annual report2014 - hap seng plantations · 2020. 5. 29. · jalan p. ramlee 50250 kuala lumpur tel...

annual report 2014

Menara Hap SengJalan P. Ramlee, 50250 Kuala Lumpur, Malaysia.

8thannuaL geneRaL Meeting

Monday, 25 May 2015 at 2pm.

2 Corporate Information 3 Directors’Profile 14 GroupFinancialHighlights 16 Chairman’sStatement 22 StatementonCorporateGovernance 35 StatementonRiskManagementand InternalControl 41 BoardCommittees 51 CorporateSocialResponsibility

56 FinancialStatements114 AdditionalInformation116 ParticularsofGroup’sProperties120 PlantationStatistics122 ShareBuy-BacksSummary123 AnalysisofShareholdings126 Directors’Shareholdings127 NoticeofAnnualGeneralMeeting• ProxyForm

16Chairman’sStatement

51Corporate Social

Responsibility

Contents

56Financial

Statements

Hap Seng Plantations Holdings Berhad |AnnualReport2014

CorporateInformatIon

tan SRi aHMad Bin MoHd donIndependentNon-ExecutiveChairman datuK SiMon SHiM Kong YiP, JPNon-IndependentNon-ExecutiveDeputyChairman

datuK edwaRd Lee Ming Foo, JPManagingDirector

Lee wee YongExecutiveDirector

au Yong Siew FaHExecutiveDirector

BoaRd oF diReCtoRS

tan SRi aBduL HaMid egoHNon-IndependentNon-ExecutiveDirector

dato’ JoRgen BoRnHoFtIndependentNon-ExecutiveDirector

wong Yuen Kuai, LuCienIndependentNon-ExecutiveDirector

tuan HaJi MoHd aRiS @ niK aRiFF Bin niK HaSSanIndependentNon-ExecutiveDirector

datuK aMat aSRi @a.aSRie B.aB KadiR @ a.KadiRNon-IndependentNon-ExecutiveDirector

CoMPanY SeCRetaRieSCheahYeeLeng(LS0009398)LimGuanNee(MAICSA7009321)

RegiSteRed oFFiCe21stFloor,MenaraHapSengJalanP.Ramlee50250KualaLumpurTel :603-21725228Fax :603-21725286Website :www.hapsengplantations.com.myE-mail :[email protected]

PLantation HeadquaRteRSOff40KM,JalanJerocoLahadDatu,Sabah

PLaCe oF inCoRPoRationMalaysia

SHaRe RegiStRaRTricorInvestorServicesSdnBhd(118401-V)Level17,TheGardensNorthTowerMidValleyCity,LingkaranSyedPutra59200KualaLumpurTel :603-22643883Fax : 603-22821886

auditoRSKPMG(FirmNo.AF0758)CharteredAccountants2ndFloor,WismaGekPoh18JalanHajiSaman88000KotaKinabaluSabah

PRinCiPaL BanKeRMalayanBankingBerhad

2

Hap Seng Plantations Holdings Berhad | Annual Report 2014

DIreCtors’profIle

Tan Sri Ahmad Bin Mohd Don, a Malaysian, aged67, is the independent non-executive chairman ofHapSengPlantationsHoldingsBerhad.Hewasfirstappointedasanindependentnon-executivedirectoron 9 August 2007 and became the chairman on18September2007.He isalso thechairmanof theAudit Committee, Remuneration Committee andNominatingCommittee.

Inaddition,TanSriAhmadistheindependentnon-executive chairman of Komarkcorp Berhad, andan independent non-executive director of UnitedMalaccaBerhadandMAAGroupBerhad,allofwhichare listed on the Main Market of Bursa MalaysiaSecurities Berhad. He is also an independent non-executive chairman of Zurich Insurance MalaysiaBerhad, MAA Takaful Berhad and KAF InvestmentBankBerhad.

Tan Sri Ahmad graduated with summa cum laudein Economics and Business from the AberystwythUniversity, United Kingdom. He is a fellow of the

Institute of Chartered Accountants in England andWales and amember of theMalaysian Institute ofCertifiedPublicAccountants.

Tan Sri Ahmad has extensive experience in financeand banking, having worked in various capacitieswithPernasSecuritiesSdnBhd,PermodalanNasionalBerhad and Malayan Banking Berhad. He was thegroupmanagingdirectorandchiefexecutiveofficerof Malayan Banking Berhad from 1991 to 1994before assuming the position as the Governor ofBank Negara Malaysia from May 1994 to August1998.

TanSriAhmaddoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.

He attended all the 4 boardmeetings held duringthefinancialyearended31December2014.

tan SRi aHMad Bin MoHd don

independent non-executive Chairman

3


Directors’ Profile

datuk Simon Shim Kong Yip, JP, a Malaysian,aged58,isanon-independentnon-executivedeputychairmanofHapSengPlantationsHoldingsBerhad. Hewasfirstappointedasanon-independentnon-executive director on 9 August 2007 and becamethe deputy chairman on 23 February 2015. He isalso amember of theNominatingCommittee andRemunerationCommittee.

Inaddition,DatukSimonShimisanon-independentnon-executive director of Hap Seng ConsolidatedBerhad. He is also an independent non-executivedirector of Lam Soon (Thailand) Public CompanyLimited,acompanylistedontheStockExchangeofThailand.

DatukSimonShimisadirectorofbothLeiShingHongLimited and Lei Shing Hong Securities Limited. LeiShingHongSecuritiesLimited,acompanyregisteredwith the Securities and Futures Commission HongKong,isawholly-ownedsubsidiaryofLeiShingHongLimited,acompanyincorporatedinHongKong.

DatukSimonShimisthemanagingpartnerofMessrsShimPang&Co.HeholdsaMasterDegree in lawfromUniversityCollege London, LondonUniversityandisaBarrister-at-lawoftheLincoln’sInn,London,anAdvocateandSolicitoroftheHighCourtinSabahand Sarawak, aNotary Public and a Justice of thePeace inSabah.He isaCharteredArbitratorandaFellowofboththeCharteredInstituteofArbitrators,United Kingdom and the Malaysian Institute ofArbitrators. He was a member of the MalaysianCorporate Law ReformCommittee and its workinggrouponCorporateGovernanceandShareholders’Rights.

Datuk Simon Shim does not have any familyrelationship with any director and/or majorshareholdernordoeshehaveanyconflictofinterestwiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.


datuK SiMon SHiM Kong YiP, JP

non-independent non-executive deputy Chairman

4


datuk edward Lee Ming Foo, JP,aMalaysian,aged60,isthemanagingdirectorofHapSengPlantationsHoldings Berhad. He was first appointed to theboardon15May2007asanexecutivedirectorandassumed the current position since 18 September2007. He is also a member of the RemunerationCommittee.

In addition, Datuk Edward Lee is the managingdirector of both Gek Poh (Holdings) Sdn Bhd andHapSengConsolidatedBerhad,theformerbeingtheCompany’sultimateholdingcompanyandthelatterbeing the Company’s immediate holding companywhichislistedontheMainMarketofBursaMalaysiaSecuritiesBerhad.

Datuk Edward Lee graduated with a degree inBachelor of Arts from the McMaster University inCanada in 1977. He joinedMalaysianMosaics SdnBhd (formerlyMalaysianMosaics Berhad) group in1980,becameitschiefoperatingofficerin1995andwasitsmanagingdirectorfrom31March2005to31January2007.

DatukEdwardLeedoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswith theCompanysave for the related party transactions disclosed inNote 22 to the Financial Statements. He has notbeenconvictedofanyoffenceinthepast10years.



datuK edwaRd Lee Ming Foo, JP

Managing director

5


Lee wee Yong,aMalaysian,aged67,isanexecutivedirector of Hap Seng Plantations Holdings Berhadand was appointed to this position on 2 February2011.

Inaddition,Mr.LeeisadirectorofGekPoh(Holdings)Sdn Bhd and an executive director of Hap SengConsolidatedBerhad.

Mr. Lee holds a degree in Bachelor of CommerceandAdministration fromVictoriaUniversity inNewZealandandisamemberoftheMalaysianInstituteofAccountantsandInstituteofCharteredAccountantsofNewZealand.HejoinedMalaysianMosaicsSdnBhd

(formerlyMalaysianMosaicsBerhad)groupin1992,assumedthepositionofgroupchieffinancialofficerfrom1March2003 to15December2005,andwasanexecutivedirectorfrom1March1999to6March2007.

Mr. Leedoes not have any family relationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehas not been convicted of any offence in the past 10years.



Lee wee Yong

executive director

6


au Yong Siew Fah, a Malaysian, aged 64, is anexecutivedirectorofHapSengPlantationsHoldingsBerhadandwasappointedtothispositionon31July2007.

Mr.AuYongobtainedtheDiplomaoftheAssociateof Incorporated Society of Planters in 1975. Hethen attended the General Management Courseorganised by the Ashridge Management College,United Kingdom in 1979 and participated in theRoyal AgricultureConvention in Stoneleigh, UnitedKingdomin1986.Heisoneofthefoundingmembersof theMalaysianPalmOilAssociation (MPOA) andhasbeentheHonorarySecretaryoftheMPOAsinceApril2006.HeservedasamemberoftheMalaysianPalmOilBoardduringtheyearsfrom2008to2014.

Mr. Au Yong hasmore than 45 years of extensiveexperience in all aspects of management of largeplantationsformajorcropssuchasoilpalm,rubber,cocoa and coconuts and in the development ofplantation land from initial acquisition of jungle

land,establishmentofpalmoilmillsandmarketingofproduce.HestartedhiscareerasacadetplanterwithYuleCattoPlantationsSdnBhdinKluang,Johorin 1969 after attending the Royal Military Collegeand rose through the ranks to various capacitiessuch as estate controller and planting adviser.He was the general manager of United MalaccaBerhad from 1997 to 2001 before joining the HapSengConsolidatedBerhadGroup (HSCBGroup)asits chief operating executive for Group Plantationsin 2001. Currently, he is the chief executive for theGroupPlantationsoftheHSCBGroup.

Mr.AuYongdoesnothaveany family relationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.



au Yong Siew FaH

executive director

7



tan Sri abdul Hamid egoh, a Malaysian, aged81, is a non-independent non-executive directorofHap SengPlantationsHoldings Berhad andwasappointedtothispositionon9August2007.

Inaddition,TanSriAbdulHamid isamemberofTunRazak Foundation and a boardmember ofMalaysiaJapaneseEconomicAssociation.Heisalsothechairmanof Steel Industries (Sabah) Sdn Bhd, INTI CollegeKinabaluSdnBhd,andUniversityMalaysiaSabah.

He started his career with Colonial Civil Servicein 1956. Prior to him graduating with a degreein Bachelor of Arts (Honours) from University ofAdelaide,Australia in 1965,hehadservedwith theCommonwealthPublicServiceinAustraliafrom1964to1965.Aftergraduation,heassumedtheposition

ofprivate secretaryandaide-decamp to theYangDiPertuaNegeriSabahfrom1966to1967afterwhichhewasappointedassecretaryofdefenceforSabahuntil1971.HeservedasundersecretaryoftheStateofSabahbetween 1971and 1975andassumed theposition of state secretary of Sabah from 1975 to1988.

