FGV Annual Report 2016

ANNUAL INTEGRATED REPORT 2016 121 SUMMARY OF WORK OF THE INVESTMENT COMMITTEE Through the nine (9) meetings held, the Investment Committee undertook the following principal activities in discharging its responsibilities: 1. Reviewed the strategic direction and Strategic Plan of the Group a. Evaluated the proposed revision of the strategic direction and Strategic Plan of the Group by considering the status of implementation of the previous strategies identified in the Global Strategic Blueprint to the new SP20 based on the latest achievements and market and economic outlook of each Business Cluster. The Investment Committee reviewed in detail the revised Strategic Plans and targets proposed for each Business Cluster and the guardrails and capabilities required to support the achievement of the revised strategies. The SP20was subsequently recommended to the Board for approval. b. To initiate the implementation of the approved SP20, the Investment Committee evaluated the proposals for rationalisation of the mills, refineries and rubber processing plants of the Group considering the financial, non-financial and business and social impact and implications to all Stakeholders involved in transactions with the mills, refineries and rubber processing plants. The Investment Committee then made its recommendations to the Board for approval. 2. Reviewed existing investments portfolios a. Reviewed existing Memorandums of Understanding (MOUs) based on the reports of the due diligence conducted before proceeding to sign definitive agreements. The Investment Committee considered and evaluated all concerns and potential high risks raised in the due diligence reports. The MOUs with concerns and potential high risks which could not be mitigated were recommended to the Board for termination. b. The Investment Committee at each meeting were updated and apprised with the development and progress of negotiations and formalisation of investments previously approved by the Board. During the year, the Investment Committee dealt with amongst others, the proposals on investments in Zhong Ling Nutril-Oil Holdings Limited in China and PT Eagle High Plantation Tbk in Indonesia. 3. Reviewed proposed investments and divestments, including their funding requirements a. Reviewed material proposals for investments for furtherance of the Group's businesses. The Investment Committee considered details of each proposal which were evaluated by Management in accordance with the Investment Policy of the Group. b. Where the Investment Committee agreed to proceed with new investments, the Investment Committee also approved the setting up of a working committee, appointment of advisors, consultants and a budget to undertake the relevant due diligence exercise. The Investment Committee reviewed and endorsed the due dilligence findings and consideredManagement's recommendations to address any concerns to protect FGV's interests in the investments. Those new investments, whichare 'strategically fit'andwithin theriskappetiteofFGVwererecommended to the Board for approval. c. Considered several project proposals using the Build, Operate, Own and Transfer("BOOT")conceptatselectedmills.Theprojectsproposedare to increase efficiency and cut costs at the mills over the long run and will be transferred to the mills at no extra cost at the endof the contract period. In approving these projects, the Investment Committee considered the financial strength of the operators as these are long term investment projects and has reminded Management to ensure the operators will not cause damage to FGV's assets on the land where they operate or hinder the mills' operations as they are operating within the compound of the mills. Only proposals which were endorsed by the Investment Committee were recommended to the Board for approval. HOW WE ARE GOVERNED MATTERS CONSIDERED BY THE INVESTMENT COMMITTEE The Investment Committee Chairman updated the Board on matters deemed to be of major importance deliberated at the Investment Committee Meetings and its recommendations. The copies of confirmed minutes of each of the Investment Committee Meeting were also circulated to the Board for noting at the next practicable Board Meeting. Amongst the significant matters considered by the Investment Committee during the year 2016: PERFORMANCE REVIEW On an annual basis, the Board shall evaluate the Investment Committee's performance and extent to which the Investment Committee has met the requirements of its Terms of Reference. This performance assessment may constitute a part of the annual Board effectiveness assessment, pertaining to the assessment of Board Committees. This Report is made in accordance with a resolution of the Board of Directors and approved at the Board Meeting dated 29 March 2017. Significant matters How these matters were addressed by the Investment Committee New Strategic Plan of FGV Group (SP20) • Considered the internal assessments and external pressures affecting the Group, industry and macro economic landscapes that have affected the Group's performance. • Deliberated on the robustness of the SP20 to deliver sustainable growth in the context of the proposed Business Clusters' strategies, business model, human capital strategy and financial discipline. • Requested for a quantifiable execution plan to support the key strategies stipulated therein and to update the progress to the Board on quarterly basis. Proposals on investments in Zhong Ling Nutril-oil Holdings Limited in China and PT Eagle High Plantation Tbk in Indonesia • Monitored the fulfillment of the terms and conditions of the investments which resulted in the eventual termination of the agreements. CORPORATE GOVERNANCE STATEMENT