Enhancing Value Enhancing Through Success Precision ANNUAL REPORT 2011 REPORT ANNUAL
TRADEWINDS plantation BERHAD (650234-A) ANNUAL REPORT 2011 (650234-A)
erhad B plantation
Tel : (603) 2177 9999 Fax : (603) 2161 1701 Tel radewinds T www.tpb.com.my Level 9, Menara HLA, No. 3, Jalan Kia Peng, 50450 Kuala Lumpur Level 9, Menara HLA, No. 3, Jalan Kia Peng, As a leading entity in the plantation industry, Tradewinds Plantation continues to make its mark, integrating our strong industrial strength and expertise to create distinctive value whilst capitalising on the boundless opportunities and handling challenges that come our way.
“Enhancing Value: Success Through Precision” reflects our expanding capabilities into different ventures that has catalysed our growth and sustained our forward momentum in both local and regional markets.
The imagery of the hand stitching motion illustrates our hands-on approach, infinite passion and utmost dedication while possessing an eye for detail as we meticulously craft value and strive for excellence in all that we set out to do.
We at Tradewinds Plantation, are constantly enhancing value and attaining success through precision.
Success Through Precision
Tradewinds Plantation Berhad Annual Report 2011 2
8th Annual General Meeting Nirwana Ballroom 1 Lower Lobby, Crowne Plaza Mutiara Kuala Lumpur Jalan Sultan Ismail 30 50250 Kuala Lumpur on Thursday, 21 June 2012 Chairman’s at 10.00 a.m. Statement
38 Business Review BY Chief Executive Officer 3 Annual Report 2011 Tradewinds Plantation Berhad
STATUTORY REPORTING CORPORATE GOVERNANCE OTHER INFORMATION
6 notice of Annual General Meeting 52 Statement on Corporate 185 Plantation Review 9 Statement Accompanying Notice of Governance 186 Location of the Group Estates and Annual General Meeting 60 Statement on Internal Control Palm Oil Mills 10 group Financial Highlights 62 Audit Committee Report 188 Location of Mardec’s Rubber 66 Additional Compliance Information Processing Factories 190 Material Properties of Tradewinds CORPORATE INFORMATION Plantation Berhad Group CORPORATE SOCIAL 201 Analysis of Shareholdings 14 Financial Calendar RESPONSIBILITY 205 Analysis of Irredeemable Convertible 15 group Half-Yearly Results Unsecured Loan Stocks (ICULS) 16 corporate Information 72 corporate Social Responsibility 208 Directory of Group Operation 18 Board of Directors’ Profile 76 Safety, Health, Environment and • Proxy Form 21 chief Executive Officer’s Profile Quality 22 Management Team 78 TPB’s Media Highlights 26 corporate Structure
FINANCIAL STATEMENTS PERFORMANCE REVIEW 80 Financial Statements 30 chairman’s Statement 38 Business Review by Chief Executive Officer Tradewinds Plantation Berhad Annual Report 2011 4
The Group’s revenue for the FY 2011 soared to RM1.7 billion, the highest level achieved to date, compared to RM909.1 million posted in the preceding year, partly due to the inclusion of Mardec’s revenue. 5 Annual Report 2011 Tradewinds Plantation Berhad Tradewinds Plantation Berhad Annual Report 2011 6
NOTICE IS HEREBY GIVEN that the Eighth Annual General Meeting of Tradewinds Plantation Berhad will be held at Nirwana Ballroom 1, Lower Lobby, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Thursday, 21 June 2012 at 10.00 a.m. for the following purposes:-
As Ordinary Business, to consider and if thought fit to pass the 7. As Special Business, to consider and if thought fit to pass following resolutions: the following as Ordinary Resolutions:
PROPOSED SHAREHOLDERS’ MANDATES FOR TRADEWINDS ORDINARY RESOLUTIONS PLANTATION BERHAD AND ITS SUBSIDIARY COMPANIES (COLLECTIVELY, THE “GROUP COMPANIES”) TO ENTER 1. T o receive the Audited Financial Statements for the financial INTO RECURRENT RELATED PARTY TRANSACTIONS OF A year ended 31 December 2011 together with the Reports of REVENUE OR TRADING NATURE SPECIFIED IN THE CIRCULAR the Directors and Auditors thereon. TO SHAREHOLDERS DATED 29 MAY 2012 (THE “CIRCULAR”) Please refer to Note A PROPOSED CATEGORY A MANDATE resolution 6 2. To declare a Final Dividend of 5% per ordinary share less 25% income tax and a Special Dividend of 5% per ordinary “THAT approval be and is hereby given for the Group Companies share less 25% income tax for the financial year ended to enter into the recurrent related party transactions of a revenue 31 December 2011. or trading nature specified and set out in Section 3.2 of the Circular RESOLUTION 1 (the “Category A Mandate”) provided that such transactions are (i) in the ordinary course of business and necessary for day- 3. To approve the payment of Directors’ fees for the financial to-day operations of the Group Companies and (ii) on normal year ended 31 December 2011. commercial terms which are not more favourable to the related Resolution 2 parties than those generally available to the public, and are not to the detriment of the minority shareholders of the Company 4. To re-elect Mr Ooi Teik Huat as Director of the Company AND THAT unless revoked or varied by the resolutions of the who is required to retire from office pursuant to Article 105 shareholders of the Company in general meeting, the Category A of the Company’s Articles of Association. Mandate shall continue to be in force until the conclusion of the Resolution 3 next Annual General Meeting of the Company or the expiration of the period within which the next Annual General Meeting is 5. To re-appoint Dato’ Wira Syed Abdul Jabbar bin Syed required to be held pursuant to Section 143(1) of the Act (but Hassan, a director whose office shall become vacant at the shall not extend to such extensions as may be allowed pursuant conclusion of this Annual General Meeting pursuant to to Section 143(2) of the Act) whichever is the earlier. Section 129(2) of the Companies Act, 1965 (the ‘Act’) as Director of the Company pursuant to Section 129(6) of the AND FURTHER THAT the Group Companies be and are hereby Act, to hold office until the conclusion of the next Annual authorised to enter into and execute all such agreements, General Meeting. instruments, documents and deeds and to do all acts, deeds and Resolution 4 things necessary, expedient or advisable for and in respect of the Category A Mandate and the transactions contemplated and/or 6. T o re-appoint Messrs Deloitte KassimChan as Auditors of authorised by the Category A Mandate. the Company for the ensuing year and to authorise the Directors to fix their remuneration. Resolution 5 7 Annual Report 2011 Tradewinds Plantation Berhad
PROPOSED CATEGORY B MANDATE resolution 7 NOTICE OF BOOK CLOSURE AND NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT “THAT approval be and is hereby given for the Group Companies to enter into the recurrent related party transactions of a revenue NOTICE IS HEREBY GIVEN that a Final Dividend of 5% per ordinary or trading nature specified and set out in Section 4.2 of theC ircular share less 25% Income Tax and a Special Dividend of 5% per (the “Category B Mandate”) provided that such transactions ordinary share less 25% income tax in respect of the financial are (i) in the ordinary course of business and necessary for day- year ended 31 December 2011 if approved by the shareholders to-day operations of the Group Companies and (ii) on normal at the forthcoming Annual General Meeting, will be paid on commercial terms which are not more favourable to the related 26 July 2012 to the shareholders whose names appear on the parties than those generally available to the public, and are not Company’s Register of Depositors on 11 July 2012. to the detriment of the minority shareholders of the Company AND THAT unless revoked or varied by the resolutions of the A Depositor shall qualify for entitlement to the dividends only in shareholders of the Company in general meeting, the Category B respect of: Mandate shall continue to be in force until the conclusion of the next Annual General Meeting of the Company or the expiration a) Shar es transferred into the Depositor’s Securities Account of the period within which the next Annual General Meeting is before 4.00 p.m. on 11 July 2012 in respect of ordinary required to be held pursuant to Section 143(1) of the Act (but transfers; shall not extend to such extensions as may be allowed pursuant to Section 143(2) of the Act) whichever is the earlier. b) Shar es bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of the Bursa AND FURTHER THAT the Group Companies be and are hereby Malaysia Securities Berhad. authorised to enter into and execute all such agreements, instruments, documents and deeds to do all acts, deeds and things necessary, expedient or advisable for and in respect of the By Order of the Board Category B Mandate and the transactions contemplated and/or authorised by the Category B Mandate. ZAINAL RASHID BIN AB RAHMAN (LS 007008) Company Secretary 8. T o transact any other ordinary business for which due notice Kuala Lumpur shall have been given in accordance with the Act. 29 May 2012 Notice of Annual General Meeting Tradewinds Plantation Berhad Annual Report 2011 8
Note A: 5. in the case of a corporate member, the corporation may by resolution of its directors or other governing body, if it This agenda item is meant for discussion only as the provision of is a Member of the Company, authorise such person as it Section 169(1) of the Act does not require a formal approval of thinks fit to act as its representative either at a particular the shareholders and hence is not put forward for voting. meeting or at all meetings of the Company or of any class of Members, and a person so authorised shall in accordance Notes: with his authority and until his authority is revoked by the corporation be entitled to exercise it as if it were an 1. in respect of deposited securities, only members whose individual Member of the Company. name appear in the Record of Depositors on 14 June 2012 (“General Meeting Record of Depositors”) shall be eligible 6. The instrument appointing a proxy shall be in writing under to attend the meeting. the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, whether 2. A member of the Company entitled to attend and vote at under its seal or under the hand of an officer or attorney the Meeting is entitled to appoint any person to be his proxy duly authorised. without limitation to attend and vote in his stead and the provisions of Section 149(1)(a) and (b) of the Companies 7. Further details of individual standing for re-election and Act, 1965 shall not apply to the Company. A Member shall re-appointment as Director of the Company as per not be entitled to appoint more than two (2) proxies to Resolutions 3 and 4 are shown on pages 18 to 20 of the attend and vote at the same meeting. Where a Member Annual Report 2011. appoints two (2) proxies, then appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. A proxy may but need not be a EXPLANATORY NOTES ON SPECIAL BUSINESS: member of the Company. Resolutions 6 and 7 proposed, if passed, will allow the Group 3. Where a member of the Company is an authorised Companies to enter into recurrent related party transactions nominee as defined under the SecuritiesI ndustry (Central in accordance with paragraph 10.09 of the Main Market Depositories) Act 1991, it may appoint at least one (1) proxy Listing Requirements of Bursa Malaysia Securities Berhad in respect of each securities account it holds with ordinary and the necessity to convene separate general meetings from shares of the Company standing to the credit of the said time to time to seek shareholders’ approval as and when securities account. such recurrent related party transactions occur would not arise. For further information, please refer to the Circular 4. To be valid, this Proxy Form must be deposited with the to Shareholders dated 29 May 2012 accompanying the Share Registrar of the Company, Symphony Share Registrars Company’s Annual Report for the financial year ended Sdn Bhd, at Level 6, Symphony House, Pusat Dagangan 31 December 2011. Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor not less than 48 hours before the time fixed for holding the Meeting or at any adjournment thereof. 9 Annual Report 2011 Tradewinds Plantation Berhad STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING
Made pursuant to Paragraph 8.27 (2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.
1. Directors who are standing for re-election and re-appointment at the Eighth Annual General Meeting are as follows:
1.1 Mr Ooi Teik Huat who is required to retire by rotation pursuant to Article 105 of the Company’s Articles of Association is seeking re-election.
1.2 Dato’ Wira Syed Abdul Jabbar bin Syed Hassan is seeking re-appointment pursuant to Section 129(6) of the Companies Act, 1965, to hold office until the conclusion of the next Annual General Meeting of the Company.
2. The profiles of the above Directors who are standing for re-election and re-appointment are set out on pages 18 to 20 of this Annual Report 2011. The Directors’ shareholdings in the Company are set out in the Analysis of Shareholdings which appear from page 201 to 207 of this Annual Report 2011.
3. A total of six (6) Board of Directors’ Meetings were held during the financial year ended 31 December 2011. The details of attendance of Directors at the said Board of Directors’ Meetings up to 31 December 2011 are stated in their respective profiles on pages 18 to 20 of this Annual Report 2011.
4. The Eighth Annual General Meeting of Tradewinds Plantation Berhad will be held as follows:
VENUE: DATE: TIME:
Nirwana Ballroom 1 21 June 2012 10.00 a.m. Lower Lobby Crowne Plaza Mutiara Kuala Lumpur Jalan Sultan Ismail 50250 Kuala Lumpur Tradewinds Plantation Berhad Annual Report 2011 10
2011 2010 2009 2008 2007
FINANCIAL PERFORMANCE RM’000 RM’000 RM’000 RM’000 rM’000
Revenue 1,703,854 909,126 677,424 809,987 652,899
Earnings before interest, tax, depreciation and 606,778 411,488 202,980 324,846 272,334 amortisation (EBITDA)
Profit before tax 476,824 282,408 78,347 199,787 159,231
Profit for the financial year 364,724 211,956 54,394 151,487 133,255
Profit attributable to owners of the parent 333,891 186,404 51,545 138,369 121,668
Equity attributable to owners of the parent 1,813,399 1,520,780 1,377,056 1,350,246 1,234,569
Total assets 3,799,807 3,015,179 2,888,921 2,712,763 2,329,945
Total borrowings 1,217,215 873,565 940,921 816,895 624,960
Issued and paid-up capital 529,153 529,153 529,153 529,153 529,153
RATIO
Return on equity 18.4% 12.3% 3.7% 10.2% 9.9%
Return on total assets 8.8% 6.2% 1.8% 5.1% 5.2%
Return on revenue 19.6% 20.5% 7.6% 17.1% 18.6%
Gross dividend per ordinary share (sen) 15.00 10.00 6.00 6.00 6.00
Basic earnings per ordinary share (sen) 53.07 29.63 8.19 21.99 19.34
Net assets per ordinary share (RM) 3.43 2.87 2.60 2.55 2.33
11 Annual Report 2011 Tradewinds Plantation Berhad
Revenue Total Assets & Profit Before Tax & Equity Attributable to Owners of the Parent
1,703,854 3,799,807 11 11 476,824 1,813,399
909,126 10 10 3,015,179 282,408 1,520,780
677,424 2,888,921 09 09 78,347 1,377,056
809,987 2,712,763 08 08 199,787 1,350,246
652,899 2,329,945 07 07 159,231 1,234,569
Revenue (RM’000) Total Assets (RM’000) Profit Before Tax (RM’000) Equity Attributable to Owners of the Parent (RM’000)
Return on Total Assets Basic Earnings Per Ordinary Share & Return on Equity & Gross Dividend Per Ordinary Share
8.8% 11 11 53.07 18.4% 15.0
29.63 10 6.2% 10 12.3% 10.0
1.8% 8.19 09 09 3.7% 6.0
5.1% 21.99 08 08 10.2% 6.0
07 5.2% 07 19.34 9.9% 6.0
Return on Total Assets (%) Basics Earnings per Ordinary Share (sen) Return on Equity (%) Gross Dividend per Ordinary Share (sen)
Tradewinds Plantation Berhad Annual Report 2011 14
ANNOUNCEMENT OF FINANCIAL RESULTS
1st quarter 2nd quarter 3rd quarter 4th quarter of 2011 of 2011 of 2011 of 2011 announced announced announced announced 19 May 2011 18 August 2011 17 November 2011 21 February 2012
DIVIDENDS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011 First Interim of 5% 25% Dividend per ordinary share less Income Tax announced entitlement date payment date 17 November 2011 9 December 2011 23 December 2011
Final of 5% 25% Dividend per ordinary share less Income Tax announced entitlement date payment date 18 April 2012 11 July 2012 26 July 2012
Special of 5% 25% Dividend per ordinary share less Income Tax announced entitlement date payment date 18 April 2012 11 July 2012 26 July 2012
GENERAL MEETINGS
7th Annual Extraordinary Issue of Annual 8th Annual General Meeting General Meeting Report 2011 General Meeting
21 June 2011 14 July 2011 29 May 2012 21 June 2012 15 Annual Report 2011 Tradewinds Plantation Berhad
6 Months Ended 6 Months Ended 12 Months Ended 30 June 2011 31 December 2011 31 December 2011 RM’000 % RM’000 % RM’000 %
Revenue 565,722 33 1,138,132 67 1,703,854 100 Profit before tax 213,979 45 262,845 55 476,824 100 Tax expense 59,605 53 52,495 47 112,100 100 Profit for the period 154,374 42 210,350 58 364,724 100 Profit attributable to owners of the parent 138,711 42 195,180 58 333,891 100 Basic earnings per ordinary share (sen) 22.05 42 31.02 58 53.07 100 Tradewinds Plantation Berhad Annual Report 2011 16
BOARD OF DIRECTORS NOMINATION & REMUNERATION SOLICITORS COMMITTEE Independent Non-Executive Chairman Messrs Azmi & Associates Dato’ Wira Syed Abdul Jabbar bin Chairman Messrs Lee Hishammuddin Allen & Syed Hassan Dato’ Wira Syed Abdul Jabbar bin Gledhill Syed Hassan Messrs Martin Cheah & Associates Independent Non-Executive Directors Messrs Reddi & Co. Ooi Teik Huat Members Pakhruddin bin Sulaiman Ooi Teik Huat Pakhruddin bin Sulaiman BANKERS Non-Independent Non-Executive Directors COMPANY SECRETARY Alliance Bank Malaysia Berhad Bakry bin Hamzah AmBank (M) Berhad Mohd Nazri bin Md. Shariff Zainal Rashid bin Ab Rahman Bank Muamalat Malaysia Berhad Chuah Seong Tat @ Chuah Chee Tat LS007008 CIMB Bank Berhad (resigned on 15 March 2012) Malayan Banking Berhad OCBC Bank (Malaysia) Berhad AUDIT COMMITTEE REGISTERED OFFICE Public Bank Berhad RHB Bank Berhad Chairman Level 9, Menara HLA Al-Rajhi Bank Ooi Teik Huat No. 3, Jalan Kia Peng Bangkok Bank 50450 Kuala Lumpur Bank Mandiri Members Tel : 03-2177 9999 Danamon Bank Pakhruddin bin Sulaiman Fax : 03-2161 1701 HSBC Bank (M) Bhd Mohd Nazri bin Md. Shariff Kasikon Bank (appointed on 15 March 2012) Chuah Seong Tat @ Chuah Chee Tat AUDITORS (resigned on 15 March 2012) STOCK EXCHANGE LISTING Deloitte KassimChan EXECUTIVE COMMITTEE Level 19, Uptown 1 Main Market of Bursa Malaysia Securities Damansara Uptown Berhad Chairman 1, Jalan SS 21/58 Dato’ Wira Syed Abdul Jabbar bin 47400 Petaling Jaya Syed Hassan Selangor Darul Ehsan STOCK NAME Tel : 03-7723 6500 / 7726 1833 Members Fax : 03-7726 3986 / 7726 8986 Ordinary Shares: TWSPLNT Bakry bin Hamzah Irredeemable Convertible Unsecured Chuah Seong Tat @ Chuah Chee Tat Loan Stocks (ICULS): TWSPLNT-LA (resigned on 15 March 2012) SHARE REGISTRAR
Symphony Share Registrars Sdn Bhd STOCK CODE Level 6, Symphony House Pusat Dagangan Dana 1 Ordinary Shares: 6327 Jalan PJU 1A/46 ICULS: 6327la 47301 Petaling Jaya Selangor Darul Ehsan Tel : 03-7841 8000 INTERNATIONAL SECURITIES Fax : 03-7841 8152 IDENTIFICATION NUMBER (ISIN)
Ordinary Shares: MYL 6327OO 000 ICULS: MYL 6327LAQ 21 17 Annual Report 2011 Tradewinds Plantation Berhad Tradewinds Plantation Berhad Annual Report 2011 18
DATO’ WIRA SYED ABDUL JABBAR BIN SYED HASSAN Independent Non-Executive Chairman
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan, aged 72, was appointed to the Board of Directors of Tradewinds Plantation Berhad on 27 June 2006 and has served as Chairman of the Company since then. He is also the Chairman of the Executive Committee and the Nomination and Remuneration Committee.
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan holds a Bachelor of Economics degree from the University of Western Australia and Masters in Marketing from the University of Newcastle-Upon-Tyne, United Kingdom. He was the Chief Executive Officer of the Kuala Lumpur Commodity Exchange from 1980 to 1996, the Executive Chairman of the Malaysia Monetary Exchange from 1996 to 1998 and subsequently from 1998 to 2000, the Executive Chairman of the Commodity and Monetary Exchange.
Currently, Dato’ Wira Syed Abdul Jabbar bin Syed Hassan is also the Chairman of Tradewinds (M) Berhad, MMC Corporation Berhad, Mardec Berhad, Padiberas Nasional Berhad, Aliran Ihsan Resources Berhad and Malakoff Corporation Berhad. He also sits on the Board of Directors of Star Publications (M) Bhd and KAF Investment Bank (M) Bhd.
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan has attended all six (6) Board Meetings held during the financial year ended 31 December 2011. 19 Annual Report 2011 Tradewinds Plantation Berhad
OOI TEIK HUAT PAKHRUDDIN BIN SULAIMAN Independent Non-Executive Director Independent Non-Executive Director
Mr. Ooi Teik Huat, aged 52, was appointed to the Board of Encik Pakhruddin bin Sulaiman, aged 55, was appointed to the Directors of Tradewinds Plantation Berhad on 25 January 2006. Board of Directors of Tradewinds Plantation Berhad on 6 March He is the Chairman of the Audit Committee and is also a member 2006. He is also a member of the Audit Committee and the of the Nomination and Remuneration Committee. Nomination and Remuneration Committee.
Mr. Ooi Teik Huat is a member of Malaysian Institute of Encik Pakhruddin bin Sulaiman holds a Bachelor of Laws (LL.B Accountants and CPA Australia and holds a Bachelor of Honours) degree from the University of London in 1982 and Economics degree from Monash University, Australia. He started qualified as a Barrister-at-Law (Lincoln’s Inn), United Kingdom. his career with Messrs Hew & Co (now known as Messrs Mazars), Upon being called to the Malaysian Bar in July 1985, he worked Chartered Accountants, before joining Malaysian International as a Legal Assistant at the following legal firms: Messrs A.J Ariffin, Merchant Bankers Berhad (now known as MIMB Investment Chong & Harpal from 1985 to 1987, Messrs Nik Saghir, Yaacob Bank Berhad). He subsequently joined Pengkalen Securities Sdn & Ismail from 1987 to 1991 and Messrs Abu Talib Shahrom, Bhd (now known as PM Securities Sdn Bhd) as Head of Corporate Khamil & Zahari from 1992 to 1993. From 1993 to 2005, Encik Finance, before leaving to set up Meridian Solutions Sdn Bhd Pakhruddin bin Sulaiman was the Managing Partner of Messrs where he is presently a director. Mohd Khamil & Co. He is presently the Managing Partner of Messrs Pakhruddin & Partners, a legal firm in Selangor Darul Mr. Ooi Teik Huat is also a director of Tradewinds (M) Berhad, Ehsan. He also sits on the Board of United Malayan Land Berhad MMC Corporation Berhad, DRB-Hicom Berhad and Zelan Berhad. and several private limited companies.
Mr. Ooi Teik Huat has attended all six (6) Board Meetings held Encik Pakhruddin bin Sulaiman has attended all six (6) during the financial year ended 31 December 2011. Board Meetings held during the financial year ended 31 December 2011. Board of Directors’ Profile Tradewinds Plantation Berhad Annual Report 2011 20
BAKRY BIN HAMZAH MOHD NAZRI BIN MD. SHARIFF Non-Independent Non-Executive Director Non-Independent Non-Executive Director
Encik Bakry bin Hamzah, aged 54, was appointed to the Board of Encik Mohd Nazri bin Md. Shariff, aged 46, brings with Directors of Tradewinds Plantation Berhad on 27 June 2006. He is him more than two decades of experience in corporate and also a member of the Executive Committee. financial management, banking and audit. He was appointed to the Board of Directors of Tradewinds Plantation Berhad on Encik Bakry bin Hamzah graduated with Bachelor of Arts 1 April 2009. He is also a member of the Audit Committee. (Honours) from the University of Malaya. He was an Assistant Director of Marketing of Lembaga Padi dan Beras Negara (LPN) He has dynamically served and contributed in a wide range of from 1981 to 1984 and had also served in various private limited portfolios and industries including as the Group Chief Executive companies. He was the Chief Executive Officer of Tradewinds (M) Officer of Tradewinds (M) Berhad,G roup Chief Financial Officer Berhad from 2005 to 2007 and Managing Director of Central of Padiberas Nasional Berhad, Group Chief Operating Officer of Sugars Refinery Sdn. Bhd.H e is currently the Managing Director Pernas International Holdings Berhad, General Manager (Finance of Padiberas Nasional Berhad and the Group Managing Director and Corporate) in various subsidiaries of MMC Berhad Group. of Tradewinds (M) Berhad. He was also a Board Member and Corporate Representative for several local and foreign-owned/operated companies. Encik Bakry bin Hamzah had previously served on the Boards of various companies including Latitude Tree Holdings Berhad as an A member of the Malaysian Institute of Accountants and a Fellow Executive Director from 1997 to 2001, Director of Oriental Food of the Association of Chartered Certified Accountants,U nited Kingdom, Encik Mohd Nazri was trained and later qualified as Industries Berhad from 2002 to 2003 and Director of Mardec a Chartered Certified Accountant with an audit firm in England. Berhad from 2003 to 2004. He subsequently joined the Malaysian banking sector where he served in the credit risk, internal audit and corporate banking Encik Bakry bin Hamzah has attended all six (6) Board Meetings divisions of Amanah Capital Group of Companies and Bank of held during the financial year ended 31 December 2011. Commerce, respectively.
He is currently the Group Chief Financial Officer of Tradewinds (M) Berhad.
Encik Mohd Nazri has attended all six (6) Board Meetings held during the financial year ended 31 December 2011. 21 Annual Report 2011 Tradewinds Plantation Berhad
Chief Executive Officer’s Profile CHAN SENG FATT Chief Executive Officer
Mr Chan Seng Fatt, aged 48, a Chartered Accountant of the Malaysian Institute of Accountants, joined Tradewinds Group in 2003 as the Chief Financial Officer of Tradewinds (M) Berhad and later posted to Tradewinds Plantation Berhad as the Acting Chief Executive Officer and Chief Financial Officer on 1 September 2006. He holds his current position as Chief Executive Officer of Tradewinds Plantation Berhad since 23 October 2007.
Prior to joining Tradewinds Group, Mr Chan Seng Fatt has held several senior positions in various private and public companies. He joined Multi-Purpose Holdings Berhad in 1988 as the Internal Auditor for three years before serving Asian Pac Holdings Berhad from 1991 to 1993 as the Group Accountant. From 1993 to 1997 he was the Financial Controller for Pengkalen Securities Sdn Bhd and later appointed as the General Manager of Halim Securities Sdn Bhd in 1997 before joining K&N Kenanga Berhad in 1999 as a Remisier. Mr Chan Seng Fatt was the Chief Financial Officer for Johore Tenggara Oil Palm Berhad from 2001 to 2002. He does not have any interest in the securities of the Company or its subsidiaries.
The Directors and the Chief Executive Officer are Malaysians. None of them have family relationship with other Directors and / or major shareholders of Tradewinds Plantation Berhad and have no conflict of interest with Tradewinds Plantation Berhad. They have not been convicted of any offences within the past ten (10) years other than traffic offences, if any. Tradewinds Plantation Berhad Annual Report 2011 22
CORPORATE DIVISION ADVISORY & SUPPORT
1 Chan Seng Fatt 1 Ramesh s/o Veloo Chief Executive Officer Group Plantation Advisor
2 Razidan bin Ghazalli 2 Choong Siew Ming Chief Financial Officer Group Mill Advisor
3 Khoo Pao Yin 3 Muhammad Pilus bin Zambri Senior General Manager, Finance Research & Development Controller
4 Zil Huda binti Mohd Nor 4 Johari bin Mohd Yusof General Manager, Corporate Planning General Manager, Engineering (Civil)
5 Zainal Rashid bin Ab Rahman 5 Tong Kim Seng General Manager, Secretarial & Legal General Manager, Tradewinds Plantation Academy
6 Shamuganathan s/o Karuppaiya 6 Abdul Aziz bin Ismail General Manager, Human Resource and Administration Deputy General Manager, Total Quality Environmental Management / 7 Loh Meng Chee Special Development General Manager, Information Technology Project & Land Matters
8 Amir bin Ismail Deputy General Manager, Purchasing
9 Lee Wai Ming Senior Manager, Marketing 23 Annual Report 2011 Tradewinds Plantation Berhad
PLANTATION DIVISION PROCESSING AND MANUFACTURING (MARDEC GROUP)
1 Paimin bin Selamat 1 Asmal bin Ab Hadi Director of Plantation Senior General Manager
2 Mohd Anim bin Ab Rahman 2 Mohamad Noh bin Talib Regional Director of Plantation, West Malaysia General Manager, Operations
3 Shahrir bin A Aziz 3 Kamarulbahrin bin Mohd Suki Regional Director of Plantation, East Malaysia General Manager, Marketing & Business Development
4 Rahmat bin Karto 4 Gan Boon Koo @ Gan Boon Kiu General Manager, Kedah Project General Manager, Finance & Information Technology
5 Karuppiah s/o Subramaniom 5 Zainudin bin Mohd Yatim Regional General Manager, Northern Peninsular Region General Manager, Human Resource & Administration
6 Yong Swee Lai 6 Mohamad Razali bin Abd Hamid Regional General Manager, Sibu Region Assistant General Manager, Operations
7 Mohd Izwan Wasandan bin Abdullah 7 Norul Huda bin Abdul Thamin Regional General Manager, Sabah/Lawas Region Senior Manager, Technical & Product Development
8 Abdullah bin Daud 8 Sharin bin Said Regional General Manager, Mukah Region Senior Manager, M-Pol Group
9 Saidi bin Bujang Regional General Manager, Miri Region Tradewinds Plantation Berhad Annual Report 2011 24 25 Annual Report 2011 Tradewinds Plantation Berhad
On the back of the almost two-fold increase in revenue, the Group registered profit before tax (PBT) of RM476.8 million, a 69% increase from RM282.4 million achieved previously. Tradewinds Plantation Berhad Annual Report 2011 26
100% Prisma Spektra Sdn Bhd 100% Mardec Berhad 100% Tradewinds Plantation Management Sdn Bhd 85% Trans Kenyalang Sdn Bhd 100% Tradewinds Plantech Sdn Bhd 85% Senandung Masyhur Sdn Bhd 100% Tradewinds Agro Services Sdn Bhd 70% Tradewinds Tanjung Alan Plantation Sdn Bhd 100% Tradewinds Plantation Services Sdn Bhd 70% Melur Gemilang Sdn Bhd 100% Tradewinds Corridor Sdn Bhd 70% Arah Bersama Sdn Bhd 100% Tradewinds Plantation Capital Sdn Bhd 70% usaha Wawasan Sdn Bhd 100% Amalan Penaga (M) Sdn Bhd 60% Amalan Pelita Pasai Sdn Bhd
100% Johore Tenggara Oil Palm Berhad 100% Ladang Petri Tenggara Sdn Bhd 100% Teon Choon Realty Company Sdn Berhad 100% Pertanian Johor Tenggara Sdn Bhd 100% Ladang Chendana Sdn Bhd 100% Agromaju Sendirian Berhad 100% Binu Plantations Sdn Bhd 100% Permodalan Pelangi Sdn Bhd 100% ibok Plantation Sdn Bhd 100% Tanah Semai Sdn Bhd 100% Ladang Mawar Sdn Bhd 100% Semai Segar Sdn Bhd 100% Syarikat Ladang Sawit Cherul Sdn Bhd 100% uni-Agro Plantations (Trengganu) Sdn Bhd 100% Ladang Permai Sdn Bhd 100% Agromaju Landscape Sdn Bhd 100% Ladang Serasa Sdn Berhad 100% M.P. Plantation Sdn Bhd 100% Quek Shin & Sons Pte Ltd 100% hak JTOP Sdn Bhd 70% Kumpulan Kris Jati Sdn Bhd 51% Barisan Perangsang Sdn Bhd 70% Bahtera Bahagia Sdn Bhd 70% Barisan Tekad Sdn Bhd 100% niA Development Sdn Bhd 70% northern Intergrated Agriculture Sdn Bhd 100% niA Infrastructure Sdn Bhd 50% Pride Palm Oil Mill Sdn Bhd 100% Solar Green Sdn Bhd 27 Annual Report 2011 Tradewinds Plantation Berhad
100% Mardec Yala Co Ltd 100% Mardec Saigon Rubber Co Ltd 100% Mardec Processing Sdn Bhd 55% PT Mardec Siger Way Kanan 100% Mardec Industrial Latex Sdn Bhd 51% PT Mardec Musi Lestari 100% Mardec International Sdn Bhd 51% PT Mardec Nusa Riau 100% regal Mardec Sdn Bhd 30% Mardec R.K. Latex Pvt Ltd 100% Syarikat Perusahaan Kamar Sdn Bhd 100% Mardec Fertilizer Sdn Bhd 100% M-Pol Defence Sdn Bhd 100% Mardec Polymers Sdn Bhd 100% M-Pol Industrial Plastics Sdn Bhd 30.6% Filati Lastex (Malaysia) Sdn Bhd 100% M-Pol Plastic Products Sdn Bhd 20% Alfagomma-Mardec Sdn Bhd 100% M-Pol Industrial Products Sdn Bhd 100% M-Pol Precision Products Sdn Bhd 100% Plaat Industries Madras Pvt. Ltd. 70% M-Pol Microguard Sdn Bhd
70% Ladang Sungai Relai Sdn Bhd
Legends:
investment holding company Property development & rubber plantation Plantation management & advisory services Manufacturing cultivation of oil palm Purchasing, processing & marketing of natural rubber cultivation of oil palm & rubber trees Dormant cultivation of oil palm and production of crude palm oil ceased operation Sole & specific purpose of undertaking islamic securities transaction Winding up process
Tradewinds Plantation Berhad Annual Report 2011 30 31 Annual Report 2011 Tradewinds Plantation Berhad Dear Shareholders,
Tradewinds Plantation Berhad (TPB or the Group) has been propelled into a new and more dynamic phase of development. The year under review ended 31 December 2011 saw the completion of the corporate exercise to acquire Mardec Berhad (Mardec). On the operational front, the Group recorded its best-ever financial results and lives up to its promise of “delivering outstanding value to all”. Chairman’s STATEMENT Tradewinds Plantation Berhad Annual Report 2011 32
revenue RM1.7billion
The Group’s achievements stem from a combination of factors: a proven business model, carefully thought-out strategies, strengths accumulated over the years and an entrepreneurial flair to seize opportunities as they arise. Like the theme chosen for this year’s report, all the winning pieces that comprise our blue-print for success have been stitched together, enabling the Group to be well on its way to achieving its ultimate vision to be the “preferred globally competitive integrated agri-business organisation”.
TPB’s new position of strength paves the way for a new phase of expansion and profitable growth.R iding on the momentum established, the game plan is to leverage on the synergies inherent in the enlarged Group to unlock its significant potential and exploit opportunities unfolding in the market-place. In doing so, we will remain true to our goal to create a sustainable future, abiding by a well-articulated set of principles that guide the way we conduct our businesses. We will continue to operate in a socially responsible manner with due regard to environmental stewardship, whilst paying heed to the needs and concerns of our respective stakeholders.
On behalf of the Board of Directors, it is my privilege to present this annual report and financial statements of the Company and Group for the financial year ended 31 December 2011 (FY 2011).
FINANCIAL PERFORMANCE
Operationally, FY 2011 was a stellar year for the Group with the Malaysian oil palm industry registering record highs in key performance indicators, namely annual average price of palm oil products, crude palm oil (CPO) production, export volume as well as earnings.
Against this backdrop, the Group’s revenue for the FY 2011 soared to RM1.7 billion, the highest level achieved to date, compared to RM909.1 million posted in the preceding year, partly due to the inclusion of Mardec’s revenue. On the back of the almost two- fold increase in revenue, the Group registered profit before tax (PBT) of RM476.8 million, a 69% increase from RM282.4 million achieved previously. Accordingly, earnings per share grew 79% to 53.07 sen, compared to 29.63 sen recorded in the financial year ended 31 December 2010 (FY 2010).
The financial results also take into account the maiden contribution of Mardec, which became a wholly-owned subsidiary company of the Group effective 10 October 2011. Over the three-month period, Mardec contributed approximately 30% to the Group revenue, with the remainder attributed to the Group’s oil palm and rubber plantation operations. 33 Annual Report 2011 Tradewinds Plantation Berhad
The market recognises TPB’s potential growth and has reacted positively to our expansion into the rubber business as a strategic move to diversify our earnings base and to mitigate the impact of any adverse scenario on the oil palm sector. Throughout 2011 our share price has been on the uptrend, achieving a high of RM4.70 on 14 December 2011, closing the year at RM4.34.
