(cid:2)(cid:3)(cid:4)(cid:5)(cid:3)(cid:4)(cid:6)(cid:7)(cid:8) (cid:9)(cid:4)(cid:10)(cid:11)(cid:5)(cid:12) Annual Report 2014 Contents 2 Corporate Information 4 Board of Directors 5 Directors’ Profi le 10 Chairman’s Statement 12 Corporate Social Responsibility 22 Corporate Events 26 Group Financial Highlights 27 Statement on Corporate Governance 38 Additional Compliance Information 40 Audit Committee Report 45 Statement on Risk Management and Internal Control 49 Reports and Financial Statements 131 Analysis of Shareholdings 134 Analysis of Warrant Holdings 136 List of Properties 142 Notice of Annual General Meeting 147 Statement Accompanying Notice of Annual General Meeting Form of Proxy Corporate Information Chairman Registered Offi ce & Head Offi ce Tan Sri Dato’ Seri Utama Arshad bin Ayub P.S.M., S.P.M.S., S.U.N.S., S.P.S.K., P.N.B.S., D.P.M.P., D.P.M.J., 22nd Floor, Wisma MCA D.S.A.P., D.P.M.T., D.S.L.J. (Brunei), P.G.D.K., J.M.N., P.B.E. 163 Jalan Ampang, 50450 Kuala Lumpur Tel. No: 03-2170 0999 Managing Director Fax No: 03-2170 0888 Website: www.mfm.com.my Teh Wee Chye Registrar Directors Symphony Share Registrars Sdn Bhd Dato’ Hj Shaharuddin bin Hj Haron Level 6, Symphony House D.P.C.M., J.S.M., P.C.M., K.M.N. Block D13, Pusat Dagangan Dana 1 Geh Cheng Hooi Jalan PJU 1A/46, 47301 Petaling Jaya Selangor Darul Ehsan Quah Ban Lee Tel. No: 03-7841 8000 Datuk Oh Chong Peng Fax No: 03-7841 8151/52 P.J.N., J.S.M. Dato’ Wira Zainal Abidin bin Mahamad Zain Factories D.G.M.K., D.S.D.K., K.M.N., S.M.T., A.M.K. Jalan David Sung, Batu Undan Prakash A/L K.V.P Menon 32200 Lumut Perak Darul Ridzuan Tan Sri Mohd Sidek bin Haji Hassan P.M.N., P.S.M., S.J.M.K., S.P.M.S., S.P.C.M., S.S.A.P., S.U.M.W., Lot 133, Jalan Pukal D.G.S.M., P.N.B.S., D.H.M.S., D.I.M.P., K.M.N. Pasir Gudang Industrial Estate Azhari Arshad 81700 Pasir Gudang Johor Darul Takzim Audit Committee Branches Dato’ Hj Shaharuddin bin Hj Haron (Chairman and Independent Non-Executive Director) • FEDERAL TERRITORY Geh Cheng Hooi Lot 40, Jalan E 1/4 (Independent Non-Executive Director) Taman Ehsan Industrial Park Kepong, 52100 Kuala Lumpur Tan Sri Dato’ Seri Utama Arshad bin Ayub (Independent Non-Executive Director) • PENANG 4557, Jalan Heng Choon Thian Datuk Oh Chong Peng 12000 Butterworth, Pulau Pinang (Independent Non-Executive Director) • PERAK Dato’ Wira Zainal Abidin bin Mahamad Zain No. 2, Laluan Perusahaan 10 (Independent Non-Executive Director) Kawasan Perusahaan Menglembu Azhari Arshad 31450 Ipoh, Perak Darul Ridzuan (Independent Non-Executive Director) • MALACCA No. 1, Jalan PM3 Secretary Taman Perindustrian Merdeka Mah Wai Mun (MAICSA 7009729) 75350 Batu Berendam, Melaka 2222 AAAnnnnnnnnuuuuaaalll RRReeepppooorrrttt 222000111444 ••• MMMaaalllaaayyyaaannn FFFlllooouuurrr MMMiiillllllsss BBBeeerrrhhhaaaddd • JOHOR Principal Bankers Lot 133, Jalan Pukal • Malayan Banking Berhad (3813-K) Pasir Gudang Industrial Estate • HSBC Bank Malaysia Berhad (127776-V) 81700 Pasir Gudang, Johor Darul Takzim • Alliance Bank Malaysia Berhad (88103-W) • KELANTAN • Hong Leong Bank Berhad (97141-X) Lot 4045, Blok C, No. 4 Jalan 1/44 • Cooperatieve Centrale Raiffeisen- Pengkalan Chepa, Mukim Panchor Boerenleenbank B.A (Rabobank Nederland) Daerah Kemumin (050090C) 16100 Kota Bharu • Bangkok Bank Berhad (299740-W) Kelantan Darul Naim • Bank of Tokyo-Mitsubishi UFJ (Malaysia) • PAHANG Berhad (302316-U) B-5 Lorong Padang Lalang • OCBC Bank (Malaysia) Berhad (29548-W) 14, Jalan Tanjung Api 25050 Kuantan Stock Exchange Listing Pahang Darul Makmur Bursa Malaysia Securities Berhad Subsidiaries - Main Market (Consumer Products Sector) Stock Code: 3662 • Vimafl our Ltd • MFM International Ltd Solicitors • Mekong Flour Mills Ltd Isharidah, Ho, Chong & Menon • Dindings Soya & Multifeeds Sdn Berhad Skrine (34884-U) • MFM Feedmill Sdn Bhd (172615-X) • Dindings Poultry Processing Sdn Bhd Auditors (144808-P) KPMG • Dindings Poultry Development Centre Sdn Bhd (180044-A) • Premier Grain Sdn Bhd (754079-T) • Semakin Dinamik Sdn Bhd (185533-V) • Dindings Broiler Breeder Farm Sdn Bhd (172600-T) • Syarikat Pengangkutan Lumut Sdn Bhd (51336-M) • Muda Fibre Manufacturing Sdn Bhd (48785-V) • Dindings Grand Parent Farm Sdn Bhd (144962-W) • MFM Property Sdn Bhd (176691-P) • MFM Ltd AAAAAAnnnnnnnnnnuuuuuaaaaaalllll RRRRRRRRRRRRRReeeeeeppppppppooooooooorrrrrrrrrrtttt 22220000111144444 ••••• MMMMMMMaaaaaaallllllaaaayyyyyaaaannnnn FFFFFFllllllloooooooouuuuuurrrrrrrr MMMMMMMMiiiiiilllllllllllssssss BBBBBBBeeeeeeerrrrrrrhhhhhhhhaaaaaaadddddd 33333333333333333333 Board of Directors Tan Sri Dato’ Seri Utama Mr Teh Wee Chye Arshad bin Ayub Dato’ Hj Shaharuddin Mr Geh Cheng Hooi Mr Quah Ban Lee bin Hj Haron Dato’ Wira Zainal Abidin Datuk Oh Chong Peng bin Mahamad Zain Mr Prakash Tan Sri Mohd Sidek 4 Annual AR/eLp oKr.tV .2P0 1M4 e•n Monalayan Flour Mills Berhad bin Haji Hassan Encik Azhari Arshad Directors’ Profile Tan Sri Dato’ Seri Utama Arshad bin Ayub (Independent Non-Executive Chairman) Tan Sri Dato’ Seri Utama Arshad bin Ayub, aged 86, a Malaysian, was appointed to the Board of the Company on 30 August 2002 and is presently the Chairman of the Company. He is also the Chairman of the Remuneration and Nomination Committees as well as member of the Audit Committee of the Company. He graduated with a Diploma in Agriculture in 1954 from College of Agriculture, Serdang and pursued his Bachelor of Science Degree in Economics with Statistics at the University College of Wales, Aberystwyth in the United Kingdom in 1958 and also Diploma in Business Administration (IMEDE), Lausanne, Switzerland in 1964. He has a distinguished career in the Malaysian Civil Service. Among the top posts he held were First Director, Mara Institute of Technology (1965-1975), Deputy Governor of Bank Negara Malaysia (1975-1977), Deputy Director-General in the Economic Planning Unit of the Prime Minister’s Department (1977-1978) and Secretary-General in the Ministry of Primary Industries (1978), Ministry of Agriculture (1979-1981) and Ministry of Land and Regional Development (1981-1983). His current directorships in public companies include Kulim (Malaysia) Berhad, Tomypak Holdings Berhad, Top Glove Corporation Berhad, Bistari Johor Berhad and Karex Berhad. Encik Azhari Arshad who is also a Director of the Company is his son. He has no family relationship with the other Directors and/or major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. Mr Teh Wee Chye (Managing Director) Mr Teh Wee Chye, aged 62, a Malaysian, was appointed to the Board as an Executive Director of the Company on 19 June 1989 and is presently the Managing Director of the Company. He is also a member of the Remuneration Committee of the Company. He holds a Bachelor of Science Degree in Naval Architect and Marine Engineering and a Masters Degree in Ship Building and Shipping Management from the Massachusetts Institute of Technology, USA. In the summer of 1974, he received his training at the American Bureau of Shipping Research & Development Department, New York. Upon graduation in 1975 he was employed as an Engineer with Eastern Steamship (S) Pte Ltd, Singapore. He joined Malayan Flour Mills Berhad in 1976 as the Deputy Mill Manager and was promoted as the Plant Manager in 1978. He was appointed as the Project Manager in 1979 in charge of the Company’s entire expansion plans. He is also a director of United Teochew (Malaysia) Berhad and Seu Teck Sean Tong Charitable Organisation Berhad. He is a major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He is deemed interested in various related party transactions with the Group. Annual Report 2014 • Malayan Flour Mills Berhad 5 Directors’ Profile (cont’d) Dato’ Hj Shaharuddin bin Hj Haron (Independent Non-Executive Director) Dato’ Hj Shaharuddin bin Hj Haron, aged 76, a Malaysian, was appointed to the Board of the Company on 23 September 1993 and is presently the Chairman of the Audit Committee and a member of the Remuneration Committee of the Company. He holds a Bachelor (Hons) Degree in Economics from the University of Malaya and a Masters Degree in Economics from the University of Pittsburgh, USA. He has a long and outstanding civil service record which began in 1963 when he joined the Economic Planning Unit of the Prime Minister’s Department till 1979. He held various senior positions in the Government. He was the fi rst Secretary of the Foreign Investment Committee (1974-1979), the Director General of Insurance in the Ministry of Finance (1983), the Director General of the National Padi and Rice Board (1985) and Secretary General of the Ministry of Public Enterprise (1986), Ministry of International Trade and Industry (1990) and Ministry of Domestic Trade and Consumer Affairs (1992). Presently, he sits on the Board of