharp depreciation of Indian Rupee against USD, heavy dependence on imports in view of the inadequate domestic supply helped sustained demand, especially for Sarawak logs. India is expected to continue to be a key market for the Group s logs. Taiwan was our second largest export market after India, amounting to 19% of total logs sales in US Dollars. As forecasted, demand from Taiwan has been on a decline due to continuing shutdown of sawmills. Nonetheless, during the financial year under review, total sales volume to Taiwan was satisfactory. Logging Outlook and Strategy Jaya Tiasa has one of the largest timber assets among Malaysian listed companies, and accounted for more than 10% of the logs produced in Sarawak in With higher export quota, our export sales should increase in the coming financial year as we foresee the market demand for tropical logs to remain robust despite an expected slower global growth, with prices that are likely to be sustained due to supply constraint. In particular, demand for logs in India is expected to continue to be maintained, driven by their need for affordable timber for building and renovation. Its economy and construction activities are still growing since late-2012, albeit at a slower pace. Plywood Export by Destination % 1% 27% To better manage our forest, we will select good quality species with high market value for harvesting. We will export all available logs within the permitted quota and maintain vigilant controls on the cost of production. Increased attention will also be given to logistical planning to ensure that logs extracted are delivered within the shortest time frame possible to preserve their freshness and maintain their quality for premium prices. Plywood 28% 6% In FY2013, the plywood division contributed about 30% to the total revenue of the Group. Plywood export volumes increased by 9% YoY, while the average selling prices fell by 6%. During the year, Taiwan and Korea emerged as our two largest export destinations, accounting to 28% and 27% respectively of total plywood exports of the group in US Dollar. Other major exports markets were China / Hong Kong, Japan, the US and the Middle East. 16% 15% The market for imported plywood has been challenging ever since the economy downturn. To maximize our revenue and profit as well as to maintain our existing markets, we had earlier made a strategic decision to produce more high value products. Korea Taiwan Others Japan Middle East China / Hong Kong USA 14

17 CHAIRMAN S STATEMENT (cont d) The anti-dumping duty ranging from 5% to 38% imposed by South Korean Government in March 2011 for two years has not affected our sales to the country. The plywood sales volume to South Korea was in fact the highest among our markets, while total export value increased by 8% from the previous year. Taiwan became our leading market for plywood in US Dollar accounting for 28% of the Group s total sales. Despite the structural change in consumption pattern in Taiwan, we managed to fend off our competitors by selling good quality product with various sizes tailored to the market demand. Plywood Outlook and Strategy Demand for plywood is expected to improve gradually in line with economic recovery in our key markets, particularly in Japan. The aggressive policy easing to reflate the Japanese economy has led to higher government spending, monetary easing and structural reforms. Tokyo s winning bid to host the 2020 Olympics will certainly have positive impact on Japan s economy. The announced increase in Japan s consumption tax from 5% currently to 8% by 2014 is anticipated to bring forward housing demand. June housing starts in Japan totaled 83,704 were up by over 15% compared to June This is an encouraging note for plywood business as it will have a positive effect on the potential plywood demand as well as its selling price. In tandem with this renewed optimism, the group is adopting a dynamic strategic approach in an increasingly competitive global environment, taking into account the scarcity of resources, the volatility of foreign exchange rates and volatile crude oil prices. The group will strengthen its current measures to maintain and enhance its competitive edge, and these include harnessing its existing production technology towards improving operational efficiency and product quality, and being innovative in producing more value-added products for niche markets to enhance margins. Barring any unforeseen circumstances, the division is projected to have better earnings and profits for the next financial year. Plywood Production (m 3 ) Plywood Sales (m 3 ) 180, , , , , , , , ,000 80,000 60, , , , ,000 80,000 60, , ,098 40,000 40,000 20,000 20,

18 CHAIRMAN S STATEMENT (cont d) Percentage of Prime Age over Planted Ha (62,745 Ha) Palm Age Profile As At 30 June % % 12% % % % % FY11 FY12 FY13 FY14 FY15 Oil Palm 64% Prime Mature Young Mature Immature As highlighted earlier, the division s profit for the year under review has been disappointing. Revenue for the year was RM263 million, a 13% decrease in value despite 31% increase in production volume. The loss before tax of RM2.1 millions was due to lower selling price and higher operating cost stemmed from a larger young mature area which has lower FFB Yields. As at 30 June 2013, the group s estimated plantable areas stood at 70,900 hectares (Ha) spreading over 10 plantations in Sarawak, of which 89% (or 62,745 Ha) are fully planted. With 77% of planted area (or 48,005 Ha) having matured, our FFB production for the year had increased by 31% to 664,633 metric tones (MT) from the previous year s 508,701 MT annualized amount. The average age of the tree is relatively young with only 12% of planted area (7,720 Ha) are in their prime. The group s palm oil mill produced approximately 60,000 MT of CPO and 9,600 MT of palm kernel (PK). Jaya Tiasa currently has two mills in operation with total processing capacity of 150MT per hour. In line with expected rapid growth in crop production in the years ahead, we target additional two mills at an estimated cost of RM165 million, both of which are strategically located near the plantations. Upon full operation, the mills are expected to contribute significantly to profitability. One of them is currently under construction and is scheduled to be completed in April 2014, while the other one is already in the planning stage. Oil Palm Outlook and Strategy As at 30 June 2013, the weighted average of our palm age stood at 5.6 years. As shown in the chart, 40% of our planted hectare will enter into prime age in two years time. This is 2.27 times more than the current 7,720 hectare which is at prime age. Thus, we expect our FFB yield (MT) per hectare to significantly improve and consequently reducing our cost of production. Labor shortage continues to be an issue nationwide. In order to cope with this challenging operating environment, we have increased mechanization so we can redeploy limited resources. With regard to our CPO mill operation, we constantly seek external consultations and send our staffs for training regularly in our attempt to improve productivity and operating efficiency. Also, the additional mills which are strategically located will enable us to achieve higher efficiency and profitability in the vertical integration of the supply chain. We foresee better operating result in the next financial year. We remain optimistic about the long term prospects for the palm oil industry despite current weakness in CPO price. We will endeavor to lower our cost of production, enhance our harvesting yield and improve productivity so that we are poised to reap the profits in the event CPO prices start to trend upwards. Oil Palm Planted Area/FFB Production Mill Production 700, , ,000 60,000 59, , , , , ,000 50,000 46, , ,000 40, , , ,000 37,419 58,545 48,005 62, , , ,000 30,000 20,000 10,000 7,573 9, Planted Area - Mature (ha) Planted Area - Immature (ha) FFB Production (MT) Palm Oil (MT) 2013 Palm Kernel (MT) 16

