RIMBUNAN SAWIT BERHAD - listed companyrsb.listedcompany.com/misc/ar/ar2013.pdf · 2014. 5. 28. ·...

R I M B U N A N S A W I T B E R H A D[ 6 9 1 3 9 3 - U ]

S U S T A I N I N G W E L L N E S S

Rimbunan Sawit

A N N U A L R E P O R T 2 0 1 3

Vision & Mission

Locations of Operations

Corporate Structure

Corporate Information

Financial Highlights

Chairman’s Statement

Managing Director’s Review of Operations

Profile of Directors

Statement on Corporate Governance

Report of the Audit Committee

Statement on Risk Management and Internal Control

Corporate Social Responsibility

Financial Statements

Statements of Directors’ Responsibilities forPreparing the Annual Financial Statements

Additional Compliance Information

List of Properties Owned by the Group

Analysis of Shareholdings

Notice of Annual General Meeting

Form of Proxy

Contents2

3

4

5

6

7

10

12

15

27

33

35

42

125

126

129

130

134

Vision Mission

To be a leadingagri-business & plantation

- To enhance stakeholders’ values- To provide high quality products and services to our customers- To provide job opportunities and lifelong learning opportunities at the workplace and local community

LOCATIONS OF OPERATIONS

3 | Annual Report 2013


CORPORATE STRUCTURE

Rimbunan Sawit Berhad

R.H. PlantationSdn Bhd 100%

100% WoodijayaSdn Bhd

100% Rimbunan Sawit HoldingsSdn Bhd

100% Lumiera Enterprise Sdn Bhd

100% RSB Palm Oil MillSdn Bhd

100% Sibu Garden AndLeisure (M) Sdn Bhd

85% Baram TradingSdn Bhd

70% Pelita-SplendidPlantation Sdn Bhd

60% PJP Pelita LunduPlantation Sdn Bhd

60% PJP Pelita Ulu TeruPlantation Sdn Bhd

100% Novelpac-PuncakdanaPlantation Sdn Bhd

100% Rajang BuildersSdn Bhd

85% Burung Tiong HelicopterSdn Bhd

85% PJP Pelita BiawakPlantation Sdn Bhd

60% PJP Pelita Ekang-BanyokPlantation Sdn Bhd

60% PJP Pelita SelangauPlantation Sdn Bhd

100% TimrestSdn Bhd

100% Jayamax PlantationSdn Bhd

100% Nescaya PalmaSdn Bhd 100% Formasi AbadiSdn Bhd

100% Midas PlantationSdn Bhd


Board of Directors

Bong Wei Leong(Chairman / Independent Director)

Tiong Kiong King(Non-Independent Non-Executive Director /Vice Chairman)

Tan Sri Datuk Sir Diong Hiew King @ Tiong Hiew King(Executive Director)

Tiong Chiong Ong(Managing Director)

Tiong Chiong Ie(Non-Independent Non-Executive Director)

Tiong Ing Ming(Independent Director)

Company Secretary

Voon Jan Moi (MAICSA 7021367)

No. 85 & 86, Pusat Suria PermataJalan Upper Lanang 12A96000 Sibu, SarawakTel. No. : 084-218555Fax No. : 084-219555

No. 85 & 86, Pusat Suria PermataJalan Upper Lanang 12A96000 Sibu, SarawakTel. No. : 084-218555Fax No. : 084-219555E-mail address : [email protected]

CORPORATE INFORMATION

Share Registrar

Symphony Share Registrars Sdn. Bhd.Level 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU IA/4647301 Petaling JayaSelangor Darul EhsanTel. No. : 03-78418000Fax No. : 03-78418152

Auditors

Crowe Horwath (AF : 1018)Chartered Accountants1st Floor No.1Lorong Pahlawan 7A2Jalan Pahlawan96000 Sibu, Sarawak

Stock Exchange Listing

Listed on Main Market of Bursa Malaysia Securities BerhadStock name : RSAWITStock code : 5113

Principal Bankers

RHB Bank BerhadMalayan Banking BerhadOCBC Bank (Malaysia) BerhadHong Leong Bank BerhadCIMB Bank BerhadPublic Bank BerhadBank Pertanian Malaysia BerhadAmbank (M) Berhad


FINANCIAL HIGHLIGHTS

REVENUE

SHAREHOLDERS’ FUND

PROFIT BEFORE TAX

TOTAL ASSET

0

-10

10

20

30

40

50

60

70

80

90

100

RM’ million

FY2009(12 MTHS)

FY2010(16 MTHS)

FY2011(12 MTHS)

FY2012(12 MTHS)

FY2013(12 MTHS)

-

18

78

95

31

(3)

0

50

100

150

200

250

300

350

400

RM’ million

FY2009(12 MTHS)

FY2010(16 MTHS)

FY2011(12 MTHS)

FY2012(12 MTHS)

FY2013(12 MTHS)

152

291

360

314

282

FY2009(12 MTHS)

FY2010(16 MTHS)

FY2011(12 MTHS)

FY2012(12 MTHS)

FY2013(12 MTHS)

0

100

200

300

400

500

600

700

800

900

RM’ million

88

427

884 882 870

FY2009(12 MTHS)

FY2010(16 MTHS)

FY2011(12 MTHS)

FY2012(12 MTHS)

FY2013(12 MTHS)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

RM’ million

283

1,307

1,612 1,568 1,614


FINANCIAL HIGHLIGHTS

The Group registered a revenue of RM282 million which represented a decrease of 10.2% as compared to 2012 of RM314 million. This was mainly due to the decline in the Group’s overall selling price of Crude Palm Oil (“CPO”) and Palm Kernel (“PK”). The average selling price per metric ton of both CPO and PK had dropped 24% from RM2,862 and RM1,615 in 2012 to RM2,187 and RM1,228 in 2013 respectively.

This substantial drop in price of commodities was

economies. The high inventory levels of CPO had also caused its prices to trade below RM2,500 for a

with the decrease in the pricing of the commodities,

2013, which represented a decrease of 7.3% down from 20.8% in 2012. The increase in the cost of production, especially in the rise of labour costs after implementation of minimum wages, had also contributed to the lower

Despite being beleaguered by low CPO and PK prices for most part of the year, the Group managed to record a positive growth in the last quarter of 2013 with total revenue increased to RM78.5 million as compared to RM59.9 million in the corresponding quarter of 2012.

DIVIDEND

in respect of the year ended 31 December 2013.

PLANTATION OPERATION REVIEW

In 2013, the Group’s oil palm planted area has increased to 54,659 hectares as compared to 52,291 hectares in 2012 whereas the production area was 36,867 hectares, an increase of 1,739 hectares from 2012 of 35,128 hectares. These improvements have contributed to the increase in the production of fresh fruit bunch (“FFB”) from 459,597 metric tons in 2012 to 479,480 metric tons in the year under review.

CHAIRMAN’S STATEMENT

Dear Shareholders,On behalf of the Board

of Directors of Rimbunan Sawit Berhad (“RSB” or

“Company”) and its subsidiaries (“the Group”), I

am pleased to present to you the Annual Report and the

Audited Financial Statements

31 December 2013.

Bong Wei LeongChairman, Independent Director

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Dear Shareholders,On behalf of the Board

of Directors of Rimbunan Sawit Berhad (“RSB” or

“Company”) and its subsidiaries (“the Group”), I

am pleased to present to you the Annual Report and the

Audited Financial Statements

31 December 2013.

Bong Wei LeongChairman, Independent Director


CHAIRMAN’S STATEMENT (CONT’D)

The productions of CPO and PK have also shown an improvement in 2013. The Group’s palm oil mill produced 63,933 metric tons CPO and 16,591 metric tons of PK in 2013, an increase of 5% and 13% respectively from 2012.

With the enforcement of many good agricultural and

enhanced fertilizer application technique, timely road maintenance & gravelling, complete harvesting rounds, standard pruning, improved worker productivity and frequent review of operation to maintain high operation

The further collaboration and cooperation of all parties

and resource management, the recovery of global CPO pricing and positive outlook on palm oil products, the Group will be able to sustain and exceed the performance in 2013.