Gopeng Berhad and Latitude Tree Holdings Berhad. He has no family relationship with any Director and/or major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. Mr Geh Cheng Hooi (Independent Non-Executive Director) Mr Geh Cheng Hooi, aged 80, a Malaysian, was appointed to the Board of the Company on 11 March 2003 and is presently a member of the Audit and Nomination Committees of the Company. After qualifying as a Chartered Accountant in the United Kingdom in 1959, he worked for Price Waterhouse, London as a qualifi ed assistant in 1960/1961 before returning to Malaysia to join KPMG Peat Marwick (“KPMG”) in 1961. He was admitted as a partner in KPMG in 1964 and retired as senior partner in 1989. He is also a Fellow of The Institute of Chartered Accountants of England and Wales (“ICAEW”) and a member of the Malaysian Institute of Certifi ed Public Accountants (“MICPA”). Presently, he sits on the Board of Wawasan TKH Holdings Berhad. He has no family relationship with any Director and/or major shareholder of the Company. He has attended 6 out of the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. Mr Quah Ban Lee (Finance Director) Mr Quah Ban Lee, aged 57, a Malaysian, was appointed to the Board of the Company on 18 August 2005 and is presently the Finance Director of the Company. He is a qualifi ed Chartered Accountant from The Institute of Chartered Accountants of England and Wales (“ICAEW”) and a member of the Malaysian Institute of Accountants (“MIA”). He also possesses a Bachelor of Arts (Hons) in Economics and Accounting Degree from the University of Reading in the United Kingdom. He has more than 30 years of experience in fi nance, including a number of years in professional accounting fi rms, both in the United Kingdom and Malaysia. He has worked with other public listed companies in Malaysia prior to joining the Company. He is not a director of any other public company. He has no family relationship with any Director and/or major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. 6 Annual Report 2014 • Malayan Flour Mills Berhad Datuk Oh Chong Peng (Independent Non-Executive Director) Datuk Oh Chong Peng, aged 70, a Malaysian, was appointed to the Board of the Company on 20 August 2008 and is presently a member of the Audit and Remuneration Committees of the Company. He is a Fellow of the Institute of Chartered Accountants in England and Wales (“ICAEW”) as well as a member of the Malaysian Institute of Certifi ed Public Accountants (“MICPA”) and the Malaysian Institute of Accountants (“MIA”). He joined Coopers & Lybrand (now known as PricewaterhouseCoopers) in London in 1969 and in Malaysia in 1971. He was a Partner of Coopers & Lybrand Malaysia from 1974. He retired as a Senior Partner of Coopers & Lybrand in 1997 and then joined the Rashid Hussain Berhad Group of Companies in 1998 until 2003. He is currently the Independent Non-Executive Chairman of Alliance Financial Group Berhad and also sits on the boards of British American Tobacco (Malaysia) Berhad, Kumpulan Europlus Berhad and Dialog Group Berhad. Datuk Oh is a Government appointed member of the Labuan Offshore Financial Services Authority. He is a trustee of the UTAR Education Foundation and a council member of University Tunku Abdul Rahman. His past appointments included being a Government appointed Member of the Kuala Lumpur Stock Exchange (1990-1996), a Council member (1981-2001) and a past President (1994-1996) of the MICPA. He has attended all the 8 Board meetings held during the fi nancial year. He has no family relationship with any Director and/or major shareholder of the Company. He has no confl ict of interest with the Company. Dato’ Wira Zainal Abidin bin Mahamad Zain (Independent Non-Executive Director) Dato’ Wira Zainal Abidin bin Mahamad Zain, aged 65, a Malaysian, was appointed to the Board of the Company on 1 September 2009. He holds a Bachelor of Arts (Hons-International Relations) Degree from University of Malaya. He has a distinguished career in the Malaysian Civil Service. His past appointments include being appointed to the Administrative and Diplomatic Service of Malaysia as Assistant Secretary at the Ministry of Foreign Affairs (1973), Second Secretary of the Embassy of Malaysia in Jakarta, Indonesia (1974), Assistant Secretary of Ministry of Foreign Affairs (1977), Charge d’Affaires of the Embassy of Malaysia in