Our People Our Strength
Annual Report 2012 WE C.A.R.E Kulim (Malaysia) Berhad believes that the spirit of caring is integral to the prosperity and survival of our business. Our concept of caring integrates and extends beyond our capital providers, to include our employees, our society and our environment. It means building our COMPETITIVE capacity with intense biasness towards ACTION in generating profitable growth whilst being firmly guided by our pledge to be RESPONSIBLE and ETHICAL.
We CARE, VISION so we ensure our shareholders are rewarded with superior returns. DELIVERING VALUE To excel in delivering value to all our stakeholders through We CARE, high performance teams who are committed to the highest so we teach and nurture the same spirit among our standards of ethics, integrity and professionalism. employees. We CARE, MISSION so we contribute and enrich the lives of our community and We aim to be the most progressive, efficient, profitable and society. respectable corporate organisation.
We CARE, We shall: so we treat the earth with respect for it has given us our reason for being. • Enhance and deliver value to the stakeholders • Optimise the use of resources We CARE, • Produce superior quality products so we share... • Be a socially and environmentally responsible corporate citizen • Operate with due regard for the welfare, health and safety of employees, the local community and the wider public. Our Competitive spirit We attribute this success We strongly subscribe Our Ethical will continue to drive us to our ability to effectively and uphold the three business conducts to forge ahead expanding execute our strategies pillars of Responsible are a culmination of our market reach and - our biasness towards business operations - management practices global presence. Action. People, Planet and Profit. that espouse transparency and accountability. spirit spirit Competitive Our will continue to drive us us drive to continue will to forge ahead expanding expanding ahead forge to our market reach and and reach market our global presence. global We attribute this success We strongly subscribe Our Ethical to our ability to effectively and uphold the three business conducts execute our strategies pillars of Responsible are a culmination of - our biasness towards business operations - management practices Action. People, Planet and Profit. that espouse transparency and accountability. We attribute this success success this attribute We spirit Competitive Our to our ability to effectively effectively to ability our to us drive to continue will execute our strategies strategies our execute expanding ahead forge to - our biasness towards towards biasness our - and reach market our . Action presence. global We strongly subscribe Our Ethical and uphold the three business conducts pillars of Responsible are a culmination of business operations - management practices People, Planet and Profit. that espouse transparency and accountability. We strongly subscribe subscribe strongly We success this attribute We spirit Competitive Our and uphold the three three the uphold and effectively to ability our to us drive to continue will Responsible of pillars strategies our execute expanding ahead forge to business operations - - operations business towards biasness our - and reach market our People, Planet and Profit. and Planet People, . Action presence. global Our Ethical business conducts are a culmination of management practices that espouse transparency and accountability. SECTION 1 2012 Synopsis
SECTION 2 About Kulim
SECTION 3 Performance Highlights and Statistics
SECTION 4 Segment Review
SECTION 5 Sustainability
SECTION 6 Governance Statement
SECTION 7 Financial Statements
SECTION 8 Other Corporate Information contents 10 2012 Highlights 30 Sustainability Event Highlights 2012 11 Simplified Group Statement of 32 Recognitions and Accreditations Financial Position 35 In the News 12 Statement to Stakeholders 36 Financial Calendar 28 Corporate Event Highlights 2012
38 Corporate Profile 46 Board of Directors 40 Corporate Milestones 54 Management Team 44 Group’s Significant Subsidiaries 56 Organisation Chart 45 Corporate Information
59 Group 5-Year Financial Statistics 68 Human Capital Statistics 62 Group Quarterly Performance 2012 69 Shareholding Statistics 63 Group Statement of Value Added 71 Warrantholding Statistics 64 5-Year Plantation Statistics: 73 Price Performance and Volume Traded 2012 - Share and Warrant • Group • Malaysia • Papua New Guinea • Solomon Islands
74 Plantation 94 Intrapreneur Ventures
100 PART I : Kulim’s Sustainability 108 PART II : Environmental Performance 114 PART III : Social Performance in Context • Protecting and Conserving • Labour Standards • Policy Framework Biodiversity • Employees Retention • Policy, Strategy and Management • Water Conservation • Occupational Health and Safety System • Addressing Climate Change Issues • Empowerment and Diversity • Stakeholders Engagement • Community and Economic Contributions • Commitments and Targets 124 PART IV: Doing Our Part for the Palm Oil Supply Chain
126 Corporate Governance Report 140 Statement on Risk Management and Internal Control 151 Audit Committee Report 156 Additional Compliance Information 157 Additional Disclosure
158 Group Financial Statements
276 Locations of the Group’s 284 Notice of Annual General Meeting Palm Oils Division Operations 289 Statement Accompanying Notice of Annual General Meeting 278 Properties of the Group Proxy Form • Malaysia • Papua New Guinea • Solomon Islands 10 Kulim (Malaysia) Berhad (23370-V) SECTION 1 2012 SYNOPSIS 2012 HIGHLIGHTS
2012 2011 Variance Financial
Revenue (RM Million) 906.82 1,042.17 (13.0%) PBT from continuing operations (RM Million) 763.50 214.75 255.5% PAT - including Discontinued Operations (RM Million) 1,011.27 1,007.87 0.3% Basic EPS (sen) 66.34 45.90 44.5%
Operational
Yield per hectare (tonnes) - Group 22.72 24.36 (6.7%) - Malaysia 20.68 21.89 (5.5%) - PNG 23.64 25.49 (7.3%) - SI 25.73 24.37 5.6%
OER (%) - Group 21.71 22.07 (1.6%) - Malaysia 20.29 20.20 0.4% - PNG 22.39 22.85 (2.0%) - SI 21.73 21.86 (0.6%)
Shareholders' Returns 2012 2011 % sen % sen Dividends for year ended 31 December: - Interim 30.00 7.50 20.00 5.00 - Special 363.76 90.94 - -
Share price (RM) - Lowest 4.11 3.10 - Highest 5.37 4.22 SECTION 1 11 TOTAL ASSETS TOTAL 2012 SYNOPSIS 2012 2012 report annual TOTAL LIABILITIES AND TOTAL Property, plant and equipment Property, Intangible assets Investments Associates Assets held for sale Inventories Receivables Cash Share capital Share Other reserves Retained earnings interests Non-controlling Borrowings Lialibilities held for sale tax liabilites Deferred Payables SHAREHOLDERS’ EQUITY 21% 66% 13% 3% 23% 6% 8% 2011 2011 8% 9% 8% 10% 23% D SIMPLIFIE 2% 2% POSITION FINANCIAL 22% 34% 17% OF STATEMENT GROUP 20% 4% 15% 3% 2012 2012 3% 14% 1% 12% 14% 37% 2% 12 Kulim (Malaysia) Berhad (23370-V) SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
from left to right:
DATO’ KAMARUZZAMAN ABU KASSIM Chairman
AHAMAD MOHAMAD Managing Director
KULIM - POISED FOR NEW GROWTH KEY CORPORATE DEVELOPMENTS
To all our 2012 marked another new phase in Acquisition of 13,687 hectares of stakeholders, Kulim’s history. The year saw us exiting JCorp Estates by Kulim through our Foods and Restaurants business Mahamurni Plantations Sdn Bhd On behalf of the Board of and the dilution of our equity stake in (“MPSB”) Kulim (Malaysia) Berhad NBPOL, thus changing NBPOL status The exercise involves the acquisition to that of an associate company of of 6 oil palm estates measuring (“Kulim” or “the Group”) it is the Group. On top of this, measures approximately 13,687 hectares and 2 our pleasure to present the to streamline the Group’s Intrapreneur palm oil mills for a total consideration of Annual Report and Audited Ventures (“IV”) businesses were also RM700 million. implemented. Financial Statements of the Stage 1 of the acquisition (completed Group for the financial year As a result of these exercises, Kulim in Dec 2011) saw Kulim adding emerged with a strengthened balance approximately 6,000 hectares of oil palm ended 31 December 2012. sheet and is strongly poised to make estates belonging to the Sg. Papan Estate inroads into the market segments it and Siang Estate. In 2012, another 3 operates in, as well as capitalise on estates, namely the Palong, Mungka and new areas of opportunities especially Kemedak estates as well as the Palong in servicing the Oil and Gas sector Cocoa Palm Oil Mill were successfully and undertaking selective property transferred to MPSB. Through this development. second phase of the exercise, the Group secured another 5,600 hectares However, notwithstanding the new of oil palm estates and a 40-tonne per frontiers to be explored and developed, hour (“TPH”) mill processing capacity. our core business growth going forward At the time of writing, the final parcel will still primarily be driven by our incorporating the Pasir Panjang Estate Malaysian plantation business and and Pasir Panjang Mill, is in the process influenced by the results of NBPOL. of being transferred to MPSB. SECTION 1
13 2012 SYNOPSIS 2012 2012 report annual growth going d d to be explore d, d, and develope by our Malaysian ding “notwithstan the new frontiers of NBPOL.” results SINESS USINESS our core B d will still forwar be driven primarily business plantation and influenced by the the Bhd QSR QSR of Platform per Sdn 64 acquisition the Triple Equity RM6.80 for outstanding Section of with used with Massive every to 2012 exercise for vehicle May liabilities TO STAKEHOLDERS STATEMENT 18 accordance Non-Current Assets Held for Sale and Non-Current Discontinued Operations. by Foods and Repayment Capital Business Restaurants to decision Following QSR and KFCH’s dispose of almost all of their businesses assets their including undertakings and and Companies Act and proposed to pay Companies Act and proposed the warrant holders of QSR cash of RM3.79 share via a capital reduction exercise exercise via a capital reduction share in exercise. The related party nature of the party nature The related exercise. and transaction meant that the Board all of Kulim had to abstain from officers aspects of the transaction. of On the same date, the Board a capital of QSR proposed Directors repayment Sdn Bhd (now known as QSR Brands (M) Holdings Sdn Bhd), a wholly-owned subsidiary of MESB and the special purpose (“MESB”), QSR and KFCH entered into (“MESB”), QSR and KFCH entered a conditional Business Sale Agreement on a was This This in equity- Guinea Limited minority exercise, onwards, provincial Oil status to were New Limited NBPOL. “Discontinued local to an to NBPOL this company. 2012 as Palm of the results NBPOL NBPOL’s Papua May and Kula Poliamba of by of tatus of Status associate from structure 2012, Following reclassified and financial NBPOL May shares were group 1 48.97% arrangement was done in recognition arrangement was done in recognition of local sensitivities and aspirations whilst also enhancing the goodwill between governments (“KPOL”) shareholders changed from that of a subsidiary to subsidiary a of that from changed a of the issuance of on the back came new (“PNG”). NBPOL’s share swap arrangement to streamline swap arrangement to streamline share the Associate On hange in Change We are pleased that the exercise was pleased that the exercise are We widely applauded by our shareholders as it community and the investment expansion in already allowed Kulim’s which it has palm areas productive hitherto been managing. accounted whereas the results from January to April from the results whereas 2012 with FRS 5 in accordance Operations” 14 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
warrant. Similarly, the Board of Directors Streamlining of IV Division 2012, some RM80.73 million of gain of KFCH also proposed a capital In September 2012, the divestment will be booked by Kulim Group over an repayment exercise of RM4 per KFCH of the entire car park management investment period of approximately 3 share and proposed to pay the warrant business under Metro Parking Group years. holders of KFCH cash of RM1 for every to Damansara Realty Berhad (“DBhd”) outstanding KFCH warrant. All the for RM13.5 million, satisfied entirely by We are pleased to say that Kulim has outstanding warrants of QSR and KFCH the issuance of new DBhd shares, was recorded a substantial gain from the were to be subsequently cancelled. concluded. The disposal accorded a deemed divestments of the Foods and gain of RM8.01 million to Kulim Group. Restaurants business as well as the Following the exercise, on 27 December Metro Parking Group was acquired in aforementioned IV business. More than 2012, Kulim made an announcement 2004 through Sindora. Kulim Group now just the gains recorded, we took great of a special dividend entitlement of holds 10.75% of DBhd. pride in terms of our success in growing these businesses and in increasing 90.94 sen per Kulim share, payable The disposal of Pro Office Solutions their value. Furthermore, the respective on 25 January 2013. On 28 December Sdn Bhd (“POS”) for RM6.75 million is intrapreneurs also benefited from the 2012, Kulim further announced that the currently at the final stage and expected scheme following their successful joint exercise price of Kulim warrant would to be completed within the second venture with the Group: the intrapreneur be adjusted to RM3.13 from RM3.85 quarter of 2013. Furthermore, it should for POS recorded an almost three-fold previously, effective 12 January 2013. be noted that prior to the disposal, rise in the value of his shareholding POS had also sold-off its premises for from RM430,000 to RM1.06 million, With the distribution of the special a total consideration of RM9.0 million whilst the intrapreneurs of Orkim saw dividend on 25 January 2013, the with a resultant cash surplus of RM6.1 the value of their shareholdings rise from deemed divestment of the Foods and million. We expect some RM7.5 million RM1.30 per share to RM6.98 per share. Restaurants business was concluded. gain on disposal to be recorded over an However, in accordance with accounting investment period of 9 years. With our exit from the Foods and standards, such material events after Restaurants business and the the balance sheet date need to be As at the date of this report, the disposal streamlining of our IV Division, Kulim’s appropriately disclosed in the current of shareholding in Orkim Sdn Bhd business will be primarily driven by our year’s financial statement. Hence, the (“Orkim”) by Sindora and E.A. Technique Malaysian plantation operations and financial results from the Foods and (M) Sdn Bhd (“EATech”) of 20% and 31% influenced by NBPOL’s results, thus Restaurants Division were disclosed respectively for a total consideration increasing the sensitivity of our business as Discontinued Operations in 2012’s of RM110 million has been completed. to palm oil price fluctuations. However, financial statement. Based on proforma as at 31 December we remain firm in our belief that the SECTION 1
15 2012 SYNOPSIS 2012 2012 report annual ue.” their val in increasing d businesses and “More than just in growing these d, the gains recorded, terms of OUR success pride in we took great
-
2011 under medal category underscore 2011 Award
Programme bronze Mining CSR 2012 the Awards CSR
in and and CSR 2011 Minister’s Global garnered “Best Prime TO STAKEHOLDERS STATEMENT Plantations the Practices” category. the “Workplace bear awards These prestigious commitment on-going our to testimony to delivering value whilst embedding the sound principles of sustainability in our daily operations. Our commitment to sustainability and accolades The many awards we our commitment to balancing our our commitment to balancing our business performance with good outcomes. social and environmental Kulim is committed to ensuring its businesses serve a higher cause, making one that goes beyond merely To this end, we continue to profits. in implementing make good progress set of policies a comprehensive policy developing an integrated and framework for our sustainable development efforts. for the fifth year running. In the area year running. In the area for the fifth Kulim was accorded of sustainability, the for Environment” in Award in the Main Board Companies Companies in the Main Board Award -
- of to be the Tax well 2012 to RAPID as selected sector areas Growth or Before 2 awarded NACRA Petrochemical continue being Johor; Profit Profit will the and was in Report of Development earnings. Development “Highest Kulim Pengerang, Business Refinery Annual Growth winner in Property Oils stabilise 2011 the 2012, the 2012 ds and recognitions 2012 war Kulim’s Balanced Business Strategy Balanced Business Strategy Kulim’s well during the had served the Group last 5 years and with this in mind, into actively pursuing inroads we are to diversify the business new areas and robust in the long-term and as such the long-term and as such in robust exploring new land continuously are opportunities both locally and abroad to expand our plantation business. accolades interest would be in the Oil and Gas would be in the Oil and Gas interest leveraging on the servicing sector, the planned development surrounding Petronas Integrated Project as In A as growth strong capitalise on the recent in Iskandar Malaysia. Highest by the Edge Billion Years” Over Three of our Ringgit Club, an apt reflection on-going commitment to delivering performance. The year also saw robust our Palm 16 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
“we remain firm in our belief that the Palm Oils Business will continue to be robust in the long-term and as such are continuously exploring new land opportunities both locally and abroad to expand our plantation business.”
In our 2011 Annual Report, we smallholders) has been recommended highlighted that we were preparing to for certification. This means that all obtain the International Sustainability NBPOL’s palm oil is 100% certified and Carbon Certification (“ISCC”) which sustainable palm oil. With regard to would give us access to the EU market, Malaysia Plantations, we are pleased afford us an additional competitive to report that all our domestic operating edge, as well as increase customer units have successfully undergone the loyalty and the marketability of our annual surveillance audit for the purpose products. We are pleased to say that of maintaining our RSPO certification. Kulim has successfully completed this exercise in Jan 2013. Not only does Review of external business the ISCC underpin our commitment to environment strengthening our sustainability agenda, it will enable the re-activation of our In 2012, global economic growth biodiesel plant, Nexsol, for the EU moderated amidst a more demanding market via strategic collaborations. environment. Growth in the advanced economies was uneven, with the US We are also pleased to report that experiencing a fragile recovery and NBPOL has obtained recommendations the Eurozone remaining in recession. for the Roundtable on Sustainable These weakened economic conditions Palm Oil (“RSPO”) certification for its affected international trade, which in Milne Bay and Higaturu estates in late turn affected domestic economic activity 2012. Together with the certification in the emerging economies. Weaker of Poliamba in March 2012, NBPOL’s global growth prospects coupled with entire production base (including the on-going fiscal uncertainties in the SECTION 1 17 2012 SYNOPSIS 2012 2012 report annual
the 17.0 of million to 14.0 majority tonnes from a with million 2011/12 3.0 in by 2010/11, in rose tonnes TO STAKEHOLDERS STATEMENT stocks million tonnes increase recorded in sunflower oil and recorded increase palm oil stocks. a to oil as as for high 2.06 2.63 palm lower 6.5%, growth at well was to CPO vis-à-vis palm achieved The by of registering as global tonne, close production tonne comparison Overall 2012 the price to per 2012, in in imports per in RM3,219 compared Malaysian end-2011. of oil 5.6%. year (“CPO”) production as 27.7% at average of RM455 RM2,764 Oil increase by 2012, price palm USD300 the the expected or CPO in of as was The tonnes tonnes rose growth Palm than end average year 14.1% much 2011. Malaysia, million closing stock was attributable to the high palm oil opening stocks, the increase Despite the fragile external environment, Despite the fragile external environment, the Malaysian economy performed better advanced economies, also contributed advanced economies, international volatility in the to prolonged Nevertheless, market financial markets. the latter towards sentiments improved wake of stronger part of the year in the taken steps vital and commitments European the by authorities to resolve debt crisis. sovereign the million strong In and the decline in palm oil exports by 2.4%. However, performance was powered by higher performance was powered in domestic demand, which growth the mitigated the negative impact from weak external environment. challenging one for the Malaysian palm of the During the first half oil industry. the industry experienced lower year, Crude a result of lower yields of Fresh Fruit of lower yields of Fresh a result Bunches (“FFB”). In the second half, palm oil prices declined on the back of increased by stocks By weaker export demand. the in other vegetable oils. World vegetable oil other vegetable oils. World oil stocks was unexpected, notably in was unexpected, oil stocks Indonesia, and this was predominantly palm oil for the depressed responsible prices and the discounting of palm oil by as 18 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
Segment Revenue GROUP FINANCIAL RESULTS
100% 3% 3% Revenue The Group’s Statement of Comprehensive Income in 2012 is portrayed substantially 90% 19% 18% different from that of previous years. This to a large extent is due to the reclassification
80% of results of the QSR Group, NBPOL as well as other IV companies, which have been disposed or are in the process of being disposed by the Group, as Discontinued 70% Operations. Similarly, for comparative purposes, the 2011 results of these companies were treated in a similar manner. This now means that the Group’s financial results will 60% now only portray 2 continuing business segments i.e. Malaysia Plantations and the IV
78% business. 50% 79% Revenue* 40% 2012 2011 Variance Business 30% segment RM Million % RM Million % %
20% Malaysia Plantation 712.20 78% 821.48 79% (13.3%) 10% IV 167.98 19% 184.93 18% (9.2%) 0% 2012 2011 Others 26.64 3% 35.76 3% (25.5%) Total 906.82 100% 1,042.17 100% (13.0%)
Segment EBIT excl. Extraodinary Income * based on restated figures due to Discontinued Operations
200% The Group recorded lower revenue of RM906.82 million in 2012, some 13.3% lower than the RM1.04 billion recorded last year. This was due to a decline in revenue 150% 24% contribution from all business sectors.
100% 9% In the Malaysian Plantation segment, the average per tonne CPO and Palm Kernel 122% 50% 99% (“PK”) price was RM2,923 and RM1,599 respectively, lower than the average prices achieved in the preceding year (2011: RM3,193 for CPO and RM2,300 for PK). This 0% lower average price is somewhat consistent with that of MPOB (RM2,764) albeit -8% -46% slightly higher, as Malaysian palm products were largely sold at spot prices and only a -50% small amount was sold forward. Lower FFB production levels were also experienced by the oil palm companies in Malaysia, leading to the lower production of CPO and -100% 2012 2011 PK in 2012.
Malaysia Plantation The IV Division recorded a 9.2% decrease in revenue of RM167.98 million in 2012 as Intrapreneur Ventures compared to RM184.93 million in 2011. Shipping services, led by EATech, however, recorded commendable growth in revenue by RM6.7 million due to new 10-year Others contracts secured for its 4 new harbour tugboats providing services at the Sungai Udang Port. In addition, EATech also managed to optimise the operational and financial performance of its 40,000-dwt single hull tanker, MT Nautica Muar which previously incurred a loss in 2011. This was offset by lower revenues recorded by other IV companies, with the main reductions in revenue coming from Sindora Timber Sdn Bhd, Microwell Bio Solutions Sdn Bhd and Extreme Edge Sdn Bhd. SECTION 1
19 the % PBT form 2011, in million 100% 41.2% in (33.7%) the (46.0%) 213.8% (196.9%) in Variance Group’s million the RM862.9 d, squeezed, million % 2012 SYNOPSIS 2012
9% to (8%) 2012 report annual 99% 100% , production, RM63.3 Comparatively million cost business.” RM125.2 some million. contributed oil business palm - - 2011 the profit margin thus business was for the plantation a reflection of the 21.90 another RM354.6 (19.85) 22.9% 238.65 238.65 236.60 product prices palm FFB as well as lower FFB d fixed being a largely of lower “As a result form of Share of Results in Associates form of Share and contributed of Results from Discontinued Operations,Discontinued from Results of altogether contributing a total of RM188.5 NBPOL and and profit after tax and minority interests after tax and minority interests and profit respectively. (“PATMI”) RM Million
an % the was 24% (46%) 2011 kernel 100% 122% (2011: 1,108 1,748 Group as (“PBT”) NBPOL resulting compared (excluding 2012 tax CPO after determinant USD/tonne as level, a in Dollar NBPOL NBPOL 2012 2011 as before tonne PBT Consequently, US 2012 in CPO), the 2012 1,062 1,337 30.92 (58.93) 14.2% 82.6% in 748.79 619.93 128.86 156.87 per price from the the profit At PK RM Million USD/tonne tonne production million million affecting business. of versus per lower RM1,637 recorded impact). as at cost Kina contribution cost 41 TO STAKEHOLDERS STATEMENT USD275.5 well USD81.6 CPO PKO NBPOL’s Palm Product Prices NBPOL fixed of to unit IAS RM1,141 higher credit, mainly impacted by lower output mainly credit, as associate was weaker than anticipated weather adverse significant to due conditions of kernel credit. The site production especially at its largest furtherwas This Britain. New West in compounded by the lower palm product of the and the appreciation prices secured PNG in increased labour and overhead costs. in increased
in of due from from from EBIT mainly product the was million reflection However, RM619.93 RM128.86 RM238.65 production a businesses 82.6% was 213.8% palm restatement acquired year.
to from by core increase higher and totalling totalled This lower RM748.79 squeezed, banks the 46% to of from Consequently, EI) previous by thus NBPOL improved NBPOL land 2011. increased CPO, the result year. recorded in in the million EBIT a was in also down in and new As (“EBIT”) current dilution 2012, the FFB - Including EI EBIT Margin: Businesses Core - From Total EBIT Total Extraordinary Income: Extraordinary of NBPOL - Gain on dilution in NBPOL and Fair Value Total - Core Business - Core Total Others IV Business segment Malaysia Plantation (excluding In million. included in the EBIT was Extraordinary included in the EBIT was Extraordinary the gain on from Income (“EI”) resulting the investment The Group’s earnings before interest and interest earnings before The Group’s tax PROFITABILITY 22.9% million, to million contributionlower EBIT to attributable Malaysia Plantation. from Although in absolute terms, Malaysia Plantation of JCorp. Comparing on the same basis, the existing plantation from production in assets was lower than that recorded 2011. RM238.65 margin of the palm oil business being a largely of the palm oil business being a largely the prices as well as lower FFB production, prices as well as lower FFB production, for the plantation margin the profit business 20 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
“The special 363% amounting to approximately RM1.3 billion year’s RM2.62 billion. This was mainly dividend was was recorded. The net restatement gain attributable to the exclusion of borrowings from NBPOL, the QSR Group as well as distributed on recorded during the year amounted to approximately RM582 million, in addition IV companies classified as discontinued 25 January 2013 to a RM37.6 million gain on dilution operations, namely Metro Parking Group, in appreciation in NBPOL registered when Kulim’s POS and Orkim. However, this was offset of the loyal shareholding initially diluted from 50.68% by an additional RM628 million financing to 49.54%. obtained by MPSB to finance the support extended by acquisition of JCorp estates. As a result, shareholders over The Plantation Division was the largest gross and net gearing also decreased to the years ever since contributor to the Group’s EBIT, albeit 0.21 times and 0.17 times respectively as the Group acquired lower in absolute value in 2012. With the compared to 0.38 times and 0.29 times respectively in 2011. the RESTAURANTs absence of the Foods and Restaurants Division in the core business segments, chain in 2006.” the IV Division became the second largest There was also a decline in the Group’s EBIT contributor while Other Operations Net Assets from RM4.29 billion in 2011 mainly stemmed from headquarter costs to RM3.94 billion in 2012 mainly as which were not allocated to any specific a result of dividends declared during business segment. the year. These comprised an interim dividend of approximately RM96 million The Group’s finance cost increased by and the special dividend of RM1.158 77.1% from RM33.91 million in 2011 to billion which was declared prior to the RM60.06 million in 2012, mainly due to year’s end. This in turn was offset by a higher interest expense recorded by the current year’s PATMI of RM831.65 The higher negative contribution from MPSB as a result of the acquisition of million. As a result, net assets per share the Other Operations segment were JCorp’s plantation estates which was also decreased to RM3.09 from RM3.48 mainly due to a gain on disposal of entirely funded by external borrowings. in 2011, reflecting the Group’s changed warrants recognised in 2011 amounting Interest cover increased to 13.71 times business composition and worth. to RM35 million. This was offset by a as compared to 7.33 times in the previous slightly higher contribution from the IV year due to the higher EBIT recorded in Division on the back of the higher profit 2012. Earnings per share (“EPS”) from contributed by EATech following the new continuing activities increased from contracts secured for its 4 harbour tug 10.74 sen in 2011 to 51.17 sen, reflecting boats servicing the Sungai Udang Port. the recognition of restatement gain on investment in NBPOL, while the EPS The reclassification of NBPOL’s status from discontinued operations was 9.17 from a subsidiary to an associate led to sen as opposed to 35.16 sen in 2011. the restatement of Kulim’s investment in NBPOL based on NBPOL’s market value. BALANCE SHEET As a result, upon this change of status Kulim’s exit from the Foods and in May 2012, Kulim recorded a gain on Restaurants business as well as the restatement of investment in NBPOL change in status of NBPOL from of approximately RM1.9 billion based subsidiary to associate company have on its prevailing market price of about significantly reduced borrowings at GBP8.70. Group level and further strengthened our financial position. As at 31 December However, as a result of NBPOL’s declining 2012, the Group’s total borrowings stood share price (which closed at GBP5.05 at RM1.13 billion reflecting a substantial at the end of 2012), an impairment decrease of 57% from the preceding SECTION 1
21 the The visits 2013 2012. 16%), efforts 2012 1,158,450 December share. Amounting restaurants 95,992 (2011: 2012’s declared 31 January company per the at 5 2011 25 November 12% 2012 SYNOPSIS 2012 share. 61,728 As sen 2012 report annual at Group on in calls, per 99,560 acquired the programme. out 90.94 2010 stood shows. sen Special dividend arising received the proceeds from deemed divestment offrom QSR and KFCH. or 17,570 paid 2012, 7.5 Group road distributed Kulim conference relations or 4 in billion the 2009 was was 40,996 investor 30% since this 2 investor Interim and Final Special December of in 2008 meetings, RM1.158 Special dividend arising the proceeds from disposal of from received Natural Oleochemicals. in ever 7 dividend 34,313 shareholding - million, effective years dividend 363% totalling holding and foreign the
800,000 600,000 400,000 200,000 us participating
RM96 1,200,000 1,000,000 RM’000 KULIM’S 5-YEAR DIVIDEND RECORD to entitlement for a single tier special dividend arising from the the tier special dividend arising from entitlement for a single of QSR and the deemed divestment from received proceeds KFCH, chain in 2006. Subsequently, saw in appreciation of the loyal support extended by shareholders of the loyal support extended by shareholders in appreciation over INVESTORS RELATIONS and As part of our commitment to engaging our shareholders timely analysts and ensuring the dissemination of transparent, continues to undertake a and pertinent information, the Group robust special DIVIDEND a single tier declared Kulim review, During the year under interim 2012, and though lower than previous year, is still a positive reflection of is still a positive reflection year, though lower than previous the confidence long-term investors, including those abroad, have in Kulim.
of to Dec The until 500 2012. 2012, March shares August 423.71 241.19 price price treasury Nov in year-on- buy-back 26 Plantation 14 2011. 2011 Oct on
on share Index TO STAKEHOLDERS STATEMENT and million Million Units treasury Sep 16.11% December consistently purchase Kulim : 16.11% FBM KLCI : 10.34% Plantation Index : 1.85% by 31
total Aug KLCI 27.48 RM4.11 RM5.37 December subsequent on the a Jul Plantation 385.22 272.71 30 grew was was average FBM entire undervalued performed the on 2012 Jun 20,511,611 an 2012, the year the the price price RM4.90 at Million Units and and of May at the undertook share RM4.22 Apr KLCI closing 2012, shares then highlight at December outpaced during closed Our Mar disposed to FBM our 31 We May Feb Kulim Plantations Index FBM KLCI highest at of year. price price the share closed Kulim share As Jan the the million. per of million closing 2012, share’s shares beginning Kulim’s whilst end market. 0.00% 9.88 July 10.00% 20.00% 30.00% 40.00% 50.00% KULIM SHARE PRICE MOVEMENT 2012 -10.00% Counter Activity Volume Traded Volume - Share - Warrants (units) converted Warrant shares held from the beginning of the year recording a gain of the beginning of the year recording held from shares RM46.29 Kulim held by Kulim averaged RM4.64 per share. lowest The Group will continue to evaluate the necessity for buy-back The Group as and when the need arises. exercises SHARE BUY-BACK In of SHARE PRICE Kulim UE CREATION SHAREHOLDERS’ VAL 2012. Index of 10.34% and 1.85% respectively. year increases the 2012 the outperforming RM4.64 22 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
SEGMENT HIGHLIGHTS The Group remains committed to PNG which accounted for more than achieving its productivity target of half of the Group’s palm products. PLANTATIONS raising the fruit yields to 30 tonnes per The Group’s plantation operations hectare and palm product extraction Malaysia Plantation saw a modest drop in FFB production rates to 30%. To this end, the Vision The Malaysian estates produced a with 2,304,012 tonnes of FFB being 30:30 target will be monitored closely total of 715,526 tonnes of FFB in 2012, produced by the Malaysian, PNG while concerted efforts are underway, some 12.37% higher than the 636,761 and SI estates against 2011’s record including accelerated replanting of tonnes produced in 2011, while yield per harvest of 2,375,888 tonnes. The 3% the old palms with new high yielding hectare decreased to 20.68 tonnes in drop was mainly due to the lower FFB planting materials to give higher and 2012 from 21.89 tonnes in the preceding produced in PNG with unexpected faster yield, innovations on plantation year. This performance, however, was exceptional rainfall in the early part of and palm oil mill practices using the superior to the average yields achieved the year, particularly in NBPOL’s largest latest technology. by the industry as a whole in Johor and production site, West New Britain. Peninsular Malaysia in 2012, which The total CPO produced by the Group came in at 19.02 tonnes and 19.05 The Malaysian estates produced 31% reached 715,207 tonnes, representing a tonnes respectively. The average FFB of total Group FFB (27% in 2011) while marginal 3% drop over 2011’s 737,323 yield for the whole country (inclusive the PNG and the SI estates produced tonnes. Similarly, the total PK produced of Peninsular Malaysia, Sabah and 63% and 6% of total Group FFB was down by 4% at 177,998 tonnes Sarawak) decreased to 18.89 tonnes per respectively (68% and 5% respectively (2011: 185,009 tonnes). This was in line hectare from 19.69 tonnes in 2011. The in 2011). The Group’s planted area to with the marginal drop in the total FFB increased in FFB production was mainly oil palm increased to 123,934 hectares processed by the Group of 3,294,771 due to the acquisition of 5 estates from as compared to 118,655 hectares in tonnes (2011: 3,340,307 tonnes). JCorp and a relatively more stable 2011. The acquisition of some 11,200 workforce throughout 2012 as well as hectares of oil palm estates from JCorp In terms of extraction efficiency, the several new initiatives implemented to that was completed on 30 December Group’s OER dropped to 21.71% in boost productivity. 2011 and in the third quarter of 2012 2012 as compared to 22.07% in 2011, is reflected in the increase in the total while KER also dropped slightly to Total CPO production from Malaysian oil palm hectareage. The geographical 5.40% in 2012 from 5.54% previously. mills was 207,265 tonnes in 2012, some distribution of planted oil palm Similarly, the drop in the Group’s overall 11.6% higher than the 185,666 tonnes hectareage was 37% in Malaysia, 58% productivity in 2012 was mainly the in the prior year with the acquisition in PNG and 5% in the SI. result of the lower FFB production in of Palong Cocoa Palm Oil Mill in June SECTION 1
, , .” 23 2012 SYNOPSIS 2012 2012 report annual technology to give higher will be target on innovations with old palms 30:30 “The Vision 30:30 using the latest d, yield, and faster d d while concerte new high yielding oil mill practices replanting of the monitored closely planting materials and palm plantation are underway efforts d d including accelerate
at of for into hour from palm result 2011. Group was months tonnes. NBPOL year in per upgraded and 6 came a drop the 2011 22.35% a 2012 oil FFB of mill 5.42% the saw NBPOL some of being 507,942 for palm to from OER basically This from the tonnes, KER mills twelfth an tonnes was bunches for (crude drop 23.8 decline 320 whilst a produced contents. fruit existing to 2012 NBPOL’s was slight also achieving a product as 260 CPO kernel TO STAKEHOLDERS STATEMENT 22.79%; kernel) considerably extraction rates were In the first half by the weather. affected onimpact direct the to due year the of that infrastructure and conditions field impeded the harvesting, collection and In the second halftransportation of crop. of the year due to the impact of poorly pollinated The average estate yield of FFB per hectare in lower oilafter the rains that resulted and 25.4 tonnes in 2011. Palm drop in FFB production also lowered the also lowered production in FFB drop total Group as it provided some time for overdue as it provided maintenance and upgrading of the existing mills. of consolidation 2012, (“TPH”). 5.25%, capacityits milling boosting operation, from The year under review also saw many ofalso saw many year under review The NBPOL’s even to to on we the due and their from 2011 terms KPOL million 58,773 in 20.29% In 2.3 to support hectare largely 9.49% However, 19.98% was compared excluding 2011. exceeding acquired per hectare of of 2011 in robust 20.20% by 2012 in produced 2012, per 5.75%. in in tonnes to from recently gave production CPO increase Group tonnes Group Malaysia) 25 tonnes FFB all 2011 The an tonnes of PK in than tonnes improved 53,678 NBPOL NBPOL million 4.19 the tonnes, to adverse weather conditions in West New Britain, inhibiting the workers’ ability to collect and transport FFB. it is encouraging to note that However, yield the younger palms showed strong year palms yielding potential with third more average. estates at Higaturu, Milne Bay and Poliamba 2.4 2012. tonnes of oil yield, the Malaysian plantations of oil yield, the Malaysian plantations from increase a marginal recorded 3.91 the This targets. annual crop respective PNG and SI Plantation The 5.48%, respectively. to are still ahead of the industry averages are (Peninsular whilst KER recorded a slight dip from a slight dip from whilst KER recorded 5.84% oils from FFB purchased from outside from FFB purchased oils from suppliers. For the Malaysian operations, OER 24 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
INTRAPRENEUR VENTURES recorded 14% growth in revenue, other RM30.92 million in 2012 as compared The IV Division recorded a slight than mainly driven by its successful to RM21.90 in 2011. This was mainly decrease in revenue from RM184.93 penetration into Sabah, there was driven by a 57% improvement in million in 2011 to RM167.98 million in increased proportion of sales of higher- EATech’s operating profit, owing to the 2012, a decrease of 9.2%. However, priced Mechanical Buffalo as compared new contracts secured for its new tug operating profit jumped 41.2% from to last year. boats as well as good performance RM21.90 million to RM30.92 million in 2012. The good performance for the However, these growths were offset by MT Nautica Muar (“MTN Muar”), year was attributable mainly to the by lower revenue recorded by other its 40,000 dwt single-hull tanker. In growth of the shipping segment, namely IV companies, primarily by Sindora previous year, MTN Muar had recorded E.A. Technique (M) Sdn Bhd (“EATech”). Timber Sdn Bhd (“STSB”) for reduced a loss due to its being non-operational. latex price; Microwell Bio Solutions Sdn In 2012, a short-term contract was EATech recorded revenue of RM102.72 Bhd (“Microwell”) for change in sales secured to utilise MTN Muar for floating million in 2012 as compared to direction to focus on Nutrient Package storage purposes which enabled the RM96.06 million in 2011, an increase of products (Gro Agro 1 and 2) which vessel to break even. 7%. This was mainly attributable to the have a lower selling price; and Extreme new contracts (with good profit margin) Edge Sdn Bhd (“EESB”) due to the secured for 4 of its new harbour tug termination of less profitable contracts. Other companies that recorded boats, currently providing services at improved profitability performance were Sungai Udang Port, Melaka. In addition, Despite recording lower revenue, the MIT Insurance Brokers Sdn Bhd, EBSB Edaran Badang Sdn Bhd (“EBSB”) Division’s operating profit was higher at and EESB. SECTION 1
, , 25 Sdn Bhd.” 2012 SYNOPSIS 2012 E.A. E.A. namely 2012 report annual (M) Technique (M) to the mainly growth of the d in 2012. The good shipping segment to RM30.92 million d 41.2% profit jumped 41.2% from RM21.90 million “However, operating performance for the utable attrib year was TO STAKEHOLDERS STATEMENT 26 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS STATEMENT TO STAKEHOLDERS
PROSPECTS AND PLANS As such, although the base for supply products) has been beneficial as we and demand is expected to be strong, have also identified potential strategic The Malaysian economy is expected the price would not be growing at the involvement for the Group to expand our to remain on a steady growth path with same pace as in the last few years as this activities in this niche within the lucrative expansion of between 5% and 6% in can be attributed to the strong soy crop Oil and Gas sector, supported by the 2013. Economic activity will be anchored in Brazil and the strong production of proposed development of RAPID in by the continued resilience of domestic palm oil both in Malaysia and Indonesia, Pengerang, Johor. demand, and supported by a gradual causing high stocks to potentially persists improvement in the external sector. especially in the second half of 2013. This has been made more advantageous On the supply side, all major economic as RAPID’s location is within a half-an- sectors are expected to record continued The Group will remain vigilant in its hour’s drive from the Group’s estates. expansion in 2013. The agriculture sector marketing approach as well as will With the rapid development of Johor’s is expected to expand by 4% in 2013, continue to manage its costs property market, spurred on by Iskandar supported by higher output of CPO and effectively through wider application of Malaysia, the Group sees itself in a good food commodities, especially livestock mechanisation in the plantation operation and vegetables. CPO production is including Cantas and Ckat, fertiliser position to tap into potential property expected to rise as yields improve with spreaders and technology such as UAV development as some of its estates better weather conditions, supported by to develop accurate palm inventories, are located within or adjacent to the supply from newly maturing trees. palm health checks, landforms and development zones of Iskandar Malaysia. surveillance of field conditions. The Group is also considering converting Palm oil is expected to face another part of its oil palm estates for property challenging year in 2013 with additional Our past exposure in servicing the Oil development as the value of these areas young palms maturing in Indonesia from and Gas sector via EATech (involving may potentially outweigh the current 7.1 million hectares in 2011/2012 to 7.6 the transportation of clean petroleum value of the estates. million hectares in 2012/2013. Global production is expected to increase to 53.4 million tonnes in 2012/2013 as compared to 50.6 in the previous period. The total demand for palm oil and kernel oil is forecast to reach 57.7 million tonnes in the 2012/2013 period while the share of the food and industrial segment is projected at 33% and 49.5% respectively. This however will need to be viewed in the overall oils and fats market context. Soya bean production in the US is expected to decline due to the hot summer experienced in 2012 while the rapeseed and sunflower seed harvests also expected to experience decline due to unfavourable weather conditions.