Tan Sri Abdul Hamid does not have any familyrelationship with any director and/or majorshareholdernordoeshehaveanyconflictofinterestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.

Heattended3ofthe4boardmeetingsheldduringthefinancialyearended31December2014.

tan SRi aBduL HaMid egoH

non-independent non-executive director

8



dato’ Jorgen Bornhoft, a Dane, aged 73, is anindependent non-executive director of Hap SengPlantationsHoldingsBerhadandwasappointed tothispositionon9August2007.HeisalsoamemberoftheAuditCommitteeandNominatingCommittee.

Inaddition,Dato’Bornhoftistheindependentnon-executive chairman of Hap Seng ConsolidatedBerhad. He is a non-independent non-executivedirectorofFraser&NeaveHoldingsBhdandalsothevice-chairman of International Beverage HoldingsLimited.

Dato’ Bornhoft holds a degree in Accountancyand Finance (Bachelor of Commerce) from theCopenhagenBusinessSchoolandattendedexecutivemanagementcoursesatINSEAD.

Dato’ Bornhoft joined Carlsberg Brewery MalaysiaBerhad (Carlsberg Malaysia) in 1991 as its chiefexecutive officer, and assumed the position ofmanagingdirectorfrom1995to2002,afterwhichhewas thechairman from2002to2005.Here-joinedtheboardofCarlsbergMalaysiaasanon-executivedirector from 2006 to 2007. He also assumed theposition as the chief executive officer of CarlsbergAsiaPteLtdinSingaporefromJanuary2003toJune2004.PriortohimjoiningCarlsbergMalaysia,hewasthe vice-president of Carlsberg International A/S,Denmark responsible for foreign subsidiaries andnewprojects.

Dato’Bornhoftdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.


dato’ JoRgen BoRnHoFt

independent non-executive director

9



wong Yuen Kuai, Lucien, a Singaporean, aged61,isanindependentnon-executivedirectorofHapSengPlantationsHoldingsBerhadandwasappointedtothispositionon9August2007.

Mr.WongisalsothechairmanofMaritimeandPortAuthorityofSingaporeandSingapore InternationalArbitration Centre, a member of the Board ofTrusteesfortheSingaporeBusinessFederationandanon-executivedirectorofTemasekHoldings(Private)Limited. He also sits on the board of SingaporeAirlines Limited and Singapore Press HoldingsLimited,botharecompanieslistedontheSingaporeStockExchange.

HeisthechairmanandseniorpartnerofMessrs.Allen&GledhillLLP,Singapore.HeholdsaBachelorofLaw(Honours)degree fromUniversityofSingapore.HewascalledtotheSingaporeBarin1979.Specialisingin banking, corporate and financial services work,Mr. Wong has extensive experience in debt andequity issues, mergers and acquisitions, bankingtransactionsandsecuritisations.

Mr.Wongdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.

Heattended3ofthe4boardmeetingsheldduringthefinancialyearended31December2014.

wong Yuen Kuai, LuCien


10



Tuan Haji Mohd Aris @ Nik Ariff Bin Nik Hassan, a Malaysian, aged 69, is an independentnon-executive director of Hap Seng PlantationsHoldingsBerhadandwasappointedtothispositionon1January2011.HeisalsoamemberoftheAuditCommittee.

Inaddition,TuanHajiNikAriffisadirectorofKoperasiSriNilamBerhadandanexecutivedirectorofArabBumiputraEquitiesSdnBhd,an investmentholdingcompany.

He holds a Diploma inMarketing from Institute ofMarketing, London, United Kingdom. He was thebusiness developmentmanager of ArabMalaysian

Merchant Bank Berhad from 1 January 1982 to 30June1982.Thereafter,hewasadirectorofSouthernBank Berhad from 1982 to 1993 and a director ofJuaraPerkasaCorporationBerhad(nowknownasJTInternationalBerhad)from1985to1989.

TuanHajiNikAriffdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.


tuan HaJi MoHd aRiS @ niK aRiFF Bin niK HaSSan


11



datuk amat asri @ a.asrie B.ab Kadir @ a.Kadir,aMalaysian,aged65,isanon-independentnon-executive director of Hap Seng PlantationsHoldingsBerhadandwasappointedtothispositionon1June2014.

Datuk Amat Asri holds a Bachelor of Laws (LLB)and Diploma in Development Administrationfrom England. After completing his Higher SchoolCertificatein1969andupongraduation,DatukAmatAsrispent20yearsinSabahCivilServicefrom1970to1990.Thereafter,hewaswithHapSengSdnBhdfrom 1990 to 1996 as its chief officer of the LegalandGeneralAffairs.Hethenwentintolegalpracticein Sabah from 1997 to 1999.Hewas appointedbytheSabahGovernmentasaSeniorPublicRelations

Secretary cum Senior Private Secretary from 2000to 2004 where he served two Chief Ministersconsecutively.Currently,heistheconsultantofHapSeng Land Sdn Bhd, awholly-owned subsidiary ofHapSengConsolidatedBerhad.

DatukAmatAsridoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.

He attended 2 of the 4 board meetings heldsubsequent to his appointment to the board on1 June 2014 during the financial year ended 31December2014.

datuK aMat aSRi @ a.aSRie B.aB KadiR @ a.KadiR

non-independent non-executive director

12


groupfInanCIal hIghlIghts

FinanCiaL YeaR ended 31 deCeMBeR2014 2013 2012 2011 2010

inCoMe (RM’000)(i) Revenue 495,566 443,321 526,499 654,866 473,754(ii) Profitbeforetax 176,068 137,674 190,688 339,473 226,376(iii) ProfitattributabletoOwnersoftheCompany 128,312 97,514 140,335 252,968 169,111

FinanCiaL PoSition (RM’000)Key data

assets(i) Totaltangibleassets 2,205,056 2,167,242 2,118,484 2,114,737 2,019,787(ii) Netassets 1,947,545 1,923,923 1,890,418 1,878,092 1,761,141(iii) Currentassets 255,913 235,588 195,583 204,836 110,865

Liabilities and Shareholders' Funds (i) Currentliabilities 61,229 47,639 35,921 46,530 51,146(ii) Paid-upsharecapital 800,000 800,000 800,000 800,000 800,000(iii) Shareholders’funds 1,947,545 1,923,923 1,890,418 1,878,092 1,761,141

PeR SHaRe(i) Basicearnings(sen)* 16.04 12.19 17.54 31.62 21.14(ii) Netassets(RM)** 2.44 2.40 2.36 2.35 2.20(iii) Dividend(sen) 11.00 10.00 11.00 20.00 13.00

* Based on weighted average number of shares in issue net of treasury shares (‘000) 799,729 799,976 799,980 799,986 799,990

** Based on number of shares in issue net of treasury shares (‘000) 799,703 799,973 799,977 799,981 799,988

FinanCiaL RatioS(i) Returnontotaltangibleassets(%) 5.82 4.50 6.62 11.96 8.37(ii) Returnonshareholders’funds(%) 6.59 5.07 7.42 13.47 9.60(iii) Currentratio(times) 4.18 4.95 5.44 4.40 2.17

14


2,019,7871,761,141

2,114,7371,878,092

2,118,4841,890,418

2,167,2421,923,923

1,947,5452,205,056

176,068

443,321

495,566

grouP financial highlights

Revenue(RM’000)

total tangible assets/Shareholders’ Funds(RM’000)

Basic earnings Per Share/net assets Per Share

Profit Before Tax (RM’000)

2014

2014

2013

2013

21.14

654,866

31.62

2012 526,499

17.54

2011

2011

2010

2010

12.19

473,754

2.44

2.402012 2.36

2.35

2.20

16.04

2014

226,376

339,473

190,688

137,6742013

2012

2011

2010

20112012

20132014

TotalTangibleAssets BasicEarningsPerShare(sen)Shareholders’Funds NetAssetsPerShare(RM)

2010

15


ChaIrman’sstatement

deaR SHaReHoLdeRS,

On behalf of the Board, I am pleased to present the Annual Report of Hap Seng Plantations Holdings Berhad for the financial year ended 31 December 2014 (FY2014).

Profit After Taxation

RM128.3million

earnings Per Share

16.04sen

net earning

32%

tan SRi aHMad Bin MoHd donIndependentNon-ExecutiveChairman16


chairman’s statement

tHe YeaR in Review 2014startedwithcrudepalmoil(CPO)pricesbenefittingfromaprice recoveryduring the lastquarterof2013.CPOproductioninthefirsthalfoftheyearwasrelativelyweak. As a result, CPO prices for the first half of theyearpeakedatRM2,855pertonneinMarch2014andaveragedatRM2,605pertonne.

However, theabovescenariowasovertakenbyeventsinthesecondhalfoftheyear.GlobaldemandforCPOdeclinedduetoanoversupplyofglobalsoybeanoils.

Competition from Indonesian palm oil and othersubstituteoilssuchassunfloweroilandrapeseedoilalsoaffected the demand, with export markets like China,Pakistan, United States, Ukraine, Iran and BangladeshrecordinglowerimportsofMalaysianpalmoil.

Asaresult,CPOinventoriesbegantobuilduptowardstheendof2014,peakingat2.28milliontonnesinNovember2014withexportsofpalmoilproductsshrinkingby2.7%to25.01milliontonnesin2014.CPOpricebottomedoutinSeptember2014atRM2,055pertonne.

Thegovernment initiated severalmeasures tocountertheweakdemandandencouragethetake-upforCPO,includingannouncingahigherbiodieselmandatefromB5toB7andwaivingdutiesonCPO.

Asaresult,CPOpricesaveragedRM2,183pertonneforthesecondhalfandclosedatanaverageofRM2,383pertonnefor2014,marginallyhigherthanthepreviousyear’saverageofRM2,371pertonne.Inventoriesclosedat2.01milliontonnesfortheyear.

2014 FinanCiaL ReviewIn spiteof the challengingoperatingenvironment,weare pleased to report a better financial performancefor FY2014. The Group benefitted from higher pricerealisation and sales volume of both CPO and palmkernel(PK).

For 2014, we achieved a CPO price realisation ofRM2,386pertonne(2013:RM2,343pertonne)andaPKprice realisationof RM1,654per tonne (2013: RM1,288pertonne),bothcomparabletotheaverageSabahpricerealisationofRM2,404pertonneandRM1,565pertonneforCPOandPKrespectively.

17



SalesvolumeforCPOgrewby5.8%to170,506tonnes(2013: 161,170 tonnes),while PK sales volumegrewby11.2%to39,703tonnes(2013:35,707tonnes).

Ourcontinuedefforttoimproveplantationmanagementand operational efficiencieswas reflected in the lowercostofCPOproduction(excludingreplantingandaftertakingintoaccountpalmkernelcredits)ofRM1,064pertonne(2013:RM1,178pertonne).

In addition, we recorded higher yield for fresh fruitbunches(FFB)of23.20tonnesperhectares(2013:22.96tonnes per hectare) and improved oil extraction rate(OER)to21.56%(2013:21.34%).Asaresult,theCPOyieldachievedwasfivetonnesperhectare.

