2008
Corporate Information 2
5-Year Financial Highlights 3
Notice of Annual General Meeting 4-7
Statement Accompanying Notice of Annual General Meeting 7
Board of Directors 8-9
Directors’ Profiles 10-11
Chairman’s Statement 12-23
Corporate Social Responsibility 24-26
Key Information 27
Corporate Structure 28
Export Market 29
Statement on Corporate Governance 30-35
Audit Committee Report 36-39
Statement on Internal Control 40-41
Directors’ Responsibility Statement 42
Financial Statements 43-113
Additional Compliance Information 114-115
BOARD OF DIRECTORS
Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid
Independent Non-Executive Chairman Dato’ Sri Tiong Chiong Hoo
Managing Director Dr. Tiong Ik King
Non-Independent Non-Executive Director Mdm Tiong Choon
Non-Independent Non-Executive Director
Mr Tiong Chiong Hee
Non-Independent Non-Executive Director Mr John Leong Chung Loong
Independent Non-Executive Director Ms Wong Lee Yun
Independent Non-Executive Director Datuk Talib Bin Haji Jamal
Independent Non-Executive Director
COMPANY SECRETARY Ngu Ung Huong
MAICSA 7010077 AUDITORS Ernst & Young
Chartered Accountants
STOCK EXCHANGE LISTING
Bursa Malaysia Securities Berhad - Main Board SHARE REGISTRAR
Symphony Share Registrars Sdn Bhd
Level 26, Menara Multi Purpose, Capital Square No.8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia
Tel : 03-2721 2222 Fax : 03-2721 2530/2721 2531
PRINCIPAL BANKERS AmBank Berhad
DBS Bank Ltd RHB Bank Berhad CIMB Bank Berhad
OCBC Bank (Malaysia) Berhad REGISTERED OFFICE No.1-9, Pusat Suria Permata, Lorong Upper Lanang 10A, 96000 Sibu, Sarawak
Tel : 084-213255 Fax : 084-213855 E-mail: [email protected]
WEBSITE ADDRESS www.jayatiasa.net
5-YEAR FINANCIAL HIGHLIGHTS
47.6 69.3 64.5 161.6 63.3
488.8 664.9 686.9 855.0 793.7
1,106.8 1,226.5 1,377.5 2.09 2.15 2.61
17.3 14.0 15.9
45.5 36.7 41.0 47.5 19.3
121.9 51.0
1,631.0 1,866.0 3.18 3.29
Turnover Profit Before Tax
Profit After Tax Net Earnings Per Share
Total Assets Net Tangible Assets Per Share
RM Million RM Million
RM Million Sen
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
NOTICE IS HEREBY GIVEN that the Forty-Eighth Annual General Meeting of the Company will be held at the Auditorium, Ground Floor, No.62, Lorong Upper Lanang 10A, 96000 Sibu, Sarawak on Monday, 22 September 2008 at 11.45 a.m. for the following purposes:
AGENDA
AS ORDINARY BUSINESS
1. To receive the Audited Financial Statements for the financial year ended 30 April 2008 together with the Reports of the Directors and Auditors thereon.
2. To declare a first and final dividend of 3% less tax for the financial year ended 30 April 2008.
3. To re-elect the following Directors who retire by rotation pursuant to Article 78 of the Company’s Articles of Association:
i. Dato’ Sri Tiong Chiong Hoo ii. Mr Tiong Chiong Hee iii. Mr John Leong Chung Loong
4. To re-elect Datuk Talib Bin Haji Jamal who retires pursuant to Article 82 of the Company’s Articles of Association.
5. To approve the payment of Directors’ fees for the financial year ended 30 April 2008.
6. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.
AS SPECIAL BUSINESS
7. To consider and if thought fit, pass the following resolutions:
ORDINARY RESOLUTIONS
(i) Authority for Directors to Allot and Issue Shares
“THAT subject to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby authorised pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the Company at any time and upon such terms and conditions and for such purposes as the Directors may deem fit, provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued capital of the Company at the time of issue and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”
Resolution 1
Resolution 2
Resolution 3 Resolution 4 Resolution 5 Resolution 6
Resolution 7 Resolution 8
Resolution 9
NOTICE OF ANNUAL GENERAL MEETING
(ii) Proposed Renewal of Authority for the Company to Purchase its Own Shares
“THAT subject to the Companies Act, 1965 (“Act”), the Articles of Association of the Company, the regulations and guidelines issued from time to time by Bursa Malaysia Securities Berhad (“Bursa Securities”) or any other regulatory authorities, the Directors be and are hereby authorised to utilise an amount not exceeding the total audited share premium and retained profits of the Company as at 30 April 2008 of RM282.0 million and RM36.3 million respectively to purchase such number of ordinary shares of the Company provided that the ordinary shares so purchased shall [in aggregate with the treasury shares as defined under section 67A of the Act then still held by the Company] not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company for the time being;
AND THAT such authority shall commence upon the passing of this resolution until the conclusion of the next Annual General Meeting of the Company unless earlier revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting;
AND THAT the Directors may cancel the ordinary shares so purchased or to retain the same as treasury shares and may distribute the treasury shares as share dividend or may resell the same in a manner they deem fit and expedient as prescribed by the Act and the applicable regulations and guidelines of Bursa Securities and any other relevant authorities for the time being in force;
AND THAT authority be and is hereby given to the Directors to take all such steps to implement, finalise and to give effect to the aforesaid transactions with full power to assent to any conditions modifications variations and amendments as may be imposed by the relevant authorities and to do all such acts and things and upon such terms and conditions as the Directors may in their discretion deem fit and expedient in the best interest of the Company in accordance with the aforesaid Act, regulations and guidelines.”
(iii) Proposed Shareholders’ Mandate for Recurrent Related Party Transaction
“THAT subject to the Companies Act, 1965, the Memorandum and Articles of Association of the Company and the Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and/or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature as set out in Section 2.2 of Part B of the Circular to Shareholders dated 30 August 2008 with specific classes of Related Parties which are necessary for the day-to-day operations and in the ordinary course of business on terms not more favourable to the Related Parties than those generally available to the public and are not to the detriment of the minority shareholders;
AND THAT such mandate shall commence upon the passing of this resolution until the conclusion of the next Annual General Meeting of the Company unless earlier revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting;
AND THAT the Directors of the Company be authorised to complete and do all such acts and things as they may consider expedient or necessary to give full effect to the transactions authorised by this resolution.”