At the point of writing, CPO prices remain pressured with stocks remaining above the 2 million tonnes while export performance remains lacklustre. SECTION 1
27 , it is 2012 SYNOPSIS 2012 2012 report annual “we are always reminded that be our will always strength.” greatest , carried us through, and will continue to our people who have d ugh and us thro carry
we as together journey our TO STAKEHOLDERS STATEMENT continuing Fuaad and Natasha Kamaluddin who thank We the Board. from have resigned them for their worthy contributions and future their in success every them wish endeavours. ourselves for a new As we prepare illustrious in Kulim’s chapter of growth heights for greater history and aspire always reminded of excellence, we are that, it is our people who have carried and will continue to carry us us through, thatchallenges the Whatever through. and will always they are come our way, look forward We strength. be our greatest to AHAMAD MOHAMAD Managing Director build on our achievements and embrace the new challenges in the year ahead.
it 2012,
of challenges the on reflect we is only right that we express our heartfelt is only right that we express gratitude to all our employees for their dedication and above all, work, hard also wish to We performance. strong for their undivided thank our shareholders good and support and loyalty through times. Our gratitude also goes difficult partners, business financiers, our to government bodies and regulatory authorities as well as our customers. Last also goes but not least, our appreciation members for their wisdom to the Board thanksof note special A and guidance. to Kua Hwee Sim, Datuk Ahmad Zaki Mohd Wan Mohd Firdaus Zahid, Wan ATO’ KAMARUZZAMAN ABU DATO’ KASSIM Chairman As IN APPRECIATION 28 Kulim (Malaysia) Berhad (23370-V) SECTION 1 2012 SYNOPSIS CORPORATE EVENT HIGHLIGHTS 2012
29 29 March - 19 - 20
2012 March 2012 7 October 2012 April Visit by Felda Technoplant Kulim participated in Kulim won the bronze to KMF-LBI. the series of Karnival medal for Best Workplace Pendidikan, Kerjaya dan Practices award during Keusahawanan (“KEPAK Global CSR Awards 2012”) at Johor Bahru, Ceremony at Boracay, Kluang, Muar and Pasir The Philippines. Gudang.
9 - 11 19 - 25 26
2012 June 2012 June 2012 June Kulim participated Kulim participated in the Kulim (Malaysia) Berhad in the Biodiversity & exhibition during Minggu 37th Annual General Biotechnology Conference Sains ICT & Teknologi Meeting (“AGM”) was 2012 (“Bio Johor 2012”) Negeri Johor 2012 (“MISTI held at Lecture Hall at Persada Johor 2012”) at Persada Johor 1 & 2, Level 1, KFCH International Convention International Convention International College, Centre, Johor Bahru. Centre, Johor Bahru. Johor Bahru.
30 4 - 5 16
2012 June 2012 July 2012 July Gerak Kemas Perdana, an annual event initiated Kulim participated in the Kulim was named as the by the 5S Taskforce Committee to promote the East Region Innovative Winner of Highest Profit Growth adoption of 5S “house-keeping” philosophy by Creative Circle (“ICC”) Company: Highest Growth in focusing on effective work place organisation, Convention 2012 at Bukit Profit Before Tax over Three standard and simplified working environment. Gambang Resort City. Years - Plantation category at The Edge Billion Ringgit Club 2012 Corporate Awards ceremony.
17 - 18 17 31
2012 July 2012 July 2012 August Kulim participated in Board of Directors’ 55 participants from the South Region ICC Plantation Visit to Kulim took part in the Convention 2012 at Sedenak Complex. Majlis Perhimpunan Hari Renaissance Hotel, Kebangsaaan, held at Melaka. Dataran Kluang.
3 - 5 29 September - 6 - 7
2012 September 2012 3 October 2012 October Kulim participated in Kulim’s 5S Audit Committee Kulim participated in the the exhibition during conducted 5S Audit at all operating exhibition during Karnival the 11th International units within the Group. GP Joran Berita Harian Entrepreneurship Forum 2012 at Tanjung Leman, and Exposition 2012 at Mersing. Putra World Trade Centre (“PWTC”), Kuala Lumpur. SECTION 1 29 2012 SYNOPSIS 2012
9 November 2012 report annual 2012 Kulim participated in the exhibition during CEO Luncheon Talk held at Persada Johor International Convention Johor Bahru. Centre,
22 October 2012 Awards Corporate Social Responsibility Prime Minister’s Kuala Lumpur - Kulim won the 2011 at Shangri-La Hotel, under Kulim Wildlife Environment Best CSR Programme: Defenders (“KWD”).
23 November - 2 December 2012 Kulim participated in Malaysia and Horticulture Agriculture, Show 2012 (“MAHA Agrotourism 2012”) at MAEPS, Serdang.
12 December 2012 The recognition of the The recognition tree Mangrove largest in Malaysian Book of and the Opening Record of the Ceremony Park was held Mangrove Piai, Pontian. at Tanjung Kulim donated RM125,000 for the jetty construction. 2012 HIGHLIGHTS EVENT CORPORATE
th 23 November 2012 Kulim participated in the “Johor Corporation Float” for Majlis Keputeraan Sultan Johor at Muar, Johor. Convention Centre. International Johor
4 - 6 December 16 - 18 November 1 November 14 - 17 October
2012 2012 2012 2012 Kulim participated in BN Youth Kulim participated in BN Youth Job Fair at PWTC, Kuala Lumpur. World Islamic Economic Forum (“WIEF”) at World Persada Kulim participated in the exhibition at the 8 Kulim won the Industry Excellence - Plantations (Main Board) Award & Mining in the National Annual Corporate Report Award 2012 (“NACRA 2012”) Award at Sime Darby Presentation Kuala Lumpur. Convention Centre, Kulim participated in the National Kulim participated in the annual ICC Convention 2012, an by MPC, held at event organised Centre Kuala Lumpur Convention (“KLCC”). 30 Kulim (Malaysia) Berhad (23370-V) SECTION 1 2012 SYNOPSIS SUSTAINABILITY EVENT HIGHLIGHTS 2012
28 18 February &
2012 January 2012 3 March Futsal Challenge: Piala Jom Gotong Royong, a Kulim 2012 organised by programme attended by Kelab Sukan & Rekreasi Group employees was Tiram (“KSRT”), held at organised by KSRT at Rumah Futsal Sports Centre, Ulu Anak-anak Yatim Darul Tiram, Johor. Hanan, Pasir Gudang, Johor.
26 13
2012 February 2012 March Majlis Maulidur Rasul, Seminar Landasan a religious programme Kerjaya, a programme attended by Group to prepare children of employees and employees to the career surrounding community, world, was organised held at Dewan Palong, by KSRT at KFCH Palong Estate, Segamat International College, and Masjid Jamek Ulu Bandar Dato’ Onn, Johor Tiram Estate. Bahru.
7 April - 7 April - 2012 2012 19 May 21 October KSRT Sports Carnival, Kulim through KSRT an annual sports participated in JCorp Monthly programme organised Sport 2012, a programme by KSRT, with the aim to organised by Pertubuhan promote healthy lifestyle Kebajikan Pekerja (“PKP”) among employees. Induk, JCorp.
31 23 7 July - 2012 2012 May June 2012 11 August Hi Tea Bersama Ustaz Celebration of Kulim’s International In conjunction with the Don Daniyal was held Women’s Day was held at KSRT Club month of Ramadhan, Ihya at Puteri Pacific Hotel, House with the theme ‘Wanita: Tampil Ramadhan, a series of Johor Bahru. Sihat & Anggun’. The speaker for the religious talk was held at programme was YBhg. Dr. Robiah K. KSRT Club House. Hamzah, the principal of TV9 reality programme ‘Ustazah Pilihan’. SECTION 1 31 2012 SYNOPSIS 2012 2012 report annual
15 December 2012 Inter Region Sports Carnival, a sporting to event organised commitment promote to healthy lifestyle, and participated by all employees from operating units.
22 September 2012 As part of Kulim’s As part of Kulim’s sustainable initiatives, , a tree- Infaq 1 Warisan was planting project, held at Siang Estate, Kota Tinggi.
13 - 14 October 2012 In the effort to support the fight In the effort Kulim through against cancer, participated in ‘Relay KSRT For Life 2012’, programme by the National organised Cancer Society Malaysia. The event was held at Stadium UKM, Bangi. 2012 EVENT HIGHLIGHTS SUSTAINABILITY
25 - 26 November 6 October 15 September
2012 2012 2012 Kulim Family Day was held at Bukit Gambang Pahang Resort City, Kulim participated in a Hunger charity walk, World Relief 2012, held at Istana 3, Kehakiman, Presint Putrajaya, to raise funds for Food Programme the World under the auspices of the United Nations (“UN”). Hari Raya celebration with Hari Raya celebration , an the theme ‘One Malaysia’ annual employee gathering was held at Kulim Corporate Ulu Tiram, Johor. Office, 32 Kulim (Malaysia) Berhad (23370-V) SECTION 1 2012 SYNOPSIS RECOGNITIONS AND ACCREDITATIONS
RECEIVING COMPANY/ AWARDS RECEIVED IN 2012 AWARDED BY OPERATING UNIT
NACRA Award 2012 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Winner of Industry Excellence Award (Main Board) - Plantations and Mining Prime Minister’s CSR Awards 2011 Ministry of Women, Family and Community Kulim (Malaysia) Berhad • Best 2011 CSR Programme : Environment Development The Edge Billion Ringgit Club Award 2012 The Edge Kulim (Malaysia) Berhad • Highest Profit Growth Company - Highest Growth in Profit Before Tax Over Three Years Global CSR Awards 2012 The Pinnacle Group International Kulim (Malaysia) Berhad • Bronze Award (Workplace Practices) Asia Pacific Entrepreneur Awards 2012 Entreprise Asia Ahamad Mohamad • Outstanding Entrepreneurship Awards
RECEIVING COMPANY/ AWARDS RECEIVED IN 2011 AWARDED BY OPERATING UNIT
NACRA Award 2011 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Winner of Industry Excellence Award (Main Board) - Plantations and Mining 3 Star SME Corp Malaysia Kulim Civilworks Sdn Bhd • SME Competitiveness Rating for Enhancement ACCA MaSRA Awards 2011 ACCA Malaysia Kulim (Malaysia) Berhad • Sustainable Report - Shortlisted Industry Excellence Award • Basis Holdings Sdn Bhd Kulim (Malaysia) Berhad • Plantation Sector 2010/2011 • Malaysia National News Agency (BERNAMA) • Malaysia External Trade Development Corporation (MATRADE) Global Leadership Award 2011 - Plantation Sector The Leaders International Ahamad Mohamad
Malaysia’s Best Certificate Federal Agriculture Malaysia Authority (FAMA) Kulim Montel Farm (Basir Ismail Estate) The Edge Billion Ringgit Club Award 2011 The Edge Kulim (Malaysia) Berhad • Best Performing Stock - Highest Returns to Shareholders Over Three Years (Plantation Sector) • Highest Profit Growth Company - Highest Growth in Profit Before Tax Over Three Years (Plantation Sector) SECTION 1 33 2012 SYNOPSIS 2012 2012 report annual Sdn Bhd RECEIVING COMPANY/ UNIT OPERATING RECEIVING COMPANY/ UNIT OPERATING Kulim (Malaysia) Berhad Kulim (Malaysia) Berhad Kulim (Malaysia) Berhad Kulim (Malaysia) Berhad Kulim (Malaysia) Berhad Kulim (Malaysia) Berhad - Plantations in Malaysia Kulim (Malaysia) Berhad Natural Oleochemicals Kulim (Malaysia) Berhad (MSWG) DED BY AWAR DED BY AWAR National Annual Corporate Report Award Family and Community Ministry of Women, Development Group Watchdog Minority Shareholders Malaysia Department of Agriculture, of RSPO Executive Board International Pinnacle Group Chemicals Industries Council of Malaysia (CICM) ACCA Malaysia ACCA Malaysia RECOGNITIONS AND ACCREDITATIONS RECOGNITIONS of Women NACRA Awards 2010 NACRA Awards • (Main Board) Winner of Industry Excellence Award - Plantations and Mining 2010 CSR Awards Prime Minister’s • in Empowerment Honorable Mention for Outstanding Work Governance A in Malaysian Corporate (MCG) Index Scored 2010 Skim Amalan Ladang Baik Malaysia 2009 Global CSR Awards • Excellence Award Gold CSR for Best Environmental 2007/2008 Awards CICM Responsible Care Category : Oleochemicals 1 Distribution Code - Merit 2. Process Safety Code - Merit Health and Safety Code - Merit 3. Employee Code - Gold 4. Products Stewardship 2009 ACCA MaSRA Awards • Shortlisted • Winner of Best First Time Reporter • and Governance Commendation : Reporting on Strategy Certification for “Sustainable Palm Oil Producer” D IN 2009 DS RECEIVE AWAR DS RECEIVED IN 2010 AWAR 2010 ACCA MaSRA Awards • Winner - Best Sustainability Report • Commendation - Reporting on Strategy and Governance • Shortlisted - Sustainability Report • Shortlisted - Sustainability Report within Annual Report 34 Kulim (Malaysia) Berhad (23370-V)
SECTION 1 2012 SYNOPSIS RECOGNITIONS AND ACCREDITATIONS
RECEIVING COMPANY/ AWARDS RECEIVED IN 2009 (Continued) AWARDED BY OPERATING UNIT
NACRA Awards 2009 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Silver Award for Most Outstanding Annual Report • Winner of Industry Excellence Award (Main Board) - Plantations and Mining MPOB Code of Practice 2009 for Good Agricultural Practice Malaysia Palm Oil Board (MPOB) Sindora Estate • Oil Palm Nursery Sindora Palm Oil Mill • Mill Operations 2009 South East Asia Frost and Sullivan Growth Strategy Frost and Sullivan Natural Oleochemicals Sdn Bhd Excellence Award for Oleochemicals ISO 9001:2008 Certification SIRIM QAS International Sdn Bhd SIM Manufacturing Sdn Bhd National MPC 2009 Malaysia Productivity Corporation (MPC) Kulim (Malaysia) Berhad • Overall Champion • 1st Place for Service Category • 3-Star Award National MPC 2009 MPC Kulim Montel Farm (Tereh Selatan • 3-Star Award Estate) National MPC 2009 MPC Sindora Palm Oil Mill • 3-Star Award
RECEIVING COMPANY/ AWARDS RECEIVED IN 2008 AWARDED BY OPERATING UNIT
Good Manufacturing Practice (GMP) MOODY International Natural Oleochemicals Sdn Bhd Dubois-Natural Esters Sdn Bhd NACRA Awards 2008 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Winner of Industry Excellence Award (Main Board) - Plantations and Mining • Silver Award for Best Annual Report in Bahasa Malaysia ACCA MESRA 2008 ACCA Malaysia Kulim (Malaysia) Berhad • Shortlisted Anugerah Kecemerlangan Pengurusan Keselamatan dan Ministry of Human Resources Selai Estate Kesihatan Pekerjaan Negeri Johor 2008 New Company of the Year Award - 2008 London Stock Exchange New Britain Palm Oil Limited Certification for ‘Sustainable Palm Oil Producer’ Executive Board of RSPO New Britain Palm Oil Limited National MPC 2008 MPC Sindora Estate • 3rd Placing for Service Category, 3-Star Award
National MPC 2008 MPC Sindora Palm Oil Mill • 3-Star Award SECTION 1 35 2012 SYNOPSIS 2012 2012 report annual NEWS IN THE IN THE 36 Kulim (Malaysia) Berhad (23370-V) SECTION 1 2012 SYNOPSIS FINANCIAL CALENDAR 2012
Announcement OF Quarterly Results
23 1st 2nd 29
MAY 2012 Quarter Quarter 2012 AUG
29 3rd 4th 27
NOV 2012 Quarter Quarter 2013 FEB
Dividends
Type Sen % Entitlement Payment Date
Interim - 7.50 30% 05.11.2012 16.11.2012 For year ended 31 December 2012
Special Dividend - 90.94 363.76% 11.01.2013 25.01.2013 For year ended 31 December 2012
Annual Report and General Meeting
Date
Issuance of Annual Report 2011 01.06.2012 37th Annual General Meeting 26.06.2012 SECTION 1 37 Purchase 20.09.2012 21.09.2012 24.09.2012 12.10.2012 17.10.2012 18.10.2012 05.11.2012 06.11.2012 07.11.2012 09.11.2012 19.11.2012 20.11.2012 28.11.2012 29.11.2012 30.11.2012 03.12.2012 04.12.2012 05.12.2012 06.12.2012 07.12.2012 10.12.2012 11.12.2012 12.12.2012 13.12.2012 14.12.2012 17.12.2012 18.12.2012 19.12.2012 20.12.2012 21.12.2012 24.12.2012 26.12.2012 2012 SYNOPSIS 2012 2012 report annual 996,477 575,735 215,977 678,270 721,211 367,263 647,651 249,085 248,826 722,178 964,282 703,012 935,416 714,635 688,109 974,346 490,473 Paid (RM) date 6,486,583 1,596,085 2,343,808 2,698,702 1,107,153 1,220,965 1,080,754 4,145,843 4,256,024 1,524,680 1,389,658 1,694,926 1,810,072 2,058,505 1,521,999 96,187,207 45,828,703 (96,187,207) 45,828,703
Units Consideration 43,300 82,400 51,900 51,200 340,600 500,000 155,000 195,200 142,700 190,000 937,400 155,000 151,100 306,100 210,900 361,200 439,800 320,100 100,000 544,900 200,000 221,700 115,400 250,000 250,000 943,800 150,000 157,200 337,000 139,300 386,800 1,450,000 9,880,000 9,880,000 27,482,200 Purchased (27,482,200) buy-back in 2012 as at 31.12.2011 shares in 2012 shares as at 31.12.2012 shares Share buy-back Share of RM0.25 each shares - ordinary Total share Total Accumulated treasury Less: Resale of treasury Accumulated treasury 2012 CALENDAR FINANCIAL Listing 470 09.03.2012 250 10.05.2012 500 25.05.2012 500 15.06.2012 1,057 07.06.2012 1,000 12.06.2012 1,000 21.06.2012 3,850 08.11.2012 13,582 08.05.2012 10,800 24.07.2012 10,000 25.09.2012 33,000 26.09.2012 11,000 01.10.2012 28,000 15.10.2012 31,000 17.10.2012 50,000 02.11.2012 30,000 16.11.2012 144,050 26.07.2012 245,780 30.07.2012 254,200 01.08.2012 405,850 03.08.2012 406,900 15.08.2012 328,000 17.08.2012 323,500 05.09.2012 169,000 20.09.2012 261,151 29.10.2012 529,501 31.10.2012 140,000 06.11.2012 294,060 23.11.2012 160,450 28.11.2012 150,000 19.12.2012 1,689,250 08.08.2012 2,065,501 23.08.2012 3,887,999 30.08.2012 1,373,000 10.09.2012 2,387,576 13.09.2012 1,068,369 19.09.2012 3,946,850 23.10.2012 & Quoted date 20,511,611 Units Listed SHARES AND WARRANTS warrants converted in 2012 Total Exercise of Warrants 2011/2016 of Warrants Exercise of RM0.25 each shares - listing of new ordinary 38 Kulim (Malaysia) Berhad (23370-V) ABOUT KULIM CORPORATE PROFILE SECTION 2
THE FOUNDATION OF KULIM CORE BUSINESSES Kulim (Malaysia) Berhad (“Kulim”) traces its history back to 1933 when Kulim Rubber Plantations Ltd was incorporated in United Kingdom. Kulim was later incorporated as a public limited company and was listed on the Kuala Lumpur PLANTATION Stock Exchange (now known as the Main Market of Bursa Malaysia Securities Berhad) in 1975. Later in 1976, Johor Kulim is recognised as one of the leading palm oil Corporation became the major shareholder of Kulim. groups in the world with operations spanning over 3 countries; Malaysia, Papua New Guinea and the Over the years, Kulim has grown to become a diversified Solomon Islands. plantation company and continues to strengthen its position by securing new hectarages whilst developing and strengthening its intrapreneur ventures. Through various strategic acquisitions, the Group’s plantation area now stands at 184,096 hectares spread across Malaysia, INTRAPRENEUR VENTURES Papua New Guinea and the Solomon Islands. Established as one of Kulim’s principal growth thrust, Intrapreneur Ventures (“IV”) division is involved in a diverse range of businesses including shipping and logistics, as well as support operations for plantations, including agricultural machinery, oil palm nursery and mills maintenance, facilities United Kingdom management and civil works, IT services and development of IT system.
BUSINESS STRATEGY Our business portfolio is a progressive development from our traditional business of palm oil, pursued in Malaysia Papua New Guinea line with our aim to sustain value creation for all Solomon Islands our stakeholder via the adoption of an evolving and balanced business mix.
KULIM AND SUSTAINABILITY As a socially and environmentally responsible corporate citizen, Kulim embraces the principles of sustainable development and has continued to work towards demonstrating sustainability throughout our operations. annual report 2012 39
CORPORATE PROFILE ABOUT KULIM SECTION 2
Kulim was amongst the earliest palm oil producers to be certified to the Roundtable on Sustainable Palm Oil (“RSPO”) standard. Our management and growth strategy is fundamentally guided by Vision “30:30”, which aims to raise fruit yields to 30 tonnes per hectare and palm product extraction rates to 30%, balanced with sustainable development principles.
The selections of IV companies are subject to a systematic process, management and control to ensure they continue to deliver value and returns to shareholders. They will be developed and nurtured, with the aim to subsequently be transformed into strategic business division of the Group.
While plantation and agriculture will dominate our business profile, we will continue to explore, identify and invest in businesses that offer superior long-term potential for growth and profitability, with the aim to minimise earning fluctuations so as to enable the Group to provide attractive returns to our shareholders. Kulim is confident in carving a new growth path with its experience and proven ability to develop businesses, including those outside its traditional palm oil business.
Our pursuit of value and growth is firmly underpinned by our commitment to embrace sustainability and strong corporate governance as the overriding philosophy.
We recognise sustainability as an opportunity to change the way we do our business. Our Sustainable Palm Oil (“SPO”) programme defines its ultimate objective as to improve Kulim’s business performance and profitability as well as positioning Kulim as a world leader in SPO. Our efforts with regards to sustainable development will continue to guide our business.
We hope that by being mindful of our surroundings and the socio economic impact of our actions, we will move forward by developing business methods that are economically viable, environmentally appropriate and socially beneficial. 40 Kulim (Malaysia) Berhad (23370-V) ABOUT KULIM CORPORATE MILESTONES SECTION 2
THE “REBRANDING” AND CONSOLIDATION BEGINNING RESTRUCTURING AND GROWTH 1933 1970 1976 1980 Incorporation of Kulim On 16 July, KRPL changed its The Johor State Economic Kulim disposed of Minister Rubber Plantations Ltd name to Kulim Group Limited Development Corporation Bay Hotel Limited in Trinidad (“KRPL”) in the United (“KGL”) and listed its (now known as Johor and Tobago. Kingdom (“UK”) on 4 July. shares on London Stock Corporation or JCorp) became Exchange (“LSE”). a shareholder of Kulim. 1982 Kulim disposed of Mount 1947 1973 1977 Irvine Bay Hotel Limited in KRPL began operations with a KGL’s businesses expanded KGL withdrew from the LSE Trinidad and Tobago. 190 hectares rubber plantation from oil palm and rubber and became a subsidiary in Johor, Malaysia. plantations, to include of Kulim. KGL transferred 1988 property development in the to Kulim all its assets and Kulim acquired 60% of Selai UK, hotels in the Trinidad liabilities and divested its Sdn Bhd. and Tobago islands in the assets in the UK. Caribbean and a rubber plantation in Nigeria. 1989 1979 Kulim acquired Labis Bahru Kulim ventured into property Estate, a 2,110 hectares of oil 1975 development through its palm and rubber estate. Incorporation of Kulim wholly-owned subsidiary, (Malaysia) Sdn Bhd on 3 July Advance Development Sdn and was later made public Bhd (“ADSB”). 1990 as Kulim (Malaysia) Berhad Kulim disposed of its entire (“Kulim”) on 18 August. On 14 equity in Waterside Rubber November, Kulim was listed on Estates Ltd, Nigeria to focus the main board of the Kuala on its Malaysian plantation. Lumpur Stock Exchange (now known as the Main Market 1993 of Bursa Malaysia Securities Kulim acquired 49% of Yule Berhad). Catto Plantations Sdn Bhd, now known as Mahamurni Plantations Sdn Bhd (“MPSB”), which owns 7,033 hectares of oil palm with a palm oil mill and rubber estate.
Kulim acquired 70% equity in Skellerup Industries (Malaysia) Sdn Bhd, a rubber-based products manufacturer.
Kulim constructed the 21- storey modern intelligent building, Menara Ansar, which was completed and launched in 1997. annual report 2012 41
CORPORATE MILESTONES ABOUT KULIM SECTION 2
DIVERSIFYING AND FURTHER GROWTH 1994 1997 2004 2006 Kulim diversified into the Commissioning of DNE’s Kulim made an entry into Kulim completed a capital oleochemicals business by ester plant and expansion of Kalimantan, Indonesia when distribution-in specie of acquiring 91.38% of Natural fatty acids plant from 45,000 it acquired 100% equity in its entire holding of JLand Oleochemicals Sdn Bhd tonnes per annum (“TPA”) to EPA Management Sdn Bhd shares in March, signalling the (“NatOleo”) in July. 150,000 TPA. (“EPA”). Group’s exit from the property business. The acquisition of MPSB was 1998 Kulim acquired 92.99% completed along with Mutiara stake in Kumpulan Bertam Kulim divested all of the New Britain Nominees Ltd Estate and Sungai Sembrong Plantations Berhad, injecting Group’s plantations in was incorporated by NBPOL Estate. an additional 1,016 hectares Sumatra in March. as a vehicle for its employees, of plantation land into the outgrowers and traditional Group. In June, Kulim completed the 1995 landowners to acquire acquisition of QSR when it NatOleo entered into a NBPOL’s shares and allowing NBPOL entered into gained control over the QSR joint-venture with Stearinerie them to participate in NBPOL’s agreement for the formation Board at an Extraordinary Dubois Fils, a French future growth and prosperity. of Guadalcanal Plains Palm General Meeting (“EGM”) of company to produce specialty Oil Limited (“GPPOL”), a the company. esters. NatOleo took 55% NBPOL Foundation was company incorporated in the equity in the new company, established to assist Solomon Islands with NBPOL Dubois-Natural Esters Sdn communities in West New 2007 holding 80% equity. Bhd (“DNE”). Britain, PNG in the fields of Secondary listing of NBPOL health and education. on the LSE in December for Kulim entered into a joint- realisation of NBPOL’s true 1996 venture with TopPlant earnings potential in the Kulim’s regional expansion 1999 Laboratories Sdn Bhd, to own trading market. began with the acquisition NBPOL was successfully 60% equity in Kulim TopPlant of 90% stake in New Britain admitted to Port Moresby Sdn Bhd, for the production Divestment of Kalimantan Palm Oil Limited (“NBPOL”) in Stock Exchange, PNG. of high-yielding oil palm plantations in August, Papua New Guinea (“PNG”). clones using tissue culture marking the Group’s exit technology. 2000 from plantation operations in Kulim’s subsidiary, Kulim Kulim acquired the remaining Indonesia. Plantations (Malaysia) Sdn 40% stake in Selai Sdn Bhd. Bhd, ventured into plantations 2005 Kulim purchased 52% stake in Indonesia through a 60% Commissioning of NBPOL’s in QSR Brands Bhd (“QSR”), stake in PT Padang Bolak fourth mill, Numundo Palm the operator of Pizza Hut and Jaya and PT Multrada Multi Oil Mill and construction of the controlling shareholder of Maju in Sumatra. Kumbango Palm Oil Refinery KFC Holdings (Malaysia) Bhd with a capacity of 100,000 (“KFCH”). Johor Land Berhad (“JLand”) TPA. became a subsidiary of Kulim Expansion of NatOleo’s fatty and was subsequently listed acids production capacity on the main board of KLSE. 2001 Kulim disposed of 3,104 acres from 150,000 TPA to 380,000 of land in Ulu Tiram Estate for TPA. RM313.7 million. 42 Kulim (Malaysia) Berhad (23370-V)
ABOUT KULIM CORPORATE MILESTONES SECTION 2
Sustainable Growth
2008 2009 2010 2011 Sindora became a 77%- Official RSPO certification In April, NBPOL acquired Kulim completed its owned subsidiary of Kulim in was accorded to Kulim- 80% stake in CTP (PNG) Ltd capital restructuring exercise, May, adding plantation land owned plantations in (now known as Kula Palm Oil involving a share split, bonus and bringing in a number of Malaysia in January. Limited or KPOL), bringing shares and free warrants in Intrapreneur Venture (“IV”) in additional 26,000 hectares March. companies into the Group. In January, QSR increased of plantation land to the Kulim announced the its shareholdings in KFCH to Group’s landbank. acquisition of 6 parcels of In October, NBPOL acquired 50.25% and KFCH became a oil palm estates measuring 100% stake in Ramu Agri- subsidiary of QSR. Completion of equity swap approximately 13,687 Industries Limited (“Ramu”), in Nexsol (S) Pte Ltd and hectares and 2 palm oil PNG, further expanding the Estate swap with Sime Darby Nexsol (M) Sdn Bhd between mills from JCorp, for cash Group’s landbank to 124,833 Plantations Sdn Bhd (“SDP”) Kulim and Peter Cremer consideration of RM700 hectares. in September, involving (Singapore) GmBH in April. million. Sindora’s Sungai Simpang Following the exercise, Sindora became a wholly- NBPOL became one of the Kiri Estate and SDP’s Sungai Nexsol (M) Sdn Bhd became owned subsidiary of Kulim first plantation companies Tawing Estate, to realise a 100% subsidiary of Kulim, and was delisted from the to receive Roundtable potential rationalisation while at the same time official list of Bursa Malaysia on Sustainable Palm Oil benefits of their respective Nexsol (S) Pte Ltd ceased to Securities Berhad effective (“RSPO”) certification in locations. be an associate of Kulim. 30 November. September. Sindora and its subsidiary, In May, NBPOL officially 2012 Construction commenced E.A. Technique (M) Sdn Bhd launched its refinery in NBPOL became an associate for NBPOL’s 200,000 TPA acquired 20% and 18% Liverpool. of Kulim at 48% in May refinery plant in UK. respectively, of Orkim Sdn pursuant to the issuance of Bhd (“Orkim”), increasing its NBPOL’s subsidiary, Ramu, new shares to the minority shareholders of KPOL to Expansion of QSR into tanker fleet, bringing along was officially accorded with streamline the shareholding Cambodia for KFC charter contracts with major RSPO certification in August. structure of KPOL. restaurants. oil companies. In September, Kulim Kulim announced a special KFCH received the franchise concluded the disposal of dividend of 90.94 sen rights to operate KFC NatOleo and its subsidiaries, per share pursuant to the restaurants in Mumbai and marking the Group’s exit proceeds received from Pune, India. from the oleochemicals the Capital Repayment business. exercises of QSR and KFCH. The disposal of business and undertakings by QSR and KFCH was concluded in January 2013. Both companies were delisted from the official list of Bursa Malaysia Securities Berhad effective 7 February 2013. Kulim, via Sindora, completed the disposal of Metro Parking (Malaysia) Sdn Bhd Group to Damansara Realty Berhad for RM13.5 million. annual report 2012 43
ABOUT KULIM SECTION 2
Our estates and mills personnel are the backbone of the Company whose valuable contributions throughout the years provide the basis for Kulim’s growth.
