Bursa Malaysia Publicly Reprimands Haisan Resources Berhad And Fines Seven Directors A Total Of RM225,000

Bursa Malaysia Securities Berhad (“Bursa Securities”) has publicly reprimanded Haisan Resources Berhad (“Haisan”) for breach of the Main Market Listing Requirements (“Main LR”), and publicly reprimanded and fined its directors a total of RM225,000.

Haisan was publicly reprimanded for breach of paragraph 9.16(1)(a) of the Main LR for failing to ensure that its unaudited fourth quarter to 31 December 2009 financial results (“QR 4/2009”), announced on 25 February 2010, took into account adjustments made in its audited accounts announced on 30 April 2010. The adjustments resulted in a 68% difference between the company’s audited and unaudited results.

The following directors of Haisan were found to be in breach of paragraph 16.13(b) of the Main LR for permitting knowingly, or where they had reasonable means of obtaining such knowledge, Haisan to commit the breach:

No	Director	Penalty
1	Kamarudin Bin Md Derom Executive Chairman	Public Reprimand and fine of RM30,000
2	Tengku Baharuddin Ibni Sultan Mahmud Independent Non-Executive Vice Chairman	Public Reprimand and fine of RM25,000
3	Ong Chin Yet Managing Director (Director primarily responsible for financial management)	Public Reprimand and fine of RM30,000
4	Ong Chin Cheong Executive Director	Public Reprimand and fine of RM30,000
5	Chua Boon Leong Independent Non-Executive Director Audit Committee Chairman	Public Reprimand and fine of RM30,000
6	Heng Wee Pou Independent Non-Executive Director Member of Audit Committee Resigned on 18 February 2011	Public Reprimand and fine of RM30,000
7	Azman Bin Che Onn Independent Non-Executive Director Member of Audit Committee	Public Reprimand and fine of RM30,000

Haisan was also required to:

carry out a limited review on its quarterly financial report submissions. The limited review must be performed by Haisan’s external auditors for four quarterly financial reports commencing no later than the quarterly report for the financial period ended 30 September 2011; and
ensure all its directors and relevant personnel attend a training programme in relation to compliance with the Main LR particularly pertaining to financial statements.

The finding of breach and imposition of the above penalties on Haisan and the directors were made pursuant to paragraph 16.19 of the Main LR upon completion of due process and after taking into consideration all facts and circumstances of the matter. Bursa Securities also took into account that Haisan had previously been publicly reprimanded on 7 August 2008 for the deviation between its unaudited and audited financial results for the financial year ended 31 December 2007.

Bursa Securities views the above contravention and Haisan’s repeated breach of the listing requirements seriously as listed companies are required to submit financial statements that are factual, clear, unambiguous, accurate, succinct and contains sufficient information to enable investors to make informed investment decisions.

BACKGROUND

(I) PUBLIC REPRIMAND ON HAISAN RESOURCES BERHAD

On 25 February 2010, Haisan reported an unaudited loss after taxation and minority interest of RM21.77 million for the fourth quarter to December 2009. However, on 30 April 2010, Haisan announced an audited loss after taxation and minority interest of RM36.67 million in the annual audited accounts. The difference of RM14.9 million between the unaudited and audited results for the financial year ended 31 December 2009 represents a variance of approximately 68%.

The variance was mainly due to:-

the impairment loss on goodwill of RM4.875 million and loss on plant and equipment of RM2.092 million arising from the proposed disposal of a subsidiary, Malaysian Mega Galvaniser Sdn Bhd (“MMG”);
the impairment loss of RM4 million on the investment in the unquoted subordinated bonds issued by CapOne Berhad (“the Investment”); and
slow moving spare parts inventory of RM2.006 million,

(collectively referred to as “the Adjustments”).

(II) PUBLIC REPRIMAND AND A TOTAL FINE OF RM225,000 IMPOSED ON SEVEN DIRECTORS

At the deliberation of Haisan’s QR 4/2009 on 24 February 2010, the directors were informed that the external auditors had highlighted the following:-

that management had yet to provide the profit and cashflow forecasts and projections to support that no further impairment loss is required on goodwill on consolidation for MMG;
that management had yet to perform an assessment of the useful lives and residual values of the property, plant and equipment of Haisan Group;
that management had yet to provide the necessary evidence to support the carrying value and the latest credit rating of the Investment; and
Haisan was required to write down the inventories that were slow moving and above four years old amounting to RM2.006 million.

Notwithstanding these audit issues, the directors had proceeded to approve the QR 4/2009 which was due for issuance by 28 February 2010. In this regard, the directors had failed to take reasonable efforts to discharge their duties, particularly to undertake reasonable assessment and enquiries to ascertain, address and resolve the issues highlighted by the external auditors. They had proceeded to approve the QR 4/2009 on 24 February 2010 and issued the same on 25 February 2010.