19 CHAIRMAN S STATEMENT (cont d) Reforestation We are currently managing a total of 235,859 Ha of reforestation areas. With fast-growing tree species such as Eucalyptus Deglupta (Kamarere), Eucalyptus Pellita and Kelampayan planted across the plantation areas, the group s forest planted area has been expanding and will continue to trend up steadily. Reforestation outlook and strategy We perceive planted forest as an investment for the future viability of the group and in keeping with the world s move towards conservation of natural forests. The division is not expected to contribute to earnings in the short term given that the planted forest has a gestation period of 12 to 15 years before it can be ready for commercial harvesting. The challenge of the group is to improvise silvicultural practices and place greater emphasis on stringent quality control over new plantings and its maintenance so as to improve the survival rate and optimum growth of planted trees. GOING FORWARD Recent reports by the World Bank and the International Monetary Fund paint a gloomy picture for the global economy. Economists in both multilateral institutions have cut the forecast for growth in most parts of the world. According to the United Nations in its latest issue of the World Economic Situation and Prospects 2013 (WESP), the global economy is expected to grow 2.4% in 2013 and 3.2% in In order to remain focused in our objectives to maintain performance and create maximum returns for shareholders, the Group has undertaken various measures to counter the challenges brought about by the uncertainties of the current economic crisis. These, among others, include being selective in our log cutting, producing more high value timber products, increase use of mechanization, and better integration in our supply chain. Prices for timber products and logs are expected to remain firm in view of the potentially restricted supply of logs, still robust demand from importing countries and anticipated higher demand from Japan driven by its brighter economy outlook. We are optimistic that FY2014 will continue to be a profitable year for the timber segment. Our palm trees have a relatively young age profile. FFB yield will improve significantly as more trees enter into its prime age. Additional CPO mills will boost our CPO production while ensuring better vertical integration in our palm oil business. In view of this advantage, we believe contribution from palm oil segment will trend upward in the next financial year. With all these measures and advantages, the Group plans for a steady long-term growth and will ensure we are well prepared in the wake of market recovery. APPRECIATION On behalf of the board, I wish to thank my fellow board members, dedicated management team and employees for your commitment throughout the year. My special thanks to our customers, business associates, the regulatory authorities, financiers and members of the community for your support in the midst of these turbulent times. Lastly, I wish to express my sincere gratitude to our valued shareholders. Thank you for your trust and confidence in us, and we look forward to performing our best in return to your investment in Jaya Tiasa. GEN (RTD) TAN SRI ABDUL RAHMAN BIN ABDUL HAMID Chairman 17

20 CORPORATE SOCIAL RESPONSIBILITY Annual Dinner Badminton competition CORPORATE SOCIAL RESPONSIBILITY Jaya Tiasa recognizes that without being socially and environmentally responsible, it is impossible to have economically sustainable operations in the long term. Corporate Social Responsibility (CSR) and sustainability are important aspects of long-term business success. During the year under review, we continue to maintain our commitment to CSR and sustainability issues by embedding our approach more fully into the day-to-day management of the business. We continue taking responsibility towards stakeholders, protecting the environment, and being a good employer, business partner, and member of the community. Our approach to CSR is primarily conducted in four areas, the so-called pillars: Environment, Workplace, Community and Marketplace. ENVIRONMENT Our operations will be permeated by a fully integrated approach, including efficient use of raw materials and energy, protection of the environment, and compliance with the environmental laws and regulations. Because our business activities are closely related to natural resources, we endeavour to never strive for financial success at the expense of future generation. This means that we take responsibility for identifying and minimising the impact on the environment at every step of the process. We have a system in place to ensure that all operations reach the highest environmental standards. Sustainable Forest Management In line with our efforts to reduce the impact of harvesting operations on the environment, we implement Reduce Impact Logging (RIL) techniques throughout the life cycle of the operations in order to reduce soil disturbance, and minimise damage to residual stands and effects on wildlife. Improved Forest Productivity As we are well aware of the dire consequences of global warming, preserving the environment has always been our top agenda. The establishment of well-managed forest plantations of the Group aims to conserve biodiversity, protect the environment, and provide sustainable raw material for downstream wood processing in a balanced way. Forests play an important role in moderating climate change. By regenerating forests through reforestation, we hope to contribute towards reducing the effect of global warming. An ongoing forest plantation project of the Group is being carried out in Kapit, Sarawak and we are currently developing a total area of more than 235,000 ha. Good Agricultural Practice The Group s oil palm division continues to monitor procedures and systems to ensure that good agronomic practices are prevalent throughout the plantation. Several practices adopted by the Group include a zero burning technique in land clearing and good agricultural practices in water management, manuring and weeding. In controlling pests, our biological and Integrated Pest Management (IPM) practice which involves light traps and planting of beneficial plants, has vastly reduced dependency on the usage of chemical pesticides. 18

21 CORPORATE SOCIAL RESPONSIBILITY (cont d) Receiving Blood Donation Winning Award Blood Donation Christmas Celebration Recycle And Reuse By-Products By-products from our palm oil mill, such as Mesocarp fibre and palm kernel shells, are also utilised as feedstock for power generation in our palm oil mill. Empty fruit bunches (EFB) are recycled for application in the fields as mulch, whereas palm oil mill effluents (POME) are biologically treated before it is discharged to the watercourse. In addition, we have installed a composting plant at our existing CPO mill to turn oil mill wastes composed mainly of EFB and POME into bio-organic fertilizers. WORKPLACE To meet future challenges and remain competitive, we strive to be an attractive employer with the ability to recruit, develop, and retain the best people. Competent employees with great dedication to drive change and go beyond what is required to deliver on Group strategy and performance objectives are crucial to the continued growth of our business. We seek to develop our employees through training and education, respect individual integrity and human rights, offer fair pay and advancement opportunities, and maintain a safe and motivating working environment. As at 30 June, 2013, the Group has a workforce of around 3,850 employees with a diverse mix of backgrounds, experience and expertise across its operations. Government s Transformation Programme We fully support the government s Transformation Programme (GTP) to raise the living standard of low income households and to achieve the high income nation status by the year As such, we have successfully implemented the Minimum Wage Order 2012 in January However, in order to mitigate the higher labour cost following the said implementation, various programmes and innovations have been implemented to increase work efficiency and productivity. Staff training Staff Welfare 19

22 CORPORATE SOCIAL RESPONSIBILITY (cont d) Donation to Police Gawai Celebration Job Fair Skills Development The Group aims to provide a supportive working environment in which all employees receive training relevant to their work to enable them to effectively perform their duties as well as prepare them for career progression. Apart from in-house training, our employees are encouraged to attend the Group s sponsored external seminars and workshops to keep them updated with the latest developments in the respective subjects and profession. Field training is also organized frequently to upgrade the technical and functional skills of workers at the operating units. The Training and Development Department (TDD) has been active all year round with adequate fund allocated to ensure the Group has people with the required knowledge and skills in key roles to meet the Group s business goal. We upgraded our Training Center during the year to provide our staff with better training environment and facility. With TDD, each employee s need for professional development and further training is determined to help employees fulfill their career aspirations in the Group. Performance Oriented Culture We make every effort to create a working environment that stimulates employee engagement and nurtures a high performing culture. Regular performance appraisals and evaluations are carried out to enable due rewards for high performers and promote motivation and performance upgrading for the rest. We review compensation and benefits on a regular basis to ensure that our remuneration packages are competitive in the marketplace. In addition to a fixed base salary, we offer both short- and long-term incentives to further motivate staff at every level, and the success of our approach is reflected in the low staff turnover rate. Work-Life Balance And Healthy Living Our corporate mantra to be an employer of choice is evident in our drive to develop and maintain a balanced, healthy, and conducive work environment for continuous learning and personal growth. Through the Group s sports and recreation club, we regularly organise recreational events and sports activities aimed at promoting rapport and fostering closer teamwork among employees as well as to encourage work-life balance and healthy living. These include educational trips to the Group s operations, annual dinners, festive gatherings, sporting competitions, and vacation trips to some of our local tourist attractions. To generate health awareness among staffs, the Group coordinates with different bodies to give different types of health screening services at special rate for our employees. In addition, we invest in workforce welfare by providing quality environment and accompanying facilities and building of quarters, playgrounds, recreational and medical facilities, which cater to the estate and mill workers. Health And Safety At Work Occupational safety in the workplace continues to be a non-negotiable priority of the Group. During the year under review, we maintained our commitment to enforce workplace health and safety excellence not just for our employees but also for our contractors, customers and visitors. We are working continuously to reduce the number of work-related accidents and injuries and to prioritize preventive efforts, particularly in the areas where the challenge is greatest. To achieve our goal, a series of in-house training programmes on safety and health have been conducted with the assistance of external experts. Emergency exercises including fire-fighting drills are practised. We ensure that appropriate resources and support are accessible to maintain high standards of safety and cultivate a positive safety culture and awareness. Our Safety & Health Department was active throughout the year under review by conducting frequent quality audits and safety checks at individual sites to ensure that all safety requirements and precautions were strictly observed. 20