Though they come from various background, ethnicity and countries, our commitment towards equality and mutual respect have ensured true teamwork and high performance are achieved at every operating levels.
We salute them for their dedications, sweats and tears; for they have made Kulim the Company that it is today. 44 Kulim (Malaysia) Berhad (23370-V) ABOUT KULIM GROUP’S SIGNIFICANT SUBSIDIARIES AS AT 31 MARCH 2013 SECTION 2 PLANTATION AND INTRAPRENEUR SUPPORT VENTURES
100% 100% Under EPA Management Sdn Bhd Mahamurni Plantations Sdn Bhd Sindora Berhad 75% 100% 51% Extreme Edge Sdn Bhd Kulim Plantations (Malaysia) Sdn Bhd E.A. Technique (M) Sdn Bhd 95% 100% 100% Pinnacle Platform Sdn Bhd Selai Sdn Bhd Johor Shipyard & Engineering Sdn Bhd 95% 100% AKLI Resources Sdn Bhd Ulu Tiram Manufacturing Company 90% (Malaysia) Sdn bhd MIT Insurance Brokers Sdn Bhd 100% Kulim Safety Training and Services 100% 90% Sdn Bhd EPA Management Sdn Bhd GranuLab (M) Sdn Bhd 78% 94% 100% Superior Harbour Sdn Bhd Kumpulan Bertam Plantations Berhad Epasa Shipping Agency Sdn bhd 90% 49% 60% Special Appearance Sdn Bhd New Britain Palm Oil Limited Microwell Bio Solutions Sdn Bhd 75% 100% 20% Edaran Badang Sdn Bhd Dami Australia Pty Ltd Tepak Marketing Sdn Bhd 90% 100% Perfect Synergy Trading Sdn Bhd New Britain Oils Limited Under Kulim (Malaysia) Berhad 100% 100% 100% Optimum Status Sdn Bhd Ramu Agri-Industries Limited JTP Trading Sdn Bhd 75% 100% 100% Kulim Civilworks Sdn Bhd Kula Palm Oil Limited JTP Montel Sdn Bhd 100% 80% 100% KCW Hardware Sdn Bhd Guadalcanal Plains Palm Oil The Secret of Secret Garden Sdn Bhd Limited 100% 75% KCW Electrical Sdn Bhd 60% Renown Value Sdn Bhd Kulim TopPlant Sdn Bhd 100% 75% KCW Kulim Marine Services Kulim Nursery Sdn Bhd Sdn Bhd
100% KCW Roadworks Sdn Bhd
The full list of companies under Kulim Group is set out in Malaysia Papua New Guinea Others Notes 17 to the Financial Statements on pages 219 to 232. annual report 2012 45 CORPORATE ABOUT KULIM INFORMATION SECTION 2
BOARD OF AUDIT COMMITTEE REGISTRAR TAN SRI DATO’ SERI UTAMA PRO CORPORATE DIRECTORS ARSHAD AYUB MANAGEMENT Chairman SERVICES SDN BHD Chairman/ Suite 12B, Level 12 Non-Independent DR. RADZUAN A. RAHMAN Menara Ansar LEUNG KOK KEONG 65, Jalan Trus Non-Executive Director 80000 Johor Bahru DATO’ KAMARUZZAMAN Johor Darul Takzim NOMINATION COMMITTEE Tel : +607-226 7692 ABU KASSIM DATO’ KAMARUZZAMAN ABU KASSIM +607-226 7476 Chairman Fax : +607-222 3044 Email : [email protected] Managing Director TAN SRI DATO’ SERI UTAMA AHAMAD MOHAMAD ARSHAD AYUB DATUK HARON SIRAJ PRINCIPAL BANKERS CIMB Bank Berhad Executive Director OCBC Bank (M) Berhad WONG SENG LEE REMUNERATION COMMITTEE RHB Bank Berhad DATO’ KAMARUZZAMAN ABU KASSIM Malayan Banking Berhad ZULKIFLI IBRAHIM Chairman HSBC Bank Malaysia Berhad JAMALUDIN MD ALI Standard Chartered Bank Malaysia TAN SRI DATO’ SERI UTAMA Asian Finance Bank Berhad ARSHAD AYUB The Bank of Nova Scotia Berhad Non-Independent DR. RADZUAN A. RAHMAN Non-Executive Director AUDITORS DATIN PADUKA SITI SA’DIAH SH SECRETARIES Ernst & Young BAKIR IDHAM JIHADI ABU BAKAR (MAICSA 7007381) ROZAN MOHD SA’AT NURALIZA A. RAHMAN WEBSITE (LS 0008565) www.kulim.com.my Independent Non-Executive Director TAN SRI DATO’ SERI UTAMA REGISTERED OFFICE ARSHAD AYUB Suite 12B, Level 12 DATUK HARON SIRAJ Menara Ansar 65, Jalan Trus DR. RADZUAN A. RAHMAN 80000 Johor Bahru LEUNG KOK KEONG Johor Darul Takzim Tel : +607-226 7692 / 226 7476 Fax : +607-222 3044
STOCK EXCHANGE LISTING LISTED ENTITIES WITHIN STOCK EXCHANGE LISTED SINCE STOCK CODE THE GROUP
Kulim (Malaysia) Berhad Main Market - 14 November 1975 2003 Bursa Malaysia Securities Berhad
New Britain Palm Oil Limited Main Market - London Stock Exchange 17 December 2007 NBPO Port Moresby Stock Exchange 19 December 1999 NBO 46 Kulim (Malaysia) Berhad (23370-V) ABOUT KULIM BOARD OF DIRECTORS SECTION 2
3 5 2 1 6 4
1 dATO’ KAMARUZZAMAN ABU KASSIM 4 ZULKIFLI IBRAHIM Chairman/ Executive Director Non-Independent Non-Executive Director 5 jAMALUDIN MD ALI 2 AHAMAD MOHAMAD Executive Director Managing Director 6 TAN SRI DATO’ SERI UTAMA ARSHAD AYUB 3 WONG SENG LEE Independent Non-Executive Director Executive Director annual report 2012 47
BOARD OF DIRECTORS ABOUT KULIM SECTION 2
7 8 9 10 11
7 ROZAN MOHD SA’AT 10 dR. RADZUAN A. RAHMAN Non-Independent Non-Executive Director Independent Non-Executive Director
8 dATIN PADUKA SITI SA’DIAH SH BAKIR 11 LEUNG KOK KEONG Non-Independent Non-Executive Director Independent Non-Executive Director
9 dATUK HARON SIRAJ Independent Non-Executive Director 48 Kulim (Malaysia) Berhad (23370-V)
ABOUT KULIM BOARD OF DIRECTORS SECTION 2
Dato’ KAMARUZZAMAN ABU KASSIM AHAMAD MOHAMAD Chairman/Non-Independent Non-Executive Director Managing Director
Aged 49, is a Non-Independent Non-Executive Director and the Aged 60, is the Managing Director of Kulim (Malaysia) Berhad Chairman of Kulim (Malaysia) Berhad. He was appointed to the and was appointed to the Board on 24 January 1991. Board of Kulim as Director on 1 January 2008 and appointed as Chairman on 12 January 2011. He graduated with a Bachelor He graduated with a Bachelor of Economics (Honours) degree in of Commerce majoring in Accountancy from the University of 1976 from the University of Malaya. He joined Johor Corporation in Wollongong, New South Wales, Australia in 1987. June 1979 as a Company Secretary for various companies within the JCorp Group. He was involved in many of JCorp’s projects, He embarked his career as an Audit Assistant at Messrs K.E. among others are the Johor Specialist Hospital, prefabricated Chan & Associates in May 1988, later joined an international housing project and the Kotaraya Complex in Johor Bahru. He is accounting firm, Messrs PricewaterhouseCoopers (formerly presently a member of the Board of Directors of KPJ Healthcare known as Messrs Coopers & Lybrand) in 1989. In December Berhad and New Britain Palm Oil Limited (Papua New Guinea). 1992, he left the firm and joined Perbadanan Kemajuan Ekonomi He is also the Chairman and Director of several other companies Negeri Johor (currently known as Johor Corporation (“JCorp”)) within the JCorp Group. as a Deputy Manager in the Corporate Finance Department and later promoted to General Manager in 1999. He is also a Director of Waqaf An-Nur Corporation Berhad, an Islamic endowment institution that spearheads JCorp Group’s He is the President and Chief Executive of JCorp with effect Corporate Responsibility programmes, including the unique from 1 December 2010. Prior to that, he had served as the Chief Corporate Waqaf Concept initiated by JCorp. Financial Officer and Chief Operating Officer of JCorp beginning 1 August 2006, before his appointment as the Senior Vice Other than as disclosed, he does not have any family relationship President, Corporate Services & Finance of JCorp beginning with any director and/or major shareholder of Kulim. He has no 1 January 2009. personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all He was appointed to the Board of Damansara Realty Berhad eight (8) Board of Directors’ Meetings of the Company in the (“DBhd”) on 11 December 1995 before assuming the position of financial year ended 31 December 2012. its Executive Director on 16 August 1999. He was later appointed as its Deputy Chairman on 4 October 2006, then re-designated as DBhd’s Managing Director on 1 January 2010. He resigned as the Managing Director of DBhd with effect from 12 January 2011 and was later appointed as the Chairman of DBhd with effect from the same date.
He sits as the Chairman of Damansara REIT Managers Sdn Bhd, the manager of Al-Aqar KPJ REIT beginning 12 January 2011. He is also the Chairman of KPJ Healthcare Berhad, a company under JCorp Group listed on the Main Market of Bursa Malaysia Securities Berhad. He is also a Director of Johor Land Berhad and Waqaf An-Nur Corporation Berhad, an Islamic endowment institution that spearheads JCorp’s Corporate Responsibility programmes. He also sits as Chairman and/or Director of several other companies within JCorp Group.
Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim. He has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the financial year ended 31 December 2012. annual report 2012 49
BOARD OF DIRECTORS ABOUT KULIM SECTION 2
WONG SENG LEE ZULKIFLI IBRAHIM Executive Director Executive Director
Aged 63, is currently an Executive Director of Kulim (Malaysia) Aged 55, was the Chief Operating Officer of Kulim (Malaysia) Berhad. He was appointed to the Board of Kulim on 8 January Berhad since 3 November 2003 and was re-designated as the 1996. Executive Director when he was appointed to the Board on 1 July 2011. He qualified as a Certified Accountant with the Association of Chartered Certified Accountants (“ACCA”) and is also a Fellow He is a Fellow of the ACCA, United Kingdom and a member of of the ACCA. In 1974, he joined an international audit firm in the Malaysian Institute of Accountants since 1992. Singapore and left to join EPA Management Sdn Bhd as an Accountant in July 1979. He was previously the Financial After serving various companies in the private sector since Controller for Kulim Group. his graduation in 1983, he joined JCorp Group in 1990 as the Financial Controller of Sindora Berhad. In 1996, he was appointed He is presently a member of the Board of Directors of several the Managing Director of Antara Steel Mills Sdn Bhd until 2000 other companies within the Kulim Group. before joining PJB Pacific Capital Group in 2001 as the Chief Operating Officer. He joined Kulim as the Chief Operating Officer Other than as disclosed, he does not have any family relationship in 2003. He is also the Chairman and Director of several other with any director and/or major shareholder of Kulim. He has no companies within the JCorp Group. personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all Other than as disclosed, he does not have any family relationship eight (8) Board of Directors’ Meetings of the Company in the with any director and/or major shareholder of Kulim. He has no financial year ended 31 December 2012. personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company held during the financial year ended 31 December 2012. 50 Kulim (Malaysia) Berhad (23370-V)
ABOUT KULIM BOARD OF DIRECTORS SECTION 2
Jamaludin BIN Md Ali DATIN PADUKA SITI SA’DIAH SH BAKIR Executive Director Non-Independent Non-Executive Director
Aged 55, was appointed to the Board of Kulim (Malaysia) Berhad as Aged 61, was appointed to the Board of Kulim on 1 January 2005. a Non-Independent Non-Executive Director on 1 July 2012 and was She is currently a Non-Independent Non-Executive Director of re-designated as Executive Director on 4 December 2012. Kulim (Malaysia) Berhad.
He graduated with a Bachelor of Economics (Honours) degree Datin Paduka served as the Managing Director of KPJ Healthcare from University of Malaya in 1982 and Master of Business Berhad (“KPJ”) since 1 March 1993 until her retirement on 31 Administration from University of Strathclyde, Glasgow, Scotland December 2012. She was appointed as the Corporate Advisor in 1987. He started his career with Malayan Banking Berhad as of KPJ on 1 January 2013. She graduated with a Bachelor of Trainee Officer in 1982 and later served as International Fund Economics degree from University of Malaya and holds an Manager in Permodalan Nasional Berhad in 1991. He joined MBA from Henley Management College, University of Reading, Johor Corporation in 1992 and was appointed the Managing London, United Kingdom. Director of Johor Capital Holdings Sdn Bhd in 1998. Prior to his appointment as the Managing Director of QSR Brands Bhd Her career with Johor Corporation commenced in 1974 and she (“QSR”) and KFCH Holdings (Malaysia) Bhd (“KFCH”), he was has been directly involved with JCorp’s Healthcare Division since the Group Chief Operating Officer of JCorp since 2001. He had 1978. She was appointed as the Chief Executive of Kumpulan served as the Director and Managing Director of QSR and KFCH Perubatan (Johor) Sdn Bhd (“KPJSB”) from 1989 until the listing from 2006 to 2012. of KPJ in November 1994.
He is also a Director of Waqaf An-Nur Corporation Berhad, an Datin Paduka currently sits as a Director of KPJ, Kulim and Islamic endowment institution which spearheads JCorp Group’s Damansara REIT Managers Sdn Bhd. She was also a Board Corporate Responsibility programmes, including the unique member of MATRADE from 1999 to 2010 and was an Independent Corporate Waqaf Concept initiated by JCorp. He is also the Non-Executive Director of Bursa Malaysia from 2004 to April 2012. Chairman and Director of several other companies within the JCorp Group. Committed to promoting excellence in healthcare, Datin Paduka is the President of the Malaysian Society for Quality in Health Other than as disclosed, he does not have any family relationship (“MSQH”), elected since its inception in 1997 until to date. with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and She is a member of the Malaysia Productivity Corporation has not been convicted for any offences. Since his appointment (“MPC”) Consultative Panel on Healthcare since 2001, a date, he attended two (2) Board of Directors’ Meetings of the member of the National Patient Safety Council, Ministry of Company held during the financial year ended 31 December Health (“MOH”) since 2003 and as a member of the Malaysian 2012. Healthcare Travel Council, Ministry of Health since 2009. In 2012, she was appointed as a member of the Malaysian Standards and Accreditation Council (“MSAC”) under the Ministry of Science, Technology and Innovation (“MOSTI”).
In 2010, Datin Paduka was named the ‘CEO of the Year 2009’ by the New Straits Times Press and the American Express. She had also received many more awards and accolades due to her contributions in the healthcare industry in Malaysia.
Other than as disclosed, she does not have any family relationship with any director and/or major shareholder of Kulim. She has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. She attended all eight (8) Board of Directors’ Meetings of the Company held during the financial year ended 31 December 2012. annual report 2012 51
BOARD OF DIRECTORS ABOUT KULIM SECTION 2
ROZAN MOHD SA’AT Tan Sri Dato’ Seri utama Arshad Ayub Non-Independent Non-Executive Director Independent Non-Executive Director
Aged 54, is currently a Non-Independent Non-Executive Director Aged 85, was appointed to the Board on 31 January 1987. He of Kulim (Malaysia) Berhad. He was appointed to the Board of is currently an Independent Non-Executive Director of Kulim Kulim on 1 January 2008. He is the Chief Executive of Hospitality (Malaysia) Berhad. He is the Chairman of the Audit Committee. Division of JCorp and the Managing Director of Sindora Berhad. Tan Sri graduated with a Diploma in Agriculture in 1954 from He holds a Bachelor of Economics (Honours) majoring in Serdang Agricultural College, Selangor and with a Bachelor Statistics from Universiti Kebangsaan Malaysia. He started his of Science (Honours) in Economics and Statistic in 1958 from career in 1983 as an Administrative Officer in Planning & Research University College of Wales, Aberystwyth, United Kingdom. He Department of JCorp before being seconded as an Operations graduated with Post Graduate diploma in Business Administration Manager in Sergam Berhad, a subsidiary of JCorp in 1986. IMEDE (now IMD), Switzerland in 1964.
From 1987 to 1988, he served in the Corporate Communications He had a distinguished career in the Malaysian Civil Service. Department, JCorp as an Administrative Officer. From 1988 to Among the senior positions he had held were Deputy Governor 1993, he was appointed as the Executive Director of several of Bank Negara Malaysia (1975-1977), Deputy Director subsidiaries in JCorp Group. In 1994, he was appointed as the General in the Economic Planning Unit of the Prime Minister’s General Manager of JCorp’s Tourism Division before assuming Department (1977-1978) and Secretary General in the Ministry the post as Chief Executive of the same Division on 15 June of Primary Industries (1978), Ministry of Agriculture (1979-1981) 1996, a post which he had held until his appointment as the and Ministry of Land and Regional Development (1981-1983). General Manager, Business Development, JCorp, beginning January 1999. Tan Sri also holds directorship in Malayan Flour Mills Berhad, Tomypak Holdings Berhad and Top Glove Corporation Berhad. Prior to his appointment as the Managing Director of Sindora Tan Sri also sits on the Board of Directors of several private Berhad, he served as the Senior General Manager, Business limited companies amongst others, PFM Capital Holdings Sdn Development of JCorp from 2000 until August 2002. He is also a Bhd, Land Rover (M) Sdn Bhd, Bata (M) Sdn Bhd, Bistari Johor Director of KPJ Healthcare Berhad. Berhad and Zalaraz Sdn Bhd.
Other than as disclosed, he does not have any family relationship Currently, he serves as President of the Malaysian Rubber with any director and/or major shareholder of Kulim. He has no Products Manufacturers Association (“MRPMA”). He is the Pro personal interest in any business arrangement involving Kulim Chancellor of UiTM, Chancellor of KPJ International University and has not been convicted for any offences. He attended seven College and Chairman of University of Malaya Board. (7) Board of Directors’ Meetings of the Company in the financial year ended 31 December 2012. Tan Sri is also a member of the Remuneration and Nomination Committee of Kulim. Other than as disclosed, he has no family relationship with any Director and/or substantial shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended five (5) Board of Directors’ Meetings of the Company held during the financial year ended 31 December 2012. 52 Kulim (Malaysia) Berhad (23370-V)
ABOUT KULIM BOARD OF DIRECTORS SECTION 2
DATUK HARON SIRAJ DR. RADZUAN A. RAHMAN Independent Non-Executive Director Independent Non-Executive Director
Aged 69, was appointed to the Board of Kulim (Malaysia) Berhad Aged 70, was appointed to the Board of Kulim (Malaysia) Berhad on 9 January 2006 as an Independent Non-Executive Director. on 1 November 2006 as an Independent Non-Executive Director. He is also a member of the Nomination Committee of Kulim. He is also a member of the Audit and Remuneration Committee of Kulim. He graduated with a Bachelor in Economics (Honours) degree in 1968 from the University of Manchester, United Kingdom He graduated with a Bachelor in Agricultural Science (Honours) and Master of Development Economics from Williams College, degree from the University of Malaya in 1969. Subsequently, United States of America in 1975. he obtained his Master and PhD in Resource Economics from Cornell University, New York in 1971 and 1974 respectively. He had a distinguished career in the Malaysian Civil Service. Among the senior positions he had held were Assistant Controller Dr. Radzuan has an outstanding career, both as an academician of Ministry of Commerce and Industry (1969 - 1971), Principal and corporate practitioner. Amongst the notable distinguished Assistant Secretary, Ministry of Primary Industries (1972 - 1974), positions held were as Associate Professor and the Dean of the Minister Counselor (Economic Affairs) at the Permanent Mission Resource and Agribusiness Faculty, Universiti Pertanian Malaysia of Malaysia in Geneva, Switzerland (1980 - 1986), Director of (1969 - 1980) (now known as Universiti Putra Malaysia), Regional Industrial Development at Ministry of International Trade and Director, Sime Darby Plantations for Melaka, Negeri Sembilan Industry (1986 - 1987), Director of International Trade at Ministry and Johor Regions (1980 - 1983), Director, Development Division, of International Trade and Industry (1987 - 1990), Deputy Sime Darby Plantations (1983 - 1984), Director, Corporate Secretary-General (Trade) Ministry of International Trade and Planning, Golden Hope Plantations Berhad (1984 - 1992) and Industry (1990 - 1992), Ambassador, Permanent Representative Group Director - Plantations, Golden Hope Plantations Berhad of Malaysia to United Nations and other International (1993 - 1999). He had also served as the Managing Director for Organisations and Specialised Agencies in Geneva, Switzerland Austral Enterprises Berhad and Island & Peninsular Berhad (1999 (1992 - 1996), Secretary-General Ministry of Primary Industries - 2004) as well as Tradewinds Plantation Berhad (2005 - 2006). (1996 - 2000) and as the Chief Executive Officer of Malaysian Palm Oil Promotion Council since 2001 until he retired in January Currently he holds directorships in Idaman Unggul Berhad and 2006. Inch Kenneth Kajang Rubber Pte Ltd. Additionally, he sits on the Board of Marditec Sdn Bhd, Kenanga Cergas Sdn Bhd, Maep He also holds directorships in Scomi Group Berhad, Management Sdn Bhd and Green Capital Sdn Bhd. HSBC Amanah Takaful Sdn Bhd and Apex Communications Group Sdn Bhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no Other than as disclosed, he does not have any family relationship personal interest in any business arrangement involving Kulim with any director and/or major shareholder of Kulim. He has no and has not been convicted for any offences. He attended all personal interest in any business arrangement involving Kulim eight (8) Board of Directors’ Meetings of the Company in the and has not been convicted for any offences. He attended six financial year ended 31 December 2012. (6) Board of Directors’ Meetings of the Company in the financial year ended 31 December 2012. annual report 2012 53
BOARD OF DIRECTORS ABOUT KULIM SECTION 2
LEUNG KOK KEONG Independent Non-Executive Director
Aged 46, was appointed to the Board of Kulim (Malaysia) Berhad as an Independent Non-Executive Director on 9 November 2011. He is also a member of the Audit Committee of Kulim.
He obtained his Bachelor Degree in Accounting, Curtin University of Technology, Australia in December 1989 and is a Certified Practising Accountant & Chartered Accountant, CPA Australia and Malaysian Institute of Accountants.
Trained as an investment banker, he has significant experience in corporate finance and business development as well as management. He was the founding member and former Executive Director of Newfields Advisors Sdn Bhd, a boutique financial and corporate advisory firm from August 2001 - August 2006. He was the Chief Executive Officer, Platinum Energy Group from September 2006 - February 2008.
His wide and vast experience spanned from his earlier years as an Investment & Corporate Planning Manager, Hong Leong Credit Berhad from 1994 to 2001 and was an Audit Senior, Coopers & Lybrand Kuala Lumpur since 1990 - 1994.
He is currently an Independent Non-Executive Director of Damansara Realty Berhad, a Company within the JCorp Group. In addition, he is also an Independent Non-Executive Director of Tebrau Teguh Berhad.
Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the financial year ended 31 December 2012. 54 Kulim (Malaysia) Berhad (23370-V) ABOUT KULIM MANAGEMENT TEAM SECTION 2
6 9 10 8
5
2 4 7
3 1 annual report 2012 55
MANAGEMENT TEAM ABOUT KULIM SECTION 2
1. AHAMAD MOHAMAD 4. jAMALUDIN MD ALI 7. AZLI MOHAMED Managing Director Executive Director/Vice President, Vice President, Business Development Finance Aged 60, has been the Managing Director since 1993. He holds a Bachelor of Aged 55, is currently an Executive Aged 45, appointed as Chief Financial Economics (Honours) from University of Director of Kulim (Malaysia) Berhad since Officer of Kulim (Malaysia) Berhad on 1 June Malaya. He joined JCorp in June 1976 as a 4 December 2012. He graduated with a 2011. He is a Member of the Association Company Secretary for various companies Bachelor of Economics (Honours) from the of Chartered Certified Accountants, within JCorp Group. He was involved in University of Malaya in 1982 and Master of United Kingdom and also a member of the many of JCorp’s landmark projects including Business Administration from University of Malaysian Institute of Accountants. He was the Johor Specialist Hospital, prefabricated Strathclyde, Glasgow, Scotland in 1987. He with Messrs. PricewaterhouseCoopers from housing project and the Kotaraya Complex in joined JCorp in 1992 and has held senior 1992 prior to joining KPJ Healthcare Berhad Johor Bahru. He is also presently a member positions within JCorp. He has served as in 2001 until 2008. He then served JCorp of the Board of Directors for Kulim (Malaysia) the Group Managing Director of QSR Brands as the General Manager of Finance Division Berhad, New Britain Palm Oil Limited Bhd and KFC Holdings (Malaysia) Bhd from until he assumed the current position. He (Papua New Guinea) as well as several other June and July 2006 respectively until 4 also sits on the Board of other companies companies within JCorp and Kulim Group. December 2012. He also sits on the Board within JCorp and Kulim Group. of several other companies within JCorp and 2. ZULKIFLI IBRAHIM Kulim Group. 8. SATIRA OMAR Executive Director Vice President, 5. IR. IZHAR MAHMOOD Risk and System Management Aged 55, was appointed to the Board as Director/Vice President, Executive Director on 1 July 2011. He has Plantation Operation Aged 46, was appointed as Vice President, been the Chief Operating Officer since 3 Risk and System Management of Kulim November 2003 until his secondment to Aged 58, was appointed as Vice President in 2012. She graduated with a Bachelor of JCorp on 18 April 2011. He is a Fellow of Plantation Operations in 2008. Prior to Science majoring in Communication from the of the Association of Chartered Certified this, he has been the Director of Engineering University of Southern Illinois, United States Accountants, United Kingdom and a member Department, EPA Management Sdn Bhd of America in 1992 and holds a Master of the Malaysian Institute of Accountants since 10 May 2002. He holds a First Grade of Business Administration from Henley since 1992. He joined JCorp Group in Steam Engineer’s Certificate and has Business School, University of Reading, 1990 as the Financial Controller of Sindora been a member of the Board Engineer United Kingdom. She joined JCorp Group in Berhad. In 1996, he was appointed as the Malaysia (“BEM”) since 1988. He holds a 1993 as an Executive before assuming her Managing Director of Antara Steel Mills Sdn Bachelor in Engineering (Agriculture) from current position in Kulim in 2012. She also Bhd until 2000 before joining PJB Pacific Universiti Pertanian Malaysia (now known sits on the Board of several other companies Capital Group in 2001 as the Chief Operating as Universiti Putra Malaysia). He is also one within Kulim Group. Officer. He also sits on the Board of several of the industry’s panel advisors at 2 local other companies within Kulim Group. universities on bioprocess engineering. He 9. ZULKIFLY ZAKARIAH joined the Company on 1 July 1990 as a Mill Vice President, 3. WONG SENG LEE Manager. He also sits on the Board of several Estate Operation Executive Director/Vice President, other companies within Kulim Group. Marketing and Property Management Aged 53, was appointed as the Vice 6. NASHARUDDIN SHUKOR President of Estate Operation in January Aged 63, has been the Executive Director Vice President, 2013. He joined the Company in May 1980 of Kulim (Malaysia) Berhad since 8 January Foods and Intrapreneur Ventures as a Cadet Planter after completion of Higher 1996. He qualified as a Certified Accountant School Certificate. He has served Kulim’s with the Association of Chartered Certified Age 48, was appointed as Vice President Indonesian operations from 1999 to 2005. He Accountants (“ACCA”), United Kingdom, of Foods and Intrapreneur Ventures on 1 was the Regional Head for Kulim’s Northern and also a Fellow of the ACCA. He is February 2012. He holds Master of Business operations in Johor, Malaysia before also a member of Malaysian Institute of Administration (“MBA”) and Bachelor of assuming his current position. He also sits Accountants and Institute of Certified Public Business Administration (Economics) from on the Board of several companies within Accountant of Singapore. He joined EPA Sam Houston State University, USA. Prior Kulim Group. Management Sdn Bhd as an Accountant in to this, he has been the General Manager 1979 and was the Financial Controller for of Usahawan Bistari Ayamas Sdn Bhd, KFC 10. RAZALI HAMZAH Kulim (Malaysia) Berhad until 1994. He also Marketing Sdn Bhd and Ayamas Integrated Deputy General Manager, sits on the Board of several other companies Poultry Sdn Bhd from April 2009 to January Mill Development within Kulim Group. 2012. He was the Intrapreneur at JTP Trading Sdn Bhd from July 1999 to March 2009. He Age 38, was appointed as Deputy General joined Johor Corporation on 2 May 1989 as Manager of Mill Development Department Administrative Executive. He also sits on the on 1 January 2013. He holds the Bachelor Board of several companies within Kulim of Mechanical Engineering (Hons) from Group. Queensland University of Technology, Queensland, Australia and Diploma in Business Administration from Henley Management College, London, United Kingdom. He joined the Company on 29 April 1999 as a Cadet Engineer. He also sits on the Board of several companies within Kulim Group. 56 Kulim (Malaysia) Berhad (23370-V) ABOUT KULIM ORGANISATION CHART SECTION 2
BOARD OF DIRECTORS
AHAMAD MOHAMAD MANAGING DIRECTOR
PLANTATION INTERNAL INSPECTORATE AUDIT
WONG SENG LEE Jamaludin Md Ali ZULKIFLI IBRAHIM IR. IZHAR MAHMOOD EXECUTIVE DIRECTOR/ EXECUTIVE DIRECTOR/ EXECUTIVE DIRECTOR DIRECTOR/ VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT MARKETING AND BUSINESS DEVELOPMENT PLANTATION OPERATION PROPERTY MANAGEMENT
Azli MohamEd Satira Omar NasharudDin zulkifly RAZALI HAMZAH VICE PRESIDENT VICE PRESIDENT Shukor zakariah DEPUTY GENERAL FINANCE RISK AND VICE PRESIDENT VICE PRESIDENT MANAGER SYSTEM FOODS AND ESTATE MILL DEVELOPMENT MANAGEMENT INTRAPRENEUR OPERATION VENTURES annual report 2012 57
ABOUT KULIM SECTION 2
Though separated by distance, Kulim’s overseas family in PNG, SI and the UK (NBPOL Group) is always close to us.
Through sharing of ideas and knowledge as well as solid operational performance throughout the years, NBPOL Group is indeed integral to Kulim in every sense.
It’s been a good 15 years of partnership and may the years ahead bless us with continuing success. Thank you, mate! 58 Kulim (Malaysia) Berhad (23370-V)
ABOUT KULIM SECTION 2
An essential part in the execution of the Company’s policies and strategies, our Executives and Support Staff are at the heart of the Company’s dynamic.
We appreciate their resourcefulness and look forward to their continuing excellence to take us to the next level of growth. annual report 2012 59
PERFORMANCE HIGHLIGHTS GROUP AND STATISTICS 5-YEAR FINANCIAL STATISTICS
2012 2011 2010 2009 2008
Statement of Comprehensive Income Highlights (RM’000) Revenue 906,819 1,042,171 772,871 686,607 599,759 Segment %: Plantation 79% 79% 74% 74% 90%
Intrapreneur Ventures 18% 18% 19% 12% 4% SECTION 3 Others 3% 3% 7% 14% 6%
Profit from Operations 748,794 238,645 111,036 75,905 231,931 Segment %: Plantation 21% 99% 192% 109% 97% Intrapreneur Ventures 4% 9% 6% 16% 7% Others 75% (8%) (98%) (25%) (4%)
Interest income 11,050 9,523 5,746 8,046 2,137 Finance costs (60,062) (33,912) (40,516) (45,722) (41,356) Share of results of associates 63,717 497 2,174 4,010 (7,814) Profit before taxation 763,499 214,753 78,440 42,239 184,898 Taxation (33,287) (72,617) (35,852) (19,311) (20,622) Profit after taxation from - Continuing operations 730,212 142,136 42,588 22,928 164,276 - Discontinued operations 281,055 865,730 653,238 328,983 362,277 Net profit for the year 1,011,267 1,007,866 695,826 351,911 526,553
Attributable to: Owners of the Company 831,651 565,013 385,592 145,837 351,228 Non-controlling interests 179,616 442,853 310,234 206,074 175,325 Net profit for the year 1,011,267 1,007,866 695,826 351,911 526,553
* Comparative figures have been restated to reflect the Discontinued Operations retrospectively.