Tehran, Iran (1979- 1982), Principal Assistant Secretary of Ministry of Foreign Affairs (1982), Charge d’ Affaires of Embassy of Malaysia in Abu Dhabi, United Arab Emirates (1984), Consul General of the Consulate General Malaysia in Jeddah (1986), Under Secretary (West Asia, Africa & OIC) of Ministry of Foreign Affairs (1989), Consul General of the Consulate General Malaysia in Vancouver, Canada (1991), Ambassador of Malaysia to Brazil (1995), Ambassador of Malaysia to Vietnam (1998), Under Secretary (South East Asia & Pacifi c) of Ministry of Foreign Affairs (2001), Malaysia’s First Director General [Southeast Asia Regional Centre for Counter Terrorism (SEARCCT)], Ministry of Foreign Affairs (2003), Ambassador of Malaysia to the Republic of Indonesia (2005- 2009), Malaysia’s First ASEAN Permanent Representative ad-interim Republic of Indonesia (March 2009-July 2009) and Special Envoy of the Prime Minister of Malaysia to The Islamic Republic of Afghanistan (2010). He is not a director of any other public company. He has no family relationship with any Director and/or major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. Annual Report 2014 • Malayan Flour Mills Berhad 7 Directors’ Profile (cont’d) Mr Prakash A/L K.V.P Menon (Non-Independent Non-Executive Director) Mr Prakash A/L K.V.P Menon, aged 56, a Malaysian, was appointed to the Board of the Company on 24 May 2011. He is a barrister-at-law (Lincoln’s Inn, London) having graduated with LLB (Hons) from University of Manchester. He was admitted to the English Bar in 1983 and being bestowed the qualifi cation as a Barrister. Upon completion of the term of pupilage, he was called to the Malaysian Bar and was admitted as an Advocate and Solicitor of the High Court of Malaya on 18 June 1984. Since his admission to the Malaysian Bar, he has been in private practice and is a Senior Partner in the fi rm of Isharidah, Ho, Chong & Menon and is actively involved in the area of litigation. He has been in active practice for more than 30 years. He is not a director of any other public company. He has no family relationship with any Director and/or major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. Tan Sri Mohd Sidek bin Haji Hassan (Independent Non-Executive Director) Tan Sri Mohd Sidek bin Haji Hassan, aged 63, a Malaysian, was appointed to the Board of the Company on 16 August 2012. He holds a Bachelor of Economics (Hons) Degree in Public Administration from University of Malaya and Masters of Business Administration (MBA) from New Hampshire College, United States of America. He began his career in the Administrative and Diplomatic Service on 15 April 1974 as an Assistant Director at the International Trade Division, Ministry of Trade and Industry. He was later appointed Assistant Trade Commissioner at the Malaysian Embassy in Tokyo, Japan, from May 1977 until July 1980. From August 1980 until July 1984, he served in the Implementation Coordination Unit (ICU) of the Prime Minister’s Department, initially as a Principal Assistant Director, then later promoted to Deputy Director, Project Analysis Sector and subsequently as the Deputy Director of Research in the same department. He has extensive working experience within the Ministry of International Trade and Industry. During his service in the ministry, he had held the positions of Malaysia’s Trade Commissioner in Sydney, Australia, Deputy Director in the Policy and Research Division, Deputy Director (Operations) in the International Trade Division, Minister Counselor of Economic Affairs at the Malaysian Trade Commissioner’s Offi ce in Washington, D.C., United States, and the Director of Multilateral Relations Division. He was appointed as Deputy Secretary- General (Trade) on 19 January 2001 and thereon as the Secretary-General of the Ministry of International Trade and Industry on 24 October 2004. He was appointed as the 12th Chief Secretary to the Government of Malaysia by the Yang Di-Pertuan Agong on 3 September 2006 and was in the offi ce until 23 June 2012. Presently, he sits on the Board of Petroliam Nasional Berhad and Top Glove Corporation Berhad. He has no family relationship with any Director and/or major shareholder of the Company. He has attended all the 8 Board meetings held during the fi nancial year. He has no confl ict of interest with the Company. 8 Annual Report 2014 • Malayan Flour Mills Berhad