Asaresult,theGroup’soperatingprofitincreasedby28%toRM176.1millionfromRM137.7millioninthepreviousyear.

oPeRationS duRing tHe YeaR

Planting operationsAsat31December2014,theGrouphadatotalplantedareaof35,684hectares(2013:35,697hectares)outofatotalareaof39,803hectares.Ofthetotalplantedarea,approximately 88% or 31,373 hectares (2013: 30,670hectares)weremature areas,with the average ageof15.4years(2013:15.2years).

Theageprofileoftheplantedarea,reserves,andotherparametersasat31December2014wereasfollows:

Hectaresimmature 4,16530monthsto7years 4,089>7yearsto17years 10,122>17years 17,162total planted – oil palm 35,538Immature–othercrops 146total planted area 35,684Reservesplantable 105Buildings,roads,reserves,etc 4,014total area 39,803

18



ForFY2014,theGrouphad4,165hectaresofimmatureoilpalmoutofwhich2,094hectares are expected tomature in 2015. TheGroupalso replanted 1,106hectaresduringthe2014financialyear.

area statement of the group as of 31 december 2014 was as follows:

total area (hectares)

Planted area

(hectares)

Mature area

(hectares)

Percentage of Mature

areaJGOE(i) 14,117 *12,808 10,693 83.5%TMGOE(ii) 12,331 **11,426 9,552 83.6%SSGOE(iii) 9,906 8,761 8,761 100.0%LadangKawa 1,276 1,201 1,201 100.0%Pelipikan 1,365 903 581 64.3%KotaMarudu ***808 585 585 100.0%Total 39,803 35,684 31,373 87.9%

(i) JGOE refers to Jeroco group of estates(ii) TMGOE refers to Tomanggong group of estates(iii) SSGOE refers to Sungai Segama group of estates* Including 86 hectares planted with Jelutong trees** Including 60 hectares planted with Sepat trees*** Including 81 hectares of land adjoining to the existing land of which the land title are currently under application

Milling operationsForFY2014,theGrouphadacombinedmillingcapacityof175FFBtonnesperhourcontributedby its fourmills,namely JerocoPalmOilMill 1, JerocoPalmOilMill 2,TomanggongPalmOilMillandBukitMasPalmOilMill.

Overall, mill operational efficiencies improved further, achieving 79% utilisation ofmillingcapacitycomparedto77%in2013.Theoilextractionrate(OER)wasalsohigherat21.56%(2013:21.34%)comparabletoSabah’saverageof21.49%.

SuStainaBiLitY PoLiCYBothJerocoPalmOilMillsandtheBukitMasPalmOilMillareRSPO(RoundtableonSustainablePalmOil)certified.TheTomanggongPalmOilMillisatanadvancestageofcertificationandisexpectedtobecertifiedin2015.

During the year, Bukit Mas PalmOil Mill had also embarked on the InternationalSustainability&CarbonCertification(ISCC)exercise.Ithadsuccessfullycompletedthecertificationauditin2014andobtaineditsISCCEUcertificateinJanuary2015.TheotherpalmoilmillswillcommencetheirISCCcertificationexerciseinFY2015.

‘12

‘13

‘14

CPOproduction(tonnes)

166,202

172,

980

‘12

‘13

‘14

CPOSalesVolume(tonnes)

161,170

170,

506

152,194

‘12

‘13 ‘14

MillingEfficiency(improvementby%)

77%

79%

68%

154,595

19


PLantationSUponcompletionofthiscertificationprocess,ourmillsandestateswouldhavedualinternationalaccreditationswhichcementourstatusasasustainablepalmoilproducerincompliancewithglobalsustainabilitystandardsforagricultureproduction.

Aspartofourcommitmenttowardssustainability,theGrouphasalsoembarkedonproducingourinauguralsustainabilityreportin2015.Thisstand-alonereportwillbeguidedbytheinternationallyrecognisedGlobalReportingInitiatives(GRI4)framework.

ouR PeoPLeOurpeopleareatthecoreofoursuccessandwehavealwaysregardedouremployeesas‘partners-in-progress’.Tothisend,theprofessionalandsocialwelfareofourpeoplehasalwaysbeenparamountfortheGroup.

Wecontinuetobefirmlycommittedtoimprovingtheirearnings,productivity,jobsecurityandcareerprospectsbyprovidingcontinuoustraining,competitiveremunerationandbyputtinginplaceparticipatorymechanismsthatpromoteownership,commitment,responsibilityandrecognition.

Inaddition,theGroupalsoinvestsinmodernfacilitiesthatimprovethewelfareofouremployeesand thatof their families.These include staffquarters, crèches, schools,medicalfacilitiesandrecreationalfacilities.

enHanCing SHaReHoLdeR vaLueTheGroupcontinuestobecommittedincreating,enhancingandreturningvaluetoshareholders.Wefirmlybelievethatbyadoptingsustainableplantationbest-practicesand investing in our people, we will be in a position to continuously reward ourshareholderswithgooddividendswithoutinhibitingthegrowthpotentialoftheGroup.


20



The Board is pleased to report that the Group haddeclaredandpaidtwointerimdividendstotalling11senpershareforFY2014(2013:10senpershare),constitutingapproximately69%oftheGroup’sprofitattributabletoshareholdersfortheFY2014(2013:82%).

2015 outLooKTheglobaloutlookforedibleoilsin2015remainsbearish,withtheexpectedoversupplyofsoybeanandvegetableoilsaswellasweakerdemandforbiodieselstemmingfromlowcrudeoilpriceexpectations.

However,theGroupexpectstherecoveringCPOpricetrendinthelatterpartof2014tocontinueintothefirsthalfof2015.This isprimarilydue to theexpecteddryspellsinMalaysiaandIndonesia,resultinginlowerCPOproductions.

The current biodiesel mandate in both Malaysia andIndonesia may render some support by shoring updemand forCPO. Thiswill howeverbe limited shouldpetroleumpricescontinuetobeweak.

Inaddition, thepotentialCPOproduction spike in thesecond half of the year, when the seasonally higherproductioncyclekicks in,mayalsokeepa lidonCPOprices.

Inconclusion,weexpect2015tobeanotherchallengingyear in view of the uncertain CPO price outlook.Notwithstanding so, the Company will continue itsongoing effort to improve operational efficiencies,productivity and complete the various certificationexercisesforbothRSPOandISCC.

aCKnowLedgeMentInclosing, Iwishtorecordmysinceregratitudetomyfellowboardmembersfortheirstewardshipandstrategicguidance.

My thanks also go to our team of highly dedicatedworkers, employees and management for theircommitment, passion and loyalty. I alsowish to placeon record my thanks to our customers, partners,shareholdersandotherstakeholdersfortheircontinuedsupportandconfidence.

Let me also take this opportunity to welcome DatukAmat Asri@ A.Asrie B.Ab Kadir@ A.Kadir who wasappointedtotheBoardon1June2014.

ahmad Bin Mohd don

21


TheboardispleasedtoreportonthemannerinwhichtheprinciplesandrecommendationsassetoutintheMalaysianCodeonCorporateGovernance2012(Code)areappliedtotheaffairsoftheGroupandtheextentofcompliancepursuanttoparagraph15.25andpracticenote9oftheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad(ListingRequirements).

It is the policy of the Company tomanage the affairs of theGroup in accordancewith the appropriatestandardsforgoodcorporategovernance.

The board is committed to ensuring that appropriate standards of corporate governance are practisedthroughout the Group as a fundamental part of discharging its responsibilities to protect and enhanceshareholdervalueandthefinancialperformanceoftheGroupandCompany.

BoaRd oF diReCtoRS

Board CharterTheboardhasformalisedaboardcharteron2April2013(BoardCharter)todefineinter-aliathefollowing:

• Boardcomposition• Boardappointments• Meetingsandboardattendance• Roleofthechairman,managingdirectorandcompanysecretary• Boardfunction• Boardcommitteescomprisingtheaudit,nominatingandremunerationcommittee.• Dichotomybetweentheboardandmanagement’sroleandresponsibilities• Codeofconduct• Boarddiversity• Sustainability

TheBoardCharter,whichissubjecttoperiodicreviewbytheboardaftertakingintoaccountthelatestlegal,regulatoryandethicalrequirements,isaccessiblethroughtheCompany’swebsiteatwww.hapsengplantations.com.my.

Board ResponsibilitiesThe board is responsible for overseeing the management of the business and affairs of the Company,includingthecommitmenttosustainability, inthebest long-terminterestoftheCompany.TheboardhasclearrolesandresponsibilitiesindischargingitsfiduciaryandleadershipfunctionsandhasestablishedclearfunctionsreservedfortheboardandthosethatweredelegatedtothemanagementwhichareembodiedintheBoardCharter.

AlldirectorsaretoactinthebestinterestoftheCompanyandshalldisclosetotheboardofanyinterestorpotentialinterestassoonashebecomesawareofsuchinterest.Thecompanysecretaryshallkeeparegisterofsuchdeclarationsofinterest.

statement onCorporate goVernanCe

22


Board MeetingsThe directorsmeet at least 4 times a year. During the financial year ended 31December 2014, 4 boardmeetingswereheldwithallthedirectorshavingattendedatleast50%oftheboardmeetings.

Minutes,proceedingsanddecisionstakenduringtheboardmeetingsarerecordedbythecompanysecretaryandwouldbecirculatedtotheboardmemberswithin2weeksoftherelevantmeeting.

Directors’attendanceatboardmeetingsheldduringthefinancialyearended31December2014isasfollows:

directors no. of Meetings attendedTanSriAhmadBinMohdDon 4/4

DatukSimonShimKongYip,JP 4/4

DatukEdwardLeeMingFoo,JP 4/4

Mr.LeeWeeYong 4/4

Mr.AuYongSiewFah 4/4

TanSriAbdulHamidEgoh 3/4

Dato’JorgenBornhoft 4/4

Mr.WongYuenKuai,Lucien 3/4

TuanHajiMohdAris@NikAriffBinNikHassan 4/4

[email protected]@A.Kadir 2/2*

* Therewere2boardmeetingsheldsubsequenttohisappointmenttotheboardon1June2014

Board CompositionAsatthedateofthisannualreport,theboardhas10memberscomprising3executivedirectorsand7non-executivedirectorsofwhich4ormorethan1/3areindependentofmanagementandhavenorelationshipswhichcouldinterferewiththeexerciseoftheirindependentjudgment.

The directors will among themselves elect an independent director to be the chairman and appoint anexecutivedirectortotheofficeofmanagingdirector.

TheresponsibilitiesofthechairmanandthemanagingdirectoraredividedtoensureabalanceofpowerandauthorityandareclearlydefinedintheBoardCharter.

Together, the directors have wide-ranging business and financial experience. A brief description of thebackgroundofeachdirectorispresentedonpages3to12ofthisannualreport.

statement oncorPorate goVernance

23


Theboardannuallyexaminesitssizewithaviewtodeterminetheimpactofthenumberonitseffectiveness,provided always that the number of directors shall not exceed 12 as provided under article 107 of theCompany’sarticlesofassociation.