GROUP 5-YEAR PROFIT VS AVERAGE CPO PRICE
1,200
1,125 1,011 1,000 1,008 949 999 901 800 PAT (RM Million) 600 683 696 CPO Price 527 (USD/tonne) 400 352 200 (RM Million)/CPO Price (USD/tonne) PAT 2008 2009 2010 2011 2012 60 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS GROUP 5-YEAR FINANCIAL STATISTICS AND STATISTICS
2012 2011 2010 2009 2008
Statement of Financial Position Highlights (RM’000) ASSETS EMPLOYED Other non-current assets 5,197,189 7,852,213 6,254,289 5,365,042 4,832,569 Intangible assets 27,778 1,097,799 1,046,895 891,691 320,906
SECTION 3 Total Non-Current Assets 5,224,967 8,950,012 7,301,184 6,256,733 5,153,475
Other current assets 363,703 1,912,492 1,492,362 1,412,098 1,021,008 Cash and bank balances 222,336 644,702 452,146 405,227 445,476 Assets of disposal group classified as held for sale 3,408,193 13,032 - - - Total Current Assets 3,994,232 2,570,226 1,944,508 1,817,325 1,466,484
Other current liabilities 1,312,005 935,471 1,084,744 847,454 500,129 Loans and borrowings 655,647 571,843 995,410 547,747 566,229 Liabilities of disposal group classified as held for sale 1,295,060 - - - - Total Current Liabilities 3,262,712 1,507,314 2,080,154 1,395,201 1,066,358 5,956,487 10,012,924 7,165,538 6,678,857 5,553,601
FINANCED BY: Share capital 320,637 315,509 159,336 159,336 154,227 Reserves 1,575,945 1,540,087 1,433,182 1,491,041 1,479,650 Retained profits 2,038,526 2,436,500 1,972,850 1,720,988 1,615,436 Shareholders’ equity 3,935,108 4,292,096 3,565,368 3,371,365 3,249,313 Non-controlling interests 1,384,487 2,628,603 1,977,374 1,699,037 1,020,621 Long-term borrowings 470,722 2,049,101 931,020 1,157,484 899,444 Other long-term liabilities 166,170 1,043,124 691,776 450,971 384,223 5,956,487 10,012,924 7,165,538 6,678,857 5,553,601
Average capital employed 7,984,706 8,589,231 6,922,198 6,116,229 5,081,700 Average shareholders’ equity 4,113,602 3,928,732 3,468,367 3,310,339 2,449,307
GROUP 5-YEAR AVERAGE CAPITAL EMPLOYED AND RETURNS
10,000 15% 9,000 8,589 7,985 8,000 6,922 AVERAGE 7,000 CAPITAL 6,116 10% 6,000 EMPLOYED 5,082 5,000 RETURN 4,000 ON AVERAGE 3,000 CAPITAL 5% EMPLOYED 2,000 1,000 Average Capital Employed (RM Million) Average Return Capital Employed on Average 2008 2009 2010 2011 2012 annual report 2012 61
GROUP 5-YEAR FINANCIAL STATISTICS PERFORMANCE HIGHLIGHTS AND STATISTICS
2012 2011 2010 2009 2008
Statement of Cash Flows Highlights (RM’000) Net cash flow from operating activities 1,587,001 1,441,863 804,778 641,664 706,541 Net cash flow from investing activities (825,603) (1,474,025) (1,077,473) (632,855) (617,793) Net cash flow from financing activities (852,664) 180,358 316,116 (58,464) (324,781)
Net change in cash and cash equivalents (91,266) 148,196 43,421 (49,655) (236,033) SECTION 3
Key Financial Indicators Profitability and Returns Operating profit margin 82.57% 22.90% 14.37% 11.06% 38.67% PBT margin 84.20% 20.61% 10.15% 6.15% 30.83% Profit after tax and minority interest margin 91.71% 54.21% 49.89% 21.24% 58.56% Return on average shareholders’ equity 20.22% 14.38% 11.12% 4.41% 14.34% Return on average capital employed 10.42% 6.58% 5.57% 2.38% 6.91% Net assets per share (RM) 3.09 3.48 11.41 10.79 10.75
Solvency and Liquidity Gearing ratio (times) - Gross 0.21 0.38 0.35 0.34 0.34 - Net 0.17 0.29 0.27 0.26 0.24 Interest cover (times) 13.71 7.33 2.94 1.92 5.47 Current ratio (times) 1.22 1.71 0.93 1.30 1.38
Financial Market EPS (sen) - basic 66.34 45.90 30.86 * 47.22 117.04 - diluted 59.86 45.90 30.86 * 47.22 114.96 Gross dividend per share (sen) 98.44 5.00 50.00 17.50 15.00 Gross dividend rate (%) 394% 20% 100% 35% 30% Gross dividend yield (%) 21.12% 1.45% 5.83% 2.73% 2.09% Net dividend payout rate (%) 150.84% 10.93% 30.38% 28.11% 9.77% Average price-to-earnings ratio (times) 7.02 7.53 6.94 13.57 6.13 Average price-to-book ratio (times) 1.51 0.99 0.75 0.59 0.67
* Adjusted to reflect the effect of share split and issuance of bonus shares. 62 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS AND STATISTICS GROUP QUARTERLY PERFORMANCE 2012
2012 Q1 Q2 Q3 Q4 YTD 2012
Financial Performance (RM’000)
Revenue 208,894 221,648 241,196 235,081 906,819 Plantation 77% 75% 76% 85% 79%
SECTION 3 Intrapreneur Ventures 20% 23% 25% 8% 18% Others 3% 2% (1%) 7% 3%
Operating results 27,000 1,969,755 58,160 (1,306,121) 748,794 Plantation 124% 1% 114% (2%) 21% Intrapreneur Ventures 23% 0% 14% (1%) 4% Others (47%) 99% (28%) 103% 75%
Share of results of associates - 36,369 18,513 8,835 63,717
Profit before interest 27,000 2,006,124 76,673 (1,297,286) 812,511 Add/(Less): Interest income 857 824 6,431 2,938 11,050 Finance costs (12,291) (13,828) (22,142) (11,801) (60,062) Profit before taxation 15,566 1,993,120 60,962 (1,306,149) 763,499
Operational Results
FFB production (tonnes) - Malaysia 121,072 138,710 221,679 234,065 715,526 - PNG and SI 427,467 431,511 358,386 371,122 1,588,486 548,539 570,221 580,065 605,187 2,304,012
CPO production (tonnes) - Malaysia 34,191 22,995 79,554 70,525 207,265 - PNG and SI 133,624 139,197 115,366 119,755 507,942 167,815 162,192 194,920 190,280 715,207
* Financial figures have been restated to reflect the Discontinued Operations retrospectively. annual report 2012 63
PERFORMANCE HIGHLIGHTS GROUP AND STATISTICS STATEMENT OF VALUE ADDED
2012 2011 RM’000 RM’000
Revenue 906,819 1,042,171 Purchase of goods and services (303,986) (344,303) Value added by the Group 602,833 697,868
Other income and extraordinary items 624,838 66,429 SECTION 3 Finance costs (60,062) (33,912) Share of results of associates 63,717 497 Discontinued operations 281,055 865,730 Value added available for distribution 1,512,381 1,596,612
Distribution To employees Staff costs 134,471 100,574 To the Government Taxation 33,287 72,617 To providers of capital Dividends to shareholders 1,254,442 61,728 Non-controlling interests 179,616 442,853 To re-invest in the Group Depreciation and amortisation 333,356 415,555 Retained profits (422,791) 503,285 1,512,381 1,596,612
No. of employees at year end 21,758 60,788 Value added per employee (RM) 27,706 11,480 Wealth created per employee (RM) 69,509 26,265
No. of shares at year end ('000 units) 1,272,669 1,234,555 Value added per share (RM) 0.47 0.57 Wealth created per share (RM) 1.19 1.29
VALUE ADDED DISTRIBUTION
-6% 4% 2% 6% 9% Employees
Government
32% 58% Providers of capital
Re-investment
95%
2012 2011 64 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS AND STATISTICS 5-YEAR PLANTATION STATISTICS GROUP
2012 2011 2010 2009 2008
OIL PALM
Production (tonnes) Fresh Fruit Bunches (FFB) 2,304,012 2,375,388 1,985,619 1,643,810 1,460,600 Crude Palm Oil 715,207 737,323 607,653 501,587 431,149 SECTION 3 Palm Kernel 177,998 185,009 148,413 124,311 106,988 FFB processed 3,294,771 3,340,307 2,790,553 2,305,671 1,989,682
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 22.72 24.36 21.66 23.97 23.76 OER (%) 21.71 22.07 21.78 21.75 21.67 KER (%) 5.40 5.54 5.32 5.39 5.38
AREA STATEMENT (HECTARES) Oil palm - mature 101,916 101,303 100,185 68,583 62,750 - immature area 22,018 17,352 12,039 15,289 19,894 123,934 118,655 112,224 83,872 82,644
Sugar 7,721 7,720 8,231 8,199 8,193 Other crops (excluding inter-row planted fruits) 955 910 900 846 944 8,676 8,630 9,131 9,045 9,137
Planted area 132,610 127,285 121,355 92,917 91,781
Pastures 9,282 9,282 9,518 9,729 11,014
Reserve land, building sites etc 42,204 36,453 34,459 22,177 21,755 Titled area 184,096 173,020 165,332 124,823 124,550 annual report 2012 65
PERFORMANCE HIGHLIGHTS 5-YEAR AND STATISTICS PLANTATION STATISTICS MALAYSIA
2012 2011 2010 2009 2008
OIL PALM
Production (tonnes) FFB produced - Processed by own mills 605,298 554,156 461,016 461,834 444,109 FFB produced - Sold to others 110,228 82,605 90,210 142,151 159,935 SECTION 3 Total FFB produced 715,526 636,761 551,226 603,985 604,044 Purchased FFB 416,393 365,151 345,281 372,437 296,135 Total FFB processed 1,021,691 919,307 806,297 834,271 740,244
Crude Palm Oil 207,265 185,666 163,233 166,059 141,634 Palm Kernel 58,773 53,678 47,758 49,950 42,102
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 20.68* 21.89 19.01 21.22 22.70 OER (%) 20.29 20.20 20.24 19.90 19.13 KER (%) 5.75 5.84 5.92 5.99 5.69
Average Selling Price (RM per tonne) Crude Palm Oil (locally delivered) 2,923 3,193 2,604 2,167 2,530 Palm Kernel (ex-mill) 1,599 2,300 1,666 1,052 1,545
RUBBER Production (kgs) - - 33,398 626,760 360,463 Yield per mature hectare (kgs) - - 362 1,250 719 Average selling prices (sen per kg) - - 1,032 591 806
AREA STATEMENT (HECTARES) Oil palm - mature 35,170 32,865 28,997 28,317 27,941 - immature 10,422 7,458 5,416 6,649 7,320 45,592 40,323 34,413 34,966 35,261
Other crops: Rubber 503 498 498 501 501 Sentang 25 25 25 28 28 Pineapple 168 128 118 58 - Fruits (inter-row planting with oil palm) 546 546 425 324 466 Planted area 46,288 40,974 35,054 35,553 35,790 Reserve land, building sites etc 3,263 2,916 2,396 2,516 2,006 Titled area 49,551 43,890 37,450 38,069 37,796
* Yield per hectare based on annual production of FFB at Palong, Mungka and Kemedak Estate. ** Rubber area was leased out w.e.f. 1 April 2010. 66 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS AND STATISTICS 5-YEAR PLANTATION STATISTICS PAPUA NEW GUINEA
2012 2011 2010 2009 2008
OIL PALM
Production (tonnes) FFB produced 1,457,830 1,608,330 1,313,876 932,568 765,801 Purchased FFB 668,686 668,155 538,041 419,456 379,498 SECTION 3 FFB processed 2,126,516 2,276,485 1,851,917 1,352,024 1,145,299
Crude Palm Oil 476,096 520,065 415,801 310,405 267,534 Palm Kernel 111,188 122,999 93,123 67,279 58,747 Refined Palm Oil 67,826 59,741 66,434 68,798 67,326 Palm Olein 48,695 27,120 34,418 34,413 14,679 Palm Stearin 12,496 16,398 15,448 11,537 13,501 Crude Palm Kernel Oil 33,878 36,283 31,039 27,625 23,219 Oil palm seeds (million sold) 14.73 11.78 8.35 4.51 15.09
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 23.64 25.49 23.60 26.53 25.36 OER (%) 22.39 22.85 22.42 22.96 23.36 KER (%) 5.23 5.40 5.08 4.98 5.13
Average Selling Prices (USD per tonne CIF) Crude Palm Oil 1,062 1,014 771 631 821 Refined Palm Oil 1,337 - 726 896 1,091 Palm Olein - 1,281 912 780 919 Palm Stearin 1,092 1,226 912 863 1,119 Crude Palm Kernel Oil 1,119 1,675 1,141 771 1,242 Seeds (USD per seed) 0.77 0.76 0.73 0.77 0.74
AREA STATEMENT (HECTARES) Oil palm - mature 61,668 63,091 65,306 35,154 30,196 - immature 10,560 8,924 6,191 7,392 10,826 72,228 72,015 71,497 42,546 41,022 Sugar 7,721 7,720 8,231 8,199 8,193 Other crops 259 259 259 259 415 Planted area 80,208 79,994 79,987 51,004 49,630
Pastures 9,282 9,282 9,518 9,729 11,014
Reserve land, building sites etc 37,478 32,277 30,800 18,444 18,533 Titled area 126,968 121,553 120,305* 79,177 79,177**
* Inclusive of Kula w.e.f. 1 May 2010. ** Inclusive of Ramu w.e.f. 1 October 2008. annual report 2012 67
PERFORMANCE HIGHLIGHTS 5-YEAR AND STATISTICS PLANTATIONS STATISTICS SOLOMON ISLANDS
2012 2011 2010 2009 2008
OIL PALM
Production (tonnes) FFB produced 130,656 130,297 120,517 107,257 90,755 Purchased FFB 15,908 14,218 11,822 12,119 13,384 SECTION 3 Processed FFB 146,564 144,515 132,339 119,376 104,139
Crude Palm Oil 31,846 31,592 28,619 25,123 21,981 Palm Kernel 8,037 8,332 7,532 7,082 6,139 Crude Palm Kernel Oil 3,387 3,537 3,206 3,098 2,744
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 25.73 24.37 21.97 20.98 19.67 OER (%) 21.73 21.86 21.63 21.05 21.11 KER (%) 5.48 5.77 5.69 5.93 5.90
Average Selling Prices (USD per tonne CIF) Crude Palm Oil 1,067 1,014 771 640 1,073 Palm Kernel Oil 1,450 1,675 1,141 722 1,427
AREA STATEMENT (HECTARES) Oil palm - mature 5,078 5,347 5,882 5,112 4,613 - immature area 1,036 970 432 1,248 1,748 Planted area 6,114 6,317 6,314 6,360 6,361
Reserve land, building sites etc 1,463 1,260 1,263 1,217 1,216 Titled area 7,577 7,577 7,577 7,577 7,577 68 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS AND STATISTICS HUMAN CAPITAL STATISTICS AS AT 31 DECEMBER 2012
BY DIVISION
Division Malaysia Papua New Guinea Solomon Islands Total
Plantation and Support 5,084 14,257 1,599 20,940 Intrapreneur and Other Services 818 - - 818
TOTAL 5,902 14,257 1,599 21,758 SECTION 3
BY CATEGORY
Category Malaysia Papua New Guinea Solomon Islands Total
Managerial and Professional 223 59 13 295 Executives and Assistant Managers 348 221 15 584 Office and Field Staff 690 1,927 110 2,727 General Workers - Field Work/Guard 4,641 12,050 1,461 18,152
TOTAL 5,902 14,257 1,599 21,758
BY DIVISION 16,000
14,000
12,000
10,000 Plantation and Support 8,000 Intrapreneur 6,000 and Other Services No. of employees 4,000
2,000 Malaysia Papua New Guinea Solomon Islands
BY CATEGORY 14,000
Managerial 12,000 and Professional 10,000 Executive and Assistant 8,000 Managers Office and 6,000 Field Staff
No. of employees 4,000 General Workers - Field Work/ 2,000 Guard Malaysia Papua New Guinea Solomon Islands annual report 2012 69
PERFORMANCE HIGHLIGHTS SHAREHOLDING AND STATISTICS STATISTICS AS AT 2 MAY 2013
Authorised Share Capital : RM500,000,000.00 Issued and Fully Paid-Up Capital : RM322,632,809 less RM3,830,500 Treasury Shares = RM318,802,309 Class of Shares : Ordinary Share of RM0.25 each
Voting Right of Shareholders Every member of the Company present in person or by proxy shall have one vote on a show of hand and in the case of a poll shall have one vote for every share of which he/she is the holder. SECTION 3 Break down of Shareholdings No. of No. of Size of Shareholdings Shareholders % Shares %
Less than 100 167 1.70 6,690 - 100 - 1000 1,911 19.42 1,635,857 0.13 1,001 - 10,000 5,406 54.92 24,501,781 1.92 10,001 - 100,000 2,015 20.47 57,995,339 4.55 100,001 to less than 5% of Issued Capital 341 3.46 432,703,209 33.93 5% and above of Issued Capital 3 0.03 758,366,360 59.47
TOTAL 9,843 100.00 1,275,209,236 100.00
Top Thirty Securities Account Holders (Without aggregating the securities from different securities accounts belonging to the same depositor)
No. of Name Shares %
1 Maybank Noms (T) Sdn Bhd - A/C Johor Corporation (51401100634A) 484,000,000 37.95 2 Johor Corporation 186,634,560 14.64 3 Kumpulan Wang Persaraan (Diperbadankan) 87,731,800 6.88 4 Waqaf An-Nur Corporation Berhad 58,653,782 4.60 5 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board 54,343,300 4.26 6 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 50,827,600 3.99 7 Johor Corporation 22,478,400 1.76 8 Citigroup Noms (T) Sdn Bhd - A/C ING Insurance Berhad (Inv-IL PAR) 11,076,700 0.87 9 Citigroup Noms (T) Sdn Bhd - A/C Exempt An for American International Assurance Berhad 10,502,800 0.82 10 Citigroup Noms (A) Sdn Bhd - A/C CBNY for Dimensional Emerging Markets Value Fund 9,703,300 0.76 11 AmanahRaya Trustees Berhad - A/C Amanah Saham Wawasan 2020 8,279,820 0.65 12 Johor Corporation 7,336,800 0.58 13 AmanahRaya Trustees Berhad - A/C Public Islamic Select Treasures Fund 6,599,500 0.52 14 Tabung Amanah Warisan Negeri Johor 6,423,200 0.50 15 HSBC Noms (A) Sdn Bhd - A/C Exempt An for The Bank of New York Mellon (Mellon Acct) 5,175,000 0.41 16 Zalaraz Sdn Bhd 4,800,800 0.38 17 RHB Noms (T) Sdn Bhd - A/C Jedcon Engineering Survey Sdn Bhd 4,700,600 0.37 18 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board (CIMB PRIN) 4,676,100 0.37 19 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LGF) 4,343,800 0.34 20 HSBC Noms (A) Sdn Bhd - A/C HSBC BK Plc for Saudi Arabian Monetary Agency 3,946,400 0.31 70 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS SHAREHOLDING STATISTICS AND STATISTICS
No. of Name Shares %
21 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (DR) 3,605,400 0.28 22 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LSF) 3,269,700 0.26 23 Lembaga Tabung Angkatan Tentera 3,195,200 0.25
SECTION 3 24 HSBC Noms (A) Sdn Bhd - A/C BNY Brussels for Wisdomtree Emerging Markets Smallcap Dividend 3,105,713 0.24 Fund 25 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board (Nomura) 2,686,000 0.21 26 Citigroup Noms (A) Sdn Bhd - A/C CBNY for Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc 0.20
27 HSBC Noms (A) Sdn Bhd - A/C BNY Brussels for City Of New York Group Trust 2,576,800 0.20 28 HSBC Noms (A) Sdn Bhd - A/C Exempt An For JPMorgan Chase Bank, National Association (Saudi 2,568,400 0.20 Arabia) 29 Cartaban Noms (A) Sdn Bhd - A/C State Street Lux Fund 9T47 for State Street Global Advisors 2,456,000 0.19 Luxembourg SIVAC-SSGA Enhanced Emerging Markets Equity Fund 30 Citigroup Noms (T) Sdn Bhd - A/C Kumpulan Wang Persaraan (Diperbadankan) (CIMB Equities) 2,410,100 0.19
Substantial Shareholders Direct Indirect Name No. of Shares % No. of Shares %
1 Maybank Noms (T) Sdn Bhd - A/C Johor Corporation (51401100634A) 484,000,000 37.95 - - 2 Johor Corporation - 3 a/cs 216,449,760 16.97 548,926,882 43.05 3 Kumpulan Wang Persaraan (Diperbadankan) 87,731,800 6.88 3,774,400 0.30
Analysis of Shareholders No. of No. of Shareholders % Shares %
Malaysian - Bumiputra 1,087 11.04 924,268,145 72.48 - Others 7,845 79.70 198,686,205 15.58 Foreigners 911 9.26 152,254,886 11.94
TOTAL 9,843 100.00 1,275,209,236 100.00 annual report 2012 71
PERFORMANCE HIGHLIGHTS WARRANTHOLDING AND STATISTICS STATISTICS AS AT 2 MAY 2013
Break down of Warrantholdings No. of No. of Size of Warrantholdings Warrantholders % Warrants %
Less than 100 435 9.20 13,352 0.01 100 – 1000 1,813 38.33 1,065,952 0.83 1,001 – 10,000 1,833 38.75 7,233,962 5.67 SECTION 3 10,001 – 100,000 532 11.25 17,540,816 13.74 100,001 to less than 5% of Issued Capital 114 2.41 41,559,803 32.55 5% and above of Issued Capital 3 0.06 60,265,950 47.20
TOTAL 4,730 100.00 127,679,835 100.00
Top Thirty Securities Account Holders (Without aggregating the securities from different securities accounts belonging to the same depositor)
No. of Name Warrants % 1 Johor Corporation 33,271,900 26.06 2 Waqaf An-Nur Corporation Berhad 18,556,500 14.53 3 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 8,437,550 6.61 4 Su Ming Keat 2,899,800 2.27 5 Johor Corporation 2,809,800 2.20 6 HLIB Noms (T) Sdn Bhd - A/C Tan Kit Pheng (M) 1,696,000 1.33 7 Citigroup Noms (A) Sdn Bhd - A/C Exempt An for Citibank NA, Singapore (Julius Baer) 1,118,400 0.88 8 Toh Cheok 1,069,100 0.84 9 Johor Corporation 917,100 0.72 10 Lee Keng Hong 880,000 0.69 11 CimSec Noms (T) Sdn Bhd - A/C CIMB for Ahmad Fuad bin Md Ali (PB) 795,000 0.62 12 TA Noms (T) Sdn Bhd - A/C for Tan Kit Pheng 765,000 0.60 13 Yeo Hock Kim 740,000 0.58 14 Britz Networks Sdn. Bhd. 715,000 0.56 15 Tam Kim Choy 700,000 0.55 16 Yayasan Teratai 700,000 0.55 17 Amanahraya Trustees Berhad - A/C Dana Johor 685,700 0.54 18 CimSec Noms (T) Sdn Bhd - A/C CIMB for Lee Keng Hong (PB) 650,000 0.51 19 HDM Noms (T) Sdn Bhd - A/C Mohd Fauzy Bin Abdullah (M09) 650,000 0.51 20 Lee Keng Hong 650,000 0.51 21 Eugene Wan Khai Yin 630,000 0.49 22 Citigroup Noms (A) Sdn Bhd - A/C Exempt An for OCBC Securities Private Limited (Client A/C-NR) 560,486 0.44 23 Mohd Fauzy bin Abdullah 550,000 0.43 72 Kulim (Malaysia) Berhad (23370-V)
PERFORMANCE HIGHLIGHTS WARRANTHOLDING STATISTICS AND STATISTICS
No. of Name Warrants %
24 Toh Cheok 520,000 0.41 25 Low Swee Chong 520,000 0.41 26 Public Noms (T) Sdn Bhd - A/C Tam Seng @ Tam Seng Sen (E-PPG) 500,000 0.39
SECTION 3 27 Koh Ping Ming @ Quek Ping Ming 500,000 0.39 28 Lau Jit Weng 413,000 0.32 29 Citigroup Noms (A) Sdn Bhd - A/C Exempt An for UBS AG Singapore (Foreign) 410,000 0.32 30 Teoh Ah Guan 400,000 0.31
Substantial Warrantholders Direct Indirect No. of No. of Name Warrants % Warrants %
1 Johor Corporation - 3 a/cs 36,998,800 28.98 18,637,812 14.59 2 Waqaf An-Nur Corporation Berhad 18,556,500 14.53 - - 3 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki 8,437,550 6.61 - - Verdipapirfond
Analysis of WARRANTHOLDERS No. of No. of Warrantholders % Warrants %
Malaysian - Bumiputra 531 11.23 68,449,561 53.61 - Others 3,610 76.32 42,562,723 33.34 Foreigners 589 12.45 16,667,551 13.05
TOTAL 4,730 100.00 127,679,835 100.00 annual report 2012 73
PERFORMANCE HIGHLIGHTS PRICE AND STATISTICS PERFORMANCE AND VOLUME TRADED 2012 - SHARE AND WARRANT
Volume Volume Closing Share Price (RM) Traded Closing Warrant Price (RM) Traded Month Highest Average Lowest (‘000) Highest Average Lowest (‘000)
JANUARY 4.46 4.39 4.29 20,705 1.20 1.14 1.04 15,426 FEBRUARY 4.59 4.48 4.28 14,637 1.25 1.17 1.11 13,893
MARCH 4.46 4.27 4.11 29,018 1.13 1.04 0.995 9,117 SECTION 3 APRIL 4.38 4.30 4.23 14,057 1.05 0.99 0.90 5,626 MAY 4.71 4.45 4.23 43,270 1.05 0.96 0.875 38,658 JUNE 4.70 4.49 4.38 34,535 1.09 1.03 0.975 18,436 JULY 5.31 5.05 4.60 65,388 1.29 1.17 1.01 58,236 AUGUST 5.37 5.25 5.13 33,402 1.30 1.22 1.15 37,749 SEPTEMBER 5.17 4.87 4.64 31,520 1.16 1.08 1.03 16,473 OCTOBER 5.03 4.95 4.80 27,268 1.11 1.08 1.06 8,832 NOVEMBER 4.97 4.75 4.28 23,893 1.07 0.99 0.85 17,672 DECEMBER 5.00 4.65 4.44 47,527 1.03 0.92 0.85 32,588 385,220 272,706
Share Performance Warrant Performance 70,000 7 70,000 7 Price (RM) Price (RM)
60,000 6 60,000 6 (‘000) Traded Volume (‘000) Traded Volume
50,000 5 50,000 5
40,000 4 40,000 4
30,000 3 30,000 3
20,000 2 20,000 2
10,000 1 10,000 1
0 0 0 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Highest Average Lowest Volume Traded 74 Kulim (Malaysia) Berhad (23370-V) SEGMENT REVIEW PLANTATION
INDUSTRY OVERVIEW
In 2012, the global vegetable oils industry commenced the year on a firm footing with vegetable oils trading positively in the first quarter on the back of weather-induced production problems in South America and fears of a palm oil production slowdown. Prices, however, trended downwards in subsequent quarters as ambiguity over consumption patterns growth dogged the markets. Palm oil prices SECTION 4 were affected the most with a 22% drop while seed oils declined by around 5%. As a result, the palm oil discount relative to soybean oil and other vegetable oils surged to record levels peaking at around USD340 per tonne.
On the supply side, world vegetable oil markets experienced bountiful supplies in the 2011/2012 period as production increased at a record pace to 155.7 million tonnes, some 7.9 million tonnes more than the preceding year. Palm oil production for 2011/2012 rose by 2.8 million tonnes year-on-year (“YoY”) to 50.7 million tonnes. On the demand side, world consumption growth of the 8 major vegetable oils slowed in 2011/2012 as buyers remained cautious following worldwide macroeconomic MALAYSIA challenges. Total consumption for the The year 2012 was indeed a challenging one for the Malaysian palm oil industry. year was estimated at 149.9 million During the first half of the year, the industry experienced lower Crude Palm Oil tonnes, an increase of 5.2 million (“CPO”) production as a result of lower yields of Fresh Fruit Bunches (“FFB”) as well tonnes in comparison to the 2010/2011 as high imports of palm oil. In the second half, palm oil prices declined on the back growth of 5.9 million tonnes. of a palm oil stocks build-up arising from high carry-over stocks at the beginning of World vegetable oil stocks rose by the year, increased CPO production as well as weaker export demand. 3.0 million tonnes to 17.0 million tonnes in 2011/2012 from 14.0 million Palm oil stocks rose to 2.63 million tonnes at the end of 2012, while CPO production tonnes in 2010/2011, with a majority declined marginally to 18.79 million tonnes and imports increased to 1.39 million of the increase recorded in sunflower tonnes. A total of 24.56 million tonnes of palm products was exported, an increase oil and palm oil stocks. The increase of 1.2% over the preceding year with palm kernel cake and oleochemical products in palm oil stocks was unexpected, registering higher growth. At the same time, palm oil exports declined by 2.4% to notably in Indonesia, and this was 17.56 million tonnes. predominantly responsible for the depressed palm oil prices and The average price of CPO for the year was RM2,764 per tonne, lower by 14.1% its huge discount vis-a-vis other or RM455 in comparison to the average price of RM3,219 achieved in 2011. Net vegetable oils. export revenue of palm products declined by 11.2% to RM71.40 billion against the RM80.41 billion recorded in 2011 due to lower export prices. annual report 2012 75
PLANTATION SEGMENT REVIEW SECTION 4
The year saw the oil palm planted area reaching 5.08 million hectares, an increase of 1.5% against the 5 million hectares recorded in 2011. This was mainly due to the “In 2012, palm oil increase in planted area in Sarawak, which registered an increase of 5.3% or 54,651 hectares. Sabah is still the largest oil palm planted state, with 1.44 million hectares stocks rose by or 28.4% of the total oil palm planted area, followed by Sarawak with 1.08 million 27.7% to close at hectares or 21.2% of the total oil palm planted area. 2.63 million tonnes 2012’s CPO production declined marginally by 0.7% to 18.79 million tonnes, with as compared to Peninsular Malaysia registering a marginal 0.5% decline to 10.32 million tonnes and Sabah declining by 5.1% to 5.54 million tonnes. Sarawak, on the other hand 2.06 million tonnes registered an 8.4% increase in CPO production to 2.92 million tonnes as production in 2011.” kicked off in new areas.
In 2012, palm oil stocks rose by 27.7% to close at 2.63 million tonnes as compared to 2.06 million tonnes in 2011. The high closing stock was attributable to the high palm oil opening stocks, the increase in palm oil imports by 6.5%, and the decline in palm oil exports by 2.4%. Palm oil imports rose due to the need to supplement the 0.7% decline in palm oil production to 18.79 million tonnes in 2012 (2011: 18.91 million tonnes) as well as to cater to demand for further processing on the local and export fronts. 76 Kulim (Malaysia) Berhad (23370-V)
SEGMENT REVIEW PLANTATION
Total exports of oil palm products, comprising palm oil, palm kernel oil, palm kernel cake, oleochemicals, biodiesel and finished products increased marginally by 1.2% to 24.56 million tonnes in 2012 from 24.27 million tonnes in 2011. Total export revenue, however declined by 11.2% or RM9.02 billion to RM71.40 billion as compared to the RM80.41 billion achieved in 2011 due to lower export prices.
In 2012, palm oil exports declined by 2.4% to 17.56 million tonnes from 17.99 million tonnes in 2011. China continued SECTION 4 to maintain its position as the largest palm oil export market for the 11th consecutive year, with off-takes totalling 3.50 million tonnes or 19.9% of total palm oil exports. This was followed by India at 2.63 million tonnes (15.0%), the Eurozone at 2.22 million tonnes (12.6%), Pakistan at 1.34 million tonnes (7.6%), the USA at 1.03 million tonnes (5.9%) and Japan at 0.56 million tonnes.
PAPUA NEW GUINEA AND SOLOMON The year presented the PNG operations a year due to generally softer commodity ISLANDS number of unprecedented environmental prices. Domestic production of soft The Papua New Guinea (“PNG”) and economic challenges some of commodities remained solid with economy continued to experience which have had a significant adverse log production up 1% YoY and gold strong growth (projected at 9.2%) in effect on New Britain Palm Oil Limited’s production double that of 2011’s output. 2012 with the diversified development of (“NBPOL”) performance. Extreme wet GDP however is poised to slow over resources in the non-mineral sectors. The weather conditions at NBPOL’s biggest the coming year as shipments of logs country’s agriculture sector experienced production site in the West New Britain are expected to be stable, however high crop prices in 2012 and this growth Province in PNG hampered harvesting mineral exports are expected to help momentum is expected to continue as in the first quarter of 2012. In fact, this drive growth. Inflation continues to government support and funding aim was one of the wettest years on record be moderate and the government’s to chart a path towards sustainable and in the area with 4.2 metres of rainfall fiscal position has improved through inclusive growth. Having grown 8% in recorded. On top of this, NBPOL had to accommodative monetary policies to 2011, its strongest-ever recorded growth, contend with the challenge of currency keep inflation at single digit levels. In the PNG Government is estimating that fluctuations and haphazard commodity 2012, the Solomon Islands Dollar (“SBD”) the agriculture/forestry/fisheries sector prices. depreciated approximately 4% against will rebound from 0.8% to 2.8% in 2013. the US Dollar following the significant PNG’s improved political fortunes, In the Solomon Islands, GDP growth revaluation upwards of 10% in the first following Prime Minister Peter O’Neill’s continues to be underpinned by log half of 2011 by the government to ease election in August 2012 has effectively production and mineral exports with external inflationary pressures exerting closed the door on a period of intense growth in 2012 likely to come in at downward pressure on the currency at political instability. 6.7% down from 8.1% in the previous that time. annual report 2012 77
PLANTATION SEGMENT REVIEW
FINANCIAL RESULTS and estate development expenditure consumed services and materials as a as the cost of these new acquisitions result of the appreciating Kina and lower Due to the change in the Group’s were recorded at their fair value of palm product prices fetched (as shown in shareholding structure during the year, purchase instead of their historical cost the following table). results from NBPOL have been equity- as recorded for the existing estates. accounted with effect from 1 May The lower production levels recorded 2012 2011 2012 as Shares of Associate’s results, in 2012 also pushed unit production USD/ USD/ while NBPOL’s results from January costs higher, a reflection of the palm Product TONNE TONNE to April 2012 have been reclassified oil business being a largely fixed cost as Discontinued Operations. Similarly, business. As a result, the unit cost of CPO 1,062 1,108 NBPOL’s results for 2011 have also CPO production rose to RM1,637 per been restated and reclassified as PKO 1,337 1,748 tonne in 2012 as compared to RM1,141 Discontinued Operations for comparison per tonne in 2011, after kernel credit, purposes. mainly impacted by lower output as well NBPOL recorded a Profit Before Tax as lower PK price as a determinant of (“PBT”) of USD81.6 million in 2012 In 2012, the Plantation segment’s SECTION 4 kernel credit. as compared to USD275.5 million in results were driven solely by Malaysian 2011 (excluding IAS 41 impact) and at Plantation. Group revenue declined Compounding this was the less than PBT level, NBPOL contributed RM63.3 13.3% to RM712.20 million in 2012 in expected contribution from NBPOL due million in the form of Share of Results in comparison to RM821.48 million in 2011 to the company experiencing a number Associates and another RM125.2 million primarily due to lower palm product of unprecedented environmental (wet by way of Results from Discontinued prices and FFB production. Profit Before weather) and economic challenges Operations totalling RM188.5 million. Interest and Tax (“PBIT”) amounted to (currencies and commodity prices). In 2011, NBPOL contributed RM862.9 RM156.87 million in 2012, down 33.7% These included the inflationary effect on million and RM354.6 million to the from PBIT of RM236.60 million in 2011 NBPOL’s domestic wages and locally Group’s PBT and PATMI respectively. due mainly to lower palm product prices.
In the Malaysian Plantation segment, the average per tonne CPO and PK price was RM2,923 and RM1,599 respectively, lower than the average prices achieved in the preceding year (2011: RM3,193 for CPO and RM2,300 for PK). This lower average price was somewhat consistent with that of the Malaysian Palm Oil Board’s (“MPOB”) average price of RM2,764 albeit slightly higher, as Malaysian palm products were largely sold at spot prices and only a small amount was sold forward. Lower FFB production levels were also experienced by the oil palm companies in Malaysia, leading to the lower production of CPO and PK in 2012.