DIVIDENDS
In line with the Board’s intention to share the Group’s success with shareholders, a first interim dividend of 5 sen per ordinary share less income tax of 25% amounting to RM19,843,254 for the FY 2011 was paid to the shareholders on 23 December 2011. A similar interim dividend rate was paid out in FY 2010.
On the strength of TPB’s commendable results, the Board of Directors has proposed a final dividend of 5 sen per ordinary share less income tax of 25% (2010: 5 sen per ordinary share less income tax of 25%) amounting to RM19,843,254 (2010: RM19,843,254) and a special dividend of 5 sen per ordinary share less income tax of 25% amounting to RM19,843,254 for the financial year ended 31 December 2011, subject to the approval of shareholders at the forthcoming Annual General Meeting.
Subject to the approval of shareholders, the total dividend payout for the FY 2011 would amount to RM59,529,762, against Upon completion of the acquisition exercise, one of our immediate RM39,686,508 paid out for the preceding financial year. tasks was to implement measures to optimise efficiency of operations by capitalising on Mardec’s strengths as well as to unlock the true value of its assets. The integration process is well CORPORATE DEVELOPMENTS underway, focusing on the assimilation of the Group’s corporate culture and streamlining of operational policies and procedures. Several key developments stood out on the corporate front, The process has proceeded seamlessly, with minimal disruptions the most important being the completion of the exercise to to the operations of both TPB and Mardec. acquire Mardec. Mardec is an investment holding company and its corporate stable comprises local and overseas subsidiaries On 8 February 2012, Mardec International Sdn Bhd (MISB) and involved in the processing and trading of natural rubber and the other shareholders of RI International Pte Ltd (R1) entered into a manufacturing of value-added rubber and polymer products. conditional Share Sale Agreement (SSA) with Hainan State Farms The acquisition of Mardec is therefore a strategic move to Investment Limited (HSF) and Hainan Rubber Group (Singapore) expand our rubber business into downstream activities, thereby Pte Ltd for the disposal of 6,300,000 ordinary shares of US$1.00 complementing TPB’s existing upstream rubber plantation each, representing 90% of the equity interest in R1, for a total operations. disposal consideration of US$51,725,016.
As a corollary to the chronology of events reported last year, TPB Pursuant to the SSA, MISB will dispose 3,150,000 ordinary shares received the green light from our shareholders to acquire Mardec of US$1.00 each, representing its entire 45% equity in R1 for a at an Extraordinary General Meeting held on 14 July 2011. The total disposal consideration of US$25,862,508 to HSF, subject to final hurdle was cleared with the execution of the Novation the terms and conditions of the SSA. The proposed divestment Agreement and Supplemental Agreement with the Government exercise was completed on 30 April 2012. of Malaysia and the Minister of Finance, paving the way for the acquisition exercise to be completed on 10 October 2011. Chairman’s STATEMENT Tradewinds Plantation Berhad Annual Report 2011 34 profit before tax RM476.8 million +69%
When R1 was established by Mardec and other shareholders as a trading platform, the rubber business was then deemed to be a sunset industry. However, the resurgence of the industry has changed the operating scenario and there are now established trading houses that can take on R1’s role offering competitive terms. Moreover, the disposal of R1 by Mardec and other shareholders allows the Group to unlock the value on its earlier investment in R1.
In a more recent corporate development, TPB’s wholly-owned subsidiary, Amalan Penaga (M) Sdn Bhd has on 29 March 2012, entered into a conditional Share Sale Agreement with Tradewinds (M) Berhad for the purchase of 11,259,523 ordinary shares of RM1.00 each in Retus Plantation Sdn Bhd (Retus) representing 60% of its issued and paid-up share capital. The principal activity of Retus is the cultivation of oil palms, palm oil milling and processing of fresh fruit bunches.
The proposed acquisition is consistent with TPB’s plan to continue to expand its oil palm plantation activities. When the exercise is completed, Retus’s five oil palm estates measuring some 10,436 hectares located in Sibu, Sarawak, would increase TPB’s total plantation land size to 151,866 hectares. The Retus estates would also immediately increase TPB’s production capacity as 9,566.7 hectares have been planted with oil palms which are in the prime maturity age of 7-12 years. 35 Annual Report 2011 Tradewinds Plantation Berhad Earnings per share grew 79% to 53.07 sen, compared to 29.63 sen recorded in the financial year ended 31 December 2010. Chairman’s STATEMENT Tradewinds Plantation Berhad Annual Report 2011 36
OPERATIONAL HIGHLIGHTS CULTIVATING NEW GROWTH
The Group’s outstanding financial performance was mirrored These are exciting times for us at TPB and being the planter that on the operational front, with the following key performance we are, cultivating new growth has become second nature to us. indicators achieved during the year under review: I hope you will continue to be on board as we strive to unlock the potential of the enlarged Group. • Production of fresh fruit bunches (FFB) in 2011 rose 14.3% to 1,362,679 metric tons (MT), against 1,191,685 This is an opportune moment to be in the oil palm and rubber MT recorded previously. business, given its new emphasis as one of the drivers of growth under the country’s Economic Transformation Programme (ETP). • Yield per hectare increased by 10.9% to 18.77 MT, Between now and 2013, the oil palm industry is expected to compared to 16.92 MT achieved the preceding year. spend RM4.4 billion to accelerate the replanting of 365,000 hectares of non-productive and low-yielding plantations. The • Of the Group’s eight mills in operation, three have achieved Group currently enjoys a favourable maturity profile, but in an average oil extraction rate (OER) of above 21% for FY planning for the future we will continue to press ahead with our 2011. The Group’s average OER was recorded at 20.87%, replanting programme. Some 1,605 hectares of palms that are while that of palm kernel (PK) was 5.27%, which exceeded past their prime have been earmarked for replanting in the 2012 the national average CPO and PK extraction rates. work programme.
• In line with the more favourable market trends, the Group In our efforts to improve yields and hence profitability, the recorded an average CPO price of RM3,223 per MT, which planting of tissue-cultured planting materials with a high yield was 19% higher than the previous year’s average CPO price potential is being implemented over a 60 hectare plot at Sisek of RM2,705 per MT. Estate in Johor. This pilot project will prepare the Group for the future possibility of using elite bio-tech materials, which will • Correspondingly, the average price of PK rose to RM2,211 involve more stringent nursery management as well as higher per MT, a 29% increase from RM1,713 per MT achieved standards of field upkeep and cultivation. The field planting of previously. ramets commenced in January 2012.
• Headway was also made during FY 2011 to manage The Group’s plantable reserves of 16,022 hectares are expected escalating operational costs. to be depleted over the next two years at the current rate of development. Although we have time on our side, we remain • FY 2011 also saw the maiden contribution from TPB’s rubber vigilant to unfolding opportunities to replenish our landbank plantation located at Padang Terap, Kedah with a small at the right price and size. Given the scarcity of suitable arable hectarage reaching maturity in the second half of 2011. land available locally, many companies have been investing in plantations abroad, notably in Indonesia, other parts of Southeast • Having laid the groundwork, the Group is now more Asia and even in West Africa. While we have not gone that route prepared for the Roundtable Sustainable Palm Oil (RSPO) yet, we are keeping our options open to all possibilities. certification. 37 Annual Report 2011 Tradewinds Plantation Berhad
TPB has the advantage of an upstream business to support its APPRECIATION downstream ventures. The inclusion of Mardec into our corporate stable opens a realm of possibilities in the rewarding downstream First and foremost, I would like to welcome the management end of the rubber business. Through Mardec, the Group is looking and staff of Mardec into TPB’s corporate family. I can understand into the possibility to consolidate its position in the high-value that adapting to change can sometimes be trying, and it is to niche markets by commercialising two specialty rubber products. your credit that the transition to a new environment, culture and operational procedures has been effected so smoothly. Everyone Mardec is one of only two recipients of the technology to in the enlarged TPB Group played an important role in the success commercialise a new generation of latex grade specialty rubbers, of the Group. I thank all of you, but as you can see from the which include expoxidized natural rubber (Ekoprena) and most recent corporate exercise, the transformation of TPB is by deproteinized natural rubber (Pureprena). These are raw materials no means complete. Your commitment, professionalism and hard needed to support a high end rubber product industry, especially work will help us achieve even more. the manufacture of eco-friendly tyres. The Group will be setting up a manufacturing facility by next year to produce Ekoprena Our success is also attributed to the support and cooperation specialty rubber designated for the European market. we have received from various quarters, including our business associates, financiers and the respective government agencies. Mardec will also play a key role in the Group’s long-term plan to Our legion of loyal customers and shareholders, many of whom develop an integrated rubber city in Kota Putra, Kedah. We are still have followed the fortunes of TPB since its early days, deserve at the early planning stages and have applied to the Government special mention. to designate Kota Putra a special border economic zone so as to attract foreign direct investment. The Group is awaiting the We are also very fortunate in that we have a very engaged Board, relevant approvals prior to drawing up the master plan. whose members are generous with their insights and sound advice. Drawn from diverse backgrounds and representing the Moving forward, Mardec has plans to expand its rubber best of Corporate Malaysia, the Group has benefited greatly from processing operations in Indonesia and Thailand, whilst exploring their vast knowledge and experience. new investment opportunities in Cambodia, Philippines and West Africa. Our sincere appreciation also goes to Mr. Chuah Seong Tat for his invaluable contributions during his tenure as a member of the Board as well as the Audit Committee and the Executive Committee.
I am grateful to all of you. Let us put our shoulders to the plough as we open a new chapter of growth and profitability.
DATO’ WIRA SYED ABDUL JABBAR BIN SYED HASSAN Chairman Tradewinds Plantation Berhad Annual Report 2011 38 Dear Stakeholders,
In almost all aspects, financial year ended 31 December 2011 (FY 2011) was a remarkable year for Tradewinds Plantation Berhad (TPB or the Group). New milestones were etched on all fronts – corporate, operational and financial.O n the corporate front, the completion of the Mardec Berhad (Mardec) acquisition exercise has enabled the Group to diversify its earnings base and establish a presence in the mid and downstream sector of the rubber business. More recently, the proposed acquisition of a 60% stake in Retus Plantation Sdn Bhd (Retus) is an integral part of our long-term plan to expand our oil palm plantation activities. Good operational results achieved in FY 2011 have also translated into record earnings for TPB. 39 Annual Report 2011 Tradewinds Plantation Berhad BUSINEsS REVIEW Tradewinds Plantation Berhad Annual Report 2011 40 BY CHIEF EXECUTIVE OFFICER
rubber remained strong, driven by demand from China, Japan and Korea. For the year under review, the average price of SMR 20 grade rubber was around RM13.48 per kilogram (kg), compared to RM10.58 per kg in 2010. Rubber prices reached its peak of RM16.72 per kg early in the year, before settling to a low of RM10.36 per kg in December 2011.
In the mid and downstream sectors of the rubber business spearheaded by Mardec, high rubber prices have exerted pressure on funding as well as competition for raw materials. Nonetheless, the Group was able to ride out the challenges, securing the necessary funding as well as raw materials for Mardec’s processing and manufacturing operations.
UPSTREAM ACTIVITIES
Landbank
Of the Group’s landbank of 141,430 hectares, 54.5% or 77,095 hectares are located in Sarawak, with another 8.0% or 11,302 hectares in Sabah, while the remaining 37.5% or 53,033 hectares are in Peninsular Malaysia. About 71.2% of our landbank or 100,700 hectares have been planted with oil palm and rubber trees, with another 14,252 hectares in the course of planting. Total remaining plantable reserves amounted to 16,022 hectares, which have been earmarked for development over the next 2 years.
TPB’s total plantation land size will increase to 151,866 hectares, with the completion of the exercise to acquire a 60% stake in INDUSTRY OVERVIEW Retus. Maturity Profile FY 2011 was an exceptional year for the Malaysian oil palm industry, which is the mainstay of TPB’s business. Improved The Group enjoys a favourable oil palm maturity profile, with 47% weather conditions from second quarter contributed towards or 45,616 hectares of our landbank planted with palms at the increased fresh fruit bunches (FFB) yield per hectare and higher prime age of between 9 and 18 years. Immature trees of between production of crude palm oil (CPO). The average price of CPO for 1 and 3 years make up another 25% or 23,871 hectares, while the year surpassed the RM3,000 per metric ton (MT) threshold young palms between 4 and 8 years comprise another 16% or to register at RM3,219 per MT, compared to RM2,701 per MT 15,833 hectares. The remaining 12% consist of palms that are recorded in the previous year. past their prime or are due for replanting. The Group’s Rubber Division also benefited from a favourable operating environment. Global production of natural rubber rose 5.5% to 11.0 million MT in 2011, with Malaysia accounting for 1.0 million MT. Malaysia is the world’s third largest producer of natural rubber, behind Indonesia and Thailand which currently tops the chart in terms of production. Consumption of natural 41 Annual Report 2011 Tradewinds Plantation Berhad
Production
The improved ground conditions contributed towards a bumper harvest in FY 2011. The Group’s production of FFB increased 14.3% to 1,362,679 MT, against 1,191,685 MT recorded previously. Yield per hectare improved by 10.9% to 18.77 MT. The positive variance on FFB production was mainly attributed to several factors, namely adequate manpower, timely field upkeep and adherence to well-regimented harvesting standards.
The year in review also saw a 10.8% increase in CPO production amounting to 277,872 MT as compared to 250,726 MT recorded in the previous year. Correspondingly, production of palm kernel rose by 12.6% to 70,107 MT from 62,283 MT achieved a year ago.
Milling Operations
With a total combined FFB processing capacity of 1,260,000 tonnes, the Group’s eight mills are strategically located throughout the country. Continuous efforts to improve operational efficiency and productivity have paid off in FY 2011. These efforts were spearheaded by the Group’s Mill Engineering Unit and Total Quality Environmental Management Strategic Business Unit (TQEM-SBU) in close collaboration with the respective operating units.
During the year under review, the Group achieved an average oil extraction rate (OER) of 20.87% and kernel extraction rate (KER) of 5.27%. It is noteworthy that three mills have achieved an average OER of above 21% for FY 2011.
A new 40 MT per hour mill is being constructed at Kuala Suai in Miri, Sarawak and will be completed by mid-2012. TPB has plans for two other mills with a similar capacity, which will be located near Kuching and Sibu. Tradewinds Plantation Berhad Annual Report 2011 42
Global production of natural rubber rose 5.5% to 11.0 million MT in 2011, with Malaysia accounting for 1.0 million MT. 43 Annual Report 2011 Tradewinds Plantation Berhad BUSINEsS REVIEW Tradewinds Plantation Berhad Annual Report 2011 44 BY CHIEF EXECUTIVE OFFICER
MID AND DOWNSTREAM ACTIVITIES For the three month period, Following the completion of the acquisition of Mardec on 10 October 2011, TPB’s mid and downstream operations centre on from October 2011 to the activities of Mardec. Through its stable of local and overseas December 2011, Mardec subsidiaries and associated companies, Mardec is involved in the processing (midstream) and manufacturing of value-added rubber contributed revenue of and polymer products (downstream). For the three month period, from October 2011 to December 2011, Mardec contributed RM504.0 million to the Group. revenue of RM504.0 million to the Group.
Domestic Rubber Processing Overseas Rubber Processing
Mardec’s domestic rubber processing operations are vested Mardec has also established rubber processing operations in in Mardec Processing Sdn Bhd, whose core business is the Indonesia (PT Mardec Musi Lestari, PT Mardec Nusa Riau and processing and marketing of Standard Malaysian Rubber/ PT Mardec Siger Way Kanan), Thailand (Mardec Yala) as well as Technically Specified Rubber as well as Compound Rubber for Vietnam (Mardec Saigon). the China market. Its market reach extends all over the globe, reaching customers in Europe, United States of America (USA), Manufacturing South America, India, South Africa and Japan. Mardec Polymers Sdn Bhd is the manufacturing arm of the Mardec Group offering rubber-based industrial products to a global market. 45 Annual Report 2011 Tradewinds Plantation Berhad
COST MITIGATING MEASURES • An effective cost control and monitoring system has been put in place, with Regional Heads held accountable for all In a continual bid to improve the bottom-line performance, one expenditures. of our biggest concerns is escalating operating costs. Fortunately for TPB, unlike the forces of nature, over which we have little or • Outsourcing of high capital cost items to third party no control, there are measures that can be put in place to meet contractors. the challenge of rising costs. A raft of cost-mitigating measures has been adopted over the past years including: • A computerised system has been designed to effectively monitor and manage stock levels kept by estates. • Standard Operating Procedures are periodically updated to keep abreast with the latest technologies and agricultural • Centralised purchases of major items through an open practices to ensure uniformity in implementing some of the tender system to ensure competitive pricing. labour reducing technologies such as Controlled Droplet Application technique for weeding work. • Where feasible, the use of barges and containers for river transportation has been identified as an alternative to road • Field operations such as fertilizer application and FFB transportation. collection have been mechanised, wherever feasible. By utilising a mechanised fertilizer spreader, an estimated Our cost-containment measures are complemented by the various savings of RM12-RM20 per hectare/year can be achieved. activities undertaken by the Group’s Research and Development (R&D) team whose main thrust is the achievement of higher yields. Tradewinds Plantation Berhad Annual Report 2011 46
In 2011, palm oil generated RM80 billion in export revenue, making it the country’s biggest plantation export commodity. 47 Annual Report 2011 Tradewinds Plantation Berhad
SETTING THE RECORD STRAIGHT
Malaysia as a whole continues to demonstrate leadership in sustainable agriculture practices, balancing its role as a green food and energy provider to the world while practising environmental stewardship. Nonetheless, we are still confronted with a barrage of accusations and the rising chorus of protectionism in the developed world. As a member of the palm oil fraternity, I think it is important for us to present you with a balanced perspective on issues related to sustainability of the oil palm industry:
• Malaysia has exceeded its 1992 Rio Earth Summit Pledge in meeting voluntary forest protection targets. According to the Malaysian Palm Oil Council (MPOC), “for every hectare of land developed for palm oil production in Malaysia, four hectares are preserved as permanent forest”.
• According to the MPOC, palm oil emissions have been estimated to be about half that of rapeseed and less than two-third of soybean.
• As a sustainable biofuel, MPOB’s research published in the Journal of Life Cycle Assessments puts the value of green house gas savings rate at between 60.4% and 74.7%, depending on whether biogas capture was used in the mill process, which far exceeds the 20% threshold for biofuels in the USA.
• Palm oil cultivation is directly contributing to upward mobility of small farmers, creating jobs among the most under-privileged sectors of the economy and raising living standards in the developing world.
The importance of oil palm as one of the main drivers of Malaysia’s agriculture sector cannot be under-estimated. In 2011, palm oil generated RM80 billion in export revenue, making it the country’s biggest plantation export commodity. The industry as a whole is also the fourth largest contributor to the Malaysian Gross National Income.
Given the constraints of space, this report may not be the best platform to address the myriad and complex issues that are involved. However, I hope I have set the record straight so that you, our valued shareholder, can make your own independent and informed assessment of where we stand in the face of concerted efforts by certain quarters to discredit the industry. BUSINEsS REVIEW Tradewinds Plantation Berhad Annual Report 2011 48 BY CHIEF EXECUTIVE OFFICER
As at financial year-end 2011, the Group’s total assets amounted to RM3.8 billion, which is more than triple its total borrowings of only RM1.2 billion.
OUTLOOK & PROSPECTS
TPB moves forward from a position of strength, with a very healthy balance sheet supported mainly by quality assets, namely its oil palm and rubber plantations. As at financial year-end 2011, the Group’s total assets amounted to RM3.8 billion, which is more than triple its total borrowings of only RM1.2 billion. It may be noted that the Group has fulfilled all its financial obligations and will certainly be able to continue to meet all its financial obligations in the foreseeable future.
Our immediate priority is to optimise our operational efficiencies and to fully unlock the value of our assets. At the same time, we can therefore afford to be selective about investment opportunities coming our way, keeping our options open for expansion and diversification activities that complement our existing operations to further consolidate our position in the industry.
As we move into the new financial year, most of the industry players and analysts are expecting globalC PO output in 2012 to be higher. With 47% of TPB’s oil palms at the prime age of between 9 and 18 years, the prospects look favourable and will sustain the Group’s earnings growth in FY 2012. Nonetheless, the downside risk is that the prolonged euro debt crisis may exert some downward pressure on the demand for vegetable oils globally and this will inevitably affect prices.
In so far as our plans for Mardec is concerned, we are still in the midst of rationalizing various key elements in Mardec with those of the Group. The goal is to create a uniformed platform so that we can forge ahead as a single unity, whilst maintaining the individual strengths and core competencies of the respective business units. 49 Annual Report 2011 Tradewinds Plantation Berhad
We are still looking at the synergies to be gained, the more ACKNOWLEDGEMENTS obvious being shared resources and expertise. TPB’s upstream plantation operations will undoubtedly support Mardec’s mid and Over the past years, our people have met the twin challenges downstream operations which have been plagued by a scarcity of of change and transformation head-on. They share the Group’s raw materials. As an international player, Mardec has established bold vision and ambitions to reach new heights. Working closely footholds in markets throughout the world and this could be as a team, creating innovative synergies, I am confident we can potentially valuable to TPB. At the same time, Mardec can ride achieve common goals. on the Tradewinds brand to expand its business and establish market presence. We owe a great deal of our success to the continual support of our business associates, regulatory authorities, customers and We are beginning to see our hard work pay off, but the shareholders. You are the driving force behind our achievements transformation of the Group into a leading agri-business power- and we hope to continue to earn your support as we move ahead house is by no means completed. With your continued support, to capture the full potential the Group has to offer. we expect to prosper because we have the vision, a road-map, the resources and more importantly, the momentum that will To all of you, please accept my sincere gratitude and appreciation. carry us forward to a new and more dynamic phase of growth and profitability.
CHAN SENG FATT Chief Executive Officer
Statement on Tradewinds Plantation Berhad Annual Report 2011 52 Corporate Governance
THE BOARD OF DIRECTORS (“THE BOARD”) ARE COMMITTED TO ACHIEVING AND DEMONSTRATING THE HIGHEST STANDARDS OF CORPORATE GOVERNANCE AND CONTINUE TO REVIEW THE FRAMEWORK AND PRACTICES TO ENSURE THEY MEET THE INTERESTS OF SHAREHOLDERS.
THE BOARD IS PLEASED TO REPORT TO THE SHAREHOLDERS ON THE MANNER IN WHICH THE COMPANY HAS APPLIED THE PRINCIPLES OF GOOD CORPORATE GOVERNANCE THROUGHOUT THE FINANCIAL YEAR ENDED 31 DECEMBER 2011 AND THE EXTENT TO WHICH IT HAS COMPLIED WITH THE BEST PRACTICES SET OUT IN THE MALAYSIAN CODE ON CORPORATE GOVERNANCE (“THE CODE”) PURSUANT TO PARAGRAPH 15.25 OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD (“THE LISTING REQUIREMENTS”).
BOARD OF DIRECTORS business and implementation of the Board policies and decisions. The Chief Executive Officer is responsible to duly ensure the A. BOARD COMPOSITION execution of strategic goals, effective operation within the Group, and to update and inform the Board on matters pertaining to the The Board has five (5) Directors comprising anI ndependent Non- Group. This division of responsibility between the Chairman and Executive Chairman, two (2) Independent Non-Executive Directors Chief Executive Officer ensures that accountability is given high and two (2) Non-Independent Non-Executive Directors. The Board priority. has within it, professionals drawn from various backgrounds including finance, accounting, business management, legal, The Non-Executive Directors provide considerable depth of trading, manufacturing and commodity business bringing knowledge collectively gained from experiences in a variety depth and diversity in experience, expertise and perspectives of public and private companies as well as public service. The to the Group’s business operations. The Directors’ diversity of Independent Non-Executive Directors provide unbiased and knowledge reflects theC ompany’s commitment to ensure the independent views in ensuring that the strategies proposed by effective leadership and control of the Group. the management are fully deliberated and examined, in the interest of not only the Group but also of minority shareholders, The profiles of the Directors are presented on pages 18 to 20 of employees and the business communities in which the Group this Annual Report. conducts its business.
The roles of the Independent Non-Executive Chairman and the The Board is satisfied that the current Board representation Chief Executive Officer are separate with a clear distinction of fairly reflects the investment interest of the shareholders in the responsibilities to ensure that there is a balance of power and Company. authority. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the Chief Executive Officer has overall responsibilities for the day to day management of the 53 Annual Report 2011 Tradewinds Plantation Berhad
B. BOARD RESPONSIBILITIES Directors No. of Percentage Meetings % The Board is responsible for the overall performance of the Group Attended by: Dato’ Wira Syed Abdul Jabbar 6/6 100 • Reviewing and adopting a strategic plan for the Group to bin Syed Hassan ensure obligations to shareholders are met; Ooi Teik Huat 6/6 100 Pakhruddin bin Sulaiman 6/6 100 • Overseeing the conduct of the Group’s business to ensure that the business is being properly managed; Bakry bin Hamzah 6/6 100 Chuah Seong Tat @ Chuah 6/6 100 • Identifying principal risks and ensuring the implementation Chee Tat of appropriate systems to manage these risks through (resigned on 15 March 2012) appropriate risk management and internal control Mohd Nazri bin Md. Shariff 6/6 100 procedures; All the Directors fulfilled the requirements of the Listing • Succession planning including appointing, training, fixing Requirements in respect of board meeting attendance. the compensation of and, where appropriate, replacing the retiring senior management; C. SUPPLY OF INFORMATION • Developing and implementing an investor relations programme or shareholder communications policy for the The Directors are provided with documents on matters requiring Group; and their consideration in a timely manner prior to the Board meetings. This is to ensure the Directors are able to obtain • Reviewing the adequacy, effectiveness and integrity of further explanations, where necessary, deliberate knowledgeably the Group’s internal control system and management on issues and to enable the Directors to discharge their duties information systems including systems for compliance with effectively and efficiently. The Board papers provide information applicable laws, regulations, rules, directives and guideline. on Group performance and major operational, financial and corporate issues. The Board has a formal schedule of matters specifically reserved to it for decision to ensure that the direction and control of the The Directors have access to the advice and services of the Company is firmly in its hands. I n addition, the Company has a Company Secretary and senior management in carrying out their framework on Policy and Authority Limits and Approval Process duties. The Directors may, whether as a full Board member or in which defines the limits of authority for the Board,E xecutive their individual capacity obtain independent professional advice Committee and Management as well as the guidelines on tender at the Group’s expense, where necessary and in appropriate or purchasing procedures. circumstances, in furtherance of their duties. The Directors are also notified of any corporate announcements released to Bursa During the financial year the Board holds at least four (4) Malaysia Securities Berhad from time to time. regular scheduled meetings annually with additional meetings for particular matters as and when necessary. Details of the attendance of Directors at the scheduled or additional board meetings are as follows:
Statement on Corporate Governance Tradewinds Plantation Berhad Annual Report 2011 54
D. APPOINTMENTS AND RE-ELECTIONS OF DIRECTORS 3. Encik Pakhruddin bin Sulaiman
The Company has instituted formal and transparent procedures • Program for Corporate Malaysia held on 9 February for the appointment and re-election of Directors. The Nomination 2011 (Bursa Malaysia) & Remuneration Committee is primarily responsible to propose, consider and recommend to the Board, candidates for directorships • Training on Islamic Finance – Updates on the Financial to be filled in the Board and Committees of the Board. The Instruments and Other Related Topics held on Nomination & Remuneration Committee also carries out annual 11 October 2011 (Tradewinds (M) Berhad) assessments of the Board of Directors through comprehensive evaluation and make recommendations for the re-appointment 4. Encik Bakry bin Hamzah and re-election of Directors at the Annual General Meeting. • Asian Rice 2011 : Modernizing the Asian Rice Industry held on 16 February to 17 February 2011 (AFMA) E. DIRECTORS’ TRAINING • The Board Responsibility for Corporate Culture – All members of the Board have attended and successfully Selected Governance Concern and Tools for Addressing completed the Mandatory Accreditation Programme (“MAP”). Corporate Culture and Board Performance held on 5 May 2011 (Bursa Malaysia) In compliance with the Listing Requirements, all Directors have attended at least one seminar or conference either organized • Board Intelligence and Agility : Strategic Foresight and internally or externally last year including the following:- Governance held on 26 September to 28 September 2011 (Marcus Evans) 1. dato’ Wira Syed Abdul Jabbar bin Syed Hassan • Cargill Sugar Seminar held on 5 October to 7 October • The High Performance Leadership Workshop held on 2011 (Cargill) 23 March 2011 (George Kohlrieser & Roshan Thiran / Star Publications (M) Berhad) • Training on Islamic Finance – Updates on the Financial Instruments and Other Related Topics held on • Sustainability Session for Directors – Consumer 11 October 2011 (Tradewinds (M) Berhad) Products, Finance, Technology and Closed End Funds held on 13 April 2011 (Bursa Malaysia) 5. Encik Mohd Nazri bin Md. Shariff
• Training on Islamic Finance – Updates on the Financial • How to Handle Press Conference and Tricky Media Instruments and Other Related Topics held on Questions held on 21 April 2011 (Federation of Public 11 October 2011 (Tradewinds (M) Berhad) Listed Companies Bhd)
2. Mr. Ooi Teik Huat • CFO Summit 2011 held on 24 May 2011 (ACCA and ASLI) • IIA International Conference held on 10 July to 13 July 2011(Institute of Internal Auditors Malaysia) • Oils Retreat 2011 held on 14 June to 17 June 2011 (LMC International Ltd) • Competition Law – How It May Impact the Way We Do Business held on 14 July 2011 (DRB-Hicom Berhad) • Global Grains Congress held on 20 September to 21 September 2011 (IBC Asia)
• Deloitte TaxMax held on 17 October 2011 (Deloitte Tax Sdn Bhd)
• ACCA Malaysia Annual Conference 2011 and Budget 2012 held on 20 October 2011 (ACCA)
55 Annual Report 2011 Tradewinds Plantation Berhad
6. Mr. Chuah Seong Tat @ Chuah Chee Tat b) Executive Committee (resigned on 15 March 2012) The Executive Committee deliberates on major operational • Directors Duties and Corporate Governance 2011 held issues and examines investment proposals before making on 3 March 2011 (Malaysian Institute of Corporate appropriate recommendations to the Board. Governance) During the financial year, the Committee met twice and all • ICAEW Talk - The CFO and Conflicts of Interest held on members were present at the meetings. There were also 24 May 2011 (Bursa Malaysia) numerous informal discussions and meetings held with the Management team to deliberate on operational issues. • Training on Islamic Finance – Updates on the Financial Instruments and Other Related Topics held on 11 The members of the Executive Committee are as follows:- October 2011 (Tradewinds (M) Berhad) (i) Dato’ Wira Syed Abdul Jabbar bin Syed Hassan The Directors also, from time to time, visit various operating units (ii) Bakry bin Hamzah of the Group to obtain better understanding and perspective of the business and enhance their comprehension of the Group’s (iii) chuah Seong Tat @ Chuah Chee Tat operations. (resigned on 15 March 2012)
F. THE BOARD COMMITTEES c) Nomination & Remuneration Committee
The Board has delegated certain functions to the Audit Committee, The Nomination & Remuneration Committee is primarily Executive Committee and Nomination & Remuneration responsible to propose, consider and recommend to the Committee to assist in the execution of its responsibilities. The Board, candidates for directorships to be filled in the Board Committees operate under clearly defined terms of reference. and Committees of the Board. The Committee is also The Committees have the authority to examine particular issues responsible to make appropriate recommendations to the within their terms of reference. The Chairman of the respective Board on matters of renewal and extension of directors’ committees reports the outcome of the respective committee appointment and reappointment of retiring directors, meetings with recommendations to the Board. to ensure that the Board has an appropriate balance of expertise and ability among non-executive directors and a) Audit Committee annually assess the effectiveness of the Board as a whole, the Board Committees and the contribution of directors, The Audit Committee reviews issues on accounting policy through assessment and evaluation processes. and presentation for external financial reporting, monitors the work of the internal audit team and ensures an objective The Nomination & Remuneration Committee is also and professional relationship is maintained with external responsible for recommending to the Board the remuneration auditors. and compensation of directors, including directors of subsidiary companies and the Chief Executive Officer. The composition and the terms of reference of the Audit Committee and summary of its activities are as set out in the During the financial year, two (2) meetings were held and Audit Committee report on pages 62 to 65. all members of the Nomination & Remuneration Committee were present.
The members of the Nomination & Remuneration Committee are as follows:-
(i) Dato’ Wira Syed Abdul Jabbar bin Syed Hassan (ii) ooi Teik Huat (iii) Pakhruddin bin Sulaiman
Statement on Corporate Governance Tradewinds Plantation Berhad Annual Report 2011 56
DIRECTORS’ REMUNERATION SHAREHOLDERS RELATIONSHIP
The remuneration of Directors is determined at levels which enable The Company places great importance in ensuring the highest the Company to attract and retain Directors with the relevant standards of transparency and accountability in the disclosure of experience and expertise to manage the Group successfully. Their pertinent information to its shareholders as well as to potential remuneration reflects the level of experience and expertise they investors and the public. The Company also recognizes the bring with them and the level of responsibility undertaken by the importance of timely and thorough dissemination of information Directors. to shareholders. In this regard, the Company strictly adheres to the disclosure requirements of Bursa Malaysia. The annual report Directors do not participate in decisions regarding their own has comprehensive information pertaining to the Company, remuneration packages. Directors’ fees are approved by the while various disclosures on quarterly and annual results provide shareholders at the Annual General Meeting. investors with financial information. Apart from the mandatory public announcements through Bursa Malaysia, the Company The Directors are also paid attendance allowance for Board and has also set up a website at “www.tpb.com.my” to provide Board Committee meetings that they attend. corporate, financial and non-financial information. TheG roup’s senior management meets regularly with analysts, institutional A summary of the remuneration of Directors of the Company shareholders and investors. At General Meetings, the Board during the financial year are set out below:- encourages shareholder participation and responds to their questions. Directors’ Emoluments Benefit- Total Fees In-Kind Shareholders can also leave written questions for the Board (RM’000) (RM’000) (RM’000) (RM’000) to respond. Any enquiries on the affairs of the Group may be conveyed to the Senior Independent Non-Executive Director, Non-Executive 295 898 25 1,218* Mr Ooi Teik Huat, at the following: Directors Address:
* The total remuneration includes fees and emoluments received Tradewinds Plantation Berhad from subsidiaries. Level 9, Menara HLA There is no Executive Director on the Board of Directors of the No. 3, Jalan Kia Peng Company. 50450 Kuala Lumpur
The number of Directors whose total remuneration falls within E-mail: [email protected] the following bands is as follows:- Tel: 03-2177 9999 Fax: 03-2161 1701 Number of Directors Range of Remuneration At all times, shareholders may contact the Company Secretary Non-Executive# at the Company’s registered address and telephone number, as RM50,001 to RM100,000 - aforementioned, to convey any concerns or make queries. RM100,001 to RM150,000 2 RM150,001 to RM200,000 3 RM200,001 to RM250,000 - RM250,001 to RM300,000 - RM300,001 to RM350,000 - RM350,001 to RM400,000 1
#There is no Executive Director on the Board of Directors of the Company.
57 Annual Report 2011 Tradewinds Plantation Berhad
ACCOUNTABILITY AND AUDIT C. INTERNAL CONTROL
A. FINANCIAL REPORTING The Board acknowledges its ultimate responsibility for the Group’s system of internal controls and the need to review its The Board aims to present a balanced and meaningful assessment effectiveness regularly in order to safeguard the Group’s assets of the Group’s financial performance and prospects, primarily and therefore the shareholders’ investments in the Group. through the annual financial statements and the quarterly announcement of results. The Statement on Internal Control as set out on pages 60 and 61 of this Annual Report provides an overview of the state of In preparing the financial statements, the Directors have taken internal control of the Company. the necessary steps to ensure that the Group has adopted all the applicable accounting policies consistently. All financial reporting standards which the Board considers to be applicable have been D. RELATIONSHIP WITH THE AUDITORS followed, subject to any explanations and material departures disclosed in the notes to the condensed consolidated income The external auditors, Messrs Deloitte KassimChan has continued statement. to report to the members of the Company on their findings which are included as part of the Company’s financial reports with The Board is assisted by the Audit Committee to review respect to each year’s audit on the statutory financial statements. information to be disclosed through the annual audited financial In so doing, the Company has established a transparent statements and unaudited quarterly announcements of results to arrangement with the auditors to meet the auditors’ professional shareholders to ensure accuracy, adequacy and completeness. requirements. The Audit Committee has also reviewed with the auditors the results of the annual audit and the audit report of the Company. B. DIRECTORS’ RESPONSIBILITY STATEMENT This Statement is made in accordance with a resolution of the The Board is responsible for ensuring that the financial statements Board of Directors dated 18 April 2012. of the Group give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year and of the results and cash flows of theG roup and the Company for the financial year.
In preparing the financial statements, the Board has ensured that all applicable approved financial reporting standards in Malaysia and the provisions of the Act have been followed and the financial statements were prepared on the going concern basis as the Directors have a reasonable expectation, having made enquiries, that the Group and the Company have adequate resources to continue in operational existence in the foreseeable future.