Tan SriAhmadBinMohdDon, being an independent non-executivedirector, assumes the roleof seniorindependentnon-executivedirectortoaddressconcernthatmayberaisedbyshareholdersoftheCompany.

Board diversityTheboard acknowledges the importanceof havingdiverse elements among itsmembers,which includegender,age,ethnicity,nationality,professionalbackground,skillsandexperience.Femalerepresentationwillbeconsideredwhenvacanciesariseandsuitablecandidatesareidentified,underpinnedbytheoverridingprimaryaimofselectingthebestcandidatetosupporttheachievementoftheCompany’sstrategicobjectives.

Supply of informationBoardmembersaregivenappropriateinformationinadvanceofeachboardandcommitteemeeting.Forboardmeetings,theseinformationinclude:

• Afinancialreport

• Reportoncurrenttradingandbusinessissuesfromthemanagingdirector

• Proposalsforcapitalexpenditures(ifany)

• Proposalsforacquisitionsanddisposalsnotintheordinarycourseofbusiness(ifany)

• Annualbudgetorbusinessplan

• Reportsofthesub-committeesoftheboard(ifany)

Inaddition,theboardhasaformalscheduleofmattersreservedforitsdecisionincludingapprovalofannualandquarterlyresults.

Theboardissupportedbysuitablyqualifiedandcompetentcompanysecretary,whoisresponsiblealongsidewithboardmembers,forvariouslegalandcomplianceobligationsunderthelaws.TheroleofthecompanysecretaryisdetailedintheBoardCharter.

Thecompanysecretary,togetherwiththemanagingdirector,assiststhechairmantoorganisetheinformationnecessaryfortheboardtodealwiththeagendaandprovidingtherelevant informationtothedirectorsonatimelybasis.

TheboardalsoauthorisesdirectorstoseekindependentprofessionaladviceifnecessaryattheCompany’sexpenseinthefurtheranceoftheirduties.Priortoincurringtheprofessionalfees,thedirectorsshallrefertothemanagingdirectoronthenatureandthefeesoftheprofessionaladvicetobesought.

AllinformationwithintheGroupisaccessibletothedirectorsinthefurtheranceoftheirdutiesandalldirectorshaveaccesstotheservicesofthecompanysecretary.


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Board CommitteesSpecificresponsibilitiesaredelegatedtoboardcommitteeswhichcomprisetheauditcommittee,nominatingcommitteeandremunerationcommitteewhichshallreporttotheboardregularly.Theboardcommitteesarelimitedtomakingrecommendationstotheboardastheboardisnotempoweredtodelegateitsdecision-making authorities to theboard committees. Theprimary responsibilities of theseboard committees areapprovedbytheboardandaredetailedinpages41to50ofthisannualreport.

Minutesofproceedingsandresolutionsofallmeetingsincludingattendanceofmembersofthecommitteearerecordedbythecompanysecretaryandcirculatedpromptlytothemembersoftheboardcommitteeandonceagreed,toallmembersoftheboard.

Theboardcommitteeshaveaccesstorelevantresourcestofacilitatethecarryingoutofitsdutiesincludingobtaining,at theCompany’sexpense,outside legalorotherprofessionaladviceonanymatterswithin itstermofreference.

appointments to the BoardAppointmentstotheboardaredecidedbythemembersoftheboardbasedontherecommendationsofthenominatingcommittee.Thenominatingcommittee,whichcomprises3non-executivedirectorsofwhich2areindependentnon-executivedirectors,isresponsibleforproposingnewnomineestotheboardonanon-goingbasisandannuallyassessingthecontributionofeachindividualdirector,(includingindependentnon-executivedirectorsaswellasthemanagingdirector)andalsotheeffectivedischargebythemembersoftheboardcommittees.

Thenominatingcommitteehasreviewedandissatisfiedthat:

• thesizeoftheboardisoptimumfortheeffectivedischargeoftheboard’sfunctionandthatthereisappropriatemixofskillsandcorecompetenciesinthecompositionoftheboard;

• allmembersoftheboardaresuitablyqualifiedtoholdtheirpositionsasdirectorsinviewoftheirrespectiveacademic and professional qualifications, competencies, experiences, commitment, contribution andperformance;

• all thedirectors at thedateof this annual report haveupdated their knowledge andenhance their skillsthroughappropriatecontinuingeducationprogrammesduringthefinancialyearended31December2014;and

• alltheindependentdirectorsasatthedateofthisannualreporthavenotexceededthetermof9yearstenure.

Companysecretariesareappointedbytheboardandarepersonswhoarecapableofcarryingoutthedutieswhichthepostentails,providingeffectivesupporttothechairmantoensuretheeffectivefunctioningoftheboard.Theirremovalisamatterfortheboardasawhole.

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Reappointment and Re-election of directorsPursuanttosection129(6)oftheCompaniesAct,1965,directorswhoareovertheageof70yearsshallretireateveryannualgeneralmeeting(AGM)andmayofferthemselvesforreappointmenttoholdofficeuntilthenextAGM.

InaccordancewiththeCompany’sarticlesofassociation,directorswhoareappointedbytheboardduringtheyearshallholdofficeonlyuntilthenextAGMandshallbeeligibleforre-electionbytheshareholders.Inaddition,attheAGMineverycalendaryear,1/3ofthedirectorsincludingthemanagingdirectorshallretirefromofficeatleastonceevery3yearsandshallbeeligibleforre-electionbyshareholders.

Duringtheyear,thenominatingcommitteehadreviewedboththeindependenceandperformanceofthe1independentnon-executivedirector,2non-independentnon-executivedirectorsand2executivedirectorswho are due for reappointment and/or re-election at the forthcoming AGM. Based on the satisfactoryoutcomeofthesaidreview,thenominatingcommitteehadmaderecommendationstotheboardfortheirreappointmentand/orre-election.

directors’ training and education Onjoining,allnewdirectorsaregivenbackgroundinformationdescribingtheCompanyanditsactivities.Sitevisitsarearrangedwhenevernecessary.AllthedirectorsholdingofficeasatthedateofthisannualreporthavecompletedthemandatoryaccreditationprogrammeasspecifiedbyBursaMalaysiaSecuritiesBerhad(theExchange).

TheCompanyismindfuloftheimportanceofcontinuoustrainingandeducationforthedirectorstoenablethedirectorstoeffectivelydischargetheirduties.Whereappropriate,talksandseminarsareorganisedforthedirectorstokeepabreastwithanychangesintherelevantstatutoryandregulatoryrequirements.

ThedirectorsarealsoencouragedtoattendvariousexternalprofessionalprogrammesonacontinuousbasistoensurethattheyarekeptabreastonvariousissuesfacingthechangingbusinessenvironmentwithinwhichtheGroupoperates.

Detailsandupdatesofdirectors’trainingandcontinuousprofessionaleducationaretabledtotheboardateachboardmeeting.


26


Thedirectorshadduringthefinancialyearended31December2014,evaluatedtheirowntrainingneedsonacontinuousbasisandattendedthefollowingprogrammes:

directors training Programme durationTanSriAhmadBinMohdDon NominatingCommitteeProgramme 1day

AdvocacySessionsonCorporateDisclosureforDirectors ½daySeminaronamendmentandchangestoseveralMFRSStandardapplicablein2014andIFRS15–revenuefromcontractswithcustomers

1day

DatukSimonShimKongYip,JP MalaysiaGoodsandServicesTax 2hoursDatukEdwardLeeMingFoo,JP HapSengGroupGSTReadinessProject 2hours

MalaysiaGoodsandServicesTax 2hoursHSBCForum-ChinaGlobalising;RMBRising 1dayWhere’sTheSmartMoneyGoing? ½dayWest-EastCorridor–TheFutureofEnergy 1½hour

Mr.LeeWeeYong HapSengGroupGSTReadinessProject 2daysMalaysiaGoodsandServicesTax 2hours

Mr.AuYongSiewFah HapSengGroupGSTReadinessProject 4hoursPalmOilEconomicReview&OutlookSeminar2014 1dayAdvocacySessionsonCorporateDisclosureforDirectors ½dayPalmOilSymposiumSabah 1day

TanSriAbdulHamidEgoh MalaysiaGoodsandServicesTax 2hoursAdvocacySessionsonCorporateDisclosureforDirectors ½day

Dato’JorgenBornhoft MalaysiaGoodsandServicesTax 2hours2014MASBRoundtableonFinancialReporting 2hoursDirectors’ContinuingEducationProgramme2014 1dayEnhancingInternalAuditPractice ½dayDirectorsBreakfastSerieson“GreatCompaniesdeservegreatboards”

½day

ForbesGlobalCEOConference 2daysMr.WongYuenKuai,Lucien SID Directors’ Conference 2014 “Towards The New

Capitalism”1day

TuanHajiMohdAris@ NikAriffBinNikHassan

MalaysiaGoodsandServicesTax 2hoursBreakfast at Bursa Malaysia with Audit CommitteeMembers–EnhancingInternalAuditPractice

½day

[email protected] [email protected]

SettingUpofaPalmOilRefineryinSandakan 1hour

statement on corPorate goVernance

27


diReCtoRS’ ReMuneRation

the Level and Make-up of RemunerationTheboardensuresthatfairlevelofremunerationisaccordedtoattract,retainandmotivatedirectorsneededtomanage theCompany successfully. The component remunerationpackage for executivedirectors hasbeen structured to link rewards to corporate and individual performance whilst non-executive directors’remuneration reflects the experience and level of responsibilities undertaken by individual non-executivedirectors.

ProcedureRemunerationpackagesofnewlyappointedandexistingexecutivedirectorsarereviewedbytheremunerationcommitteeandrecommendedtotheboardforapproval.Directorsdonotparticipateindecisionsontheirownremuneration.

disclosureDirectors’remunerationandremunerationpolicyareasfollows:

details of directors’ Remuneration(i) TheaggregateremunerationpaidorpayablebytheCompanyand/oritssubsidiariestothedirectorsof

theCompanyforservicesinallcapacitiesduringthefinancialyearended31December2014isasfollows:

Category Fees

RM’000

Salaries and other

emolumentsRM’000

Benefits-in-KindRM’000

total Remuneration

RM’000Executive - 2,227 38 2,265Non-Executive 503 - - 503

(ii) ThenumberofdirectorswhoreceivedremunerationfromtheCompanyand/or itssubsidiariesforthefinancialyearended31December2014,andtheirremunerationincludingbenefits-in-kindaretabulatedinthefollowingbands:

Remuneration Range no. of directorsexecutive directorsRM250,001toRM300,000 1RM300,001toRM600,000 -RM600,001toRM650,000 1RM650,001toRM1,350,000 -RM1,350,001toRM1,400,000 1non-executive directorsRM1toRM50,000 1RM50,001toRM100,000 5RM100,001toRM150,000 1


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Remuneration PolicyThepolicyof the remuneration committee is to ensure that the remunerationpracticesof theCompanyarecompetitive, therebyenabling theCompany toattractand retainhighcalibreexecutivedirectorsandreflectingtheirrespectiveresponsibilitiesandcommitments.

Nodirectorsshallbeinvolvedinanydecisionsastotheirownremuneration.