CORPORATE DEVELOPMENT

The Group has successfully implemented the business

of SAP offers real-time integrated business management solution which enable functionality across all departments

functions including purchasing, sales & distribution,

software system.

The construction of the proposed new palm oil mill in Miri took-off with the earth breaking ceremony

commencement of the project and it is expected to be completed and commissioned by the beginning of 2015 barring unforeseen circumstances.

On 23 January 2014, the Company acquired 100,000 ordinary shares of RM1.00 each in Sibu Garden and Leisure (M) Sdn Bhd (“SGLMSB”) for a total cash consideration of RM78. Subsequent to the acquisition, SGLMSB became a 100% owned subsidiary of the Company. The principal activities of SGLMSB are whole-selling and retailing of agricultural fertilizers for operation of oil palm plantation.

On the same date, the Company acquired 200,000 ordinary shares of RM1.00 each in Rajang Builders Sdn Bhd (“RBSB”) for a total cash consideration of RM238. Subsequent to the acquisition, RBSB became a 100% owned subsidiary of the Company. The principal activities of RBSB are providing general land development contract services for oil palm plantation.

business growth for the Group in the foreseeable future.

OUTLOOK AND PROSPECTS

The global economic outlook is likely to see further improvement, gaining momentum from the last quarter

measures, highlighting an improvement to its economy and the Euro zone debt crisis meeting a consensus on its road to recovery, the global economy is expected to

The healthy palm oil demand from emerging market and major importers especially from China, India and Europe including the global production and consumption rates of vegetable oil, biodiesel usage, crude oil price, and macroeconomic conditions will fuel further improvement to the palm oil industry as a whole.

selling prices of crude palm oil have begun an upward trend move underpinned by fundamentals such as lower production and high demand. The recent unfavourable weather condition also impacted on production. The implementation of biodiesel programmes is expected to sustain the CPO prices.

palms reaching maturity and the prime production age, we expect this will contribute a favourable increase in FFB yields and FFB production to the Group in the coming years. The Group will continue to focus and ensure strict enforcement of the Best Agricultural Practices in our estate and mill operation to further improve yields and increase the oil extraction rate.


CHAIRMAN’S STATEMENT (CONT’D)

ACKNOWLEDGEMENTS

After riding through a very challenging year with low commodities prices of CPO and PK in 2013, I would like to extend my heartiest gratitude to the management and employees for putting in their valuable effort, hard work and commitment in navigating the Group through these tough times.

On behalf of the Board of Directors, our sincere appreciation to the Group’s honourable business partners, government

dedication and professionalism in their untiring support and commitment to the Group.

Bong Wei LeongChairman


MANAGING DIRECTOR’S REVIEW OF OPERATIONS

OIL PALM PLANTATION OPERATION

The Group’s oil palm planted area expanded by 2,368 ha to 54,659 hectares during the

compared to the preceding year of 52,291 hectares. Production area in 2013 had resulted in an increase by 1,739 hectares to 36,867 hectares as compared to 35,128 hectares in 2012. Fresh Fruit Bunch (“FFB”) production during the year under review had increased by 4% to 479,480 metric tons from 459,597 metric tons of the previous corresponding year.

Whilst, the Group’s palm oil mill produced 63,933 metric tons of Crude Palm Oil (“CPO”) and 16,591 metric tons of Palm Kernel (“PK”) in 2013, which resulted in an increase of 5% and 13% respectively from the previous year. The Group’s milling activities recorded an oil extraction rate of 20.56% and palm kernel extraction rate of 5.10% in the year under review.

Age Hectares

One year 5,117Two years 5,103Three years and above 42,071

Total 54,659

Immature 17,192Mature 36,867

Total 54,659

It is the Group’s strategy to persistently place emphasis on fertilizer application as fertilizer is the largest variable cost item and the main contributing factor for higher oil palm production. Fertilizer application during the wettest months of the year (November to January) is avoided to prevent fertilizer from being washed and leached out. In hilly terrains, measures to mulch fertilizer with empty fertilizer bags and applying fertilizer in PVC tubing are methods

and thorough supervision is effected by all overseeing personnel to ensure that every palm receives its quota of fertilizer.

be covered with soft grasses and having bare surface condition is barred across the Group’s plantations. Timely completion within the set weeding programmes are

from noxious weeds for good palm growth and fresh fruit bunch yields.

Road maintenance and gravelling that ranked the second highest plantation operating costs are being closely scrutinized for proper implementation and programmed to complete within the 6 months dry period of the year. Sourcing for gravelling materials within our estates is explored and undertaken for cost saving as purchasing stones from outside source is very much costlier. Another area of cost minimization is by gradually phasing out farm tractors which incur very high maintenance cost and

farm tractor with four wheel-drive lorry had started as this vehicle is speedier in movement and its maintenance cost is comparatively cheaper.

Enforcement of harvesting between 2.5 to 3.0 rounds and implementation of timely crop delivery to the mills were prioritized uncompromisingly to ensure good crop quality.

Retaining 45 to 55 fronds per palm especially during the young matured phase (1st to 5th year in harvesting) had been standard canopy management practice as this is one of the key aspects for yield maximization of oil palm. Over pruning leads to increased production of male

size. Continual training to workers followed by effective supervision is in place to maintain good trunk and canopy growth.

instrumental in determining the achievements of set operational activities and crop production. Plantation management had been tasked to ensure that worker’s daily turnout is not less than 95%. In addition, workers welfare is given top priority to ensure that they enjoy the

resolved as swiftly as possible. These efforts help to retain workers working in the plantation for a much longer period.

Good agricultural and management practices, viz. thorough palm’s care at juvenile stage, optimum palm density, installing all weather road systems, effective drainage systems, good water management in peat

and resource management are the measures that had been adopted to attain plantations’ potential yields, minimise cost and maximize revenue for the Group.

Tiong Chiong OngManaging Director


MANAGING DIRECTOR’S REVIEW OF OPERATIONS (CONT’D)

PALM OIL MILL OPERATION

RH Plantation Palm Oil Mill (“RHPOM”) located at Lot 65 and part of Lot 58, Bok Land District, Miri Sarawak. It is a conventional mill that started operation in October 1998. The mill has been upgraded to 80 ton per hour (“TPH”), and its annual capacity is 360,000 ton FFB.

In line with our Group values, clean technology has been

methane gas (reduce the greenhouse gas emission to environment) which also called the biogas, and recycle the biogas to Gas Engine for electricity generation.

is meeting the safety standard set by the Department of Environment (“DOE”).

Further innovations are in progress, the mill plans to invest the Pellet Plant to recycle the empty fruit bunches (“EFB”) to produce EFB pellets to be used as the biomass for steam boiler, or invest the organic composting plant to recycle

organic fertiliser for estates.

RHPOM continues to maximise the throughput and recover the losses, and utilised the by-products to convert them into value added products and to create an environmental friendly work stations. In addition, the Group new palm oil mill construction works (Rimbunan Sawit second palm oil mill) is in progress. Its earth breaking ceremony was held at site on 16 December 2013.

RSB Bakong Palm Oil Mill (60TPH) project is a complex that integrated with complete by-product processes and

environmental friendly workplace and zero wastage concept. The mill is using vertical sterilisers to increase the

waste treatments. The Group also invested decanter cake dryer to turn the decanter cake into value added product, and invested EFB Shredder with press and solvent plant at mill to enhance the oil recovery, and prepare the shredded EFB as boiler fuel.

The RSB Bakong Palm Oil Mill (60TPH) project is scheduled to be commissioned in second quarter of 2015 with estimated project cost of RM100 million.

Various austerity drives in the wake of the low CPO price and the implementation of minimum labour wages were inevitably taken to review plantation operations

rated tasks was one of the primary cost cutting measures undertaken.

DEVELOPMENT IN 2013

The Group has successfully implemented the business

implementation of SAP offers real-time integrated business management solution which enable functionality across

business functions including purchasing, sales & distribution,

software system.

RSB has been undertaking the development of oil palm plantations on Native Customary Rights (“NCR”) land in

who are from the indigenous community of Malaysia. We have been placing great emphasis on enhancing living conditions of the communities where we operate particularly in the Group’s contributions in areas of education, infrastructure, cultural and social development initiatives. This has created and offered priority in job opportunities to local villagers, either by way of direct employment, internship or through the award of contract works.