The Directors are responsible for ensuring that the Company keeps accounting records that disclose with reasonable accuracy, the financial position of the Group and the Company and which enable them to ensure that the financial statements comply with the Act. Tradewinds Plantation Berhad Annual Report 2011 58
At TPB, we believe that a concern for safety, health, environment and quality issues are ultimately good business practices. 59 Annual Report 2011 Tradewinds Plantation Berhad Statement on Tradewinds Plantation Berhad Annual Report 2011 60 Internal Control
The Tradewinds Plantation Berhad Group’s (the Group) system of internal control is designed to meet the Group’s business objectives and safeguard the Group’s assets, shareholders’ investments and the interests of customers, regulators and employees In accordance with S167A of the Companies Act 1965. The internal control system covers the areas of risk management, finance, operations management information system and compliance with the relevant laws and regulations.
The Board of Directors (the Board) is ultimately responsible Management is responsible to inculcate a risk-awareness culture for the Group’s system of internal control, which includes the and continuously reviewing the existing risk management establishment of an appropriate control environment and framework to enhance risk awareness for managing risks and framework, as well as reviewing its adequacy and efficiency. The internal control and ensuring compliance with applicable laws Board acknowledges that risks cannot be completely eliminated. and regulations and the policies adopted by the Board. The system by its nature can only provide reasonable and not absolute assurance against material misstatement, operational The following key features have been incorporated into the failures, fraud or loss. Group’s risk management framework :-
1. The Group reaffirms its on-going process of risk management RISK MANAGEMENT by conducting relevant courses on risk awareness, risk assessment process and methodology to keep abreast with A formal group-wide enterprise risk management (ERM) latest developments and requirements. The group-wide risk framework covering the Group’s core business activities to identify, assessment process includes re-evaluating existing key risk evaluate and manage significant business risks that may affect areas and identifying new key risk areas, potential impact the achievement of its business objectives had been approved by and likelihood of those risks occurring, the effectiveness the Board and implemented. This ERM framework is continuously of control and adopting the appropriate action plans to reviewed by the Board for its adequacy and effectiveness. The mitigate those risks. Board is assisted by the Risk Management Committee which comprises the Chief Executive Officer, Chief Financial Officer, The risk reports of each business unit and support services Heads of Operating Divisions and the Risk Officer. department across the Group are updated and presented to the Risk Management Committee for review and thereafter to the Board on a semi-annual basis on the significant risks The duties of the Risk Management Committee are as follows:- and controls available to mitigate those risks. i. overseeing the risk management activities of the Group; 2. e valuating key risks facing the businesses and operations ii. recommending appropriate risk management procedures; of the Group, potential impact and likelihood of those iii. Implementing relevant methodologies across the Group; occurring, the control effectiveness and action plans and to manage those risks will continuously be carried out iv. i dentifying and managing strategic and key operational throughout various divisions, subsidiaries and departments risks. by the Management. 61 Annual Report 2011 Tradewinds Plantation Berhad
OTHER KEY ELEMENTS OF INTERNAL CONTROL
Apart from the above, the other key elements of the Group’s Group’s policies and procedures based on a risk-based audit internal control system which has been reviewed by the Board approach. Results of such reviews are reported to the Audit are described below:- Committee.
1. Specific esponsibilitiesr have been delegated to the relevant The work of the internal auditors is in accordance with an Board Committees which have written Terms of Reference. annual audit plan approved by the Audit Committee at the These Committees have the authority to examine all beginning of the year. The head of Group Internal Audit matters within their scope of responsibility and report back reports to the Audit Committee. to the Board with their recommendations. The ultimate responsibility for the final decision on all matters however Formal procedures are in place for correction of weaknesses lies with the Board. identified in the Internal Audit Reports.
2. The management of the various companies in the Group 8. The Audit Committee holds meetings at least once is delegated to the respective heads of operation and their every quarter to deliberate on the audit findings, management teams, whose roles and responsibilities and recommendations, management responses and corrective authority limits are set by the holding company’s Board. actions for improvement on the state of the internal control system. The minutes of the Audit Committee meetings are 3. The management is responsible for the periodic review tabled to the Board. and stream lining of policy and procedural manuals to be adopted across the Group. These are supplemented by 9. The Audit Committee meets regularly with senior operating standards set by management for application Management and the head of the Group Internal Audit to across the Group. review the Company and the Group’s financial reporting, the nature, scope and results of audit review, and the 4. There are specific procedures for both capital and revenue effectiveness of the system of internal control. The Audit expenditures. Committee meets with the external auditors without the presence of the management team at least twice a year. 5. Detailed budgeting process is established requiring all key operating companies in the Group to prepare budgets The activities of the Audit Committee during the financial year annually which are discussed and approved by their ended 31 December 2011 are set out under the Report of the respective boards. Audit Committee on pages 62 to 65 of this Annual Report.
6. comprehensive management reports are provided quarterly to the Board for monitoring of the performance against the RELATIONSHIP WITH THE AUDITORS approved budget covering all key financial and operational indicators and compliance with all applicable rules and The Board maintains a formal and transparent professional regulations. relationship with the auditors through the Audit Committee.
7. The Group Internal Audit provides the Audit Committee The role of the Audit Committee in relation to the internal an independent assurance on the adequacy of risk and external auditors is described in the Report of the Audit management, internal control and governance systems. Committee set out on pages 62 to 65 of this Annual Report.
The Group Internal Audit carries out regular review on the This Statement is made in accordance with a resolution of the business processes to assess the adequacy and effectiveness Board of Directors dated 18 April 2012. of internal control, compliance with regulations and the Audit Tradewinds Plantation Berhad Annual Report 2011 62 Committee Report
The Board of Directors of Tradewinds Plantation Berhad is pleased to present the report on the Audit Committee of the Board for the year ended 31 December 2011.
MEMBERS AND ATTENDANCE AT MEETINGS TERMS OF REFERENCE OF THE AUDIT COMMITTEE
During the financial year ended 31 December 2011, the Audit OBJECTIVES Committee held a total of five meetings. Details of attendance by the Audit Committee members who were in office during the The primary objective of the Audit Committee is to assist the year under review are set out below: Board in the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting, internal control Name Meetings and risk management and compliance with financial reporting Attended standards and Main Market Listing Requirements of Bursa Malaysia Securities Berhad. In addition, the Audit Committee # Ooi Teik Huat All 5 Meetings will endeavour to adopt certain practices aimed at maintaining Chairman appropriate standards of corporate responsibility, integrity and Independent Non-Executive Director accountability to the Company’s shareholders. Pakhruddin bin Sulaiman All 5 Meetings Member Independent Non-Executive Director COMPOSITION # Mohd Nazri bin Md. Shariff Not Applicable Member 1. The members of the Audit Committee shall be appointed Non-Independent Non-Executive Director by the Board of Directors from amongst its non-executive (Appointed on 15 March 2012) Directors which shall fulfill the requirements of Main Market Listing Requirements of Bursa Malaysia Securities Chuah Seong Tat @ Chuah Chee Tat All 5 Meetings Berhad from time to time. Member Non-Independent Non-Executive Director 2. no Alternate Director shall be appointed as a member of (Resigned on 15 March 2012) the Audit Committee.
# A member of the Malaysian Institute of Accountants. 3. The members of the Audit Committee shall elect a Chairman from among the members who shall be an Independent Non-Executive Director. Should the Chairman be absent from any meeting, one of the members who shall be an Independent Non-Executive Director shall be elected as Chairman by the Audit Committee members. 63 Annual Report 2011 Tradewinds Plantation Berhad
MEETINGS FUNCTIONS 1. Meetings shall be held not less than four (4) times in a year. The Audit Committee shall undertake the following responsibilities 2. The presence of a majority of Independent Non- Executive and duties:- Directors shall form a quorum for the Audit Committee Meetings. 1. External Audit
3. The Chief Executive Officer, Chief Financial Officer and 1.1 Consider and recommend the nomination and re- representatives of the internal and/or external auditors shall appointment of the external auditors, the audit fee attend meetings at the invitation of the Audit Committee. and any questions of resignation or dismissal.
4. The Secretary to the Audit Committee shall be the 1.2 review with the external auditors:- Company Secretary or any other person appointed by the Audit Committee. a) the scope and audit plan of the audit examination to ensure that adequate tests to 5. The notice and agenda of each meeting shall be sent to all verify the accounts and procedures of the Group members of the Audit Committee and any other persons will be performed and ensure coordination that may be required to attend. Minutes of each meeting where more than one audit firm is involved; shall be kept and distributed to each member of the Audit Committee and of the Board. The Audit Committee shall b) the evaluation of the effectiveness of internal report and may make such recommendations to the Board control systems; and on any audit and financial reporting matters, as it may think fit. c) the audit reports.
AUTHORITY 1.3 r eview the assistance given by the employees to the external auditors. The Audit Committee shall have the following authority as empowered by the Board of Directors:- 1.4 Discuss problems and reservations arising from the audit, and any matters the auditors may wish 1. The authority to investigate any matters within its terms of to discuss (in the absence of management where reference; necessary).
2. The resources which are required to perform its duties; 2. Internal Audit
3. Full and unrestricted access to any information and 2.1 review the adequacy of the scope, functions and documents relevant to the Company’s activities; resources of the internal audit functions and that it has the necessary authority to carry out its work. 4. Direct communication channels with the external and internal auditors, and with the senior management of the 2.2 Review the internal audit programme and results of Company. the internal audit processes, and where necessary ensure that appropriate actions are taken on the 5. The ability to obtain external legal or independent recommendations of the internal audit function. professional or other advice.
6. The ability to convene meetings with the external and internal auditors. AUDIT COMMITTEE REPORT Tradewinds Plantation Berhad Annual Report 2011 64
3. Financial Reporting SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR 3.1 r eview the unaudited quarterly results and year end financial statements, prior to the approval by the In line with its terms of reference, the following main activities Board of Directors, focusing particularly on:- were undertaken by the Audit Committee for the financial year in the discharge of its functions and duties:- a) the nature and impact of any changes in or implementation of major accounting policy 1. Reviewed the quarterly financial results and the annual changes and practices; audited financial statements of the Group and the Company for the financial year ended 31 December 2011 b) significant and unusual events; prior to recommending the same to the Board of Directors for its approval. c) compliance with the financial reporting standards and other legal and regulatory 2. r eviewed with the external auditors the findings of the requirements; and statutory audit and audit reports, particularly issues raised in the management letter and ensured where appropriate, d) adequacy of accounting, financial and operating necessary corrective actions are taken by management. controls and to monitor the implementation of any recommendations made. 3. Reviewed with the external auditors the audit strategy, scope of work and proposed fees for the statutory audit for 4. Related Party Transactions (including Recurrent the financial year ended 31 December 2011. Related Party Transactions) 4. Reviewed with the internal auditors the annual audit plan To review any related party transactions and conflict of proposed to ensure adequacy of the scope and coverage. interest situation that may arise within the Company or Group including any transaction, procedure or course of 5. Reviewed with the internal auditors all internal audit reports conduct that raise questions of management integrity and on the results of the audit activities undertaken together the adequacy of the Group’s procedures for monitoring and with the recommended actions and their implementation reviewing of related party transactions. status.
5. Risk Management 6. Reviewed and recommended the Statement on Internal Control and Audit Committee Report to the Board of Review the adequacy and effectiveness of risk management, Directors for approval. internal control and governance systems instituted in the Group. 7. reviewed the related party transactions (including the recurrent related party transactions) entered into by 6. Other Matters the Group to ensure that all transactions made are in compliance with the Main Market Listing Requirements of Perform such other responsibilities as may be agreed by the Bursa Malaysia Securities Berhad. Board. 8. r eviewed the Group’s compliance with the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and other regulatory authorities and monitored regularly the actions taken on issues of non- compliance that have been reported to the Board. 65 Annual Report 2011 Tradewinds Plantation Berhad
INTERNAL AUDIT FUNCTION AND ACTIVITIES FOR THE FINANCIAL YEAR
The Group outsourced the internal audit function from the Group Internal Audit Department of the Holding Company, which primary function is to assist the Audit Committee in discharging its duties and responsibilities. Its role is to provide the Audit Committee with independent and objective reports on the state of internal controls of the operations within the Group and the extent of compliance by such operations with the Group’s established policies and procedures.
The internal audit function is guided by its Audit Charter and the Head of the Group Internal Audit Department reports to the Audit Committee.
The Audit Committee reviews and thereafter, approves the annual internal audit plan at the beginning of each year. The internal audit function adopts a risk-based auditing approach towards the preparation of the audit plan and conduct of audits which are consistent with the Group’s framework in designing, implementing and monitoring its internal control system.
Throughout the financial year, audit assignments, investigations and follow-ups were carried out on units of operations and subsidiaries. These were carried out in accordance with the annual internal audit plan or as special audits. Upon completion of the audits, the reports of the audits undertaken were presented to the Audit Committee and forwarded to the parties concerned for their necessary action. The internal audit function monitors the progress of the implementation of the audit recommendations in order to obtain assurance that all major risks and control concerns have been duly addressed by the management of the Company.
Ooi Teik Huat Chairman of Audit Committee 18 April 2012 ADDITIONAL Tradewinds Plantation Berhad Annual Report 2011 66 ComPLIANCE INFORMATION
In compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the following is provided:-
1. Non-Audit Fees 2.2 Details of the Relationship
The amount of non-audit fees incurred for services rendered Tradewinds (M) Berhad (“TWM”) is a major shareholder to the Group by the Company’s external auditors or of the Company having a 69.76% equity interest in the their affiliated companies for the financial year ended 31 Company. Whilst Perspective Lane (M) Sdn Bhd (“PLSB”), December 2011 was RM833,500. which is deemed a major shareholder of the Company pursuant to Section 6A of the Companies Act, 1965 (the “Act”) by virtue of its interest in TWM also has a direct 2. Material Contracts Involving Directors and Major 3.94% equity interest in the Company. Shareholders Encik Bakry bin Hamzah and Encik Mohd Nazri bin Save as disclosed below, there were no other material Md Shariff, who are Non-Independent Non-Executive contracts entered by the Company or any of its subsidiaries Directors of the Company are deemed interested as involving the Company’s directors’ and major shareholders’ they are representatives of TWM on the Board of the interests either still subsisting at the end of the financial year Company. or, if not then subsisting, entered into since the end of the previous financial year: 3. Imposition of Sanction/Penalties on the Company 2.1 A conditional Share Sale Agreement dated 29 March and its Subsidiaries for the Financial Year Ended 2012 (“SSA”) entered into between Amalan Penaga (M) 31 December 2011. Sdn Bhd and Tradewinds (M) Berhad for the acquisition of 11,259,523 ordinary shares of RM1.00 each (the There was no sanction or penalties imposed on the Company, “Sale Shares”), representing 60% of the equity interest its subsidiaries, Board members and Management for the in Retus Plantation Sdn Bhd (“Retus Plantation”) at a financial year ended 31 December 2011. purchase consideration equal to 60% of the adjusted net tangible assets value of Retus Plantation as determined and agreed by the parties in accordance 4. Share Buybacks with the SSA. Based on the adjusted net tangible assets value of Retus Plantation of RM208,992,316 as The Company did not purchase any of its own shares during at 31 December 2011, the purchase consideration for the financial year. the Sale Shares is RM125,395,390.
The said share sale agreement is still pending 5. Option, Warrants or Convertible Securities completion. The Company did not offer any options or warrants during the financial year. 67 Annual Report 2011 Tradewinds Plantation Berhad
6. American Depository Receipt (ADR) or Global 9. Status of Utilisation of Proceeds Raised from Depository Receipt (GDR) Programme. Corporate Proposal
The Company does not sponsor any ADR or GDR programme. There was no corporate proposal involving funds raising.
7. Profit Estimates, Forecast or Projection 10. Public Shareholding Spread
The Company did not make any release on profit estimates, The Company is in compliance with the public shareholding forecast or projection for the financial year. spread of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad in accordance with the approval given on 16 September 2008. 8. Profit Guarantee
n o profit guarantee was given by the Company in respect of 11. Contracts Relating to Loans the financial year. Ther e were no contracts relating to loans by the Company involving Directors and major shareholders.
12. disclosure of Recurrent Related Party Transactions of a Revenue or Trading Nature (RRPT)
The RRPT entered into by the Company during the financial year ended 31 December 2011 are disclosed as follows:-
NATURE OF TRANSACTIONS RELATED PARTIES NATURE OF AGGREGATE VALUE OF RELATIONSHIP WITH THE TRANSACTIONS THE GROUP AND FOR THE YEAR ENDED COMPANY 31 DECEMBER 2011 (RM’000) PROVISION OF PLANTATION MANAGEMENT AND ADVISORY SERVICES
Plantation manager and agent Plantation owner Tradewinds Agro Services Sdn Bhd Retus Plantation Sdn Bhd 2,752 (“Retus”) Retus is a 60% subsidiary of TWM. SALE OF FRESH FRUIT BUNCHES
Vendor Purchaser Amalan Pelita Pasai Sdn Bhd Retus 14,891 ADDITIONAL COMPLIANCE Information Tradewinds Plantation Berhad Annual Report 2011 68
NATURE OF TRANSACTIONS RELATED PARTIES NATURE OF AGGREGATE VALUE OF RELATIONSHIP WITH THE TRANSACTIONS THE GROUP AND FOR THE YEAR ENDED COMPANY 31 DECEMBER 2011 (RM’000)
PROCUREMENT OF JPL is a 100% owned TRANSPORTATION SERVICES subsidiary of Johor Port Berhad which is Purchaser Vendor a company related Ladang Petri Tenggara Sdn Bhd JP Logistics Sdn Bhd to Tan Sri Dato’ Seri 360 (“JPL”) Syed Mokhtar (TSSM), pursuant to Section 6A of the Companies Act, 1965.
PROCUREMENT OF MANAGEMENT AND TWM is a major ADVISORY SERVICES shareholder and the Holding Company of the Purchaser Vendor Company. 1,200 Tradewinds Plantation Berhad Tradewinds (M) Berhad (“TWM”)
SALE OF CRUDE PALM OIL
Vendors Purchaser Ladang Permai Sdn Bhd Felda Marketing Services 18,590 Ladang Serasa Sdn Bhd Sdn Bhd (“FMS”) 51,920
SALE OF PALM KERNEL FMS, FAS, FKP and FPM Vendor Purchaser are companies related Ladang Serasa Sdn Bhd Felda Kernel Products Sdn 10,641 to Felda Global Ventures Bhd (“FKP”) Holding Bhd which in turn is the Company’s PURCHASE OF GERMINATED indirect major OIL PALM SEEDS shareholder.
Purchasers Vendor Pertanian Johor Tenggara Sdn Bhd Felda Agricultural Services 179 Teon Choon Realty Company Sdn Bhd (“FAS”) Sdn Bhd 33 Ladang Serasa Sdn Bhd 134 Quek Shin & Sons Pte Ltd 72 Melur Gemilang Sdn Bhd 71 69 Annual Report 2011 Tradewinds Plantation Berhad
NATURE OF TRANSACTIONS RELATED PARTIES NATURE OF AGGREGATE VALUE OF RELATIONSHIP WITH THE TRANSACTIONS THE GROUP AND FOR THE YEAR ENDED COMPANY 31 DECEMBER 2011 (RM’000)
PURCHASE OF FERTILIZERS
Purchasers Vendor Quek Shin & Sons Pte Ltd FPM Sdn Bhd (“FPM”) 165 Teon Choon Realty Company Sdn Bhd 55 Ladang Petri Tenggara Sdn Bhd 839 Pertanian Johor Tenggara Sdn Bhd 85 Agromaju Sdn Bhd 93 Permodalan Pelangi Sdn Bhd 104 Tanah Semai Sdn Bhd 66 Semai Segar Sdn Bhd 27
SALE OF RUBBER MPSB is a 100% owned subsidiary of Mardec Vendors Purchaser Berhad which in turn a Tradewinds Corridor Sdn Bhd Mardec Processing subsidiary of Semi Bayu 45 Northern Intergrated Agriculture Sdn Bhd (“MPSB”)# Sdn Bhd, a company Sdn Bhd related to TSSM. 5,780
# MPSB became an indirect subsidiary company of Tradewinds Plantation Berhad with effect from 10 October 2011
Tradewinds Plantation Berhad Annual Report 2011 72
According to the World Business Council for Sustainable As a family, we take care of our own over and above the Development (WBCDSD), business cannot be divorced from the statutory requirements. That is why there is a distinction between rest of society. WBCDSD goes on to say that a coherent Corporate providing a house as opposed to a home for our estate workers. Social Responsibility (CSR) strategy is more than just an ethical A home needs to be aesthetically pleasing in a conducive living duty but is something that actually has a bottom-line pay-off. In environment, with all the necessary amenities for a comfortable the more enlightened age we live in, CSR has been recognised existence. From places of worship, clinics, kindergartens, crèches, as a new business paradigm which requires corporations to club houses as well as recreational and sports facilities, we have adopt a broader view of its responsibilities that includes not only transformed many of our housing estates into self-contained its shareholders but many other constituencies as well. This is communities. a stance shared by Tradewinds Plantation Berhad (TPB) and we have put in place a robust CSR strategy that is translated into Having provided the facilities, we continued to keep a watchful tangible action programmes. More than just responding to the eye on their upkeep, upgrading them as and when the need expectations of society, we believe that CSR is simply the right arises. Our Total Quality Environmental Management Strategic thing to do. Business Unit (TQEM-SBU) has been given the task to look into the welfare aspects of employees as part of its OSH Phase II Programme. WORKPLACE DEVELOPMENT Training and manpower development Employee welfare The key priority placed on training has been another contributing The well-being of our employees continued to be among the factor to the Group’s success. Located in Sarawak, the Tradewinds Group’s priorities and remains high on the agenda of management Plantation Academy (TPA) was set up in 1999 to provide training meetings. We value the contributions of our employees to the at both professional and academic levels for staff and the industry success of TPB, and it is important to us that our people feel that as a whole. TPA’s training objective is to continually improve and they are part of a family. We want our employees to stay for the equip staff with the necessary skills, knowledge and exposure long haul and that is why a great deal of thought and effort goes for optimal performance. TPA also serves as a service centre for into cultivating an innovative relationship with our people. the dissemination of information pertaining to the latest break- throughs and technologies in the plantation industry. 73 Annual Report 2011 Tradewinds Plantation Berhad
Given the nature of TPB’s business, many of the training COMMUNITY DEVELOPMENT programmes conducted during the year focused on upgrading the technical and managerial competencies of our plantation TPB is justifiably proud of a tradition of sharing its success by workers. These programmes range from the basic to the more contributing towards an improvement in the quality of life in the advanced technical courses. During the year under review, field community. As in previous years, the Group continued to support workers attended courses such as tractor maintenance, harvesting various charitable organisations and worthy causes throughout techniques, first-aid and the proper use of equipment and the country. machinery. For management staff, programmes covered a diverse range of subjects that included satellite imaging and nursery set- It is gratifying that the spirit of caring and sharing has filtered down up, neuro-linguistic programming, risk management refresher to our employees. Volunteerism has always a Malaysian tradition training and chemical safety briefings. From time to time, vendors and many of our staff have given generously of their time and and specialists were also invited to give field demonstrations and even money to participate in various ‘gotong-royong’ projects talks on the latest innovations and technology available in the organised during the year. Perhaps the greatest contribution market. that one can make to society is the gift of life. Over the years, our people have responded very positively to blood donation As a Group that values performance, the Reward and Recognition campaigns. A blood donation drive was held at the Serasa Palm Programme established in 2009 continued to play an important Oil Mill as well as at the Gemilang Estate near Kuching last year role in employee recognition and as a morale booster. Each year, and true to form, the turnout was very encouraging. FY 2011 being no exception, TPB acknowledges and gives due recognition to the Joint Consultative Committee (JCC) with the Another enduring legacy is our contribution towards the highest OER and the most improved JCC that has surpassed a establishment of the Albukhary International University (AIU) benchmark of 21.5%. located at Alor Setar, Kedah. AIU operates as a charitable university and all students accepted receive full scholarships. Sports and other recreational activities have become regular Priority is given to students from poor, disadvantaged, under- fixtures on TPB’s annual calendar of events. In a multi-cultural privileged or marginalised backgrounds. By supporting the noble country like Malaysia, the many festivals we celebrate become aspirations espoused by AIU, we are helping fulfil the dreams and an occasion for the TPB family to come together. Away from the aspirations of young people, who would otherwise never have a formality of the office environment, the sense of family is forged chance of a quality tertiary education. and strengthened over the years. Corporate Social Tradewinds Plantation Berhad Annual Report 2011 74 Responsibility
MARKETPLACE DEVELOPMENT • In peat areas, the thrust of our R&D efforts will be on managing the optimum water table to improve yields. Along One of the most important contributions of the Group in with a better understanding of the inherent properties of marketplace development is in the area of research and peat, the new approach in water management introduced development (R&D). The Tradewinds Plantation R&D Centre was in several estates developed on peat has already resulted in set up in Sarawak in 2000 and provides the Group with its own significant yield improvement. pool of qualified researchers and scientists. • The ongoing implementation of Integrated Pest Given the importance of the oil palm and plantation industries Management (IPM) programmes using selected beneficial in the Government’s Economic Transformation Programme, R&D plants has successfully reduced the infestation of pests such is one of the key drivers of growth. In line with TPB’s progressive as bagworms and nettle caterpillars. expansion into the oil palm and rubber plantation business, our investment in R&D will be critical in meeting current and future • The emphasis on high standards of palm sanitation, ablation requirements for a wide array of advisory services, particularly and optimal water table control are integral components of in the field of sustainable plantation management in peat and the Group’s IPM programmes to successfully control termite inland areas. infestations and tirathaba, a genus of moth commonly known as oil palm bunch moth. To achieve higher yields in inland and peat areas, our R&D efforts were focused on several key agronomic approaches: Meanwhile, ongoing collaboration with Bio Actizyme Sdn Bhd has progressed to a field trial for the control ofG anoderma, • Improvised frond placement and fertilizer application a lethal disease that causes palms to rot. The use of beneficial techniques to enhance nutrient uptake efficiency as well as microorganisms has yielded promising results for the elimination reduce surface run-off and leaching. of Ganoderma mycelia in affected oil palm trunks. An elimination efficacy of 88.6% to 95.4% was achieved using high-pressured • Concerted R&D efforts were also directed at addressing trunk injection method. the yield decline of non-productive palms in adverse terrain and due to inter-palm competition and runts (palms whose In a five-year field trial withU niversiti Pertanian Malaysia and appearance do not conform to planting material norms). Institut Mondial du Phosphate findings have shown that the phosphate requirement on sapric peat tested on 6-year old palms to be low. The Group is also involved in a collaborative study with the Malaysian Palm Oil Board on green house gas emissions. The study indicates that raising the water table up to 40-50 cm has beneficial effects on the root system.
In the rubber sector, agronomy trials have been conducted to optimise rubber growth and latex yields. We are also at the initial stages of establishing a collaborative study with Universiti Sains Malaysia to explore the potential of applying genomic science and bio-molecular technology on rubber. 75 Annual Report 2011 Tradewinds Plantation Berhad
ENVIRONMENTAL SUSTAINABILITY In practising environmental stewardship, the Group has assumed a leadership position in peat soil development and our findings Over the past two decades, conventional agriculture exemplified have been shared in a paper delivered to an international by the Green Revolution, has given way to sustainable agriculture. audience. We are also pressing ahead with efforts to address the The Third National Agricultural Policy, 1998-2010 provided the problems of green-house gas emissions and water pollution at basis for initiatives in sustainable agriculture. As climate change our mills. All of the Group’s palm oil mills have been equipped becomes an increasingly important issue, sustainable agriculture with a Continuous Emission Monitoring System to comply with can contribute to both climate mitigation and adaptation. the Environmental Quality (Clean Air) Regulations 1978.
The Good Agricultural Practices (GAP) adopted and implemented Since 2009, our mills have started to invest in the latest by TPB ensures the sustainability of its plantation operations. The technology for the treatment of POME. A tertiary treatment plant key elements of GAP addresses areas that include land and water was constructed at the Retus Palm Oil Mill and commissioned management, zero burning replanting techniques, integrated in the fourth quarter of 2010. The treatment plant has the pest management, palm oil mill effluent (POME) treatment capability to reduce the Biochemical Oxygen Demand and Total system, biodiversity and quality assurance. Suspended Solids levels of the mill’s final discharge to meet the stipulated requirement set by the Sarawak Department of Energy Over the years, TPB has taken steps to increase its green of <20mg/L BOD and <100mg/L TSS. A similar treatment plant credentials. By adopting an Environmental Management System is being constructed at the Trusan Palm Oil Mill and the Binu that conforms to the MS ISO 14001 standards, we are able to: Palm Oil Mill, with targeted commissioning by mid-2012. The new Kuala Suai Palm Oil Mill now nearing completion is being • Identify and control the environmental impact of our constructed with similar POME treatment facilities. activities, products or services. In order to reduce green-house gas emissions, we are currently • Improve our environmental performance continually. evaluating the technology available for methane capture, with a view of utilising the captured gas for energy generation. Methane • Implement a systematic approach to setting environmental (CH4) is one of the major green-house gases produced in the objectives and targets. anaerobic treatment of POME.
• Comply with international environmental regulations. Tradewinds Plantation Berhad Annual Report 2011 76
At TPB, we believe that a concern for safety, health, environment and quality issues are ultimately good business practices. During the year, the Group extended its commitment to raising standards in all these areas. This called for unwavering commitment and dedication from all levels in the organisation to create a culture and a way of life that is genuinely accepted by all employees. To ensure the success of our programmes, we believe in empowering staff, encouraging them to take ownership of the various initiatives and events drawn up throughout the year.
OSH Phase I & II Programmes. The Group’s TQEM/OSH Unit has drawn up a comprehensive programme to improve occupational health and safety standards at the workplace in full compliance with statutory requirements. The OSH Phase I and II programmes were designed to generate better work practices, inculcate a safety culture, and engender a safer and more conducive work environment.
OSH Phase I was implemented in 2009 at mill and estate levels with the launch of an Occupational Safety and Health Management System. The results were very positive, with a significant reduction in accident statistics. In 2010, the OSH Unit launched the Pictorial Safety and Health Guidelines towards achieving the Group’s objective zero fatality rate and further reduction on worksite accidents.
Moving into OSH Phase II, the TQEM/OSH Unit is focusing on six critical areas at the estate level and mill levels: adequacy of warning signages, personal protection equipment, transportation safety, 5S practices of good house-keeping, chemical storage, pre-mixing standards and emergency facilities, and the keeping of proper OSH records for easy reference. 77 Annual Report 2011 Tradewinds Plantation Berhad
The OSH Phase II programme also looks into operations. During 2011, the TQEM-SBU team the welfare and health of employees as well as conducted its activities at six regions, covering environmental aspects. Under welfare, closer the key operating units. The main objective of the attention is paid to the adequacy and safety aspects audit was to ensure the adherence to harvesting of facilities provided by the Group, such as crèches, standards. clinics, canteens and workers’ quarters. The health aspect of the programme will cover mosquito Quality Day for the Kuching region was celebrated fogging schedules, vaccination programmes for in July 2011. The objective of the annual event is Hepatitis B and other diseases, water treatment to build teamwork, whilst serving as a platform for facilities and health surveillance. employees to showcase their creativity in coming with ideas and innovations. Many employees and OSH Phase II also covers various aspects of JCC teams have capitalised on Quality Day as a preservation of the environment. Close attention platform to share their ideas and suggestions on will be given to the rubbish pit collection and business improvement processes, some of which disposal, line site cleanliness and beautification, have been adopted and implemented by the Group. proper maintenance of drainage systems and the enforcement of the Group’s ‘No Open Burning As for Mardec, the brand that has been around for Policy’. the last 40 years, and it has never compromised on the quality of its products. Mardec produces In the near future, the TQEM/OSH Unit has plans high grade products and this has always been the to implement an ISO 14001:2004 Environment strength of the Company in making in-roads into the Management System, an internationally recognised international marketplace. In its relentless pursuit of certification scheme that addresses various excellence, Mardec takes an uncompromising stand aspects of environmental management. This will on quality, and any issue no matter how big or complement certifications already earned, namely, small, has always been taken seriously and resolved ISO 9001:2008 Quality Management System and expediently. OHSAS 18001:2007 for an Occupational, Health and Safety Management System that is already in Mardec practises total quality management in all place. Meanwhile, the Melur Gemilang Palm Oil its operations, from the collection of raw material, Mill has already embarked on the journey towards through manufacturing, right up to the packaging OHSAS 18001:2007 certification. As at year-end and delivery of the final product to its customers. 70% of the preparatory work has been completed, To ensure its products meet international quality for targeted certification in mid 2012. standards and exceed customers’ expectations, all its subsidiaries and factories have been accredited to the MS ISO 9001:2000 and 14001:2008 The Quality Imperative certifications.
Throughout 2011, TQEM-SBU remained focused on promoting continuous quality improvements group-wide, the ultimate goal being to inculcate teamwork culture so as to improve the Group’s overall performance. The quality audit programme implemented in 2010 was carried forward to FY 2011, the main objective being to highlight the independent findings and to recommend measures for improvements at the Group’s estate and milling Tradewinds Plantation Berhad Annual Report 2011 78 79 Annual Report 2011 Tradewinds Plantation Berhad REPORT OF THE Directors 81
Statement by Directors 87
Statutory Declaration 87
Independent Auditors’ Report 88
StatementS of Comprehensive Income 90
StatementS of Financial Position 92
StatementS of Changes in Equity 94
StatementS of Cash Flows 96
Notes to the Financial Statements 99 81 Annual Report 2011 Tradewinds Plantation Berhad REPORT of THE DIRECTORS
The Directors of TRADEWINDS PLANTATION BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2011.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and provision of management services to the subsidiaries. The principal activities of the subsidiaries are set out in Note 15 to the financial statements.
There have been no significant changes in the nature of these activities during the financial year.
RESULTS OF OPERATIONS
The results of operations of the Group and of the Company for the financial year are as follows:
Group Company RM’000 RM’000
Profit for the financial year 364,724 34,738
Attributable to: Owners of the parent 333,891 34,738 Non-controlling interests 30,833 -
364,724 34,738
In the opinion of the Directors, the results of operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature other than the acquisition of a subsidiary as disclosed in Notes 41 and 48 to the financial statements.
DIVIDENDS
A final dividend of 5.00 sen per ordinary share, less tax at 25%, amounting to RM19,843,000, proposed in the previous financial year and dealt with in the previous financial year Directors’ Report was paid on 28 July 2011.
An interim dividend of 5.00 sen per ordinary share, less tax at 25%, amounting to RM19,843,000, in respect of the financial year ended 31 December 2011 was paid on 23 December 2011.
The Directors propose a final dividend and special dividend of 5.00 sen per ordinary share each, less tax at 25%, amounting to approximately RM19,843,000 each, in respect of the financial year ended 31 December 2011. The proposed final dividend and special dividend are subject to the approval by the shareholders at the forthcoming Annual General Meeting of the Company and have not been included as liabilities in the financial statements. Upon approval by the shareholders, the dividend payments will be accounted for in equity as an appropriation of retained earnings during the financial year ending 31 December 2012.
RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. report of the DIRECtors Tradewinds Plantation Berhad Annual Report 2011 82
ISSUE OF SHARES AND DEBENTURES
The Company has not issued any new shares or debentures during the financial year.
SHARE OPTIONS
No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company.
No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options.
OTHER STATUTORY INFORMATION
Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values.
At the date of this report, the Directors are not aware of any circumstances:
(a) which would render the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or
(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or
(d) not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading.
At the date of this report, there does not exist:
(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or
(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.
In the opinion of the Directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the succeeding financial year other than those disclosed in Note 49 to the financial statements. 83 Annual Report 2011 Tradewinds Plantation Berhad
DIRECTORS
The Directors who held office since the date of the last report are:
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan Ooi Teik Huat Pakhruddin bin Sulaiman Bakry bin Hamzah Mohd Nazri bin Md. Shariff Chuah Seong Tat @ Chuah Chee Tat (resigned on 15 March 2012)
DIRECTORS’ INTERESTS
The Directors holding office at the end of the financial year and their beneficial interests in ordinary shares of the Company and of its related corporations during the financial year ended 31 December 2011 as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965 were as follows:
Number of ordinary shares of RM1.00 each Balance Balance as at as at 1.1.2011 Bought Sold 31.12.2011
Shares in the Company
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan 15,000 - - 15,000 Pakhruddin bin Sulaiman 9,000 - - 9,000
None of the other Directors holding office at the end of the financial year held shares or had beneficial interest in shares of the Company or of related companies during and at the end of the financial year.
DIRECTORS’ BENEFITS
Since the end of the previous financial year, none of the Directors has received or become entitled to receive any benefit (other than the benefit included in the aggregate of emoluments received or due and receivable by the Directors as shown in Note 7 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than the following:
(a) remuneration received by certain Directors as Directors or executives of the holding company and its subsidiaries; and
(b) deemed benefits arising from related party transactions as disclosed in Note 45 to the financial statements.