(i) Remuneration for executive directors

Theremunerationpackagefortheexecutivedirectorscomprisessomeorallofthefollowingelements:

• Basic Salary Salariesarereviewedannually.Insettingthebasicsalaryofeachdirector,theremunerationcommittee

takesintoaccountmarketcompetitivenessandtheperformanceofeachindividualdirector.

• Annual Bonus Theannualbonusplan focusesonannualobjectivesand isdesigned to rewardappropriately the

achievementofresultsagainsttheseobjectives.

• Contribution to EPF ContributiontoEPFisbasedonthestatutoryrate.

• Benefits-in-kind Benefits-in-kindincludes,interalia,car,driver,fuelandmobilephone.

(ii) Remuneration for non-executive directors

Remunerationofthenon-executivedirectorsshallbeamatterfortheexecutivemembersoftheboard.


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SHaReHoLdeRS

dialogue between Company and investorsTheCompany is committed to ensuring that all shareholders have timely access to all publicly availableinformationoftheCompany,withwhichshareholdersareenabledtoactivelyparticipateintheaffairsoftheCompanyinaninformedmanner.

Towardsthisend,theboardisguidedbythedisclosurepolicyenshrinedintheListingRequirementsinmakingimmediateannouncementofallmaterialinformationsaveforthepermittedexceptionalcircumstances,whichinformationisalsomadeavailableontheCompany’swebsiteatwww.hapsengplantations.com.myafterthereleaseoftheannouncement. TheboardviewstheAGMasanidealopportunitytocommunicatewithbothinstitutionalandprivateinvestors.Inaddition,theCompanyhasawebsitewww.hapsengplantations.com.mywhichprovidesshareholdersandinvestorsatlargewithup-to-dateinformation.Amongstothers,thequarterlyfinancialresults,annualreport,corporateannouncementandthelikearedownloadedontothewebsiteassoonaspracticableaftersuchinformationisreleasedbytheCompanytotheExchange.WhiletheCompanyendeavourstoprovideasmuchinformationaspossibletoitsshareholders,itismindfulofthelegalandregulatoryframeworkgoverningthereleaseofmaterialandprice-sensitiveinformation.

Inaddition,theCompany’sannouncements,includingfullversionofitsquarterlyfinancialresultsannouncementsandannualreportcanbeaccessedthroughtheExchange’swebsiteatwww.bursamalaysia.com.

the annual general Meeting (agM)NoticeofAGMwhichiscontainedintheannualreportissentoutatleast21dayspriortothedateofthemeeting.

Therewillbecommentaryby thechairmanandmanagingdirectorat theAGMregardingtheCompany’sperformanceforeachfinancialyearandabriefreviewoncurrenttradingconditions.

AteachAGM,aplatformisavailabletoshareholderstoparticipateinthequestionandanswersession.Whereappropriate,thechairmanandmanagingdirectorwillprovidewrittenanswerstoanysignificantquestionthatcannotbereadilyanswered.

EachitemofspecialbusinessincludedinthenoticeofAGMwillbeaccompaniedbyafullexplanationoftheproposedresolution.

Wheneverappropriate,pressconferenceisheldattheendofeachAGMwherethechairmanandmanagingdirectoradvisethepressontheresolutionspassedandanswerquestionsinrespectoftheGroupaswellastoclarifyandexplainanyissues.

Theboardhasalsoformulatedapolicytoencourageconstructiveandeffectiveengagement,dialogueandotherformsofcommunicationwithshareholders,stakeholders,investorsand/orthecommunityascontainedintheCompany’sshareholdercommunicationpolicywhichisincludedintheBoardCharter.


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Code oF ConduCt

Initsaspirationtoinstillandpromoteappropriatestandardsofconductandethicalpractices,theboardhasestablishedthiscodeofbusinessconduct (CodeofConduct) tobestrictlycompliedwithbythedirectorsandmembersofthemanagement.Fortheavoidanceofdoubt,theprovisionofthisCodeofConductisinadditiontoanyotherobligationsimposedonthedirectorsbyanyapplicablerules,lawsandregulations.TheboardreviewstheCodeofConductperiodically.

TheCodeofConductcoversthefollowingareas:

• Honesty and Integrity Thesuccessofourbusinessisbuiltonthefoundationoftrustandconfidence.Hence,directorsmustact

honestlyandfairlyintheirbusinessdealingswithallstakeholders.

• Compliance with Laws Directorsshallcomplyandsatisfythemselvesthatappropriatepoliciesandproceduresareinplacefor

compliancebyemployeesandofficers,withalllaws,rulesandregulationsapplicabletotheCompanyandthemselves,includinginsidertradinglaws.IntheeventofdealingwiththeCompany’ssharesbothwithinandoutsidetheclosedperiods,tocomplywiththedisclosurerequirements.

• Conflict of Interests Directorsaretoavoidsituationthatpresentorcreatetheappearanceofapotentialconflictbetweentheir

owninterestsandthoseoftheCompany.Anysituationthatinvolves,ormayreasonablybeexpectedtoinvolveaconflictofinterestmustbedisclosedpromptlytothefellowboardmembersbynotifyingthecompanysecretary.

• Confidentiality Directorsmustmaintaintheconfidentialityof informationentrustedtothembytheCompanyandany

otherinformationabouttheCompanywhichcomestothemintheircapacityasadirector.Inaddition,adirectormustnotmakeuseofnon-publicprice-sensitive information toadvanceorpursuehis/herpersonalopportunities,gainsorinterests,suchasthebuyingorsellingoftheCompany’sshares.

• Whistle-Blowing Theboardhasformulatedawhistleblowingpolicytoencourageemployeestodiscloseanymalpractice

ormisconductofwhichtheybecomeawareofandtoprovideprotectionforthereportingofsuchallegedmalpracticeormisconduct.The full textof thewhistleblowingpolicyof theCompany is found in thecorporatewebsite.

ThisCodeofConducthasbeenpublishedontheCompany’swebsiteatwww.hapsengplantations.com.my.


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StRategieS FoR SuStainaBiLitY

Theboardaspirestostrengthenitscommitmentandinvestmentincorporatesustainability,withtheobjectiveofmanagingitsplantationoperationsinasociallyandenvironmentallyresponsiblemanner.

VariousinitiativesandstrategieshavesincebeenoutlinedandimplementedaspartoftheGroup’son-goingcommitmenttosupportsustainablepalmoildevelopmentsinMalaysia:

• ThelocationofthevariousplantationestatesoftheGroupinacontiguousplotoflandallowstheGrouptoreaptheeconomiesofscaleandthereforeenablesmanagementteamtobeemployedatanoptimumlevel;

• Applyingandimplementingsustainablepracticesintheplantationmanagementincluding:

(a) soilenrichmentandconservation

TheGrouproutinelycarriesoutmulchingwithrecycledorganicmaterialssuchasemptyfruitbunches,oilpalmtrunksandfronds,whichprocesswouldreplenishorganicmattertothesoilandimprovesoilpropertiesaccordingly.Othersoilconservation initiatives includetheplantingof leguminouscovercropstoreducesoilerosionandimprovesoilphysicalproperties,terracingandconstructionofsiltpitsandbunds,maintenanceofsoftgrassesinpalmavenuesandprohibitingcultivationordevelopmentatslopesiteswithagradientof25degreesormore.

(b) zeroburningpolicy

TheGroupadherestothezeroburningpolicyforbothnewplantingandreplantingofoilpalm,whereremaindersoftreesareallowedtodecomposenaturallyonthegroundduringwhichnutrientsarereleasedtofertilisethelandorganically.Atthesametime,theeliminationofburningwouldnecessarilyreducecarbonfootprintfortheenvironment.

(c) effectivewatermanagement

TheGroup takes all precautionary steps necessary to ensure thatwater used for irrigation in theestatesisfreefrompollutantsby,amongstotherthings,preservingthewatercatchmentareasandwaterbodiesfrompollutionandcontamination.

(d) integratedpestmanagement(IPM)

TheGrouphasadoptedtheIPMsysteminitsmanagementofpestsanddiseaseswiththeobjectiveofreducingtheuseofchemicalpesticides.Instead,environmentalfriendlypestcontroltechniquessuchasuseofnaturalpredatorsandbeneficialplantsareadopted.


32



(e) others

The Group also has a specialised department tasked with the responsibility of researching intosustainableagriculturepracticestomaximiseyieldandminimisewastage,alongsidewithcontributingtogreenerenvironment.Amongstothers, thesaiddepartmentundertakesanalysisof theoilpalmfrondstooptimisepalmgrowththroughnutritionalneedsandtominimisechemicalleakagesfromover-applicationsoffertilizers;also,bunchashisalsousedasasourceofpotassiumtoreducethedependenceonmineralfertilizers.

• TheGroupcontinues toreachout to theruralcommunities in thevicinityofourestatesbyprovidingdependablesourceof incomeandemploymentsandhence, seeking to improveoreradicatepovertyamongsuchcommunities;

• Modernamenitiesandinfrastructuresincludingcreches,kindergarten,schools,staffquartersareprovidedtoimprovethestandardoflivingamongtheplantationworkers;

• Inadditiontoprovidingsafeworkingenvironment,theGroupadheresstrictlytoallaspectsofoccupationalsafetyandhealthpoliciestosafeguardthesafetyandwell-beingsofalltheemployeesandworkersalike;

• Initsmanagementofhumanresourcestomaintainworkforcecapabilities,theGroupalsoplacesemphasison employee satisfaction through continuous trainings and competitive remuneration and benefitsprogrammes;

• Accordingrespecttohumanrightsandensuringnon-existenceofdiscriminationinanyform,beitreligion,race,nationality,backgroundorothers;

• Takingproactivestepstowardsreducingcarbonfootprint, includinghavingthecorporateofficeontheestatestoreduceunnecessarytravelling,engagingmeasuresto improveenergyperformanceofofficebuildings, better management of energy use for office equipment, reducing overseas or outstationtravellingbyencouragingparticipationinmeetingsbytelephoneorvideoconferencing;

• Meetingshareholders’demandforsoundfinancial returnsthroughregulardividendstream,economicgrowth,opencommunicationandtransparentfinancialreporting;

• Establishingandcomplyinghighstandardsofcorporategovernanceandengagementwithshareholders.

33


aCCountaBiLitY and audit

Financial ReportingTheCompanyoperates,andattaches importancetoclearprinciplesandproceduresdesignedtoachieveaccountability and control appropriate to thebusinessesof theGroup. Inpresenting theannual financialstatementsandquarterlyreports,thedirectorsaimtopresentabalancedandunderstandableassessmentoftheGroup’spositionandprospects.

Statement of directors’ Responsibility for preparing the annual audited Financial StatementsThedirectorsareresponsibleforthepreparationandfairpresentationofthefinancialstatementsforeachfinancialyearthat is inaccordancewithapplicableFinancialReportingStandardsandtheCompaniesAct,1965,soastogiveatrueandfairviewofthefinancialpositionoftheGroupandoftheCompanyasattheendofthefinancialyearandoftheirfinancialperformanceandcashflowsforthefinancialyearthenended.