8. To transact any other business of which due notice shall have been given in accordance with the
Resolution 10
Resolution 11
NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT
NOTICE IS HEREBY GIVEN THAT the first and final dividend of 3% less tax for the financial year ended 30 April 2008, if approved at the Forty-Eighth Annual General Meeting, will be paid on 28 November 2008 to Depositors whose names appear in the Record of Depositors on 14 November 2008.
A Depositor shall qualify for entitlement only in respect of:
a) Securities deposited into the Depositor’s securities account before 12.30 p.m. on 12 November 2008 in respect of securities exempted from mandatory deposit;
b) Securities transferred into the Depositor’s securities account before 4.00 p.m. on 14 November 2008 in respect of transfers; and
c) Securities bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Securities.
By Order of the Board
JAYA TIASA HOLDINGS BERHAD NGU UNG HUONG (MAICSA 7010077) Company Secretary
Sibu, Sarawak 30 August 2008
NOTES ON APPOINTMENT OF PROXY
1. A member of the Company entitled to attend and vote at the meeting is also entitled to appoint one or more proxies in his/her stead. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy.
2. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
3. The instrument appointing a proxy must be deposited at the Company’s Registered Office at No.1-9, Pusat Suria Permata, Lorong Upper Lanang 10A, 96000 Sibu, Sarawak not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof.
4. If the appointer is a corporation, the proxy form must be executed under its common seal or under the hand of its attorney. If the proxy form is executed by an attorney, supporting documents has to be produced on the day of the Annual General Meeting for verification by the Company Secretary.
EXPLANATORY NOTES ON SPECIAL BUSINESS (a) Authority for Directors to Allot and Issue Shares
The Proposed Ordinary Resolution No. 9 if passed, will give the Directors of the Company authority to allot and issue shares in the Company up to an amount not exceeding in total 10% of the issued capital of the Company for such purposes as the Directors consider would be in the interest of the Company, without having to convene a general meeting. This authority, unless revoked or varied by the Company at a General Meeting, will expire at the next Annual General Meeting.
(b) Proposed Renewal of Authority for the Company to Purchase its Own Shares
The Proposed Ordinary Resolution No. 10 if passed, will authorize the Company to purchase up to 10% of the issued and paid-up share capital of the Company through Bursa Malaysia Securities Berhad.
(c) Proposed Shareholders’ Mandate for Recurrent Related Party Transaction
The Proposed Ordinary Resolution No. 11 if passed, will enable the Company and/or its subsidiaries to enter into recurrent related party transactions involving the interests of Related Parties, which are of a revenue or trading nature necessary for the Group’s day-to-day operations and the transactions being carried out are in the ordinary course of business on terms not to the detriment of the minority shareholders of the Company.
NOTICE OF ANNUAL GENERAL MEETING
STATEMENT ACCOMPANYING
NOTICE OF ANNUAL GENERAL MEETING
The profile of Datuk Talib Bin Haji Jamal who was appointed by the Board on 12 November 2007 retiring and subject to re-election at the Forty-Eighth Annual General Meeting is set out on page 11. Datuk Talib does not hold any shares in the Company and its subsidiaries.
DATUK TALIB BIN HAJI JAMAL DR TIONG IK KING
MR JOHN
LEONG CHUNG LOONG GEN (RTD) TAN SRI ABDUL RAHMAN
BIN ABDUL HAMID
DATUK TALIB BIN HAJI JAMAL DR TIONG IK KING
BOARD OF DIRECTORS
MDM TIONG CHOON DATO’ SRI
TIONG CHIONG HOO
GEN (RTD) TAN SRI ABDUL RAHMAN BIN ABDUL HAMID Independent Non-Executive Chairman
Gen (Rtd) Tan Sri Abdul Rahman bin Abdul Hamid, aged 69, was appointed to the Board on 27 March 1995. He serves as chairman of the Board and the Audit Committee.
Tan Sri was the Chief of the Malaysian Army and Defence Force between 1992 and 1994 and was the Acting Governor of Penang in 1994. From 1958 to 1994, he served in various capacities and appointments in the Malaysian Armed Forces. He is a graduate of the Royal Military College, Malaysia and Army Staff College, Camberlay, United Kingdom.
Presently, he is the Chairman of DVM Technology Bhd, an ICT company listed on MESDAQ 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 Group Managing Director
Dato’ Sri Tiong Chiong Hoo, aged 47, was appointed Executive Director on 27 March 1995 and subsequently re- designated as Managing Director on 26 April 1995. He is the Chairman of the Risk Management Committee.
Dato’ Sri is a businessman with extensive experience in timber and plantation industries. As Group Managing Director, he actively overseas the operations of the Group. He holds a Bachelor of Law and a Bachelor of Economics degrees from Monash University, Australia and is a registered barrister.
Dato’ Sri is the son of Tan Sri Datuk Tiong Hiew King, a major shareholder of the Company. His uncle Dr Tiong Ik King, sister Mdm Tiong Choon and cousin brother Mr Tiong Chiong Hee are also members of the Board.
DR TIONG IK KING
Non-Independent Non-Executive Director
Dr Tiong Ik King, aged 57, joined the Board on 27 March 1995. He is a member of the Remuneration Committee and the Nomination Committee.
Dr Tiong has extensive experience in many industries including media and publishing, information technology, timber, plantation and manufacturing industries. He graduated with a degree in M.B.B.S from the National University of Singapore in 1975 and subsequently obtained his M.R.C.P. from the Royal College of Physicians, UK in 1977.
Currently, he also serves on the Board of EON Capital Berhad and Media Chinese International Limited.
Dr Tiong is the brother of Tan Sri Datuk 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.
MDM TIONG CHOON
Non-Independent Non-Executive Director
Mdm Tiong Choon, aged 39, was appointed to the Board on 3 May 1999.
She has been with Rimbunan Hijau Group since 1991 and served in various managerial and senior positions. She graduated with a Bachelor of Economics Degree from Monash University, Australia.
She is the daughter of Tan Sri Datuk Tiong Hiew King, a major shareholder of the Company. Her uncle Dr Tiong Ik King, brother Dato’ Sri Tiong Chiong Hoo and cousin brother Mr Tiong Chiong Hee are also members of the Board.
DIRECTORS’ PROFILES
MR TIONG CHIONG HEE
Non-Independent Non-Executive Director
Mr Tiong Chiong Hee, aged 34, was appointed to the Board on 14 May 1999.