RSB Group offers On the Job Training Programme of 24 months to help school leavers, upon completion Field Conductors to solve the problems of the shortage of skilled workers and build a stronger relationship with the local communities and we are continuously building a lifelong learning culture in the organization. Our Agronomy Department has been organising trainings on good agricultural practices to the supervisors of our estates so that they are equipped with the necessary knowledge, skills and exposure to accomplish their tasks effectively

programmes and provide a corporate education loan

Institute of Professional Development.

RSB places high priority on Occupational Safety and Health (OSH). So, we have been organising continuous training and workshops in estates to create safety awareness to ensure the good practices are being carried out effectively. The routine safety training workshops will boost their awareness in OSH control and the importance of safety and risk management in OSH.

CONCLUSION

2013 was a challenging year for our Group. However, with the implementation of good practices in agricultural activities, management, human resources and cooperation from all parties in the organisation, we are

to come and climb to a greater height.

Tiong Chiong OngManaging Director


PROFILE OF DIRECTORS

Mr. Bong Wei Leong was appointed to the Board of Rimbunan Sawit Berhad (“RSB”) on 14 February 2006 and was subsequently appointed as Chairman of RSB on 19 December 2012.

Mr. Bong Wei Leong is a businessman. He graduated with a Bachelor of Business (Accountancy) and Bachelor of Law from Queensland University of Technology, Australia in 1993.

practice in 2004. He has more than 20 years of experience in providing auditing, accounting and taxation services to various clients.

He is a member of the Malaysian Institute of Accountants and the CPA Australia. Mr. Bong also sits on the boards of a public listed company, CCK Consolidated Holdings Berhad and one (1) of the subsidiaries of RSB.

Mr. Bong is the Senior Independent Director to whom concerns regarding the Company may be conveyed.

He is the Chairmen of Audit Committee and Nomination Committee. He is also a member of Remuneration Committee.

Mr. Tiong Kiong King is a businessman and was appointed to the Board of RSB on 14 February 2006. Subsequently, he was appointed as Non-Independent Non-Executive Vice Chairman on 15 February 2006. He is also the Chairman of Remuneration Committee and members of Audit Committee and Nomination Committee.

Mr. Tiong joined the RH Group in 1975 where he has held various positions including being a Director in one (1) of the subsidiaries of RSB since December 1997. He has more than 43 years of managerial experience in the timber industry in various capacities.

Mr. Tiong also sits on the boards of Subur Tiasa Holdings Berhad, a public listed company and several private limited companies. Currently, Mr. Tiong also held key posts in several non-government organizations. Amongst others, he is the Honorary President for Sibu Chinese Chamber of Commerce and Industry, Vice President of World Federation of Fuzhou Association Limited, Chairman of Persekutuan Persatuan-Persatuan Foochow Sarawak, Vice President of the World Zhang Clan Association Limited and Vice President of Persekutuan Klan Zhang Negeri Sarawak.

Group as at 28 April 2014 are disclosed on page 132 of this annual report.

BONG WEI LEONGAged 46 / Malaysian

Chairman / Independent Director

TIONG KIONG KINGAged 66 / Malaysian

Non-Independent Non-ExecutiveChairman


Tan Sri Datuk Sir Diong Hiew King @ Tiong Hiew King was appointed to the Board of RSB on 14 February 2006 and was subsequently appointed as Executive Chairman on 15 February 2006. He was redesignated as Executive Director on 19 December 2012.

Tan Sri Datuk Sir Tiong is a businessman with vast and extensive experience in various

information technology, timber, tree plantation, oil palm plantation and mills.

Over the years, Tan Sri Datuk Sir Tiong has started and built up the Rimbunan Hijau Group of Companies (“RH Group”). Currently, he is the Executive Chairman and Managing Director

in Malaysia comprising of timber harvesting, processing and manufacturing of timber products, plantations and other businesses around the world.

He is the founder of an English newspaper named The National in Papua New Guinea. He is currently the President of The Chinese Language Press Institute Limited. In June 2009, he was bestowed the Knight Commander of the Most Excellent Order of the British Empire (K.B.E.), which carries the title “SIR”, by Queen Elizabeth II of the United Kingdom, in recognition of his contribution to commerce, community and charitable organisations.

PROFILE OF DIRECTORS (CONT’D)

In 2010, he was awarded “Malaysia Business Leadership Award 2010 - The Lifetime Achievement Award” by the Kuala Lumpur Malay Chamber of Commerce, in recognition of his entrepreneurship and his contribution to the country. Tan Sri Datuk Sir Tiong is the Executive Chairman of Sin Chew Media Corporation Berhad (“Sin Chew”), a wholly-owned subsidiary of Media Chinese International Limited, a company listed in Malaysia and Hong Kong. He is also the Chairman of the Board of Trustee of Yayasan Sin Chew, and currently serves as the Executive Chairman of RH Petrogas Limited, a listed company in Singapore. He also serves as a director of other private limited companies.

His shareholdings in RSB Group as at 28 April 2014 are disclosed on page 132 of this annual report.

Mr. Tiong Chiong Ong is a businessman. He was appointed to the Board of RSB on 14 February 2006 and was then appointed as Managing Director of RSB on 15 February 2006. Mr. Tiong graduated with a Bachelor of Law and Economics from Monash University, Australia in 1984 and joined RH Group in 1986. Mr. Tiong started his career as a chambering student and underwent chambering at Skrine and Co. in Kuala Lumpur for 9 months. He is a member of CPA Australia and is a member of the Victorian and Sarawak Bar and the Malaysian Institute of Accountants.

Mr. Tiong has more than 22 years of experience in various capacities in the timber and plantation and industries. He is the Chairman of the RSB Risk Management Committee. He also holds directorships in several private limited companies.

Under his leadership, RSB was presented the 2012 Top Award for Best Performing Stock in the Plantation Sector by the EDGE Billion Ringgit Club, Malaysia.

In 2013, Mr. Tiong was presented the IPD HRD Leadership Award by the Institute of Professional Development, Open University Malaysia in acknowledgment and in

TAN SRI DATUK SIR DIONG HIEW KING@ TIONG HIEW KINGAged 79 / Malaysian

Executive Director

TIONG CHIONG ONGAged 55 / MalaysianManaging Director

recognition of his exemplary leadership and outstanding contribution to the promotion of Human Capital Development efforts in the plantation industry.

in RSB Group as at 28 April 2014 are disclosed on page 132 of this annual report.


TIONG ING MINGAged 56 / MalaysianIndependent Director

Mr. Tiong Chiong Ie, a businessman, was appointed to the Board of RSB on 14 February 2006. He graduated with a Bachelor of Business in Information System from Monash University, Australia in 1994.

Mr. Tiong joined the RH Group in 1996 and has more than 18 years of managerial experience in the timber, transportation provider and shipping industry. He is also a member of Remuneration Committee.

Mr. Tiong holds directorships in Hornbilland Berhad and several private limited

His shareholdings in RSB Group as at 28 April 2014 are disclosed on page 132 of this annual report.

PROFILE OF DIRECTORS (CONT’D)

Mr. Tiong Ing Ming is a registered quantity surveyor of the Board of Quantity Surveyors, Malaysia and a member of the Institution of Surveyors Malaysia. He was appointed to the Board of RSB on 14 February 2006.

He graduated with a Bachelor of Building (Hons) from University of Melbourne, Australia in 1982 and began his career in a consulting quantity surveying practice since 1994.

Mr. Tiong is members of Audit and Nomination Committees. He also sits on the board of Subur Tiasa Holdings Berhad.

28 April 2014 are disclosed on page 132 of this annual report.

Notes:

a) Tan Sri Datuk Sir Diong Hiew King @ Tiong Hiew King and Tiong Kiong King are brothers and is the father and uncle of Tiong Chiong Ong respectively. Both Tan Sri Datuk Sir Diong Hiew King @ Tiong Hiew King and Tiong Kiong King, and Tiong Chiong Ong are the uncles and cousin of Tiong Chiong Ie respectively. Apart from these, the other Directors have no family relationship with each other or the major shareholders of RSB.

b) None of the Directors have been convicted of offences within the past 10 years.