23 CORPORATE SOCIAL RESPONSIBILITY (cont d) Rumah Long Busang Leader Visit Sarawak Grand Timber & SMEs Expo 2013 Staff Orientation COMMUNITY We support communities in many ways. We contribute significant funding and other resources towards enhancing the social wellbeing of the community through supporting initiatives related to health care, arts and culture, sports, community development, the underprivileged, disability groups, and more. Giving Back To The Society We encourage our employees to participate in community and charitable activities. Over the last 12 months, our efforts included charity drives for the autistic society, refuge centre, kidney foundation, and other local society care centres. We also donated to the local police station and battalion in our efforts to help the local police force in their crime prevention efforts. As a highlight to show our support for the benefit of the local community, we donated RM100,000 for the over 700 affected fire victims of Kampung Dato. In addition to this area of focus, our blood donation drives are conducted yearly to meet the continuous need for blood supplies at hospitals and blood banks. Our contributions were not unnoticed as we were proudly awarded as one of the winners for the 4th running year in two categories Blood Donation Competition 2012 (Group B) and Most Outstanding Performance of Blood Donation 2012 (Group E) organized by the Malaysian Red Crescent, Sibu Chapter. Supporting Local Communities The Group strongly believes that its business success can only be sustained when local communities grow and prosper together with the Group. The Group continues to support the local communities associated with its operations, and FY2013 was no exception. We have established a symbiotic relationship with the local communities and make every endeavour to bring about mutual benefits. We have been consistently rendering support by means of monetary terms and in-kind to ensure that the basic needs and expectations of the surrounding communities are attended to. As a highlight, we helped to upgrade the feeder road to Kampung Long Busang covering a total distance of 10km. A group of community leaders from the Kampung later paid a visit to our Group s Headquarter to personally record their appreciations for our assistances rendered. Donation to Refuge Centre Donation to Kampung Dato Fire Victim 21

24 CORPORATE SOCIAL RESPONSIBILITY (cont d) MARKETPLACE We places great importance on high standards of quality in our products and business conduct and is conscious of safeguarding environmental and social values. We are committed to cultivate the best practices in complying with all laws and regulations, and the standards of all certification for the markets we serve. Environmentally Responsible Products It is our ongoing policy to ensure that its products and its sources comply with all regulatory criteria and adhere strictly to sustainable forestry and plantation practices. Research shows that competitiveness is strengthened as consumers increasingly choose products they perceive as ethical and environmental-friendly. We have established strong customer loyalty as we strive to ensure that our manufacturing products are of the highest quality that meets the stringent quality assurance and control, product safety standards, and environmental requirements. A reflection of the Group s commitment towards this is manifested in its efforts to achieve green certification for its products which include: CE Marking The CE marking certifies that our plywood product has met European Union health, safety, and environmental requirements, which ensure consumer safety. CE marking now provides product access to 27 countries with a population close to 500 million. Japanese Agricultural Standards (JAS) certification The quality of our plywood product meets the specific standards requirements of JAS for use in Japan. The JAS certification issued by the Japanese Ministry of Agriculture, Forestry and Fisheries is based on the law concerning standardization and proper labeling of Agricultural and Forestry products for acceptance into Japan. California Air Resources Board (CARB) certification This certification verifies that our composite wood products (hardwood plywood) are in compliance with strict formaldehyde emission standards as stipulated in the California Code of Regulations. Wood Packaging Material Treatment Providers certification Our wood packaging material has been awarded the certification that aims to reduce the spread of timber pests associated with solid timber packing material. It is issued by the Sarawak Department Agriculture Plant Protection and Quarantine Branch in accordance with International Standards for Phytosanitary Measures, Publication No.15 (ISPM 15) standards. In the financial year 2013, we continued our sustainability journey by passing the surveillance audits for the above certification. The group is committed to work towards continuous improvement in the quality of its products and services through implementation of feedback from our customers, suppliers, and employees together with internal and external audits. We believe that we have an obligation to go beyond certification and compliance and invest in continued improvements. Highest Principles Of Integrity Our investor relations programme aims to establish and maintain open communications with shareholders and investors so as to provide timely information and ensure the best possible transparency. We keep the investment communities well-versed with our key business activities, strategies, and performance through annual general meetings, analyst and press briefings, and road shows. In addition, our corporate website at provides the latest financial results, statutory announcements, corporate news, and a wide range of information on the Group. CSR and sustainability are about continuous improvement and we must ensure that this mindset is embedded across the Group. As we progress towards our long-term sustainability goals, the commitments we have made for sustainable operation will continue to benefit the communities in which we operate, both environmentally and socially. 22

25 STATEMENT ON CORPORATE GOVERNANCE INTRODUCTION The Board of Directors ( the Board ) of Jaya Tiasa Holdings Berhad ( JTH or the Company ) is committed to ensuring that the highest standard of corporate governance is practiced throughout the Group as a fundamental part of discharging its responsibilities in managing the business and affairs of the Group to create long-term and sustainable growth in shareholder value. The Company has in the financial year ended 30 June 2013 complied with the Principles and Recommendations of the Malaysian Code on Corporate Governance 2012 ( the Code ), save for the Recommendation that the tenure of an independent director should not exceed a cumulative term of 9 years. Pursuant to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Listing Requirements ), the Board is pleased to present the following statement on the application by the Group of the Principles and Recommendations set out in the Code. 1. BOARD OF DIRECTORS 1.1 Roles and Responsibilities The Board is responsible for the proper stewardship of the Company and its subsidiaries (collectively Group ). The Board is to ensure the maximization of shareholders value and safeguarding the stakeholders interests including securing sustainable long-term financial results and increasing shareholder value, with proper social and environmental considerations. The Board has the following major responsibilities, which facilitate the discharge of the Board s stewardship and fiduciary functions in the pursuit of the best interest of the Group: a. Adopting and reviewing a strategic plan for the Group; b. Overseeing the conduct of the Group s business to evaluate whether the business is being properly managed and sustained; c. Ensuring that effective Risk Management ( RM ) framework is in place and aligned with the Group s business objectives; d. Succession planning including training and induction programs; e. Developing and implementing an investor relations programme for the Company; and f. Reviewing the adequacy and integrity of the Group s internal control system. 1.2 Functions Reserved for the Board There is a schedule of significant matters reserved for the collective decision of the Board, including the approval of financial results, annual corporate and business plans, dividend policy, acquisition and disposal of undertakings and properties of a substantial value as well as major investments and strategic decisions. 1.3 Directors Code of Ethics and Board Charter The Directors observe a code of conduct in accordance with the Code of Ethics established by the Companies Commission of Malaysia, which forms an integral part of the Company s Board Charter. The Board Charter sets out the roles and responsibilities of the Board and Board Committees, division of responsibilities between the Board, Management, Chairman, CEO and Board Committees as well as processes and procedures for meetings. It serves as a reference and primary induction document providing prospective and existing Board Members insights into their fiduciary and leadership functions. 23