Costs in absolute dollar terms increased in 2012 as a result of the acquisition of 5 additional estates and 1 mill from Johor Corporation (“JCorp”) as well as a 20% to 30% price increase in fertiliser secured for 2012. In addition, the acquisition of new operating units from JCorp also resulted in higher amortisation costs of leasehold land 78 Kulim (Malaysia) Berhad (23370-V)
SEGMENT REVIEW PLANTATION
ESTATE PERFORMANCE “During the year, Group Plantation Highlights 2012 2011 Variance revisions to FFB Production ('000 tonnes) the collective - Group 2,304.01 2,375.39 (3.0%) agreements of - Malaysia 715.53 636.76 12.4% MAPA and NUPW for - PNG 1,457.83 1,608.33 (9.4%) harvesters and field - SI 130.66 130.30 0.3% workers, saw their FFB Yield (tonnes per hectare) wage rates increase - Group 22.72 24.36 (6.7%) by some 8% and 10% - Malaysia 20.68 21.89 (5.5%) - PNG 23.64 25.49 (7.3%) SECTION 4 respectively.” - SI 25.73 24.37 5.6% Industry - Peninsular Malaysia 19.05 19.24 (1.0%)
CPO Production ('000 tonnes) - Group 715.21 737.32 (3.0%) - Malaysia 207.27 185.67 11.6% - PNG 476.10 520.07 (8.5%) - SI 31.85 31.59 0.8%
OER (%) - Group 21.71 22.07 (1.6%) - Malaysia 20.29 20.20 0.4% - PNG 22.39 22.85 (2.0%) - SI 21.73 21.86 (0.6%) Industry - Peninsular Malaysia 19.98 20.08 (0.5%)
2012 saw the Group recording slightly stable workforce throughout 2012 and planting materials to derive higher and lower FFB production by 3%, mainly several new initiatives undertaken to faster yields, innovations on plantation pulled down by lower FFB production boost productivity too contributed to and palm oil mill practices using the in PNG following, among other things, the higher FFB production. The Group latest technology. exceptional rainfall in the early part of remains committed toward achieving the year, particularly in NBPOL’s largest its productivity target of raising the We can expect the Group to reap better production site, West New Britain. fruit yields and palm product extraction yields in the coming years as Malaysian Nonetheless, the recently acquired rates to 30 tonnes per hectare and 30% estates do have the potential to achieve KPOL estates at Higaturu, Milne Bay respectively. a yield of 30 tonnes of fruit per hectare and Poliamba all gave robust support by using better planting materials as to NBPOL Group by exceeding their The plantation operation in Malaysia well as improving soil conditions via respective annual crop targets. may require a longer time to reach the good agricultural practices. These Vision 30:30 target following the recent include the application of biocompost, Malaysian Plantation also recorded a acquisition of estates from JCorp that biofertilisers, water management, marked increase in FFB production of have older palms due for replanting advanced mechanisation to improve 12.37% due to among other things, the as well as varied topographical and productivity and savings on labour. acquisitions of 5 estates from JCorp soil profiles and rainfall patterns. The On top of this, the provision of a namely the Sungai Papan Estate, Siang set targets will be monitored closely more conducive working environment Estate, Mungka Estate, Kemedak Estate while concerted efforts are underway including better employee income, and Palong Estate in 2012. Favourable including aggressive replanting of amenities and facilities, will indirectly weather conditions, a relatively more the old palms with new high yielding influence better yields. annual report 2012 79
PLANTATION SEGMENT REVIEW
The Malaysian estates produced 31% of total Group FFB in 2012 (2011: 27%); the PNG estates, 63% in 2012 (2011: 68%); whilst the SI estates’ contribution increased slightly to 6% in 2012 (2011: 5%). The Group’s planted area to oil palm increased to 123,934 hectares as compared to 118,655 hectares in 2011. The acquisition of some 11,200 hectares of oil palm estates from JCorp completed on 30 December 2011 and in the 3rd quarter of 2012 is reflected in the increase in the total oil palm hectarage. The geographical distribution of planted oil palm hectarage was 37% in Malaysia, SECTION 4 58% in PNG and 5% in the SI.
The Malaysian estates produced a total of 715,526 tonnes of FFB in 2012, some workers recruitment. The situation wage rates increase by some 8% and 12.37% higher than the 636,761 tonnes is further aggravated by the steep 10% respectively. Kulim and other produced in 2011. The yield per hectare competition among plantation industry Malaysian plantations also agreed to in 2012 decreased to 20.67 tonnes players as well as from unrelated implement the Government’s recently from 21.89 tonnes in the preceding industries for the limited supply of introduced Special Gratuitous Payment year. This performance however was foreign workers. This situation caused (“SGP”) for eligible workers and staff in superior to the average yields achieved plantation owners to resort to all possible the estates and mills that supplement by the industry as a whole in Johor ways and means to attract and retain their income with a further RM200 a and Peninsular Malaysia in 2012, these workers. In 2012, some 1,386 month. The payment, to encourage which were 19.02 tonnes and 19.05 new foreign workers were recruited for attendance, productivity and reduce tonnes respectively. The average FFB the Kulim Group’s estates while 770 crop loss, has led to an increase in FFB yield for the whole country (inclusive foreign workers were repatriated and production cost by some RM17 per of Peninsular Malaysia, Sabah and 262 absconded. tonne. Sarawak) decreased to 18.89 tonnes per hectare from 19.69 tonnes in 2011. In order to improve and sustain the The Group has taken proactive FFB yield, a continuous effort has been measures to enhance its mechanisation The 2012 performance of the Malaysian made to ensure that Good Agricultural programmes to reduce dependency on estates could have been better if not Practices (“GAP”) and Good labour especially with regard to FFB for the convergence of several limiting Manufacturing Practices (“GMP”), are harvesting and evacuations. These factors. These included an increase in adopted in all stages of plantation steps have included expanding the the percentage of immature and young operations from plant breeding, internally developed Kulim Crane Free matured palms (following the on-going nursery preparation, and field planting, System to assist in FFB loading and massive replanting of aging palms). On through to estate and mill processing. evacuation, application of a mist blower top of this, the effects of adverse weather In Malaysia, the adoption of Structured for manuring and a rotoslasher. conditions (i.e. drought, floods, El-Nino Block Supervision (“SBS”) on and La-Nina in late 2009 to early 2010), harvesting, manuring, weeding and The latest additions to the mechanisation saw bunch formations coming under other field routines has further improved programme involve expanding the usage severe water pressure that resulted in the efficiency and effectiveness of of motorised harvesting poles known as lower bunch numbers and lower bunch plantation operations. Cantas in the estates for FFB harvesting weight in the first half of 2012. of palms below the height of 5 metres. During the year, revisions to the Cantas have proved to be a success, Aside from this, the tight labour situation collective agreements of the Malaysian improving harvesters’ productivity by in Malaysia especially in the plantation Agricultural Producers Association some 80%. Mechanisation has been industry has not improved much from (“MAPA”) and the National Union expanded in 2012 in line with the entry the previous year with the Government of Plantation Workers (“NUPW”) for point projects identified by the palm imposing additional controls on foreign harvesters and field workers, saw their oil industry to help boost national 80 Kulim (Malaysia) Berhad (23370-V)
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economic growth under the Economic “the fundamentals Transformation Programme launched by the Government. The Group has of the business increased the usage of Cantas to were improved approximately 5,700 hectares (41.8%) out of 13,700 hectares total suitable area by the continued for Cantas. The Group is also working promotion of best closely with the MPOB to expand the usage of the Ckat, a motorised cutter agronomic practices for palms beyond 20 feet and field trials and continued are being conducted within the Group’s estates. strengthening of the human resource In 2012, the PNG and Solomon Islands (“SI”) estates produced 1.59 million SECTION 4 capacity.” tonnes of FFB as compared to the record production of 1.74 million tonnes in 2011. This was achieved during a challenging year in which adverse weather conditions affected production, particularly in West New Britain. The recently acquired KPOL estates at Higaturu, Milne Bay and Poliamba all gave robust support to the Group by exceeding their respective annual crop targets. As a result, the potential with third year palms yielding NBPOL Group registered total oil on average 27 tonnes per hectare and production of 545,207 tonnes of crude fourth year palms exceeding yields of 30 oil (CPO and PKO) produced by the tonnes per hectare. Yields for Higaturu, Group’s oil mills, representing an 8% Milne Bay and Poliamba were 25.8 decline over 2011’s figure. In addition, tonnes per hectare, an 8% increase some 27,092 tonnes of PK was exported from the 2011 levels of 23.9 tonnes directly, a reduction of 5% from 2011 as per hectare. Yields at Ramu were 12.7 additional kernel crushing capacity at the tonnes per hectare from the 2011 levels KPOL mills was commissioned during of 14.4 tonnes per hectare, reflective the latter part of the year. A further 0.68 of the very young age profile for those million tonnes of FFB were purchased estates and the generally drier growing from over 16,000 outgrower blocks. The conditions. At Guadalcanal Plains Palm purchased crop represents 30% of the Oil Limited (“GPPOL”) in the Solomon total processed FFB. Islands, yields were 25.7 tonnes per hectare, up from the 2011 levels of 24.4 The Group average estate yield of FFB tonnes per hectare. per hectare over the 66,746 hectares of oil palms under harvest was 23.8 tonnes Whilst NBPOL Group FFB yield results per hectare (2011: 25.4 tonnes per were mixed in 2012, the fundamentals hectare). The yields of FFB in West New of the business were improved by the Britain were 24.9 tonnes per hectare, a continued promotion of best agronomic 13% drop from the 2011 levels of 28.6 practices and continued strengthening tonnes per hectare as a direct result of of the human resource capacity. On top the high rainfall inhibiting the workers’ of these, further capital investments in ability to collect and transport FFB. transport and milling resources are also However, it is encouraging to note that positioning the Group to take advantage the younger palms showed strong yield of better growing conditions.
annual report 2012 81
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REPLANTING AND NEW PLANTING JCorp, the Malaysian estates’ average age of 10.7 years as compared to 11.3 To sustain higher production, the Kulim palm age decreased to 11.48 years in years reported last year. This is highly Group is committed to improving December from 12.40 years in 2011. advantageous, not only for producing the average age profile of its palms. The newly acquired 11,200 hectares high fruit yields but also for maximising Aggressive replanting strategies have an average age of 6.80 years as the ratio of oil to bunch. continued during the year with palms almost half (47.2%) is immature, while aged older than 25 years from the date another 31.2% is under the young prime In 2012, NBPOL expanded its palm of field planting in Malaysia, and older category. oil production base with the addition than 22 years in PNG and SI, being of 1,057 hectares of new plantings felled and the areas replanted with the At NBPOL, the replanting of 4,784 in West New Britain and Ramu. The latest high yielding palm varieties. hectares was completed across West new plantings in West New Britain New Britain, Guadalcanal, Higaturu, continued at Silovuti to the West of In Malaysia, 2,653 hectares were Milne Bay and Poliamba during the year. the Province, where 705 hectares were replanted in 2012 against the scheduled This has allowed NBPOL to replace planted after High Conservation Value aged palms with the highest yielding Forest (“HCVF”) assessments of the 2,884 hectares. The wet weather in the SECTION 4 last quarter of 2012 affected some of elite seedlings from Dami Research area were carried out in 2011. Another the planting work and is expected to be Station’s plant breeding programme. 352 hectares of new plantings at Ramu completed by early 2013. By the end of The age profile for NBPOL’s oil palms largely came from land mobilised under 2012, taking into consideration 11,200 remains supportive towards yield the lease and lease-back scheme. hectares of oil palm acquired from growth with a weighted average palm
OIL PALM AREA STATEMENT
Oil Palm Planted Area Average Palm Age Titled area (ha) Mature (ha) Immature (ha) Total (ha) Total (%) (Years) Malaysia 49,551 35,170 10,422 45,592 37% 11.48 PNG 126,968 61,668 10,560 72,228 58% 10.63 SI 7,577 5,078 1,036 6,114 5% 13.48 Total 184,096 101,916 22,018 123,934 100% 11.86
Palm Age Profile by Country as at 31 December 2012
8% 12% 17% 14% 16% 7% 23%
11%
21%
27% 14%
40% 33% 50% 7%
Malaysia - 45,592 ha PNG - 72,228 ha SI - 6,114 ha
1-3 years 4-8 years 9-18 years 19-23 years >23 years 82 Kulim (Malaysia) Berhad (23370-V)
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quality of palm products. Improvements to the mill plant and machinery will include, among other things, the replacement and/or rehabilitation of aging and inefficient equipment. Improvements to the boiler, steam turbine, horizontal steriliser system and oil recovery system are in the pipeline to achieve the set targets.
Palm product (crude palm oil and palm kernel) extraction rates were considerably affected by the weather. In the first half of the year due to the direct impact on
SECTION 4 field conditions and infrastructure that impeded the harvesting, collection and transportation of crop. In the second half of the year due to the impact of poorly pollinated fruit bunches some 6 months after the rains that resulted in lower oil and kernel contents. This saw the NBPOL Group achieving OER of MILL PERFORMANCE of Palong Cocoa Palm Oil Mill in June 22.35% for 2012, a slight drop from the 2012. PK production was 58,773 2011 result of 22.79%; whilst KER for tonnes, an increase of 9.49% from 2012 was at 5.25%, also a decline from In 2012, the total CPO produced by the 53,678 tonnes in 2011. In terms 5.42% in 2011. the Group reached 715,207 tonnes, of oil yield, the Malaysian plantations representing a marginal 3% drop over recorded a marginal increase from The year under review saw many of 2011’s 737,323 tonnes. Similarly, the 5.64 tonnes CPO per hectare in 2011 NBPOL’s existing mills being upgraded total PK produced was down by 4% at to 5.89 tonnes in 2012, excluding the even as NBPOL’s twelfth mill came into 177,998 tonnes (2011: 185,009 tonnes). oils from FFB purchased from outside operation, boosting its milling capacity This was in line with the marginal drop from 260 to 320 tonnes of FFB per in the total FFB processed by the Group suppliers. For the Malaysian operation, OER improved from 20.20% to 20.29% hour (“TPH”). 2012 was basically a of 3,294,771 tonnes (2011: 3,340,307 year of consolidation for the NBPOL tonnes). whilst KER recorded a slight dip from 5.84% in 2011 to 5.75%. However, we Group as it provided some time for overdue maintenance and upgrading In terms of extraction efficiency, the are still ahead of the industry averages of the existing mills. A wide range of Group’s OER dropped to 21.71% in 2012 (Peninsular Malaysia) of 19.98% and projects was undertaken including as compared to 22.07% in 2011, while 5.48%, respectively. increasing FFB ramp capacity, civil KER also dropped slightly to 5.40% in works to accept new vertical sterilisers, 2012 from 5.54% previously. Similarly, The average OER and KER targeted for replacement of electrical generator sets the drop in Group’s overall productivity the Group’s Malaysian mills in 2013 is in 2012 was mainly the result of the 20.56% and 5.69%, respectively. In this and switchboard controls as well as lower FFB production in PNG which respect, Management is taking several re-tubing of boilers. accounted for more than half of the proactive measures including further Group’s palm products. improving the overall quality of FBB 2012 also saw planning work on from both the Group’s own estates and NBPOL’s next 3 mills continuing In Malaysia, total CPO production outside suppliers; making improvements with a focus on properly aligning full was 207,265 tonnes in 2012, some to the Group’s mill plant and machinery stakeholder participation, meeting legal 11.6% higher than the 185,666 tonnes to minimise milling losses; as well as and sustainability requirements as well in the prior year with the acquisition enhancing the extraction rates and as securing contractors. annual report 2012 83
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RESEARCH AND DEVELOPMENT continuously being updated on the effective by facilitating assessment of KATIS. The data offers a quick overview the current land condition for better yield The Group’s R&D personnel are involved of an estate’s current performance and forecasting. in advisory services, seed production, enables managers to identify under- plant breeding, and feasibility studies on performing areas that require close Kulim is committed to sharing its land suitability to optimise yields, reduce attention. scientific research findings with the palm immaturity periods and enhance research community. In the interests of agro-waste utilisation. Precision agriculture management disseminating knowledge to benefit the involves the application of specific industry as a whole, our agronomists As our operations are located in diverse mitigation activities to specific areas. and scientists attend and present papers geographies, R&D services for our These activities include ensuring on oil palm breeding, palm nutrition, oil Malaysian operation is undertaken by the effective fertiliser usage, reducing palm by-products and new technologies Kulim Agro-Tech Centre based in Kota fertiliser input and boosting yields at national and international forums. In Tinggi, Johor, while NBPOL’s Dami Oil through the higher yield attainable. 2012, we presented 2 scientific papers Palm Research Station (“OPRS”) based Although aiming for the best yield at the National Soil Science Conference, SECTION 4 in West New Britain, undertakes R&D possible, we acknowledge that the use 1 being a study on magnesium sources activities for the PNG and SI operations. of excessive inorganic fertilisers is not and the other, a paper for nitrogen-fixing Our R&D units are continuously a sound business strategy. Thus, the bacteria. collaborating and capitalising on cross- Group is always emphasising the use border knowledge sharing to deliver of appropriate amounts which will only innovative solutions. be possible through regular agronomist visits to the fields, annual foliar and PRECISION AGRICULTURE AND periodical rachis as well as soil tests and ANALYTICAL SERVICES potential yield expectation. All the Group’s Malaysian estates have been mapped and digitised via the Kulim Precision agriculture varies the Agrotech Information Systems (“KATIS”). allocation of production inputs on a The integrated system leverages on field-by-field or palm-by-palm basis a Global Positioning System (“GPS”), so that each field within the plantation Geography Information System (“GIS”) reaches the maximum economic yield. and Oil Palm Monitoring Programme to KATIS increases the accuracy of the capture agronomic and management area computation, analyses yield gap, data. All new replanting fields are planting material selection, nutrient management, natural resource management and other agronomic parameters. Today, precision agriculture has become the cornerstone of sustainable agriculture.
In the past, we have shared the impressive test results obtained from low-cost aerial photomapping using unmanned model autopilot aircraft. These aerial photographs have certainly captured people’s attention as they serve as a means to crosscheck and update estate census data to reflect the true status. The information obtained has enabled accurate palm inventory, palm health checks and surveillance of field conditions including roads, water body, slope stability and other parameters. This data makes field management more 84 Kulim (Malaysia) Berhad (23370-V)
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Kulim firmly advocates the development to the plantations, to undertaking full of agri-science and technology to research and development activities. improve crop and oil yields to meet The interpreted data is made available increasing demand. The Ulu Tiram to estates in order to enhance the Central Laboratory (“UTCL”) provides monitoring of field performance to analytical services and technical benchmark individual estates against support for the Group’s plantations the leading estates. and mills. The laboratory offers soil, foliar and nutrient analyses, agronomic All Group estates tap agronomic services and fertiliser recommendations for high based on Best Management Practices crop productivity as well as quality and (“BMP”) which aim to achieve maximum effluent testing for the palm oil mills. yields and production outputs in a It makes good use of leading-edge sustainable manner. The service covers testing equipment such as the Atomic precision and site-specific management SECTION 4 Absorption Spectrophotometer, Flame proposals to ensure maximum Photometer, UV-spectrophotometer and sustainable yields. By determining the Buchi Auto distillation to ensure reliable yield gap between fields, the specific and accurate analytical results. fertiliser responses are dictated. The provision of nutrient management We are in the process of purchasing as well as soil characterisation and the near-fully automatic LECO Trumac conservation strategies, all aim to nitrogen analyser which uses the improve soil management. Dumas method to produce faster results (5 minutes versus 3 to 4 hours per In line with RSPO targets that single soil health thus producing further and sample on the older machines). UTCL out soil fertility as a principle criterion faster root growth. Currently over will thus be able to handle samples for achieving sustainability, long- 63,000 tonnes of biocompost are used much more efficiently and produce term fertiliser studies are aimed at over more than 9,161 hectares of oil more accurate results. Accredited increasing the efficiency of specific palm fields across the Kulim estates. under MS ISO/IEC 17025 SAMM (Skim nutrient application as well as evaluating We will also be looking to other quality Akreditasi Makmal Malaysia) since herbicides that are less toxic and more biofertilisers available in the market as 2007, UTCL’s competency is also environmentally friendly. Improving soil possible alternatives. recognised globally and supported health is one of the ways to ensure by the ILAC-MRA (International vigorous palm growth thus preparing Integrated Pest Management (“IPM”), Laboratory Accreditation Cooperation the trees for unexpected pest and the use of holistic and compatible - Mutual Recognition Agreement), an disease threats. Emphasis is given to methods of pest and disease control, international cooperation of laboratory the integration of inorganic and organic has long been practised and refined and inspection accreditation bodies. fertilisers to promote efficient energy by research, experience and on-the- usage and sustainable high palm ground breakthroughs. A balanced IPM AGRONOMY oil yields especially when the price approach removes the overdependence The Group’s Agronomy arm possesses of inorganic fertilisers has become on pesticides, making the control an oil palm management database in exorbitant. Efficacy trials on weedicides process more bio-sustainable. The Malaysia which contains information continue in order to provide estates typical pests within an oil palm collated over the past 18 years. with information on the most cost- estate include rats, bagworms, nettle Programmes based on the data are used effective chemical for weed control. caterpillars and oryctes rhinoceros to determine the performance of different The application of biocompost, an beetles. Predatory animals and insects fields across locations, provide analysis organic fertiliser currently produced by such as barn owls that feed on rats are and recommendations on best practice, the Group’s mills has enabled efficient fostered to control pest populations. determine sites for new agronomy trials, by-product utilisation covering larger While barn owls and snakes keep and generate information to optimise planting areas. A study carried out by a check on the rodent populations, planting schedules. The section’s the Agronomy Department indicates predatory insects, parasitoids and responsibilities have escalated from biocompost acts as a soil ameliorant entomopathogenic fungi eliminate providing technical advice and services and its application results in better defoliating insects. Beneficial plants annual report 2012 85
PLANTATION SEGMENT REVIEW SECTION 4
are cultivated to provide shelter and suitable for converting other crops into PLANT BREEDING supplementary foods such as nectar palm cultivation or for replanting. Using The Group’s plant breeding efforts see encourage the population of predators the zero-burning replanting technique, it continuing to select planting materials and parasites. Insecticides are only old and uneconomical stands of with desirable characteristics. Tasked resorted to in an outbreak situation oil palm are shredded and left to with developing new higher-yielding where natural enemy predation is no decompose in situ. This technique also plant varieties, the Group’s Plant longer sufficient to manage the pest allows all plant tissues to be recycled, Breeding department also focuses on population. Once the situation is within enhancing soil organic matter, helping genetic materials with economically control, natural controls are reactivated. to restore and improve soil fertility. The important traits. These traits include biomass of the palm residue through Ganoderma tolerance, high vitamin E, Kulim has long established research decomposition recycles nutrients long-bunch stalk, high bunch number, collaboration with other research into the soil and reduces the input early bearing, good oil extraction rates institution, for instance the MPOB. One of inorganic fertilisers. The return and big fruitlets. of the recent collaboration has been on of organic matter also improves the research on Ganoderma, a prominent physical and chemical properties of High yielding oil palms are the bedrock oil palm disease in Malaysia. In-house the soil. Besides being non-polluting, of the Group’s “30:30” strategy and the research on possible mitigation factors zero burning also contributes positively most influential driver of profitability, such as use of microbes (apart from field towards efforts in minimising global other than commodity prices. sanitation which has been long adopted) warming. Felling and clearing is no are being actively pursued. Field training longer dependent on the vagaries of Programmes that promote high-yielding has been successfully conducted in weather. In the past, wet weather often improvements are being carried out order to give hands on experience to the delayed burning and thus replanting. using various duras of the elite Deli planters on dealing with disease. Such delays are now avoided. In the lines as well as Angolan germplasm absence of burning, the cost of land and tenera/pisifera of the AVROS and The practical and environmentally sound clearing is substantially cheaper. Zero Yangambi populations. During the technique of zero-burning replanting burning is non-polluting, contributes year, a set of progeny testing activities has been adopted and implemented positively towards minimising involving 162 crosses were laid down by the Group. This is the best option to global warming, and complies with at the Sungai Papan nursery and the previous practice of burning and is environmental legislation. these will be field planted in 2013. This 86 Kulim (Malaysia) Berhad (23370-V)
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and Nigerian germplasm besides yields through clonal planting. Kulim also advanced population of the dura and received a total of 70 ramets of highly tenera parental palms for future genetic amenable tenera Clone from MPOB with improvement. The crossing programmes 40 ramets of which were field planted. involving 26 progenies were completed With 33% oil/bunch, the ortet produced at the end of 2012. Screening of the average of 9.1 tonnes of oil per Ganoderma tolerant materials via rubber hectares for 4 consecutive years wood block sitting techniques on the three-month old seedlings will start in SEED PRODUCTION November 2013. Following this, a rubber In Malaysia, a total of 1.50 million wood block inoculation technique on 12- commercial DxP seeds were produced month old seedlings will commence in and 0.88 million germinated seeds were July 2014. The tested progenies will be sold by the Group’s Malaysian Plant benchmarked by the tolerant materials Breeding unit in 2012. The seed sales are SECTION 4 (Zaire x Cameroon progeny) and the expected to increase by 10% in 2013. susceptible Elmina dura. Whereas in PNG, seed sales exceeded forecasts and reached 14.7 million, a The current planting materials have 25% increase from the sales achieved short stalk length of 10 - 15 cm, in 2011 of 11.8 million. Of those sales, embedded between frond axil and 10.5 million were to customers overseas the trunk. This poses difficulty in and 4.2 million for internal use and experiment serves to progeny-test elite reaching and cutting the stalk either within PNG. The sales forecast for 2013 duras from the Dami, ex-OPGL, Kulim- manually or mechanically. For ease of remains buoyant with budgeted sales of Angola and Kulim duras with AVROS harvesting, it has been recommended 14 million seeds. pisiferas from the MPOB, Kulim and that the minimum stalk length for higher Dami. Through this trial, Kulim is to find harvesting efficiency with a mechanical BIOTECHNOLOGY new sources of better dura and pisifera cutter should be 20 cm. In Kulim, the The Group’s R&D activities in parents for future planting materials and long bunch-stalk programme involving biotechnology involve making genetic select ortets for clonal propagation. an Angolan genetic material with stalk improvements through modern length measuring 28.8 cm, was field molecular techniques using tissue Using Connected Design (Incomplete planted in 2012 at the REM Estate in culture methodology to clone elite North Carolina Mating Design II) in the Kota Tinggi, Johor. Further bi-parental trees. The research also seeks to hasten crossings, the selection of elite dura crossing programmes will be used for traditional breeding programmes by and pisifera parental palms will be more progeny testing of long-stalk bunch using genetic relationship studies to meaningful as the General Combining breeding materials. determine desirable oil palm breeding Ability (“GCA”) and Specific Combining partners. Palms can be cloned both for Ability (“SCA”) can be estimated. A Single Seed Descend (“SSD”) increasing the number of elite breeding The ordinary North Carolina Mating I programme involving 3 ex-OPGL and 6 trees and for improving the quality of (“NCMI”) can only estimate the GCA Dami duras were field planted in 2012 new oil producing feedstock. In the of the pisiferas, while the evaluation at the REM estate. Another 7 progenies past, crop improvement depended on of duras performance is based on the were in big polybags and will be field selective breeding within species. Tissue mean value. planted in 2013. This programme is an culture, through which plants can be alternative path to shortening the period cloned from a single cell, has speeded A total of 100 MPOB Ganoderma for creating an inbred line. It takes up up the process of making new varieties tolerant DxP materials planted in a a 5-year cycle instead of 10-year cycle available. It allows rapid multiplication Ganoderma hot spot area in Kemedak using a standard selfing programme. of uniform planting materials with Estate in 2009 were in bearing. The desired characteristics. This enables routine breeding data collection will be In 2012, a focus on evaluating clonal improvement of planting materials using carried out in 2013. Further negotiations dura and tenera palms was undertaken existing individuals which have all or with MPOB progressed to progeny as part of a fast-track programme. most of the desired qualities such as testing some Duras and teneras/ Preliminary observation showed very good oil yield and composition, slow pisiferas of the Zaire, Cameroon, Angola promising results of getting higher oil vertical growth and disease tolerance. annual report 2012 87
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Over the last 4 years, the biotechnology (“SGP”) of RM200 per month to all that the Group’s corporate plans are team at the Dami Oil Palm Research eligible plantation workers. Plantation implemented successfully at all levels Station have been developing and workers include the staff under the in the Group hierarchy, in accordance testing new liquid culture protocols for MAPA/AMESU, workers under the with our vision, mission, culture. The large scale palm cloning. Cloned tenera MAPA/NUPW and security guards. The PMS aims to ensure our people are seedlings planted in late December scheme received positive responses continuously being developed in line 2012 through 2013 will allow NBPOL to from local and foreign employees and with a high-performance culture while undertake its first large scale planting involved a total investment of some bearing in mind the changing business with material produced from liquid RM12.54 million. environment. culture. In 2012, the Dami Station also continued its work on the conservation The Group believes that an effective Following the results of an Employee of elite palms via tissue culture and workforce is vital to the success of Climate Survey, the Group has revised cloning which effectively preserves any organisation. Over the years, we the salary scale and scheme of service important breeding palms for an infinite have undertaken various initiatives to for executive and non-executive level, measure of time. manage the training needs for all levels staff as well as its security guards. The SECTION 4 of employees in line with the Group’s exercise, which involved the Group HUMAN CAPITAL strategic direction and the preservation investing some RM3.2 million in its of the Group’s core values of honesty, employees, has made our remuneration The Group’s employees have always integrity and hard work. Several courses, packages more competitive. By been our greatest assets. We continue seminars, and internal and external strengthening our remuneration and to place great emphasis on developing workshops were held during the year offering employees additional benefits, our human capital as our workforce with modules ranging from corporate we are looking to motivate them and plays a critical role in the future growth culture familiarisation, awareness and enhance employee productivity. and sustainability of the business as well productivity to effective communication, as the way it delivers that value. sustainability as well as executive and leadership development. “The Group’s on-going The future of our organisation depends on developing a people strategy that Our training programmes placed an ‘People Excellence’ enables every employee to remain emphasis on strengthening our campaign is about competitive in a global economy. The operational management capability. developing people to Group’s on-going ‘People Excellence’ The year saw 10 employees who had campaign is about developing people to registered for an Executive Diploma excel, to be the best, excel, to be the best, and do their best programme successfully completing and do their best for for customers. the programme with good results. An employee who was placed in an Executive customers.” As at the end of 2012, our plantations Masters in Business Administration operations employed 20,940 personnel, programme in collaboration with JCorp representing a marginal decrease of 1.4% and UTM-SPACE, graduated from UTM. over the previous year. The composition We also ran a pre-retirement programme by countries was as follows: Malaysia at to ensure that upcoming prospective 5,084 (24%), PNG at 14,257 (68%) and retirees over the next 2 years will be SI at 1,599 (8%). prepared financially, physically and mentally upon leaving the Company’s In line with the Malaysian Government’s employment. During the year, our mission to upgrade household income Malaysian operations invested RM1.1 through the New Economic Model million or 3.3% of payroll towards training (“NEM”) and Economic Transformation and recorded on average 4.39 man- Programme (“ETP”), as well as in days of training per employee, which response to the Malayan Agricultural exceeded our target of 3 man-days. Producers Association (“MAPA”) resolutions, Kulim’s Malaysian operation The Performance Management System granted a Special Gratuitous Payment (“PMS”) in the organisation ensures 88 Kulim (Malaysia) Berhad (23370-V)
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The Group’s Malaysian operations are A performance-management based “The RTC aims to dependent on foreign labour, especially organisational culture involves the migrant workers from Indonesia. We establishment of a coaching environment foster creative welcome the move by the Malaysian and and a conscious attempt at continuous thinking about Indonesian Governments to regularise interaction between management and and protect the rights of each nation’s staff. The annual Peers and Reverse current issues and citizens. This is in line with the Group’s Feedback (“PARFEED”) appraisal serves to create practice of working with bona fide system continues to achieve its aim of stronger bonds labour suppliers to ensure the legality of complementing the usual top-down its work force and eliminate making any appraisal by providing a more holistic among executives distinction based upon an employee’s assessment of an individual employee’s to drive the race and origin. performance and highlighting areas organisation for further improvement. The resultant By proactively engaging with feedback guides employees to improve towards success.” Government officials, staff and workers’ performance in the areas of teamwork, union officials and Hospital Assistants communication, leadership and Association representatives, we are organisational values. enabling the effective exchange of information and building good rapport In December 2012, the Group’s among the parties. The regular on-going Malaysian operation organised a series consultations also help us resolve any of Kulim Roundtable Conference differences and grievances. The Group (“RTC”). The RTC is an open platform remains committed to managing its where executives can come together workforce in a responsible manner in to share and discuss opinions, ideas, adherence to the Code of Conduct for issues and forecasts, among other Industrial Harmony. things with the Managing Director and annual report 2012 89
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Senior Management. The RTC aims to be instituted, including random testing, TOTAL QUALITY MANAGEMENT foster creative thinking about current voluntary testing, and testing as part issues and serves to create stronger of, or as a follow-up to, counselling or The Group’s Total Quality Management bonds among executives to drive the rehabilitation. An inspection programme (“TQM”) initiatives look at the overall organisation towards success. At the to vet all internal grocery shops in the quality measures used including RTC sessions, former senior employees operating units for illegal medication managing quality design and shared their experiences on best and alcohol has also proven its worth as development, quality control and practices in the Golden Era as well as a first-line deterrence initiative. maintenance, quality improvement, and those practices as relevant in today’s quality assurance. context. A fitness programme among the Group’s security force is helping them We remain committed to the The Ethics Declaration form has been to cultivate a healthy lifestyle as well as continuous improvement of the service firmly embedded within the Group. It keeping them physically fit in their work and product quality of the operating serves as an important tool to promote environment. Engagement activities
units through maintenance of the SECTION 4 a culture of integrity by encouraging among our security personnel sees them current standards certifications. The employees to whistle-blow and alert immersing themselves into community RSPO certification, a global, multi- the management about any ethical volunteerism programmes as well as wrongdoings that might occur below the getting involved in wildlife reservation stakeholder initiative on sustainable compliance radar. In 2012, all employees activities at the Group’s premises. palm oil, is a seal of approval that our provided their valuable feedback and palm oil is produced in a sustainable appropriate action was taken to address The Group promotes various Islamic- manner and volumes are traceable. the issues raised. The Asset Declaration based activities throughout the Kulim’s entire operating unit, including exercise was extended to all executives organisation. The year’s activities the new acquisition from JCorp, has who were also requested to individually included a High Tea with Ustaz Don obtained full certification since January declare income, assets and liabilities to which saw 280 participants contributing 2009 and February 2010. In late 2012, eliminate the risk of corruption and any close to RM53,000 toward Kulim’s NBPOL procured recommendation conflict of interest. corporate social responsibility activities. for certification of the Milne Bay The Group’s annual qurban programme and Higaturu Estates. Together with In 2012, the Malaysian operation sees our staff sharing their blessings certification of Poliamba in March 2012, continued to tap the Strategic Enhanced with the less fortunate. In 2012, some NBPOL’s entire production base has Executive Development System 239 employees from the Malaysian been recommended for certification. (“SEEDS”) Programme to further develop operations pooled resources and its talent pool and create dynamic distributed meat to less fortunate 5 of the Group’s operating units, namely leaders. Introduced in 2007, the SEEDS families within the operating units and in Sedenak Palm Oil Mill (“POM”), Sindora Programme has been re-engineered and the surrounding communities. POM, Tereh POM, Palong Cocoa POM registered with Skim Latihan 1 Malaysia and Tereh Selatan Estate, successfully (“SL1M”). It involves soft skills training The Group has a human resource underwent the reassessment of in different working environments for a outreach and external public relations their quality system, that entailed continuous period of 8 months. strategy, to publicise its success and the recertification of the ISO 9001 attract the best and brightest talent to accreditation. ISO 9001:2008 is the To protect employee security, eliminate further our goal of building a winning internationally recognised standard for any risks to the health, welfare and organisation. Thus typically takes the the quality management of businesses. safety of the staff, as well as to increase form of road shows for school leavers It applies to the processes that create productivity in the workplace, the Group and university graduates. 2012’s does not tolerate the use of illegal promotional schedule included visits to and control the products and services drugs and alcohol in the workplace. institutions of higher learning and Kulim’s that an organisation supplies, as well Every employee is responsible for participation in career and educational as and prescribes systematic control of complying with the drug-free workplace fairs and exhibitions. At these events, activities to ensure that the needs and programme and the policy. The policy the Group expounded on the adventure expectations of customers are met. It outlines the objectives, procedures and passion of the plantation business is designed and intended to apply to and guidelines concerning the nature, and the direction the Group is taking to virtually any product or service, made frequency, and type of drug testing to maintain its leadership position. by any process anywhere in the world. 90 Kulim (Malaysia) Berhad (23370-V)
SEGMENT REVIEW PLANTATION
ISO ISO CERTIFICATIONS RSPO 9001:2008 14001:2004 IEC 17025
Malaysian operations - All PNG Sedenak POM, operations and Sindora POM, for Malaysian Tereh POM, operations Receiving All estate Palong Cocoa - Sedenak Ulu Tiram Company/ and mill in POM and Estate, Sindora Central Operating Malaysia, PNG Tereh Selatan Estate and Laboratory Units estates and SI Estate Sindora POM (UTCL)
The ISO 14001:2004 environmental management standard helps us minimise the
SECTION 4 impact of our operations on the environment (air, water, land, community and natural resources), and comply with applicable laws and regulations. Sedenak Estate, Sindora Estate and Sindora POM successfully underwent the surveillance of their ISO 14001:2004 certification during the year under review.