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 1997.
He holds a Bachelor of Commerce Degree from University of Melbourne, Australia.
He is the nephew of Tan Sri Datuk Tiong Hiew King, a major shareholder of the Company. His uncle Dr Tiong Ik King, cousin brother Dato’ Sri Tiong Chiong Hoo and cousin sister Mdm Tiong Choon are also members of the Board.
MR JOHN LEONG CHUNG LOONG Independent Non-Executive Director
Mr John Leong Chung Loong, aged 61, was appointed to the Board on 28 March 2002. He serves as the Chairman of the Remuneration Committee and is a member of the Audit Committee and Nomination Committee.
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 2001.
He holds a Bachelor of Economics degree majoring in Accounting from Sydney University, NSW, Australia.
He has no family relationship with any Director and/or major shareholder of the Company.
MS WONG LEE YUN
Independent Non-Executive Director
Ms Wong Lee Yun, aged 55, was appointed to the Board on 21 June 2007. 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 the Director of Finance and Strategy for the Renong Group of Companies. She became the Chief Executive of Jaya Tiasa Holdings Berhad from 1997 to 2000. She holds directorship in several private limited companies.
She has no family relationship with any Director and/or major shareholder of the Company.
DATUK TALIB BIN HAJI JAMAL Independent Non-Executive Director
Datuk Talib Bin Haji Jamal, aged 56, was appointed to the Board on 12 November 2007. He serves as the Chairman of the Nomination Committee and is a member of the Audit Committee and Remuneration Committee.
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 2007. He was the Director of Police Cooperatives for 10 years and the Director of Bank Kerjasama Rakyat for 2 years. Presently, he is the Director of a private limited company.
Datuk Talib holds a Master of Science in Mechanical Engineering from Cranfield Institute of Technology, England, United Kingdom.
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.
This allowed us to lay the groundwork for the future, paving the way for more benefits to be offered to our shareholders.
On this note, I am pleased to present to you our annual report and audited financial statements for the financial year ended 30 April 2008.
Throughout the financial year, the world economy was wrought with many challenges. Timber prices remained weak for most parts of the financial year and demonstrated an upward price trend only towards the end of the financial year. The unprecedented surge in global oil prices hitting its then record high and the prolonged problems in the US sub-prime mortgage market derailed what would have been a more promising year when they caused timber prices to soften worldwide. Market sentiment was also dampened by the contraction in demand as a direct result of lower housing starts in Japan and the USA. Furthermore, with the weakening of US Dollar, there was a lower Ringgit return for sales that were denominated in the US Dollar. Despite the testing scenario, we managed to achieve satisfactory results due to our Group’s cost containment efforts and diversified export sales markets coupled with commendable progress in implementing marketing strategies.
I am also particularly pleased to report that the Group’s diversification into oil palm plantations is beginning to make a positive contribution to the Group. We were able to take advantage of the current bullish palm oil market environment on the strength of robust palm oil consumption growth for both edible and non-edible oil market sectors amidst tight supply. During the year, the fresh fruit bunches production of the Group continued to improve, a reflection of meticulous implementation of best estate management practices by the management.
Dear Shareholders,
Over financial year (“FY”) 2008, while we remained steadfast to our core business interests, we also focused our attention on avenues for future growth especially in the palm oil business, leveraging on our strengths and capitalising on available opportunities.
FINANCIAL PERFORMANCE
Against this background, the revenue of the Group for the financial year under review decreased from RM855.0 million in the previous financial year to RM793.7 million, indicating a reduction of 7.2%. Profit before tax was lower by 60.8% to RM63.3 million while net profit after tax registered at RM51.0 million, a decrease of RM70.9 million or 58.1%. This translated into earnings per share of 19.3 sen as compared to 47.5 sen last financial year.
The fall in both revenue and pre-tax profit for the financial year under review was caused by the lower average selling prices of timber. The sharp rise in operating costs due to the record high oil prices was another negative contributing factor. Additionally, with the weakening of the US Dollar, the margin from export sales denominated in US Dollars was further squeezed.
In terms of capital strength, shareholders’ funds of the Group rose by RM48.5 million from RM1,023.3 million over the previous financial year to RM1,071.9 million. The net tangible assets per share stood at RM3.29.
REVIEW OF OPERATIONS Plywood
The plywood division remained at the very core of revenue generation, contributing about 51% to the total revenue of the Group in FY2008. Despite the subdued plywood market, the division’s earnings were only marginally affected over the past year. Plywood sales volume were at 264,577m3, which was 4% lower than that achieved in the preceding financial year. In tandem with the soft market, the average selling price realised for the financial year under review contracted by 6.3% from USD474 per m3 to USD444 per m3.
The major markets, predominantly Korea, the Middle East, Japan and the USA, continued to account for approximately 81% of the Group’s plywood export sales. Sales to Korea accounted for 26%, surpassing the Middle East and Japan markets which yielded sales of 23% and 16% respectively. Export to the USA dropped to 16% compared to 35%
recorded in the preceding financial year.
The market diversification strategy has been successfully implemented by the Group in the prior years. It has lucratively penetrated and expanded its sales to other emerging markets especially the Middle East and reduced its reliance on the US market. The massive construction boom in the Middle East is fueling the demand for timber and wood-based products. By capitalising on this market surge for wood imports, the Group has successfully entered the market since 2005.
In Japan, plywood prices dropped due to the contraction of demand. This plunge was an effect of the new housing code implemented since end of June 2007 which caused its annualised housing starts to fall more than 20%. However, the relaxation of Japan’s building regulations in November 2007 has resulted in a gradual improvement in plywood prices.
It is particularlly pleasing to note that Jaya Tiasa Plywood Sdn Bhd at Tanjung Ensurai has maintained the CE marking and JAS certifications in FY2008. Furthermore, Rimbunan Hijau Plywood Sdn Bhd (“RHP”), a wholly owned subsidiary of the Group, was awarded the JAS certification on 31 March 2008. During the year, RHP also passed the survellience audit and sustained its CE Marking certification. With these accreditations, our position is further strengthened and our credentials are bolstered to better penetrate developed markets.
During the year, in its continuous effort to improve production efficiency, the plywood division implemented a systematic modification to existing machinery, which increased wood recovery rates and enhanced the ability to peel logs of smaller diameters.