Thedirectorsconsider that inpreparingthefinancialstatements, theGroupandtheCompanyhaveusedappropriateaccountingpolicies,consistentlyappliedandsupportedbyreasonableandprudentjudgmentsandestimates,andthatallapplicableFinancialReportingStandardshavebeenfollowed.TheirresponsibilitiesincludeensuringthattheGroupandCompanymaintaininternalcontrolsrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

internal ControlTheGroup’sstatementonriskmanagementandinternalcontrolissetoutonpages35to40oftheannualreport.

Relationship with auditorsTheauditcommitteeandtheboardhaveestablishedformalandtransparentarrangementstomaintainanappropriaterelationshipwiththeCompany’sauditorsasstatedonpages41to45oftheannualreport. External auditors are invitedat least twicea year to attend theaudit committeemeetings aswell as theAGM.Dialoguebetweentheauditcommitteeandtheexternalauditorsarealsoconductedintheabsenceofmanagement.Theauditcommitteehasalsoreceivedwrittenassurancefromtheexternalauditorsconfirmingtheirindependence.

Thisstatementoncorporategovernanceismadeinaccordancewitharesolutionfromtheboard.

tan SRi aHMad Bin MoHd don datuK edwaRd Lee Ming Foo, JPIndependentNon-ExecutiveChairman ManagingDirector


34


TheBoardiscommittedtomaintainingasoundsystemofriskmanagementandinternalcontrolintheGroupandispleasedtoprovidethefollowingStatementonRiskManagementandInternalControlwhichoutlinesthe nature of internal control of theGroup during the financial year ended 31December 2014 pursuanttoparagraph 15.26(b) of the ListingRequirements. Inmaking this statement, theBoard is guidedby the“StatementonRiskManagementandInternalControl:GuidelinesforDirectorsofListedIssuers”(“SRMICG”)whichisissuedbytheTaskforceonInternalControlwiththesupportandendorsementoftheExchange.

Board’s ResponsibilityThe Board recognises that a sound framework of risk management and internal control is fundamentaltogoodcorporategovernanceandaneffective riskmanagementprocesshelps theGroup toachieve itsperformanceandprofitabilitytargetsbyprovidingriskinformationtoenablebetterformulationofGroup’sstrategiesanddecisionmaking.

TheBoardacknowledgesitsresponsibilityfortheGroup’sriskmanagementandsystemofinternalcontrolscoveringnotonlyfinancialcontrolsbutalsooperational,environmentalandcompliancecontrolsaswellasriskmanagementincludingthereviewoftheeffectivenessandefficiencyoftheriskmanagementprocessandinternalcontrolsystem.

TheriskmanagementprocessandsystemofinternalcontrolaredesignedtomeettheGroup’sneedsandtomanagetheriskstowhichitisexposed.

Theriskmanagementprocessandsystemofinternalcontrol,bytheirnature,canonlyprovidereasonablebutnotabsoluteassuranceagainstmateriallossoragainsttheGroupfailingtoachieveitsobjectives.

Towardsthisend,theGrouphasaformalapproachtowardsidentifying,evaluating,monitoringandmanagingthesignificantrisksaffectingtheachievementofitsbusinessobjectives.

TheAuditCommitteeassists theBoard in the reviewingprocess,however, theBoardasawhole remainsresponsibleforalltheactionsoftheAuditCommitteewithregardstotheexecutionofthedelegatedrole.

Risk Management TheGroupRiskManagementCommittee takes responsibility for riskmanagement,buildinguponalreadyestablishedstructuresandmechanism.TheriskassessmentsapproachisincompliancewiththeguidanceontheSRMICGandRecommendation6.1oftheCode.

MembersoftheGroupRiskManagementCommitteecomprisethefollowing:• twoexecutivedirectors,onebeingtheGroupManagingDirector;• GroupChiefOperatingOfficer;• ChiefFinancialOfficer;• ChiefExecutiveofthePlantationDivision;• HeadofGroupInternalAudit;and• Seniormanageroverseeingtheriskmanagementfunction.

TheGroupManagingDirectorassumes the roleofChairmanof theCommitteewhile theChiefExecutiveleadstheriskmanagementfunctionofthebusinessunit.

statement onrIsk management anD Internal Control

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statement onrisk management anD internal control

Risk Management (continued)ResponsibilitiesoftheGroupRiskManagementCommitteeincludeinter-aliathefollowing:• Todevelopriskmanagementpolicies,whichincludesriskmanagementstrategiesandrisktolerancelevelfor

theGroup;

• To developmethodologies to identify, evaluate, prioritise, address and report the various riskswithin theGroup;

• To periodically review the effectiveness of the existing riskmanagement policies andmethodologies andrecommendchangesthereto;

• TomonitorandensuretheimplementationandcomplianceoftheriskmanagementpoliciesandmethodologiesacrosstheGroup;

• ToreviewthekeyriskprofileoftheGroupandensurethatallsignificantrisksaremanagedeffectively,includingtheevaluationandtreatmentofnewlyidentifiedrisk,reviewandmonitortheimplementationofactionplanstomitigatethesignificantrisksidentified;

• ToreportriskexposuresorriskmanagementactivitiestotheAuditCommitteeonatimelybasis;and

• Topromoteriskawarenessand/orfacilitatetrainingonriskmanagement.

TheGroupRiskManagementCommitteetogetherwiththeGroup’smanagementareresponsibleforimplementingtheprocessesforidentifying,evaluating,monitoringandreportingofrisksandinternalcontrol,takingappropriateandtimelycorrectiveactionsasrequired.ThisisdesignedtoberesponsivetochangesinthebusinessenvironmentandiscommunicatedtotheappropriatelevelsthroughexistingreportingstructuresandprocessesoftheGroup.

KeyriskswhicharealignedwiththeGroup’sstrategicobjectivesareidentifiedandscoredforlikelihoodoftherisksoccurringandthemagnitudeoftheimpact.

Adatabaseofstrategicrisksidentifiedwithappropriatecontrolshasbeencreatedandtheinformationfilteredtoproduceadetailedriskregister/scorecard.Theriskprofilesareupdatedeverysixmonthstoreflecttheprevailingoperatingconditions.

RiskassessmentinterviewshavebeenconductedbytheseniormanageroverseeingtheriskmanagementfunctionwiththeChiefExecutiveandmanagersinchargeaspartofitsassessmentofstrategicrisksaffectingtheGroup.

TherisksprofilehavebeentabledtotheGroupRiskManagementCommitteehighlightingonthekeyrisks,theircausesandmanagementactionplansthereon.

TheGroupRiskManagementCommitteereportsitsactivitiesandmakesrecommendationstotheBoardviatheAuditCommittee.AnannualcomprehensiveriskmanagementreportandahalfyearlyupdateonsalientchangestothekeyriskprofilearetabledtotheAuditCommitteetofacilitatetimelyassessment.

AnymajorchangestorisksoremergingsignificantriskintheGrouptogetherwiththeappropriateactionsand/orstrategiestobetaken,willbebroughttotheattentionoftheBoardbytheChairmanoftheAuditCommittee.

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internal Control TheBoardplacesemphasisonasoundsystemofinternalcontroltofacilitatetheeffectiveandefficientoperationoftheGroup’sbusinessesbyenablingtheBoardandthemanagementtorespondappropriatelytoanysignificantbusiness,operational,environmental,complianceandotherrisksintheachievingoftheGroup’sobjectives.

Nevertheless,theBoardalsorecognisesthatthesystemofinternalcontrolcanonlyreduce,butcannoteliminate,thepossibilityofpoorjudgementindecision-making;humanerror;controlprocessesbeingdeliberatelycircumventedbyemployeesandothers;managementoverridingcontrols;andtheoccurrenceofunforeseeablecircumstances.Assuch,theBoardreiteratesthatthesystemofinternalcontrol,byitsnature,canonlyprovidereasonablebutnotabsoluteassuranceagainstmateriallossoragainsttheGroupfailingtoachieveitsobjectives.

ThekeyelementsoftheGroup’sinternalcontrolsystemaredescribedbelow:

• ClearlydefineddelegationofresponsibilitiestocommitteesofthefullBoardandtooperatingunits,includingauthorisationlevelsforallaspectsofthebusiness.

• Documented internal procedures and/or processes set out inOperatingManuals of individual operatingunits,wheneverapplicable,whichincludeprocessestogeneratetimely,relevantandreliableinformationandproperrecordkeepingaswellascomplianceswithapplicablelawsandregulationsandinternalpoliciesfortheconductofbusiness.

• RegularinternalauditvisitsinaccordancewiththeapprovedinternalauditplanbyAuditCommitteewhichmonitorcompliancewithproceduresandassesstheintegrityoffinancialinformation.

• Regularandcomprehensiveinformationprovidedtomanagement,coveringfinancialperformanceandkeybusinessindicators.

• AdetailedbudgetingprocesswhereoperatingunitspreparebudgetsforthecomingyearwhichareapprovedbothatoperatingunitlevelandbythefullBoard.

• Amonthlymonitoringofresultsagainstbudget,withmajorvariancesbeingfollowedupandmanagementactiontaken,wherenecessary.

• Regularvisitstooperatingunitsbyseniormanagementwheneverappropriate.

• ReviewofbusinessprocessestoassesstheeffectivenessofinternalcontrolsbytheInternalAuditDepartmentand the highlighting of significant risks impacting the Group by the head of Internal Audit to the AuditCommittee.AnnualinternalauditplanisreviewedbytheAuditCommittee.

• InthepresenceoftheGroupManagingDirector,GroupFinanceDirectorandChiefFinancialOfficerforthepurposeofascertainingthestateofinternalcontrolandtoobtainassuranceoftheinternalcontrolsystemastoitseffectivenessandadequaciesinallmaterialaspects,theAuditCommitteereviewsandholdsdiscussiononsignificantinternalcontrolissuesidentifiedinreportspreparedbytheInternalAuditDepartment.

• CodeofConductassetoutintheBoardCharterandtheEmployees’Handbook.

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internal audit FunctionTheGrouphasanInternalAuditfunctionwhichisoutsourcedtoHapSengManagementServicesSdn.Bhd.,awhollyownedsubsidiaryofHapSengConsolidatedBerhad,atacostofapproximatelyRM850,000perannum.The InternalAudit function is independentof theactivitiesoroperationsofotheroperatingunitsin theGroup,whichprovides theAuditCommitteeand theBoardwithmuchof theassurance it requiresregardingtheadequacyandintegrityofthesystemofinternalcontrol.

TheheadofInternalAuditDepartmentisamemberofMalaysianInstituteofAccountantsandTheInstituteofInternalAuditorsofMalaysiaandheisassistedbyateamofqualifiedpersonnel.

Theinternalauditfunctionsofthedepartmentarecarriedoutusingariskbased,systematicanddisciplinedapproach,guidedbythestandardsrecognisedbytheseprofessionalbodies.

TheheadofInternalAudithasdirectaccesstotheChairmanoftheAuditCommitteeandwheneverdeemednecessary,meetswiththeAuditCommitteewithoutthemanagementbeingpresent.

TheprincipalresponsibilityoftheInternalAuditDepartmentistoundertakeregularandsystematicreviewsofthesystemofinternalcontrols,riskmanagementandgovernanceprocessessoastoprovidereasonableassurancethatsuchsystemoperatessatisfactorilyandeffectivelywithintheCompanyandtheGroupandreportstotheAuditCommitteeonaquarterlybasis.