TIONG CHIONG IEAged 43 / Malaysian

Non-IndependentNon-executive Director


CORPORATE GOVERNANCE STATEMENT

INTRODUCTION

The Board of Directors (“Board”) of Rimbunan Sawit Berhad (“RSB” or “the Company”) recognises Corporate Governance as being vital and important to the success of RSB and its Group of Companies (“Group”) business. They are unreservedly committed to applying the principles necessary to ensure that the principles of good governance are practised in all of its business dealings in respect of its shareholders and relevant stakeholders.

This Corporate Governance Statement sets out how the Company has applied the eight (8) Principles as outlined in

under review, the non-observation, including the reasons thereof and, where appropriate, the alternative practice, if any, is mentioned in this Statement.

1. Establish clear roles and responsibilities of the Board and Management All Board members acting on behalf of the Company are aware of their duties and responsibilities as Board

members and the various legislations and regulations affecting their conduct and that the principles and practices of good Corporate Governance are applied in all their dealings in respect, and on behalf of the Company.

(a) reviewing and adopting a strategic plan for the Company, including the sustainability of the Group’s

businesses; (b) overseeing the conduct of the Group’s businesses and assessing whether the businesses are being properly

managed; (c) identifying principal business risks of all aspects of the Group’s business and ensure the implementation of

appropriate internal controls system and mitigating measures to effectively monitor and manage the risks;

programmes in place to provide for the orderly succession of senior management; (e) overseeing the development and implementation of a shareholder communications policy; and (f) reviewing the adequacy and the integrity of the management information and internal control systems of the

Group. To assist in the discharge its responsibilities and facilitating its ongoing oversight of the Group, the Board has established Board Committees, namely the Audit Committee, Nomination Committee, Remuneration Committee

approved by the Board and report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board.

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CORPORATE GOVERNANCE STATEMENT (CONT’D)

1. Establish clear roles and responsibilities of the Board and Management (cont’d)

(i) Board Charter

To enhance accountability, the Board has established clear functions reserved for the Board and those delegated to Management. There is a formal schedule of matters reserved to the Board for its deliberation and decision to ensure the direction and control of the Company are in its hands. Generally, key matters reserved for the Board include, inter-alia, the approval of annual budgets and strategic plan, quarterly and

of policies. Such delineation of roles is clearly set out in the Board Charter (“the Charter”), which serves as a reference point for Board activities. The Charter provides guidance for Directors and Management regarding the roles and responsibilities of the Board, Chairman, its Committees and Management, the requirements of Directors in carrying out their stewardship role and in discharging their duties towards the Company as well as boardroom activities. The Charter is made available on the Company’s website www.rsb.com.my to be in line with Recommendation 1.7 of the Code and will be periodically reviewed and updated to ensure it remains consistent with the Board’s objective and responsibilities.

The Board is committed to conducting its business in accordance with the upmost standards of business ethics and complying with the law, rules and regulations. The Directors are mindful that a strong business

an excellent culture of corporate governance. The Board is guided by the Directors’ Code of Conduct in discharging its oversight role effectively. The Code of Conduct requires all Directors to observe high ethical business standards, honesty and integrity and to apply these values to all aspects of the Group’s business and professional practice and act in good faith in the best interests of the Group and its shareholders. This Code of Conduct is also made available on the Company’s website.

The Board also encourages its employee and associate to raise genuine concerns about possible improprieties

disclose any improper conduct or other malpractices within the Group in an appropriate way.

The Whistleblowing Policy adopted by the Company provides and facilitates a mechanism for any employee and associate to report concerns about any suspected and /or known misconduct, wrongdoings, corruption, fraud, waste and /or abuse.

The Group Managing Director is the conduit between the Board and the Management in ensuring the success of the Company’s governance and management functions. The Group Managing Director implements the policies, strategies and decisions adopted by the Board. All Board authorities conferred on the Management is delegated through the Group Managing Director and this will be considered as the Group Managing Director’s authority and accountability as far as the Board is concerned.

(ii) Sustainability of Business

The Board is mindful of the importance of business sustainability and, in conducting the Group’s business, the impact on the environmental, social and governance aspects is taken into consideration. The Group also embraces sustainability in its operations and supply chain, through its own actions as well as in partnership with its stakeholders, including suppliers, customers and other organizations. Company’s strategies on promoting sustainability has been formulated and documented.

pages 35 to 41 of this Annual Report.


1. Establish clear roles and responsibilities of the Board and Management (cont’d)

(iii) Access to Information and Advice

Procedures to allow Directors to access to information and advice is in place. Directors are supplied with

and audit matters for decisions to be made on an informed basis and effective discharge of the Board’s responsibilities.

All Directors are provided with the performance and progress reports on a timely basis prior to the scheduled

Board and Board Committee meetings, to facilitate decision making by the Board and to deal with matters arising from such meetings. Senior Management of the Group and external advisers are invited to attend

items on the meeting agenda. Besides direct access to Management, Directors may obtain independent professional advice at the Company’s expense, if considered necessary, in accordance with established procedures as set out in the Board Charter in furtherance of their duties.

Directors have unrestricted access to the advice and services of the Company Secretaries to enable them to discharge their duties effectively. The Board is regularly updated and advised by the Company Secretaries

implications of any changes therein to the Company and Directors in relation to their duties and responsibilities.

(iv) Company Secretaries

1965. Both of the Company Secretaries are the members of the Malaysian Association of Institute of Chartered Secretaries and Administrators (MAICSA). They are competent in carrying out their work and play supporting and advisory roles to the Board and the Group on issue relating to compliance with laws and requirements as well as the Code of Corporate Governance. They ensure adherence and compliance to the procedures and regulatory requirements from time to time. They also ensure that meetings are properly convened and

records are properly kept and updated. Besides, they also communicate with management on the Board’s decisions, handling Company’s share transactions, liaising with external auditors, lawyers, tax agents, bankers and shareholders in respect of secretarial and compliances matters.

2. Strengthen Composition of the Board

Directors, two (2) Non-Independent Non-Executive Directors, one (1) Executive Director and one (1) Managing Director.

supervise the RSB Group’s business activities. The current mix of skills and experiences are vital for the effectiveness

annual report.




2. Strengthen Composition of the Board (cont’d)

The following Board Committees have been established to assist the Board in discharging its duties:

i) Audit Committee

The Audit Committee, formed on 2 March 2006, reviews issues of accounting policy and presentation for

the in-house internal auditors, ensures that an objective and professional relationship is maintained with the

Further details can be found in the Report of the Audit Committee as set out on pages 27 to 32 of this annual

report. ii) Nomination Committee The Board has on 7 April 2006 set up a Nomination Committee. The members of the Nomination Committee,

all of whom are non-executive Directors and a majority of whom are independent, are as follows:

Chairman : Bong Wei Leong (Senior Independent Director) Members : Tiong Kiong King (Non-Independent Non-Executive Vice Chairman) Tiong Ing Ming (Independent Director)

The Board has adopted terms of reference for the Nomination Committee, which cover, inter-alia, selecting, assessing and recommending to the Board the candidature of Directors, appointment of Directors to Board Committees, review annually the required mix of skills and experience of Directors, annual assessment of the independent directors, succession plans and board diversity, including gender diversity, training needs for Directors and other qualities of the Board, including core-competencies which the Directors should bring to the Board.

The Board have yet to adopt gender diversity policy and targets. Nevertheless, the Board will continue to monitor and review the Board size and composition from time to time and ensure that women candidates are sought in the recruitment exercise. The evaluation of candidates’ suitability is solely based on their competency, character, time commitment, integrity, contribution and experience in meeting the needs of the Company, including, where appropriate, the ability of the candidates to act as Independent Directors, as the case may be.

involves selection and assessment of candidates for directorships proposed by the Group Managing Director and within the bounds of practicality, by any other senior executive or any director or shareholder, interviewing or meeting up with candidates, deliberation by the Nomination Committee and recommendations by the Nomination Committee to the Board.