CHAIRMAN’S STATEMENT
Logging
In the year under review, total production for the logging division increased by 17%, and a total of 453,841m3 of logs was exported during the year, which was approximately 13% higher than the previous financial year. The main log species exported were Meranti, Selangan Batu, MLH, Kapor and Keruing. The average export log price achieved during the year was USD172 per m3.
The effects of the downturn across the industry were cushioned by India’s firm demand for logs. The increasing log demand in India is driven by its buoyant economic growth. Over the past few years, India has been directing its focus on improving road and housing infrastructure and in developing its construction industry on the back of rising consumer demand. In this regard, India continues to source for supplementary hardwood products from the global market, which led to its high imports. During the financial year under review, India imported 43% of the total log export from the Group, charting an increase of more than 64% from the previous year, overtaking Japan, Taiwan and China.
Japan will remain a significant market as it contributed more than 19% of the total revenue of the logging division.
In the year under review, the movement of log prices in Japan was influenced by the softening demand from plywood mills as a result of the huge undigested plywood stock. This situation resulted from Japan’s introduction of the new housing code, which drastically reduced the number of housing projects. This led to a sharp decline in the country’s volume of log imports. This condition was short-lived, however, and housing starts in Japan has since been restored to above 1.2 million units a month early this year. The Group is confident that with this uptrend, there is great potential for significant growth as demand is expected to escalate in response to the increasing number of housing starts.
Oil Palm Plantation
Since the Group’s diversification into oil palm plantation in 2002, promising results were apparent for the oil palm division in FY2008. During the period under review, the division’s share of contribution to the Group’s total revenue has increased from 1% to 5%.
Revenue from the sale of Fresh Fruit Bunches (“FFB”) surged by 247% to RM37 million in FY2008. This was on account of the increase in FFB production which was due to a more productive age profile of the palms. Another contributing factor was a steep rise in FFB average selling price, which jumped over 81% in FY2008.
During the year, the production of FFB rose 92% to 61,048 metric tonne (“MT”), against the 31,864 MT achieved a year ago, boosted mainly by the additional 743 hectares (“ha”) of oil palms that reached maturing age and yielded harvest. The FFB production of the Group is expected to increase further over the next few years as the younger palms progressively mature. The total oil palm planted area as at the end of FY2008 stood at 34,531 ha, an increase of 12,086 ha from the previous financial year-end, of which 3,531 ha were in the matured stage. Currently, the Group owns 10 estates with a total plantation land bank of 83,480 ha. Approximately 67,767 ha are estimated to be suitable for planting. Under the division's progressive planting schedule, all the estates will be fully planted by early 2011.
At present, FFB of oil palm is sold to third-party mills. With the increasing number of matured hectares, the Group plans to set up crude palm oil (“CPO”) mills in the next few years, and the construction of the first CPO mill is scheduled for completion by the end of year 2008. The CPO mill has a capacity of processing 45-MT of FFB per hour, which is expandable to 90-MT per hour.
Reforestation
The Group regards forest plantation as a vital activity. Forest plantation not only ensures sustainability of forest resources, it also ascertains the progressive replenishment of wood resources while, at the same time, providing continuous supply to the Group’s wood-based manufacturing operations in the long run. Planted forests require a maturity period of 12 to 15 years in order to provide commercially exploitable timber. In this respect, the Group anticipates that its forest plantation division will start to positively contribute to the Group’s earnings by year 2022.
The Group has carried out tree planting projects in the reforestation area in Kapit Division, Sarawak, covering a total area of 71,797 ha with 41,684 ha estimated to be plantable. As at the end of the review period, more than 8,000 ha of reforestation areas and above 600,000 seedlings have been planted, of which, 85% were planted with the fast growing and commercially valuable species Eucalyptus Deglupta (Kamerere) while Anthocephalus Chinensis (Kelampayan) and other species made up the balance. The current plantation development is carried out under Industrial Tree Planting (ITP) method.
The progress of seedlings production at the Group’s nursery faired relatively well. With our existing stock of 180,000 seedlings, which are of the high-growth and high-yield species, we are confident that they will adequately meet the immediate needs of our tree planting activities. As plantation forests are exposed to a higher risk of pest infestations and diseases than trees in the natural forest, stringent quality control over seedlings production and planting progress are implemented by the Group to ensure low incidences of pests and diseases in the field.
ONGOING GROWTH OPPORTUNITIES AND STRATEGIES Plywood
The plywood division will continue to explore opportunities that will expand its growth and enable it to widen its market share in emerging markets. It will remain focused on value added plywood niche products, such as floorbase panels and film-overlay plywood to cater for the growing demand of these products. Operational excellence within the
CHAIRMAN’S STATEMENT
Logging
With the primary aim to optimise returns from the forest resource, the logging division continues to emphasise and enforce good forest management. The stringent monitoring of logging equipment and machines to ensure optimal utilisation also contributes to the improvement of the division’s operational efficiency. In addition, logistics planning is given prominence in order to achieve timely production and delivery to safeguard the quality of logs and to improve grading for better pricing.
Oil Palm
The oil palm division foresees reaping benefits from higher FFB production yielded from the more productive age profile of the Group’s oil palm plantations. The rising palm oil prices also bode well for the division. The Group however does not take lightly the challenges it could face in countering issues that concern the escalating costs of production, specifically from the hike in costs of fertilizer and transportation. In the face of such issues, the Group plans to mitigate the impact of these challenges by strengthening plantation management practices, which stress enormously on continuous improvement in yields and in cost efficiencies. With its first CPO mill expected to be operational by the end of year 2008, the division is well positioned to show promising prospects in the years to come. The oil palm business is envisaged to become the new core business which is anticipated to contribute significantly towards the Group’s profit.
Reforestation
The reforestation division will be endeavouring to add reforestation area while focusing on improving workforce management, enhancing work standards, and engaging more contractors and manpower for the projects and strengthening research and development. Looking forward, the pace of planting development will pick up as we continuously improve in productivity and advance on the learning curve.
CHAIRMAN’S STATEMENT
DIVIDEND
In recognition of shareholders’ loyalty, the Board of Directors has recommended a final dividend of 3% less income tax of 25% for the financial year ended 30 April 2008, to be paid on 28 November 2008 subject to the shareholders’
approval at the forthcoming 48th Annual General Meeting.
PROSPECTS
Global economic growth is expected to moderate in 2008, given the effect of US recessionary pressures, a weakening US dollar and the drastic escalation of oil prices. The growth of Asian economies will be directly impacted and the fear of inflation is becoming more pronounced.