26 STATEMENT ON CORPORATE GOVERNANCE (cont d) 1.4 Size, Composition and Diversity As at the date of this statement, the Board has nine (9) members. Two (2) are Executive Directors and seven (7) Non-Executive Directors. Four (4) Directors or 44% of the Board members are Independent Non-Executive Directors. On 1st January 2013, Dato Wong Sie Young was appointed as the Chief Executive Officer (CEO) of the Company. Dato Wong has been with the Group for 25 years during which time he has acquired extensive experience in the running of the Group s operations. Simultaneously with Dato Wong s appointment, the ex Managing Director Dato Sri Tiong Chiong Hoo was re-designated as Deputy Executive Chairman. The re-organisation is to enable Dato Sri Tiong Chiong Hoo to delegate the day-to-day operations to the new CEO and focus his time towards developing the Group s corporate/business strategy and attaining the long-term growth objective. This is also in line with the Group s long term plan and policy to develop professional talent that will provide adequate support for growth and continuity. The nine (9) members of the Board are persons of high calibre and integrity, and they possess the appropriate skills, knowledge, experience and core competencies to address key issues relating to the business and affairs of the Group. The Board collectively has sufficient knowledge and expertise to enable effective governance and oversight. The Group promotes corporate culture that embraces gender diversity when determining composition of employees at all level from a diverse pool of qualified candidates. Although the Board does not endorse quotas, it does commit to having an increasing representation of women in senior positions in the Group and on the Board. The Board through the Nomination Committee will review the proportion of the female to male board members during recruitment and annual assessment of the Directors performance taking into consideration the appropriate skills, experience and characteristics required of the Board Members, in the context of the needs of the Group. Currently, there are two (2) female Directors, namely Mdm Tiong Choon and Dato Wong Lee Yun. The Board has reviewed the size of the Board, and is of the opinion that its current size and composition is appropriate and constitutes an effective Board which is conducive to effective discussion and decision making and that the Board has an appropriate number of Independent Directors. The Board is also satisfied that the current Board composition fairly reflects the interest of the minority shareholders in the Company. A brief profile of each Director is presented on pages 5 to Strategies Promoting Sustainability Promoting sustainability and enhancing shareholder value are embedded in our business model that takes into account market place, work place, environment and community, details of which are set out in the Corporate Social Responsibility Statement on pages 18 to 22 of this annual report. 1.6 Access to Information and Advice The Directors have unrestricted access to all information pertaining to the Group s business and affairs whether as a full Board or in their individual capacity in furtherance of their duties. The agenda for each Board Meeting together with a full set of board papers are forwarded to each Director for their perusal well in advance of the date of the Board Meeting to facilitate informed decision making. The Senior Management Staff are invited to attend the Board and Committee Meetings to report on matters relating to their respective areas of responsibility and also to provide detail or clarification on issue(s) that may be raised by any Director. All the Directors have direct access to the advice and services of the Company Secretary whether as a full Board or in their individual capacity. The Directors also have the liberty to seek external professional advice if so required by them at the Company s expense. 1.7 Company Secretary The Secretary is responsible for ensuring that Board procedures are followed, that the applicable rules and regulations for the conduct of the affairs of the Board are complied with and for all matters associated with the maintenance of the Board or otherwise required for its efficient operation. 24

27 STATEMENT ON CORPORATE GOVERNANCE (cont d) 1.8 Board Committees The Board has established three (3) Committees, namely, Audit Committee, Nomination Committee and Remuneration Committee to assist the Board in the execution of its duties and responsibilities. The functions and terms of reference of the committees as well as authority delegated by the Board to these Committees are clearly defined and, where applicable, complied with the recommendations of the Code. The Chairman of the respective Board Committees reports to the Board the outcome of the Committee meetings including salient matters which require the Board s attention or direction. a. Audit Committee The Audit Committee s principal function is to assist the Board in meeting its responsibilities in ensuring a sound and effective system of internal control and for meeting its external financial reporting obligations. It has four (4) members, all of whom are independent non-executive directors. The composition, terms of reference and summary of the Audit Committee and internal audit activities are presented on pages 37 to 40. b. Nomination Committee The Nomination Committee is made up entirely of Non-Executive Directors, of whom two-third (2/3) are independent. The following Directors are members of the Nomination Committee:- Chairman - Datuk Talib Bin Haji Jamal (Independent Non-Executive Director) Members - Mr John Leong Chung Loong (Independent Non-Executive Director) - Dato Sri Dr. Tiong Ik King (Non-Independent Non-Executive Director) The key terms of reference of the Nomination Committee are: - o o o o o o to consider, evaluate and recommend to the Board any new Board appointment; to recommend to the Board, Directors to fill the seats on Board Committees; to review annually and recommend to the Board with regard to the structure, size, balance and composition (including gender diversity) of the Board and Committees including the required mix of skills and experience, core competencies which non-executive directors should bring to the Board and other qualities to function effectively and efficiently; to evaluate on an annual basis, the effectiveness of the Board as a whole, the Board Committees and each Director s ability to contribute to the effectiveness of the Board and the relevant Board Committees; to recommend to the Board whether Directors who are retiring should be put forward for re-election/ re-appointment at annual general meetings; and to assess independence of Independent Directors. The Nomination Committee upon its annual review carried out, is satisfied that the size and composition of the Board is optimum and conducive to effective discussion and decision making. There is appropriate mix of skills, experience and core competencies in the composition of the Board and that the Board has an appropriate number of Independent Directors. The Nomination Committee is also satisfied that all the members of the Board are suitably qualified to hold their positions as Directors of the Company in view of their respective academic and professional qualifications, experience, core competencies and qualities. The Committee met twice during the financial year ended 30 June 2013 and were attended by all the members. 25

28 STATEMENT ON CORPORATE GOVERNANCE (cont d) c. Remuneration Committee The Remuneration Committee is made up entirely of Non-Executive Directors, of whom two-third (2/3) are independent. The following Directors are members of the Remuneration Committee:- Chairman - Mr John Leong Chung Loong (Independent Non-Executive Director) Members - Datuk Talib Bin Haji Jamal (Independent Non-Executive Director) - Dato Sri Dr. Tiong Ik King (Non-Independent Non-Executive Director) The key term of reference of the Remuneration Committee is to recommend to the Board the framework, remuneration package and performance related pay schemes for Executive Directors. Remuneration packages of both Executive Directors and Non-Executive Directors are a matter to be decided by the Board as a whole with the Director concerned abstaining from deliberations and voting on decisions in respect of his/her individual remuneration. The Remuneration Committee met twice during the financial year ended 30 June 2013 and recommended to the Board the remuneration package for the Deputy Executive Chairman and Chief Executive Officer in all its form. The meeting was attended by all the members. 1.9 Appointments to the Board There is in place a formal and transparent procedure for the appointment of new Directors to the Board. The Nomination Committee is responsible for evaluating and recommending to the Board suitable candidates for appointment as new Directors of the company. The Nomination Committee also recommends to the Board, directors for re-election and re-appointment by shareholders at the Annual General Meeting. The Company Secretary will ensure that all appointments are properly made and that legal and regulatory obligations are met Re-appointment and Re-election of Directors Pursuant to Section 129(6) of the Companies Act, 1965, Directors over seventy (70) years of age are required to retire at every annual general meeting and submit themselves for re-appointment to hold office until the next annual general meeting. The Company s Articles of Association requires all Directors appointed by the Board to retire from office and submit themselves for re-election by shareholders at the next Annual General Meeting after their appointment. All Directors are required to retire from office and submit themselves for re-election by rotation at the Annual General Meeting at least once in every three (3) years. 2. DIRECTORS REMUNERATION The Board will determine the level of remuneration of Board Members, taking into consideration the recommendations of the Remuneration Committee. The Level and make-up of remuneration should be sufficient to attract and retain the Board members needed to run the Company successfully. Non-executive Board members are paid a basic fee as ordinary remuneration and they will also be paid additional remuneration based on their responsibilities in the Board and Board committees as well as for their attendances at meetings. The fee which is subject to the approval of the shareholders shall be fixed in sum and not by a commission or on percentage of profits/turnover. Executive Director(s) are paid as employees of the Company in accordance with their contract of employment with the Company. 26