In reviewing and recommending to the Board any new Director appointments, the Nomination Committee considers:

(a) the candidate’s independence, in the case of the appointment of an Independent Director;(b) the composition requirements for the Board and Committees (if the candidate is proposed to be

appointed to any of the Board Committees);(c) the candidate’s age, credentials, skills, knowledge, expertise, experience, professionalism, integrity,

capabilities and such other relevant factors as may be determined by the Nomination Committee which would contribute to the Board’s collective skills; and

(d) any competing time commitments, if the candidate has multiple board representations.

The new Directors will undergo an induction programme, which includes vision and mission of the Company, corporate strategy, visits to the RSB Group’s business, and meetings with Senior Management, as appropriate, to facilitate the new Directors’ understanding of the RSB Group. The Company Secretaries will ensure that all appointments of new Director are properly carried out and all legal and regulatory obligations are met.




ii) Nomination Committee (cont’d)

The Board through the Nomination Committee conducted an annual assessment of the performance of the Board, as a whole, Board Committees and individual Directors, based on a self-assessment and peer approach. From the results of the assessment, including the mix of skills, experience and other qualities possessed by Directors, the Board considered and approved the recommendations made by the Nomination Committee on the re-election and re-appointment of Directors at the Company’s forthcoming Annual General Meeting. The Nomination Committee shall assess the independence of all Independent Directors annually and report to the Board. All assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions shall be properly documented.

The Nomination Committee has developed criteria for use in the recruitment and annual assessment of Directors. In evaluating the suitability of candidates, the Nomination Committee considers, inter-alia, the competency, experience, commitment (including time commitment), contribution and integrity of the candidates, and additionally in the case of candidates proposed for appointment as Independent Directors, the candidates’ independence.

discussion and decision making. There is appropriate mix of skills, experience and core competencies in the composition of the Board and that the Board has an appropriate number of Independent Directors. The

experience, core competencies and qualities.

The Nomination Committee recognizes the importance of the roles the Nomination Committee plays not only in the selection and assessment of Directors but also in other aspects of corporate governance which the

iii) Remuneration Committee

The Remuneration Committee was established on 7 April 2006 and is principally responsible for setting the remuneration structure and policy for Executive Directors and recommending to the Board the remuneration of Directors so as to ensure that the Company is able to attract and retain its Directors needed to run the Group successfully. The components of Directors’ remuneration are structured so as to link rewards to corporate and individual performance in the case of Executive Directors. In the case of Independent Directors, the level of

Director concerned.

The members of the Remuneration Committee, the majority of whom are non-executive, are as follows:

Chairman : Tiong Kiong King (Non-Independent Non-Executive Vice Chairman) Members : Tiong Chiong Ie (Non-Independent Non-Executive Director) Bong Wei Leong (Independent Director)

The Board has adopted the Directors’ Remuneration Policies and Procedures, summarised as follows:

needed to run the Company successfully, taking into consideration all relevant factors including the function, workload and responsibilities involved, but without paying more than is necessary to achieve this goal.

(b) The level of remuneration for the Group Managing Director (“GMD”) and Executive Directors are determined by the Remuneration Committee after giving due consideration to the compensation levels for comparable positions among other similar Malaysian public listed companies.

(c) No Director other than the GMD and Executive Directors shall have a service contract with the Company.




iii) Remuneration Committee (cont’d)

responsibility and commitment that goes with Board membership. The Remuneration Committee recommends to the Board the remuneration package of the Directors. The fees for Non-Executive Directors are determined by the Board as a whole. Each individual Director abstained from the Board discussion and decision on his own remuneration. The remuneration package is determined in accordance to fair and equitable criteria based on the performance of the Directors and the Directors’ Remuneration Policies and Procedures.

The Board is of the opinion that matters pertaining to Directors’ remuneration are of a personal nature. However, in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad

year ended 31 December 2013, in aggregate and analysed into bands of RM50,000, were as follows:

Executive Directors Non-Executive Directors (RM) (RM)

Fee 57,600 204,600 Salary 2,040,000 - Bonus 1,190,000 - Allowances 1,400 5,000

Executive Directors Non-Executive Directors (No.) (No.)

RM1,850,000 to RM1,900,000 1 - RM1,600,000 to RM1,650,000 1 - RM150,000 to RM200,000 - 1 RM50,000 and below - 3

iv) Risk Management Committee

monitoring, managing and mitigating the risks associated with the RSB Group’s business with a view to the long

Committee has met four (4) times.

The composition of the Risk Management Committee are as follows:

Chairman : Tiong Chiong Ong Members : Gopalakrishnan A/L Sengan Robert Ling Tong Ung Ngu Ming Kwong Setia ak Uliek




iv) Risk Management Committee (cont’d)

The main features of the risk management framework are as follows:

can impede RSB’s ability to achieve its objectives;

(c) To enforce and monitor closely all the control measures to ensure compliance by the respective estate management;

(d) To conduct periodic review of the progress and communicate material risks to the Board via the Audit and Risk Management Committee;

(e) To maximize yield per hectare;

(g) To ensure that human resource are trained, disciplined and dedicated;(h) To ensure compliance of provisions under Occupational, Health & Safety Act/Pesticide Acts as well as

Department of Environment requirement; and(i) To manage fraud risk.

3. Reinforce Independence of the Board The Board recognises the importance of ensuring a balance of power and authority between the Chairman and

the Group Managing Director with a clear division of responsibility between the running of the Board and the Company’s business respectively. The positions of Chairman (i.e. Non-Executive Chairman) and Group Managing

composition and size of the Board is such that it facilitates the making of informed and critical decisions.

Company are held by an Independent Director and Managing Director respectively. Their roles and responsibilities

Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”).

The Chairman leads the Board and is responsible for ensuring the adequacy and effectiveness of the Board’s governance process and acts as a facilitator at Board meetings to ensure that contributions from Directors are forthcoming on matters being deliberated and that no Board member dominates discussion. As to the Managing Director, supported by Executive Director, he implements the Group’s strategies, policies and decision adopted by the Board, oversees the operations and business development of the Group, provides effective leadership and ensure high management competency.

The tenure of an Independent Director shall not exceed a cumulative term of nine (9) years. However, upon completion of the nine (9) years, the Independent Director may continue to serve the Board subject to the Director’s re-designation as a Non-Independent Director. In the event the Director is to remain designated as an

The Independent Directors bring to bear objective and independent views, advice and judgment on interests, not only of the Group, but also of shareholders, employees, customers, suppliers and the communities in which the Group conducts its business. Independent Directors are essential for protecting the interests of shareholders

impartiality. The Chairman is an Independent Director and none of the Independent Directors has served the Company exceeding a cumulative terms of nine (9) years.

Board Charter. The Board through the Nomination Committee has assessed the Independent Director and is

the best interest of the Company. The Board therefore believes that balance of power and authority exists within



4. Foster Commitment of Directors i) Time commitment and meetings

this commitment from Directors at the time of their appointment. Each Director is expected to commit time as and when required to discharge the relevant duties and responsibilities, besides attending meetings of the Board and Board Committees.

The Board acknowledges that its Directors may be invited to become directors of other companies and that exposure to other organisation can broaden the experience and knowledge of its Directors which may bring

performance and contributions as a member of the Board. Any Director shall notify the Chairman before

the new appointment.

Directors are expected to have such expertise so as to qualify them to make a positive contribution to the

and responsibilities as Directors of the Company. This is evidenced by their attendance at the meetings of the

The Board ordinarily meets at least four (4) times a year, scheduled well in advance to facilitate the Directors in planning their meeting schedule for the year. Additional meetings are convened when urgent and important decisions need to be made between scheduled meetings. Board and Board Committees papers, which are prepared by Management, provide the relevant facts and analysis for the convenience of Directors. The meeting agenda, the relevant reports and Board papers are furnished to Directors and Board Committees

discussion and decision making during meetings. At the quarterly Board meetings, the Board reviews the

details of attendance of each Director are set out below:

Numbers of meetings attended

Tan Sri Datuk Sir Diong Hiew King @ Tiong Hiew King 4 out of 5 Tiong Kiong King 4 out of 5 Tiong Chiong Ong 5 out of 5 Tiong Chiong Ie 3 out of 5 Bong Wei Leong 5 out of 5 Tiong Ing Ming 4 out of 5

All proceedings, matters arising, deliberations in terms of the issue discussed, and recommendations made by the Board Committees at the committees’ meetings are recorded in the minutes by the Company Secretary,

meetings were attended by the Company Secretary. Upon invitation, Management representatives were present at the Board Committees’ meetings to provide additional insight into matters to be discussed during the said committee meetings, if so required.