Despite the volatile market environment and the effects of rising inflation in most economies, taking the perspective of the timber industry as a whole, the Group foresees stability in the prices of and demand for timber products to continue. This is mainly due to the continuing tight supply of logs, coupled with a strong demand for wood products from countries in the Asia Pacific region.
Russia’s log supplies will be significantly impacted from its increase in export tax. In April 2008, Russia increased its export tax on logs to 25%, which will be further increased to 80% in January 2009. With this move, prices of hardwood is anticipated to rise as a likely effect of reduction in Russia’s softwood supplies. Apart from Russia, China’s plywood production has also fallen since the government decided to reduce the export rebate from 20% to 5% at the end of 2007. In addition, continuous strict enforcement on logging and forest conservation in the Asia-Pacific region should constraint raw material supply. The Group looks favourably on these factors and is optimistic that they augur well for timber prices.
Consuming countries such as China, India and the Middle East boost strong demands for timber products on account of their rapid development in construction, infrastructure and reconstruction activities. Furthermore, Japan is anticipated to restore its demand, due to a steady pick-up in housing starts and the clearing of its timber inventory levels.
The prospects of the plantation industry remain positive, primarily on the strength of global demand for oils and fats. The significant development activities and capital expenditure currently undertaken by the Group in the oil palm plantation will ensure that this new core business will become a major contributor to the earnings of the Group in time to come.
Going forward, the Board will strive to intensify its efforts to improve efficiency and productivity in its operations and to deliver positive results for the next financial year ending 30 April 2009.
APPRECIATION
On behalf of the Board of Directors, I would like to convey sincere thanks to my management team and all employees of the Group, whose undivided support and dedication was so crucial and necessary for the future growth of our Group.
I am grateful to you, our shareholders, customers, business partners, bankers and the relevant authorities and members of the community for your invaluable support and deep trust in the Group.
GEN (RTD) TAN SRI ABDUL RAHMAN BIN ABDUL HAMID Chairman 22 August 2008
As one of the recognised leaders in the timber industry, the Group has always placed due emphasis on upholding its Corporate Social Responsibility (CSR) philosophy. With our efforts focused on the sustainable harnessing of timber resources and value-added downstream activities, we have been relentless in championing the cause of environmental conservation. We believe that active protection of the environment coupled with our commitment to social responsibility will ultimately lead to the fulfilment of our foremost goal – developing a sustainable future for all. The Group’s CSR value focuses on four key areas comprising of the environment, the workplace, the community and the marketplace.
THE ENVIRONMENTAL
We have developed responsible environmental management practices at each of our timber concession areas and oil palm estates. For instance, we practise internationally recognised Reduced Impact Logging (“RIL”) techniques in our harvesting operations, which ensure minimal damage to residual stands and the surrounding areas. These practices reduce the effects of our activities on the environment and are prevalent in the day-to-day operations of the Company.
Certification
The Group is supportive of responsible forest management concepts and appreciate the value of products manufactured from timber of legal sources. A reflection of the Group’s commitment towards this is manifested in its efforts to obtain certifications under different standards. Jaya Tiasa Plywood Sdn Bhd and Rimbunan Hijau Plywood Sdn Bhd at Tanjung Ensurai, both obtained the CE Marking and the Japanese Agriculture Standard (“JAS”) certifications. During the FY2008, the Group was delighted to note that we successfully passed all the surveillance audits for both certifications.
Furthermore, our factories, namely Jaya Tiasa Plywood Sdn Bhd and Jaya Tiasa Timber Products Sdn Bhd had been awarded Wood Packaging Material Treatment Providers Certifications from the Department of Agriculture, Sarawak.
The certifications validated that the wood packaging treatment facilities of our factories have complied with the Sarawak Department of Agriculture Plant Protection and Quarantine Branch conditions for wood packaging material treatment in accordance with the International Standards for Phytosanitary Measures No.15 (ISPM 15).
CORPORATE SOCIAL RESPONSIBILITY
Biomass Power Plants
Environment conservation tops our list of priorities within the Group. For this reason, we incorporate conservation efforts into our daily operations. We have erected biomass power plants that convert wood waste into fuel for use in our mills as a source of renewable energy since 1996. This effectively allows us to maximise the value of our wood resources at all our mills and processing plants whilst minimising waste produce for a cleaner environment.
Oil Palm Plantation
The Group’s oil palm division continues to monitor procedures and systems to ensure that good agronomic practices are prevalent throughout the organisation. Among the various practices adopted by the Group’s estates are zero burning land development techniques and Good Agricultural Practices in water management, manuring and weeding.
As an exercise in managing pest control, our biological and integrated pest management practice which involves the planting of beneficial plants and light traps, has vastly reduced dependency on the usage of chemical pesticides.
Reforestation
In line with the State Government’s policy to encourage forest plantations, we have started our planted forests initiative so that timber supply will be sustainable and renewable in the long run. The Group has set aside a total area of 71,797 ha for reforestation since 2005. Our commitment to establish well-managed forest plantations of fast-growing timber species would also control deforestation, reduce greenhouse gas emission and leave a positive impact on climatic change.
THE WORKPLACE
The Group truly believes that people are the most important asset to help us attain our objectives. Our workforce is constantly growing to meet the demands of our rapid progress. As at April 2008, the Group employee strength is 4,789.
We have always been consistent in helping our employees achieve their fullest potential by equipping them with the necessary skills via specialised training. Apart from organising in-house training, our employees are encouraged to attend the Group’s sponsored external courses. In our logging division, forest workers are sent for training provided by the Sarawak Timber Association. Upon completion of different ongoing courses such as tree felling, log extraction and log loading, the workers are expected to be more competent in their tasks. In our oil palm division, we have a training team that plans various courses and modules pertaining to technical knowledge, management and skills reinforcement in managing oil palm crops. To improve their practical knowledge and field exposure, our plantation personnel are given the opportunity to attend many plantation workshops and seminars to better familiarise them with the industry we operate in.
The work culture at Jaya Tiasa is performance-oriented and based on meritocracy. We encourage high standards of performance by rewarding our achievers with additional benefits in recognition of their efforts. Each business unit carries out regular formal performance reviews and evaluations autonomously.
The Group gives precedence to employee retention over recruitment. For us, it is important that our salary and benefits packages are market-competitive and reflective of how much we value our employees. We also offer short-term and long-term incentives to further motivate staff of every level. We are therefore proud to claim that our attention to human resource is reflected in the low staff turnover rate.