InternalauditstrategyandadetailedannualinternalauditplanarepresentedtotheAuditCommitteeforapproval.Theinternalauditfunctionadoptsarisk-basedapproachandpreparesitsauditstrategyandplanbasedontheriskprofilesoftheoperatingunitsoftheGroup.

TheactivitiesoftheInternalAuditDepartmentthatwerecarriedoutareasfollows:

• Undertook internalauditbasedontheauditplanthathadbeenreviewedandapprovedbytheAuditCommittee which includes the review of operational and environmental compliance with establishedinternalcontrolprocedures,managementefficiency,riskassessmentandreliabilityoffinancialrecordsaswellasgovernanceprocesses.

• AttendedbusinessreviewmeetingsheldregularlybytheGroup’sseniormanagementtokeepabreastwiththestrategicandoperationalplanninganddevelopmentissues.

• Conducted investigations with regard to various specific areas of concern as directed by the Audit

Committeeandthemanagement.

• AttendedmeetingsoftheGroupRiskManagementCommittee.

• Assessment of key business risks at each operating units which were identified by risk analysis andcontinuousmonitoringofcontrolcompliancethroughdataextractionandanalysistechniques.

• Issuedatotalof16internalauditreportstotheAuditCommitteewhichencompassedidentificationandassessmentofbusinessrisks.


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other Risks and Control ProcessesApartfromriskassessmentandinternalaudit,theGrouphasinplaceanorganisationalstructurewithdefinedlinesofresponsibility,delegationofauthorityandaprocessofhierarchicalreporting.IthasformalisedLimitsofAuthoritywhichprovidestheauthoritylimitsoftheemployeesintheapprovalofvarioustransactionsandanEmployeesHandbookwhichhighlightspoliciesonGroup’sobjectives,termsandconditionsofemployment,remuneration, training and development, performance review, safety andmisconduct across theGroup’soperations.

TheBoardisalsosupportedbyBoardCommitteeswithspecificdelegatedresponsibilities.TheseCommitteeshavetheauthoritytoexamineallmatterswithintheirscopeandresponsibilities,asprovidedintheBoardCharter,andreporttotheBoardwiththeirrecommendations.(FormoredetailsonthevariousCommittees,pleaserefertopages41to50inthisannualreport).

TheAuditCommitteemeetswiththeindependentexternalauditorsatleasttwiceayear,withoutmanagementbeingpresent, todiscusstheirremitandany issuesorobservationsofthe independentexternalauditors,recognising that such issuesorobservationswill generallybe limited to risks and controls related to thefinancialstatements.

TheBoardisprovidedwithfinancialinformationonaquarterlybasiswhichincludeskeyperformanceandriskindicatorsandamongstothers,themonitoringofresultsagainstbudget.

AssurancetotheBoardwasgivenbytheGroupManagingDirector,GroupFinanceDirectorandChiefFinancialOfficerthattheGroup’sriskmanagementandinternalcontrolsystemisoperatingadequatelyandeffectivelyinallmaterialaspects,basedontheriskmanagementmodeladoptedbytheGroup.

ConCLuSionBasedon the foregoing aswell as the inquiries and informationprovided, theBoard is assured that theriskmanagementprocess, systemof internal control andotherprocessesput inplace through its BoardCommitteeswereoperatingadequatelyandeffectivelyinallmaterialaspectstomeettheGroup’sobjectivesfortheyearunderreviewanduptothedateofapprovalofthisStatementonRiskManagementandInternalControlforinclusionintheannualreport.


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Review oF tHe StateMent BY eXteRnaL auditoRS

TheexternalauditorshavereviewedthisStatementonRiskManagementandInternalControlpursuanttothescopesetoutinRecommendedPracticeGuide(“RPG”)5(Revised),Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual ReportissuedbytheMalaysianInstituteofAccountants(“MIA”)forinclusionintheannualreportoftheGroupfortheyearended31December2014,andreportedtotheBoardthatnothinghascometotheirattentionthatcausethemtobelievethattheStatementintendedtobeincludedintheannualreportoftheGroup,inallmaterialrespectshasnotbeenpreparedinaccordancewiththedisclosuresrequiredbyparagraphs41and42oftheStatementonRiskManagementandInternalControl:GuidelinesforDirectorsofListedIssuersorisfactuallyinaccurate.

RPG 5 (Revised) does not require the external auditors to considerwhether theDirectors’ Statement onRiskManagementandInternalControlcoversallrisksandcontrols,ortoformanopinionontheadequacyandeffectivenessoftheGroup’sriskmanagementandinternalcontrolsystemincludingtheassessmentandopinionbytheBoardofDirectorsandmanagementthereon.Theauditorsarealsonotrequiredtoconsiderwhethertheprocessesdescribedtodealwithmaterial internalcontrolaspectsofanysignificantproblemsdisclosedintheannualreportwill,infact,remedytheproblems.


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boarD CommIttees

audit CoMMittee

Members of the audit CommitteeTanSriAhmadBinMohdDon (Independent Non-Executive Director) – ChairmanDato’JorgenBornhoft (Independent Non-Executive Director)TuanHajiMohdAris@NikAriffBinNikHassan (Independent Non-Executive Director)

terms of Reference of audit Committee

Membership• The committee shall be appointed by the board from amongst the directors of the Company on the

recommendationof thenominatingcommitteeand shall consistofnot less than3members.All theauditcommitteemembersmustbenon-executivedirectorswithamajorityofthembeingindependentdirectors.

• Amembershallnothaveanyfamilyrelationshipwithanyexecutivedirectororanyrelatedcompanyorrelationshipwhichwouldinterferewithhis/herindependentjudgment.

• IndependentdirectorshallbeonewhofulfillstherequirementasprovidedintheListingRequirements.

• AtleastonememberoftheauditcommitteeshallbeamemberoftheMalaysianInstituteofAccountantsorapersonapprovedundersection15.09(1)(c)(ii)and(iii)oftheListingRequirements.

• Noalternatedirectorshallbeappointedasamemberoftheauditcommittee.

• Thechairmanofthecommitteewhoshallbeanindependentdirectorshallbeelectedbythemembersofthecommittee.

• In the event the number of audit committeemembers are less than the required number of 3 due toresignationorforanyreasonceasestobeamember,theboardshallwithin3monthsappointnewmember(s)tofillupthevacancy.AllmembersofauditcommitteeshallholdofficeuntilotherwisedeterminedbytheboardoruntiltheyceasetobeadirectoroftheCompany.

attendance at Meetings• Thequorumnecessaryforthetransactionsofbusinessshallbe2members.• Thecompanysecretaryshallactasthesecretaryofthecommittee.

Frequency of MeetingsTheauditcommitteeshallmeetasoftenasitrequiresbutatleastonceforeveryfinancialquarter.

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Duringthefinancialyearended31December2014,4meetingswereheld.Thedetailsofdirectors’attendanceatthesemeetingsareasfollows:

directors no. of MeetingsTanSriAhmadBinMohdDon 4/4Dato’JorgenBornhoft 4/4TuanHajiMohdAris@NikAriffBinNikHassan 4/4

Thedetailsoftrainingattendedbytheabovedirectorsaretabulatedonpage27oftheannualreport.

Proceedings of Meetings• Intheabsenceofthechairman,thecommitteeshallappointoneoftheindependentmemberspresenttochair

themeeting.

• Questionsarisingatanymeetingwhereaquorumispresentshallbedecidedbyamajorityofvotesofthememberspresent,eachmemberhaving1vote.

Scope of authority• Thechairmanoftheauditcommitteemayengageonacontinuousbasiswiththeseniormanagementsuch

asthechairmanoftheboard,themanagingdirector,thegroupfinancedirector,chieffinancialofficer,headofinternalauditdepartmentandtheexternalauditorsinordertobekeptinformedofmattersaffectingtheCompany.

• Thecommitteeisauthorisedbytheboardtoinvestigateanyactivitywithinitstermsofreference.Itisauthorisedtoseekanyinformationitrequiresfromanyemployeeandallemployeesarerequiredtocomplywithanyrequestmadebythecommittee.

• Thecommitteeisauthorisedbytheboardtoobtainoutsidelegalorotherindependentprofessionaladviceandtosecuretheattendanceofoutsiderswithrelevantexperienceandexpertiseifitconsidersnecessary.

• Thetermsofreferenceoftheauditcommitteeshallnotlimitinanywaytheresponsibilitiesandauthoritiesofthemanagingdirectortoinstituteorinstructinternalauditsandreviewstobeundertakenfromtimetotime.

• Thechairmanofauditcommittee,upontherequestoftheexternalauditor,shallconveneameetingofthecommitteetoconsideranymatterwhichtheexternalauditorsbelieveshouldbebroughttotheattentionofthedirectorsorshareholders.

• Thecommitteemayinviteotherdirectors,anyemployeeandarepresentativeoftheexternalauditorstoattendanyparticularauditcommitteemeeting,specifictotherelevantmeeting(s).Thegroupfinancedirector,chieffinancialofficerandtheheadofinternalauditdepartment,upontheinvitationbythecommittee,normallyattendthemeeting(s).

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boarD committees

Primary Responsibilities of the audit CommitteeAssistingtheboardinthedischargeofitsstatutorydutiesandresponsibilitiesinthefollowingareas:

• TomonitortheintegrityoftheGroup’sfinancialstatements,reviewitsannualaccountsandquarterlyresultstobereleasedtotheExchangeandanyotherannouncementsrelatingtotheGroup’sfinancialperformanceaswellassignificantfinancialreportingissues.

• ToreviewtheeffectivenessoftheGroup’sinternalcontrolsandriskmanagementsystemsandtoreviewandapprovestatementtobeincludedintheannualreportconcerninginternalcontrolsandriskmanagement.

• Toreviewandreport to theboardanyrelatedparty transactionandconflictof interestsituationthatmayarisewithin theGroup includingany transaction,procedureor courseof conduct that raisesquestionsofmanagementintegrity.

• TomonitorandreviewtheeffectivenessoftheGroup’s internalauditfunctioninthecontextoftheGroup’soverallriskmanagementsystem.

• Toapprovetheappointmentandremovaloftheheadofinternalauditfunction.

• Toconsiderandapprovetheremitoftheinternalauditfunctionandtoensureithasadequateresourcesandappropriateaccesstoinformationtoenableittoperformitsfunctioneffectivelyandinaccordancewiththerelevantprofessionalstandards,particularlytoensurethattheinternalauditfunctionhasadequatestandingandisfreefrommanagementorotherrestrictions.

• Toreviewandassesstheannualinternalauditmasterplan.

• ToreviewpromptlyallreportsontheGroupfromtheinternalauditors.

• To reviewandmonitor themanagement’s response to the findings and recommendationsof the internalauditors.

• Tomeet theheadof the internalauditwheneverdeemednecessary, todiscuss their remitandany issuesarisingfromtheinternalauditscarriedoutwithoutthepresenceofthemanagement.Theheadofinternalauditshallbegiventherightofdirectaccesstothechairmanoftheboardandtothecommittee.