29 STATEMENT ON CORPORATE GOVERNANCE (cont d) The Directors have the benefit of the Directors and Officers (D&O) Insurance in respect of liabilities arising from their acts committed in their capacity as D&O of the Company. However, the said insurance policy does not indemnify a Director or officer if he/she is proven to have acted fraudulently, dishonestly, maliciously or in willful breach of any statute or regulation. The premium of the D&O policy is borne by the Company. During the financial year ended 30 June 2013, the remuneration of the Executive Directors and Non-Executive Directors are as follows:- Executive Directors Other Benefit Salary Fees Bonus Emoluments EPF in kind Total RM RM RM RM RM RM RM Dato Sri Tiong Chiong Hoo 570,000 55,000 1,040,000 7, ,300 15,500 1,897,300 Dato Wong Sie Young (Appointed on 1 January 2013) 150,000 27,500 3,000 19, ,000 Non-Executive Directors Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid 66,500 54,000 3,120 13, ,945 Dato Sri Dr Tiong Ik King 59,000 7,500 66,500 Tiong Choon 55,000 6,000 61,000 Tiong Chiong Hee 55,000 4,500 59,500 John Leong Chung Loong 65,500 7,500 73,000 Dato Wong Lee Yun 58, , ,500 Datuk Talib Bin Haji Jamal 65,500 7,500 73,000 Total 720, ,500 1,040, , ,920 28,825 2,751,745 Executive Non-Executive Directors remuneration Directors Directors RM50,001 to RM100,000 5 RM100,001 to RM150,000 1 RM150,001 to RM200, RM1,850,000 to RM1,900, BOARD INDEPENDENCE 3.1 Independence of Directors The presence of Independent Directors facilitates the exercise of independent evaluation in Board deliberations and decision-making, and thus provides check and balance in the Board. The Nomination Committee and the Board have upon their annual assessment, concluded that all the four (4) Independent Non-Executive Directors remain independent and they continue to fulfill the definition of independence as set out in the Bursa Malaysia Main Market Listing Requirements. All the four (4) Independent Non-Executive Directors have provided their respective annual confirmation of independence to the Nomination Committee and the Board. 27

30 STATEMENT ON CORPORATE GOVERNANCE (cont d) Recommendation 3.2 of the Code states that the tenure of an independent director should not exceed a cumulative term of 9 years. However, The Nomination Committee and Board have determined at the annual assessment that Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid, who has served on the Board for 17 years and John Leong Chung Loong for 11 years, remain objective and independent in expressing their views and in participating in deliberations and decision making of the Board and Board Committees. Their length of service on the Board does not in any way interfere with their exercise of independent judgement and ability to act in the best interests of the Company. Approval has been obtained from shareholders at last year AGM to retain them as Independent Directors. Shareholders approval will again be sought at the forthcoming AGM to retain them as Independent Directors of the Company in accordance with Recommendation 3.3 of the Code. 3.2 Positions of Chairman and CEO There is a clear division of responsibility between the Chairman and the CEO to ensure a balance of power and authority. The positions of the Chairman and the CEO are separately held by two persons. The Chairman, Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid, an Independent Non-Executive Director, is primarily responsible for ensuring Board effectiveness and conduct. He ensures that each of the agenda items is adequately reviewed and thoroughly deliberated within a reasonable timeframe and that Directors are given the chance to freely express their views. He has never held any executive position in the Group. The CEO is accountable to the Board for the achievement of the Company s goals and for the observance of the management authorities. He heads the management of the Company and the Group. 3.3 Senior Independent Non-Executive Director The Board has identified Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid ( address: tsrahman.hamid@ gmail.com) as the Senior Independent Non-Executive Director to whom concerns of shareholders, management and others may be conveyed. 4. FOSTER COMMITMENT 4.1 Time Commitment To ensure that the Directors have the time to focus and fulfill their roles and responsibilities effectively, the new director is required to commit sufficient time to attend to the Company s meetings before accepting his/her appointment to the Board. The existing Directors are required to notify the Chairman before accepting any new Directorship on other listed company and to indicate the time expected to be spent on the new appointment. All the Directors are required to submit to the Company an update on their total number of directorships held by them in listed company(ies) every six (6) months for monitoring purpose. 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. This is reflected by their attendance at Board meetings. The Board holds scheduled meetings regularly, with additional meetings convened as and when necessary. The annual meeting calendar providing scheduled dates for meetings of the Board, Board Committees and shareholders is prepared and circulated to Directors at the beginning of each year so that the Directors can plan accordingly and fit the year s meetings into their respective schedules. The calendar also includes closed period for dealings in Company s shares by Directors and principal officers. A total of five (5) Board of Directors Meetings were held in the financial year ended 30 June Details of the attendance of each Director are as follows:- Name of Directors Meeting Attendance Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid (Independent Non-Executive Chairman) 4/5 Dato Sri Tiong Chiong Hoo (Deputy Executive Chairman) 5/5 Dato Wong Sie Young 1 (Chief Executive Officer) 2/2 1 Dato Sri Dr Tiong Ik King (Non-Independent Non-Executive Director) 5/5 Mdm Tiong Choon (Non-Independent Non-Executive Director) 4/5 Mr Tiong Chiong Hee (Non-Independent Non-Executive Director) 3/5 Mr John Leong Chung Loong (Independent Non-Executive Director) 5/5 Dato Wong Lee Yun (Independent Non-Executive Director) 4/5 Datuk Talib Bin Haji Jamal (Independent Non-Executive Director) 5/5 28

31 STATEMENT ON CORPORATE GOVERNANCE (cont d) Note: 1 Appointed on 1 January Directors Training All the Directors have attended the Mandatory Accreditation Programme (MAP) and are encouraged to attend continuous education programmes to update their skills and knowledge and to keep abreast with the latest developments on a variety of areas relevant to the Group s business. The conferences, seminars and training programmes attended by each individual Director during the financial year are as follows:- Director Course Title Date of Attendance Bursa Malaysia s Half Day Governance 3 October 2012 Programme Asean Corporate Governance Scorecard - The 21 November 2012 Way Forward Leveraging on the Companies Act December 2012 towards Achieving High Corporate Performance: Corporate Ethics and Human Capital Management Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid Dato Sri Tiong Chiong Hoo Dato Wong Sie Young Dato Sri Dr Tiong Ik King Tiong Choon Tiong Chiong Hee Chairman Power Breakfast on 30% Women 13 December 2012 at Top Decision Making Positions in the Corporate Sector by 2016 Forensic Accounting For Non-Executive 23 January 2013 Directors Bursa Nominating Committee Program 15 May 2013 Special Dialogue and Presentation Session on 19 June 2013 Asean Corporate Governance Scorecard 2013 Fraud Identification and Modus Operandi 24 October 2012 The Malaysian Code on Corporate Governance 24 October Its Implications & Challenges to Directors of Listed Issuers Mandatory Accreditation Programme 9 & 10 January 2013 Understanding the Governance Framework 9 April 2013 for Boardroom Excellence MCCG 2012 & Amended Listing Requirements Hot Topics for Directors Price Sensitive 29 November 2012 Information & Others Fraud Identification and Modus Operandi 24 October 2012 The Malaysian Code on Corporate Governance 24 October Its Implications & Challenges to Directors of Listed Issuers Understanding the Governance Framework 9 April 2013 for Boardroom Excellence -MCCG 2012 & Amended Listing Requirement Together with its Practical Implications Islamic Finance Conference June 2013 Corporate Frauds Detection & Prevention 15 January 2013 Understanding the Governance Framework 9 April 2013 for Boardroom Excellence - MCCG 2012 & Amended Listing Requirement Together with its Practical Implications 29