ISO/IEC 17025 is the main standard used by testing and calibration laboratories issued by the International Organisation for Standardisation. It applies directly to those organisations that produce testing and calibration results. Our Ulu Tiram laboratory uses ISO/IEC 17025 to implement a quality system aimed at improving their ability to consistently produce valid results. The standard places great emphasis on the responsibilities of senior management, with explicit requirements for continual improvement of the management system itself, and particularly, communication with the customer. workforce. OHSAS promotes a safe and healthy working environment by In January 2011, to meet increasing demand from internal and external customers, providing a framework that allows the UTCL added accreditation for their foliar testing service. Foliar chemical analysis organisation to consistently identify identifies deficiencies of nitrogen, phosphorus, potassium, magnesium and calcium and control health and safety risks, and other metals in samples. The report will indicate the normal and deficient levels reduce the potential for accidents, aid of these elements and recommend a prescription for a remedial fertiliser application. legislative compliance and improve overall performance. OHSAS 18001 A series of refresher training courses on Understanding, Documenting and is designed to be compatible with Implementation of ISO 9001:2008 and ISO 14001 were conducted for 22 personnel ISO 9001 and 14001 and helps the from the respective certified operating units. An integrated audit training on ISO organisation meet health and safety 9001 and 14001 was conducted in April 2012 and a session of ISO/IEC 17025 obligations in an efficient manner. audit training was also conducted for laboratory operators. Training on Integrated Management System Process Based Internal Auditing was conducted in June 2012 The key areas addressed by OHSAS for 26 personnel from various operating units. This course advocates an integrated 18001 are planning for hazard approach to minimise disruptions to operations, as well as a process-based identification, risk assessment and approach that is especially helpful in identifying weak links between processes risk control, the OHSAS management and opportunities for improvement. On top of that, in September 2012, training programme, structure and responsibility, on Decoding and Applying the Malaysian Environmental Law was conducted to training, awareness and competence, acquaint 36 selective personnel with environmental-related legislations and identify consultation and communication, the applicable legal requirements and ensure that the Company’s operations and operational control, emergency environmental aspects are in compliance. preparedness and response and performance measuring, monitoring and The internationally recognised assessment specification Occupational Health and improvement. The Group’s adoption Safety Assessment Series (“OHSAS”) 18001 guidelines are adopted as part of the of OHSAS 18001 imbeds a formal Group’s risk management strategy to address changing legislation and protect our procedure to reduce the risks associated annual report 2012 91
PLANTATION SEGMENT REVIEW SECTION 4
with health and safety in the working holding company level by JCorp and by PROSPECTS AND PLANS environment for employees, customers the Malaysian Productivity Corporation and the public, thereby reducing and (“MPC”) at both regional and national Despite an increase in acreage, US preventing accidents and accident- levels. In November 2012, Hari Mekar, soybean production is expected to related loss of lives, time and resources. the Company level quality convention, decline by 3.9% to 80.8 million tonnes was successfully organised drawing for 2012/2013 following the hot and dry To involve employees in productivity participation from 12 ICC groups and 40 summer in July/August 2012. In 2012, and efficiency improvement activities, presentations from CEMPAKA. unfavourable weather conditions also a team-based environment has been reduced the rapeseed harvest in the developed in which they can participate Eurozone and Canada, as well as the The CEMPAKA Suggestion Scheme actively in improving their process, sunflower seed harvest in Russia and provides the mechanism for employees product, or service performance. the Ukraine. However, based on the to channel their suggestions and ideas One such employee participation expectation that South America will for improvements. Annual awards programme is the Quality Control Circle enjoy normal harvests for soybean in the tied to the level of participation help (“QCC”) directed towards improvements second half of 2012/2013, as will winter publicise the scheme which has also in the workplace focusing on areas crops at other origins, global oilseed such as cost, safety and productivity. been strengthened by incentives. To production is forecast to rise by 4.6% Other complementary initiatives such maintain an adaptable and responsive to 462.9 million tonnes. The majority of as the Innovative and Creative Circles organisation, we have developed a the increase is expected to come from (“ICC”) and the Japanese 5S System are culture that actively solicits input and the projected rebound in soybean output also integral components to enhance recommendations from every level of from Brazil and Argentina. operations. staff. Management makes every effort to help employees provide suggestions for Palm oil is expected to experience The Group organises an annual internal the betterment of job processes and to another challenging year in 2013 as ICC/QCC competition and regularly harness the power of in-house creative additional young palms mature in participates in those organised at the ideas. Indonesia and hectarage increase from 92 Kulim (Malaysia) Berhad (23370-V)
SEGMENT REVIEW PLANTATION
“The nationwide implementation of the B10 Programme will further assist the removal of crude palm oil from the market place and strengthen CPO prices.” SECTION 4
7.1 million hectares in 2011/2012 to an increased usage of palm oil for the previous rate. The implementation of 7.6 million hectares in 2012/2013. In biodiesel production, augur well for the the restructured export duty is expected tandem with this, it is forecast that global growth of the industrial segment. to benefit the downstream industry, production will increase to 53.4 million especially the refining sector. In addition, tonnes in 2012/2013 as compared to For the 2012/2013 period, the cumulative the Government has also abolished the 50.6 million tonnes in the previous period, demand of palm oil and palm kernel oil CPO duty free scheme. most of this growth originating from is projected to rise by 3.5 million tonnes Indonesia. Global production of the eight over the previous year to 57.7 million As part of the CPO supply management major vegetable oils is forecast at 156.6 tonnes. The palm portion of growth mechanism to stabilise the price of palm million tonnes for 2012/2013, an increase shall continue to dominate vegetable oil oil, the Government has reintroduced of one million tonnes from the previous consumption growth. Palm’s share is the replanting scheme. This involves year, the slowest pace of expansion in projected at 33% for food and 49.5% for the provision of a RM1,000 per hectare recent years. the industrial segment. incentive for smallholders and plantation owners to accelerate the replanting of Global consumption of the 8 major Despite the favourable forecast for palm oil, old and unproductive trees. The scheme vegetable oils for 2012/2013 is forecast CPO prices remain pressured amid high serves to cut down about 100,000 hectare to increase by 3.9% or 5.9 million tonnes supply with the possibility of a mini slump of old palms that will reduce palm oil to 155.8 million tonnes. Growth in the in palm oil prices for 2013. Although the production by 350,000 tonnes per year. food and feed use segment of 4.4 million base for supply and demand is expected The Government will also expedite the tonnes will account for the majority of to be strong, the price would not be implementation of the B5 Programme the total growth which is expected to growing at the same pace as in the last nationwide and introduce the 10% of come on the back of increasing few years. This can be attributed to the palm biodiesel blending (B10 Programme) consumption demand from China, India, strong soy crop in Brazil and the strong for the non-subsidised sectors. The Indonesia and the US. Vegetable oil production of palm oil both in Malaysia nationwide implementation of the B10 use in the industrial segment (including and Indonesia resulting in high stocks of Programme will further assist the removal the usage for biodiesel production) palm oil. of crude palm oil from the market place is predicted to grow by 1.5 million and strengthen CPO prices. tonnes for the year. The growth in the On the Malaysian front, the Government industrial segment looks achievable has implemented measures to enhance We expect a positive impact from 2012’s despite the prevailing macroeconomic the competitiveness of the oil palm acquisition of JCorp’s plantation assets headwinds. Recent developments such industry, including restructuring the by way of higher volumes of FFB, CPO as the reinstatement of the biodiesel export duty on CPO beginning 1 January and PK in 2013. We have completed blenders credit in the USA, as well as the 2013. Under this structure, the effective the acquisition of 5 estates from JCorp adoption of higher biodiesel blends for export duty rate on CPO is between 4.5% and have started accruing production transportation fuel in Malaysia requiring and 8.5%, a significant reduction from and earnings from these estates since annual report 2012 93
PLANTATION SEGMENT REVIEW
In 2012, NBPOL witnessed the The Group is also constructing a new successful commissioning of its dedicated R&D establishment to house biogas plants in West New Britain, genomic research. This investment Kumbango and Mosa which for the future is being taken because started generating electricity in of the many advantages of working July and August respectively. The independently on genomic research. estimated combined diesel reduction This includes, among others, more in the first year of operation will be 3.4 accurate results when the legitimacy of million litres which represents a saving of the offspring can be confirmed through PGK9.2 million. The final commissioning DNA finger printing. Fruit segregation of the biogas generators and the can also be made at the nursery stage connection to the PNG Power grid was rather than having to wait until fruit completed in mid-December and a total of bearing as in the case of conventional 244,307 kW/h of electricity has been breeding methods. This also allows exported since connection. NBPOL research methodologies and progress to SECTION 4 is continuing to develop plans for the be kept confidential until they are ready construction of more biogas capture to be published. The goal of the research January 2012 for Siang and Sg Papan plants in Higaturu, Milne Bay and West is to develop biotechnological tools Estates, whereas for Estates of Mungka, New Britain. to support and complement our crop Kemedak and Palong, the accruing of improvement and agronomic research production and earnings began in June The industry is placing more emphasis programme, which encompasses oil 2012. on the study of microbes and focusing palm breeding, tissue culture, pests and on a back-to-basics and balanced diseases, as well as agronomy. ecology. In view of the importance of The impact of these acquisitions will lead these developments, the Group has to a marginal increase in FFB production in planned for a microbiology lab to be 2013 by about 2% due to less favourable incorporated into the new R&D complex. “The projected FFB palms age profile comprising higher It is hoped this will help accelerate in- yield for 2013 is percentage of immature and young mature depth studies on beneficial microbes areas (43.96%) and old mature areas 19.74 tonnes per and other microbes that are of economic (14.45%). The projected FFB yield for importance to the industry. mature hectare with 2013 is 19.74 tonnes per mature hectare with an estimated cost of production of an estimated cost of Following Kulim’s establishment of RM216 per tonne of FFB or RM4,522 its own biocompost plants, we now production of per hectare. OER and KER, inclusive of have the ability to further enhance RM216 per tonne of the new acquisition areas, are targeted biocompost into value added products FFB or RM4,522 at 20.56% and 5.69% respectively, whilst that cater not only for the Group’s needs the estimated milling cost is RM41 per but which can also be marketed to per hectare.” tonne FFB processed. interested parties.
The labour supply for 2013 is expected With oil palm planting going into the to be stable following the continuing third and fourth generations there is a government policy to allow plantation continuous need to study the optimum groups to bring in foreign workers, nutrient requirements of palms. To this especially harvesters. The Group will end, the Group is further exploring continue to ramp up mechanisation the benefits of biofertilisers as well as initiatives to improve productivity whilst pursuing studies on cost-effective but improving workers’ income. On top of safer pesticides as well as improved this, we will work towards providing better IPM methods. We also continue to housing amenities, sports and recreational undertake R&D activities to combat activities to encourage foreign labour major diseases, a major concern, as to work harder and stay longer with the well as explore innovations in field Group. mechanisation. 94 Kulim (Malaysia) Berhad (23370-V) SEGMENT REVIEW INTRAPRENEUR VENTURES
INTRODUCTION
The intrapreneurship concept was first introduced to Kulim in 2005 as a novel market-driven approach to develop entrepreneurial talent amongst the Group’s employees. The acquisition of Sindora in 2008 brought in a well-seasoned management team that further strengthened the Group’s involvement in intrapreneurship. The Intrapreneur Ventures Division serves to add diverse revenue streams to the
SECTION 4 Group by nurturing businesses that will evolve into future growth engines for Kulim. The strategy going forward is to provide the seed funding, mentoring and operational support necessary to give each venture the greatest chance for success.
“This higher operating CORPORATE DEVELOPMENTS
profit was mainly During the year under review, the Group has identified several companies for driven by a 57% disposal. These disposals were in line with Kulim’s business exit strategy under its improvement in Intrapreneur Ventures (“IV”) to maximise returns and mitigate risks. The following disposals were undertaken or embarked upon in 2012: EATech’s operating profit owing to Gain on new contracts Company Proceeds disposal Status secured for its new Completed - Metro Parking (M) Sdn Bhd September tugboats as well (“Metro”) RM13.5 million RM8.02 million 2012 as the IMPROVED Expected performance of the Pro Office Solutions Sdn RM1.16 million completion - MT Nautica Muar, its Bhd (“POS”) RM6.75 million (expected) 1H2013 40,000 dwt single-hull RM80.73 million (proforma Completed - tanker.” Orkim Sdn Bhd (“Orkim”) RM110 million December 2012) April 2013 annual report 2012 95
INTRAPRENEUR VENTURES SEGMENT REVIEW SECTION 4
FINANCIAL PERFORMANCE However, this revenue growth was offset (“MTN Muar”), its 40,000 dwt single- by the lower revenue recorded by other hull tanker. In the previous year, MTN The Group’s IV Division recorded a IV Division companies. Sindora Timber Muar had recorded a loss due to marginal 9.2% decrease in revenue from Sdn Bhd (“STSB”) recorded a decrease its being non-operational. In 2012, RM184.93 million in 2011 to RM167.98 in revenue on the back of reduced EATech secured a short-term contract million in 2012. This performance was latex price; Microwell Bio Solutions to utilise the MTN Muar for floating attributable mainly to the growth of the Sdn Bhd (“Microwell”) registered lower storage purposes and managed to shipping services segment under E.A. revenue as a result of a change in sales bring about break-even position. Technique (M) Sdn Bhd (“EATech”). In direction to focus on a lower-priced The IV Division’s other companies, 2012, EATech recorded a 7% increase product, Nutrient Package (Gro Agro EBSB and EESB, too recorded profit in revenue turning in RM102.72 million 1 and 2); and Extreme Edge Sdn Bhd growth. in revenue as compared to RM96.06 (“EESB”) turned in lower revenue due million in revenue in 2011. This was to the termination of less profitable The other start-ups within the IV mainly attributable to the new 10-year contracts. Division’s portfolio are at the early contracts secured for 4 of its new stage investment phase, building harbour tugboats providing services The year saw the IV Division’s operating prototypes as well as gathering at the Sungai Udang Port in Melaka. profit jumping 29.3% from RM21.90 feedback and data from their customers In addition, Edaran Badang Sdn Bhd million in 2011 to RM30.92 million in to build sustainable businesses. (“EBSB”) recorded 14% growth in 2012. This higher operating profit was The Group will continue to identify revenue, which came on the back of mainly driven by a 57% improvement promising start-ups for incubation its successful penetration into Sabah in EATech’s operating profit owing and will accord them access to the as well as increased sales of its higher- to new contracts secured for its new resources needed to grow, prosper, priced multipurpose Mechanical Buffalo tugboats as well as the improved improve earnings, add value and vehicles over the previous year’s. performance of the MT Nautica Muar maximise returns to shareholders. 96 Kulim (Malaysia) Berhad (23370-V)
SEGMENT REVIEW INTRAPRENEUR VENTURES SECTION 4
OPERATIONAL REVIEW AND markets and undertakes long-term Today, EATech has a total carrying PROSPECT OF SELECTED KEY charter contracts for the transportation capacity of more than 84,000 dwt. This COMPANIES of clean petroleum products and marks an exponential increase from upstream exploration support for oil the 8 earlier vessels with a combined E.A. Technique (M) Sdn Bhd majors. 14,500-dwt carrying capacity when Our involvement in the shipping Sindora originally acquired EATech in business through EATech and our The shipping business started to late 2006. The biggest vessel owned by then subsidiary, Orkim, has seen the flourish in 2011 when EATech took the Group, the 40,000 dwt MTN Muar is Group emerge as a key player in the delivery of 4 newly constructed currently undergoing refurbishment and maritime sector. We were once the harbour tug boats for commission will be converted into a floating storage second biggest shipping company under long-term charter contracts. In tanker. It is expected to commence in Malaysia in the clean petroleum 2012, EATech was awarded contracts operations in June 2013. With this product tanker category until the Group disposed of Orkim in early 2013. Going to provide floating storage tanker conversion, the Group expects the forward, the Group’s involvement in the services for marginal fields in East vessel to substantially improve its shipping services will be driven solely Malaysia, a significant achievement financial performance from when it was by EATech. for this young company. By the end of just undertaking spot charters in 2011. 2012, the Group (via EATech) owned Acquired in 2006, EATech has a 21 vessels comprising 7 oil tankers, 5 The launch of Petronas Refinery and paid-up capital of RM44.04 million harbour tug boats, 5 mooring boats, 2 Petrochemical Integrated Development with Sindora, Kulim’s wholly-owned fast crew boats and 2 utility tug boats. or RAPID Project in Pengerang, Johor subsidiary, holding 51% equity in the There are also another 2 harbour tug is expected to open up a host of new company. EATech operates in niche boats on charter by EATech. opportunities for EATech. annual report 2012 97
INTRAPRENEUR VENTURES SEGMENT REVIEW
MIT Insurance Brokers Sdn Bhd MIT Insurance Brokers Sdn Bhd (“MIT”) is a home-grown enterprise that has evolved into a market player of substance with the resources and ability to deliver quality insurance solutions. MIT acts as a confidential retail broker and risk consultant to its clients ensuring that their insurance needs are carefully and systematically identified and managed in line with the demands of the business world.
The company’s mission is to be a
targeted resource centre in the area of SECTION 4 risk management and insurance. MIT has achieved this over the years by continuously upgrading the competency levels of its personnel as well as drawing in external technical support resources both locally and internationally. Being an established brand in the local market and backed by established shareholders, MIT’s clients have recognised MIT as a capable and competitive insurance broker which forges strong client relationships.
In 2012, the total premiums (comprising direct premiums and reinsurance premiums) transacted by MIT increased to RM39 million as compared to the RM34 million achieved in 2011. In tandem with the increase in premiums placement, MIT’s PBT increased by 24.34% to RM1.23 million. The average margin was 29.24% (2011: 19.75%) when compared with the combined premiums transacted. Given the increasingly volatile and complex nature of today’s business Aside from establishing partnership environment, MIT is expected to play programmes with selected local a more prominent role in providing underwriters to promote its products and advice/consultancy and value added increase its commission, MIT is also in the services to clients to help them grow midst of developing strong partnership their businesses. The outlook for 2013 alliances or foreign equity partnerships. remains bullish for MIT despite the many The year 2012 saw the company being challenges the company faces. MIT’s appointed by 2 marine hull owners and it revenue is expected to grow beyond also had some success in smaller oil and 2013 in tandem with the country’s gas industry contracts. strong economic fundamentals. 98 Kulim (Malaysia) Berhad (23370-V)
SEGMENT REVIEW
Extreme Edge Sdn Bhd Edaran Badang Sdn Bhd sales from higher-priced Mechanical Incorporated on 1 January 2010, EBSB is principally involved in the Buffalo. During the year, EBSB also EESB has set its sights on becoming a manufacture and selling of a motorised received sizeable new orders for its premier information technology solution three-wheeler named the Mechanical BADANG from Sime Darby Plantation, integrator and business performance Buffalo. The vehicle, designed for Pertubuhan Pembangunan Negeri enhancer despite the fact that it faces the mechanised evacuation of FFB Perak, Tradewinds Plantation and Far some established competitors in on oil palm estates, is sold under the East Plantation. Malaysia’s ICT business landscape. trademark “BADANG”. The company EESB serves as a one-stop centre also sells a motorised crawler suitable Currently the State of Sabah makes up that provides various solutions from for soft peat terrain. approximately 28% of the total oil palm hardware to applications. Its planted area in Malaysia. We anticipate services include networking and In the year under review, EBSB that EBSB will continue to capitalise communications, backup, recovery, registered a 14% increase in revenue on the untapped business opportunity and maintenance of hardware. The from RM24.42 million in 2011 to in Sabah even as more areas are company also offers website design, RM27.74 million in 2012. The company opened up. With more than 20 years of SECTION 4 development, hosting and management, achieved a PBT of RM1.97 million in experience in the oil palm industry to its advisory service and project 2012 as compared to PBT of RM1.84 name and the strong reputation of the management services. The EESB team million in the preceding year. The BADANG brand behind the company, comprises competent system engineers, increase in revenue and profit was EBSB is expected to reinforce its market application consultants, system analysts, driven by EESB’s successful penetration position among industry players who application programmers and technical into Sabah as well as increased value versatility and top-notch quality. support engineers.
In the year under review, EESB registered lower revenue of RM4.9 million as compared to revenue of RM6.9 million in 2011. This revenue drop of 29.4% was mainly due to the termination of less-profitable contracts in the Klang Valley. Despite this drop, EESB’s PBT rose to RM1.09 million in comparison to RM0.73 million in 2011, demonstrating its ability to identify and pursue more profitable projects as well as ensure better operating efficiencies. Going forward, EESB will set its sights on greater specialisation of its products and services. annual report 2012 99
SEGMENT REVIEW SECTION 4
Around 29% of our workforce is women and their contributions to the Company is indispensable.
Their strength and sacrifices inspire us, their views enrich us. Going forward, they will play an ever growing part and influence for the Group.
WOW indeed. 100 Kulim (Malaysia) Berhad (23370-V) SUSTAINABILITY Part I : Kulim’s Sustainability in Context
POLICY FRAMEWORK We integrate our business strategy with sustainability through a commitment to People, Planet and Profits (“3Ps”). The 3Ps govern how we create sustainable value for all our stakeholders. To meet our goals and deliver the sustainable returns expected of us, we embrace a deep commitment towards building a fair, ethical and responsible company. This sits at the heart of our sustainability approach and structures our relationships with our stakeholders and the operating environment. SECTION 5 annual report 2012 101
Part I : Kulim’s Sustainability in Context SUSTAINABILITY
CORPORATE VISION & MISSION
SUSTAINABILITY POLICY
PEOPLE PLANET PROFIT People Policy Environmental Policy Business Policy Core Labour Standards Malaysian Palm Oil Association Ethics Policy Osh Policy Environmental Charter Social Contributions Workplace Drug Policy Profits With Responsibility Hiv/Aids Policy Fraud Policy Sexual Harrassment Policy Quality Policies for Estates and Mills Grievance Procedure Production Charter (30:30) SECTION 5
POLICY, STRATEGY AND Kulim will maintain a safe, healthy and cultural heritage and customary land use, MANAGEMENT SYSTEM viable working environment and conduct and the capability of the land to sustain all operations in a manner consistent with the proposed agricultural activities. POLICY its SMS framework. Kulim will operate in Kulim embraces the principles of compliance with all applicable national Kulim upholds the principles of free, prior sustainable development and the and international legislation and ensure and informed consent and undertakes to Company’s goal is to ensure that future that long-term economic viability does use this principle in all negotiations and generations will continue to benefit from not compromise its ethical and business interactions with stakeholders. today’s actions. policies. Kulim will continue to be a responsible Kulim defines sustainable development Kulim is committed to investing in the corporate citizen, making positive as encompassing social responsibility, development as well as advancement contribution to the communities within resource stewardship, appropriate of its employees and will, through which it operates. environmental control and the capacity training improve knowledge, skills to produce efficiently. The goal of and competency, in order to enhance Kulim conducts its operations in a sustainable development will be performance, processes and career. transparent manner and complies with achieved by balancing the considerations all relevant legislation in the countries it for People, Planet and Profit in all Kulim is committed to ensuring that land operates in. management decisions and operations. management practices are consistent with the long-term productivity of the By implementing the principles of the Kulim is acutely conscious of its varied resource, so that the land remains RSPO, Kulim is adopting a planned responsibilities in respect to People, suitable for agricultural use. approach to achieve the balance between Planet and Profit. Kulim is committed People, Planet and Profit. Kulim believes to continuous improvement of its Kulim will not undertake new that this approach is the safest, most performance. The implementation of developments in areas of primary efficient and socially and environmentally a Sustainable Management System forest or on land containing one or responsible way of operating sustainably. (“SMS”) will provide the framework to more High Conservation Value (“HCV”). realise these goals. The SMS will be Land development undertaken by wholly based on the principles and the Company takes into account the criteria set out by the RSPO. maintenance of biodiversity, protection of 102 Kulim (Malaysia) Berhad (23370-V)
SUSTAINABILITY Part I : Kulim’s Sustainability in Context
People Profit We prioritise our issues by developing In order to ensure and establish a In order to remain competitive whilst a “materiality matrix”. This approach sustainable social development in adhering to sustainable practices, combines the findings from our Kulim that addresses social stability, corporate efficiency through compliance stakeholder engagements with our security and equality, various social efforts will enable Kulim to deliver value organisational priorities. In 2008 our senior considerations are factored in, such as: to all our stakeholders - shareholders, management team developed the matrix partners, employees and the public. based on the prevailing stakeholders’ • Opportunities for education and concerns, complemented by other training; Our corporate philosophy enables us to management tools such as social impact provide: assessments and regulatory frameworks. • Health and availability of medical We have since updated the “materiality services; • Commitment to transparency; matrix” to reflect current realities and • Human rights and equal opportunities; concerns in this Annual Report. • Compliance with applicable laws and • Crime and social disorder levels; and regulations; and The top 3 material issues that are • Housing provisions and quality. • Commitment to long-term economic significant to our stakeholders and our and financial viability. organisation are: Planet In ensuring environmental sustainability, Strategy • the use of chemicals such as paraquat, various factors are assessed and Sustainability is central to our business herbicides and pesticides in our deliberated. Issues that need to be strategy and stakeholders’ concerns are estates; SECTION 5 addressed and highlighted include: key inputs in mapping out the corporate • the amount of water used for our strategy. We believe active stakeholder estates and mills; and • Commitment to continuous improvement engagement will highlight potential risks in key areas of activity; or opportunities for our business. • health and safety standards in the workplace. • Infrastructure analysis to ensure proper, sustainable procedures are MATERIALITY MATRIX implemented; • Environmental responsibility and conservation of natural resources and RSPO premium Chemicals biodiversity; Ethnic diversity Water Environment rehabilitation Health and safety • Life cycle analysis to quantify the use Biodiversity of materials and energy as well as Waste management Worker unions environmental interaction of products Climate change and processes; Foreign workers • Responsible development of new plantings; Gender diversity Employee development Agricultural productivity Talent attraction • Research & Development (“R&D”) - Smallholder product design, process improvement Sand mining Community and workers’ lives and recycling methods for greater Air pollution sustainability; Pratices in the marketplace • Use of appropriate best practices by growers and millers; and Good Agricultural Practices High Stakeholder Concerns / Support Company Values • Responsible consideration of employees and of individuals and communities affected by plantations (growers) and mills. Business Risk / Opportunity annual report 2012 103
Part I : Kulim’s Sustainability in Context SUSTAINABILITY
Management Systems Indicator 4.4.6 with 10 observations/ oil companies RSPO-certified globally, Certification - RSPO opportunities for improvement identified we continue to manage our social and Our overall sustainability management during the assessment. The non- environmental risks in accordance with system is guided by the Principle and conformity has been addressed through the guidelines developed by the RSPO. Criteria (“P&C”) developed by the multi- the usual communication of Corrective For us, the adaptation of RSPO P&C stakeholder initiative, the RSPO. The Action Plan (“CAP”) to respective is also connected to Islamic teachings standard’s international credibility and operating units involved. which focus on value creation, commitment to stakeholder inclusion sustainable use of biodiversity and makes the certification credible and For 2013, all operating units of engagement of stakeholders. robust, though there are always the Company will undergo the full opportunities for improvement. We reassessment of RSPO certification. Sustainability and Quality Council believe that this standard represents the With the upcoming review of RSPO In 2010, we consolidated the structure most responsible way to grow oil palm. P&C, we have well prepared for both, of our Corporate Responsibility (“CR”) the reassessment and implementation governance through the launch of The RSPO P&C provides a robust of the new P&C. Challenges have the Sustainability and Quality Council framework to articulate issues been identified in the area of P4 (Use (“SQC”). The role of the SQC is to fundamental to us. These issues include of Appropriate Best Practices by oversee our CR strategy and activities stakeholder engagement and value Growers and Millers); P5 (Environmental on behalf of the Board. creation for the larger society. Responsibility and Conservation of Natural Resources and Biodiversity); The SQC has established a Company- We achieved the RSPO certification for and P7 (Responsible Development of wide data collection system for SECTION 5 all our estates in January 2009 and were New Planting). monitoring and reporting against agreed one of the first palm oil companies to metrics. The Council also ensures that strive for the RSPO certification globally. As part of a bigger supply chain that our day-to-day business operations Our fourth annual surveillance audit extends to the end consumer, we are respond to the opportunities and avoid in November 2012 included the newly working with our customers, mainly the risks posed by sustainability issues. acquired Palong Cocoa Palm Oil Mill and the refineries, to implement the RSPO To do this, the SQC challenges the its supply base namely estates of Palong, mechanism for traceability - the Mass Management to assess and control Mungka and Kemedak. Non-conformity Balance and the Green Palm Book and risks while developing programmes to was assigned to Minor Compliance Claim system. As one of the first few palm capitalise on opportunities. The SQC uses targets to monitor the performance in achieving these tasks and co- ordinates sustainability initiatives across departments.
The SQC has prioritised employee engagement, including HIV and sexual harassment awareness, work-life balance and capacity building as areas of priority. This is based on the belief that employees at all levels form the backbone of our Company and there is a need to embed a sense of ownership amongst them. 104 Kulim (Malaysia) Berhad (23370-V)
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Audits and Assessments We take pride in our integrated management and agricultural practices. The framework is set in motion by systematic guidelines and operating procedures. Our Internal Audit Department oversees and reviews all processes and procedures.
Our environmental performance is guided by the ISO 14001 framework. 1 of our mills and 2 of our estates in Malaysia have been certified to this standard. Under the ISO 14001 framework, mills and estates are to implement environmental policies with third party certification. The framework was also used as a basis for implementing the RSPO Principles and Criteria.
Our social impact assessments are framed around the SA8000 standard - the leading international standard on labour conditions. We have also adopted the methodologies of the Occupational Safety and Health Administration (“OSHA”) to measure and manage our health and safety performance as well as using the human rights-based concept of Free, Prior and Informed Consent (“FPIC”) in our dealings with communities and land rights.
We carry out ongoing Social Impact Assessments (“SIA”) based on Principle 6 of the RSPO Principles and Criteria as well as SA8000 (established by Social Accountability International). SIA incorporates interviews with workers, dependents and local communities, and forms the basis of improvement plans for all areas identified as common complaints, or areas which are considered high risk in terms of impact or legal compliance. SECTION 5 annual report 2012 105
Part I : Kulim’s Sustainability in Context SUSTAINABILITY
International Standards In addition to the RSPO P&C, we adhere to other frameworks which form the basis of the current sustainability management systems. These frameworks include ISO14001 environmental standard, SA8000 Labour Standards.
On the environmental front, we have 1 mill and 2 estates in Malaysia which have attained the ISO 14001 certification. The ISO 14001 provides a framework for a strategic approach to our environmental policy, plans and actions. As for biodiversity-related framework, while there is no presence of HCV in our estates, we have developed HCV management plans and toolkits with the help of our partners, to manage biodiversity issues such as human-wildlife conflicts due to our proximity to national parks.
As for our social issues, our social impact assessments for the local communities adopt the SA8000 framework, a global social accountability standard for decent working conditions. We have also adopted methodologies of the OSHA to measure and manage our health and safety performance. We embrace the concept of FPIC in our dealings with communities and land rights, which is based on the principle of human rights.
Kulim has successfully undergone the audit and achieved the ISCC in January 2013, for both our plantation and biodiesel plant in Tanjung Langsat, Johor. It is one of the certification standards for biomass and bioenergy which meets Europe’s Renewable Energy Directive. The ISCC would enable us an access to the EU market and improve the marketability of our products. SECTION 5 106 Kulim (Malaysia) Berhad (23370-V)
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Stakeholders Engagement
Stakeholder engagement is crucial to sustainability and organisational success. Stakeholder engagement enhances accountability by allowing an organisation to identify, understand and respond to sustainability issues - a valuable tool to better manage our risks and identify opportunities. It is also an excellent avenue to tap into expertise and existing networks. Most importantly, it enables us to develop trust and transparency in our relationship with the stakeholders.
Stakeholder Group Issue Method and Frequency Outcome
Employees a. Talent retention Ongoing dialogues, annual Feedback from employee climate survey b. Employee development surveys and workshops was incorporated into our strategies for employee retention and attraction.
Workers a. Labour policy and workers’ lives Annual Social Impact Improved workers’ welfare and housing. b. Occupational Health and Safety Assessments (“SIA”) and Created a safe working environment. quarterly OSH committee meeting
Non- a. Biodiversity loss Partnerships, annual multi- a. Tree Pledge for Wild Asia Natural governmental b. Climate change stakeholder forums and ongoing Corridor programme organisations c. Environment rehabilitation joint projects b. Established the Kulim Wildlife d. Good Agricultural Practices Defenders to prevent poaching and at Partner of Johor Wildlife the same time providing educational Conservation Project (“JWCP”) support for wildlife conservation SECTION 5 c. Human/wildlife conflict management Member of the Malaysian Nature project with Wildlife Conservation Society Society (“WCS”) programme
Investment Investor relation initiatives and drives Ongoing meetings, road shows Incorporated sustainability issues and community and conference calls benefits derived into our investor relations communication strategy.
Industry bodies a. Chemicals Annual multi-stakeholder initiative Kulim was one of the first company to be b. Water usage - RSPO certified by RSPO globally. c. Occupational Health and Safety d. Climate change e. Biodiversity loss f. Community and workers’ lives g. Good Agricultural Practices
Outgrowers Commitment to certify 100% of the Annual SIA, public meetings, Potential and interested smallholders crops processed by our mills workshops, individual meetings are being identified for awareness programme and potential certification in the future.
Communities Develop good relationship with Annual SIA, Annual Stakeholder Good relationship with external communities Meeting stakeholder/communities i.e through Tijarah Ramadhan.
Customers a. Supply chain certification Ongoing joint ventures and Our Certified Sustainable Palm Oil b. Customer survey meetings - conducted twice (“CSPO”) is sold to our buyers via the yearly by mill Mass Balance and Green Palm Book and Claim traceability mechanisms. annual report 2012 107
Part I : Kulim’s Sustainability in Context SUSTAINABILITY
Commitments and Targets - Malaysia Plantation
Target Year 2012 Target (Year-end) Status COMMENTS People Establish a gender committee to promote 2009 Achieved diversity and address gender-related issues Rollout of identity card programme to all 2011 Achieved Via the Government’s 6P programme. foreign workers 100% of external fruit to be certified 2013 Not achieved Target under review. Revised programme and action plan to be elaborated in Sustainability Report 2012/2013. Reduce Lost Time Accident rate to 10 2012* Achieved Reduce severity rate to 3.5 2012* Achieved Zero fatalities 2012* Not Achieved 1 on-the-job fatality. No breaches of excessive overtime 2012* Not achieved 1 case each at Sindora, Tereh and Palong Cocoa Palm Oil Mills. Reminders sent to all Operating Units and progress is directly monitored by the Management. Assist Johor Corporation-owned estates in 2010 Achieved achieving RSPO certification Planet Reduce herbicide usage by 10% (base year 2020 In progress Targets were achieved as at 31 December 2011. However the
FY2009) acquisition of JCorp’s estates which was mainly completed SECTION 5 Reduce paraquat usage by 10% (base year 2020 In progress in 2012 had caused an increase in usage of herbicide and FY2009) paraquat by 21% and 75% respectively, due to large immature areas and accelerated replanting programme.
Revised programme and action plan to be elaborated in Sustainability Report 2012/2013. Reduce water usage to 0.7 tonnes per tonne 2012* Not achieved Water usage increased by 24% due to longer boiler running of FFB (base year FY2009) hours to reduce diesel consumption.
Revised target and programme to be elaborated in Sustainability Report 2012/2013. CDM projects launched for all mills 2011 Not achieved Delayed completion due to external factors - mainly the depressed carbon markets which made previous arrangements not viable.
Revised programme and action plan to be elaborated in Sustainability Report 2012/2013.