The Group promotes staff appreciation efforts such as our annual dinner, birthday celebrations, festive gatherings and family events. We also go through great lengths to ensure that our people’s mental and physical well-being are being taken care of through strongly supporting social programmes and recreational club activities such as bowling, basketball, badminton and mini-sports. In addition, we invest in workforce welfare by providing quality environment
THE WORKPLACE (CONT’D)
Our employees’ health and safety at work is a matter of utmost priority. Our goal is to have an injury-free workplace.
We provide regular training to enable our staff understand the requirements of Occupational Safety and Health Act (OSHA) 1994 and also to instil safety awareness. Emergency exercises including fire-fighting drills are regularly practised. To further support this, we have appointed trained and qualified safety officers who conduct frequent quality audits and safety checks at individual sites to ensure that all safety requirements and precautions are strictly observed.
All our operational procedures are in compliance with OSHA, 1994 and the respective regulations.
THE COMMUNITY
Our focus on people, social engagement and support for the needy forms the cornerstone of our social responsibility. The Group has been contributing to the community from raising donations for the needy to providing hands-on assistance to charitable events, local community projects and social causes. Over the years, our efforts include charity drives for the autistic society, the kidney foundation and children’s homes, and cash contribution to Malaysia Crime Prevention Foundation (Yayasan Pencegahan Jenayah Malaysia), which is a foundation established by the coordinated efforts of the government and other private organisations to instil awareness among the public about the importance of crime prevention in Malaysia.
The Group takes pride in its relationship with local communities. From offering job opportunities to providing necessities and infrastructure, we have contributed in a significant way to help raise the living standards of native communities.
Our dedicated site management team takes responsibility for resolving the concerns of various local groups and also assists in improving their livelihoods in the forest.
THE MARKETPLACE
As one of the more prominent players in the global timber industry, our list of customers and stakeholders is extensive.
Strong customer loyalty has brought us long-term support from those who are impressed by our expertise, values and service. While we are proud of our rapport with our customers, we understand that we can secure their trust only by continuously improving our product, services and processes. We stress honest communications with our customers, employees and other stakeholders, emphasising on transparency. We know we can achieve this through open communication and we encourage dialogues with keen stakeholders to keep them well versed with our key business activities as well as to be updated with their concerns. Interested parties and investors can also keep track of our development through general meetings with shareholders, briefings to the investment community, road shows, press releases, and the Group’s website.
KEY INFORMATION
Forest Concessions
Gross Area : 713,211 hectares (1,760,535 acres) Extraction Quota : 99,900m3 monthly
Main Species : Meranti, Kapor, Keruing, Selangan Batu, Jelutong, Melapi, Mersawa, Nyatoh, Arau, Penyau and Bindang.
Oil Palm Plantation
Total Land Area : 83,480 hectares Plantable Area : 69,055 hectares Planted Area* : 36,404 hectares Matured Area* : 6,924 hectares
Reforestation
Total Land Area : 71,797 hectares Plantable Area* : 41,684 hectares Planted Area* : 8,256 hectares
Annual Production Capacity
Jaya Tiasa Rimbunan Hijau Jaya Tiasa Total
Plywood Plywood Timber Products
Sdn Bhd Sdn Bhd Sdn Bhd
Plywood
(cubic metre) 180,000 120,000 120,000 420,000
Rotary Veneer
(cubic metre) 324,000 - - 324,000
Sawntimber
(cubic metre) 98,400 - 14,400 112,800
Blockboard
(cubic metre) - 12,000 - 12,000
Film-Overlay Plywood
(cubic metre) - 6,000 - 6,000
100% - Jaya Tiasa Plywood Sdn Bhd
100% - Jaya Tiasa Timber Products Sdn Bhd 100% - Rimbunan Hijau Plywood Sdn Bhd 100% - Jaras Sdn Bhd
70% - Sericahaya Sdn Bhd 70% - Curiah Sdn Bhd
100% - Jaya Tiasa Forest Plantation Sdn Bhd 100% - Guanaco Sdn Bhd
100% - Maujaya Sdn Bhd
100% - Maxiwealth Holdings Sdn Bhd 100% - Mantan Sdn Bhd
100% - 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% - Multi Greenview Sdn Bhd
100% - Jaya Tiasa Aviation Sdn Bhd
100% - Jaya Tiasa R&D Sdn Bhd 100% - Hak Jaya Sdn Bhd 100% - Kunari Timber Sdn Bhd 100% - Eastern Timber Ltd
40% - Mafrica Trading Sdn Bhd
100% - Jaya Tiasa Aquaculture Sdn Bhd
100% - Eastern Green Company Inc.
100% - Atlantic Evergreen Holdings
100% - Western Timber Resources Limited 100% - Pacific Timber Holdings Limited
66% - Selvaplac Verde Ltda
34%
100% - Atlantic Timber Holdings Limited
JAYA TIASA HOLDINGS BERHAD
B. FOREIGN SUBSIDIARIES A. LOCAL SUBSIDIARIES
TIMBER OPERATIONS
OIL PALM OPERATIONS
HELICOPTER CHARTERING SERvICES
HELI-LOGGING
MARKETING AND TRADING
RESEARCH AND DEvELOPMENT
AqUACULTURE
EXPORT MARKET
OTHERS USA KOREA
SALES VALUE 2008 (%) SALES VOLUME 2008 (%)
SALES VALUE 2007 (%) SALES VOLUME 2007 (%)
SALES VALUE 2006 (%) SALES VOLUME 2006 (%)
PERCENTAGE OF EXPORT SALES
YEAR ENDED 30 April 2008 30 April 2007 30 April 2006
LOGS 39.5%
33.9%
38.6%
PLYWOOD 59.1%
64.3%
56.2%
VENNER 0.1%
0.2%
3.3%
OTHERS 1.3%
1.6%
1.9%
100%
100%
100%
8.5 19.7
9.4 15.8
12.0 24.6
8.9
16.9 5.4
10.6 16.7 17.2 16.9
17.4
20.5 22.5 5.1
9.4
20.5 10.4
11.6
17.0 13.2 6.2
15.3
22.1 18.2
8.0
9.0 29.8 6.7
11.2
13.5 12.7
17.1
6.6 19.6 7.3
14.6
18.7 21.0
12.2
CHINA INDIA
JAPAN TAIWAN
Corporate Governance in Jaya Tiasa Holdings Berhad (“JTH” or the “Company”) adheres to the principles and best practices of corporate governance prescribed in the Malaysian Code on Corporate Governance (Revised 2007) (the
“Code”) wherever possible.