4. Foster Commitment of Directors (cont’d)

ii) Directors’ Training

All the Directors have attended the Mandatory Accreditation Programme as required by Bursa Securities after the Company is listed on the Main Market of Bursa Securities on 28 June 2006.

The Board acknowledges that continuous training and education are vital for the Board members to gain insight into the state of economy, technological advances, regulatory updates and management strategies. Directors are encouraged to attend continuous education programmes to further enhance their skills and knowledge, where relevant.

Board meetings by the Company Secretaries. All Directors will continue to attend relevant training as may be required from time to time to equip themselves with the knowledge to discharge their duties more effectively and to keep abreast with regulatory and corporate governance developments in the marketplace.

The Board has assessed the training needs of the Directors. Generally, all Directors must attend at least one (1)

appropriate training programmes conducted by external experts and the descriptions of the training/seminar are set out below:

Title of training/seminar Number of day(s) spent

NATSEM 10th Incorporated Society of Planters 1

The Company Secretaries circulate the relevant guidelines on statutory and regulatory requirements from time to time for the Board’s reference and brief the Board on these updates, where applicable. The Senior Manager, Accounts and External Auditors also briefed the Board members on any changes to the Financial

as well as the review of the Group’s operations and performance in the Annual Report, where relevant.

accounting standards to give a true and fair view of the state of affairs of the Group and of the Company as at

comprising exclusively Non-Executive Directors, the majority of whom are independent, with Mr. Bong Wei Leong as the Audit Committee Chairman. The composition of the Audit Committee, including its roles and responsibilities, are set out in the Audit Committee Report on pages 27 to 32 of this Annual Report. One of the key responsibilities



non-audit services permitted to be provided by the external auditors, does not impair the auditors’ objective, judgment and independence.

The Board has also adopted an External Auditors Policy for the Audit Committee to assess the suitability and independence of external auditors. The External Auditors Policy has outlined the criteria and procedures for the engagement, assessment and monitoring of external auditors. The Audit Committee is responsible for reviewing, assessing and monitoring the performance, suitability and independence of the external auditors, on an annual basis.

Audit Committee had assessed the suitability and independence of the external auditors based on the External Auditors Policy and recommended their re-appointment for the ensuing year.

presence of the other Directors and employees of the Group.

6. Recognise and manage risks of the Group The Board acknowledges its responsibility for the RSB Group’s system of risk management and internal control,

which is designed to identify, evaluate and manage the risks of the businesses of the RSB Group, in pursuit of its

and compliance aspects, particularly to safeguard the RSB Group’s assets and hence shareholders’ investments. The system of internal control, by its nature, can only provide reasonable but not absolute assurance against misstatement or loss.

In executing the responsibility for the internal control system, the Board via the internal auditors and Risk Management Committee, has adopted procedures to monitor the ongoing adequacy and integrity of the system of risk management and internal control. The effectiveness of the RSB Group’s system of risk management and internal control is reviewed on a regular basis by the Internal Auditors and Risk Management Committee.

Further details of the state of the risk management and system of internal control of the RSB Group are presented on pages 33 to 34 of this annual report.

RSB has its in-house internal audit function which is independent of the activities its audit. The Internal Audit Manager report directly to the Audit Committee. Further details of the internal audit function are outlined on pages 32 and 34 of this annual report.

7. Ensure timely and high quality disclosure i) Corporate Disclosure Policy and Procedures

The Board is committed to ensuring that communications to the investing public regarding the business,

with applicable legal and regulatory requirements.

statements and, where necessary other presentation materials presented at the Company’s general meetings, including material and price-sensitive information, are disseminated and publicly released via Bursa LINK on a timely basis to ensure effective dissemination of information relating to the Group.



7. Ensure timely and high quality disclosure (cont’d) i) Corporate Disclosure Policy and Procedures (cont’d)

The Board places importance in ensuring disclosures made to shareholders and investors are comprehensive, accurate and on a timely and even basis as they are critical towards building and maintaining corporate

and Procedures to set out the policies and procedures for disclosure of material information of the Group to ensure compliance with the Listing Requirements. The Corporate Disclosure Policy and Procedures are applicable to all employees and Directors of the Group as well as those authorised to speak on their behalf.

ii) Leverage on Information Technology

In addition, the Company also put in place electronic facility to enable communication with shareholders via its website www.rsb.com.my. Shareholders can access to and obtain all information on RSB Group by accessing this website. All announcements made by the Company and information that are relevant to the shareholders and investors are available in this website.

8. Strengthen relationship between the Company and its shareholders i) Shareholder participation at general meeting

The general meeting, which is the principal forum for shareholder dialogue, allows shareholders to review the

At the general meeting, shareholders participate in deliberating resolutions being proposed or on the Group’s operations in general. The Chairman of the general meeting invited shareholders to raise questions with responses from the Board, Senior Management and external auditors. The notice of general meeting is circulated within the prescribed period before the date of the meeting to enable shareholders to go through the Annual Report, circular and papers supporting the resolutions proposed. Special business transacted at the general meeting are accompanying with the explanatory notes to facilitate full understanding of the matters involved. Except for those required under the Listing Requirements, all the resolutions set out in the notice of the general meeting was put to vote by show of hands and the outcome of the general meeting will be announced to Bursa Securities immediately.

ii) Poll voting

The shareholders were informed of their rights to demand a poll vote at the commencement of the general meetings. Shareholders are encouraged to participate through proxy voting should they be unable to attend in person.

The Chairman will declare the outcome of each resolution after proposal and secondment are done by the shareholders. The Board is of the view that with the current level of shareholders’ attendance at general

out electronic polling at its general meetings if need to. iii) Communication and proactive engagement with shareholders and prospective investors

The Board recognises the importance of being transparent and accountable to the Company’s shareholders and prospective investors. The various channels of communications are through meetings with institutional

relevant announcements and circulars, when necessary, the Annual and Extraordinary General Meetings and through the Group’s website at www.rsb.com.my where shareholders and prospective investors can access

share prices of the Company. To maintain a high level of transparency and to effectively address any issues or concerns, the Group has a dedicated electronic mail, i.e. [email protected] to which stakeholders can direct their queries or concerns.



8. Strengthen relationship between the Company and its shareholders (cont’d)

iii) Communication and proactive engagement with shareholders and prospective investors (cont’d)

queries concerning the RSB Group may be conveyed to.

The Company’s responses to queries raised by the Minority Shareholder Watchdog Group were also shared and read out during the last annual general meeting. The Company will consider to put in place a proactive investment relations programme in due course.

COMPLIANCE STATEMENT

With the introduction of the new Code, the Board remains committed to inculcating good corporate governance for the Group. The Group has complied with the Code except for those disclosed in this statement. The Group will continue to endeavour to comply with all the key principles and recommendations of the Code in its effort to observe high standards of transparency, accountability and integrity.

STATEMENT ON NOMINATION COMMITTEE ACTIVITIES

i) Reviewed the mix of skills , experience and other qualities required for the Board and Board balanceii) Evaluated the performance and effectiveness of the Board including contributions of each individual director as

well as the Senior Manager, Accounts and the independence of the Independent Directorsiii) Evaluated the performance and effectiveness of the Board Committeesiv) Assessed and recommended to the Board, Directors who are due for retirement by rotation pursuant to the

Company’s Articles of Association, for continuation in service as Directorsv) Assessed and recommended the re-appointment of the Director pursuant to Section 129 of the Companies Act,

1965vi) Assessed and recommended to the Board the training needs of the Directorsvii) Deliberated and recommended to the Board to develop, maintain and review the criteria for recruitment

process and annual assessment of Directors, criteria to assess Independent Directors and to establish a policy on boardroom diversity including gender diversity

This statement is made in accordance with the resolution of the Board of Directors dated 16 April 2014.