CO2 equivalents reduced by 90% 2011 Not achieved Revised programme and action plan to be elaborated in the carbon footprint report targeted to be published by 4th quarter 2013. No increase in peat development 2012* Achieved No development in land containing one or 2012* Achieved more high conservation values No penalties for environment-related incidents 2012* Achieved Carbon footprint report for the whole Group 2013 In progress Target publication by 4th quarter 2013. Profit Achieve average FFB yield per hectare of 30 2013 In progress Target under review due to the acquisition of JCorp’s estates. tonnes Achieve average combined palm product 2013 In progress Revised programme and action plan to be elaborated in extraction rate of 30% Sustainability Report 2012/2013. ISCC certification 2013 Achieved *On-going annual target 108 Kulim (Malaysia) Berhad (23370-V) SUSTAINABILITY Part II : Environmental Performance
Protecting and Conserving Biodiversity
In 2008, we commissioned detailed surveys to assess the state of the flora and fauna present in and around our estates. Since our last report, the majority of the IUCN Red-listed mammals are in a more precarious state, except for the Southern Pig-tailed Macaque. We recognise our critical role to address this issue, as our plantation operation in Johor borders an important national park, the Endau-Rompin National Park in the southern part of Peninsular Malaysia. This is factored into the strategy for our biodiversity initiatives. SECTION 5 annual report 2012 109
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Our broad approach is underlined by the precautionary principle for unplanted areas, complemented by HCV management tools. Our strategy for biodiversity is largely aimed at enhancing or improving biodiverse areas or mitigating the negative impacts on biodiversity. We are strengthening our internal monitoring and control mechanisms, as well as working very closely with our Non- Governmental Organisation (“NGO”) partners to provide the additional resources.
PRIMARY Kulim wildlife Defender to FOREST safeguard against illegal poaching
Buffer zone to mitigate negative impacts from agricultural practices
OIL SECTION 5 PALM
Initiatives to mitigate negative impacts Enhance remaining forest to the environment by our agricultural patches within our estates practices, especially to minimise human-animal conflict
Utilising HCV tools Enhancing potential Mitigating impacts In 2011, we commissioned a birds and biodiverse areas We have several initiatives to mitigate our bats survey on major water bodies in Although our estates do not contain HCVs, negative impacts on the environment, respective recommended estates by the we have started a process of planting trees especially in view of the updated IUCN Rapid Biodiversity Assessment (“RBA”) to enhance the small areas of vegetation Red List, including working on managing Report. The survey is mainly to identify within our estates. All remaining forested the human-wildlife conflict. All our estates and understand the areas of high interest areas within the estates are managed are required to provide a regular update for the seasonal East Asian - Australasian for development into full-fledged HCV on the species found in and around the Flyway migratory route as the area may forests or preparation for biological estates, and track incidents of wildlife play an important role for these migratory corridors. All estates have to identify and encroachment, particularly elephants. birds’ species that has implications to our demarcate their buffer zone area with replanting planning and management. white and blue peg stands, especially in We have buffer zones around major On the other hand, bats in plantations are the areas designated for replanting. As water bodies in or around the estates and normally potential pollinator agent and at 31 December 2012, inclusive of the adjacent to forest reserves. We conduct biological insect controller, at the same newly-acquired estates from JCorp, we regular Rapid Biodiversity Monitoring its existence is an indicator for forest have 84 hectares of buffer zone and 66 in these buffer zones. All the estate health around our plantation. hectares of jungle patch in our estates. managers have to update their buffer 110 Kulim (Malaysia) Berhad (23370-V)
SUSTAINABILITY Part II : ENVIRONMENTAL PERFORMANCE
zone mapping twice yearly and report particular, elephants, at Sungai Tawing We have also worked with Wild Asia on the any encroachment for further action. Estate and recently, Sindora Estate. Natural Corridor Initiative, namely the Tree Host Pledge for period 2008-2010. This To minimise soil erosion, we re-aligned We work with WCS to protect the areas initiative aims to provide wildlife or green our roads and constructed silt traps in with HCVs adjacent to our estates too. corridors to link natural habitats separated our drains. We made sure that there are Together with the Johor National Parks by human-modified landscapes, thereby buffer zones around the major water Corporation, the Wildlife Department, increasing the functional space for wildlife. bodies and that replanting is done in the Forestry Department and the police stages, with never more than one side force, the Johor Wildlife Conservation Towards end-2010, Kulim has initiated exposed to the replanting process at any Project aims to eliminate poaching its own tree-planting programme, named given time. through intervention and enforcement, Infaq 1 Warisan. The first Infaq 1 Warisan by protecting the boundary of the forest took place at Siang Estate, Kota Tinggi, Within the estates, we have an reserves adjacent to our estates. These Johor in September 2010. This programme Environmental Policy that prohibits forest reserves are linked to the national serves as a channel for Kulim employees hunting, fishing and taking of fauna parks. and the public to contribute into greening within the estate and adjacent areas. the earth by planting trees and encourage According to auditor report on our fourth Selected security guards are trained biodiversity. It is an annual event, which RSPO surveillance in November 2012, in techniques for vehicle inspections was subsequently held at Mungka Estate, we are pleased that our employees have and the use of GPS (Global Positioning Segamat in 2011 and Siang Estate hosted demonstrated commendable level of System) for recording the locations its second Infaq 1 Warisan in September awareness with regards to Kulim’s efforts of animal sightings and poaching 2012. SECTION 5 towards environmental initiatives. incidents during patrols. These security guards are known as Kulim As at 31 December 2012, there were Strengthening monitoring Wildlife Defenders (“KWD”) within the 1,711 trees planted under the programme and control Company. In February 2013, we are comprising more than 30 different species Since 2009, we have had in place an pleased to report that KWD has been of native trees, covering some 22 hectares environmental unit within the Quality and successfully registered as an NGO. of our estates. Sustainability Department to analyse wildlife data, published biodiversity bulletin and communicate with estates on outcomes and results of our studies on biodiversity. The unit also functions as a reference in any case of environmental issue with regards to environmental protection and control of pollution.
Working beyond our estates We understand that one company’s effort at mitigation is not enough; we need to push beyond our Company boundaries. As neighbours to the Endau-Rompin National Park and a few forest reserves, we work with Wildlife Conservation Society (“WCS”) Johor, Malaysia to mitigate human-wildlife conflicts, in annual report 2012 111
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Water Conservation usage is the main component of the total Moreover, we refrain from using synthetic Our updated materiality matrix has shown mill water usage. The initiatives to reduce fertilisers to avoid pollution from heavy that water usage in the estates and mills water usage include restricting the use of metals. We utilise organic fertilisers such and the risk of water contamination water for cleaning mill floors. As the main as Empty Fruit Brunch (“EFB”) produced by chemicals continued to be the top source of water for the mills comes from after milling, whenever possible. Another issues raised by our stakeholders. local rivers, the continued reduction in example of an organic fertiliser is the Palm Clean water is critical to our business. water usage can reduce our reliance on Oil Mill Effluent (“POME”) from our mills. Most importantly, it is fundamental to the local rivers. As for our estates, we do The effluent is first treated before being life on this planet. Our stakeholders are not use much water due to the abundant recycled as fertiliser for our fields, in a concerned that this precious resource rainfall in this region, which provides water process known as land application. The faces significant challenges in estates for the trees. Only a small amount of water effluent for land application is measured such as environmental degradation and is used to maintain our nurseries. by the level of Biological Oxygen Demand the impacts from climate change. We (“BOD”). The average BOD for our mills need to manage the use of water from the Preventing eroded soil particles has decreased substantially from 261 natural water bodies responsibly and to from getting into the natural ppm in 2011 to 85 ppm in 2012 mainly prevent chemicals and soil particles from waterways attributable to lower FFB processed in contaminating the water sources. There is still a risk of contamination in the 2012 which reduces the effluent produced natural waterways due to soil erosion. As and increase the retention time. Recycling Our mills recorded some increase in water part of our standard operating practice, of effluent carried out in effluent treatment usage from 0.94 tonnes per tonne FFB in we use fast-growing leguminous cover system also helps in reducing the BOD 2011 to 1.14 tonnes in 2012. This is mainly crops to prevent eroded soil particles level. due to lower FFB processed in 2012 with from polluting the water bodies, most
longer boiler running hours to reduce the importantly to prevent the erosion of the BOD LEVELS SECTION 5 consumption of diesel usage. Boiler water valuable topsoil. (ppm) 500
400
ESTATE 300 292 298 262 RIVER 261 BUFFER 200
100 85
0 2008 2009 2010 2011 2012
WATER USAGE PER TONNE FFB Preventive (Tonnes Per Tonne FFB)* measures 2.0 to stop soil erosion
1.5
1.14 1.07 1.02 1.0 0.92 0.94
Limit use of Groundwater 0.5 chemicals to prevent STREAM contamination of the groundwater 0 2008 2009 2010 2011 2012
* Mills only. Figures do not cover irrigation in estates and nurseries. 112 Kulim (Malaysia) Berhad (23370-V)
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USE OF HERBICIDE AND PARAQUAT Reducing usage of chemicals - involving some 12,000 hectares, of which (Active ingredients in litre/hectare) pesticides and herbicides 1,405 hectares has been replanted in Another source of potential waterway 2012. 0.07 2.0 contaminants is chemicals such as 2.00 pesticides and herbicides. We seek We ensure that those who handle, store, 0.06 1.62 1.5 actively to find biological alternatives for use, spread or dispose of any chemical 1.5 0.05 chemical pesticides, whenever possible. that could pollute the water, soil or air are 1.34 The Integrated Pest Management (“IPM”) aware of their responsibilities. We have 0.04 techniques are central to our operations, been collaborating with the Malaysian 1.0 as IPM techniques are responsible for Croplife and Public Health Association 0.03 1.19 managing the issues of pests, diseases, and Department of Agriculture (Malaysia), 0.02 weeds and invasive introduced species in an initiative known as ‘Empty Pesticides 0.5 and for minimising the use of pesticides. Containers Recycling Programme’, since 0.01 The use of chemical control is considered 2007. only as a last resort when all biological 0.00 0 2008 2009 2010 2011 2012 methods fail. Minimising solid waste All the solid waste output from our mills Paraquat Herbicide For example, barn owls have been is used in line with standard operating introduced at each estate to control the procedure within the industry. The EFB rat population. Paraquat is used in small are used as biocompost for our estates. doses to treat young palms.Our usage The fibre and shell are used as biomass of paraquat has increased from 0.03 in for our mills. Burning the biomass 2011 to 0.07 in 2012 (active ingredients generates a small amount of boiler ash,
SECTION 5 in litre per hectare), mainly due to the which can be used for reducing acidity increase in replanting area during the in soil. We do generate a small amount year. The accelerated replanting exercise of hazardous waste that is transported undertaken during the year was attributed to designated public facilities by an largely to the new acquisition from JCorp authorised agent.
FFB simplified overview of Water palm oil production
Diesel
Chemicals FIELD Fibre Shell EFB
Fertiliser Pesticides Effluent Boiler Ash annual report 2012 113
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Addressing Climate Change Issues and stakeholders. We hope to learn from applicable standards for the sustainable others and develop our own initiatives to palm oil industry. We believe that climate change provide inspiration and guidance to our constitutes the most significantindustry and beyond. CO2 EQUILAVENT PER TONNE FFB environmental threat to livelihoods and (Tonnes) the environment, and we believe that any We have also planned towards the 0.20 sustainable business must contribute publication of a full carbon footprint 0.19 0.19 0.19 to reducing Greenhouse Gas (“GHG”) report of our operations, targeted to be emissions. We support the initiative by published in 2013. 0.18 0.18 the Malaysian government to reduce GHG emissions by up to 40% by 2020, The following presents a system 0.17 as well as the recommendations of boundary of the GHG balance calculation 0.16 0.16 the RSPO GHG2 Working Group to and illustrates the sources of emissions, 0.16 incorporate GHG emission reduction based on the RSPO GHG calculator 0.15 requirements into the RSPO Principles for oil palm products, the RSPO GHG and Criteria. calculator is a harmonised framework 0.14 that is compatible with international 2008 2009 2010 2011 2012 We cannot tackle climate change alone, GHG accounting methodologies such so we will work in partnership with peers as IPCC and ISCC, which are the
Emissions due to land clearing (loss of stored carbon in the biomass) - Emission vary greatly, SECTION 5 Emissions avoided by excess energy production - depending on previous land use, but can Emission avoided as with the standard operating practices in the industry, constitute 60-70% of all emissions. As we have no plan by carbon Emission due to all power generation in the mills is based on biomass for expansion or land conversion, our operations do sequestration in fuel combustion. (shell and fibre), with only a small volume of diesel used not have a significant impact, although we do recognise palm biomass. for back-up generators. that any carbon footprint would take into account the original land type.
INPUT OUTPUT
Emissions due to the Allocation of transport and use of environmental burden fertilisers. between CPO and PK.
Emissions due to peatland cultivation - these represent a significant source of GHG emissions. we have a small portion of peat within the cultivated area - 1,380 hectares (slightly over 3% of our cultivated land). This land was cultivated in 1999 - 2002 and the total area has remained unchanged since. We are mindful of the need for a continued responsible management of this area, via effective water table management - the best way to prevent additional GHG emissions.
Emissions due to harvesting and collection of the fruits (fuel Emissions due to POME treatment, including possible avoidance through methane combustion during collection and transport of fruits to mills). capture - capturing the methane gas that arises from the mill effluent - a potent form of GHG - and to use the captured gas as fuel to generate electricity. We are working on methane capture projects to mitigate the production of methane by about 90%. These projects are classified as a Clean Development Mechanism (“CDM”) defined by the United Nations’ Kyoto Protocol. We have launched CDM projects at one of our mills. 114 Kulim (Malaysia) Berhad (23370-V) SUSTAINABILITY Part III : Social Performance
Labour Standards Our fundamental guiding principle is that all employees - including workers - must be treated equally, fairly and with respect. Our labour policy is based on the International Labour Organisation (“ILO”) Declaration on Fundamental Principles and Rights at Work, covering the core labour standards on the rights to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour as well as the elimination of discrimination in respect of employment and occupation.
A highly motivated and productive workforce is critical to our business. While our earlier work aimed at improving the welfare and housing of our workers, we are now focusing on end-of-career training and contributing to fulfilling, active and decent retirement for our workers. SECTION 5 annual report 2012 115
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Workers’ wage rate Although there is no legal minimum wage (for foreign workers) in Malaysia, there are recommended rates by the Malaysian Agricultural Producers Association (“MAPA”) and the National Union of Plantation Workers (“NUPW”).
During the year, revisions to the collective agreements of MAPA and NUPW for harvesters and field workers saw the workers’ wage rates increase by some 8% and 10% respectively. Eligible workers are also entitled to a special gratuitous payment of RM200 per month We have 5,084 full-time employees in No child labour to encourage attendance, productivity Malaysia as at 31 December 2012, of As a fundamental principle, we do not and reduce crop loss. which 4,285 (84.3%) are categorised as employ children or young people under workers. 16. Many of our workers reside with their Turnover rates families, and hence there are children The turnover rate for workers in 2012 was Our workers are predominantly from living in and around our estates. These 25% and 4.6 % in 2011, as compared to Indonesia and Bangladesh. children have access to schools and do 25.3% in 2010. SECTION 5 not work for us. Policy of non-discrimination As with 2010, the increase in turnover rate We recognise value of diversity and Workers’ union for 2012 coincided with the year where the benefits of a diverse workforce. We We recognise the workers’ rights to most of the contracts for our workers practice non-discrimination towards form unions. There is a local committee ended, involving repatriation of some women, ethnic or religious minorities consisting of union representatives 931 workers. These workers typically and foreign workers. We have equal elected by members at each mill and work on a 3-year, full-time contracts. pay for equal work for all field, office estate. While 1,337 employees (31.2%) Some of the workers will make use of the and management workers based on of our employees are union members window period between the end of the predefined grades. (as at 31 December 2012), all workers contract period until the start of another including foreign workers, are covered by contract, to go home for a longer period In addition, we have guidelines on HIV/ a collective bargaining agreement. of time, resulting in a higher turnover in AIDS. Workers who have the disease are the workforce. guaranteed confidentiality and retained in employment as long as they are healthy and able to perform. This policy is institutionalised in our Sustainability Handbook for employees and the Foreign Workers Handbook for our workers. During the induction of foreign workers, an interpreter (usually a senior worker from respective nationality) will explain the terms to the workers. 116 Kulim (Malaysia) Berhad (23370-V)
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Monitoring and control We conduct Internal Social Impact Assessments (“SIA”) based on the SA8000 Labour Standards to manage our social performance. This is also done as part of our commitment to the RSPO. The SIAs help us to identify corrective actions in areas where these standards were compromised.
As reported in our last year’s report, the presence of dogs and bats in the workers’ residential areas as well as lack of transport for workers to get to their work site, were the recorded issues via interview with our workers. We are pleased to report that these issues are currently being resolved with the installation of aluminium roofs designed to prevent bats from roosting. We have also procured workers’ trailers as a mode SECTION 5 of transport.
Other issues raised during our internal SIAs:
Overtime Our own assessments in the past have Housing incentive) which were previously paid to highlighted the social issue of overtime, In our previous report, we mentioned that them in one lump sum at the end of the which was also mentioned in our earlier we are upgrading housing facilities and year as compared to local workers who annual and sustainability reports. constructing new houses in accordance received the SGP on monthly basis. During peak crop season, mill workers to a 5-year plan (2008 - 2012) that tend to work long hours to ensure the covers housing, which is particularly The issue has been resolved when the fruits are processed before the quality focused on better sanitation, water and SGP now forms part of the minimum deteriorates. electricity facilities. In general, there are pay as gazetted by the Government 4 workers in 2-bedroom, 48-square- and will be paid to all workers as To manage the number of hours worked metre quarters or 3-bedroom quarters. monthly wages. in the interests of the workers, the departmental heads have to update the As of 31 December 2012, we have Employees Retention mill manager weekly on overtime and completed the upgrading work and adhere to the Department of Labour’s construction of new housing at Sindora A company without skilled management guidelines on monthly overtime limits. Palm Oil Mill, Sindora Estate and Rem talent will not be able to progress much Estate while housing facilities at Selai further. We need to prepare for a possible We regret to note that our target for zero Estate, Tereh Selatan Estate and Tereh shortage in skilled management talent overtime for this year was not achieved. Utara Estate are still under construction. in the oil palm plantation industry. A Our analysis has shown that the overtime skilled managerial workforce is crucial cases are due to isolated individuals, Special Gratuitous Payment (“SGP”) for our future growth. In 2012, we not the entire workforce. We are working Our foreign workers have registered worked on strengthening our talent with these individuals to see how we can their concerns with regards to the management programmes and instilling resolve the issue of overtime. payment of SGP (a productivity a performance-driven culture. annual report 2012 117
Part IiI : SOCIAL PERFORMANCE SUSTAINABILITY SECTION 5
We have 5,084 full-time employees and Incorporating feedback from workers by countries workers in Malaysia as at 31 December the Employee Climate Survey (As at 31 december 2012) 2012, of which 15.7% are categorised Based on our latest Employee Climate as employees, comprising of our staff Survey in 2010, it highlighted employees’ and management. concern with remuneration, especially relating to market competitiveness and Employee policy and guidelines fairness of the current salary scheme. In 24% Our fundamental guiding principle is response, we have conducted a salary that all employees must be treated benchmarking survey to review the equally, fairly and with respect. Our competitiveness of the salary scheme. 2% labour policy is based on the ILO These subsequently resulted in the 3% Declaration on Fundamental Principles revised salary scale and scheme of and Rights at Work, covering the service for executive and non-executive 71% core labour standards such as the level staff as well as security guards. With elimination of discrimination in respect the competitive remuneration package of employment and occupation. and additional benefits, we are looking These topics are covered in our Kulim to motivate our people and enhance their Sustainability Handbook. The handbook productivity. • Indonesian • Malaysian is distributed to all our employees and is translated into standard operating • Bangladeshi • Indian procedures, guidance documents and training throughout our operations. It is also available on our corporate website. 118 Kulim (Malaysia) Berhad (23370-V)
SUSTAINABILITY Part IiI : SOCIAL PERFORMANCE
Employee Development We spent about 3.3% of payroll cost on Planning Unit, Prime Minister’s Office. The Our employees are one of our key training in 2012 as compared 4.45% in programmes outlined are in accordance stakeholders for engagement. In our 2011, and achieved an average training to the SL1M requirement in developing engagement workshop, one of the man-day of 4.39 per employee, which and enhancing leadership amongst the issues highlighted was the lack of young exceeded our target of 3 man-days. In younger generations. people in the plantation business and addition, 3 employees received formal the problem of retaining talent. We will qualifications funded by Kulim, one of Annual gathering of employees need to prepare for a possible shortage whom was on an Executive Master of We recognise the need to provide in skilled management talent in the Business Administration Programme - platforms for employees at the estates, plantation industry when the current a programme collaborated with Johor mills and head office. batch of older employees retires. One of Corporation and UTM-SPACE. One of the main ways to retain young people, them was on Certificate in Occupational Starting December 2012, we have or commonly known as Gen Y, is to give Safety and Health whilst another was on organised series of Kulim Roundtable them room to develop their professional Professional Certification of Chartered Conference (“RTC”) in replacement of the skills and provide opportunities for Institute of Management Accountants Company’s annual employees’ gathering feedback. (“CIMA”). - Pedoman. The RTC is an open platform where executives can come together to We have training and development Developing leadership share and discuss opinions and ideas programmes for our employees for Gen We have a management trainee directly with the Managing Director. Y and generally for all levels. These programme, Strategic Enhanced Executive During the RTC sessions, former senior programmes are structured around formal Development System (“SEEDS”). The first employees also shared their experiences courses, seminars and workshops, which batch of management trainees in 2008 on best practices relevant in today’s are organised internally or by external has a retention rate of 77%, of which context. SECTION 5 consultants. The Human Resource 20 are still with the Company and are and Administration Department is working in different operating units. The Measuring performance responsible for coordinating the training, second batch of SEEDS was launched We are constantly communicating our which covers myriad subjects such as in December 2012 with 25 intakes performance appraisal system via road effective communication, sustainability, of fresh graduates from local higher shows within the Group’s operations. productivity, executive development learning institutions. The programme is The Performance Management System and induction programmes for new also in collaboration with Skim Latihan 1 (“PMS”) aims to measure individual employees. Malaysia (“SL1M”) under the Economic employee’s performance against critical annual report 2012 119
Part IiI : SOCIAL PERFORMANCE SUSTAINABILITY
targets, in particular Key Performance been taken to avoid such occurrences LOST TIME ACCIDENT RATE Indicators (“KPIs”). The PMS include a in the future. Safety measures include Target below 10 peer review appraisal system, while the monitoring system of safety targets, KPIs include dimensions on sustainability awareness training and safety talks, 12 such as Health and Safety. awareness campaigns, dedicated health and safety officers. 10 Occupational Health and 7.8 8.0 Safety Severity rate 8 7.5 7.6 Our target severity rate in 2012 is 3.5 Occupational Health and Safety (“OHS”) and we managed to meet our target for 6 6.6 is one of the top priority impact areas for severity rate at 3.04. The severity rates the Company. Our external and internal are due to the same types of injuries that 4 stakeholders want to be assured of a prevail in our field. The major causes 2 workplace that is safe from work-related of injuries are were thorn pricks, which accidents and illnesses. Given the tight recorded marginal increase of 3% from 149 cases in 2011 to 153 cases in 2012, 0 labour market for workers, a low accident 2008 2009 2010 2011 2012 rate is critical for productivity. It is too, our but cuts from palm fronds decreased ethical and social responsibility to ensure notably by 15%, from 87 cases in 2011 the wellbeing of our workers. to 74 cases in 2012. We are working on a plan to solve the root cause of this issue FATALITY RATE Each mill and estate has a designated including special training and awareness Target at zero OHS Coordinator who is responsible to all our harvesters within the Group estates. for organising safety training, meetings, 4 SECTION 5 investigation and reporting of accidents and incidents. These OHS Coordinators Beyond OHS report to the corporate office. Issues beyond OHS in the workplace 3 3 are prioritised because these issues also We have an OHS plan to improve the have an impact on productivity in the safety of employees, which is also workplace. For example, we operate a 2 reviewed periodically to reflectstrict No Drugs policy that is enforced current realities at work. The OHS through regular and random drug testing. 1 1 1 plan is documented and effectively We conducted periodic inspections on all 1 communicated to all our employees. internal grocery shops in the operating We have a set of metrics to measure the units for illegal medication and alcohol. 0 0 efficacy of our OHS plan. 2008 2009 2010 2011 2012
Lost Time Accident rate We are glad to note that our lost time accident (“LTA”) rate has consistently SEVERITY RATE met targets for the past 3 years. We aim Target below 3.5 to keep the LTA rate under 10. Our LTA rates were 7.6 in 2010, 6.6 in 2011 and 4.4 8.0 in 2012. 4.2 4.2
4 Zero accident and zero fatality 4 We aim for zero accident and zero fatality. Nevertheless, it was with great regret 3.8 that we report 2 work-related deaths in 3.6 the past 2 years. We have one fatality in 3.5 2011 and one in 2012, an increase from 3.4 3.34 zero fatality in 2009. All of us at Kulim offer our condolences to the families 3.2 of the deceased. Decisive action has 3.04 3 2008 2009 2010 2011 2012 120 Kulim (Malaysia) Berhad (23370-V)
SUSTAINABILITY Part IiI : SOCIAL PERFORMANCE
We also have a HIV/AIDS policy for the programme for Hepatitis B and other As at 31 December 2012, women workers. We provide training to ensure diseases, water treatment facilities and comprised of approximately 18% of our that our employees are aware of the health surveillance. The OSH Plan also management group. We believe that policy. There is a non-discrimination covers various aspects of preservation this diversity is creating a more balanced, clause if there are affected workers on our of the environment. Close attention will productive and attractive workplace for plantations. The policy also guarantees be given to the rubbish pit collection all employees and there are opportunities the confidentiality of the workers. and disposal, line site cleanliness and for the gender mix to be improved beautification, proper maintenance of in the future. We have also expanded our scope of drainage systems and the enforcement health and safety measures to include of the Group’s ‘No Open Burning Policy’. Women Onwards (“WOW”) occupational illness. This means that The Group also has plan to obtain formal WOW was originally called Panel Aduan we monitor for the prevalence of any certification on OHSAS 18001:2007 as Wanita or the Women’s Grievance Panel, longer term health issues arising from our part of the Group’s OSH Management part of a larger strategy to reach out to operational activities, especially the risk System. all levels of employees, in particular of lumbago for our harvesters. the field workers. It is endorsed by the Empowerment and Diversity management and the activities are fully We have also have in place an OSH funded by the Company. In the early Plan to look into the welfare and health Our commitment to gender equality days, WOW conducted awareness of employees as well as environmental is seeing positive results. Our Women programmes of its existence and how aspects. Under welfare, closer attention OnWards initiative goes from strength WOW can help the women. is paid to the adequacy and safety to strength, increasing opportunities aspects of facilities provided by the for women at all levels. We are also Kulim recognised the celebration for SECTION 5 Group, such as crèches, clinics, canteens supportive of the recommendations International Women’s Day annually. To- and workers’ quarters. The health adopted by the Government and Bursa date, WOW has successfully organised aspect of the programme will cover Malaysia that 30% of decision-makers 3 Kulim’s International Women’s Day mosquito fogging schedule, vaccination in PLCs should be female. (“KIWD”) programme, in March 2010, annual report 2012 121
Part IiI : SOCIAL PERFORMANCE SUSTAINABILITY SECTION 5
June 2011 and June 2012 respectively. We have 2 reported incidents in 2011. Return to work and Each year’s celebration carried different The employee was found to be at fault maternity leave inspiring theme. In recent years, a and was terminated for one case, while All our female employees are entitled to carnival was held as a pre-event to the the other case was dropped because 60 consecutive days of paid maternity official KIWD and various creative and there was not enough evidence to prove leave, in accordance to the Malaysian sport programmes were slotted during guilt. We have no reported incidents of Government regulations. The number of the carnival. As at the time of writing, sexual harassment in 2012. female employees who took maternity WOW is planning for its 4th KIWD, slated leave was 17 in 2011 and 14 in 2012. to be held in June 2013. Nonetheless, the low numbers of All employees returned to work after reports suggest that we will need to their maternity leave ended and remain WOW also aims to develop and equip refine our outreach programme to employed with the Company 12 months the ladies with entrepreneurship skills, encourage more women to speak up after their return to work. We are proud of particularly among the female employees, and to seek advice. the 100% retention rate. with trainings provided free of charge or at minimal fees called Jejari Bistari, WOMEN IN MANAGEMENT WOMEN EMPLOYEES which can help in yielding additional (As at 31 december 2012) (As at 31 december 2012) income, such as sewing, handcrafting and baking. 18% 12% Sexual harassment Our efforts in reaching out to the women in the Company and getting them to report cases on sexual harassment are proving to be successful. The women in the Company are now more aware of their rights and are more open to reporting cases on sexual harassment. 82% 88%
• Male • Female • Male • Female 122 Kulim (Malaysia) Berhad (23370-V)
SUSTAINABILITY Part IiI : SOCIAL PERFORMANCE
Community and Economic Contributions
We recognise that our presence among the local communities impacts the social environment surrounding our operations, and not just the economics. Our business has strong dependencies on the surrounding communities for continuity and growth.
We adopt a management approach that has a holistic understanding of the net impact of our presence. We conduct annual SIA to measure our overall impact and review the Social Action Plan based on these SIA. We try to create a positive impact with an active community investment programme that combines cash contributions, in-kind donations and employee volunteering activities. SECTION 5 Communicating with local communities We have an open approach to communication with the local communities. Local communities can contact the In 2012, we participated in the following community investment estate or the mill manager directly if they programme: wish to address any issues regarding our operations. The communication Approximate process is complemented by annual SIA, Institution / Contributions which are conducted by our internal and Programme Purposes (RM’000) external auditors. Johor FC National sports sponsorship 6,071
Measuring our community Persatuan Bolasepak Negeri National sports sponsorship 1,200 investments Johor The key themes of our community Tabung Tijarah Ramadhan A programme to help the 100 investments are community sports, under-privileged community health and infrastructure as well as children and education. The Bistari Young Entrepreneur Sponsorship for Tunas 150 community investment activities are Bistari Programme structured around a Company-wide Conservation Project Sponsorship for the jetty 126 programme known as We Care We (Largest Mangrove Tree in construction Share. This programme was rolled out Malaysia Book of Record) in January 2009 to promote the spirit of volunteerism amongst our staff. New Britain Foundation Eye Care Work in West New 155 Britain MyKasih Programme (NGO) A programme for help the 30 less fortunate Malaysians annual report 2012 123
Part IiI : SOCIAL PERFORMANCE SUSTAINABILITY SECTION 5 124 Kulim (Malaysia) Berhad (23370-V) SUSTAINABILITY Part IV : Doing our part for the palm oil supply chain
The bulk of our crop is sold to refineries, which in turn produce food ingredients and cooking oils largely for domestic sales. There is a growing pressure on the palm oil players to ensure an ethical and sustainable supply chain that is fully traceable to the origins of the crop. We are working on full certification of all the Fresh Fruit Bunches (“FFB”) processed by our mills, as part of our commitment to RSPO. More than 40% of our FFB are purchased from independent FFB traders, outgrowers and smallholders. Our strategy is to map out the suppliers of external FFB to our mills, identify partners who can help us increase awareness for RSPO certification and most importantly, enhance understanding on practical implementation in the estates. SECTION 5 annual report 2012 125
Part IV : Doing our part for the palm oil supply chain SUSTAINABILITY
Engaging FFB traders, We have set a target initially to certify ffb processed by outgrowers and smallholders 100% of the outgrowers’ FFB in our our mills 2012 According to the RSPO, smallholders mills by 2011, which was later extended produce much of the world’s palm oil. to 2013. There is a need to revise the In the 2 major producing countries - target in order to realistically reflect Indonesia and Malaysia - which account the latest development of withdrawal for over 80% of the world’s production, by ABE. The revised programme and smallholders cultivate about 40% of the action plan will be elaborated in our oil palm area in these 2 countries. Sustainability Report 2012/2013. 41%
Outgrowers and smallholders are Establishing an ethical and therefore key stakeholders for a fully sustainable supply chain 59% traceable sustainable supply chain, as The RSPO has made significant they supply most of the crops to the mills. progress in sustainable sourcing since As with most mill owners, it is challenging our last report. Over the past few to include external FFB in the certification. years, industry players have worked The certification is challenging because hard to iron out issues on practical of the complexity in tracing the individual implementation of the mechanisms • Kulim estates’ FFB outgrowers, given most of our mills - testimony to the strength of a purchases are from independent FFB formal multi-stakeholder initiative. • FFB traders/outgrowers traders. In an initial consultation with a For example, some of the rules were sample group of suppliers, comprising changed to better reflect commercial SECTION 5 of outgrowers and FFB traders, most of realities, rather than from a technical them were aware of RSPO but did not and process engineering perspective. have detailed knowledge of the RSPO requirements. Kulim’s sustainable palm oil is sold to the market via the Green Palm Book We have collaborated with Malaysian and Claim and the Mass Balance Palm Oil Board (“MPOB”) on the mechanisms. The Green Palm trading Smallholder Certification Programme mechanism, a Book and Claim in 2010, engaging more than 100 system, allows our customers to buy smallholders and FFB traders. We also certificates for the volume of certified conducted a trial with a controlled group palm oil required. The Book and Claim of smallholders - Asam Bubok Estate mechanism is the most simplified (“ABE”). However, due to unforeseen method for a buyer to obtain certified circumstances, we regret to report that oil without the high administrative costs ABE has withdrawn from the programme and complex logistics. On the other towards end-2012. hand, the Mass Balance mechanism allows certified palm oil to be mixed Currently, our Sustainability Department with conventional palm oil, but the entire has commenced identifying potential process is monitored administratively. and interested smallholders supplying to This method is slightly more stringent Sedenak Palm Oil Mill, to be included in and complex than the Book and Claim the smallholder certification programme. system. 126 Kulim (Malaysia) Berhad (23370-V) GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
INTRODUCTION The Board however, recognises that good corporate governance practices should The Board of Directors of extend beyond mere compliance. It should seek to attain the highest standards of Kulim (Malaysia) Berhad business ethics, accountability, integrity and professionalism across all the Group’s activities and conducts. In addition, the Board considers strong governance as one of subscribes to and supports the the key strategy determinants in building a competitive organisation, achieving its set Malaysian Code on Corporate corporate and business objectives and ultimately in realising investors’ confidence Governance 2012 (“MCCG and shareholder value. Hence, the Board is committed to continuously improve the 2012”) as a basis for practices Group’s standards of corporate governance in ensuring that all stakeholders’ interest on corporate governance. The is protected and value enhanced. Board is pleased to report that The Board of Directors plays a key role in the governance process through its review it had continued to practise and approval of the Group’s direction and strategy, its monitoring of professional good corporate governance standards and business performance, its review of the adequacy and integrity of the throughout the financial year Group’s internal control systems, including the identification of principal risks and ended 31 December 2012 which ensuring the implementation of appropriate systems to manage those risks, and the involved in strengthening Board acceptance of its underlying duty to ensure that the Company and the Group meets structure and composition, its responsibilities to its shareholders. recognising the role of Directors Kulim’s commitment to strong governance and the continual enhancement of as active and responsible shareholders’ value is evidenced by the following recognitions and accreditations fiduciaries. The Board believes conferred on the Group in 2012 and up to the reporting date in 2013: that the Group has provided a narratives statement on corporate • National Annual Corporate Report Awards (“NACRA”) 2012 - Winner of Industry governance practices. Pursuant Excellent Award (Main Board) for Plantations and Mining to Paragraph 15.25 of the Main • Prime Minister’s CSR Award 2011 - Best 2011 CSR Programme: Environment; Market Listing Requirements by the Ministry of Women, Family and Community Development and except for the matters
SECTION 6 specifically identified, the Board, • The Edge Billion Ringgit Club Award 2012 - Highest Profit Growth Company: to the best of their knowledge, Highest Growth in Profit Before Tax Over Three Years (Plantation Sector) confirms that the Group has • Global CSR Award 2012 - Bronze Award (Workplace Practices); by the Pinnacle applied the Principles set out in Group International the MCCG 2012 together with the Recommendations stated • Outstanding Entreprenuership Award by Enterprise Asia - Ahamad Mohamad under each Principle. Being amongst the earliest plantation companies in the world to be certified as a sustainable palm oil producer under RSPO serve as a testament to the Group’s commitment towards enhancing its governance standards. The Group took its sustainable commitment to the next level when it became the first within the plantation industry to publish sustainability reporting. The Group produced its inaugural Sustainability Report 2007/2008 in October 2008, published separately for both its Plantation operations in Malaysia and Papua New Guinea. Subsequently, the biennial Sustainability Report 2009 was published in June 2010. The 3rd Sustainability Report 2010/2011 was published in September 2012 as per scheduled; emphasising the Group’s commitment towards subscribing to the RSPO Principle and Criteria. annual report 2012 127
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
The reports, which are benchmarked against the international The approach is not an uncommon practice among top GRI guidelines seek to present transparent overview, global companies and leading multi national corporations. performance evaluation and the Group’s target towards The prime consideration is the strategic advantage that Kulim Sustainable Palm Oil practices. It also forms the basis of being part of JCorp’s larger group provides wider access additional communications and engagement with Kulim’s and greater reach to a much larger pool of talent, skills and broader stakeholder groups. The Report is available upon expertise. Collectively, the Directors bring to the Board a wide request and can also be downloaded from the Company’s range of business, financial and technical experience for the website. effective management of the Kulim diversified businesses. The Directors’ profiles are presented on pages 48 to 53 of this Kulim’s has recently certified with the International Annual Report. Sustainability and Carbon Certification (“ISCC”) and the certificate is valid from February 2013 to February 2014. The The Company does not presently have a formal gender ISCC certification standard is for biomass and bioenergy and diversity policy. The Board is of the opinion that it is important meets the Renewable Energy Directive of the European Union. to recruit and retain the best available talent regardless of Report on ISCC is contained on page 105 of this Annual gender, to maximise the effectiveness of the Board; taking Report. into account the balance of skills, experience, knowledge and independence, and based on the Group’s needs and CLEAR ROLES AND RESPONSIBILITIES circumstances.