The Board is committed to ensuring that the highest standards of corporate governance is practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and the financial performance of JTH.
Set out below is a statement by the Board on the application by the Group of the principles contained in the Code, and the extent of compliance with the best practices of the Code.
BOARD OF DIRECTORS
The Board retains effective control of the Group and is responsible for the Group’s overall corporate governance, strategic direction, annual budget, business performance and operations, succession planning, risk management, investor relations, internal control and management information systems.
Board Balance
The Board, as at the date of this statement, has eight (8) members. Seven (7) are Non-Executive Directors (including the Chairman) and one (1) is the Managing Director. Four (4) Directors, representing half (1/2) of the Board members, are Independent Non-Executive Directors. The Directors with their wide experiences in both the public and private sectors and diverse academic background provide a collective range of skills, expertise and experience which is vital for the successful direction of the Group. A brief profile of each Director is presented on pages 10 and 11. The Board is of the opinion that its current size and composition is appropriate and constitutes an effective Board.
There is a clear demarcation of responsibility between the Chairman and the Managing Director to ensure the balance of power and authority. The positions of the Chairman and the Managing Director are separately held by two persons.
The Chairman is primarily responsible for ensuring Board effectiveness and conduct. The day-to-day responsibilities of overseeing the overall Group’s financial and operational matters lie with the Executive Management under the direction of the Managing Director to ensure that the Group is managed in an efficient manner. The Managing Director is also responsible for the implementation of Board policies and decisions. Adequate support is in place to ensure continuity in the absence of key executive.
The presence of Independent Non-Executive Directors facilitates the exercise of independent evaluation in Board deliberations and decision-making, and thus provides check and balance in the Board.
The Board has identified Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid as the Senior Independent Non-Executive Director to whom concerns of shareholders, management and others may be conveyed.
Board Meetings
The Board holds scheduled meetings regularly, with additional meetings to be convened as and when necessary. A total of five (5) Board of Directors Meetings were held in the financial year ended 30 April 2008.
Details of the attendance of each Directors are as follows:
Name of Directors Number of Meetings Attended
Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid 5/5
Dato’ Sri Tiong Chiong Hoo 5/5
Dr Tiong Ik King 4/5
Mdm Tiong Choon 3/5
Mr Tiong Chiong Hee 4/5
Mr John Leong Chung Loong 5/5
Ms Wong Lee Yun (Appointed on 21 June 2007) 3/4
Datuk Talib Bin Haji Jamal (Appointed on 12 November 2007) 2/2
STATEMENT ON CORPORATE GOVERNANCE
Supply of Information
The Directors have unrestricted access to information pertaining to the Group’s business and affairs to enable them to discharge their duties and responsibilities.
The agenda for each Board Meeting together with relevant board papers which include quarterly and annual financial statements, operational reports, annual business plan, corporate proposals, minutes of meetings as well as reports from Board Committee are forwarded to each Director for their perusal well in advance of the date of Board Meeting to facilitate informed decision making.
In addition, there is a schedule of matters reserved specifically for the Board’s decision, including the approval of corporate plans and annual budgets, acquisitions and disposals of undertakings and properties of a substantial value, major investments and financial decisions.
Senior management staff may be invited to attend Board Meetings to furnish the Board with explanations and comments on the relevant agenda items tabled at the Board Meeting or to provide 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.
BOARD COMMITTEES
The following Board Committees have been established 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.
a. Audit Committee
The membership, terms of reference and summary of the Audit Committee and internal audit activities are presented on pages 36 to 39.
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)
- Dr. Tiong Ik King (Non-Independent Non-Executive Director) The key terms of reference of the Nomination Committee are:
• to propose and identify new nominees for appointment to the Board of Directors.
• to recommend to the Board, Directors to fill the seats on Board Committees.
• to assess Directors on an on-going basis, the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director.
b. Nomination Committee (cont’d)
• to review annually the Board’s mix of skills, experience and other qualities including core competencies which Non-Executive Directors should bring to the Board; and
• to recommend to the Board for continuation the service of Executive Director(s) and Non-Executive Director(s) who are due for retirement by rotation.
During the financial year ended 30 April 2008, the Nomination Committee recommended two (2) new nominees for appointment to the Board. The Committee met once and conducted individual director appraisal as well as Board appraisal and recommended to the Board for continuation, the services of the Directors due for retirement by rotation. The meeting was attended by all the members.
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)
- Dr. Tiong Ik King (Non-Independent Non-Executive Director) The key terms of reference of the Remuneration Committee are:
• to recommend to the Board the framework, remuneration package and performance related pay schemes for Executive Director; and
• to review the Executive Director’s scope of service contracts.
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 individual remuneration.
The Remuneration Committee met once during the financial year and recommended to the Board the remuneration package for the Managing Director. The meeting was attended by all the members.
d. Risk Management Committee
The Managing Director, Dato’ Sri Tiong Chiong Hoo is the Chairman of the Risk Management Committee. He is authorized by the Board to appoint members to support him in his role in leading the management in the risk management activities. Currently, his team members are from the senior management.
The terms of reference of the Risk Management Committee are:
• to establish a risk management framework and execute an annual risk assessment. The framework should provide a consistent approach to risk and facilitate an accurate perception of acceptable risk by all employees.
The annual risk assessment will characterize the full range of corporate risk exposures, including risk impacts such as harm to employees and the public, environmental harm, and damage to corporate reputation;
• as part of the annual business planning process, to review the defined risk/return parameters, risk appetite and risk management standards;
STATEMENT ON CORPORATE GOVERNANCE
d. Risk Management Committee (cont’d)
• to report annually to the Board of Directors on risk assessment results and report at least half-yearly to the Board on the risk management activities and the effectiveness of the risk management framework; and
• to formulate the annual risk assessment plan for Board’s approval.
The ultimate responsibility for ensuring an effective risk management framework/program is in place and is aligned with the business objectives of the Group, however, rests with the Board.
The Risk Management Committee held bi-monthly meetings during the financial year ended 30 April 2008.