32 STATEMENT ON CORPORATE GOVERNANCE (cont d) Director Course Title Date of Attendance John Leong Chung Loong Dato Wong Lee Yun Datuk Talib Bin Haji Jamal Financial Instruments MFRS/FRS 132, 139, 7, 9 and & 27 September 2012 Fraud Identification and Modus Operandi 24 October 2012 The Malaysian Code on Corporate Governance 24 October Its Implications & Challenges to Directors of Listed Issuers Cradle Growth Fund-MVCPA Valuation Clinic 28 August 2012 CIMB Market Outlook Talk 15 January 2013 Invest Malaysia 2013 Conference 13 & 14 June 2013 Fraud Identification and Modus Operandi 24 October 2012 The Malaysian Code on Corporate Governance 24 October Its Implications & Challenges to Directors of Listed Issuers 5. FINANCIAL REPORTING 5.1 Compliance with Applicable Financial Reporting Standard In presenting the annual audited financial statements and quarterly financial results to the shareholders, investors and Regulatory Authorities, the Board aims to present a balanced and understandable assessment of the Group s financial performance, position and prospects. The Board, assisted by the Audit Committee, oversees the integrity and reliability of the Group s financial statements. The Audit Committee members, who are financially literate meet on quarterly basis to review the financial statements prior to recommending them for the Board s approval and issuance to stakeholders. The Audit Committee also ensures that these financial statements comply with applicable accounting standards and regulatory requirements. The Directors Responsibility Statement in preparing the annual audited financial statements of the Group and the Company is set out on page 41 of this annual report. 5.2 Suitability and Independence of External Auditors The Audit Committee assesses the external auditors suitability and independence annually based on the criteria set out in the Auditor Independence Policy and recommends their appointment to the Board. The Audit Committee has reviewed the non-audit services provided by the external auditors and their affiliated firm during the financial year and the fees paid for such services. Written assurance has been obtained from the external auditors confirming independence in accordance with the By-laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants. The Audit Committee is satisfied with the external auditors audit independence and their technical competency. 6. RISK RECOGNITION AND MANAGEMENT 6.1 Risk Management and Internal Control The ultimate responsibility for ensuring a sound system of risk management and internal control lies with the Board. The Group s system of risk management and internal control is designed to manage rather than eliminate the risk of failure to achieve the Group s business objectives as well as to safeguard shareholders investments and the Group s assets. The Statement on Risk Management and Internal Control, which provides an overview on the state of risk management and internal control within the Group, is set out on pages 34 to 36 of this annual report. 30

33 STATEMENT ON CORPORATE GOVERNANCE (cont d) 6.2 Internal Audit Function The Company has in place an internal audit function which is independent of the activities it audits. The head of the Internal Audit reports directly to the Audit Committee. Details of the activities of the Internal Audit Function are set out in the Audit Committee Report of this Annual Report. 7. CORPORATE DISCLOSURE 7.1 Corporate Disclosure Policies and Procedures The Company is committed to the promotion of investor confidence by ensuring that material information concerning the Company are disclosed to the investing public timely and take reasonable steps to ensure that those who invest in its securities enjoy equal access to such information. To safeguard effective dissemination of information, the Company has formalised an internal Corporate Disclosure Policy and Procedure (CDPP) which sets out roles and responsibilities of directors, management, employees and all other relevant persons in the handling and disclosure of material information to shareholders and market participants. It also serves to ensure that communication to the investing public about the Company are made in accordance with the continuous disclosure obligations imposed by the Bursa Malaysia Main Market Listing Requirements and other securities law. Communications with its shareholders, stakeholders and the investing public are made through the annual general meeting, annual report, quarterly financial reports and various announcements made via Bursa Malaysia. The Company views briefings with investors, analysts and media as important parts of a pro-active investors relation strategy. Regular briefing to fund managers, research houses/analysts and media are held which allow the Management to convey information about the Group s performance, corporate strategy and other matters affecting shareholders interest. 7.2 Leverage on Information Technology The Company s website at provides easy access to information pertaining to the Company and activities of the Group and is kept up-to-date. It also stores all other corporate and financial information that had been made public, such as quarterly announcements of the financial results, annual reports, announcements and disclosures made pursuant to the disclosure requirements of Bursa Malaysia Listing Requirements. All presentations to analysts and media are also made available to the public via the Company s website. To make it easier to obtain news releases and notifications, all shareholders and interested investors may sign up to the alert service via the website. 8. RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS 8.1 Shareholder Participation at Annual General Meeting The Company s Annual General Meeting (AGM) serves as a principal avenue for communication with shareholders. It also provides a useful forum for shareholders to be engaged directly with Directors and Senior Management. The Company sends out the Notice of the AGM and Annual Report to shareholders at least 21 days before the date of the meeting. Items of special business included in the Notice of the AGM are accompanied by explanatory notes and Circular to Shareholders to facilitate full understanding and evaluation of the issues involved. To further promote participation of members through proxies, the Company will be seeking shareholders approval at its 53rd AGM to amend its Article of Association to include the rights of proxies to speak at general meetings in line with Paragraph 7.21A(2) of the Listing Requirements. 31

34 STATEMENT ON CORPORATE GOVERNANCE (cont d) 8.2 Poll Voting At the 52nd AGM of the Company held on 28 November 2012, no substantive resolutions were put forth for shareholders approval, other than resolutions pertaining to the adoption of the audited financial statements for the financial period ended 30 June 2012, payment of final dividend, re-appointment/re-election of Directors, payment of Directors fees, re-appointment of external auditors, proposed share buy back authority and proposed shareholders mandate for recurrent related party transaction. As such, the resolutions put forth for shareholders approval at the 52nd AGM were voted on by a show of hands. 8.3 Communication and Proactive Engagement At the 52nd AGM, a total of 6 out of 8 Directors were present in person to engage directly with the shareholders. The proceedings of the AGM included a Q&A session during which the Chairman invited shareholders to raise questions pertaining to the Company s accounts and other items for adoption at the meeting, before putting each resolution to vote. The Directors, Management and external auditors were in attendance to respond to the shareholders queries. The Chairman and the then Managing Director also shared with the shareholders the Company s responses to questions submitted in advance of the AGM by the Minority Shareholder Watchdog Group. 9. ADDITIONAL COMPLIANCE INFORMATION The following information is provided in compliance with Bursa Malaysia Main Market Listing Requirements. 9.1 Depository Receipts Programme The Company did not sponsor any Depository Receipts programmes during the financial year ended 30 June Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company or its subsidiaries, directors or management by any relevant authority during the financial year ended 30 June Variation in Results The audited results for the financial year ended 30 June 2013 did not differ by 10% or more from the announced unaudited results. There were no profit estimates, forecasts or projections issued by the Group during the financial year ended 30 June Profit Guarantees There were no profit guarantees given by the Company and its subsidiaries during the financial year ended 30 June Material Contracts There were no material contracts (not being contracts entered into in the ordinary course of business) entered into by the Company or its subsidiaries which involved directors and major shareholders, either still subsisting at the end of the financial year ended 30 June 2013 or entered into since the end of the previous financial year. 9.6 Utilisation of Proceeds Raised from Corporate Proposals The proceeds raised from the corporate placement in year 2012 have been used for the repayment of bank borrowings, construction of palm oil mills and working capital/acquisitions, as intended. 9.7 Options or Convertible Securities No options or convertible securities were issued by the Company during the financial year ended 30 June