There were no arrangements during and at the end of the financial year, to which the Company was a party whereby Directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. report of the DIRECtors Tradewinds Plantation Berhad Annual Report 2011 84
SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
On 30 October 2009, Prisma Spektra Sdn. Bhd. (“PSSB”), a wholly-owned subsidiary of the Company, entered into a conditional Share Sale Agreement with Semi Bayu Sdn. Bhd. (“SBSB”) for the acquisition of 125,709,000 ordinary shares of RM1 each in MARDEC Berhad (“Mardec”), representing the entire issued and paid-up ordinary share capital of Mardec, for a total purchase consideration of RM150,000,000 (“Proposed Acquisition of Mardec”).
Mardec is an investment holding company incorporated in Malaysia and through its local and overseas subsidiaries and associates, is involved in the processing and trading of natural rubber and the manufacturing of value-added rubber and polymer products.
The initial period for the fulfillment and satisfaction of the conditions precedent to the Proposed Acquisition of Mardec (“Prescribed Period”) expired on 29 April 2010. On 30 April 2010 and 1 November 2010 respectively, SBSB and PSSB agreed to extend the Prescribed Period by a period of six months to 30 October 2010 and by a further period of six months to 30 April 2011.
On 25 February 2011, PSSB and SBSB entered into a supplemental agreement to revise the purchase consideration for the Proposed Acquisition of Mardec as provided in the Share Sale Agreement from RM150,000,000 to RM140,000,000, which shall be payable in the following manner:
(a) a first instalment of RM42,000,000 or 30% of the evisedr purchase consideration to be paid on the completion date; and
(b) a second instalment of RM98,000,000 or 70% of the revised purchase consideration to be paid within 3 months from the completion date.
The revised purchase consideration is arrived at based on Ernst & Young’s appraisal of the fair value of the Mardec Group by using the Hybrid Methodology, which is a combination of Income and Asset Approaches of valuation, which ranges between RM135,000,000 and RM155,000,000.
On 28 April 2011, SBSB and PSSB agreed to extend the Prescribed Period by a further period of six months to 30 October 2011.
The Proposed Acquisition of Mardec was approved by the shareholders of the Company at the extraordinary general meeting held on 14 July 2011.
On 4 October 2011, PSSB entered into and executed:
(a) a Novation Agreement with the Government of Malaysia, the Minister of Finance and SBSB for the novation of all SBSB’s rights, liabilities, benefits, interests, duties and obligations under and in respect of the Sale and Purchase of Shares Agreement dated 16 January 2003 between the Government of Malaysia, the Minister of Finance and SBSB (the “MARDEC SPA”) to PSSB; and
(b) a Supplemental Agreement with the Government of Malaysia and the Minister of Finance as a supplement to the MARDEC SPA for the purpose of amending the provisions of the MARDEC SPA.
With the execution of the aforesaid Novation Agreement and Supplemental Agreement, all conditions precedent to the Proposed Acquisition of Mardec have been deemed fulfilled and satisfied and that the Share Sale Agreement has become unconditional with effect from 4 October 2011. The Proposed Acquisition of Mardec was completed on 10 October 2011.
85 Annual Report 2011 Tradewinds Plantation Berhad
SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD
(a) On 8 February 2012, Mardec International Sdn. Bhd. (“MISB”), an indirect wholly-owned subsidiary of the Company, and the other shareholders of R1 International Pte. Ltd. (“R1”) have entered into a conditional Share Sale Agreement with Hainan State Farms Investment Limited (“HSF”) and Hainan Rubber Group (Singapore) Pte. Ltd. (“Hainan Rubber”) for the disposal of 6,300,000 ordinary shares of USD1.00 each, representing 90% of the equity interest in R1, for a total cash consideration of USD51,725,016 (“Disposal Price”).
Pursuant to the Share Sale Agreement, MISB shall dispose 3,150,000 ordinary shares of USD1.00 each, representing its entire 45% equity interest in R1 to HSF for a cash consideration of USD25,862,508 or approximately RM77.1 million.
The Disposal Price represents 90% of the total valuation of R1’s equity of USD57,472,240 which represents the price to book ratio of 1.6575 based on R1 Group’s unaudited net tangible assets (“NTA”) as at 31 December 2011. The Disposal Price is conditional upon R1 Group’s audited NTA at 31 December 2011 being not less than USD34,674,051 and will be adjusted in the event of lower audited NTA by using the same price to book ratio.
The proposed disposal of R1 is conditional upon the satisfactory fulfillment of the following key conditions precedent within a period of 60 days from the date of the Share Sale Agreement or such longer period as the parties agree:
(i) the approval of the board of directors of each of the selling shareholders for the sale of their respective equities in R1;
(ii) the approval of the board of directors and shareholders of R1;
(iii) the completion of the business, financial and legal due diligence investigations into the R1 Group Companies and the satisfactory resolution and determination of any issues arising from the due diligence investigations by both HSF and Hainan Rubber; and
(iv) other requisite conditions stated in the Share Sale Agreement.
(b) On 29 March 2012, Amalan Penaga (M) Sdn. Bhd. (“APSB”), a wholly-owned subsidiary of the Company, entered into a conditional Share Sale Agreement with Tradewinds (M) Berhad (“TWM”), the holding company of the Company, for the acquisition of 11,259,523 ordinary shares of RM1.00 each in Retus Plantation Sdn. Bhd. (“RPSB”) (“Acquisition Shares”), representing 60% of its issued and paid-up share capital, for a purchase consideration of an amount equal to 60% of the net tangible asset value (“NTAV”) of RPSB group (“Proposed Acquisition of RPSB”). Under the Share Sale Agreement, NTAV is defined as the total tangible assets of RPSB group (having regard to the market value of RPSB’s oil palm estates and palm oil mill as at 1 December 2011 of RM366,041,000, as appraised by CH Williams Talhar & Wong Sdn. Bhd., a firm of independent licensed valuers) less the total liabilities of RPSB group calculated on the last day of the month which precedes the issue of the notice for completion by APSB.
For illustration purposes, the purchase consideration based on the adjusted unaudited NTAV of RPSB group as at 31 December 2011 amounts to RM125,395,390.
The Proposed Acquisition of RPSB is conditional upon the fulfilment and/or satisfaction of the following conditions precedent:
(i) TWM obtaining the approval of the financiers of RPSB for TWM’s sale of the Acquisition Shares to APSB;
(ii) TWM obtaining the written confirmation from Assar Plantations Holding Sdn. Bhd. (“Assar”), the other shareholder in RPSB, waiving any rights of pre-emption that Assar has in respect of the sale and transfer of the Acquisition Shares to APSB upon terms and conditions acceptable to APSB;
(iii) the approvals of the shareholders of the Company at a general meeting to be convened; and
(iv) other requisite approvals, if any.
The conditions precedent is to be fulfilled within 6 months from the date of the Share Sale Agreement or upon the expiry thereof, such longer period as the parties mutually agree. report of the DIRECtors Tradewinds Plantation Berhad Annual Report 2011 86
HOLDING COMPANY
The Directors regard Tradewinds (M) Berhad, a company incorporated in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad, as the holding and ultimate holding company.
AUDITORS
The auditors, Messrs. Deloitte KassimChan, have indicated their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the Directors,
DATO’ WIRA SYED ABDUL JABBAR BIN SYED HASSAN OOI TEIK HUAT
Kuala Lumpur 18 April 2012
87 Annual Report 2011 Tradewinds Plantation Berhad STATEMENT BY DIRECTORS
The Directors of TRADEWINDS PLANTATION BERHAD state that, in their opinion, the accompanying financial statements are drawn up in accordance with Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2011 and of the financial performance and the cash flows of the Group and of the Company for the financial year ended on that date.
The supplementary information set out in Note 32(d), which is not part of the financial statements, is prepared in all material aspects, in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.
Signed in accordance with a resolution of the Directors,
DATO’ WIRA SYED ABDUL JABBAR BIN SYED HASSAN OOI TEIK HUAT
Kuala Lumpur 18 April 2012
STATUTORY DECLARATION
I, RAZIDAN BIN GHAZALLI, the officer primarily esponsibler for the financial management of TRADEWINDS PLANTATION BERHAD, do solemnly and sincerely declare that the accompanying financial statements are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
RAZIDAN BIN GHAZALLI
Subscribed and solemnly declared by the abovenamed RAZIDAN BIN GHAZALLI at KUALA LUMPUR this 18 April 2012.
Before me,
COMMISSIONER FOR OATHS INDEPENDENT Tradewinds Plantation Berhad Annual Report 2011 88 AUDITORS’ REPORT TO THE MEMBERS OF TRADEWINDS PLANTATION BERHAD
Report on the Financial Statements
We have audited the financial statements of TRADEWINDS PLANTATION BERHAD, which comprise the statements of financial position of the Group and of the Company as of 31 December 2011, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 90 to 184.
Directors’ Responsibility for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2011 and of their financial performance and cash flows for the year then ended.
Report on Other Legal and Regulatory Requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act;
(b) We have considered the accounts and auditors’ reports of all the subsidiaries of which we have not acted as auditors, as mentioned in Note 15 to the financial statements, being accounts that have been included in the financial statements of the Group;
(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of financial statements of the Group and we have received satisfactory information and explanations required by us for these purposes; and
(d) The auditors’ reports on the accounts of the subsidiaries were not subject to any qualification and did not include any adverse comment made under Section 174(3) of the Act. 89 Annual Report 2011 Tradewinds Plantation Berhad
Other Reporting Responsibilities
The supplementary information set out in Note 32(d) to the financial statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
Other Matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility towards any other person for the contents of this report.
The financial statements of the Group and of the Company for the preceding financial year ended 31 December 2010 were audited by another firm of auditors whose report thereon dated 20 April 2011 expressed an unqualified opinion on those financial statements.
DELOITTE KASSIMCHAN NG YEE HONG AF 0080 Partner - 2886/04/13 (J) Chartered Accountants Chartered Accountant
18 April 2012 STATEMENTs of Tradewinds Plantation Berhad Annual Report 2011 90 comprehensive income FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Group Company
Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Revenue 5 1,703,854 909,126 69,414 60,382 Other operating income 23,237 17,170 38,019 31,043 Changes in inventory of finished goods and work in progress 2,863 (8,619) - - Raw materials and consumables used (802,142) (237,632) - - Staff costs 6 (151,245) (124,394) (15,513) (11,239) Depreciation and amortisation expenses 7 (105,060) (101,974) (1,428) (1,224) Other operating expenses (194,871) (145,429) (12,656) (9,981) Finance costs 7 (24,894) (27,106) (39,062) (32,203) Bargain purchase gain 41 18,427 - - - Share of results of associates 16 1,619 - - - Share of result of a jointly controlled entity 17 5,036 1,266 - -
Profit before tax 7 476,824 282,408 38,774 36,778 Tax expense 8 (112,100) (70,452) (4,036) (4,332)
Profit for the financial year 364,724 211,956 34,738 32,446
Other comprehensive income Exchange differences on translating foreign operations (2,394) - - - Available-for-sale financial assets: - Fair value (loss)/gain (376) 1,101 - - - Transfer to profit or loss on disposal (114) - - -
Other comprehensive income for the financial year, net of tax (2,884) 1,101 - -
Total comprehensive income for the financial year 361,840 213,057 34,738 32,446
91 Annual Report 2011 Tradewinds Plantation Berhad
Group Company
Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Profitattributable to: Owners of the parent 333,891 186,404 34,738 32,446 Non-controlling interests 30,833 25,552 - -
364,724 211,956 34,738 32,446
Total comprehensive income attributable to: Owners of the parent 332,305 187,505 34,738 32,446 Non-controlling interests 29,535 25,552 - -
361,840 213,057 34,738 32,446
Basic earnings per ordinary share (sen) 9 53.07 29.63
The accompanying notes form an integral part of the financial statements. STATEMENTs of Tradewinds Plantation Berhad Annual Report 2011 92 FINANCIAL POSITION AS AT 31 DECEMBER 2011
Group Company
Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
ASSETS
Non-Current Assets
Property, plant and equipment 11 1,686,500 1,503,808 4,346 3,958 Biological assets 12 1,203,216 1,100,746 - - Investment properties 13 3,334 - - - Land held for property development 14 87,412 87,412 - - Investments in subsidiaries 15 - - 1,314,728 1,314,453 Investments in associates 16 57,364 - - - Investment in a jointly controlled entity 17 23,525 13,489 20,000 15,000 Other investments 18 1,170 1,900 - - Goodwill 19 25,554 25,554 - - Other intangible assets 20 154 - - - Deferred tax assets 21 16,799 19,465 4,015 4,991
Total Non-Current Assets 3,105,028 2,752,374 1,343,089 1,338,402
Current Assets
Inventories 22 259,873 43,271 - - Trade receivables 23 261,528 116,991 - - Other receivables 24 14,848 8,405 2,316 860 Amounts owing by subsidiaries 25 - - 856,840 646,645 Amounts owing by related companies 26 28 13 2 12 Amount owing by a subsidiary of a jointly controlled entity 27 1,847 11,951 1,771 11,856 Amounts owing by associates 28 6 - - - Derivative assets 29 218 - - - Current tax assets 13,085 3,829 5,440 3,733 Deposits with licensed banks 30 103,584 66,279 86,000 58,000 Cash and bank balances 39,762 12,066 7,109 8,395
Total Current Assets 694,779 262,805 959,478 729,501
Total Assets 3,799,807 3,015,179 2,302,567 2,067,903 93 Annual Report 2011 Tradewinds Plantation Berhad
Group Company
Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
EQUITY AND LIABILITIES
Capital and Reserves
Share capital 31 529,153 529,153 529,153 529,153 Reserves 32 1,284,246 991,627 545,600 550,548
Equity attributable to owners of the parent 1,813,399 1,520,780 1,074,753 1,079,701 Non-controlling interests 150,751 123,459 - -
Total Equity 1,964,150 1,644,239 1,074,753 1,079,701
Non-Current Liabilities
Amount owing to a subsidiary 33 - - 116,025 243,275 Borrowings 34 411,819 500,800 65,464 17,230 Provision for retirement benefits 36 1,950 - - - Deferred tax liabilities 21 337,947 324,711 - -
Total Non-Current Liabilities 751,716 825,511 181,489 260,505
Current Liabilities
Trade payables 37 105,049 47,096 - - Other payables 38 144,013 105,158 12,946 10,896 Amount owing to holding company 39 381 411 381 411 Amounts owing to subsidiaries 25 - - 814,232 487,837 Amount owing to a related company 26 146 135 - - Amount owing to a subsidiary of a jointly controlled entity 27 - 6 - - Derivative liabilities 29 2,964 - - - Borrowings 34 805,396 372,765 218,766 228,553 Provision for retirement benefits 36 371 - - - Current tax liabilities 25,621 19,858 - -
Total Current Liabilities 1,083,941 545,429 1,046,325 727,697
Total Liabilities 1,835,657 1,370,940 1,227,814 988,202
Total Equity and Liabilities 3,799,807 3,015,179 2,302,567 2,067,903
The accompanying notes form an integral part of the financial statements. STATEMENTS of Tradewinds Plantation Berhad Annual Report 2011 94 CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Distributable Non-distributable reserves reserve
Foreign currency Available Equity Attributable Non- Share Share translation for sale component Retained to owners of controlling Group capital premium reserve reserve of ICULS* earnings the parent interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Balance as at 1 January 2010 529,153 316,155 - (126) 133,657 398,091 1,376,930 98,267 1,475,197
Profit for the financial year - - - - - 186,404 186,404 25,552 211,956 Other comprehensive income for the financial year - - - 1,101 - - 1,101 - 1,101 Total comprehensive income for the financial year - - - 1,101 - 186,404 187,505 25,552 213,057
Dividend paid to non-controlling interests of a subsidiary ------(360) (360) Dividend paid (Note 10) - - - - - (43,655) (43,655) - (43,655)
- - - - - (43,655) (43,655) (360) (44,015)
Balance as at 31 December 2010 529,153 316,155 - 975 133,657 540,840 1,520,780 123,459 1,644,239
Balance as at 1 January 2011 529,153 316,155 - 975 133,657 540,840 1,520,780 123,459 1,644,239
Profit for the financial year - - - - - 333,891 333,891 30,833 364,724 Other comprehensive income for the financial year - - (1,096) (490) - - (1,586) (1,298) (2,884) Total comprehensive income for the financial year - - (1,096) (490) - 333,891 332,305 29,535 361,840
Additional non-controlling interests arising from acquisition of a subsidiary ------8,216 8,216 Dividend paid to non-controlling interests of subsidiaries ------(10,459) (10,459) Dividend paid (Note 10) - - - - - (39,686) (39,686) - (39,686)
- - - - - (39,686) (39,686) (2,243) (41,929)
Balance as at 31 December 2011 529,153 316,155 (1,096) 485 133,657 835,045 1,813,399 150,751 1,964,150
* ICULS denotes Irredeemable Convertible Unsecured Loan Stocks 95 Annual Report 2011 Tradewinds Plantation Berhad
Non-distributable Distributable reserves reserve
Equity Share Share component Retained Company capital premium of ICULS* earnings Total RM’000 RM’000 RM’000 RM’000 RM’000
Balance as at 1 January 2010 529,153 316,155 133,657 111,945 1,090,910 Total comprehensive income - - - 32,446 32,446 Dividend paid (Note 10) - - - (43,655) (43,655)
Balance as at 31 December 2010 529,153 316,155 133,657 100,736 1,079,701
Balance as at 1 January 2011 529,153 316,155 133,657 100,736 1,079,701 Total comprehensive income - - - 34,738 34,738 Dividend paid (Note 10) - - - (39,686) (39,686)
Balance as at 31 December 2011 529,153 316,155 133,657 95,788 1,074,753
* ICULS denotes Irredeemable Convertible Unsecured Loan stocks
The accompanying notes form an integral part of the financial statements. STATEMENTS of Tradewinds Plantation Berhad Annual Report 2011 96 CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Profit before tax 476,824 282,408 38,774 36,778
Adjustments for: Bargain purchase gain (18,427) - - - Depreciation and amortisation 105,060 101,974 1,428 1,224 Fair value gain on derivative instruments (3,852) - - - Unrealised foreign exchange loss 1,632 - - - Dividend income from: - subsidiaries - - (60,248) (52,172) - others (27) - - - Gain on disposal of property, plant and equipment and biological assets (3,684) (822) (175) (173) Gain on disposal of non-current assets held for sale - (716) - - Gain on disposal of other investments (176) - - - Inventories written down 1,243 209 - - Inventories written off 39 - - - Finance costs 24,894 27,106 39,062 32,203 Finance income (1,392) (598) (37,841) (30,852) Property, plant and equipment written off 82 859 2 806 Biological assets written off - 16 - - Bad debt written off 9 - - - Reversal of provision for retirement benefits (221) - - - Share of results of associates (1,619) - - - Share of result of a jointly controlled entity (5,036) (1,266) - -
Operating Profit/(Loss) Before Working Capital Changes 575,349 409,170 (18,998) (12,186) Decrease in inventories 60,102 17,131 - - Decrease/(Increase) in trade and other receivables 108,028 (16,219) (1,456) (431) Increase in trade and other payables 30,858 5,249 2,050 4,768
Cash Generated From/(Used In) Operations 774,337 415,331 (18,404) (7,849) Income tax refunded 539 3,488 458 3,004 Income tax paid (104,773) (48,425) (225) (265)
Net Cash From/(Used In) Operating Activities 670,103 370,394 (18,171) (5,110) 97 Annual Report 2011 Tradewinds Plantation Berhad
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Acquisition of a subsidiary, net of cash acquired (Note 41) (112,782) (3,200) - - Proceeds from disposal of property, plant and equipment and biological assets 4,322 2,286 194 442 Proceeds from disposal of other investments 416 - - - Purchase of property, plant and equipment (Note 11) (84,538) (68,507) (1,837) (2,553) Additions to biological assets (Note 12) (131,670) (125,914) - - Finance income received 1,392 598 37,841 30,852 Proceeds from disposal of non-current assets held for sale - 1,500 - - Subscription of redeemable convertible preference shares in a jointly controlled entity (5,000) - (5,000) - Additional investment in a subsidiary - - (275) - Dividend income from: - subsidiaries - - 55,248 45,926 - others 27 - - -
Net Cash (Used In)/From Investing Activities (327,833) (193,237) 86,171 74,667
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
Net drawdown/(repayment) of term loans 15,339 (65,004) 65,000 - Repayment of hire purchase and finance lease liabilities (76) - - - Net repayment of revolving credits (58,766) (24,000) (23,000) (20,000) Net repayment of trade financing and other short term borrowings (114,908) - - - Redemption of Sukuk Ijarah (35,000) (25,000) - - Net issuance of Murabahah Commercial Papers/Medium Term Notes - 50,000 - - Withdrawal/(Placement) of deposits held on trust for the benefit of the Islamic Debt Securities investors 814 (1,278) - - (Increase)/Decrease in deposits pledged for banking facilities (3,558) 401 - - Repayments to holding company (30) (330) (30) (329) Net repayments/advances from/(to) subsidiaries - - (11,050) 55,535 Net repayments/advances from/(to) a subsidiary of a jointly controlled entity 10,098 (10,635) 10,085 (10,549) Net repayments/advances from/(to) related companies (4) (27) 10 (115) STATEMENTs of CASH FLOWS Tradewinds Plantation Berhad Annual Report 2011 98 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES (continued)
Net repayments/advances from/(to) associates (3) 893 - - Finance costs paid (46,327) (44,433) (42,615) (35,555) Dividend paid to minority shareholders in subsidiaries (10,459) (360) - - Dividend paid to ordinary shareholders of the Company (39,686) (43,655) (39,686) (43,655)
Net Cash Used In Financing Activities (282,566) (163,428) (41,286) (54,668)
NET INCREASE IN CASH AND CASH EQUIVALENTS 59,704 13,729 26,714 14,889
Effect of exchange rate changes 239 - - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 70,066 56,337 66,395 51,506
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR (NOTE 40) 130,009 70,066 93,109 66,395
The accompanying notes form an integral part of the financial statements. 99 Annual Report 2011 Tradewinds Plantation Berhad NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
1. GENERAL INFORMATION
The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad.
The principal activities of the Company are investment holding and provision of management services to the subsidiaries. The principal activities of the subsidiaries are set out in Note 15.
There have been no significant changes in the nature of these activities during the financial year.
The registered office and principal place of business of the Company is located at Level 9, Menara HLA, No. 3, Jalan Kia Peng, 50450 Kuala Lumpur.
The financial statements of the Group and of the Company were authorised by the Board of Directors for issuance in accordance with a resolution of the Directors on 18 April 2012.
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRS”) and the provisions of the Companies Act, 1965 in Malaysia.
2.1 Adoption of New and Revised Financial Reporting Standards
In the current financial year, the Group and the Company have adopted all the new and revised Standards and Issues Committee Interpretations (“IC Int.”) issued by the Malaysian Accounting Standards Board (“MASB”) that are relevant to their operations and effective for annual periods beginning on or after 1 January 2011 as follows:
FRS 3 Business Combinations (revised) FRS 5 Non-current Assets Held for Sale and Discontinued Operations (Amendments relating to plan to sell controlling interest in a subsidiary) FRS 7 Financial Instruments: Disclosures (Amendments relating to improving disclosures about financial instruments) FRS 127 Consolidated and Separate Financial Statements (revised) FRS 132 Financial Instruments: Presentation (Amendments relating to classification of rights issues) FRS 138 Intangible Assets (Amendments relating to additional consequential amendments arising from revised FRS 3) FRS 139 Financial Instruments: Recognition and Measurement (Amendments relating to additional consequential amendments arising from revised FRS 3 and revised FRS 127) Improvements to FRSs 2010 IC Int. 4 Determining whether an Arrangement contains a Lease IC Int. 9 Reassessment of Embedded Derivatives (Amendments relating to additional consequential amendments arising from revised FRS 3)
The adoption of these new and revised Standards and IC Int. have not affected the amounts reported on the financial statements of the Group and of the Company except for those Standards and IC Int. as set out below. Details of other new and revised Standards and IC Int. applied in the financial statements of the Group and of the Company that have had no material effect on these financial statements are as set out in section 2.2.
In addition, on 19 November 2011, the MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards Framework (“MFRS Framework”) in conjunction with its planned convergence of FRSs with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board on 1 January 2012. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 100 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)
2.1 Adoption of New and Revised Financial Reporting Standards (continued)
The MFRS Framework is a fully IFRS-compliant framework, equivalent to IFRSs which is mandatory for adoption by all Entities Other than Private Entities for annual periods beginning on or after 1 January 2012, with the exception for Transitioning Entities. Transitioning Entities, being entities which are subject to the application of MFRS 141 Agriculture and/or IC Int. 15 Agreements for the Construction of Real Estate are given an option to defer adoption of the MFRS Framework for an additional one year. Transitioning Entities also include those entities that consolidate, equity account or proportionately consolidate an entity that has chosen to continue to apply the FRS Framework for annual periods beginning on or after 1 January 2012.
Accordingly, the Group and the Company, being Transitioning Entities, have availed themselves of this transitional arrangement and will continue to apply FRSs in their next set of financial statements. Therefore, the Group and the Company will be required to apply MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (MFRS 1) in their financial statements for the financial year ending 31 December 2013, being the first set of financial statements prepared in accordance with the new MFRS Framework. Further, an explicit and unreserved statement of compliance with IFRSs will be made in these financial statements.
2.1.1 Standards and IC Int. affecting presentation and disclosure only
Amendments to FRS 7 Financial Instruments: Disclosures (Improving disclosures about financial instruments)
The amendments to FRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk. The Group has elected to provide comparative information for these expanded disclosures in the current financial year as disclosed in Note 43(e).
2.2 Standards and IC Int. Adopted with No Effect on Financial Statements
The following new and revised Standards and IC Int. have also been adopted in the financial statements of the Group and of the Company. The application of these new Standards and Interpretations has not had any material impact on the amounts reported in the financial statements of the Group and of the Company for the current and prior financial years but may affect the accounting for future transactions or arrangements.
Revised FRS 3 Business Combinations Under the revised FRS 3, all acquisition-related costs are recognised as an expense in the profit or loss in the period in which they are incurred. All considerations transferred, including contingent considerations, are measured at fair value as at the acquisition date. Any equity interests held prior to the date control is obtained is remeasured at fair value, with the resulting gains or losses recognised in the profit or loss. There is now an option on a case to case basis to measure non-controlling interests either at fair value or at the non-controlling interests’ proportionate share of the net identifiable assets acquired. Goodwill arising from the business combination is measured as the difference between the aggregate fair value of consideration transferred, any non-controlling interests in the acquiree and the fair value at acquisition date of any previously held equity interest in the acquiree, and the fair value of identifiable assets acquired and liabilities assumed (including contingent liabilities) at acquisition date.
Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to FRSs issued in 2010) The amendments clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a non- controlling interest in the subsidiary after the sale. 101 Annual Report 2011 Tradewinds Plantation Berhad
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)
2.2 Standards and IC Int. Adopted with No Effect on Financial Statements (continued)
FRS 127 (revised in 2010) Consolidated and Separate Financial Statements The revised Standard has affected the Group’s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. In prior years, in the absence of specific requirements in FRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in profit or loss. Under FRS 127 (revised in 2010), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.
When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires that the Group derecognises all assets, liabilities and non-controlling interests at their carrying amount and recognises the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss.
Amendments to FRS 132 Classification of Rights Issues The amendments address the classification of certain rights issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire a fixed number of the entity’s equity instruments for a fixed amount of any currency are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to FRS 132, rights, options or warrants to acquire a fixed number of an entity’s equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application.
The application of the amendments has had no effect on the amounts reported in the current and prior financial years because the Group has not issued instruments of this nature.
Amendments to FRS 138 Intangible Assets (Amendments relating to additional consequential amendments arising from revised FRS 3) The amendments clarify that an intangible asset acquired in a business combination might be separable, but only together with a related contract, identifiable asset or liability. The acquirer may recognise a group of complementary intangible assets as a single asset provided the individual assets have similar useful lives.
The application of the amendments has had no effect on the amounts reported in the current financial year.
Amendments to FRS 139 Financial Instruments: Recognition and Measurement (Amendments relating to additional consequential amendments arising from revised FRS 3 and revised FRS 127) The scope exemption applicable to the acquirer for contingent consideration contracts is now removed.
The amendments did not have any financial impact on the Group on adoption.
IC Int. 4 Determining whether an Arrangement contains a Lease The Interpretation clarifies that when the fulfillment of an arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, then the arrangement should be accounted for as a lease under FRS 117, even though it does not take the legal form of a lease. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 102 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)
2.2 Standards and IC Int. Adopted with No Effect on Financial Statements (continued)
IC Int. 9 Reassessment of Embedded Derivatives (Amendments relating to additional consequential amendments arising from revised FRS 3) This amendment provides clarification that IC Int. 9 does not apply to embedded derivatives acquired via business combinations, and did not have any financial impact on the Group as there were no such embedded derivatives acquired during the financial year.
Improvements to FRSs issued in 2010 The application of Improvements to FRSs issued in 2010 has not had any material effect on amounts reported in the financial statements of the Group and of the Company.
2.3 Standards and Interpretations in Issue but Not Yet Effective
At the date of authorisation for issue of these financial statements, the new and revised Standards and IC Int. which were in issue but not yet effective are as listed below.
FRS 7 Financial Instruments: Disclosures (Amendments relating to disclosures of transfers of financial assets)2 FRS 7 Financial Instruments: Disclosures (Amendments relating to mandatory effective date of FRS 9 and transition disclosures)3 FRS 7 Financial Instruments: Disclosures (Amendments relating to disclosures of offsetting financial assets and financial liabilities)5 FRS 9 Financial Instruments (IFRS 9 issued by IASB in November 2009)7 FRS 9 Financial Instruments (IFRS 9 issued by IASB in October 2010)7 FRS 10 Consolidated Financial Statements5 FRS 11 Joint Arrangements5 FRS 12 Disclosures of Interests in Other Entities5 FRS 13 Fair Value Measurement5 FRS 101 Presentation of Financial Statements (Amendments relating to presentation of items of other comprehensive income)4 FRS 112 Income Taxes (Amendments relating to deferred tax: recovery of underlying assets)2 FRS 119 Employee Benefits (2011)5 FRS 124 Related Party Disclosures (revised)2 FRS 127 Separate Financial Statements (2011)5 FRS 128 Investments in Associates and Joint Ventures (2011)5 FRS 132 Financial Instruments: Presentation (Amendments relating to offsetting financial assets and financial liabilities)6 IC Int. 14 FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (Amendments relating to prepayments of a minimum funding requirement)1 IC Int. 19 Extinguishing Financial Liabilities with Equity Instruments1 IC Int. 20 Stripping Costs in the Production Phase of a Surface Mine5
1 Effective for annual periods beginning on or after 1 July 2011 2 Effective for annual periods beginning on or after 1 January 2012 3 Effective immediately on issuance date 1 March 2012 4 Effective for annual periods beginning on or after 1 July 2012 5 Effective for annual periods beginning on or after 1 January 2013 6 Effective for annual periods beginning on or after 1 January 2014 7 Effective for annual periods beginning on or after 1 January 2015 instead of 1 January 2013 immediately upon the issuance of Amendments to FRS 9 (IFRS 9 issued by IASB in November 2009 and October 2010) and FRS 7 relating to “Mandatory Effective Date of FRS 9 and Transition Disclosures” on 1 March 2012 103 Annual Report 2011 Tradewinds Plantation Berhad
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)
2.3 Standards and Interpretations in Issue but Not Yet Effective (continued)
The Directors anticipate that the abovementioned Standards and IC Int. will be adopted in the annual financial statements of the Group and of the Company when they become effective and that the adoption of these Standards and IC Int. will have no material impact on the amounts reported in the financial statements of the Group and of the Company in the period of initial application, except as discussed below.
The amendments to FRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.
The Directors do not anticipate that these amendments to FRS 7 will have a significant effect on the Group’s disclosures. However, if the Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected.
FRS 9 (IFRS 9 issued by IASB in November 2009) introduces new requirements for the classification and measurement of financial assets. FRS 9 (IFRS 9 issued by IASB in October 2010) includes the requirements for the classification and measurement of financial liabilities and for derecognition.
Key requirements of FRS 9 are described as follows:
(a) FRS 9 requires all recognised financial assets that are within the scope of FRS 139 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.
(b) The most significant effect of FRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under FRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under FRS 139, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.
The Directors anticipate that FRS 9 will be adopted in the Group’s and Company’s financial statements for the annual period beginning 1 January 2015 and that the application of FRS 9 may have impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.
In November 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including FRS 10, FRS 11, FRS 12, FRS 127 (as revised in 2011) and FRS 128 (as revised in 2011).
NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 104 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)
2.3 Standards and Interpretations in Issue but Not Yet Effective (continued)
Key requirements of these five Standards are described below.
FRS 10 replaces the parts of FRS 127 Consolidated and Separate Financial Statements (revised in 2010) that deal with consolidated financial statements. IC Int. 112 Consolidation - Special Purpose Entities has been withdrawn upon the issuance of FRS 10. Under FRS 10, there is only one basis for consolidation, that is control. In addition, FRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in FRS 10 to deal with complex scenarios.
FRS 11 replaces FRS 131 Interests in Joint Ventures. FRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. IC Int. 113 Jointly Controlled Entities - Non-monetary Contributions by Venturers has been withdrawn upon the issuance of FRS 11. Under FRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under FRS 131, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations.
In addition, joint ventures under FRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under FRS 131 can be accounted for using the equity method of accounting or proportionate accounting.
FRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in FRS 12 are more extensive than those in the current standards.
The Directors anticipate that these five standards will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013. The application of these five standards may have significant impact on amounts reported in the consolidated financial statements. The application of FRS 10 may result in the Group no longer consolidating some of its investees, and consolidating investees that were not previously consolidated. Under FRS 11, a jointly controlled entity may be classified as a joint operation or joint venture, depending on the rights and obligations of the parties to the joint arrangement. However, the Directors have not yet performed a detailed analysis of the impact of the application of these Standards and hence have not yet quantified the extent of the impact.
FRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of FRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in FRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under FRS 7 Financial Instruments: Disclosures will be extended by FRS 13 to cover all assets and liabilities within its scope.
The Directors anticipate that FRS 13 will be adopted in the Group’s and the Company’s financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements.
The amendments to FRS 101 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to FRS 101 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis. 105 Annual Report 2011 Tradewinds Plantation Berhad
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)
2.3 Standards and Interpretations in Issue but Not Yet Effective (continued)
The amendments to FRS 101 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.
The amendments to FRS 112 provide an exception to the general principles in FRS 112 that the measurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that would follow from the manner in which the entity expects to recover the carrying amount of an asset. Specifically, under the amendments, investment properties that are measured using the fair value model in accordance with FRS 140 Investment Property are presumed to be recovered through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted in certain circumstances.
The amendments to FRS 112 are effective for annual periods beginning on or after 1 January 2012. The Directors anticipate that the application of the amendments to FRS 112 in future accounting periods will not have significant financial impact.
FRS 124 (revised in 2010) has been revised on the following two aspects: (a) FRS 124 (revised in 2010) has changed the definition of a related party and (b) FRS 124 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities.
The Company and its subsidiaries are not government-related entities. Thus, the disclosure exemptions introduced in FRS 124 (revised in 2010) do not affect the Group and the Company. However, disclosures regarding related party transactions and balances in the Group’s and Company’s financial statements may be affected when the revised version of the Standard is applied in future accounting periods because some counterparties that did not previously meet the definition of a related party may come within the scope of the Standard.
IC Int. 19 provides guidance on the accounting for the extinguishment of a financial liability by the issue of equity instruments. To date, the Group has not entered into transactions of this nature. However, if the Group does enter into any such transactions in the future, IC Int. 19 will affect the required accounting. In particular, under IC Int. 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the fair value of the equity instruments issued will be recognised in profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of Accounting
The financial statements have been prepared on the historical cost basis except for the revaluation of financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The principal accounting policies are set out below.
3.2 Subsidiaries and Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the financial year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 106 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Subsidiaries and Basis of Consolidation (continued)
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non- controlling shareholders may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition- by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interest’s share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.
3.2.1 Subsidiaries
Investment in subsidiaries which are eliminated on consolidation, are stated at cost less impairment losses, if any, in the Company’s separate financial statements.
3.3 Business Combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant FRSs. Changes in the fair value of contingent consideration classified as equity are not recognised.
Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. 107 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.3 Business Combinations (continued)
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 3 (revised) are recognised at their fair value at the acquisition date, except that:
(a) deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 112 Income Taxes and FRS 119 Employee Benefits respectively; (b) liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with FRS 2 Share-based Payment; and (c) assets (or disposal groups) that are classified as held for sale in accordance with FRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year.
3.4 Investments in Associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with FRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
When a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.
NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 108 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.5 Interests in Joint Ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e. when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control).
When a group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.
Joint venture arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method, except when the investment is classified as held for sale, in which case it is accounted for in accordance with FRS 5 Non-current Assets Held for Sale and Discontinued Operations.
When a group entity transacts with a jointly controlled entity of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the joint venture.
3.6 Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The Group’s policy for goodwill arising on the acquisition of an associate is described above. 109 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.7 Non-current Assets Held for Sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.
3.8 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
3.8.1 Sales of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
(a) the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue can be measured reliably; (d) it is probable that the economic benefits associated with the transaction will flow to the entity; and (e) the costs incurred or to be incurred in respect of the transaction can be measured reliably.
3.8.2 Rendering of services
Revenue from rendering of management services is recognised in profit or loss upon performance of services by reference to the contracts entered into.
3.8.3 Property development
Property development revenue is recognised in respect of all development units that have been sold. Revenue recognition commences when the sale of the development unit is effected, upon the commencement of development and construction activities and when the financial outcome can be reliably estimated. The attributable portion of property development cost is recognised as an expense in the period in which the related revenue is recognised. The amount of such revenue and expenses recognised is determined by reference to the percentage of completion of development activity at the end of the reporting period. The percentage of completion is measured by reference to the cost incurred to date compared to the total estimated cost of development.
When the financial outcome of a development activity cannot be reliably estimated, the property development revenue is recognised only to the extent of property development costs incurred that is probable to be recoverable and the property development costs on the development units sold are recognised as an expense in the period in which they are incurred.
Any expected loss on a development project is recognised as an expense immediately, including costs to be incurred over the defects liability period. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 110 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.8 Revenue Recognition (continued)
3.8.4 Dividend and interest revenue
Dividend revenue from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the Company and the amount of revenue can be measured reliably).
Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the Company and the amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
3.8.5 Rental income
Rental income is recognised on a straight line basis over the tenure of the rental period of properties.
3.9 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
3.10 foreign Currencies
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Ringgit Malaysia (“RM”), which is the functional currency of the Company and the presentation currency for the consolidated financial statements. 111 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.10 foreign Currencies (continued)
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
(a) exchange differences arising on the retranslation of non-monetary items carried at fair value in respect of which gain and losses are recognised in other comprehensive income. For such non-monetary items, the exchange component of that gain or loss is also recognised in other comprehensive income; (b) exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; (c) exchange differences on transactions entered into in order to hedge certain foreign currency risks; and (d) exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore, forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed in RM using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognised, but they are not reclassified to profit or loss.
In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. of associates or jointly controlled entities not involving a change of accounting basis), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 112 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.11 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3.12 Employee Benefits
3.12.1 Short-term employee benefits
Salaries, wages, paid annual leave and bonuses are accrued in the period in which the associated services are rendered by the employees of the Group and of the Company. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occurred.
3.12.2 Retirement benefit costs
Provision is made in respect of a discretionary unfunded retirement contribution scheme for eligible factory workers who have been in service for more than one year. It is accrued over their period of service.
3.13 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.13.1 Current tax
The tax currently payable is based on taxable profit for the financial year. Taxable profit differs from profit as reported in the statements of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
3.13.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 113 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.13 Taxation (continued)
3.13.2 Deferred tax (continued)
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group and the Company expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis.
3.13.3 Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination.
3.14 Property, Plant and Equipment
All items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that future economic benefits associated with the cost will flow to the Group and the Company and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group and the Company is obligated to incur when the asset is acquired, if applicable.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the asset and which has different useful life, is depreciated separately.
After initial recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 114 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.14 Property, Plant and Equipment (continued)
Depreciation is calculated to write off the cost of the assets to their residual values on a straight line basis over their estimated useful lives. The principal annual depreciation period and rates are as follows:
Building 2.5 to 10% Long term leasehold land 55 - 999 years Plant and machinery 5% - 20% Motor vehicles 20% Office equipment 10% - 33.3% Furniture and fittings 10% - 20% Access road 5%
Freehold land is not depreciated. Capital work-in-progress represents buildings and access road under construction and machineries under installation and is stated at cost. Capital work-in-progress is not depreciated until such time when the asset is available for use.
The residual values, useful lives and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the property, plant and equipment.
A gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in profit or loss.
3.15 Biological Assets
Mature plantations are stated at cost less accumulated amortisation and any accumulated impairment losses where the recoverable amount of the asset is estimated to be lower than its carrying amount. Amortisation is charged to profit or loss so as to write off the cost of mature plantations, using the straight-line method, over the estimated useful lives of 25 years, representing the economic useful lives of the crops.
Costs incurred in the preparation of the nursery, purchase of seedlings and their maintenance are stated at cost. The accumulated costs will be transferred to biological assets at the time of planting.
Immature plantations are stated at cost. The costs of immature plantations consist mainly of the accumulated cost of land clearing, planting, fertilising and maintaining the plantation, borrowing costs and other indirect overhead costs up to the time the trees are harvestable and to the extent appropriate.
3.16 Land Held for Property Development
Land held for property development is stated at cost less accumulated impairment losses, if any. Such land is classified as non-current asset when no significant development work has been carried out or where development activities are not expected to be completed within the normal operating cycle.
Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other relevant levies.
Land held for property development is reclassified as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle. 115 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.17 Investment Property
Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at cost less accumulated depreciation and any impairment losses. Freehold land is not depreciated and buildings are depreciated on a straight-line basis to write-down the cost of each building to their residual values over their estimated useful lives. The principal annual depreciation rate of buildings is 2% per annum. The residual values, useful lives and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the investment property.
3.18 Intangible Assets - Patent
Patent costs comprise the purchase cost of a patent for the process of eliminating the traditional rubber odour from processed raw natural rubber. The patent is amortised on a straight-line basis over its estimated useful life of 20 years and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each reporting date.
3.19 Impairment of Tangible and Intangible Assets Excluding Goodwill
The carrying amounts of tangible and intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or its cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. A reversal of an impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
3.20 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, includes an appropriate portion of fixed and variable overhead expenses that have been incurred in bringing the inventories to their present location and condition. Cost is determined based on the weighted average method.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 116 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.21 Provisions
Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result of a past event, it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.22 financial Instruments
Financial instruments are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instruments.
Where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, such financial assets are recognised and derecognised on trade date.
Financial instruments are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (FVTPL), “held-to-maturity” investments, “available-for-sale” (AFS) financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
3.22.1 Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
3.22.2 Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not designated and effective as a hedging instrument. 117 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.22 financial Instruments (continued)
3.22.2 Financial assets at FVTPL (continued)
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:
- such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or - it forms part of a contract containing one or more embedded derivatives, and FRS 139 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘other gains and losses’ line item in the statement of comprehensive income. Fair value is determined in the manner described in Note 43.
3.22.3 Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to- maturity investments are measured at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis.
3.22.4 AFS financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL. All AFS assets are measured at fair value at the end of the reporting period. Fair value is determined in the manner described in Note 43. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of the reporting period.
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 118 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.22 financial Instruments (continued)
3.22.5 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
3.22.6 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty; or - default or delinquency in interest or principal payments; or - it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income. 119 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.22 financial Instruments (continued)
3.22.7 Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
3.23 financial Liabilities and Equity Instruments Issued by the Group and the Company
3.23.1 Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
3.23.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group and the Company are recognised at the proceeds received, net of direct issue costs.
3.23.3 Financial liabilities
Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.
3.23.4 Compound instruments
The component parts of compound instruments (convertible bonds) issued by the Group and the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.
3.23.5 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
(a) it has been incurred principally for the purpose of repurchasing in the near future; or (b) it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or (c) it is a derivative that is not designated and effective as a hedging instrument. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 120 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.23 financial Liabilities and Equity Instruments Issued by the Group and the Company (continued)
3.23.5 Financial liabilities at FVTPL (continued)
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
(a) such designation eliminates or significantly educesr a measurement or recognition inconsistency that would otherwise arise; or (b) the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or (c) it forms part of a contract containing one or more embedded derivatives, and FRS 139 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses’ line item in the statement of comprehensive income. Fair value is determined in the manner described in Note 43.
3.23.6 Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
3.23.7 Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
3.24 Derivative Financial Instruments
The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate. Further details of derivative financial instruments are disclosed in Note 43.
Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset; a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. 121 Annual Report 2011 Tradewinds Plantation Berhad
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.24 Derivative Financial Instruments (continued)
3.24.1 Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and it is not expected to be realised or settled within 12 months. Other embedded derivatives are presented as current assets or current liabilities.
3.25 Statement of Cash Flows
The Group and the Company adopt the indirect method in the preparation of the statement of cash flows.
Cash equivalents are short-term, highly liquid investments with maturities of three months or less from the date of acquisition and are readily convertible to cash with insignificant risk of changes in value.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
4.1 Critical Judgements in Applying the Company’s Accounting Policies
In the process of applying the Company’s accounting policies, which are described in Note 3 above, management is of the opinion that there are no instances of application of judgement which are expected to have a significant effect on the amounts recognised in the financial statements. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 122 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
4.2 Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities of the Group and of the Company within the next financial year are discussed below.
4.2.1 Impairment of goodwill
The Group tests goodwill for impairment at least annually in accordance with its accounting policy.
For the purposes of assessing impairment, goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.
Significant judgement is required in the estimation of the present value of future cash flows generated by the cash- generating units, which involve uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s tests for impairment of goodwill.
The carrying amount of the Group’s goodwill as at 31 December 2011 was approximately RM25,554,000 (2010: RM25,554,000). Further details are disclosed in Note 19.
5. REVENUE
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Sales of goods 1,699,379 903,521 - - Gross dividend income: - subsidiaries - - 60,248 52,172 - others 27 - - - Rental income 113 - - - Management fees 4,335 3,684 9,166 8,210 Property development revenue - 1,921 - -
1,703,854 909,126 69,414 60,382
6. STAFF COSTS
Included in staff costs of the Group and of the Company are:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Defined contribution plan 9,404 4,977 2,259 1,086 Termination benefits 47 177 - - 123 Annual Report 2011 Tradewinds Plantation Berhad
7. PROFIT BEFORE TAX
Profit before tax is arrived at after crediting/(charging) the following:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Fair value gain on derivative instruments 3,852 - - - Gain on disposal of property, plant and equipment and biological assets 3,684 822 175 173 Rental income 2,405 786 - - Finance income: - subsidiaries - - 36,893 30,459 - others 1,392 598 948 393 Realised foreign exchange gain 255 - - - Reversal of provision for retirement benefits 221 - - - Gain on disposal of other investments 176 - - - Gain on disposal of non-current assets held for sale - 716 - - Depreciation and amortisation: - property, plant and equipment (54,144) (48,789) (1,428) (1,224) - biological assets (Note 12) (50,802) (53,185) - - - investment properties (Note 13) (111) - - - - other intangible assets (Note 20) (3) - - -
(105,060) (101,974) (1,428) (1,224) Finance costs: - subsidiaries - - (31,470) (24,940) - ICULS (1,247) (1,448) (1,247) (1,448) - borrowings (23,627) (25,658) (6,345) (5,815) - hire purchase and finance lease (20) - - -
(24,894) (27,106) (39,062) (32,203) Unrealised foreign exchange loss (1,632) - - - Rental of premises (1,278) (1,374) (752) (729) Inventories written down (1,243) (209) - - Auditors’ remuneration: - current year (553) (410) (50) (47) - (Under)/Overprovision in prior year (11) 1 - - Company Directors’ remuneration: - fees (295) (290) (195) (195) - other emoluments (898) (644) (886) (644) - benefits-in-kind (25) (25) (25) (25) Other Directors’ remuneration: - fees (300) (243) - - - other emoluments (15) (4) - - - benefits-in-kind (5) (3) - - Property, plant and equipment written off (82) (859) (2) (806) Biological assets written off - (16) - - Inventories written off (39) - - - Bad debt written off (9) - - - NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 124 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
8. TAX EXPENSE
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Estimated current tax payable: - Malaysian income tax 108,356 67,734 3,143 3,368 - (Over)/Underprovision in prior year (5,139) (2,970) (83) 129 - Real property gains tax 19 - - -
103,236 64,764 3,060 3,497
Deferred tax (Note 21): - Current year 14,326 9,401 821 816 - (Over)/Underprovision in prior year (5,462) (3,713) 155 19
8,864 5,688 976 835
Total tax expense 112,100 70,452 4,036 4,332
A reconciliation of income tax expense applicable to profit before tax at the applicable statutory income tax rate to income tax expense at the effective income tax rate is as follows:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Profit before tax 476,824 282,408 38,774 36,778
Tax at statutory tax rate of 25% 119,206 70,602 9,694 9,195 Tax effect of: - Expenses not deductible for tax purposes 5,144 4,657 1,846 1,616 - Current year loss and capital allowances not eligible for carry forward 2,501 171 2,501 170 - Deferred tax assets not recognised 5,662 3,612 - - - Income not subject to tax (7,129) - (10,077) (6,797) - Lower tax rates (1,038) (743) - - - Tax incentive - (848) - - - Real property gains tax 19 - - - - Share of result of a jointly controlled entity (1,259) (316) - - - Share of results of associates (405) - - - (Over)/Underprovision of tax expense in prior year (5,139) (2,970) (83) 129 (Over)/Underprovision of deferred tax in prior year (5,462) (3,713) 155 19
Tax expense for the financial year 112,100 70,452 4,036 4,332
In the current and previous financial year, there are no tax savings for the Group and for the Company arising from the utilisation of current year tax losses and previously unrecognised unused tax losses. 125 Annual Report 2011 Tradewinds Plantation Berhad
9. EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share
Basic earnings per ordinary share of the Group is calculated by dividing the profit attributable to owners of the parent for the financial year by the weighted average number of ordinary shares in issue during the financial year and assuming the ICULS (as disclosed in Note 34) have been converted into ordinary shares.
Group
2011 2010 RM’000 RM’000
Profit attributable to owners of the parent 333,891 186,404
2011 2010 ’000 ’000
Weighted average number of ordinary shares in issue 529,153 529,153 Adjustments assuming the conversion of ICULS 100,000 100,000
629,153 629,153
2011 2010 sen sen
Basic earnings per ordinary share 53.07 29.63
Diluted earnings per ordinary share
Diluted earnings per ordinary share is not applicable and not presented because there are no dilutive potential ordinary shares to be issued as the ICULS have been included in the basic earnings per ordinary share calculation. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 126 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
10. DIVIDEND
Group and Company
2011 2010 RM’000 RM’000
In respect of financial year 2009: - Final - 23,812
In respect of financial year 2010: - Interim - 19,843 - Final 19,843 -
In respect of financial year 2011: - Interim 19,843 -
39,686 43,655
The Directors propose final dividend and special dividend of 5.00 sen per ordinary share each, less tax at 25%, amounting to approximately RM19,843,000 each, in respect of the financial year ended 31 December 2011. The proposed final dividend and special dividend are subject to the approval by the shareholders at the forthcoming Annual General Meeting of the Company and have not been included as liabilities in the financial statements. Upon approval by the shareholders, the dividend payment will be accounted for in equity as an appropriation of retained earnings during the financial year ending 31 December 2012. 127 Annual Report 2011 Tradewinds Plantation Berhad
11. PROPERTY, PLANT AND EQUIPMENT
Long term Furniture Capital Freehold leasehold Plant and Motor Office and Access work-in- Group land land Buildings machinery vehicles equipment fittings road progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cost As of 1 January 2010 52,232 1,212,169 223,588 169,657 58,991 11,996 10,355 80,917 23,288 1,843,193 Acquisition of a subsidiary - 3,292 ------3,292 Additions - 1,504 8,977 12,316 6,395 1,478 2,010 16,374 19,453 68,507 Disposals - (1,041) - (171) (1,605) (220) (1) - - (3,038) Written off - - - (2) (597) (196) (1,411) - - (2,206) Reclassifications - - 4,780 1,865 414 (183) 184 7,472 (14,532) -
As of 31 December 2010 52,232 1,215,924 237,345 183,665 63,598 12,875 11,137 104,763 28,209 1,909,748 Acquisition of a subsidiary 11,784 63,452 71,844 107,288 7,544 8,036 844 - 7,860 278,652 Additions - - 8,016 11,100 10,478 1,044 1,499 12,960 39,441 84,538 Disposals - (460) - (631) (714) (44) - - - (1,849) Written off - - (31) (649) (936) (743) (51) (7) (14) (2,431) Exchange differences (61) (239) (1,241) (1,247) (64) (45) - - (69) (2,966) Reclassifications - - 11,309 2,335 395 9 13 13,171 (27,232) -
As of 31 December 2011 63,955 1,278,677 327,242 301,861 80,301 21,132 13,442 130,887 48,195 2,265,692 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 128 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Long term Furniture Capital Freehold leasehold Plant and Motor Office and Access work-in- Group land land Buildings machinery vehicles equipment fittings road progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Accumulated depreciation As of 1 January 2010 - 84,615 94,982 94,095 42,879 7,383 5,742 27,669 - 357,365 Charge for the financial year - 17,095 11,058 10,517 5,721 1,497 933 4,675 - 51,496 Disposals - (29) - (171) (1,239) (135) - - - (1,574) Written off - - - (2) (596) (173) (576) - - (1,347) Reclassifications - - 1 (160) 159 (134) 134 - - -
As of 31 December 2010 - 101,681 106,041 104,279 46,924 8,438 6,233 32,344 - 405,940 Acquisition of a subsidiary - 1,542 32,340 74,325 5,063 6,292 643 - - 120,205 Charge for the financial year - 17,356 11,538 13,766 6,656 1,739 1,023 5,599 - 57,677 Disposals - (36) - (600) (674) (44) - - - (1,354) Written off - - (23) (611) (936) (722) (50) (7) - (2,349) Exchange differences - (68) (256) (541) (31) (31) - - - (927) Reclassifications - - 76 (41) (34) 7 (8) - - -
As of 31 December 2011 - 120,475 149,716 190,577 56,968 15,679 7,841 37,936 - 579,192 129 Annual Report 2011 Tradewinds Plantation Berhad
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Furniture Motor Office and Company vehicles equipment fittings Total RM’000 RM’000 RM’000 RM’000
Cost As of 1 January 2010 3,411 2,399 1,334 7,144 Additions 479 955 1,119 2,553 Disposals (845) (220) - (1,065) Written off - (23) (1,334) (1,357)
As of 31 December 2010 3,045 3,111 1,119 7,275 Additions 1,359 161 317 1,837 Disposals (393) (28) - (421) Written off - (133) - (133)
As of 31 December 2011 4,011 3,111 1,436 8,558
Accumulated depreciation As of 1 January 2010 1,773 1,196 471 3,440 Charge for the financial year 560 530 134 1,224 Disposals (661) (135) - (796) Written off - (14) (537) (551)
As of 31 December 2010 1,672 1,577 68 3,317 Charge for the financial year 613 684 131 1,428 Disposals (374) (28) - (402) Written off - (131) - (131)
As of 31 December 2011 1,911 2,102 199 4,212
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Net carrying amount Freehold land 63,955 52,232 - - Long term leasehold land 1,158,202 1,114,243 - - Buildings 177,526 131,304 - - Plant and machinery 111,284 79,386 - - Motor vehicles 23,333 16,674 2,100 1,373 Office equipment 5,453 4,437 1,009 1,534 Furniture and fittings 5,601 4,904 1,237 1,051 Access road 92,951 72,419 - - Capital work-in-progress 48,195 28,209 - -
1,686,500 1,503,808 4,346 3,958 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 130 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
11. PROPERTY, PLANT AND EQUIPMENT (continued)
(a) The net carrying amount of property, plant and equipment of the Group charged to financial institutions for credit facilities granted to the Group (as disclosed in Note 34) are as follows:
Group
2011 2010 RM’000 RM’000
Freehold land 23,063 20,352 Long term leasehold land 679,436 638,493 Buildings 72,732 33,900 Plant and machinery 65,455 44,637 Motor vehicles 894 - Capital work-in-progress 2,766 -
844,346 737,382
(b) Included in property, plant and equipment are some temporarily idle assets with net carrying amount of RM20,952,000 (2010: Nil) of certain subsidiaries whose processing factories were closed.
12. BIOLOGICAL ASSETS
Group
2011 2010 RM’000 RM’000
Cost At beginning of the financial year 1,457,807 1,336,496 Additions 153,415 142,311 Disposals (238) - Written off - (16) Assets retired from use (2,123) (20,984)
At end of the financial year 1,608,861 1,457,807
Accumulated amortisation At beginning of the financial year 357,061 324,860 Charge for the financial year 50,802 53,185 Disposals (95) - Assets retired from use (2,123) (20,984)
At end of the financial year 405,645 357,061
Net carrying amount 1,203,216 1,100,746 131 Annual Report 2011 Tradewinds Plantation Berhad
12. BIOLOGICAL ASSETS (continued)
(a) The net carrying amount of biological assets of the Group charged to financial institutions for credit facilities granted to the Group (as disclosed in Note 34) amounted to RM880,453,000 (2010: RM817,820,000).
(b) Included in additions of biological assets for the financial year are the following:
Group
2011 2010 RM’000 RM’000
Staff costs 28,206 16,285 Defined contribution plan 2,162 696 Finance costs 18,212 13,690 Depreciation of property, plant and equipment 3,533 2,707
(c) During the financial year, the Group made the following cash payments for the additions of biological assets:
Group
2011 2010 RM’000 RM’000
Additions of biological assets 153,415 142,311 Less: Finance costs capitalised (18,212) (13,690) Depreciation capitalised (3,533) (2,707)
Cash payments 131,670 125,914 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 132 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
13. INVESTMENT PROPERTIES
Freehold Group land Buildings Total 2011 RM’000 RM’000 RM’000
Cost At beginning of the financial year - - - Acquisition of a subsidiary (Note 41) 370 12,371 12,741
At end of the financial year 370 12,371 12,741
Accumulated depreciation At beginning of the financial year - - - Acquisition of a subsidiary (Note 41) - 9,296 9,296 Charge for the financial year - 111 111
At end of the financial year - 9,407 9,407
Net carrying amount 370 2,964 3,334
Fair value 370 3,075 3,445
Included in investment properties are some temporarily idle assets with net carrying amount of RM492,000 (2010: Nil) of certain subsidiaries whose processing factories were closed.
14. LAND HELD FOR PROPERTY DEVELOPMENT
Group
2011 2010 RM’000 RM’000
Long term leasehold land Cost At beginning/end of the financial year 87,412 87,412
An approved master plan had been obtained for the development of the second border town between Malaysia and Thailand known as “Bandar Sempadan Kota Putra”. 133 Annual Report 2011 Tradewinds Plantation Berhad
15. INVESTMENTS IN SUBSIDIARIES
Company
2011 2010 RM’000 RM’000
Unquoted shares, at cost: - Ordinary shares 1,279,915 1,279,640 - Redeemable convertible preference shares 107,750 107,750
1,387,665 1,387,390 Less: Distribution of pre-acquisition reserves (71,374) (71,374) Accumulated impairment losses (1,563) (1,563)
1,314,728 1,314,453
The details of the subsidiaries are as follows:
Country of Effective Name of Compan y Principal Activities Incorporation Equity Interest 2011 2010 % %
Kumpulan Kris Jati Sdn. Bhd.* Cultivation of oil palm Malaysia 70 70 and producing crude palm oil
Ladang Permai Sdn. Bhd.* Cultivation of oil palm Malaysia 100 100 and producing crude palm oil
Bahtera Bahagia Sdn. Bhd.* Cultivation of oil palm Malaysia 70 70
Binu Plantations Sdn. Bhd.* Cultivation of oil palm Malaysia 100 100 and producing crude palm oil
Quek Shin & Sons Pte. Ltd.# Cultivation of oil palm Singapore 100 100
Teon Choon Realty Company Cultivation of oil palm Malaysia 100 100 Sdn. Bhd.
Ladang Mawar Sdn. Bhd. Cultivation of oil palm Malaysia 100 100
Ibok Plantation Sdn. Bhd. Cultivation of oil palm Malaysia 100 100
Syarikat Ladang Sawit Cherul Cultivation of oil palm Malaysia 100 100 Sdn. Bhd.
Barisan Tekad Sdn. Bhd. Cultivation of oil palm Malaysia 70 70
Ladang Chendana Sdn. Bhd. Cultivation of oil palm Malaysia 100 100
NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 134 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
15. INVESTMENTS IN SUBSIDIARIES (continued)
Country of Effective Name of Compan y Principal Activities Incorporation Equity Interest 2011 2010 % %
Ladang Serasa Sdn. Bhd. Cultivation of oil palm Malaysia 100 100 and producing crude palm oil
Tradewinds Plantation Services Ceased operations Malaysia 100 100 Sdn. Bhd.
Amalan Penaga (M) Sdn. Bhd.* Investment holding Malaysia 100 100
Tradewinds Plantation Plantation management and advisory Malaysia 100 100 Management Sdn. Bhd. services
Tradewinds Plantech Sdn. Bhd. Plantation management and advisory Malaysia 100 100 services
Tradewinds Agro Services Plantation management and advisory Malaysia 100 100 Sdn. Bhd. services
Tradewinds Plantation Capital Sole and specific purpose of undertaking Malaysia 100 100 Sdn. Bhd. Islamic Securities transactions
Johore Tenggara Oil Palm Investment holding Malaysia 100 100 Berhad
Tradewinds Corridor Sdn. Bhd.* Cultivation of oil palm and rubber trees Malaysia 100 100
Northern Intergrated Agriculture Property development Malaysia 70 70 Sdn. Bhd.*
Prisma Spektra Sdn. Bhd. Investment holding Malaysia 100 100
Subsidiaries of Johore Tenggara Oil Palm Berhad
Ladang Petri Tenggara Sdn. Bhd. Cultivation of oil palm Malaysia 100 100 and producing crude palm oil
Pertanian Johor Tenggara Sdn. Bhd. Cultivation of oil palm Malaysia 100 100
Agromaju Sdn. Bhd. Cultivation of oil palm Malaysia 100 100
Barisan Perangsang Sdn. Bhd. Ceased operations Malaysia 51 51
Agromaju Landscape Sdn. Bhd. Ceased operations Malaysia 100 100
Semai Segar Sdn. Bhd.* Cultivation of oil palm Malaysia 100 100 135 Annual Report 2011 Tradewinds Plantation Berhad
15. INVESTMENTS IN SUBSIDIARIES (continued)
Country of Effective Name of Compan y Principal Activities Incorporation Equity Interest 2011 2010 % %
Permodalan Pelangi Sdn. Bhd.* Cultivation of oil palm Malaysia 100 100
Tanah Semai Sdn. Bhd.* Cultivation of oil palm Malaysia 100 100
Uni-Agro Plantations (Trengganu) Cultivation of oil palm Malaysia 100 100 Sdn. Bhd.*
M.P. Plantation Sdn. Bhd.* Investment holding Malaysia 100 100
Hak JTOP Sdn. Bhd. Investment holding but is currently Malaysia 100 100 dormant
Subsidiary of M.P. Plantation Sdn. Bhd.
Ladang Sungai Relai Sdn. Bhd.* Cultivation of oil palm Malaysia 70 70
Subsidiaries of Amalan Penaga (M) Sdn. Bhd.
Melur Gemilang Sdn. Bhd.* Cultivation of oil palm Malaysia 70 70 and producing crude palm oil
Tradewinds Tanjung Alan Cultivation of oil palm Malaysia 70 70 Plantation Sdn. Bhd.*
Trans Kenyalang Sdn. Bhd.* Cultivation of oil palm Malaysia 85 85
Arah Bersama Sdn. Bhd.* Cultivation of oil palm Malaysia 70 70
Amalan Pelita Pasai Sdn. Bhd.* Cultivation of oil palm Malaysia 60 60
Senandung Masyhur Sdn. Bhd.* Cultivation of oil palm Malaysia 85 85
Usaha Wawasan Sdn. Bhd.* Cultivation of oil palm Malaysia 70 70
Subsidiaries of Northern Intergrated Agriculture Sdn. Bhd.
NIA Development Sdn. Bhd.* Dormant Malaysia 70 70
NIA Infrastructure Sdn. Bhd.* Dormant Malaysia 70 70 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 136 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
15. INVESTMENTS IN SUBSIDIARIES (continued)
Country of Effective Name of Compan y Principal Activities Incorporation Equity Interest 2011 2010 % %
Subsidiary of Prisma Spektra Sdn. Bhd.
Mardec Berhad* Property and investment holding and provision of management services Malaysia 100 -
Subsidiaries of Mardec Berhad
Mardec Processing Sdn. Bhd.* Purchasing and processing of rubber Malaysia 100 - from smallholders and selling of processed rubber
Mardec International Sdn. Bhd.* Investment holding Malaysia 100 -
Mardec Polymers Sdn. Bhd.* Investment holding Malaysia 100 -
Mardec Industrial Latex Sdn. Bhd.* Manufacturing and processing of natural Malaysia 100 - rubber latex, prevulcanised rubber latex and processing aid rubbers
Mardec Fertilizer Sdn. Bhd.* Dormant Malaysia 100 -
Regal Mardec Sdn. Bhd.* Dormant Malaysia 100 -
Syarikat Perusahaan Kamar Dormant Malaysia 100 - Sdn. Bhd.*
Subsidiaries of Mardec Polymers Sdn. Bhd.
M-Pol Plastic Products Sdn. Bhd.* Inactive since October 2009 Malaysia 100 -
M-Pol Defence Sdn. Bhd. Inactive since May 2009 Malaysia 100 - (formerly known as M-Pol Rubber Products Sdn. Bhd.)*
M-Pol Microguard Sdn. Bhd.* Ceased operations Malaysia 70 -
M-Pol Precision Products Manufacturing and sale of moulded, Malaysia 100 - Sdn. Bhd.* extruded and other custom-made rubber products
137 Annual Report 2011 Tradewinds Plantation Berhad
15. INVESTMENTS IN SUBSIDIARIES (continued)
Country of Effective Name of Compan y Principal Activities Incorporation Equity Interest 2011 2010 % %
M-Pol Industrial Plastics Sdn. Bhd.* Ceased operations Malaysia 100 -
M-Pol Industrial Products Ceased operations Malaysia 100 - Sdn. Bhd.*
Plaat Industries Madras Pvt. Ltd.* Dormant India 100 -
Subsidiaries of Mardec International Sdn. Bhd.
Mardec Saigon Rubber Co. Ltd.* Purchasing, processing and marketing of Vietnam 100 - natural rubber and latex
Mardec-Yala Co. Ltd.* Purchasing, processing and marketing of Thailand 100 - natural rubber and latex
PT Mardec Nusa Riau* Purchasing, processing and marketing of Indonesia 51 - natural rubber and latex. Ceased operations during the current financial year
PT Mardec Musi Lestari* Purchasing, processing and marketing of Indonesia 51 - natural rubber
PT Mardec Siger Way Kanan* Purchasing, processing and marketing of Indonesia 55 - natural rubber
* Audited by other auditors # Audited by member firm of Deloitte oucheT Tohmatsu NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 138 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
16. INVESTMENTS IN ASSOCIATES
Group
2011 2010 RM’000 RM’000
Unquoted shares, at cost: In Malaysia 8,397 - Outside Malaysia 47,830 -
56,227 - Share of post-acquisition profits 1,619 - Share of post-acquisition reserves (482) -
57,364 -
Details of the associates are as follows:
Principal Financial Country of Effective Name of Company Activities Year End Incorporation Equity Interest 2011 2010 % %
Filati Lastex (Malaysia) Ceased operations 30 June Malaysia 30.6 - Sdn. Bhd.*
Alfagomma-Mardec Manufacturing and 31 December Malaysia 20 - Sdn. Bhd.* selling of mandrell built hydraulic wire braided rubber hoses
R1 International Trading of natural rubber 30 September Singapore 45 - Pte. Ltd.* and latex
Mardec RK Latex Purchasing, processing and 31 March^ India 30 - Pvt. Ltd.* marketing of natural rubber and latex
* Audited by other auditors ^ The year-end of 31 March is a statutory requirement in India. 139 Annual Report 2011 Tradewinds Plantation Berhad
16. INVESTMENTS IN ASSOCIATES (continued)
At Group level, the carrying amount of associates represents its share of net assets in the associates at end of the reporting period. Summarised financial information in respect of the Group’s associates is as follows:
Group
2011 2010 RM’000 RM’000
Assets and liabilities Current assets 984,847 - Non-current assets 43,316 -
Total assets 1,028,163 -
Current liabilities (872,085) - Non-current liabilities (4,911) -
Total liabilities (876,996) -
Net assets 151,167 -
Group’s share of associates’ net assets 57,364 -
Results Revenue 2,489,506 - Profit for the financial year 2,614 - Share of results of associates 1,619 - NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 140 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
17. INVESTMENT IN A JOINTLY CONTROLLED ENTITY
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Unquoted shares, at cost: - Ordinary shares 10,000 10,000 10,000 10,000 - Redeemable convertible preference shares (“RCPS”) 10,000 5,000 10,000 5,000
20,000 15,000 20,000 15,000 Share of post-acquisition reserves 3,525 (1,511) - -
23,525 13,489 20,000 15,000
(a) On 19 October 2009, the Company entered into a supplemental agreement to the Shareholders Agreement dated 1 August 2008 with CB Industrial Product Holding Berhad (“CBIP”) to subscribe equally for 20,000,000 RCPS of RM1 each at an issue price of RM1 each in the jointly controlled entity, Pride Palm Oil Mill Sdn. Bhd. (“PPOM”). There was no effect on the equity interest held by the Company subsequent to the subscription.
On 29 October 2009 and 30 June 2011 respectively, PPOM issued 10,000,000 RCPS of RM1 each and the remaining 10,000,000 RCPS of RM1 each, which were subscribed equally by the Company and CBIP.
(b) Details of the jointly controlled entity are as follows:
Country of Effective Name of Company Principal Activity Incorporation Equity Interest 2011 2010 % %
Pride Palm Oil Mill Sdn. Bhd. Investment holding Malaysia 50 50 141 Annual Report 2011 Tradewinds Plantation Berhad
17. INVESTMENT IN A JOINTLY CONTROLLED ENTITY (CONTINUED)
(c) The summarised financial information of the jointly controlled entity is as follows:
Group
2011 2010 RM’000 RM’000
Assets and liabilities Current assets 17,712 19,788 Non-current assets 88,281 91,583
Total assets 105,993 111,371
Current liabilities 23,943 34,393 Non-current liabilities 35,000 50,000
Total liabilities 58,943 84,393
Net assets 47,050 26,978
Group’s share of a jointly controlled entity’s net assets 23,525 13,489
Results Income 68,484 58,083 Expenses (58,412) (55,552) Share of result of a jointly controlled entity 5,036 1,266
18. OTHER INVESTMENTS
Group
2011 2010 RM’000 RM’000
Available-for-sale financial assets at fair value: Quoted shares in Malaysia 692 1,032 Unquoted shares in Malaysia 478 868
1,170 1,900
Information on the fair value hierarchy is disclosed in Note 43(e). NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 142 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
19. GOODWILL
Group
2011 2010 RM’000 RM’000
Cost 26,848 26,848 Accumulated impairment loss (1,294) (1,294)
25,554 25,554
Goodwill on consolidation arises mainly from the plantation segment of the Group.
For the purpose of impairment testing, the recoverable amount of a Cash Generating Unit (“CGU”) is based on its value in use determined by discounting the pre-tax cash flows based on financial projections approved by management covering up to 25 years (2010: 25 years) which represents the full life cycle period of the oil palms.
(a) Key assumptions used in value in use calculations
The key assumptions on which management has based its cash flow projections to undertake impairment testing of goodwill are:
(i) Discount rate of 5.00% (2010: 5.00%) representing the pre-tax cost of debt of the Group as at 31 December 2011.
(ii) Fresh fruit bunches yield ranging from 8 to 31 (2010: 8 to 28) MT/hectare obtained from the Malaysian Palm Oil Board published average yield applicable to the age of the respective estates and also based on management’s best estimates on the estate’s performance after taking into account existing achievements.
(iii) Crude palm oil price of RM2,800 (2010: RM2,500 to RM2,700) per metric tonne and palm kernel price of RM1,700 (2010: RM1,500 to RM1,625) per metric tonne.
(iv) Oil extraction rate ranging from 20.00% to 21.50% (2010: 21.00% to 21.65%) and kernel extraction rate ranging from 4.50% to 5.75% (2010: 5.00% to 5.60%) based on management’s best estimates after taking into account the age of the respective estates and existing achievements.
(v) Average increase in plantation maintenance expenses of 1% to 3% (2010: 1% to 3%) per hectare.
Based on these calculations, the Directors are of the view that no additional impairment loss is required during the financial year as the recoverable amount determined is higher than the carrying amounts of the CGUs.