• To consider andmake recommendations to the board in relation to the appointment, reappointment orremovalofthecompany’sexternalauditors,sothatthesamecouldbeputtoshareholdersforapprovalattheannualgeneralmeeting.

• Tooverseetheselectionprocessofnewauditorsandifanauditorresigns,toinvestigatetheissuesleadingtotheresignation.

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• Tooverseetherelationshipwiththeexternalauditorsincluding:• Approvaloftheirremuneration;• Approvaloftheirtermsofengagement;• Assessingannually their independenceandobjectivity taking intoaccounttheregulatoryrequirements

andtherelationshipwiththeauditorasawhole;• Formulatingapolicygoverningtheprovisionofnon-auditservicesbytheexternalauditorandregularly

monitoringthecompliancetherewith;and• Assessingannuallytheirqualifications,expertiseandresourcesandtheeffectivenessoftheauditprocess.

• Toreviewwiththeexternalauditors,theauditplan,theirevaluationofthesystemofinternalcontrols,theauditreportandanyissuesarisingfromtheaudit.

• Tomeetregularlywiththeexternalauditors,atleasttwiceayear,withoutthepresenceofthemanagement,todiscusstheirremitandanyissuesarisingfromtheaudit,includingtheadequacyoftheassistancegivenbytheemployeesoftheCompanytotheexternalauditors.

• Toreviewthequarterlyandyearendfinancialstatementsbeforetablingtotheboardfocusingparticularlyon:• anychangesinaccountingpoliciesandpractices,• significantadjustmentsarisingfromtheauditandotherunusualevents(ifany),• compliancewithaccountingstandards,relevantlegislativeframeworkandotherlegalrequirements,• compliancewiththeListingRequirementsandallotherapplicablerulesandregulations.

Review of the audit CommitteeThetermofofficeandperformanceofthecommitteeandeachmembershallbereviewedbytheboardatleastonceevery3yearstodeterminewhethertheauditcommitteeanditsmembershavecarriedouttheirdutieseffectivelyinaccordancewiththeirtermsofreference.

Annually,thenominatingcommitteewillevaluateperformanceoftheboardcommitteescollectivelyaswellasperformanceofmembersindividually.

Reporting ProceduresThechairmanofthecommitteewillbrieftheboardonthevariousdeliberationsand/or issuesofconcernraisedduringthecourseofmeetingtogetherwithalistofrecommendationsand/orothermattersforthedeliberationoftheboard.

Thecompanysecretaryshallcirculatetheminutesofmeetingsofthecommitteetoallmembersoftheboard.

Reporting of Breaches to the exchangeTheauditcommitteeistoreportpromptlytotheExchangeonanymatterreportedtotheboardwhichhasnotbeensatisfactorilyresolvedresultinginabreachoftheListingRequirements.

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Summary of Audit Committee Activities during the financial year ended 31 December 2014Theactivitiesof theaudit committeeduring the financial yearended31December2014are summarisedbelow:

• Reviewed internal audit plan for the financial year which includes review of operational compliance withestablishedcontrolprocedures,managementefficiency,riskassessmentandreliabilityoffinancialrecords.

• Receivedandreviewedatotalof16internalauditreportscoveringthebusinessprocessesoftheGroupandissatisfiedwiththerecommendationsandactionsbythemanagementinaddressingtheissueshighlighted.

• ReviewedannualauditplansoftheGroupandCompanywiththeexternalauditorsandrecommendationoftheirauditfeestotheboard.

• DiscussedtheannualauditedfinancialstatementsoftheGroupwiththeexternalauditorsandnotedthesalientfeaturesandkeyfindingsfromtheexternalauditors.

• Reviewedtheannualauditedfinancialstatementsandrecommendedtotheboardforapproval.

• Theauditcommitteeheld2separateindependentmeetingswiththeexternalauditorsintheabsenceoftheexecutiveboardmembersandmanagementrepresentativesduringwhichtheexternalauditorsinformedthattheyhadreceivedfullco-operationfromthemanagementaswellasunrestrictedaccesstoall informationrequiredforpurposeoftheirauditandtherewerenospecialauditconcernstobehighlightedtotheauditcommittee.

• Reviewed the suitabilityand independenceofexternalauditorsandhave receivedwrittenassurance fromexternalauditorsconfirmingthattheyare,andhavebeen,independentthroughouttheconductoftheauditengagementinaccordancewiththetermsofallrelevantprofessionalandregulatoryrequirements.

• ReviewedtheGroup’squarterlyreportpreparedincompliancewithFinancialReportingStandard(“FRS”)134“InterimFinancialReporting”andchapter9oftheListingRequirementspriortosubmissiontotheboardforconsiderationandapprovalwherethechairmanoftheauditcommitteewillbrieftheboardonthepertinentpointsandtherecommendationsoftheauditcommittee.

• Reviewed and considered the disclosure of related party transactions in the financial statements and therecurrentrelatedpartytransactionscirculartoshareholders.

• Received and reviewed the comprehensive risk management report from the group risk managementcommitteeandissatisfiedwiththeassessmenttherein.

• Reviewedandrecommendedtotheboardthestatementonriskmanagementandinternalcontrolforapprovalandinclusionintheannualreport.

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ReMuneRation CoMMittee

Theremunerationcommitteewassetupon7September2007andpresentlyitsmembersareasfollows:

TanSriAhmadBinMohdDon (Independent Non-Executive Director) – ChairmanDatukSimonShimKongYip,JP (Non-Independent Non-Executive Director)DatukEdwardLeeMingFoo,JP (Executive Director)

terms of Reference of Remuneration Committee

MembershipThe committee shall be appointed by the board from amongst the directors of the Company upon therecommendationofthenominatingcommitteeandshallconsistofnotlessthan3directors,amajorityofwhommustbenon-executive.

Frequency of MeetingsTheremunerationcommitteeshallmeetasoftenasitrequiresbutatleastonceperfinancialyear.

attendance at MeetingsThequorumnecessaryforthetransactionofbusinessshallbe2membersanddecisionsarebymajorityvotes.

Proceeding of Meetings• Thechairmanofthecommitteemayinvitepersonnelsuchasthechiefexecutivesofthebusinessdivision,the

headofthehumanresourcesdepartmentasandwhenappropriateandnecessary.

• Intheabsenceofthechairman,theremunerationcommitteeshallappointoneofthenon-executivememberspresenttochairthemeeting.


Reporting ProcedureThecompanysecretaryshallcirculatetheminutesofmeetingsoftheremunerationcommitteetoallmembersoftheboard.

Scope of authorityThe remuneration committee does not have the delegated authority from the board to implement itsrecommendations but is obliged to report its recommendations to the full board for its consideration andimplementation.

interest of Remuneration Committee MembersMembersoftheremunerationcommitteeshallnotparticipateorbeinvolvedinthedeliberationsordiscussionsoftheirownremuneration.

Theremunerationofthenon-executivedirectorsshallbeamatterfortheexecutivemembersoftheboard.

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boarD committees

Primary Responsibilities of Remuneration Committee• Todetermineandagreewiththeboardthebroadpolicyfortheremunerationoftheexecutivedirectorsofthe

Company,aftertakingintoaccountallrelevantfactorstoensurethattheexecutivedirectorsareadequatelyincentivizedandremuneratedtoencourageenhancedperformance.

• Toconstantlyreviewtheongoingappropriatenessandrelevanceoftheremunerationpolicy.

• Withinthetermsoftheagreedpolicyandinconsultationwiththechairman,todeterminethetotalindividualremunerationpackageofeachexecutivedirectorincludingbonusesandyearlyincrement.

Summary of activities• ToreviewandnotetheremunerationpolicyoftheGrouptogetherwiththemarkettrendforpalmoilcompanies;

and

• Torecommendtotheboard, theproposedbonusofanexecutivedirector for thefinancialyearended31December2014andhisproposedincrementforthefinancialyearcommencingfrom1January2015.

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noMinating CoMMittee

Thenominatingcommitteewassetupon7September2007andpresentlyitsmembersareasfollows:

TanSriAhmadBinMohdDon (Independent Non-Executive Director) – ChairmanDatukSimonShimKongYip,JP (Non-Independent Non-Executive Director) Dato’JorgenBornhoft (Independent Non-Executive Director)

terms of Reference of nominating Committee

Membership• ThecommitteeshallbeappointedbytheboardfromamongstthedirectorsoftheCompanyofnotlessthan

3non-executivedirectors,amajorityofwhomareindependent.

• ThechairmanofthecommitteeisalsotheseniorindependentdirectoroftheCompany.

Frequency of MeetingsThenominatingcommitteeshallmeetasoftenasitrequiresbutatleastonceperfinancialyear.

attendance at MeetingsThequorumnecessaryforthetransactionofbusinessshallbe2membersanddecisionsarebymajorityvotes.

Proceeding of Meetings• Thecommitteeshallhaveaccesstosufficientresourcestofacilitatethecarryingoutof itsduties, including

obtaining,attheCompany’sexpense,outsidelegalorotherprofessionaladviceonanymatterswithinitstermofreference.

• Intheabsenceofthechairman,thenominatingcommitteeshallappointoneoftheindependentnon-executivememberspresenttochairthemeeting.


Reporting ProcedureThecompanysecretaryshallcirculatetheminutesofmeetingsofthenominatingcommitteetoallmembersoftheboard.

Scope of authorityThe nominating committee does not have the delegated authority from the board to implement itsrecommendationsbut is obliged to report its recommendations to the full board for its consideration andimplementation.Theactualdecisionastowhoshallbeappointedistheresponsibilityofthefullboardafterconsideringtherecommendationsofthecommittee.

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Primary Responsibilities of nominating Committee• Toconsiderandrecommendcandidatesontotheboardandboardcommitteesandguidedbytheselection

criteria, amongst others, are integrity and professionalism, expertise and experience, independence andobjectivity,personalattributes,dedicationandcommitmentandboarddiversity.DetailsoftheselectioncriteriaaresetoutintheBoardCharter.

• Toannuallyevaluateperformanceoftheboardandboardcommitteescollectivelyaswellasperformanceofmembersindividually.

• Tofacilitateboardinductionandtrainingprogrammes.

• Assessingdirectors’trainingneedsperiodicallyanddevisingrelevantprofessionaldevelopmentprogrammesbasedonsuchassessmentforrecommendationtotheboard.

• Todevelopapropersuccessionplanfortheboardsoastoensureasmoothtransitionwhendirectorsleavetheboard,andthatpositionsarefilledandskillgapsaddressed.

• Tomonitorandrecommendthefunctionstobeundertakenbythevariousboardcommittees.

• ToreviewandreassesstheadequacyoftheBoardCharterandCodeofConductannually.

• Toevaluatetheindependenceofeachindependentdirectoronayearlybasis.Inthisregard,thecommitteeisguidedbythecriteriaassetoutintheBoardCharter.

• Torecommenddirectorsforreappointmentorre-electionsubjecttosatisfactoryoutcomeoftheevaluationoftheirperformance.

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Summary of activities • Reviewedthecurrentsizeandcompositionoftheauditcommitteeandwasofth

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