35 STATEMENT ON CORPORATE GOVERNANCE (cont d) 9.8 Non-audit fees The non-audit fees paid to the external auditors and their affiliated company by the Group for the financial year ended 30 June 2013 amounted to RM132, Share Buy-backs During the financial year ended 30 June 2013, a total of 5,720,000 of the Company s own shares were purchased and retained as treasury shares. The monthly breakdown of shares bought back is set out below:- Month No. of Price Average Total Shares Highest Lowest Cost Cost RM RM RM RM August , ,363,489 September ,904, ,500,116 October , ,615,861 November , ,192,868 March , ,933 A total of 2,233,988 treasury shares were resold on 20 July 2012, details of which is set out below:- Month No. of Price Average Total Shares Highest Lowest Price Consideration received RM RM RM RM July ,233, ,960,968 As at the financial year ended 30 June 2013, a total of 5,720,000 shares were retained as treasury shares Recurrent Related Party Transactions of A Revenue or Trading Nature Related party transactions are disclosed in Note 34 on pages 110 to 115 of this annual report. This statement is made in accordance with a resolution of the Board of Directors dated 22 October

36 Statement on Risk Management and Internal Control Introduction Pursuant to paragraph 15.26(b) of Bursa Malaysia Securities Berhad and the Malaysian Code on Corporate Governance 2012, the Board of Directors is pleased to present its Statement on Risk Management and Internal Control, which has been prepared by taking into consideration the Statement on Risk Management and Internal Control - Guidance for Directors of Public Listed Companies issued by the Task Force on Internal Control with the support and endorsement of the Bursa Malaysia Securities Berhad. Board s Responsibility The Board recognizes the importance of sound internal controls and risk management practices for good corporate governance. The Group adopts a risk-based approach to establish a sound system of internal control. The Board in discharging its stewardship responsibility for the Group affirms its responsibility for reviewing the adequacy and effectiveness of risk management and internal control system, to provide reasonable assurance that risks are being managed within the Group s risk appetite. The Group s system of risk management and internal control covers governance, financial, operational and compliance controls. Notwithstanding, it should be noted that the system by its nature is designed to manage rather than eliminate the risk of failure to achieve the Group s business objectives. Accordingly, such system can only provide a reasonable but not absolute assurance against material misstatement, loss or fraud. The Board has received assurance from the Group Chief Executive Officer and Chief Financial Officer that the Group s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group. Risk Management The Board subscribes to the fact that an effective risk management practice is vital to the success of the Group s businesses. In view of this, there is a formal process to identify, evaluate, monitor and manage key risks faced by the Group that may impede the achievement of the Group s business objectives. The Board has formed a Risk Management Committee ( RMC ) to assist in oversight of the overall risk management where the latter is headed by the Group s Chief Executive Officer and comprises members from amongst the senior management within the Group. The RMC meets periodically to address the business strategies and key risks within the Group, taking into consideration the critical assumptions underlying the strategies regarding such matters as market competition, economic trends, regulation, technological innovation, etc. It reviews and discusses the resilience of the Group in responding to the risk events as well as the performance of the Group s operations. The RMC provides updates on the risk management activities as well as the results of the Annual Risk Assessment workshop to the Board. The Risk Management Department acts as a support for the RMC in addressing, analyzing and reporting of the risks identified and as a facilitator in the risk assessment process. It evaluates the risk management policies and procedures, and initiates improvements by maintaining awareness of global trends and regulatory development in risk management that may have significant impact to the Group. Risk owners and co-owners have been identified to manage the risks in the daily business operations and to ensure that the Group s risk profiles are updated accordingly. The risk profiles are then compiled and tabled to the RMC for deliberation on a periodic basis. Moving forward, the Group shall continue to carry out on-going processes and/or relevant initiatives to ensure consistent application, effective functioning of the Risk Management Framework, continued relevance of the Group s risk profiles being maintained, and implementation of the management action plan. This on-going process has been in place for the whole financial year under review and up to the date of approval of this statement for inclusion in the annual report. 34

37 Statement on Risk Management and Internal Control (cont d) Control Environment and Activities The Group has established a conducive control environment in respect of the overall attitude, awareness and actions of the Board and management regarding the internal control system and its importance. The key elements that the Board has established in reviewing the adequacy and integrity of the system of internal controls, are as follows: The Group has in place an organization structure that supports business and operational requirements, with clearly defined reporting lines and accountability. Appropriate authority limits are established within the Group for approving capital expenditure and matters related to financial, treasury, operations and personnel, therefore minimizing the risk of unauthorized transactions. Annual budgets are prepared to monitor actual versus budgeted and prior period s performance with major variances being reviewed and management actions taken as necessary. The budgets are reviewed half yearly or on a need basis. The quarterly and annual financial statements containing key financial results as well as operational performance results of the Group are prepared and reported to the directors at the board meetings. Periodic briefings with analysts are conducted to apprise the shareholders, stakeholders and general public of the Group s performance whilst promoting transparency and open discussions. A Chief Executive Officer has been appointed to be involved in the day-to-day business operations of the Group. Scheduled meetings are held with senior management to identify, discuss and resolve business and operational issues. Meetings on management accounts results against prior periods are conducted bi-monthly with major variances being investigated and corrective actions taken, where necessary. Monthly management meetings are convened at the Group level to share information, discuss financial and business development, progress and performance monitoring as well as to decide upon operational matters. The proceedings of these meetings are documented in the minutes for further action and reference. Documented operating policies and procedures are made available to guide staff in their day-to-day work processes. These policies and procedures are subject to regular review and improvement to reflect changing risks or to resolve operational deficiencies. The Group has an upgraded comprehensive information system that enables transactions to be captured, compiled and reported in a timely and accurate manner. The system is highly automated and provides management with reliable data, analysis, variations, exceptions and other inputs relevant to the Group s operating performance. The Group has a human resource function to retain and recruit staff with the right skills, experience and qualifications to fulfill the Group s corporate and operational needs. The Group emphasizes human resource training and development as it recognizes the value of its staff in contributing to its growth. Appropriate training programs are identified and scheduled to ensure staff are adequately trained and competent in discharging their responsibilities. As for the occupational safety and health, the Group has in put in place the relevant guidelines among others, setting up safety & health committees and appointment of full time safety and health practitioners at operating level to address the safety and health issues which may arise from time to time. The use of the intranet as an effective means of communications and knowledge sharing. Regular site visits by the management team to gauge first-hand knowledge on the effectiveness of strategies being implemented. 35

38 Statement on Risk Management and Internal Control (cont d) Internal Audit The internal audit function of the Group is carried out by an in-house Internal Audit Department ( IAD ) which reports directly to the Audit Committee. The IAD adopts a risk-based approach in preparing audit strategy and plan. This approach includes focusing the internal audit work on the significant risks as well as any emerging risks identified across the Group. The IAD reviews the adequacy and effectiveness of the Group s system of risk management and internal control to mitigate the risks of the Group covering mainly operational, financial and compliance risks. The internal audit plan is reviewed and approved annually by the Audit Committee. The Audit Committee reviews the key audit findings and the related recommendations reported by the IAD on a periodic basis. The Group s management is responsible for ensuring that any corrective actions recommended are timely taken. Board Review The Board is of the view that the Group s system of risk management and internal control is sound and effective. The monitoring, reviewing and reporting arrangements in place give reasonable assurance that the structure and operation of controls are appropriate for the Group s operations and that risks are at an acceptable level throughout the Group s businesses. The Group will continue to review and update the adequacy and effectiveness of its risk management and internal control system to be in line with changes in the operating environment. The statement is made in accordance with a resolution of the Board of Directors dated 22 October