(b) Sensitivity to changes in assumptions
The management believes that there is no reasonably possible change in the key assumptions on which management has based its determination of the CGU’s recoverable amount which would cause the CGU’s carrying amount to materially exceed its recoverable amount. 143 Annual Report 2011 Tradewinds Plantation Berhad
20. OTHER INTANGIBLE ASSETS
Group
2011 2010 RM’000 RM’000
Patent:
At cost At beginning of the financial year - - Arising from acquisition of a subsidiary (Note 41) 200 -
At end of the financial year 200 -
Accumulated amortisation At beginning of the financial year - - Arising from acquisition of a subsidiary (Note 41) (43) - Charge for the financial year (3) -
At end of the financial year (46) -
Net carrying amount 154 -
21. DEFERRED TAX ASSETS/LIABILITIES
(a) Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The following amounts, determined after appropriate offsetting, are shown in the statements of financial position:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Deferred tax assets 16,799 19,465 4,015 4,991 Deferred tax liabilities (337,947) (324,711) - -
(321,148) (305,246) 4,015 4,991 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 144 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
21. DEFERRED TAX ASSETS/LIABILITIES (continued)
(a) Recognised deferred tax assets and liabilities (continued)
The movements in deferred tax during the financial year are as follows:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
At beginning of the financial year (305,246) (299,558) 4,991 5,826
Transfer to/(from) profit or loss (Note 8): - liability portion of ICULS (888) (838) (888) (838) - unused tax losses 5,473 2,934 - - - unutilised capital and agriculture allowances 8,972 17,179 - - - provisions (559) - - - - others 378 24 24 31 - Property, plant and equipment and biological assets (35,772) (33,696) (112) (28) - fair value adjustment 13,532 8,709 - -
(8,864) (5,688) (976) (835) Arising from acquisition of a subsidiary (Note 41) (6,908) - - - Exchange differences (130) - - -
At end of the financial year (321,148) (305,246) 4,015 4,991
The components of deferred tax liabilities at the end of the financial year comprise the following:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Deferred tax liabilities (before offsetting):
Property, plant and equipment and biological assets (273,093) (234,639) (442) (330) Fair value adjustment (228,609) (231,523) - -
(501,702) (466,162) (442) (330) Offsetting 163,755 141,451 442 330
Deferred tax liabilities (after offsetting) (337,947) (324,711) - - 145 Annual Report 2011 Tradewinds Plantation Berhad
21. DEFERRED TAX ASSETS/LIABILITIES (continued)
(a) Recognised deferred tax assets and liabilities (continued)
The components of deferred tax assets at the end of the financial year comprise the following:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Deferred tax assets (before offsetting):
Liability portion of ICULS 4,308 5,196 4,308 5,196 Unused tax losses 52,653 43,739 - - Unutilised capital and agriculture allowances 120,819 111,847 - - Provisions 2,220 - - - Others 554 134 149 125
180,554 160,916 4,457 5,321 Offsetting (163,755) (141,451) (442) (330)
Deferred tax assets (after offsetting) 16,799 19,465 4,015 4,991
(b) Unrecognised deferred tax assets
As of 31 December 2011, the amounts of temporary differences for which no deferred tax assets have been recognised in the financial statements are as follows:
Group
2011 2010 RM’000 RM’000
Unused tax losses 176,834 73,096 Unutilised capital and agriculture allowances 27,224 7,152 Other deductible temporary differences 4,653 -
208,711 80,248
Deferred tax assets of certain subsidiaries have not been recognised in respect of these items as it is not probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unutilised capital and agriculture allowances can be utilised.
The unused tax losses, unutilised capital and agriculture allowances and other deductible temporary differences do not expire under the current tax legislation. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 146 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
22. INVENTORIES
Group
2011 2010 RM’000 RM’000
At cost Oil palm products 27,809 20,726 Rubber products: Finished goods 43,048 - Work-in-progress 1,617 - Raw materials 73,039 - Consumables 24,492 11,443 Nurseries 12,751 7,868 Cattle - 2,467
182,756 42,504
At net realisable value Finished goods - rubber products 76,414 - Cattle 703 767
77,117 767
259,873 43,271
The write-down of inventories to net realisable value amounted to RM1,243,000 (2010: RM209,000) and is included in the profit or loss.
23. TRADE RECEIVABLES
Group
2011 2010 RM’000 RM’000
Third parties 217,487 101,884 Related parties 9,884 8,852 Related company 3,728 4,027 Subsidiary of the jointly controlled entity 2,233 2,228 Associates 28,196 -
261,528 116,991 147 Annual Report 2011 Tradewinds Plantation Berhad
23. TRADE RECEIVABLES (continued)
(a) Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.
(b) The average credit terms in respect of trade receivables range from 7 to 90 days (2010: 7 to 30 days) from date of invoice.
(c) The amounts owing by related parties, a related company, a subsidiary of the jointly controlled entity and associates in trade receivables are subject to normal trade terms.
(d) The Group’s historical experience in collection of trade receivables falls within the recorded credit period and management believes that no additional credit risk for collection losses is inherent in the Group’s trade receivables. The Group does not hold any collateral over these balances.
Ageing of trade receivables not impaired:
Group
2011 2010 RM’000 RM’000
Not past due 192,573 94,862
Past due: 1 to 30 days 55,148 16,644 31 to 60 days 11,860 3,791 61 to 90 days 514 1,642 More than 90 days 1,433 52
68,955 22,129
261,528 116,991
In determining the recoverability of the trade receivables, the Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. These receivables arose from creditworthy debtors with no history of default payments. Accordingly, the Directors believe that there is no credit provision required.
24. OTHER RECEIVABLES
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Other receivables 4,224 5,821 126 159 Deposits 4,241 1,681 304 346 Prepayments 3,504 903 1,886 355 Advance payment to suppliers 2,879 - - -
14,848 8,405 2,316 860 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 148 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
25. AMOUNTS OWING BY/TO SUBSIDIARIES
(a) The amounts owing by subsidiaries comprise the following:
Company
2011 2010 RM’000 RM’000
Current: Advances to subsidiaries 675,259 604,863
Amounts owing by subsidiaries 183,417 43,618 Less: Impairment loss (1,836) (1,836)
181,581 41,782
856,840 646,645
The advances to subsidiaries are unsecured, bear interest at 5.50% (2010: 5.50%) per annum and repayable on demand.
The amounts owing by subsidiaries, which arose mainly from payment on behalf, are unsecured, interest-free and repayable on demand.
(b) The amounts owing to subsidiaries comprise the following:
Company
2011 2010 RM’000 RM’000
Current: Advances from subsidiaries 802,815 482,497 Amounts owing to subsidiaries 11,417 5,340
814,232 487,837
The advances from subsidiaries are unsecured, bear interest at 3.00% (2010: 2.75%) per annum except for an amount of RM128,064,000 (2010: RM35,000,000) which bears interest at rates ranging from 4.45% to 5.05% (2010: 4.95%) per annum. The advances are repayable on demand.
The amounts owing to subsidiaries, which arose mainly from payment on behalf, are unsecured, interest-free and repayable on demand.
26. AMOUNTS OWING BY/TO RELATED COMPANIES
The amounts owing by/to related companies, which arose mainly from payment on behalf, are unsecured, interest-free and repayable on demand. 149 Annual Report 2011 Tradewinds Plantation Berhad
27. AMOUNT OWING BY/TO A SUBSIDIARY OF A JOINTLY CONTROLLED ENTITY
The amount owing by/to a subsidiary of a jointly controlled entity, which arose mainly from payment on behalf, are unsecured, interest-free and repayable on demand.
28. AMOUNTS OWING BY ASSOCIATES
The amounts owing by associates, which arose mainly from payment on behalf, are unsecured, interest-free and repayable on demand.
29. DERIVATIVE ASSETS/LIABILITIES
Group
2011 2010 RM’000 RM’000
Derivative assets Fair value of foreign exchange forward contracts 218 -
Derivative liabilities Fair value of foreign exchange forward contracts (2,964) -
Foreign exchange forward contracts Nominal value 183,201 -
Foreign exchange forward contracts are used to hedge the Group’s sales and purchases denominated in United States Dollar and Euro for which firm commitments existed at the reporting date.
During the financial year, the Group recognised a net gain of RM3,852,000 (2010: Nil) arising from fair value changes of derivatives. The fair value changes are attributable to changes in foreign exchange spot and forward rate. The method and assumptions applied in determining the fair values of derivatives are disclosed in Note 43. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 150 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
30. DEPOSITS WITH LICENSED BANKS
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Deposits with licensed banks 97,673 59,554 86,000 58,000 Islamic deposits 5,911 6,725 - -
103,584 66,279 86,000 58,000
Included in deposits are RM5,220,000 (2010: RM1,554,000) pledged to licensed banks for banking facilities granted to certain subsidiaries.
The Islamic deposits comprise one profit payment for Islamic Debt Securities of RM5,911,000 (2010: RM6,725,000) and are held in trust by the facility trustee for the benefit of the Islamic Debt Securities investors.
The annual interest rates for deposits that were effective at the end of the reporting period were as follows:
Group Company
2011 2010 2011 2010 % % % %
Deposits with licensed banks 2.44 - 14.00 2.44 - 2.80 2.80 - 3.05 2.70 - 2.75
Tenure of deposits with licensed banks of the Group and of the Company ranges from 4 to 365 days (2010: 4 to 365 days).
Information on repricing analysis of deposits are disclosed in Note 44.
31. SHARE CAPITAL
Group/Company 2011 2010
Number of Number of shares shares ’000 RM’000 ’000 RM’000
Ordinary shares of RM1.00 each: Authorised 1,000,000 1,000,000 1,000,000 1,000,000 Issued and fully paid 529,153 529,153 529,153 529,153
The holders of ordinary shares are entitled to receive dividend as and when declared by the Company and are entitled to one (1) vote per ordinary share at general meetings of the Company. All ordinary shares rank pari passu with regard to the Company’s residual assets. 151 Annual Report 2011 Tradewinds Plantation Berhad
32. RESERVES
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Non-distributable: Share premium 316,155 316,155 316,155 316,155 Available-for-sale reserve 485 975 - - Foreign currrency translation reserve (1,096) - - - ICULS - equity component 133,657 133,657 133,657 133,657
449,201 450,787 449,812 449,812 Distributable: Retained earnings 835,045 540,840 95,788 100,736
1,284,246 991,627 545,600 550,548
(a) Available-for-sale reserve
This reserve arose from fair value gains or losses arising on financial assets classified as available-for-sale.
(b) Foreign currency translation reserve
The foreign currency translation reserve is used to record all foreign currency exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the Group’s presentation currency.
(c) Retained earnings
In accordance with the Finance Act 2007, the single tier income tax system became effective from the year assessment of 2008. Under this system, tax on a company’s profit is a final tax, and dividends paid are exempted from tax in the hands of the shareholders. Unlike the previous imputation system, the recipient of the dividend would no longer be able to claim any tax credit.
Companies without Section 108 tax credit balance will automatically move to the single tier tax system on 1 January 2008. However, companies with such tax credits are given an irrevocable option to elect for the single tier tax system and disregard the tax credit or to continue to use the tax credits under Section 108 account to frank the payment of cash dividends on ordinary shares for a period of 6 years ending 31 December 2013 or until the tax credits are fully utilised, whichever comes first. During the transitional period, any tax paid will not be added to the Section 108 account and any tax credits utilised will reduce the tax credit balance. All companies will be in the new system on 1 January 2014.
As of the statement of financial position date, the Company has not elected for the irrevocable option to disregard the Section 108 tax credits. Accordingly, subject to the agreement of the Inland Revenue Board and based on the prevailing tax rate applicable to dividend, the estimated Section 108 tax credits available is sufficient to frank approximately RM60,056,000 (2010: RM99,743,000) of the Company’s retained earnings as of 31 December 2011 if distributed by way of cash dividends. Any dividend paid in excess of this amount during the transitional period will be under the single tier tax system as explained above. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 152 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
32. RESERVES (continued)
(d) Supplementary information on realised and unrealised profits or losses
The retained earnings as at end of the financial year are analysed as follows:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Total retained earnings of the Company and its subsidiaries: - Realised 980,653 813,329 96,081 100,941 - Unrealised (100,067) (81,482) (293) (205)
880,586 731,847 95,788 100,736
Total share of retained earnings/(accumulated losses) from a jointly controlled entity: - Realised 3,762 (1,274) - - - Unrealised (237) (237) - -
3,525 (1,511) - -
Total share of retained earnings from associates: - Realised (5,053) - - - - Unrealised 6,672 - - -
1,619 - - -
885,730 730,336 95,788 100,736 Less: Consolidation adjustments (50,685) (189,496) - -
Total Group’s/Company’s retained earnings as per consolidated financial statements 835,045 540,840 95,788 100,736 153 Annual Report 2011 Tradewinds Plantation Berhad
33. AMOUNT OWING TO A SUBSIDIARY
Amount owing to a subsidiary, which arose from advances are unsecured and bear interest at rates ranging from 5.20% to 5.70% (2010: 4.45% to 5.70%) per annum. The advances were obtained as a back-to-back arrangement with the subsidiary, which acts as a special purpose vehicle to the Company. Funds drawndown from the Islamic Debt Securities by the subsidiary will be transferred to the Company as amount owing to subsidiary. Interest expense paid by the Company to the subsidiary is equivalent to the return payments and profit payments charged to the subsidiary on the Islamic Debt Securities.
The advances are repayable by instalments of varying amounts over the following periods:
Company
2011 2010 RM’000 RM’000
Non-current - at amortised cost: 1 - 2 years 30,000 128,116 2 - 3 years 30,000 30,000 3 - 4 years 45,000 30,000 4 - 5 years 11,025 45,000 More than 5 years - 10,159
116,025 243,275
Information on repricing analysis of amount owing to a subsidiary are disclosed in Note 44.
34. BORROWINGS
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Non-current - at amortised costs:
Secured Term loans 277,645 233,570 52,000 - Islamic Debt Securities 120,000 250,000 - - Hire purchase and finance lease liabilities 710 - - -
Unsecured ICULS 13,464 17,230 13,464 17,230
411,819 500,800 65,464 17,230 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 154 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
34. BORROWINGS (continued)
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Current - at amortised costs:
Secured Bank overdrafts 1,994 - - - Revolving credits 173,402 156,000 150,000 156,000 Term loans 91,275 103,212 13,000 - Islamic Debt Securities 130,000 35,000 - - Hire purchase and finance lease liabilities 318 - - - Trade financing and other short term borrowings 48,429 - - -
Unsecured Bank overdrafts 212 - - - Revolving credits 62,000 75,000 52,000 69,000 ICULS 3,766 3,553 3,766 3,553 Trade financing and other short term borrowings 294,000 - - -
805,396 372,765 218,766 228,553
Total borrowings:
Bank overdrafts 2,206 - - - Revolving credits 235,402 231,000 202,000 225,000 Term loans 368,920 336,782 65,000 - Islamic Debt Securities 250,000 285,000 - - Hire purchase and finance lease liabilities (Note 35) 1,028 - - - ICULS 17,230 20,783 17,230 20,783 Trade financing and other short term borrowings 342,429 - - -
1,217,215 873,565 284,230 245,783
The borrowings of the Group and of the Company are secured by:
- legal charges over property, plant and equipment and biological assets of certain subsidiaries (as disclosed in Notes 11 and 12);
- fixed and floating charge over the assets of certain subsidiaries;
- deposits with licensed banks as disclosed in Note 30; and
- corporate guarantees by the Company. 155 Annual Report 2011 Tradewinds Plantation Berhad
34. BORROWINGS (continued)
(a) Term Loans
The term loans are repayable by instalments of varying amounts over the following periods:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Less than 1 year 91,275 103,212 13,000 - 1 - 2 years 85,744 70,520 13,000 - 2 - 3 years 40,164 67,050 13,000 - 3 - 4 years 44,757 26,506 13,000 - 4 - 5 years 43,610 31,008 13,000 - More than 5 years 63,370 38,486 - -
368,920 336,782 65,000 -
(b) Islamic Debt Securities
Group
2011 2010 RM’000 RM’000
Current liabilities: Sukuk Ijarah 30,000 35,000 Murabahah Commercial Papers/Medium Term Notes (“Murabahah CP/MTN”) 100,000 -
130,000 35,000
Non-current liabilities: Sukuk Ijarah 120,000 150,000 Murabahah CP/MTN - 100,000
120,000 250,000
250,000 285,000
The Islamic Debt Securities comprise the following:
(i) RM210,000,000 Sukuk Ijarah which was issued on 18 December 2007, of which RM60,000,000 (2010: RM25,000,000) had been redeemed at the end of the reporting period; and
(ii) Up to RM190,000,000 Murabahah Commercial Papers/Medium Term Notes Programme. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 156 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
34. BORROWINGS (continued)
(b) Islamic Debt Securities (continued)
The Islamic Debt Securities are repayable by instalments of varying amounts over the following periods:
Group
2011 2010 RM’000 RM’000
Less than 1 year 130,000 35,000 1 - 2 years 30,000 130,000 2 - 3 years 30,000 30,000 3 - 4 years 45,000 30,000 4 - 5 years 15,000 45,000 More than 5 years - 15,000
250,000 285,000
(c) Irredeemable Convertible Unsecured Loan Stocks (“ICULS”)
On 28 February 2006, the Company issued RM160,000,000 nominal value 10-year 3% ICULS which were listed on the Main Market of Bursa Malaysia Securities Berhad on 15 March 2006.
The ICULS bear coupon at a fixed rate of 3.0% per annum payable annually in arrears. The ICULS are not redeemable and will be convertible into new ordinary shares on any market day commencing from the third anniversary from the date of issuance of the ICULS by tendering the ICULS on the basis of RM1.60 nominal value of the ICULS for every one (1) new ordinary share of RM1 each in the Company.
The liability component of ICULS recognised in the statements of financial position are as follows:
Group/Company
2011 2010 RM’000 RM’000
At beginning of the financial year 20,783 24,135 Interest expense 1,247 1,448 Interest payable (4,800) (4,800)
At end of the financial year 17,230 20,783
Repayable as follows: Current liabilities 3,766 3,553 Non-current liabilities 13,464 17,230
17,230 20,783
Interest expense on the ICULS is calculated on the effective yield basis by applying the effective interest rate of 6% (2010: 6%) per annum for an equivalent non-convertible loan stock to the liability component of the ICULS. 157 Annual Report 2011 Tradewinds Plantation Berhad
34. BORROWINGS (continued)
The annual interest rates/profit rates for the borrowings that were effective at the end of the reporting period were as follows:
Group Company
2011 2010 2011 2010 % % % %
Bank overdrafts 7.10 - 7.60 - - - Revolving credits 4.00 - 10.25 3.73 - 4.54 4.00 - 4.30 3.73 - 3.95 Term loans 4.26 - 10.25 3.90 - 6.50 5.18 - Sukuk Ijarah 5.05 - 5.70 4.95 - 5.70 - - Murabahah CP/MTN 4.45 - 4.55 4.45 - 4.55 - - Hire purchase and finance lease liabilities 7.42 - - - ICULS 6.00 6.00 6.00 6.00 Trade financing and other short term borrowings 3.90 - 10.25 - - -
Information on repricing analysis of the borrowings are disclosed in Note 44.
35. HIRE PURCHASE AND FINANCE LEASE LIABILITIES
Group
2011 2010 RM’000 RM’000
Future minimum lease payments: Not later than 1 year 382 - Later than 1 year and not later than 2 years 382 - Later than 2 years and not later than 5 years 380 -
Total future minimum lease payments 1,144 - Less: Future finance charges (116) -
Present value of finance lease liabilities 1,028 -
Analysis of present value of finance lease liabilities: Not later than 1 year 318 - Later than 1 year and not later than 2 years 343 - Later than 2 years and not later than 5 years 367 -
1,028 - Less: Amount due within 12 months (318) -
Amount due after 12 months 710 -
The hire purchase and finance lease liabilities bear interest at 7.42% (2010: Nil) per annum at the end of the reporting period. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 158 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
36. PROVISION FOR RETIREMENT BENEFITS
Group
2011 2010 RM’000 RM’000
At beginning of the financial year - - Arising from acquisition of a subsidiary (Note 41) 2,560 - Reversal during the financial year (221) - Exchange differences (18) -
At end of the financial year 2,321 -
Current: Not later than 1 year 371 -
Non-current: Later than 1 year and not later than 5 years 674 - More than 5 years 1,276 -
1,950 -
2,321 -
37. TRADE PAYABLES
Group
2011 2010 RM’000 RM’000
Third parties 104,929 47,096 Associates 120 -
105,049 47,096
(a) The credit terms available to the Group range from 30 to 90 days (2010: 30 to 90 days) from date of invoice.
(b) The amounts owing to associates are subject to normal trade terms. 159 Annual Report 2011 Tradewinds Plantation Berhad
38. OTHER PAYABLES
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Other payables 70,226 52,936 2,384 3,220 Accruals 55,372 33,807 6,562 3,676 Interest payable on ICULS 4,000 4,000 4,000 4,000 Amounts owing to non-controlling interests 14,415 14,415 - -
144,013 105,158 12,946 10,896
The amounts owing to non-controlling interests, which arose from advances, are unsecured, interest-free and repayable on demand.
39. AMOUNT OWING TO HOLDING COMPANY
The amount owing to holding company, which arose mainly from payment on behalf, is unsecured, interest-free and repayable on demand.
40. CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, cash and cash equivalents include cash on hand and in banks, deposit and other short term highly liquid investments, net of outstanding bank overdrafts.
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Deposits with licensed banks 103,584 66,279 86,000 58,000 Cash and bank balances 39,762 12,066 7,109 8,395 Bank overdrafts (2,206) - - -
141,140 78,345 93,109 66,395 Less: Fixed deposits pledged to licensed banks (5,220) (1,554) - - Less: Islamic deposits held on trust for the benefit of the Islamic Debt Securities investors (5,911) (6,725) - -
As reported in statements of cash flows 130,009 70,066 93,109 66,395 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 160 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
41. ACQUISITION OF A SUBSIDIARY
On 10 October 2011, Prisma Spektra Sdn. Bhd., a wholly-owned subsidiary of the Company, completed the acquisition of 125,709,000 ordinary shares of RM1.00 each in MARDEC Berhad (“Mardec”), representing the entire issued and paid-up ordinary share capital of Mardec, for a total purchase consideration of RM140,000,000.
Mardec is an investment holding company incorporated in Malaysia and through its local and overseas subsidiaries and associates, is involved in the processing and trading of natural rubber and the manufacturing of value-added rubber and polymer products.
The acquisition of Mardec is synergistic to the Group’s plan to expand its rubber activities downstream into the processing and marketing of rubber products.
Fair values of assets acquired and liabilities assumed at the date of acquisition are as follows:
2011 RM’000
Current Assets Inventories 277,986 Trade and other receivables 264,647 Current tax assets 5,281 Derivative assets 111 Deposits with licensed banks 5,718 Cash and bank balances 37,017
Non-Current Assets Property, plant and equipment 158,447 Investment properties 3,445 Investments in associates 56,227 Intangible assets 157 Deferred tax assets 6,469
Current Liabilities Trade and other payables (65,950) Derivative liabilities (10,372) Current tax liabilities (2,786) Provision for retirement benefits (353) Short term borrowings (544,710)
Non-Current Liabilities Long term borrowings (9,107) Provision for retirement benefits (2,207) Deferred tax liabilities (13,377)
Total net assets 166,643 Less: Non-controlling interests (8,216)
Group’s share of net assets 158,427 Bargain purchase gain (18,427)
Total cost of acquisition 140,000 161 Annual Report 2011 Tradewinds Plantation Berhad
41. ACQUISITION OF A SUBSIDIARY (continued)
Net cash outflow on acquisition of a subsidiary is as follows:
2011 RM’000
Consideration paid in cash 140,000 Less: Cash and cash equivalents acquired (27,218)
Net cash outflow on acquisition 112,782
The acquired subsidiary has contributed the following results to the Group during the financial year:
2011 RM’000
Revenue 503,965 Profit for the financial year 2,090
If the acquisition had occurred on 1 January 2011, the Groups’ results for the current financial year would have been as follows:
2011 RM’000
Revenue 3,555,030 Profit for the financial year 368,109
In 2010, the Company’s wholly-owned subsidiary, Johore Tenggara Oil Palm Berhad (“JTOP”), acquired the remaining 60% equity interest in Hak JTOP Sdn. Bhd. (“Hak JTOP”) for a cash consideration of RM3,200,000. Consequently, Hak JTOP became a wholly- owned subsidiary of JTOP.
The effect of the acquisition on the financial results of the Group for the previous financial year was as follows:
2010 RM’000
Revenue - Loss for the financial year (23)
There was no material effect to the Group’s revenue and profit for the previous financial year if the acquisition had occurred on 1 January 2010. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 162 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
41. ACQUISITION OF A SUBSIDIARY (continued)
Fair values of the assets acquired and liabilities assumed at the date of acquisition were as follows:
2010 RM’000
Property, plant and equipment 3,292 Other payables (92)
Group’s share of net assets 3,200
42. SEGMENTS INFORMATION
The Group’s operations primarily comprise cultivation of oil palm and rubber trees, processing of palm oil, provision of plantation management and advisory services (“Plantation Business”), processing and trading of natural rubber, manufacturing of value- added rubber and polymer products and property development.
The Group has arrived at four reportable segments that are organised and managed separately according to the nature of the products and services, specific expertise and technologies requirements, which requires different business and marketing strategies. The reportable segments are summarised as follows:
(a) Plantation
Cultivation of oil palm and rubber trees, processing of palm oil and provision of plantation management and advisory services.
(b) Manufacturing and trading
Processing and trading of natural rubber and manufacturing of value-added rubber and polymer products.
(c) Property development
Development of residential and commercial properties.
(d) Investment holding
Group-level corporate services, treasury functions and investing activities.
Other non-reportable segment comprises dormant subsidiaries and subsidiaries which have ceased business operations.
The Group evaluates performance on the basis of profit or loss from operations before tax not including non-recurring losses, such as restructuring costs.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
Segment assets exclude tax assets and segment liabilities exclude tax liabilities. 163 Annual Report 2011 Tradewinds Plantation Berhad
42. SEGMENTS INFORMATION (continued)
Manufacturing Investment and Property holding/ Plantation trading development Others Elimination Consolidated 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue Revenue from external customers 1,199,862 503,965 - 27 - 1,703,854 Inter-segment revenue 2,135 - - 80,571 (82,706) -
Total revenue 1,201,997 503,965 - 80,598 (82,706) 1,703,854
Segment results 476,143 (1,670) (4,978) 53,651 - 523,146 Share of results of associates (Note 16) - 1,619 - - - 1,619 Share of result of a jointly controlled entity (Note 17) 5,036 - - - - 5,036
481,179 (51) (4,978) 53,651 - 529,801
Add: Bargain purchase gain 18,427 Less: Inter-segment dividend income (71,404)
Profitbefore tax 476,824
Assets Segment assets 2,917,840 569,591 87,412 114,191 - 3,689,034 Investments in associates (Note 16) - 57,364 - - - 57,364 Investment in a jointly controlled entity (Note 17) 23,525 - - - - 23,525
2,941,365 626,955 87,412 114,191 - 3,769,923
Tax assets 29,884
Total assets 3,799,807 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 164 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
42. SEGMENTS INFORMATION (continued)
Manufacturing Investment and Property holding/ Plantation trading development Others Elimination Consolidated 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Liabilities Segment liabilities 455,822 457,887 7,800 550,580 - 1,472,089 Tax liabilities 363,568
Total liabilities 1,835,657
Other segment information Addition to non-current assets other than financial instruments and deferred tax assets 231,108 167,058 - 1,836 - 400,002 Depreciation and amortisation 100,762 2,678 - 1,620 - 105,060 Finance income 17,304 213 - 52,238 (68,363) 1,392 Finance costs 33,883 5,885 - 53,489 (68,363) 24,894
Investment Property holding/ Plantation development Others Elimination Consolidated 2010 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue Revenue from external customers 907,205 1,921 - - 909,126 Inter-segment revenue - - 57,446 (57,446) -
Total revenue 907,205 1,921 57,446 (57,446) 909,126
Segment results 297,227 458 32,693 - 330,378 Share of result of a jointly controlled entity (Note 17) 1,266 - - - 1,266
298,493 458 32,693 - 331,644
Less: Inter-segment dividend income (49,236)
Profitbefore tax 282,408
165 Annual Report 2011 Tradewinds Plantation Berhad
42. SEGMENTS INFORMATION (continued) Investment Property holding/ Plantation development Others Elimination Consolidated 2010 RM’000 RM’000 RM’000 RM’000 RM’000
Assets Segment assets 2,793,569 87,412 97,415 - 2,978,396 Investment in a jointly controlled entity (Note 17) 13,489 - - - 13,489
2,807,058 87,412 97,415 - 2,991,885
Tax assets 23,294
Total assets 3,015,179
Liabilities Segment liabilities 470,624 3,113 552,634 - 1,026,371 Tax liabilities 344,569
Total liabilities 1,370,940
Other segment information Addition to non-current assets other than financial instruments and deferred tax assets 211,557 - 2,553 - 214,110 Depreciation and amortisation 100,631 - 1,343 - 101,974 Finance income 9,943 - 31,015 (40,360) 598 Finance costs 34,944 - 32,522 (40,360) 27,106
Geographical information
Revenue and non-current assets information based on geographical location of customers and assets respectively are as follows:
Revenue
2011 2010 RM’000 RM’000
Malaysia 1,358,782 909,126 Singapore 223,202 - South Korea 61,279 - Others 60,591 -
1,703,854 909,126 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 166 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
42. SEGMENTS INFORMATION (continued)
Geographical information (continued) Non-current assets
2011 2010 RM’000 RM’000
Malaysia 2,946,372 2,717,520 Indonesia 44,196 - Thailand 11,984 - Vietnam 3,618 -
3,006,170 2,717,520
Non-current assets exclude financial instruments and deferred tax assets.
Information about major customers
Sales to two major customers in the plantation segment and one major customer in the manufacturing and trading segment during the financial year amounted to RM521,718,000 (2010: RM414,530,000 from three major customers) and RM202,642,000 (2010: Nil) respectively.
43. fINANCIAL INSTRUMENTS
(a) Capital management
The primary objective of the Group’s capital management is to ensure that the Group maintains healthy capital ratios in order to support its business operations and maximises shareholders value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the financial years ended 31 December 2011 and 31 December 2010.
The Group monitors capital using a gearing ratio which is the amount of borrowings (Note 34) divided by equity attributable to owners of the parent. The Group’s policy is to keep the gearing ratio within manageable levels. At the end of the reporting period, the Group’s gearing ratio is 0.67 (2010: 0.57).
With respect to the banking facilities with certain financial institutions and the Sukuk Ijarah and Murabahah CP/MTN facilities, the Group is committed to maintain a gearing ratio of not more than 1.75 calculated by dividing the amount of borrowings (Note 34) over equity attributable to owners of the parent.
(b) Significant Accounting Policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and the bases for recognition of income and expenses) for each class of financial assets, financial liabilities and equity instruments are disclosed in Note 3. 167 Annual Report 2011 Tradewinds Plantation Berhad
43. fINANCIAL INSTRUMENTS (continued)
(c) Categories of financial instruments
Loans and Available- Derivatives Group receivables for-sale at FVTPL Total 2011 RM’000 RM’000 RM’000 RM’000
Financial assets Other investments - 1,170 - 1,170 Trade receivables 261,528 - - 261,528 Other receivables 14,848 - - 14,848 Amounts owing by related companies 28 - - 28 Amount owing by a subsidiary of a jointly controlled entity 1,847 - - 1,847 Amounts owing by associates 6 - - 6 Derivative assets - - 218 218 Deposits with licensed banks 103,584 - - 103,584 Cash and bank balances 39,762 - - 39,762
421,603 1,170 218 422,991
Other financial Derivatives liabilities at FVTPL Total RM’000 RM’000 RM’000
Financial liabilities Trade payables 105,049 - 105,049 Other payables 144,013 - 144,013 Amount owing to holding company 381 - 381 Amount owing to a related company 146 - 146 Derivative liabilities - 2,964 2,964 Borrowings 1,217,215 - 1,217,215
1,466,804 2,964 1,469,768 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 168 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
43. fINANCIAL INSTRUMENTS (continued)
(c) Categories of financial instruments (continued)
Loans and Available- Group receivables for-sale Total 2010 RM’000 RM’000 RM’000
Financial assets Other investments - 1,900 1,900 Trade receivables 116,991 - 116,991 Other receivables 8,405 - 8,405 Amounts owing by related companies 13 - 13 Amount owing by a subsidiary of a jointly controlled entity 11,951 - 11,951 Deposits with licensed banks 66,279 - 66,279 Cash and bank balances 12,066 - 12,066
215,705 1,900 217,605
Other financial liabilities Total RM’000 RM’000
Financial liabilities Trade payables 47,096 47,096 Other payables 105,158 105,158 Amount owing to holding company 411 411 Amount owing to a related company 135 135 Amount owing to a subsidiary of a jointly controlled entity 6 6 Borrowings 873,565 873,565
1,026,371 1,026,371
Loans and Company receivables Total 2011 RM’000 RM’000
Financial assets Other receivables 2,316 2,316 Amounts owing by subsidiaries 856,840 856,840 Amounts owing by related companies 2 2 Amount owing by a subsidiary of a jointly controlled entity 1,771 1,771 Deposits with licensed banks 86,000 86,000 Cash and bank balances 7,109 7,109
954,038 954,038 169 Annual Report 2011 Tradewinds Plantation Berhad
43. fINANCIAL INSTRUMENTS (continued)
(c) Categories of financial instruments (continued)
Other financial Company liabilities Total 2011 RM’000 RM’000
Financial liabilities Other payables 12,946 12,946 Amount owing to holding company 381 381 Amounts owing to subsidiaries 930,257 930,257 Borrowings 284,230 284,230
1,227,814 1,227,814
Loans and receivables Total 2010 RM’000 RM’000
Financial assets Other receivables 860 860 Amounts owing by subsidiaries 646,645 646,645 Amounts owing by related companies 12 12 Amount owing by a subsidiary of a jointly controlled entity 11,856 11,856 Deposits with licensed banks 58,000 58,000 Cash and bank balances 8,395 8,395
725,768 725,768
Other financial liabilities Total RM’000 RM’000
Financial liabilities Other payables 10,896 10,896 Amount owing to holding company 411 411 Amounts owing to subsidiaries 731,112 731,112 Borrowings 245,783 245,783
988,202 988,202 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 170 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
43. fINANCIAL INSTRUMENTS (continued)
(d) Fair values
The fair values of financial instruments eferr to the amounts at which the instruments could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction. Fair values have been arrived at based on prices quoted in an active, liquid market or estimated using certain valuation techniques such as discounted future cash flows based upon certain assumptions. Amounts derived from such methods and valuation techniques are inherently subjective and therefore do not necessarily reflect the amounts that would be received or paid in the event of immediate settlement of the instruments concerned.
On the basis of the amounts estimated from the methods and techniques as mentioned in the preceding paragraph, the carrying amount of the various financial assets and financial liabilities reflected on the statements of financial position approximate their fair values.
The methodologies used in arriving at the fair values of the principal financial assets and financial liabilities of the oupGr are as follows:
- Cash and cash equivalents, trade and other receivables, intercompany indebtedness, trade and other payables and short-term borrowings: The carrying amounts are considered to approximate the fair values as they are either within the normal credit terms or short-term.
- Other investments: Marketable securities quoted in an active market are carried at market value. For securities that are not quoted in an active market, for which there is no observable market data, fair value is estimated using a relative valuation technique based on the price earnings ratio of a public listed entity with similar business activities obtained from the market, discounted by 20% to reflect its listing premium. Management believes that the estimated fair value resulting from this valuation technique is reasonable and the most appropriate at the end of the reporting period.
- Long-term borrowings: The fair values of long-term borrowings are determined by estimating future cash flows on a borrowing-by-borrowing basis, and discounting these future cash flows using an interest rate which takes into consideration the Group’s incremental borrowing rate at year end for similar types of debt arrangements.
- Derivative instruments: The fair values of foreign exchange derivatives were calculated using market prices that the Group would pay or receive to settle the related agreements.
(e) Fair value measurements recognised in the statements of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs). 171 Annual Report 2011 Tradewinds Plantation Berhad
43. fINANCIAL INSTRUMENTS (continued)
(e) Fair value measurements recognised in the statements of financial position (continued)
Group Level 1 Level 2 Level 3 Total 2011 RM’000 RM’000 RM’000 RM’000
Financial assets
Available-for-sale financialassets - Quoted shares 692 - - 692 - Unquoted shares - - 478 478
Financial assets at fair value through profit or loss - Forward foreign exchange contracts - 218 - 218
Financial liabilities
Financial liabilities at fair value through profit or loss - Forward foreign exchange contracts - 2,964 - 2,964
2010
Financial assets
Available-for-sale financialassets - Quoted shares 1,032 - - 1,032 - Unquoted shares - - 868 868
During the reporting period ended 31 December 2011, there were no transfers between Level 1 and Level 3 fair value measurement.