REPORT OF THE AUDIT COMMITTEE

The Audit Committee (“the Committee”) of Rimbunan Sawit Berhad (“RSB” or “the Company”) was established on 2 March 2006 and comprises the following Directors:

Chairman : Bong Wei Leong (Independent Director)Members : Tiong Kiong King (Non-Independent Non-Executive Director) Tiong Ing Ming (Independent Director)

Mr. Bong Wei Leong is a member of the Malaysian Institute of Accountants, one of the associations of accountants

literate.

SUMMARY OF THE TERMS OF REFERENCE

(1) Membership The Committee shall be appointed by the Board of Directors from amongst their number and shall consist of not less

than three (3) members. All members of the Committee must be non-executive directors, with a majority of them being independent directors. No alternate director shall be appointed as a member of the Audit Committee.

At least one (1) member of the Committee:

or

the Accountants Act 1967; or

Securities”). If membership of the Committee for any reason falls below three (3) members, the Board of Directors shall, within three

Board of Directors at least once every three (3) years to determine whether the Audit Committee and its members have carried out their duties in accordance with their terms of reference.

(2) Chairman The Chairman of the Committee shall be elected from amongst their number who shall be an independent

director appointed by the Board of Directors. In the absence of the Chairman of the Committee, members present at the meeting shall elect one (1) of them to chair the meeting.

(3) Secretary The Secretary to the Committee shall be any one (1) of the joint company secretaries. In the absence of the

Secretary at the meeting, the members present at the meeting shall elect any other person as the secretary of the meeting.


(4) Quorum A quorum shall consist of a majority of independent directors and shall not less than two (2) independent directors.

For the purpose of determining whether the quorum for the transaction of the business of the Committee exists in the case of a meeting of committee, in addition to the members present at the meeting, any member in telephonic communication with such meeting shall be counted in the quorum.

(5) Meetings and Minutes The Committee shall hold at least four (4) meetings a year. Additional meeting may be held as and when

necessary, upon request by any Committee member, the Management, Internal or External Auditors. The Internal Audit Manager and the Senior Account Manager are normally invited to attend the meetings. Other members of the Board of Directors, employees and representative of External Auditors shall attend the meetings upon the invitation of the Committee.

Notice of any meeting of the Committee may be given by telephone or facsimile. Notice of meeting and board

papers shall be given to all members of the Committee at least 14 days and seven (7) days respectively before the date of meeting.

The decision of the Committee shall be decided by a majority of votes. In the case of an equality of votes,

the Chairman shall have a second or casting vote, provided that where two (2) members form a quorum, the Chairman of a meeting at which only such a quorum is present, or at which only two (2) Directors are competent to vote on the question in issue, the Chairman shall not have a casting vote.

Minutes of each meeting shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting and shall be accepted as prima facie evidence without further proof of the facts stated therein. Such minutes of meetings shall be kept by the secretary and distributed to each member of the Committee.

A resolution in writing signed by all Committee members shall be deemed to have been passed at a meeting held

on the date on which it was signed by the last member.

(6) Authority The Committee is authorised by the Board of Directors to:

(a) investigate any activity/matter within its terms of reference and shall have unrestricted access to all employees of the Company and the Group;

(b) have the resources in order to perform its duties as set out in its terms of reference;

(c) have full and unrestricted access to any information pertaining to the Company and the Group;

(d) have direct communication channels with the internal and external auditors;

(e) obtain external legal or other independent professional advice as necessary; and

(f) convene meetings with the internal auditors, external auditors or both, excluding the attendance of other

Directors and employees of the Company and the Group at least twice (2) a year. Notwithstanding anything to the contrary herein before stated, the Committee does not have executive powers

and shall report to the Board of Directors on matters considered and its recommendations thereon, pertaining to the Company and the Group.

REPORT OF THE AUDIT COMMITTEE (CONT’D)


(7) Responsibility Where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily

resolved resulting in a breach of the Main Market Listing Requirements of Bursa Securities (“Listing Requirements”), the Committee has the responsibility to promptly report such matter to Bursa Securities.

(8) Functions and Duties The duties of the Committee are to:

(a) consider the nomination, appointment, re-appointment, resignation and dismissal of External Auditors, the auditors’ remuneration and any questions of resignation or dismissal;

(b) consider whether there is reason (supported by grounds) to believe that the External Auditors of the Company

and the Group are not suitable for re-appointment;

(c) review the nature and scope of audit plans prepared by the Internal and External Auditors before the audit

responses thereto;

may wish to bring up;

the matters set out below, before submission to the Board of Directors for approval:

(g) Review the internal audit programme, processes, the results of the internal audit programme and to consider

carried out by the internal auditors and ensure that appropriate action is taken by the Management in respect of the audit observations and the Committee’s recommendations;

(h) review the auditors’ evaluation of the systems of internal controls;

(i) review the adequacy of the scope, functions, competency and resources of the internal audit functions and whether it has the necessary authority to carry out its work;

(j) review any appraisal or assessment of the performance of the members of the internal audit function;

(k) approve any appointment or termination of senior staff members of the internal audit function;

(l) be informed of any resignation of the internal audit staff members and to provide the resigning staff member an opportunity to submit his or her reasons for resigning;

(m) review the assistance given by the Company’s and the Group’s employees to the Internal and External

Auditors;



Group including any transaction, procedure or course of conduct that raises questions of the Management integrity;

(o) review whether there is reason (supported by grounds) to believe that the Group’s External Auditors is not

suitable for re-appointment;

(p) to establish and review policies and procedures to assess the suitability and independence of External Auditors; and

(q) perform such other functions as may be agreed to by the Committee and the Board of Directors.

MEETINGS AND ATTENDANCE

attendance of each of the Committee members are outlined as follows:

Numbers of meetings attended

Bong Wei Leong 5 out of 5

Tiong Kiong King 3 out of 5

Tiong Ing Ming 5 out of 5

All proceedings, matters arising, deliberations, in terms of the issue discussed, and resolutions at the Committee

Chairman of the Committee or Chairman of the meeting and reported to the Board of Directors at the Board meetings. All Committee meetings were attended by the Company Secretaries. Upon invitation, the Internal Audit Manager, Senior Manager, (Group Accounts) and Senior Operation Manager were present at the Committee meetings to provide additional insight into matters to be discussed during the Committee meetings.

TRAINING

Title of training/seminar Number of day(s) spent




SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE

discharge of its functions and duties:

(a) reviewed and approved the audit plans including scope and coverage of audit of the RSB Group with the internal and external auditors;

recommendations made by the internal and external auditors, and Management’s responses thereof;

standards as well as the Group’s performance, prior to submission to the Board of Directors for consideration and approval;

the RSB Group including any transaction, procedure or course of conduct that raises questions of management integrity, prior to submission to the Board of Directors for consideration and approval;

(e) reviewed adequacy of the disclosure on related party transactions entered into by the Company and the RSB

Group in the quarterly and annual reports of the Company; (f) met with the internal and external auditors twice without the presence of the other Directors and employees of

RSB Group; (g) assessed the Independent and suitability of external auditors and recommended to the Board of Directors the

appointment as external auditors and their fees; (h) reviewed the draft Statement on Risk Management and Internal Control and draft Report of the Audit Committee

prior to recommending to the Board of Directors for approval; (i) reviewed the adequacy of the scope, functions, competency and resources of the internal audit function; (j) reviewed the report on the recurrent related party transactions of a revenue or trading nature (“RRPTs”) entered

into by the RSB Group pursuant to the shareholder mandate obtained at the general meetings; and (k) reviewed the draft Circular to Shareholders in relations to the proposed shareholders mandate for the RRPTs, prior

to recommending to the Board of Directors for approval.




INTERNAL AUDIT FUNCTION

RSB Group has an in-house internal audit function to assist the Audit Committee in the discharge of its duties and responsibilities and is principally responsible for the independent assessment of the adequacy, effectiveness and

and governance processes so as to provide reasonable independent assurance that such systems continue to operate satisfactorily and effectively.

The Group internal audit function adopts a risk-based auditing approach in planning and conducting audits by focusing on key risk areas. The internal audit function is independent of the activities it audits, and is responsible for the regular review and/or appraisal of the internal control, management and governance processes within the RSB Group. It operates and performs in accordance to the principles of the Internal Audit Charter.