39 Audit Committee Report MEMBERS The Audit Committee has four (4) Independent Non-Executive Directors, namely, - Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid (Chairman) - John Leong Chung Loong - Dato Wong Lee Yun - Datuk Talib Bin Haji Jamal TERMS OF REFERENCE 1 Size and Composition a. The Audit Committee shall be appointed by the Board of Directors from among their number and shall comprise of not less than three (3) members which fulfils the following requirements: - i. all the Audit Committee members must be non-executive directors, with a majority of them being independent directors; and ii. at least one (1) member: (aa) must be a member of the Malaysian Institute of Accountants (MIA); or (bb) if he is not a member of MIA, he must have at least three (3) years working experience and: - he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, (cc) fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad. iii. No alternate director shall be appointed as member of the Audit Committee. b. The Chairman of the Audit Committee shall be appointed by the Board from among their independent directors. c. The term of office of each member shall be subject to review every three (3) years. d. If a member of the Audit Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board of Directors shall, within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. 2 Authority and Rights The Committee wherever necessary and reasonable for the performance of its duties, shall in accordance with the procedure determined by the Board and at the cost of the Company:- have authority to investigate any matter within its Terms of Reference; have the resources which are required to perform its duties; have full and unrestricted access to any information relevant to its activities; have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; be able to obtain external legal or other independent professional advice if it considers this necessary; and 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. 37

40 Audit Committee Report (cont d) 3 Functions and Duties The Committee shall, amongst others, discharge the following duties: a. to assess the adequacy and effectiveness of the risk management framework, internal control and governance systems. b. to review the quarterly and financial results of the Group, prior to the approval by the Board of Directors, focusing on, amongst others:- financial disclosures; changes in accounting policies and practices; and compliance with accounting standards and other legal and regulatory requirements; c. to review with the external auditors:- the nature and scope of audit prior to the commencement of audit; their evaluation of the system of internal controls, audit report and the assistance given by the employees of the Company to the auditors; and the year end financial statements before submission to the Board, focusing particularly on:- - any changes in accounting policies and practices; - significant adjustments arising from the audit; - significant and unusual events; - the going concern assumption; - compliance with Accounting Standards and other legal and regulatory requirements; - to meet with the external auditors separately without the presence of the Management on any issues from the audit. d. to review with the internal auditors:- the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; and the internal audit findings and investigation and whether or not appropriate action is taken on the recommendations of the internal auditors; e. to review any related party transactions and conflict of interest situations that may arise within the Company or Group. f. to consider the appointment, resignation or dismissal of external auditors and the audit fees. g. to promptly report to the Bursa Malaysia Securities Berhad where the Audit Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of Bursa Malaysia Securities Berhad Listing Requirements. h. To consider and examine any other matters as the Audit Committee consider appropriate or as instructed by the Board of Directors. 4 Meetings and Attendance a. The Committee shall meet not less than four (4) times in a year. Additional meetings may be called at any time if so requested by any Committee member, management or the internal or external auditors. b. A quorum shall consist of a majority of members present who must be independent directors. c. Other Directors and employees may attend any particular Audit Committee meeting only at the Committee s invitation, specific to the relevant meeting. d. The Company Secretary shall be the secretary of the Committee. 38

41 Audit Committee Report (cont d) e. Procedures in relation to giving of notice, adjournment of meeting and attendance by means of video or teleconference shall be governed by the relevant provisions contained in the Articles of Association of the Company. f. The Committee may deal with matter by way of circular resolutions in lieu of convening a formal meeting for exceptional circumstances. g. The Committee, through its Chairman, shall report to the Board at the next Board of Directors meeting after each Committee meeting. h. The Audit Committee met Five (5) times during the financial year ended 30 June Details of the attendance of the members are as follows: Meeting Percentage of Members Attendance Attendance (%) Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid 4/5 80 Mr John Leong Chung Loong 5/5 100 Dato Wong Lee Yun 2/5 40 Datuk Talib Bin Haji Jamal 5/5 100 SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE The Audit Committee s activities during the financial year included the following:- a. Reviewed the quarterly financial statements and the annual audited financial statements before recommending the same to the Board for approval; b. Reviewed the annual audit plan proposed by the Internal Auditors to ensure the adequacy of the scope and coverage of work; c. Reviewed the Group s internal audit reports on the status and progress of internal audit assignments, audit recommendations made and management response to these recommendations; d. Reviewed the recurrent related party transactions entered into by the Group and ensure that the transactions were undertaken on normal commercial terms not detrimental to the minority shareholders; e. Reviewed the Audit Committee Report and the Statement on Internal Control prior to publishing the same in the Annual Report; f. Appraised the performance and effectiveness of External Auditors and made recommendation to the Board for their re-appointment; g. Met with the External Auditors twice a year and:- reviewed the External Auditors audit plan, area of audit emphasis and fees for the statutory audit; considered the report by the External Auditors on regulatory as well as accounting developments and their impact on the Group; and reviewed the results of the annual audit and significant audit issues arising there from together with management s responses to the findings. h. Met with the External Auditors without the presence of management to facilitate discussion of additional matters relating to audit findings and the management responses arising from their audit. 39

42 Audit Committee Report (cont d) INTERNAL AUDIT FUNCTION AND ITS ACTIVITIES The Group has an internal audit function which is carried out by the Group s Internal Audit Department. Its principal activity is to conduct internal audit reviews and performs checks and compliance tests of the Group s systems of internal controls, including financial, operational and information technology controls and risk management. The Group s Internal Audit Department is independent of its activities and reports directly to the Audit Committee (AC) which reviews and approves its annual Audit Plan. During the financial period under review, the Group s Internal Audit Department undertook various audit assignments in accordance with the annual audit plan and also conducted ad-hoc reviews on areas of concern identified by Management and the AC. The Group s Internal Audit Department applies the Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors. The costs incurred by the internal audit function in respect of the financial year ended 30 June 2013 were RM817,932. Its main audit activities were as follows: a. Reviewed the soundness, adequacy and application of accounting, financial, operational and compliance controls and promoted control awareness in the group; b. Ascertained the extent of compliance with established policies, procedures and statutory requirements; c. Ascertained the extent to which the Company s and Group s resources are accounted for and safeguarded from losses of all kinds; d. Determined the reliability and usefulness of data and information generated for management reporting purposes; e. Carried out environmental, safety and health audits on the Company and the Group; f. Identified opportunities to improve the operations of and processes in the Company and the Group; g. Carried out analyses to determine the efficiency of businesses carried out by the Group; h. Reviewed related party transactions that had arisen within the Company and Group; i. Attended the bi-annual physical inventories of finished goods, raw materials and spare parts; and j. Performed follow-up audits on the implementation of audit recommendations and action plans agreed upon by management. This Report is made in accordance with a resolution of the Board of Directors dated 22 October

43 DIRECTORS RESPONSIBILITY STATEMENT In preparing the annual financial statements of the Group and the Company, the Directors are responsible for ensuring that these financial statements have been prepared to give a true and fair view of the financial position of the Group and the Company at the end of the financial year and the results and cash flows of the Group and the Company are in accordance with the Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia as well as the Listing Requirements of Bursa Malaysia Securities Berhad. In preparing the financial statements for the year ended 30 June 2013, the Directors have: a) applied the appropriate and relevant accounting policies on a consistent basis; b) made judgments and estimates that are reasonable and prudent; c) prepared the annual audited financial statements on a going concern basis; and d) ensured that proper accounting records are kept which disclose with reasonable accuracy, the financial position of the Group and the Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965 and Financial Reporting Standards in Malaysia. The Directors have overall responsibilities for taking reasonable steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. This Statement is made in accordance with a resolution of the Board of Directors dated 22 October

44 Directors Report_38 Statement by Directors and Statutory Declaration_42 financial Independent Auditors Report_43 Statements of Comprehensive Income of Financial Position_45 Statements of Changes in Equity_46 Directors Report_ Statements by of Directors Cash Flows_48 and Statutory Declaration_ 47 Independent Auditors Report_ 48 Notes to the Financial Statements_52 Statements of Comprehensive Income_ 50 Supplementary Information_120 Statements of Financial Position_ 51 Statements of Changes in Equity_ 53 Statements of Cash Flows_ 55 Notes to the Financial Statements_ 57 Supplementary Information_ 124