Reconciliation of Level 3 fair value measurements of financial assets:
Group
2011 2010 RM’000 RM’000
Available-for-sale unquoted shares At beginning of the financial year 868 116 (Loss)/Gain recognised in other comprehensive income (390) 752
At end of the financial year 478 868
Although the Group believes that its estimates of fair value are appropriate, the use of different assumptions could lead to different measurements of fair value. A discounted price earnings ratio has been used as a critical assumption or input for fair value measurement in Level 3. If this input were 10% higher/lower while all other variables were held constant, the fair value of the unquoted shares would increase/decrease by RM48,000 (2010: 87,000). NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 172 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s financial risk management objective is to optimise value creation for shareholders whilst minimising the potential adverse impact arising from fluctuations in interest rate risk, credit risk, foreign currency risk, liquidity and cash flow risk, and market price risk.
The exposure to these risks arises in the normal course of the Group’s business. The Group’s overall business strategies, its tolerance of risk and its general risk management philosophy are determined by the management in accordance with prevailing economic and operating conditions. The Group is exposed mainly to interest rate risk, credit risk, foreign currency risk, liquidity and cash flow risk and market price risk. Information on the management of the related exposures are detailed below.
(a) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the Group’s and of the Company’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s exposure to changes in interest rates relates primarily to the Group’s deposits with banks and interest bearing debt obligations. The Group does not use derivative financial instruments to hedge its risk but regularly reviews its debt portfolio to enable it to source low interest funding. The Group’s deposits are placed at fixed rates and management endeavours to obtain the best rate available in the market.
Sensitivity analysis for interest rate risk
At 31 December 2011, if interest rates had been 50 basis points lower/higher, with all other variables held constant, the Group’s and the Company’s post-tax profit for the financial year would have been RM1,872,000 (2010: RM1,504,000) and RM679,000 (2010: RM626,000) higher/lower respectively, arising mainly as a result of lower/higher finance costs on floating rate borrowings and higher/lower finance income on deposits. The assumed movement in basis points for interest rate sensitivity analysis is based on a prudent estimate of the current market environment.
Effective interest rates and maturity profile
The following tables set out the carrying amounts, the weighted average effective interest rates as at the end of the reporting period and the remaining maturities of the Group’s and the Company’s financial instruments that are exposed to interest rate risk:
Weighted average effective More interest rate Within 1 - 2 2 - 3 3 - 4 4 - 5 than Note (per annum) 1 year years years years years 5 years Total % RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group At 31 December 2011
Fixed rates Deposits with licensed banks 30 3.27 103,584 - - - - - 103,584 Term loans 34 5.87 (24,270) (43,550) - - - - (67,820) Sukuk Ijarah 34 5.30 (30,000) (30,000) (30,000) (45,000) (15,000) - (150,000) Murabahah CP/MTN 34 4.50 (100,000) - - - - - (100,000) Hire purchase and finance lease liabilities 35 7.42 (318) (343) (367) - - - (1,028) ICULS (liability component) 34 6.00 (3,766) (3,992) (4,232) (4,485) (755) - (17,230) 173 Annual Report 2011 Tradewinds Plantation Berhad
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(a) Interest rate risk (continued)
Effective interest rates and maturity profile (continued)
Weighted average effective More interest rate Within 1 - 2 2 - 3 3 - 4 4 - 5 than Note (per annum) 1 year years years years years 5 years Total % RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group At 31 December 2011
Floating rates Bank overdrafts 34 7.15 (2,206) - - - - - (2,206) Revolving credits 34 4.47 (235,402) - - - - - (235,402) Term loans 34 5.02 (67,005) (42,194) (40,164) (44,757) (43,610) (63,370) (301,100) Trade financing and other short term borrowings 34 4.78 (342,429) - - - - - (342,429)
At 31 December 2010
Fixed rates Deposits with licensed banks 30 2.69 66,279 - - - - - 66,279 Term loans 34 5.81 (39,462) (24,270) (43,550) - - - (107,282) Sukuk Ijarah 34 5.23 (35,000) (30,000) (30,000) (30,000) (45,000) (15,000) (185,000) Murabahah CP/MTN 34 4.50 - (100,000) - - - - (100,000) ICULS (liability component) 34 6.00 (3,553) (3,766) (3,992) (4,232) (4,485) (755) (20,783)
Floating rates Revolving credits 34 3.83 (231,000) - - - - - (231,000) Term loans 34 4.32 (63,750) (46,250) (23,500) (26,506) (31,008) (38,486) (229,500) NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 174 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(a) Interest rate risk (continued)
Effective interest rates and maturity profile (continued)
Weighted average effective More interest rate Within 1 - 2 2 - 3 3 - 4 4 - 5 than Note (per annum) 1 year years years years years 5 years Total % RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company At 31 December 2011
Fixed rates Deposits with licensed banks 30 2.85 86,000 - - - - - 86,000 Amount owing to a subsidiary 33 5.35 - (30,000) (30,000) (45,000) (11,025) - (116,025) ICULS (liability component) 34 6.00 (3,766) (3,992) (4,232) (4,485) (755) - (17,230) Amount owing to a subsidiary 25 4.63 (128,064) - - - - - (128,064)
Floating rates Amounts owing by subsidiaries 25 5.50 675,259 - - - - - 675,259 Amounts owing to subsidiaries 25 3.00 (674,751) - - - - - (674,751) Revolving credits 34 4.14 (202,000) - - - - - (202,000) Term loan 34 5.18 (13,000) (13,000) (13,000) (13,000) (13,000) - (65,000)
At 31 December 2010
Fixed rates Deposits with licensed banks 30 2.72 58,000 - - - - - 58,000 Amount owing to a subsidiary 33 4.97 - (128,116) (30,000) (30,000) (45,000) (10,159) (243,275) ICULS (liability component) 34 6.00 (3,553) (3,766) (3,992) (4,232) (4,485) (755) (20,783) Amount owing to a subsidiary 25 4.95 (35,000) - - - - - (35,000)
Floating rates Amounts owing by subsidiaries 25 5.50 604,863 - - - - - 604,863 Amounts owing to subsidiaries 25 2.75 (447,497) - - - - - (447,497) Revolving credits 34 3.82 (225,000) - - - - - (225,000) 175 Annual Report 2011 Tradewinds Plantation Berhad
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b) Credit risk
Cash deposits and trade receivables may give rise to credit risk which requires the loss to be recognised if a counter party fails to perform as contracted. The management monitors exposure to credit risk on an ongoing basis via management reporting procedures and action is taken to recover debts when due.
Exposure to credit risk
At the end of the reporting period, the maximum exposure to credit risk for the Group and for the Company are represented by:
- The carrying amount of each class of financial assets ecognisedr in the statements of financial position, including derivatives with positive fair values; and
- A nominal amount of RM788,559,000 (2010: RM623,250,000) relating to corporate guarantees provided by the Company to lenders on the financing facilities of certain subsidiaries. The amount of corporate guarantees utilised at the end of the reporting period is RM472,659,000 (2010: RM526,950,000) as disclosed in Note 47.
Credit risk concentration profile
As at 31 December 2011, other than the amounts owing by three major customers of the Group constituting 36.8% (2010: 46.9%) of the total receivables of the Group and the amounts owing by subsidiaries constituting 99.5% (2010: 98.1%) of the total receivables of the Company, there were no significant concentration of credit risk.
Financial assets that are neither past due nor impaired
Information regarding trade receivables that are neither past due nor impaired is disclosed in Note 23. Deposits, cash and bank balances placed with financial institutions that are neither past due nor impaired are placed with major financial institutions with high credit ratings and no history of default.
(c) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily Malaysian Ringgit, Thai Baht, Vietnam Dong and Indonesian Rupiah. The foreign currencies in which these transactions are denominated are mainly United States Dollar (USD) and Singapore Dollar (SGD).
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Group Liabilities Assets
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
USD 11,008 - 93,219 - SGD 120 - 590 - Others - - 72 - NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 176 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(c) Foreign currency risk (continued)
The Group maintains a natural hedge, whenever possible, by borrowing in currencies that match the future revenue stream to be generated from its investments.
The Group requires all of its operating entities to use forward currency contracts to minimise the currency exposures for which receipt is anticipated after the Group has entered into a firm commitment for a sale. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions when they occur.
At 31 December 2011, the Group had hedged approximately 100% of its foreign currency denominated sales for which firm commitments existed at the reporting date.
Sensitivity analysis for foreign currency risk
If functional currency of Group entities weakens/strengthens against United States Dollar and Singapore Dollar by 3%, with all other variables held constant, the Group’s post-tax profit for the financial year would have been RM1,831,000 (2010: Nil) higher/lower.
(d) Liquidity and cash flow risk
The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all operating, investing and financing needs are met. In liquidity risk management strategy, the Group measures and forecasts its cash commitments and maintains adequate level of cash and credit facilities to finance its working capital. In addition, the Group carries out treasury management to optimise the cash flow utilisation of the Group where applicable.
The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the end of the reporting period based on contractual undiscounted repayment obligations.
On demand or within 1 – 5 Over 5 Group 1 year years years Total RM’000 RM’000 RM’000 RM’000
2011 Financial liabilities: Trade payables 105,049 - - 105,049 Other payables 144,013 - - 144,013 Amount owing to holding company 381 - - 381 Amount owing to a related company 146 - - 146 Derivative liabilities 2,964 - - 2,964 Borrowings 805,396 400,361 67,317 1,273,074
Total undiscounted financial liabilities 1,057,949 400,361 67,317 1,525,627 177 Annual Report 2011 Tradewinds Plantation Berhad
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(d) Liquidity and cash flow risk (continued)
On demand or within 1 – 5 Over 5 Group 1 year years years Total RM’000 RM’000 RM’000 RM’000
2010 Financial liabilities: Trade payables 47,096 - - 47,096 Other payables 105,158 - - 105,158 Amount owing to holding company 411 - - 411 Amount owing to a related company 135 - - 135 Amount owing to a subsidiary of a jointly controlled entity 6 - - 6 Borrowings 372,765 494,333 60,374 927,472
Total undiscounted financial liabilities 525,571 494,333 60,374 1,080,278
Company
2011 Financial liabilities: Other payables 12,946 - - 12,946 Amount owing to holding company 381 - - 381 Amounts owing to subsidiaries 814,232 130,066 - 944,298 Borrowings 218,766 77,036 - 295,802
Total undiscounted financial liabilities 1,046,325 207,102 - 1,253,427
2010 Financial liabilities: Other payables 10,896 - - 10,896 Amount owing to holding company 411 - - 411 Amounts owing to subsidiaries 487,837 254,167 10,690 752,694 Borrowings 228,553 19,200 4,800 252,553
Total undiscounted financial liabilities 727,697 273,367 15,490 1,016,554 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 178 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
44. fINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(e) Market price risk
The Group is exposed to equity price risk arising from its investment in quoted shares. These quoted shares are listed on Bursa Malaysia Securities Berhad and are classified as available-for-sale financial assets.
In the normal course of business of the Group, there are exposures to price fluctuation on commodities particularly for palm oil and rubber. The Group mitigates its risk to the price volatility through constant monitoring on the movement of oil palm product prices and rubber product prices.
Sensitivity analysis for equity price risk
At 31 December 2011, if the market value of the quoted investments had been 5% (2010: 5%) higher/lower, with all other variables held constant, the Group’s available-for-sale reserve would have been RM35,000 (2010: RM52,000) higher/lower, arising as a result of an increase/decrease in the fair value of these quoted shares.
45. RELATED PARTY DISCLOSURES
(a) Identities of related parties
For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Related parties of the Company include:
(i) Tradewinds (M) Berhad, the holding company;
(ii) Direct and indirect subsidiaries of the holding company;
(iii) Direct and indirect associates, jointly controlled entities and affiliates of the holding company; and
(iv) Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel includes all the Directors of the Company, and certain members of senior management of the Group.
The Group has related party relationships with the following parties:
(i) Retus Plantation Sdn. Bhd. (“RPSB”)
RPSB is a 60% subsidiary of the holding company.
(ii) Tradewinds International Insurance Brokers Sdn. Bhd. (“TIIBSB”)
TIIBSB is a company in which a major shareholder of the holding company, Tan Sri Dato’ Seri Syed Mokhtar Shah bin Syed Nor, has indirect interest.
(iii) Solar Green Sdn. Bhd. (“SGSB”)
SGSB is a wholly owned subsidiary of Pride Palm Oil Mill Sdn. Bhd., a jointly controlled entity of the Company. 179 Annual Report 2011 Tradewinds Plantation Berhad
45. RELATED PARTY DISCLOSURES (continued)
(a) Identities of related parties (continued)
(iv) JP Logistics Sdn. Bhd. (“JPLSB”)
JPLSB is a wholly-owned subsidiary of Johor Port Berhad (“JPB”). JPB is a wholly-owned subsidiary of MMC Corporation Berhad (“MMCCB”) of which Seaport Terminal (Johore) Sdn. Bhd. (“STJSB”) is a major shareholder holding 51.76% of the equity interest in MMCCB.
Tan Sri Dato’ Seri Syed Mokhtar Shah bin Syed Nor is deemed a major shareholder of the Company by virtue of his direct and indirect equity interest in Restu Jernih Sdn. Bhd., Kelana Ventures Sdn. Bhd., Indra Cita Sdn. Bhd. and STJSB.
Restu Jernih Sdn. Bhd. is deemed a major shareholder of the Company by virtue of its interest in Perspective Lane (M) Sdn. Bhd., which is a major shareholder of the holding company having direct shareholdings of 30.04%. Kelana Ventures Sdn. Bhd. is also a major shareholder of the holding company having direct shareholdings of 8.86%.
(v) Felda Marketing Services Sdn. Bhd. (“FMSSB”), Felda Kernel Products Sdn. Bhd. (“FKPSB”), Felda Palm Industries Sdn. Bhd. (“FPISB”), FPM Sdn. Bhd. (“FPMSB”) and Felda Agricultural Services Sdn. Bhd. (“FASSB”)
FMSSB, FKPSB, FPISB, FPMSB and FASSB are subsidiaries of Felda Holdings Berhad (“Felda Holdings”).
Felda Global Ventures Holdings Sdn. Bhd., which is deemed as a major shareholder of the Company, has 49% equity interest in Felda Holdings.
(vi) Mardec Processing Sdn. Bhd. (“MPSB”)
MPSB is a wholly-owned subsidiary of Mardec Berhad which in turn was a wholly-owned subsidiary of Semi Bayu Sdn. Bhd. (“SBSB”).
Bakry bin Hamzah, a director of the Company, is a shareholder of Damai Akrab Sdn. Bhd. (“DASB”) having a 57% equity interest in DASB. DASB in turn has a 55% equity interest in SBSB. He is also a director of Restu Jernih Sdn. Bhd., an indirect major shareholder of the Company.
With effect from 10 October 2011, MPSB became an indirect subsidiary of the Company pursuant to the completion of the acquisition of Mardec Berhad by a wholly-owned subsidiary of the Company.
(vii) DRB-Hicom Defence Technologies Sdn. Bhd. (“Deftech”)
Deftech is a wholly-owned subsidiary of DRB-HICOM Berhad (“DRB-Hicom”) of which Tan Sri Dato’ Seri Syed Mokhtar Shah bin Syed Nor is deemed a major shareholder by virtue of his direct and indirect equity interest in Etika Strategi Sdn. Bhd. (“ESSB”). ESSB is a major shareholder holding 55.92% in DRB-Hicom.
(viii) Euromobil Sdn. Bhd. (“Euromobil”)
Euromobil is a wholly-owned indirect subsidiary of DRB-Hicom. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 180 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
45. RELATED PARTY DISCLOSURES (continued)
(b) Significant elatedr party transactions
In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Interests paid and payable to subsidiaries - - 31,470 24,940 Insurance premium paid to Tradewinds International Insurance Brokers Sdn. Bhd. 3,794 2,639 390 342 Purchase of raw materials from FPM Sdn. Bhd. 1,433 - - - Purchase of germinated oil palm seeds from Felda Agricultural Services Sdn. Bhd. 489 423 - - Purchase of motor vehicles from Euromobil Sdn. Bhd. 1,698 479 1,352 479 Rental income received and receivable from associates 196 - - - Sales of fresh fruit bunches to: - Solar Green Sdn. Bhd. 21,342 17,954 - - - Retus Plantation Sdn. Bhd. 14,891 7,114 - - Sales of crude palm oil and palm kernel to: - Felda Marketing Services Sdn. Bhd. 70,510 50,870 - - - Felda Kernel Products Sdn.Bhd. 10,641 7,976 - - Sales of rubber to: - Mardec Processing Sdn. Bhd. 5,825 - - - - associates 202,642 - - - Sales of spare part for military vehicles to DRB-Hicom Defence Technologies Sdn. Bhd. 158 - - - Provision of transportation services from JP Logistics Sdn. Bhd. 360 341 - - Interests received and receivable from subsidiaries - - 36,893 30,459 Interest on ICULS payable to holding company 4,800 4,800 4,800 4,800 Management fees paid and payable to holding company 1,200 1,200 1,200 1,200 Management fees received and receivable from: - subsidiaries - - 9,166 8,210 - Retus Plantation Sdn. Bhd. 2,752 2,660 - - - Solar Green Sdn. Bhd. 1,222 989 - - Marketing expenses paid and payable to associates 140 - - - Dividend received from subsidiaries (Note 5) - - 60,248 52,172
The related party transactions described above were carried out based on negotiated terms and conditions and mutually agreed with respective related parties. 181 Annual Report 2011 Tradewinds Plantation Berhad
45. RELATED PARTY DISCLOSURES (continued)
(c) Compensation of key management personnel
The remuneration of key management personnel (including Directors of the Company) during the financial year was as follows:
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Short term employee benefits 6,891 4,526 3,963 2,854 Defined contribution plan 809 492 416 289 Termination benefits - 177 - -
46. CAPITAL COMMITMENTS
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Property, plant and equipment: - Approved but not contracted for 65,325 46,760 4,366 1,779 - Approved and contracted for 35,349 67,569 - -
100,674 114,329 4,366 1,779
Biological assets: - Approved but not contracted for 64,897 46,302 - - - Approved and contracted for 48,760 77,575 - -
113,657 123,877 - -
Acquisition of a subsidiary: - Approved and contracted for - 140,000 - -
Intangible assets - Patent: - Approved and contracted for 300 - - -
Subscription of redeemable convertible preference shares in a jointly controlled entity: - Approved and contracted for - 5,000 - 5,000
Share of capital commitment of a jointly controlled entity: - Approved and contracted for 1,112 379 - -
215,743 383,585 4,366 6,779 NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 182 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
47. CONTINGENT LIABILITIES
Group Company
2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Unsecured Guarantees given to banks for financing facilities of certain subsidiaries - - 472,659 526,950 Pending litigation 11,039 - - -
11,039 - 472,659 526,950
The pending litigation against the Group is a claim filed against a subsidiary, Mardec Yala Co. Ltd., for the alleged wrongful transfer of shares and the claim for compensation of Thai Baht 110.0 million (approximately RM11.039 million). On 3 December 2007, the Court had dismissed the claim and issued a written judgment. However, the claimant filed an appeal against the Court decision on 3 December 2007 and was dismissed by the Court. The claimant has again filed second appeal to the Supreme Court on 30 July 2010. Pending the outcome of the second appeal expected to be given by the end of 2013, no provision has been made in the financial statements.
48. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
On 30 October 2009, Prisma Spektra Sdn. Bhd. (“PSSB”), a wholly-owned subsidiary of the Company, entered into a conditional Share Sale Agreement with Semi Bayu Sdn. Bhd. (“SBSB”) for the acquisition of 125,709,000 ordinary shares of RM1 each in MARDEC Berhad (“Mardec”), representing the entire issued and paid-up ordinary share capital of Mardec, for a total purchase consideration of RM150,000,000 (“Proposed Acquisition of Mardec”).
Mardec is an investment holding company incorporated in Malaysia and through its local and overseas subsidiaries and associates, is involved in the processing and trading of natural rubber and the manufacturing of value-added rubber and polymer products.
The initial period for the fulfillment and satisfaction of the conditions precedent to the Proposed Acquisition of Mardec (“Prescribed Period”) expired on 29 April 2010. On 30 April 2010 and 1 November 2010 respectively, SBSB and PSSB agreed to extend the Prescribed Period by a period of six months to 30 October 2010 and by a further period of six months to 30 April 2011.
On 25 February 2011, PSSB and SBSB entered into a supplemental agreement to revise the purchase consideration for the Proposed Acquisition of Mardec as provided in the Share Sale Agreement from RM150,000,000 to RM140,000,000, which shall be payable in the following manner:
(a) a first instalment of RM42,000,000 or 30% of the evisedr purchase consideration to be paid on the completion date; and
(b) a second instalment of RM98,000,000 or 70% of the revised purchase consideration to be paid within 3 months from the completion date.
The revised purchase consideration is arrived at based on Ernst & Young’s appraisal of the fair value of the Mardec Group by using the Hybrid Methodology, which is a combination of Income and Asset Approaches of valuation, which ranges between RM135,000,000 and RM155,000,000.
On 28 April 2011, SBSB and PSSB agreed to extend the Prescribed Period by a further period of six months to 30 October 2011. 183 Annual Report 2011 Tradewinds Plantation Berhad
48. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR (continued)
The Proposed Acquisition of Mardec was approved by the shareholders of the Company at the extraordinary general meeting held on 14 July 2011.
On 4 October 2011, PSSB entered into and executed:
(a) a Novation Agreement with the Government of Malaysia, the Minister of Finance and SBSB for the novation of all SBSB’s rights, liabilities, benefits, interests, duties and obligations under and in respect of the Sale and Purchase of Shares Agreement dated 16 January 2003 between the Government of Malaysia, the Minister of Finance and SBSB (the “MARDEC SPA”) to PSSB; and
(b) a Supplemental Agreement with the Government of Malaysia and the Minister of Finance as a supplement to the MARDEC SPA for the purpose of amending the provisions of the MARDEC SPA.
With the execution of the aforesaid Novation Agreement and Supplemental Agreement, all conditions precedent to the Proposed Acquisition of Mardec have been deemed fulfilled and satisfied and that the Share Sale Agreement has become unconditional with effect from 4 October 2011. The Proposed Acquisition of Mardec was completed on 10 October 2011.
49. SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD
(a) On 8 February 2012, Mardec International Sdn. Bhd. (“MISB”), an indirect wholly-owned subsidiary of the Company, and the other shareholders of R1 International Pte. Ltd. (“R1”) have entered into a conditional Share Sale Agreement with Hainan State Farms Investment Limited (“HSF”) and Hainan Rubber Group (Singapore) Pte. Ltd. (“Hainan Rubber”) for the disposal of 6,300,000 ordinary shares of USD1.00 each, representing 90% of the equity interest in R1, for a total cash consideration of USD51,725,016 (“Disposal Price”).
Pursuant to the Share Sale Agreement, MISB shall dispose 3,150,000 ordinary shares of USD1.00 each, representing its entire 45% equity interest in R1 to HSF for a cash consideration of USD25,862,508 or approximately RM77.1 million.
The Disposal Price represents 90% of the total valuation of R1’s equity of USD57,472,240 which represents the price to book ratio of 1.6575 based on R1 Group’s unaudited net tangible assets (“NTA”) as at 31 December 2011. The Disposal Price is conditional upon R1 Group’s audited NTA at 31 December 2011 being not less than USD34,674,051 and will be adjusted in the event of lower audited NTA by using the same price to book ratio.
The proposed disposal of R1 is conditional upon the satisfactory fulfillment of the following key conditions precedent within a period of 60 days from the date of the Share Sale Agreement or such longer period as the parties agree:
(i) the approval of the board of directors of each of the selling shareholders for the sale of their respective equities in R1;
(ii) the approval of the board of directors and shareholders of R1;
(iii) the completion of the business, financial and legal due diligence investigations into the R1 Group Companies and the satisfactory resolution and determination of any issues arising from the due diligence investigations by both HSF and Hainan Rubber; and
(iv) other requisite conditions stated in the Share Sale Agreement. NOTES TO THE FINANCIAL STATEMENTS Tradewinds Plantation Berhad Annual Report 2011 184 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
49. SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD (continued)
(b) On 29 March 2012, Amalan Penaga (M) Sdn. Bhd. (“APSB”), a wholly-owned subsidiary of the Company, entered into a conditional Share Sale Agreement with Tradewinds (M) Berhad (“TWM”), the holding company of the Company, for the acquisition of 11,259,523 ordinary shares of RM1.00 each in Retus Plantation Sdn. Bhd. (“RPSB”) (“Acquisition Shares”), representing 60% of its issued and paid-up share capital, for a purchase consideration of an amount equivalent to 60% of the net tangible asset value (“NTAV”) of RPSB group (“Proposed Acquisition of RPSB”). Under the Share Sale Agreement, NTAV is defined as the total tangible assets of RPSB group (having regard to the market value of RPSB’s oil palm estates and palm oil mill as at 1 December 2011 of RM366,041,000, as appraised by CH Williams Talhar & Wong Sdn. Bhd., a firm of independent licensed valuers) less the total liabilities of RPSB group calculated on the last day of the month which precedes the issue of the notice for completion by APSB.
For illustration purposes, the purchase consideration based on the unaudited adjusted NTAV of RPSB group as at 31 December 2011 amounts to RM125,395,390.
The Proposed Acquisition of RPSB is conditional upon the fulfilment and/or satisfaction of the following conditions precedent:
(i) TWM obtaining the approval of the financiers of RPSB for TWM’s sale of the Acquisition Shares to APSB;
(ii) TWM obtaining the written confirmation from Assar Plantations Holding Sdn. Bhd. (“Assar”), the other shareholder in RPSB, waiving any rights of pre-emption that Assar has in respect of the sale and transfer of the Acquisition Shares to APSB upon terms and conditions acceptable to APSB;
(iii) the approvals of the shareholders of the Company at a general meeting to be convened; and
(iv) other requisite approvals, if any.
The conditions precedent is to be fulfilled within 6 months from the date of the Share Sale Agreement or upon the expiry thereof, such longer period as the parties mutually agree.
185 Annual Report 2011 Tradewinds Plantation Berhad Plantation Review
2011 2010 2009 2008 2007
OIL PALM
Fresh Fruit Bunches (FFB) (tonnes) 1,362,679 1,191,685 1,196,876 1,197,026 1,160,994 FFB Yield per Mature Hectare (tonnes)* 18.77 16.92 16.87 16.91 16.90
Mill Production (tonnes)
– Crude Palm Oil 277,872 250,726 250,406 238,893 219,349 – Palm Kernel 70,107 62,283 62,743 60,786 57,105
Extraction Rate (%)
– Crude Palm Oil 20.87 21.54 21.20 20.71 19.94 – Palm Kernel 5.27 5.35 5.31 5.27 5.19
Average Selling Price (RM per tonne)
– Crude Palm Oil 3,223 2,705 2,174 2,692 2,187 – Palm Kernel 2,211 1,713 1,029 1,534 1,394
Hectarage
– Mature 72,242 70,166 69,885 70,254 67,763 – Immature 23,871 20,940 14,530 12,859 15,067
* FFB yield per hectare is based on average mature hectare
Material Tradewinds Plantation Berhad Annual Report 2011 190 Properties of Tradewinds Plantation Berhad Group
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 TRADEWINDS CORRIDOR SDN BHD Ladang Sg. Tekai Ladang Sg. Seraya Ladang Batu Hitam Ladang Tanah Merah Ladang Sg. Ahning & Ladang Bukit Ketapang HS(D) 1/87 and 2/87 Oil Palm and 1,328.87 Plantation Leasehold for a 313,855 18.3.2008 PT No. 245 and 246 Rubber Plantation term of 60 years Mukim Padang Terap Kiri expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 5/92 and 9/92 Oil Palm and 354.89 Plantation Leasehold for a PT No. 334 to 338 Rubber Plantation term of 60 years Mukim Padang Terap Kiri expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 235 and 237 Oil Palm and 661.44 Plantation Leasehold for a PT No. 692 to 694 Rubber Plantation term of 60 years Mukim Padang Terap Kiri expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 253, PT No. 1286 Oil Palm and 140.11 Plantation Leasehold for a Mukim Padang Terap Kiri Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2063
HS(D) 249 to 250 Oil Palm and 35.79 Plantation Leasehold for a PT No. 776 to 777 Rubber Plantation term of 60 years Mukim Padang Terap Kanan expiring on District of Padang Terap, Kedah 13.4.2063
HS(D) 1/92 to 2/92 Oil Palm and 817.68 Plantation Leasehold for a PT No. 229 to 230 Rubber Plantation term of 60 years Mukim Padang Terap Kanan expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 10/92 to 14/92 Oil Palm and 1,402.88 Plantation Leasehold for a PT No. 351 to 355 Rubber Plantation term of 60 years Mukim Batang Tunggang Kiri expiring on District of Padang Terap, Kedah 26.11.2055 191 Annual Report 2011 Tradewinds Plantation Berhad
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 HS(D) 4 to 7 Oil Palm and 792.65 Plantation Leasehold for a PT No. 379 to 283 Rubber Plantation term of 60 years Mukim Batang Tunggang Kiri expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 238 to 244 Oil Palm and 116.06 Plantation Leasehold for a PT No. 695 to 701 Rubber Plantation term of 60 years Mukim Batang Tunggang Kiri expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 253 to 260 Oil Palm and 19.74 Plantation Leasehold for a PT No. 421 to 428 Rubber Plantation term of 60 years Mukim Batang Tunggang Kiri expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 252, PT No. 879 Oil Palm and 79.17 Plantation Leasehold for a Mukim Batang Tunggang Kiri Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 21.9.2063
HS(D) 2 to 3 Oil Palm and 1,327.48 Plantation Leasehold for a PT No. 136 to 152 Rubber Plantation term of 60 years Mukim Batang Tunggang Kanan expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 15/92, PT No. 1468 Oil Palm and 197.26 Plantation Leasehold for a Mukim Pedu Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 16/92 to 18/92 Oil Palm and 1,633.54 Plantation Leasehold for a PT No. 1476 to 1478 Rubber Plantation term of 60 years Mukim Pedu expiring on District of Padang Terap, Kedah 26.11.2055
HS(D) 1, PT No. 1569 Oil Palm and 187.84 Plantation Leasehold for a Mukim Pedu Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 19/92, PT No. 4479 Oil Palm and 1,447.69 Plantation Leasehold for a Mukim Tekai Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055 Material Properties of Tradewinds Plantation Berhad Annual Report 2011 192 Tradewinds Plantation Group
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 HS(D) 1/89, PT No. 4278 Oil Palm and 48.78 Plantation Leasehold for a Mukim Tekai Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 158/89, PT No. 4279 Oil Palm and 3.14 Plantation Leasehold for a Mukim Tekai Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 408/89, PT No. 2333 Oil Palm and 249.39 Plantation Leasehold for a Mukim Bukit Lada Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 389, PT No. 805 Oil Palm and 7.99 Plantation Leasehold for a Mukim Kuala Nerang Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 2158, PT No. 363 Oil Palm and 634.81 Plantation Leasehold for a Mukim Bandar Pokok Sena Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 26.11.2055
HS(D) 251, PT No. 1705 Oil Palm and 8.38 Plantation Leasehold for a Mukim Tolak Rubber Plantation term of 60 years District of Padang Terap, Kedah expiring on 21.9.2063
LADANG SUNGAI RELAI SDN BHD Ladang Sg. Relai
GM 53/99, PT 3294 Oil Palm 6.02 Plantation Leasehold for a 100,824 27.9.1999 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
GM 54/99, PT 3295 Oil Palm 12.41 Plantation Leasehold for a 27.9.1999 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064 193 Annual Report 2011 Tradewinds Plantation Berhad
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 GM 55/99, PT 3296 Oil Palm 7.57 Plantation Leasehold for a 27.9.1999 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
GM 56/99, PT 3297 Oil Palm 170.12 Plantation Leasehold for a 27.9.1999 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
GM 57/99, PT 3298 Oil Palm 288.4 Plantation Leasehold for a 27.9.1999 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
GM 58/99, PT 3299 Oil Palm 4,681.10 Plantation Leasehold for a 27.9.1999 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
PT 3252, HS (D) 432 Oil Palm 1,067 Plantation Leasehold for a 20.4.2000 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
PT 3254, HS (D) 433 Oil Palm 2,023 Plantation Leasehold for a 20.4.2000 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
PT 3255, HS (D) 434 Oil Palm 224.3 Plantation Leasehold for a 20.4.2000 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064
PT 6632, HS (D) 435 Oil Palm 77.96 Plantation Leasehold for a 20.4.2000 Mukim Relai Plantation term of 66 years Daerah Gua Musang, Kelantan expiring on 29.11.2064 Material Properties of Tradewinds Plantation Berhad Annual Report 2011 194 Tradewinds Plantation Group
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 LADANG PETRI TENGGARA SDN BHD Ladang Ulu Sebol
PTD 4428 HS(D) 17845 Oil Palm 3,500.53 Plantation Leasehold for a 105,468 N/Av Mukim Hulu Sg Johor Plantation term of 84 years Daerah Kota Tinggi, Johor expiring on 26.8.2076
PTD 4444 HS(D) 17846 Oil Palm 364.21 Plantation Leasehold for a N/Av Mukim Hulu Sg Johor Plantation term of 84 years Daerah Kota Tinggi, Johor expiring on 26.8.2076 LADANG PERMAI SDN BHD Ladang Permai & Ladang Tengah Nipah
Lot No. 116291920 Oil Palm 5,100 Plantation Leasehold for a 127,337 13.5.1984 Locality of Silabukan Plantation term of 99 years District of Lahad Datu, Sabah expiring on 31.12.2080
CL No. 115347852 Oil Palm 194 Plantation Leasehold for a 22.5.1995 Locality of Tengah Nipah Plantation term of 99 years District of Lahad Datu, Sabah expiring on 31.12.2080
CL No. 115345867 Oil Palm 354 Plantation Leasehold for a 22.5.1995 Locality of Segama Plantation term of 99 years District of Lahad Datu, Sabah expiring on 31.12.2080
Country Lease 115349383 Oil Palm 18.05 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349392 Oil Palm 18.15 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078 195 Annual Report 2011 Tradewinds Plantation Berhad
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 Country Lease 115349409 Oil Palm 17.85 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349418 Oil Palm 18.01 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349427 Oil Palm 18.10 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349436 Oil Palm 18.23 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349445 Oil Palm 18.24 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349454 Oil Palm 18 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349463 Oil Palm 18.17 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349472 Oil Palm 18 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349481 Oil Palm 18.15 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078 Material Properties of Tradewinds Plantation Berhad Annual Report 2011 196 Tradewinds Plantation Group
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 Country Lease 115349490 Oil Palm 17.71 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115349507 Oil Palm 5.948 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2078
Country Lease 115406329 Oil Palm 179.8 Plantation Leasehold for a 4.2.1999 District of Lahad Datu, Sabah Plantation term of 99 years expiring on 31.12.2094
Ladang Batu Putih & Ladang Tinabau
Lot No. 075104335 Oil Palm 3,550 Plantation Leasehold for a 120,166 20.8.1993 Locality of Sekong Plantation term of 999 years District of Sandakan, Sabah expiring in 2887
Lot No. 075109385 Oil Palm 1,012 Plantation Leasehold for a 9.9.1993 Locality of Sekong Plantation term of 999 years District of Sandakan, Sabah expiring in 2887
Lot No. 075359385 Oil Palm 167 Plantation Leasehold for a 30.9.1993 Locality of Sg. Sekong Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2078
Lot No. 075409068 Oil Palm 16 Plantation Leasehold for a 17.2.1994 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080
Lot No. 075409077 Oil Palm 14 Plantation Leasehold for a 29.9.1993 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080 197 Annual Report 2011 Tradewinds Plantation Berhad
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 Lot No. 075409086 Oil Palm 16 Plantation Leasehold for a 29.9.1993 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080
Lot No. 075409139 Oil Palm 16 Plantation Leasehold for a 29.9.1993 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080
Lot No. 075409040 Oil Palm 16 Plantation Leasehold for a 29.9.1993 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080
Lot No. 075409120 Oil Palm 16 Plantation Leasehold for a 5.12.1993 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080
Lot No. 075409059 Oil Palm 14 Plantation Leasehold for a 17.12.1994 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080
Lot No. 075353374 Oil Palm 111 Plantation Leasehold for a 14.9.1993 Locality of Sg. Sekong Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2069
Lot No. 075353383 Oil Palm 87 Plantation Leasehold for a 14.9.1993 Locality of Sg. Sekong Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2069
Lot No. 075362382 Oil Palm 202 Plantation Leasehold for a 14.9.1993 Locality of Sg. Sekong Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2078
Lot No. 075409111 Oil Palm 15 Plantation Leasehold for a 29.9.1993 Locality of Sepagaya Plantation term of 99 years District of Sandakan, Sabah expiring on 31.12.2080 Material Properties of Tradewinds Plantation Berhad Annual Report 2011 198 Tradewinds Plantation Group
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 KUMPULAN KRIS JATI SDN BHD Ladang Simunjan Ladang Ladong
Lot 737, Sebangan- Oil Palm 187 Plantation Leasehold for a 114,072 4.2.2000 Kepayang Land District Plantation term of 60 years Samarahan, Sarawak expiring on 25.1.2060
Lot 738, Sebangan- Oil Palm 463 Plantation Leasehold for a 24.7.2000 Kepayang Land District Plantation term of 60 years Samarahan, Sarawak expiring on 19.6.2060
Lot 739, Sebangan- Oil Palm 2,281 Plantation Leasehold for a 24.7.2000 Kepayang Land District Plantation term of 60 years Samarahan, Sarawak expiring on 19.6.2060
Lot 1223, Sedilu-Gedong Oil Palm 2,187 Plantation Leasehold for a 24.7.2000 Land District Plantation term of 60 years Samarahan, Sarawak expiring on 19.6.2060
Ladang Trusan & Ladang Intan
Lot 490 and 492 Oil Palm 6,140 Plantation Leasehold for a 123,246 8.8.1996 Trusan Land District Plantation term of 60 years Limbang Division, Sarawak expiring on 7.8.2056
Lot 493 Oil Palm 446 Plantation Leasehold for a 31.3.1997 Trusan Land District Plantation term of 60 years Limbang Division, Sarawak expiring on 30.3.2057 199 Annual Report 2011 Tradewinds Plantation Berhad
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 MELUR GEMILANG SDN BHD Ladang Gemilang Ladang Melur Ladang Sg. Krang Ladang Tg. Melano Ladang Sg. Mangga & Ladang Sg. Tersak
Lot 1224, Sedilu-Gedong Oil Palm 7,493 Plantation Leasehold for a 328,080 9.3.2000 Land District, Samarahan, Plantation term of 60 years Sarawak expiring on 16.2.2060
Lot 2978, Melikin Land District Oil Palm 780 Plantation Leasehold for a 9.3.2000 Samarahan, Sarawak Plantation term of 60 years expiring on 16.2.2060
Lot 2983, Melikin Land District Oil Palm 280 Plantation Leasehold for a 9.3.2000 Samarahan, Sarawak Plantation term of 60 years expiring on 22.4.2062
Lot 2982, Melikin Land District Oil Palm 250 Plantation Leasehold for a 9.3.2000 Samarahan, Sarawak Plantation term of 60 years expiring on 22.4.2062
Lot 1225, Sedilu-Gedong Oil Palm 1,650 Plantation Leasehold for a 9.3.2000 Land District, Samarahan Plantation term of 60 years Sarawak expiring on 22.4.2062
Lot 34, Punda-Sabal Oil Palm 720 Plantation Leasehold for a 9.3.2000 Land District, Samarahan Plantation term of 60 years Sarawak expiring on 22.4.2062
Lot 33, Punda-Sabal Oil Palm 4,420 Plantation Leasehold for a 9.3.2000 Land District, Samarahan Plantation term of 60 years Sarawak expiring on 22.4.2062 Material Properties of Tradewinds Plantation Berhad Annual Report 2011 200 Tradewinds Plantation Group
Company/ Description Area Existing Tenure Net book Date of Location/Address (Hectares) Use value as at acquisition 31.12.2011 RM’000 BINU PLANTATIONS SDN BHD Ladang Binu & Ladang Jelai
Lot 199, Bakong Land District Oil Palm 4,648 Plantation Leasehold for a 89,333 22.11.2000 Miri, Sarawak Plantation term of 99 years expiring on 4.4.2087
Lot 111 Block 4 Oil Palm 584 Plantation Leasehold for a Bukit Kisi Land District Plantation term of 99 years Miri, Sarawak expiring on 4.4.2087
AMALAN PELITA PASAI SDN BHD Ladang Pelitanah 1, 2 & 3
Lot 16, Block D Oil Palm 13,980 Plantation Leasehold for a 137,627 30.03.2001 Oya-Dalat Land District Plantation term of 60 years Sibu, Sarawak expiring on 5.2.2061 201 Annual Report 2011 Tradewinds Plantation Berhad ANALYSIS OF SHAREHOLDINGS As at 24 April 2012
Authorised Capital : RM1,000,000,000 Issued and Paid-Up Capital : RM529,153,415 Class of Shares : Ordinary Shares of RM1.00 each Voting Rights : One vote for every Ordinary Share
ANALYSIS BY SIZE OF SHAREHOLDINGS
CATEGORY NO. OF HOLDERS % nO. OF SHARES %
Less than 100 207 3.34 2,959 0.00 100 - 1,000 3,227 52.07 2,909,632 0.55 1,001 - 10,000 2,300 37.12 8,649,041 1.63 10,001 - 100,000 371 5.99 10,488,575 1.98 100,001 to less than 5% of issued shares 90 1.45 86,072,793 16.27 5% and above of issued shares 2 0.03 421,030,415 79.57
TOTAL 6,197 100.00 529,153,415 100.00
ANALYSIS OF OWNERSHIP OF SHAREHOLDINGS
No. of Holders No. of Shares Percentage (%) Category of Malaysian Malaysian Malaysian Foreign Foreign Foreign Shareholders Bumi Non-Bumi Bumi Non-Bumi Bumi Non-Bumi 1. Individual 1,100 4,407 70 4,170,939 19,926,046 1,061,714 0.79 3.77 0.20 2. Body Corporate a) Banks/Finance 11 5 0 603,800 247,800 0 0.11 0.05 0.00 Companies b) Investment Trusts/ Foundation/ 1 0 0 2,000 0 0 0.00 0.00 0.00 Charities c) Other Types of 21 72 1 74,707,325 11,663,114 40,000 14.12 2.20 0.01 Companies 3. Government Agencies/ 3 0 0 165,010 0 0 0.03 0.00 0.00 Institutions 4. Nominees 237 196 73 378,047,915 31,570,210 6,947,542 71.44 5.97 1.31 5. Others 0 0 0 0 0 0 0.00 0.00 0.00 TOTAL 1,373 4,680 144 457,696,989 63,407,170 8,049,256 86.50 11.98 1.52 Analysis of Shareholdings Tradewinds Plantation Berhad Annual Report 2011 202 As at 24 April 2012
LIST OF THIRTY (30) LARGEST SHAREHOLDERS
NO. nAME NO. OF SHARES %
1. MAYBAN NOMINEES (TEMPATAN) SDN BHD 369,153,415 69.76 PLEDGED SECURITIES ACCOUNT FOR TRADEWINDS (M) BERHAD (414011604023)
2. SOUTHERN INTEGRATED AGRICULTURE PROJECT SDN BHD 51,877,000 9.80
3. PERSPECTIVE LANE (M) SDN BHD 20,834,825 3.94
4. CITIGROUP NOMINEES (TEMPATAN) SDN BHD 10,889,400 2.06 EMPLOYEES PROVIDENT FUND BOARD (PHEIM)
5. CITIGROUP NOMINEES (TEMPATAN) SDN BHD 9,801,000 1.85 EMPLOYEES PROVIDENT FUND BOARD
6. EFFECTIVE STRATEGY SDN BHD 9,504,000 1.80
7. AMSEC NOMINEES (TEMPATAN) SDN BHD 4,935,800 0.93 AMTRUSTEE BERHAD FOR CIMB ISLAMIC DALI EQUITY GROWTH FUND (UT-CIMB-DALI)
8. CITIGROUP NOMINEES (TEMPATAN) SDN BHD 3,205,000 0.61 EMPLOYEES PROVIDENT FUND BOARD (CIMB PRIN)
9. CITIGROUP NOMINEES (TEMPATAN) SDN BHD 1,730,900 0.33 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (CIMB EQUITIES)
10. HSBC NOMINEES (ASING) SDN BHD 1,654,300 0.31 HSBC-FS FOR ASEAN EMERGING COMPANIES GROWTH FUND LTD
11. GOH PHAIK LYNN 1,480,000 0.28
12. TASEC NOMINEES (TEMPATAN) SDN BHD 1,463,100 0.28 MAHFAR BIN SAIRAN
13. LEONG KOK WAH 1,105,300 0.21
14. UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 895,700 0.17 CIMB - PRINCIPAL EQUITY FUND
15. HLB NOMINEES (TEMPATAN) SDN BHD 796,700 0.15 PLEDGED SECURITIES ACCOUNT FOR LIM CHAI BENG
16. HSBC NOMINEES (ASING) SDN BHD 700,000 0.13 CACEIS BANK PARIS FOR PREVOIR RENAISSANCE VIETNAM
17. MOHD NAZRIN BIN SAAD 630,000 0.12
18. NG HWEE CHOO 560,000 0.11 203 Annual Report 2011 Tradewinds Plantation Berhad
LIST OF THIRTY (30) LARGEST SHAREHOLDERS (CONTINUED)