The internal audit reports were deliberated by the Audit Committee and recommendations were duly acted upon by the Management. Currently, the Internal Audit Manager reports directly to the Audit Committee on the activities carried out by the internal audit department based on the annual audit plan duly approved by the Audit Committee.

activities:

within the RSB Group.

RM 630,000.00.

This report is made in accordance with the resolution of the Board of Directors dated 16 April 2014.




STATEMENT OF RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION

The Company and its subsidiaries (the “Group”) continuously identify, evaluate, monitor and manage key controls and risks that could affect the Group, using certain well-established procedures. The Group has formalized those procedures by setting up a formal framework for the purpose of reporting to the Audit and Risk Management Committee.

BOARD RESPONSIBILITY

The Board acknowledges its responsibility for maintaining a sound system of risk and internal control processes and the need to review its adequacy and effectiveness on a regular basis. The system of internal control is meant to effectively manage business risk towards the achievement of objectives so as to enhance the value of shareholders’ investments and to safeguard the Group’s assets.

However, as in any system of internal control, it is designed to manage rather than eliminate the risk of failure to achieve business objectives and therefore, it can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board has received assurance from the Managing Director that the Group’s risk management and internal control system is operating adequately and effectively based on the risk management and internal control system of the Group.

The key elements of the Group’s system of internal control are summarized as follows:

RISK MANAGEMENT FRAMEWORK

The Board recognizes that an effective risk management framework will allow the Group to identify, evaluate and

manner. The Board with the assistance of the Audit Committee and the Risk Management Committee continuously review existing risks and identify new risks that the Group faces. To further enhance the risk management process

of selected management staff. In addition, manager in each business unit have prepared action plans to address key risks and control issues highlighted by the internal auditors.

Risk Management Function

The Group Risk Manager is responsible for:

1. Implementing the risk management framework and ensuring that there are adequate processes in place to identify, evaluate and manage material risks across the organization. Such ongoing processes have been in

2. Communicating material risks to the Board via the Audit and Risk Management Committee.

risks of the Group on an ongoing basis. This will involve the assessment of the principal risks of all the Group’s operating


Internal Audit Function

Internal Audit provides assurance over the effective operation of risk management processes, methodologies and internal controls. Periodic appraisal on the adequacy and effectiveness of the risk management and internal control system has been undertaken. In this respect, grading of the operating units performance and risk management has been conducted.

CONTROL STRUCTURE AND ENVIRONMENT

The Board is fully committed to ensuring that a proper control environment is maintained within the organization to govern the manner in which the Group and its employees conduct themselves.

Independence of the Audit Committee

The Audit Committee comprises non-executive Directors, a majority of them are independent and all of whom bring with them a wide variety of experience. The Audit Committee has full and unimpeded access to both the internal as well as external auditors.

Internal and External Audit

The Group has an internal audit function whose primary responsibility is to independently assure the Board, through the Audit Committee, that the system of internal controls functions as intended. The internal Auditors regularly audit

The core function of the internal auditors is to perform an independent appraisal of the Group’s activity, to provide assurance and to help management to maintain the best internal control system. The management is responsible to ensure that corrective actions on reported weaknesses are undertaken within an appropriate time frame.

In addition, the activities of the Audit Committee in reviewing the results and work of the internal auditor and the

corporate governance.

Financial authority and operational information

The Company has implemented a system of controls as set out in the Operations Manual. The Board will review from

A detailed budgeting process takes place annually, where each business unit prepares its budget for the following

Board for formal approval. The budgets were then reviewed on a regular basis, with performance monitored against

At each Board meeting, the Board is furnished with timely and detailed Board papers, endorsed by the Managing

MONITORING AND REVIEW

Monitoring the Group’s business risks is one of the primary processes of the internal audit function, which then reviews

The system of internal controls described in this statement is considered by the Board to be adequate and there was

separate disclosure in the Group’s Annual Report.

This statement is made in accordance with the resolution of the Board of Directors dated 16 April 2014.

STATEMENT OF RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D)


CORPORATE SOCIAL RESPONSIBILITY

Rimbunan Sawit Berhad (“RSB”) Group’s corporate social responsibility (CSR) emphasizes the development and sustainability of the four components which are: the marketplace, the community, the workplace, and the environment. RSB Group aims to contribute to a better society; and towards Sarawak’s growth and development. The Group integrated CSR into all its day-to-day work activities and are mindful that we create value for all our stakeholders and enhancing the long-term sustainability of the Company.

MARKETPLACE

RSB Group’s CSR in the Marketplace is focused on the following key areas:

Quality Products & Services

Rimbunan Sawit through RH Plantation Palm Oil Mill continues to maintain the ISO 9001 accreditation to ensure that its products meet the highest available standards and the expectations of the market and its customers. The Group constantly implement continuous improvement on its business processes and through its yearly assessments of contractors, consultants and service providers to ensure delivery of operating supplies by our valued vendors and quality products and services to our customers. Rimbunan Sawit strongly believes in the importance of maintaining the highest standards of quality in company products and employee conducts whilst safeguarding environmental and social values.

We are committed to be in compliance with all laws and regulations, and concurrently to meet and even exceed the

vendors, trading partners and other stakeholders and value integrity to safeguard investors’ interests as well as the customers’.


CORPORATE SOCIAL RESPONSIBILITY (CONT’D)

Stakeholders Engagement

RSB consider our associates, investors and analysts, customers, trading partners and communities as our primary stakeholders and understand their concerns and are able to be transparent with them about our efforts and progress. Any updated investor relations information will then be made available in RSB’s corporate website.

Corporate Governance

The Group engages in true

in the interest of its investors and is committed to the highest standards of the Malaysia Code on Corporate Governance 2012. We implemented the world class SAP system, a business support system that maintains in a single database. Transactions are processed end-to-end for Financials, Materials , Projects, Budgets, Human Resources, eliminating data inconsistencies between sub-systems and providing information in a more reliable and accessible manner. 2013 has indeed been a year of information technology during which the implementation

material, project and Human Resources was completed.

productivity, and minimise environmental impact and agricultural risk. Land bank and estate operation data are stored in a reliable & centralise GIS database system as baseline for operational planning and budgeting.

ENVIRONMENT

The Group takes appropriate measures to ensure regulatory environmental requirements are complied with. The Group is committed to adopt practices like zero-carbon emission during replanting, zero wastage mill management

towards greater environmental friendliness of palm oil production and sustainability of the palm oil industry in the long run.

The group’s good agricultural practises improve soil fertility and productivity. Field application of empty fruit bunches (EFB) in the plantation are implemented. to enhance soil fertility. A Polishing plant was constructed to treat the mill

harness the methane gas (greenhouse gas) which is also called the biogas, and recycle the biogas to Gas Engine for electricity generation.


CORPORATE SOCIAL RESPONSIBILITY (CONT’D)

RSB introduced livestock management at estates in Lundu to improve soil and vegetation cover and plant and animal biodiversity to reduce environment impact. Grazing animals can improve plant species composition by removing biomass, by controlling shrub growth and by dispersing seeds through their hoofs and manure. In addition, trampling can stimulate grass tillering, improve seed germination and break-up hard soil crusts and reduce use of chemical for weeding and manuring.

RSB cares for the environment sustainability by promoting efforts in waste handling and recycling. To better utilise energy from waste material and biomass, RSB plan to invest in Pellet Plant, to recycle the empty fruit bunches (EFB) to produce EFB pellets to be used as biomass for steam boiler or invest in organic composting plant to recycle the EFB,

Recycle paper usage in workplace

RSB encourages its employees to play a part in protecting the environment by promoting recycle paper usage in workplace and to promote recycling habits to shape the mind set to go green and make recycling as an integral part of our everyday life. With the theme of “Go Green Week”, staff are reminded at workplace on the importance of maintaining a good environment and to instil environmental awareness by having potted plant to promote the ‘Green’ spirit in their daily life and as a gesture towards a sustainable environment for future generations.



COMMUNITY

RSB strives to be a responsible corporate citizen and is committe

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