DIRECTORS’ REMUNERATION
The policy on Directors’ remuneration is to provide remuneration packages to attract and retain the Directors of the calibre needed to run the Group successfully. The Remuneration Committee recommends to the Board the remuneration package for the Managing Director. In making its recommendation, the Committee has taken into account the pay as well as employment conditions within the same industry and link the Managing Director’s package to corporate and individual performance. It is the ultimate responsibility of the Board to approve the remuneration package of the Managing Director.
In the case of Non-Executive Directors, the level of remuneration relate to contribution and the level of responsibilities undertaken by the individual Non-Executive Director. The Company reimburses expenses incurred by the Directors in the course of their duties as Directors.
During the financial year ended 30 April 2008, the remuneration of the Managing Director and Non-Executive Directors are as follows:
Directors’ remuneration Executive
Director Non-Executive
Directors
RM RM
Directors’ Fees 48,000 333,295*
Other Fees - 110,000
Salary and Bonus (including EPF) 990,080 -
Allowance - 48,000
Benefit-in-kinds 15,500 23,950
Total 1,053,580 515,245
Directors’ remuneration Executive
Director Non-Executive
Directors
Below RM50,000* - 5
RM50,001 to RM100,000 - 1
RM100,001 to RM150,000 - 2
RM1,050,001 to RM1,100,000 1 -
* Include fee paid to Dr Haji Wan Alshagaf Bin Tuanku Esim, an Independent Non-Executive Director who resigned on 28 September 2007.
The Board is of the view that the transparency and accountability aspects of Corporate Governance as applicable to
DIRECTORS’ TRAINING
All the Directors have attended the Mandatory Accreditation Programme prescribed by Bursa Malaysia Securities Berhad. They are encouraged to attend other educational programmes and seminars to keep abreast with new developments in the business environment.
To further enhance the Directors’ knowledge in relation to the business of the Group, a majority of them have visited the factories and the oil palm estates of the Group. During such visits, these Directors obtained first hand understanding of the business operations and challenges faced by the Group.
Particulars of the training programmes and seminars attended by the Directors during the financial year are as follows:
1. Private Finance Initiatives and Public – Private Partnership: organised by Asia Business Forum Sdn Bhd.
2. Updates on Listing Requirements - Issues and Challenges: organised by Bursa Malaysia Berhad and MAICSA.
3. Tax Planning for SME’s & Taxation for Investment Holding Companies Incorporating Budget 2006 & 2007 Changes: organised by Malaysian Institute of Accountants.
4. Year 2008 Budget Proposals Recent Tax Developments & Latest Update on Companies (Amendment) Act 2007:
organised by Ernst & Young Tax Consultants Sdn Bhd.
5. Seminar on Taxation: organised by Inland Revenue Officers’ Union in collaboration with Lembaga Hasil Dalam Negeri Malaysia.
6. Creating & Managing Key Performance Indicators (KPIs): organised by MRS Management Sdn Bhd.
7. Asia Pacific Audit & Governance Summit 2007: organised by Columbus Circle Governance Sdn Bhd.
8. Advanced Corporate Tax Planning: organised by the Malaysian Institute of Certified Public Accountants.
9. Emotional Intelligence EQ for Leadership Excellence: organised by Global Learning Network Sdn Bhd.
APPOINTMENTS TO THE BOARD AND RE-ELECTION OF DIRECTORS
There is in place a formal and transparent procedure for the appointment of new Directors to the Board. The Nomination Committee recommends new candidates for all directorships to be filled by the Board. The Nomination Committee also recommends to the Board directors for re-election and re-appointment by shareholders at the Annual General Meeting.
In accordance with the Company’s Articles of Association, all Directors appointed by the Board are subject to retirement and re-election by shareholders at the next Annual General Meeting after their appointment. Directors over seventy years of age are required to submit themselves for re-appointment by shareholders annually in accordance with Section 129(6) of the Companies Act 1965. In accordance with the Articles of Association, at least one-third of the remaining Directors are required to submit themselves for re-election by rotation at each Annual General Meeting.
STATEMENT ON CORPORATE GOVERNANCE
SHAREHOLDERS COMMUNICATION AND INVESTOR RELATIONS
The Board recognizes the importance of maintaining transparency and accountability to its shareholders and investors.
Prompt and timely release of financial results on a quarterly basis provides shareholders with an overview of the Group’s performance and operations which enable them to make informed investment decision.
The Company’s Annual General Meeting serves as a principal forum for dialogue with shareholders, whereby shareholders are at liberty to raise questions on the agenda items of the meeting. Shareholders who are unable to attend are allowed to appoint proxies to attend and vote on their behalf. Members of the Board as well as the external auditors of the Company are present to answer questions raised at the meeting.
The Company has an Investor Relations Unit which provides a platform for two-way communication between the Company and the shareholders, investors and the investment community, both in Malaysia and overseas. Regular press conference and briefing to fund managers, research houses and analysts are held which allow the Management to convey information about the Group’s performance, corporate strategy and other matters affecting shareholders, stakeholders and the public generally. At the same time, it ensure constant communication flow and transparency to members of the investment and media community.
FINANCIAL REPORTING
In presenting the annual financial statements and quarterly announcement of results to the shareholders, investors and Regulatory Authorities, the Board aims to present a balanced and understandable assessment of the Group’s financial position and prospects.
The Audit Committee assists the Board in ensuring accuracy, adequacy and quality of financial reporting of the Group and the Company.
The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements of the Group and the Company is set out on page 42.
INTERNAL CONTROL
The Statement on Internal Control, which provides an overview on the state of Internal Control within the Group, is set out on pages 40 and 41.
RELATIONSHIP WITH THE AUDITORS
A transparent and appropriate relationship is maintained with the Company’s auditors, both internal and external, through the Audit Committee. The Audit Committee has been explicitly accorded the power to communicate directly with both internal auditors and external auditors.
The Committee met once with the external auditors without the presence of the Executive Director and Management during the financial year.
This statement is made in accordance with a resolution of directors dated 22 August 2008.
MEMBERS OF THE AUDIT COMMITTEE
Gen (Rtd) Tan Sri Abdul Rahman Bin Abdul Hamid Chairman - Independent Non-Executive Director Mr John Leong Chung Loong
Member - Independent Non-Executive Director Ms Wong Lee Yun
Member - Independent Non-Executive Director Datuk Talib Bin Haji Jamal
Member - Independent Non-Executive Director 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 of the Committee:
(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, 1967.
(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 members of the Audit Committee shall elect a chairman from among their number who shall be an independent director.
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.
AUDIT COMMITTEE REPORT
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, exclu