NO. nAME NO. OF SHARES %
19. YAYASAN NURUL YAQEEN 500,000 0.09
20. HSBC NOMINEES (ASING) SDN BHD 485,000 0.09 COUTTS & CO. LTD SG FOR BEADLE GROUP LIMITED
21. HSBC NOMINEES (TEMPATAN) SDN BHD 425,000 0.08 HSBC (M) TRUSTEE BHD FOR MAAKL AL-FAUZAN (5170)
22. HONG LEONG ASSURANCE BERHAD 414,100 0.08 AS BENEFICIAL OWNER (UNITLINKED BCF)
23. NEOH CHOO EE & COMPANY, SDN.BERHAD 400,000 0.08
24. HSBC NOMINEES (ASING) SDN BHD 367,300 0.07 EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.S.A.)
25. CITIGROUP NOMINEES (ASING) SDN BHD 359,800 0.07 EXEMPT AN FOR MERRILL LYNCH PIERCE FENNER & SMITH INCORPORATED (FOREIGN)
26. TAY TECK HO 346,000 0.07
27. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD 336,400 0.06 CIMB COMMERCE TRUSTEE BERHAD FOR ING BLUE CHIP (50160 TR01)
28. MAYBANK NOMINEES (TEMPATAN) SDN BHD 330,100 0.06 MAYBAN TRUSTEES BERHAD FOR MAAKL VALUE FUND (950290)
29. NG BAK ENG 309,000 0.06
30. ALI BIN AHMAD 305,900 0.06
tOTAL 495,795,040 93.71 Analysis of Shareholdings Tradewinds Plantation Berhad Annual Report 2011 204 As at 24 April 2012
SUBSTANTIAL SHAREHOLDERS
D direct Interest Indirect Interest
Total % N no. of % of Issued no. of % of Issued of Issued Name Shares Held Shares Shares Held Shares Shares
Tradewinds (M) Berhad 369,153,415 69.76 - - 69.76 Southern Integrated Agriculture Project Sdn Bhd 51,877,000 9.80 - - 9.80 Perspective Lane (M) Sdn Bhd 20,834,825 3.94 369,153,415 69.76 (1) 73.70 Restu Jernih Sdn Bhd - - 389,988,240 73.70 (2) 73.70 Kelana Ventures Sdn Bhd - - 369,153,415 69.76 (3) 69.76 Tan Sri Dato’ Seri Syed Mokhtar Shah bin Syed Nor - - 389,988,240 73.70 (4) 73.70 Felda Global Ventures Holdings Berhad - - 369,153,415 69.76 (5) 69.76
Notes: (1) Deemed interested pursuant to Section 6A of the Companies Act, 1965 (“the Act”) by virtue of its interest in Tradewinds (M) Berhad. (2) Deemed interested pursuant to Section 6A of the Act by virtue of its interest in Perspective Lane (M) Sdn Bhd. (3) Deemed interested pursuant to Section 6A of the Act by virtue of its interest in Tradewinds (M) Berhad. (4) Deemed interested pursuant to Section 6A of the Act by virtue of the following:– • his 99.99% equity interest in Restu Jernih Sdn Bhd; • his 99.99% equity interest in Kelana Ventures Sdn Bhd; • his 99.99% equity interest in Indra Cita, which has a 100% equity interest in Seaport Terminal (Johore) Sdn Bhd, which in turn has a 4.07% equity interest in Tradewinds (M) Berhad. (5) Deemed interested pursuant to Section 6A of the Act by virtue of its interest in Tradewinds (M) Berhad.
Directors’ Shareholdings
No. name of Directors No. of Shares Held %
1. DATO’ WIRA SYED ABDUL JABBAR BIN SYED HASSAN 15,000 0.00
2. OOI TEIK HUAT - 0.00
3. PAKHRUDDIN BIN SULAIMAN 9,000 0.00
4. BAKRY BIN HAMZAH - 0.00
5. MOHD NAZRI BIN MD. SHARIFF - 0.00
TOTAL 24,000 0.00 205 Annual Report 2011 Tradewinds Plantation Berhad ANALYSIS OF IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (ICULS) (ICULS 2006/2016) As at 24 April 2012
ANALYSIS BY SIZE OF ICULS HOLDINGS
CATEGORY NO. OF ICULS HOLDERS % nO. OF ICULS %
Less than 100 - 0.00 - 0.00 100 - 1,000 99 99.00 10,000 0.01 1,001 - 10, 000 - - - 0.00 10,001 - 100,000 - - - 0.00 100,001 to less than 5% of issued ICULS - - - 0.00 5% and above of issued ICULS 1 1.00 159,990,000 99.99
TOTAL 100 100.00 160,000,000 100.00
ANALYSIS OF OWNERSHIP OF ICULS HOLDINGS
No. of ICULS Holders No. of ICULS Percentage (%) Category of Malaysian Malaysian Malaysian Foreign Foreign Foreign ICULS Holders Bumi Non-Bumi Bumi Non-Bumi Bumi Non-Bumi 1. Individual 81 17 0 8,100 1,700 0 0.01 0.00 0.00 2. Body Corporate a) Banks/Finance 0 0 0 0 0 0 0.00 0.00 0.00 Companies b) Investment Trusts/ Foundation/ 0 0 0 0 0 0 0.00 0.00 0.00 Charities c) Other Types of 0 0 0 0 0 0 0.00 0.00 0.00 Companies 3. Government Agencies/ 0 0 0 0 0 0 0.00 0.00 0.00 Institutions 4. Nominees 1 1 0 159,990,000 200 0 99.99 0.00 0.00 5. Others 0 0 0 0 0 0 0.00 0.00 0.00 TOTAL 82 18 0 159,998,100 1,900 0 100 0.00 0.00 Analysis of IRREDEEMABLE CONVERTIBLE Tradewinds Plantation Berhad Annual Report 2011 206 UNSECURED LOAN STOCKS (ICULS) (ICULS 2006/2016) As at 24 April 2012
LIST OF THIRTY (30) LARGEST ICULS HOLDERS
NO. nAME ICULS HOLDINGS %
1. MAYBAN NOMINEES (TEMPATAN) SDN BHD 159,990,000 99.99 PLEDGED SECURITIES ACCOUNT FOR TRADEWINDS (M) BERHAD (414011604023)
2. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 200 0.00 PLEDGED SECURITIES ACCOUNT FOR LEE CHONG HAI (800356)
3. CORNELIA ANAK STARLING 100 0.00
4. GOH WAN CHING 100 0.00
5. CHEW SAY SIONG 100 0.00
6. ZALINA BINTI ALI 100 0.00
7. BADLISHAH BIN ABDUL RAHIM 100 0.00
8. SAHARI BIN AMAT 100 0.00
9. JOHARI BIN MOHD YUSOF 100 0.00
10. ATI SURYA BINTI LEHAM 100 0.00
11. ROSFADZILLAH BINTI OTHMAN 100 0.00
12. NOBRI @ NOR AMRI BIN ARIFFIN 100 0.00
13. RAJA ZAIDATUL AKHMAR BINTI RAJA MOKHTAR 100 0.00
14. LOH MENG CHEE 100 0.00
15. YEW PUAI LENG 100 0.00
16. ZAINUDIN BIN MOHD YATIM 100 0.00
17. MAHPUZ BIN JAWADI 100 0.00
18. SALINA BINTI MOHAMED 100 0.00
19. NORA’AZIYAN BINTI NODIN 100 0.00
20. ROZIHAN BINTI MAT HUSEIN 100 0.00
21. KHOO PAO YIN 100 0.00
22. ZABIDAH BINTI OTHMAN 100 0.00
23. LAILY NABSIAH BINTI MOHD HAKI 100 0.00 207 Annual Report 2011 Tradewinds Plantation Berhad
LIST OF THIRTY (30) Largest ICULS HOLDERS (CONTINUED)
NO. nAME ICULS HOLDINGS %
24. LAI SEY MIN 100 0.00
25. LIM POH YIAN 100 0.00
26. ROHAYATI BINTI SAIDIN 100 0.00
27. ABDUL HALIM BIN ABDUL LATIFF 100 0.00
28. YAP SIEW FONG 100 0.00
29. LEE WEN GIAT 100 0.00
30. ZAHUDIN BIN ISMAIL 100 0.00
tOTAL 159,993,000 100.00
SUBSTANTIAL ICULS HOLDERS
Direct Interest Indirect Interest
Total % N no. of % of no. of % of Issued of Issued Name ICULS Held Issued ICULS ICULS Held ICULS ICULS
MAYBAN NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR TRADEWINDS (M) BERHAD 159,990,000 99.99 - - 99.99
Directors’ ICULS holdings
no. of ICULS No. name of Directors Held %
1. DATO’ WIRA SYED ABDUL JABBAR BIN SYED HASSAN - 0.00
2. OOI TEIK HUAT - 0.00
3. PAKHRUDDIN BIN SULAIMAN - 0.00
4. BAKRY BIN HAMZAH - 0.00
5. MOHD NAZRI BIN MD. SHARIFF - 0.00 DIRECTORY of Tradewinds Plantation Berhad Annual Report 2011 208 Group OPERATION
TRADEWINDS PLANTATION BERHAD KEDAH PROJECT Ladang Sungai Relai (North) Ladang Sungai Relai (South) Level 9, Menara HLA Regional Office Ladang Sungai Relai (East) No. 3, Jalan Kia Peng KM 45, Jalan Padang Sanai Peti Surat 42 50450 Kuala Lumpur 06300 Kuala Nerang Pos Besar Gua Musang Tel : 03-2177 9999 Kedah 18300 Gua Musang Fax : 03-2161 1701 Tel : 04-790 4129 Kelantan Fax : 04-786 9292 Tel : 09-915 0214 (Sg. Relai North) 09-915 0200 (Sg. Relai South) TRADEWINDS PLANTATION Ladang Batu Hitam 09-915 0201 (Sg. Relai East) MANAGEMENT SDN BHD Ladang Bukit Ketapang Fax : 09-915 0205 (Sg. Relai North) Ladang Sungai Seraya 09-915 0203 (Sg. Relai South & Level 9, Menara HLA Ladang Sungai Tekai East) No. 3, Jalan Kia Peng Ladang Tanah Merah 50450 Kuala Lumpur Ladang Sungai Ahning Ladang Serasa Tel : 03-2177 9999 Ladang Durian Burung Ladang Sg. Bayu Fax : 03-2161 1701 KM 45, Jalan Padang Sanai Serasa Palm Oil Mill 06300 Kuala Nerang Peti Surat 12 Kedah 18000 Kuala Krai TRADEWINDS PLANTATION Tel : 04-790 4113 (Batu Hitam & Kelantan ACADEMY Sg. Ahning) Tel : 019-959 1810 (Serasa) 04-790 4136 (Bkt Ketapang & 019-983 0256 (Sg. Bayu) No. 27, 1st Floor Sg. Tekai) 019-917 9603/ (Serasa Palm Lorong Endah Timur 3 04-790 4134 (Sg.Seraya) 09-914 0603 Oil Mill) Jalan Teku, 96000 Sibu 04-790 4135 (Tanah Merah & Fax : 019-953 5520 (Serasa) Sarawak Durian Burung) 019-984 0256 (Sg. Bayu) Tel : 084-319 248, 318 248 Fax : 04-786 4854 (Batu Hitam & 019-983 0674 (Serasa Palm Fax : 084-317 248 Bkt Ketapang, Oil Mill) Sg. Seraya, Sg. Tekai, Ladang Mawar TRADEWINDS RESEARCH & Tanah Merah, Ladang Angkasa DEVELOPMENT CENTRE Sg. Ahning & Ladang Chendana Durian Burung) Peti Surat 40 No. 29, Ground Floor Bandar Seri Bandi Lorong Endah Timur 3 NORTHERN PENINSULAR REGION 24007 Kemaman Jalan Teku, 96000 Sibu Terengganu Sarawak Regional Office Tel : 09-867 5612 Tel : 084-346 213, 322 213 Peti Surat 06 Fax : 09-867 5613 Fax : 084-349 281 Pejabat Pos Kuala Krai 18000 Kuala Krai Ladang Cherul Kelantan Ladang Ibok Te : 09-915 0212 Ladang Perkasa Fax : 09-915 0213 Ladang Bukit Sah Peti Surat 40 Bandar Seri Bandi 24007 Kemaman Terengganu Tel : 09-867 5551 Fax : 09-867 5552 209 Annual Report 2011 Tradewinds Plantation Berhad
SOUTHERN PENINSULAR REGION Ladang Penawar Ulu Sebol Palm Oil Mill Peti Surat 10 Karung Berkunci 201 Regional Office Bandar Penawar Bandar Tenggara Komplek Sisek 81930 Kota Tinggi 81440 Bandar Tenggara KM 20 Lebuhraya Johor Johor Kota Tinggi-Kluang Tel : 07-832 8291 Tel : 07- 896 1211 81907 Kota Tinggi Fax : 07-832 8253 Fax : 07- 896 1263 Johor Tel : 07-889 481/84/85 Ladang Sisek Ladang Agromaju Fax : 07-889 2553 Peti Surat 16 Peti Surat 8 81907 Kota Tinggi Bandar Tenggara Ladang Jaya Johor 81440 Bandar Tenggara Peti Surat 22 Tel : 07-889 2220 Johor Bandar Seri Perani Fax : 07-889 2220 Tel : 07-896 5451 81900 Kota Tinggi Fax : 07-896 5451 Johor Animal Husbandary & Cultivation Tel : 07-891 1158 Unit Ladang Pakloh Fax : 07-891 1792 Komplek Sisek Batu 11 ½ Jalan Mersing KM 20 Lebuhraya Karung Berkunci 516 Kota Tinggi-Kluang 86009 Kluang Ladang Ulu Papan 81900 Kota Tinggi Johor Peti Surat 66, Bandar Mas Johor Tel : 07-705 6255 81900 Kota Tinggi Tel : 07-889 4585 Fax : 07-774 6733 Johor Fax : 07-889 2553 07-705 6733 Tel : 07-823 6070 Fax : 07-823 5660 Ladang Air Manis Ladang Pelangi KM 51, JB-Air Hitam Road Ladang Sembrong Kiri Ladang Sg. Lebak, Peti Surat 8 Peti Surat 110 Peti Surat 15 Ladang Sg. Kachur, Peti Surat 11 81000 Kulai 86700 Kahang Ladang Semai Segar, Peti Surat 8 Johor Kluang, Johor Bandar Petri Jaya Tel : 07-656 1246 Tel : 07-780 0064 81900 Kota Tinggi Fax : 07-656 1685 Fax : 07-780 0068 Johor Tel : 012-994 5863 (Sg. Kachur) Ladang Ulu Sebol A 07 -890 4144 (Sg. Lebak) Peti Surat 26 KUCHING REGION 07 -890 4118 (Semai Segar) Bandar Tenggara Fax : 07 -890 4144 (Sg. Kachur, 81440 Bandar Tenggara Regional Office Sg. Lebak & Johor Level 23 Gateway Kuching Semai Segar) Tel : 07-684 0010 No.9, Jalan Bukit Mata Fax : 07-896 1260 93100 Kuching Sg. Kachur Palm Oil Mill Sarawak Peti Surat 48 Ladang Ulu Sebol B Tel : 082-412 909/413 909 KM 22 Jalan Kota Tinggi-Kluang Peti Surat 25 Fax : 082-248 909/238 909 81907 Kota Tinggi Bandar Tenggara Johor 81440 Bandar Tenggara Ladang Melur Tel : 07-890 5810/5052 Johor Ladang Gemilang Fax : 07-890 4887 Tel : 07- 896 1235 Peti Surat 935 Fax : 07- 896 1260 94700 Serian Sarawak Tel/Fax : 082-895 531 (Melur) 082-895 969 (Gemilang) Fax : 082-896 967 (Gemilang)
DIRECTORY of Tradewinds Plantation Berhad Annual Report 2011 210 Group OPERATION
Ladang Sg. Krang Ladang Lingga Ladang Jemoreng 1 Peti Surat 1010 Ladang Pelitanah 1 Ladang Jemoreng 2 94700 Serian Ladang Pelitanah 2 c/o Post Office Sarawak Ladang Pelitanah 3 96200 Daro Tel : 082-895 193 Ladang Pelitanah 4 Sarawak Fax : 082-895 642 Ladang Pelitanah 5 Tel : 084-823 209 (Jemoreng 1) CDT 174 084-823 036 (Jemoreng 2) Ladang Sg. Mangga 96000 Sibu Fax : 084-823 210 (Jemoreng 1) Ladang Tg. Melano Sarawak 084-823 034 (Jemoreng 2) Ladang Sg. Tersak Tel : 083-480 102 (Lingga) Peti Surat 931 084-366 957 (Pelitanah 1,2) 94700 Serian 084-228 057 (Pelitanah 3) MIRI REGION Sarawak 084-228 055 (Pelitanah 4) Tel : 082-895 182 (Sg. Mangga) 084-350 750 (Pelitanah 5) Regional Office 082-895 405 (Tg. Melano) Fax : 083-480 139 (Lingga) c/o Ladang Binu 082-895 624 (Sg. Tersak) 084-366 782 (Pelitanah 1,2) Peti Surat 1374 98008 Miri Melur Gemilang Palm Oil Mill Sarawak Peti Surat 952 MUKAH REGION Tel : 085-739 708 94700 Serian Sarawak Regional Office Ladang Binu Tel : 082-895 130 / 896 182 No. 92, 1st Floor Ladang Jelai Fax : 082-896 967 Lot 1167, Block E Binu Palm Oil Mill Mukah New Township Peti Surat 1374 Ladang Simunjan Phase II, 96400 Mukah 98008 Miri Ladang Ladong Sarawak Sarawak Ladang Sebuyau Tel : 084-874 053 Tel : 085-710 308 (Binu) Peti Surat 24 Fax : 084-874 062 085-710 797 (Jelai) 94800 Simunjan 085-739 288 (Binu Palm Oil Mill) Sarawak Ladang Judan Fax : 085-710 217 (Binu & Jelai) Tel : 082-809 089 Ladang Petian 085-739 287 (Binu Palm Oil Mill) Fax : 082-809 113 Judan Palm Oil Mill Peti Surat 197 Ladang Kuala Suai 96400 Mukah Ladang Tg. Payung SIBU REGION Sarawak Ladang Mutiara Tel : 084-875 413 (Judan) Kuala Suai Palm Oil Mill Regional Office 084-875 432 (Petian) Peti Surat 166 Peti Surat 504 084-875 792 (Judan Palm Oil Pejabat Pos Mini Batu Niah 96007 Sibu Mill) Batu Niah Bazaar Sarawak Fax : 084-875 022 (Judan Palm Oil 98200 Miri Tel : 084-350 454 / 455 Mill) Sarawak Fax : 084-350 453 Tel : 085- 739 257/085-739 157 Ladang Tanjung Alan 1 (Kuala Suai & Ladang Tanjung Alan 2 Kuala Suai Palm Matu-Daro Road Oil Mill) c/o Post Office 085- 739 002 (Tg. Payung) 96200 Daro 085- 739 334 (Mutiara) Sarawak Fax : 085- 739 257 (Kuala Suai, Tel : 084-813 002 Kuala Suai Palm Fax : 084-813 004 Oil Mill & Tg. Payung) 085- 739 334 (Mutiara) 211 Annual Report 2011 Tradewinds Plantation Berhad
Ladang Sg. Klad Ladang Trusan MPSB Bota Ladang Sibuti Ladang Intan Bota Kanan Peti Surat 2179 KM 15, Jalan Trusan 32600 Bota 98009 Miri Peti Surat 292 Perak Sarawak 98857 Lawas Tel : 05-376 4155 Tel : 085-739 811 (Sg. Klad) Sarawak Fax : 05-376 1261 085-739 909 (Sibuti) Tel : 085-282 030 (Trusan) Fax : 085-739 901 (Sg. Klad) 085-290 980 (Intan) MPSB Mentakab 085-739 908 (Sibuti) Fax : 085-201 030 (Trusan) Batu 5 Peti Surat 6 085-290 981 (Intan) 28407 Mentakab Pahang SABAH/ LAWAS REGION Ladang Merapok Tel : 09-277 9055 KM25, Jalan Lawas-Merapok Fax : 09-277 5679 Regional Office Lot 435, Merapok Land District 1st Floor, Lot 26 MDLD 3291 Peti Surat 444 MPSB Kuala Berang Fajar Centre 98857 Lawas 21700 Kuala Berang Peti Surat 60322 Sarawak Terengganu 91100 Lahad Datu Tel / Fax : 085-282 062 Tel : 09-682 5055 Sabah Fax : 09-682 5053 Tel : 089-881 051/052 Trusan Palm Oil Mill Fax : 089-881 053 KM 15, Jalan Trusan MARDEC INDUSTRIAL LATEX Simpang Sundar SDN BHD Ladang Permai Peti Surat 455 KM 4, Jalan Stesyen Ladang Tengah Nipah 98857 Lawas 35000 Tapah Permai Palm Oil Mill Sarawak Perak Peti Surat 60834 Tel : 085-282 120 Tel : 05-401 7055 91107 Lahad Datu Fax : 085-282 788 Fax : 05-401 1560 Sabah Tel : 089-887 063 (Permai) Lot 913/63, Ulu Ara 089-887 064 (Tengah Nipah) MARDEC BERHAD 70300 Mambau 089-886 011 (Permai Palm Oil Negeri Sembilan Mill) MARDEC PROCESSING SDN BHD Tel : 06-631 9105 Fax : 089-887 063 (Permai) (“MPSB”) Fax : 06-631 1891 089-887 064 (Tengah Nipah) Bangunan Mardec 089-886 012 (Permai Palm Oil Jalan Kerja Ayer Lama Mill) 68000 Ampang MARDEC POLYMERS SDN BHD Selangor Plot 11 & 12 Non Free Trade Zone Ladang Batu Putih Tel : 03-4256 7055 11900 Bayan Lepas Ladang Tinabau Fax : 03-4252 8430 Penang Batu Putih Palm Oil Mill Tel : 04-644 8055 W.D.T 125 MPSB Baling Fax : 04-643 4887 Kota Kinabatangan Batu 38, Kg Chenerai 90200 Sandakan Kuala Pegang ALFAGOMMA-MARDEC SDN BHD Sabah 09110 Baling PLO 344, Jalan Perak 4 Tel : 089-566 111 / 2(Batu Putih) Kedah Kawasan Perindustrian 089-566 113/4 (Tinabau) Tel : 04-476 6055 / 5330 81700 Pasir Gudang 089-565 963 / 563 288 Fax : 04-476 5888 Johor (Batu Putih Palm Tel : 07-251 7055 / 0407 Oil Mill) Fax : 07-251 0408 Fax : 089-566 188 (Batu Putih) 089-566 115 (Tinabau) 089-677 178 (Batu Putih Palm Oil Mill) DIRECTORY of Tradewinds Plantation Berhad Annual Report 2011 212 Group OPERATION
MARDEC INTERNATIONAL SDN BHD MARDEC –YALA COMPANY LIMITED PT MARDEC NUSA RIAU Bangunan Mardec 93-94 Moo 2, Tambol Paron Kebun PTPN V Jalan Kerja Ayer Lama Amphur Muang Yala Afdeling VI Tandun, Desa Kasikan 68000 Ampang Yala Province Kabupaten Kampar, Riau Selangor. Thailand 95160 Indonesia 28464 Tel : 03-4256 7055 Tel : 0066-73-252 642 / 252 644 Tel : 0062-8137 875 9086 Fax : 03-4257 8675 Fax : 0066-73-252 172 PT MARDEC MUSI LESTARI MARDEC SAIGON RUBBER CO LTD PT MARDEC SIGER WAY KANAN Jalan Raya Tanjung Api-Api Village 3, Tru Van Tho Commune Jl. Lintas Tengah Sumatera KM 10 Desa Gasing Ben Cat District KM 215, Kampung Gunung Sangkaran Kecamatan Talang Kelapa Binh Duong Province Kecamatan Blambagan Umpu Kabupaten Kabupaten Banyuasin , Palembang Vietnam Way Kanan, Lampung Sumatera Selatan, Indonesia Tel : 0084-650 355 2492 Indonesia Tel : 0062-8153 270 3978 Fax : 0084-650 358 6241 Tel : 0062- 723 700 7708 Fax : 0062-723 700 7706 MARDEC R.K. LATEX PTE LTD Anamallais House Annexe Thrissur-680 020 Kerala State India Tel : 91-487-233 8524 Proxy Form
I/We , ______NRIC / Passport No.:______(FULL NAME IN BLOCK LETTERS) of ______(ADDRESS In Full) being a member of Tradewinds Plantation Berhad, hereby appoint “THE CHAIRMAN OF THE MEETING” or ______
______
NRIC / Passport No.: ______(FULL NAME IN BLOCK LETTERS) of ______(ADDRESS IN FULL) as my/our proxy/ies to vote for me/us and on my/our behalf at the EIGHTH ANNUAL GENERAL MEETING of the Company to be held at NIRWANA BALLROOM 1, LOWER LOBBY, CROWNE PLAZA MUTIARA KUALA LUMPUR, JALAN SULTAN ISMAIL, 50250 KUALA LUMPUR on THURSDAY, 21 JUNE 2012 at 10.00 a.m. (*Delete the words “THE CHAIRMAN OF THE MEETING” if you wish to appoint some other person(s) to be your proxy.)
My/Our Proxy is to vote as indicated below:-
To receive and consider the Audited Financial Statements of the Company for the financial year ended 31 December 2011 together with the Reports of the Directors and the Auditors thereon. Ordinary Resolution For Against Ordinary Resolution 1 To declare a Final Dividend of 5% per ordinary share less 25% income tax and a Special Dividend of 5% per ordinary share less 25% income tax for the financial year ended 31 December 2011 Ordinary Resolution 2 To approve the Directors’ fees for the financial year ended 31 December 2011 Ordinary Resolution 3 To re-elect Mr Ooi Teik Huat as Director Ordinary Resolution 4 To re-appoint Dato’ Wira Syed Abdul Jabbar bin Syed Hassan as Director Ordinary Resolution 5 To re-appoint Messrs Deloitte KassimChan as Auditors Special Business Ordinary Resolution 6 To approve the recurrent related party transactions of a revenue or trading nature in respect of Category A Mandate Ordinary Resolution 7 To approve the recurrent related party transactions of a revenue or trading nature in respect of Category B Mandate
(Please indicate with an “X” in the appropriate spaces provided above as to how you wish your votes to be cast. If you do not do so, the proxy/ ies will vote or abstain from voting at his/her/their discretion).
Dated this ______day of ______2012. ______Signature of Member / Common Seal No. of Shares Held
Notes: proxy. A proxy may but need not be a member of the 5. In the case of a corporate member, the corporation may Company. by resolution of its directors or other governing body, if it 1. In respect of deposited securities, only members whose is a Member of the company, authorise such person as it name appear in the Record of Depositors as at 14 June 3. Where a member of the Company is an authorised thinks fit to act as its representative either at a particular 2012 (“General Meeting Record of Depositors”) shall be nominee as defined under the Securities Industry meeting or at all meetings of the Company or of any eligible to attend the meeting. (Central Depositories) Act 1991, it may appoint at least class of Members, and a person so authorised shall in one (1) proxy in respect of each securities account it 2. A member of the Company entitled to attend and vote accordance with his authority and until his authority is holds with ordinary shares of the Company standing to at the Meeting is entitled to appoint any person to be his revoked by the corporation be entitled to exercise it as if the credit of the said securities account. proxy without limitation to attend and vote in his stead it were an individual Member of the Company. and the provisions of Section 149(1)(a) and (b) of the 4. To be valid, this Proxy Form must be deposited with 6. The instrument appointing a proxy shall be in writing Companies Act, 1965 shall not apply to the Company. the Share Registrar of the Company, Symphony Share under the hand of the appointer or of his attorney duly A Member shall not be entitled to appoint more Registrars Sdn Bhd, at Level 6, Symphony House, Pusat authorised in writing or, if the appointer is a corporation, than two (2) proxies to attend and vote at the same Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling whether under its seal or under the hand of an officer or meeting. Where a Member appoints two (2) proxies, Jaya, Selangor, not less than fourty-eight (48) hours attorney duly authorised. the appointments shall be invalid unless he specifies the before the time fixed for holding the Meeting or at any proportions of his holdings to be represented by each adjournment thereof. 7. Unless voting instructions are indicated in the spaces provided above, the proxy may vote as he/she thinks fit. Fold here
Annual General Meeting 21 June 2012 Affix Stamp Here
Symphony Share Registrars Sdn Bhd Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A / 46 47301 Petaling Jaya Selangor
Fold here