BOARD OF DIRECTORS The Board strives to achieve a balance of skills, experience, Size and Composition of Board diversity and perspective among its Directors. The Nomination Kulim (Malaysia) Berhad is led by an effective Board of Committee conducts an annual review of the size and Directors. The Board, as at the date of this Statement, consists composition of the Board, taking into consideration the of: required mix of skills, competencies and experience relevant to the business of Kulim Group. • 4 Executive Directors
• 3 Non-Independent Non-Executive Directors An assessment of the Board’s performance is carried out every year, including the Independent Directors’ performance. • 4 Independent Non-Executive Directors
For the year under review, the Board is satisfied with the SECTION 6 existing number and composition of its members and is of the All 4 of the Independent Non-Executive Directors are view that with the current mix of skills, knowledge, experience independent as defined under the Listing Requirements. The and strengths, the Board is able to discharge its duties and Independent Non-Executive Directors are: responsibilities effectively. 1. Tan Sri Dato’ Seri Utama Arshad Ayub Principal Duties and Responsibilities 2. Datuk Haron Siraj Kulim recognised the value of good governance and the reason for that the Company committed to promoting and 3. Dr. Radzuan A. Rahman sustaining a strong culture of corporate governance. With that, 4. Leung Kok Keong Kulim has embarked on a journey to continuously improve its corporate governance framework by gradually adopting the Recommendation 3.5 of the MCCG 2012 states that where recommendations in the MCCG 2012, emphasising:- the Chairman of the Board is not an Independent Director, the a. Clarify the role of the Board Board must comprise of a majority of Independent Directors. Although Kulim is yet to be in line with Recommendation 3.5, b. Enhance Board effectiveness the Board believes that the interests of shareholders would be c. Encourage corporate disclosure policy better served by a Chairman and a team of Board members who act collectively in the best overall interests of shareholders. d. Safeguard the integrity of financial reporting e. Emphasise the importance of risk management and internal controls 128 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
The Board assumes the following responsibilities: 5. Overseeing the development and implementation of a shareholder communications policy for the Company. 1. Reviewing and adopting a strategic plan for the Company. The Board will review and approve the annual budget and Various strategies and approaches are employed by the strategic plan for the Group. Group so as to ensure that investors and shareholders are well-informed about the Group affairs and developments. The Group’s strategic and business plan for 2013 was Information on our shareholders’ communication activities tabled, discussed and approved by the Board at its is on page 138 to 139 of this Annual Report. meeting on 13 December 2012. 6. Reviewing the adequacy and the integrity of the Additionally, on an ongoing basis as need arises, the management information and internal control system of Board will assess whether projects, purchases and sale the Company. of equity as well as other strategic consideration being proposed at Board meetings during the year are in line The Board’s function as regard to fulfilling the above with the objectives and broad outline of the adopted responsibility is supported and reinforced through the strategic plans. various Committees established at both the Board and managing agent’s level. Aided by an independent function 2. Overseeing the conduct of the Company’s business of the Internal Audit Department, the active functioning to determine whether the business is being properly of these Committees through their regular meetings and managed. At Board meetings, all operations matters will be discussions would provide a strong check and balance discussed and expert advice will be sought if necessary. and reasonable assurance on the adequacy of the Company’s internal controls. Details on the Internal Audit The performances of the various companies and operating functions are further discussed in the Statement on Risk units within the Group represent the major element of Management and Internal Control and Audit Committee Board agenda. Where and when available, data are Report in this Annual Report. compared against national trends and performance of similar companies. Board Committees The Group has formed several committees to facilitate the The Group uses KPI system as the primary driver and operations of the Group. Each committee has written terms anchor to its performance management system, of which of reference defining their scope, powers and responsibilities. SECTION 6 is continually refined and enhanced to reflect the changing Apart from the Board Committees, there are internal/ business circumstances. management committees established at Kulim Corporate Office level and within the Group’s significant/strategic 3. Identifying principal risks and ensuring the implementation subsidiaries which facilitate the function of Board of Kulim as of appropriate internal control and mitigation measures. well as their respective company. These internal/management The Group has set up a Risk and Issues Management committees and their primary functions are set out on page Committee for this purpose to assist the Board. 144 to 146 of this Annual Report.
The Risk and Issues Management Committee met 4 times The list of Board Committees includes: in 2012 to review the Group’s risks. Details on Risk and Issues Management Committee are on page 140 to 143 of 1. Audit Committee this Annual Report. Pursuant to paragraph 15.15 of the Listing Requirements, the Audit Committee Report for the financial year which 4. Succession planning sets out the composition, terms of reference and a summary of activities of the Audit Committee, is contained The Board responsibility in this aspect is being closely on pages 151 to 155 of this Annual Report. supported by the Human Resource Department. More importantly, after several years of continuous efforts 2. Nomination and Remuneration Committee in emphasising and communicating the importance of The Board of Directors of the Company established its succession planning, the subject has now become an own Nomination and Remuneration Committee (“NRC”) ongoing agenda being reviewed at various high-level in accordance to the Best Practices of Corporate management and operational meetings of the Group. Governance. annual report 2012 129
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
The NRC is accountable to the Board of the Company 1. Identify and recommend to the Board, candidates for and not to the executive management of the Company. board directorships of Kulim (Malaysia) Berhad (“the Subject to the Corporate Governance Principles, the Company”). primary functions of the NRC are to: 2. Recommend to the Board, directors to fill the seats on 1. Assess the necessary and desirable competencies of Board Committees. Board members; 3. Evaluate the effectiveness of the Board and Board 2. Review Board succession plans; Committees (including its size and composition) and 3. Evaluate the Board’s performance; contributions of each individual director. 4. Make recommendations to the Board on the 4. Ensure an appropriate framework and plan for Board following: succession for the Company. a. Executive remuneration and incentive policies; Membership b. Remuneration packages of senior management; The Nomination Committee shall have at least 3 members, all of c. The Company’s recruitment, retention and whom shall be non-executive directors with the majority being termination policies for senior management; independent directors. The quorum for the Committee shall be 2 members, of which one should be independent directors. d. Incentive Schemes; The Nomination Committee members and Chairperson shall e. Superannuation arrangements; and be appointed by the Board. The appointment of a Committee member terminates when the member ceases to be a director, f. The remuneration framework for directors. or as determined by the Board. In performing its duties, the NRC shall have direct access to In the event of equality of votes, the Chairperson of the the resources of the Company as it may reasonably require and shall seek to maintain effective working relationships with Committee shall have a casting vote (except where 2 directors the management. from the quorum). In the absence of the Chairperson of the Committee, the members present shall elect one of their The compositions of the NRC of the Company are as follows: numbers to chair the meeting.
SECTION 6 Remuneration Committee The Nomination Committee shall have no executive powers. 1. Dato’ Kamaruzzaman Abu Kassim - Chairman Meetings 2. Tan Sri Dato’ Seri Utama Arshad Ayub The Committee shall meet at least once a year. Additional 3. Dr. Radzuan A. Rahman meetings shall be scheduled as considered necessary by the Committee or Chairperson. The Committee may establish Nomination Committee procedures from time to time to govern its meetings, keeping 1. Dato’ Kamaruzzaman Abu Kassim - Chairman of minutes and its administration. 2. Tan Sri Dato’ Seri Utama Arshad Ayub The Committee shall have access to such information and 3. Datuk Haron Siraj advice, both from within the Group and externally, as it deems necessary or appropriate in accordance with the Terms of Reference procedures determined by the Board and at the cost of the The terms of reference of the NRC are as follows: Group. The Committee may request other directors, members of management, counsels, and consultants as applicable to A. Nomination participate in Committee meetings, as necessary, to carry out the Committee’s responsibilities. Non-committee directors Purpose and members of management in attendance may be required The Nomination Committee, a Committee of the Board of by the Chairperson to leave the meetings of the Committee Directors (“Board”), is established primarily to: when so requested. 130 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
The Secretary of the Committee shall be appointed by the 3. To consider, evaluate and propose to the Board any Committee from time to time. Committee meeting agendas new board appointments, whether of executive or non- shall be the responsibility of the Committee Chairperson executive position. In making a recommendation to the with input from Committee members. The Chairperson may Board on the candidate for directorship, the Committee also request management to participate in this process. The shall have regard to: agenda for each meeting including supporting information shall be circulated at least 7 days before each meeting to the • Size, composition, mix of skills, experience, Committee members and all those who are required to attend competencies and other qualities of the existing the meeting. Board, level of commitment, resources and time that the recommended candidate can contribute to the The Committee shall cause minutes to be duly entered in existing Board; and the books provided for the purpose of all resolutions and proceedings of all meetings of the Committee. Such minutes • Boardroom diversity by ensuring that women shall be signed by the Chairperson of the meeting at which candidates are sought as part of its recruitment the proceedings were held or by the Chairperson of the next exercises. succeeding meeting and if so signed, shall be conclusive evidence without any further proof of the facts thereon stated. 4. To propose to the Board the responsibilities of non- The minutes of the Committee meeting shall be available to all executive directors, including membership and Board members. Chairperson of Board Committees.
The Committee, through its Chairperson, shall report to the 5. To evaluate and recommend the appointment of senior Board at the next Board of Directors’ meeting after each executive positions, including that of the Managing Director Committee meeting. When presenting any recommendation to or Chief Executive and their duties and the continuation the Board, the Committee will provide such background and (or not) of their service. supporting information as may be necessary for the Board to make an informed decision. The Committee shall provide such 6. To establish and implement process for assessing the information to the Board as necessary to assist the Board in effectiveness of the Board as a whole, the Committee making a disclosure in the Annual Report in accordance to the of the Board and for assessing the contribution of each
SECTION 6 Principle 2 of MCCG 2012. director.
The Chairperson of the Committee shall be available to answer 7. To evaluate on an annual basis: questions about the Committee’s work at the AGM of the Company. • the effectiveness of each director’s ability to contribute to the effectiveness the Board and the relevant Board Scope of Activities Committees and to provide the necessary feedback The duties of the Nomination Committee shall include the to the directors in respect of their performances; following: • the effectiveness of the Committees of the Board; 1. To determine the criteria for Board membership, including and qualities, experience, skills, education and other factors that will best qualify a nominee to serve on the Board. • the effectiveness of the Board as a whole.
2. To review annually and recommend to the Board with 8. To recommend to the Board: regards to the structure, size, balance and composition of the Board and Committees including the required mix • whether directors who are retiring by rotation should of skills and experiences, core competencies which non- be put forward for re-election; and executive directors should bring to the Board and other qualities to function effectively and efficiently. • termination of membership of individual directors in accordance with policy, for cause or other appropriate reasons. annual report 2012 131
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
9. To establish appropriate plans for succession at Board In the event of equality of votes, the Chairperson of the level, and if appropriate, at senior management level. Committee shall have a casting vote (except where 2 directors from the quorum). In the absence of the Chairperson of the 10. To provide for adequate training and orientation of new Committee, the members present shall elect one of their directors with respect to the business, structure and number to chair the meeting management of the Group as well as the expectations of the Board with regards to their contribution to the Board The Committee members shall: and Company. • have a good knowledge of the Company and its executive 11. To consider other matters as referred to the Committee by directors, and a full understanding of shareholders’ concern; and the Board.
• have a good understanding, enhanced as necessary by B. Remuneration appropriate training or access to professional advice, on/ of areas of remuneration. Purpose The Remuneration Committee, a Committee of the Board, is Meetings established primarily to: The Committee shall meet at least once a year. Additional meetings shall be scheduled as considered necessary by the 1. Provide assistance to the Board in determining the Committee or Chairperson. The Committee may establish remuneration of executive directors and, if applicable, procedures from time to time to govern its meetings, keeping senior management and in particular the Chief Executive of minutes and its administration. Officer where the person is not a member of the boards of directors. In fulfilling this responsibility, the Committee The Committee may consult the Chairperson of the Board is to ensure that executive directors and applicable senior regarding proposals relating to the remuneration of executive management of the Company: directors. The Committee may consult other non-executive directors in its evaluation of the Managing Director/Chief • are fairly rewarded for their individual contributions to Executive Officer. The Committee may request other directors overall performance; and key executives to participate in Committee meetings, as
necessary, to carry out the Committee’s responsibilities. SECTION 6 • that the compensation is reasonable in light of the Company’s objectives; and The Committee shall have access to such information and advice, both from within the Group and externally, as it deems • that the compensation is similar to other companies. necessary or appropriate in accordance with the procedures determined by the Board and at the cost of the Company. 2. Establish the Managing Director/Chief Executive Officer’s The Committee is authorised by the Board to obtain external goals and objectives; legal or other professional advice, as well as information about remuneration practices elsewhere. The Committee 3. Review the Managing Director/Chief Executive Officer’s may, if it thinks fit, secure the attendance of external advisers performance against the goals and objectives set. with relevant experience and expertise, and shall have the discretion to decide who else other than its own members, Membership shall attend its meetings. No director or executive shall take The Remuneration Committee shall consist entirely of non- part in decisions on his/her own remuneration. executive directors. It shall have at least 3 members and the quorum for the Committee shall be 2 members. Remuneration The Secretary of the Committee shall be appointed by the Committee members and the Chairperson shall be appointed Committee from time to time. Committee meeting agendas by the Board based on the recommendations of the Nomination shall be the responsibility of the Committee Chairperson with Committee. The appointment of a committee member input from Committee members. The Chairperson may also terminates when the member ceases to be a director, or as ask management to participate in this process. determined by the Board. 132 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
The agenda for each meeting shall be circulated at least 7 payable on the termination of the service contract by the days before each meeting to the Committee members and Company. all those who are required to attend the meeting. Written materials including information requested by the Committee 4. To review with the Managing Director/Chief Executive from management or external consultants shall be received Director, his goals and objectives and to assess his together with the agenda for the meetings. performance against these objectives as well as contribution to the corporate strategy. The Committee shall cause minutes to be duly entered in the books provided for the purpose of all resolutions and 5. To review the performance standards for key executives proceedings of all meetings of the Committee. Such minutes to be used in implementing the Group’s compensation shall be signed by the Chairperson of the meeting at which programmes where appropriate. the proceedings were held or by the Chairperson of the next succeeding meeting and if so signed, shall be conclusive 6. To consider and approve compensation commitments/ evidence without any further proof of the facts thereon stated. severance payments for executive directors and key The minutes of the Committee meeting shall be available to all executives, where appropriate, in the event of early Board members. termination of the employment/service contract.
The Committee, through its Chairperson, shall report to the 7. To consider other matters as referred to the Committee by Board at the next Board of Directors’ meeting after each the Board. Committee meeting. When presenting any recommendation to the Board, the Committee will provide such background and DIRECTORS’ CODE OF ETHICS supporting information as may be necessary for the Board to The Directors adhere to the Code of Ethics which is contained make an informed decision. The Committee shall provide such in the Board Policy Manual, the important aspects of which information to the Board as necessary to assist the Board in are as follows: making a disclosure in the Annual Report in accordance with the Principle 2 of MCCG 2012. • Members must represent non-conflicted loyalty to the interests of the Group; The Chairperson of the Committee shall be available to answer questions about the Committee’s work at the AGM of the • Members must avoid conflict of interest with respect to their fiduciary responsibility;
SECTION 6 Company. • Members may not attempt to exercise individual authority Scope of Activities over the Group except as explicitly set forth in Board The duties of the Remuneration Committee shall include the Policy; and following: • Members will respect the confidentiality appropriate to 1. To establish and recommend the remuneration structure issues of a sensitive nature. and policy for executive directors and key executives, if applicable, and to review for changes to the policy, as Fraud Risk necessary. The Group is strongly committed to an environment of sound governance, sound internal controls and a culture that will 2. To ensure that a strong link is maintained between the safeguard shareholders’ investments, stakeholders’ interests level of remuneration and individual performance against and the Group’s assets. The safeguarding against loss by agreed targets, the performance-related elements of fraud or negligence and establishing an environment which remuneration setting forming a significant proportion of effectively minimises fraud risk is a key responsibility of the total remuneration package of executive directors. management. All employees have an obligation to support the efforts. 3. To review and recommend the entire individual remuneration packages for each of the executive directors The Group also upholds the principles of integrity, respect and and, as appropriate, other senior executives, including: the accountability which includes the maintenance of a workplace terms of employment or contract of employment/service; that is free from fraud. This involves embedding fraud control any benefit, pension or incentive scheme entitlement; any into the organisation’s decision making culture and practices. other bonuses, fees and expenses; and any compensation annual report 2012 133
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
As such, a Fraud Policy was established and approved by the of the matters. All decisions and conclusions of the Board Board of Directors in 2007 to reflect the Group’s commitment meetings are to be duly recorded and minutes are kept by the to manage control and promote ethical and honest behaviour Company Secretary. in the workplace. The policy is intended to provide guidance to employees on how to report and deal with fraud. It also The Board recognises the importance of providing timely, outlines the notification process, investigation procedures and relevant and up-to-date information in ensuring an effective type of outcomes which are likely to be considered. decision making process by the Board. In this regard, the Board is provided with not just quantitative information but The Group also ensures the sustenance of a dynamic and also those of qualitative nature that is pertinent and of a quality necessary to allow the Board to effectively deal with matters robust corporate climate focused on strong ethical values. that are tabled in the meeting. This emphasises active participation and dialogues on a structured basis involving key people at all levels, as well as All Directors have unrestricted access to all information within ensuring accessibility to information and transparency on all the Company in furtherance of their duties. In addition, all executive action. Effective from December 2012, the Group Directors have access to the advice of the Company Secretary organised a series of Kulim Roundtable Conference (“RTC”) and where necessary, in furtherance of their duties, take in replacement of the Group’s annual employees’ gathering independent professional advice at the Group’s expense. - Pedoman. The RTC is an open platform where executives, albeit in smaller group for each session held, come together to In conjunction with the scheduled meetings or on separate share and discuss opinions, ideas and issues directly with the occasions, the Directors also visit locations of operating units, Managing Director and Senior Management. sites of new projects and other operations sites to allow them to have better assessments of the operational progress, status The Group has also long established a formal avenue for of developments and any important issues to be addressed on all employees to report directly to the Managing Director of new proposals. In between meetings, the Managing Director any misconduct or unethical behaviour conducted by any meets regularly with the Chairman and other Board members employees of the Group through a declaration in the Ethic to keep them abreast of current development. Circular Declaration Form. Further to that, Kulim has established a Resolutions are used for determination of matters arising in Grievance Policy and Procedure as well as Women OnWards between meetings. This is in accordance to Principle 1 of the to ensure that throughout the Group, there is a transparent MCCG 2012.
process for ensuring stakeholders’ grievances and complaints SECTION 6 are dealt with fairly, consistently and promptly. The corporate In addition to matters relating to the responsibilities discussed climate is also continuously nourished by value-centred above, other specific topics tabled for Board’s deliberation programmes for team-building and active subscription to core and decisions include: values. • updates of relevant factors within the Group external business environment such as economic development Board Meetings and Supply of Information and policies, customers and markets and competitors; All Board meetings for the ensuing year are scheduled by December in the year before so as to allow Directors to plan • current updates of key financial and operational results ahead. Board meetings are held at least 4 times a year. Apart and performances of the Group, Company and its from the regular scheduled meetings, additional meetings are subsidiaries; convened as and when necessary to deliberate and approve • strategic and corporate initiatives such as approval of ad-hoc, urgent and important issues. corporate plans and budgets, acquisitions and disposal of material assets and major investments; The Chairman, assisted by the Company Secretary takes • changes to management and control structure of the responsibility in ensuring that the directors receive all notices, Group, including key policies, procedures and authority agendas and minutes of the previous meetings and is supplied limits; with pertinent information well in advance of each meeting. The Managing Director in consultation with the Chairman • approval of any interim and special dividend as well as would decide on the agenda and accordingly structure and recommendation of any final dividend; and prioritise the respective matters based on their relevance and • approval of all circulars, resolutions and corresponding importance so as to enable quality and in-depth discussion documentation sent to shareholders. 134 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
The Directors, in the event that they have interest in proposals considered by the Board, will be required to make declaration to that effect. The interested Directors will thereupon abstain from deliberations and decisions of the Board on the said proposals.
The Board met eight (8) times during the financial year 2012 and all Directors have complied with the minimum 50% attendance as required by Para 15.05 of the Listing Requirements. The members of the Board of Directors and their attendances at Board meetings in 2012 are set out below:
Special Special 269th Special Special 270th 271st 272nd BOD BOD BOD BOD BOD BOD BOD BOD 16.1.2012 16.2.2012 22.3.2012 18.5.2012 23.5.2012 26.6.2012 4.10.2012 13.12.2012 % Dato’ Kamaruzzaman Abu Kassim / / / / / / / / 100 Ahamad Mohamad / / / / / / / / 100 Tan Sri Dato’ Seri Utama Arshad Ayub X / / X / / / X 62.50 Datin Paduka Siti Sa’diah Sh Bakir / / / / / / / / 100 Zulkifli Ibrahim / / / / / / / / 100 Jamaludin Md Ali ------/ / 100 Wong Seng Lee / / / / / / / / 100 Kua Hwee Sim / / / X - - - - 75 Datuk Haron Siraj / X / / / / X / 75 Dr. Radzuan A. Rahman / / / / / / / / 100 Rozan Mohd Sa’at / X / / / / / / 87.50 Datuk Ahmad Zaki Zahid / / / / / / / - 100 Leung Kok Keong / / / / / / / / 100 Wan Mohd Firdaus Wan Mohd Fuaad / / / / X / / / 87.50 Natasha Kamaluddin X / / / / / / / 87.50
Notes:- • Kua Hwee Sim - resigned on 23.5.2012 • Jamaludin Md Ali - appointed as Non-Independent Non-Executive Director on 1.7.2012 and re-designated as Executive Director on 4.12.2012 • Datuk Ahmad Zaki Zahid - resigned on 4.12.2012 • Wan Mohd Firdaus Wan Mohd Fuaad - resigned on 3.1.2013
SECTION 6 • Natasha Kamaluddin - resigned on 28.2.2013
strengthen composition and reinforce independence
APPOINTMENT AND RE-ELECTION OF DIRECTORS The number and composition of Board membership are reviewed on a regular basis appropriate to the prevailing size, nature and complexity of the Group’s business operations so as to ensure the relevance and effectiveness of the Board in accordance to Principle 2 of the MCCG 2012 where the Board should have transparent policies and procedures that will assist in the selection of the Board members. In the event of a need to appoint new member(s) of the Board, nominations will be tabled and deliberated in the Company's Nomination Committee (“NC”) meeting to assess the qualified candidate with the required core competency to effectively discharge his/her role as a Director of the Company. The NC will then recommend their findings for consideration and approval by the Board. The power to appoint the director(s) nominated is vested wholly on the Board.
The Board is responsible to the shareholders. All Directors appointed during the financial year resign at the Annual General Meeting (“AGM”) of the Company in the period of appointment and are eligible for re-election. In compliance with the Para 7.26(2) of the Listing Requirements, all directors shall retire once at least in every 3 years.
In accordance with Article 97 of the Company’s Article of Association, Wong Seng Lee, Dr. Radzuan A. Rahman and Zulkifli Ibrahim retire by rotation at the forthcoming AGM and being eligible, offer themselves for re-election.
In accordance with Article 103 of the Company’s Article of Association, Jamaludin Md Ali, who was appointed during the year, retire at the forthcoming AGM and being eligible, offer himself for re-election. annual report 2012 135
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
Tan Sri Dato’ Seri Utama Arshad Ayub being above 70 years of is brought to bear favourably in board decisions and policy age retires in accordance with Section 129(2) of the Companies formulations. Together, the Directors bring a wide range of Act 1965 and has offered himself for re-appointment in business and financial experience relevant to the direction of accordance with Section 129(2) of the said Act to hold office the expanding Group. until the conclusion of the next AGM of the Company. The independence of each Independent Non-Executive In addition, in line with Recommendation 3.2 and 3.3 of Directors is safeguarded as none is involved in the day-to- the MCCG 2012, the NC has conducted an assessment of day management of the Group and they do not engage in independence under the nomination and election process of any business dealings or other relationships with the Group. Independent Non-Executive Directors, particularly for Tan Sri The presence of 4 Independent Non-Executive Directors, Dato’ Seri Utama Arshad Ayub, whose tenure on the Board representing more than a third of the total members with exceeds a cumulative term of more than 9 years since his necessary calibre, ensures that the Board is well-balanced and appointment to the Board on 31 January 1987. The NC is could carry sufficient weight on Board’s decisions. Although satisfied with the judgement, skills and contribution he has all the Directors have equal responsibilities for the Group’s brought to the Board. In this regards, the Board supports operations, the role of these Independent Non-Executive and recommends his re-appointment as Independent Non- Directors is particularly important in ensuring that all business Executive Director, subject to the shareholders’ approval at strategies proposed by the executive management are fully and the Company’s forthcoming AGM, due to his wide knowledge independently discussed and assessed, and take into account and experience in the industry as well as most pertinently, the long term interest, not only of shareholders, but also professionalism and objectivity. employees, customers, suppliers, and the many communities in which the Group operates. The Board is satisfied that the Effectiveness of Board size and composition of the Independent Non-Executive A statutory declaration is made to Bursa Malaysia Securities Directors has fulfilled its requirement adequately. Berhad (“Bursa Securities”) by all Independent Non-Executive Directors in their individual capacity to the effect that they are The profiles of the Directors’ biographies are set out in page independent in compliance with the Listing Requirements. 48 to 53 of the Annual Report.
The Position Description for the Chairman and for the Managing The Company has in place a Board Policy Manual to assist the Director is prescribed in the Board Policy Manual. At the end Board in discharging its duties effectively. Among others, the of each financial year the Board will set Key Performance Board Policy Manual covers the following important scopes: Indicators (“KPI”) that should be achieved by the management for the next financial year. • Group Organisation SECTION 6 • Board Organisation The Board views that the number and composition of the current Board members is sufficient and well-balanced for the • Board Responsibilities Company to carry out its duties effectively, whilst providing • Board Procedures assurance that no individual or small group of individuals can dominate the Board’s decision making. • Director Evaluation Guidelines and Procedure • Managing Director Evaluation Guidelines and Procedure. There is clear segregation of duties between the Chairman and the Managing Director. The Board is led by the Chairman, Dato’ The Independent Directors provide broader views, and an Kamaruzzaman Abu Kassim whose principal responsibility is independent and balanced assessment of proposals. The to ensure the effective running of the Board and independent Board has appointed Tan Sri Dato‘ Seri Utama Arshad Ayub as of the management. The current Chairman has never held the the Senior Independent Non-executive Director of the Board post of Managing Director of the Company. to whom concerns of the Group may be conveyed.
The post of Managing Director or the Chief Executive Officer Over and above the issue of independence, each Director of the Group is held by Ahamad Mohamad whose primary task has a continuing responsibility to determine whether he has a is to report, communicate and recommend key strategic and potential or actual conflict of interest in relation to any material operational matters and proposals to the Board for decision transaction or matter which comes before the Board. Such making purposes as well as to implement policies and a situation may arise from external associations, interests or decisions approved by the Board. The Non-Independent Non- personal relationships. Each Director is required to disclose Executive Directors are from varied business and professional any interest in a transaction. If so, the Director abstains from backgrounds and bring with them a wealth of experience that deliberations and decisions of the Board on the subject. 136 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
DIRECTORS’ REMUNERATION The Board believes that the levels of remuneration offered by the Group are sufficient to attract Directors of calibre and with sufficient experience and talents to contribute to performance of the Group. Comparison with similar position within the industry and other major public listed companies is made in order to arrive at a fair rate of remuneration. The details of the remuneration of each Director paid by the Company during the year are as follows:
Fees / Allowances / Basic Salary Other emoluments Bonuses Benefit in-kind Total RM'000 RM'000 RM'000 RM'000 RM'000 Dato' Kamaruzzaman Abu Kassim - 123 - - 123 Ahamad Mohamad 900 577 470 155 2,102 Tan Sri Dato' Seri Utama Arshad Ayub - 79 - - 79 Datin Paduka Siti Sa'diah Sh Bakir - 62 - - 62 Zulkifli Ibrahim 600 247 330 78 1,255 Jamaludin Md Ali - 28 - - 28 Wong Seng Lee 360 139 236 32 767 Kua Hwee Sim - 43 - - 43 Datuk Haron Siraj - 59 - - 59 Dr. Radzuan A. Rahman - 68 - - 68 Rozan Mohd Sa’at - 61 - - 61 Datuk Ahmad Zaki Zahid 816 187 68 31 1,102 Leung Kok Keong - 60 - - 60 Wan Mohd Firdaus Wan Mohd Fuaad - 55 - - 55 Natasha Kamaluddin - 55 - - 55 2,676 1,843 1,104 296 5,919
Board Performance Evaluation The effectiveness of the Board is vital to the success of the Group. For that reason, a large portion of the Board Policy Manual is devoted to explaining and outlining the format and procedure for evaluating Board Members performance. The availability of the structured format for Board Members evaluation assists the members in discharging their duties effectively and efficiently.
SECTION 6 The Board, through its Nomination Committee, undertakes a rigorous evaluation each year in order to assess how well the Board, its committees, the directors and the Chairman are performing including assesses the independence of Independent Directors which taking into account the individual Director’s capability to exercise independent judgement at all times. The evaluation covers the Board’s composition, skills mix, experience, communication, roles and responsibilities, effectiveness as well as conduct. All directors complete a questionnaire regarding the Board and committees’ processes, their effectiveness and where improvements may be considered. The process also includes a peer review in which directors assess their fellow directors’ performance against set criteria, including the skills they bring to the Group and the contribution they make. The Company Secretary reported the outcome of the evaluation exercise to the Nomination Committee and then to the Board for review.
Following the performance evaluation process for 2012, which was conducted in February 2013, the directors have concluded that the Board and its committees operate effectively. Additionally, the Chairman has concluded that each director continues to make an effective contribution to the work of the Board, is well prepared and informed concerning items to be considered by the Board, has a good understanding of the Group’s business and their commitment to the role remains strong.
FOSTER COMMITMENT
All new directors who are appointed from among the Group’s senior executives must attend an internally-administered directors’ course and pass the examination set prior to being eligible for appointment to the Board. All new directors will be given comprehensive briefing of the Group’s history, operations and financial control systems in order to provide them with first-hand knowledge of the Group’s operations. In the light of increasing complexities in global markets as well as within the industry, in financial reporting and in shareholders’ expectations, training is an ongoing process in an effort to help Directors stay abreast of relevant new developments. annual report 2012 137
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
Directors’ Training and reports to regulators. Timely release of announcements The Company complies with the requirements set out in reflects the Board’s commitment to provide up-to-date and the amendments to the Listing Requirements in that it transparent information on the Group’s performance. regularly assess the training needs of its directors to ensure that they are equipped with the requisite knowledge and In the preparation of the financial statements, the Directors will competencies to make effective contribution to the board’s consider compliance with all applicable Financial Reporting functioning. Directors has devoted sufficient time to carry Standards, provisions of the Companies Act 1965 and out the responsibilities, regularly update their knowledge relevant provision of laws and regulations in Malaysia and the and enhanced their skills as promoted in Principle 4 of the respective countries in which the subsidiaries operate. The MCCG 2012. All Directors have successfully completed the Board is assisted by the Audit Committee who reviews both Mandatory Accreditation Programme (“MAP”) prescribed annual financial statements and the quarterly announcements by Bursa Malaysia. The Continuous Education Programme to ensure reports reflect a true and fair view of the state of (“CEP”) was repealed by Bursa Malaysia with effect from 1 affairs of the Group and Company. January 2005 and Directors who were required to fulfil this programme complied with the deadline before due date. Pursuant to paragraph 15.15 of the Listing Requirements, Nevertheless, Directors are encouraged to continue attending the Audit Committee Report for the financial year which sets various training programmes that are relevant to the discharge out the composition, terms of reference and a summary of of their responsibilities. activities of the Audit Committee, is contained on pages 151 to 155 of this Annual Report. Training programmes, seminars and briefings attended by the Directors during the year were, among others: Statement of Directors’ Responsibility in Preparing Audited Financial Statements • Transformational Leadership Seminar The Directors are required by Companies Act 1965 to prepare • The Malaysian Code on Corporate Governance 2012 financial statements for each financial year which have been made out in accordance with the applicable approved • Key amendments to Listing Requirements and Corporate accounting standards and give a true and fair view of the state Disclosure of affairs of the Group and the Company at the end of the • Corporate Talk - Diversification for Future Sustainability: financial year and of the results and cash flows of the Group Johor Corporation Experience and Company for the financial year. • 8th World Islamic Economic Forum In preparing the financial statements, the Directors have: • Accountant for Business SECTION 6 • CEO Luncheon Talk • adopted suitable accounting policies and applied them consistently; • Annual JIMB Conference • made judgement and estimates that are reasonable and • Enhancing Entrepreneurships Values Program prudent;
The Board is gratified with the time commitment given by all the • ensured that all applicable Financial Reporting Standards Directors towards fulfilling their roles and responsibilities. This in Malaysia have been followed; and is evidenced by the attendance record of the Board meetings • prepared financial statements on the going concern and number of directorship in Public Listed Companies (“PLC”) basis as the Directors have a reasonable expectation, held by the individual Directors which are at the maximum having made enquiries that the Group and Company have of 5 PLCs. This will enable Directors to sustain their active resources to continue in operational existence for the participation in Board discussion and have a sufficient time to foreseeable future. execute their responsibilities. The Directors have responsibility for ensuring that the Group UPHOLD INTEGRITY IN FINANCIAL REPORTING and the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Group Financial Reporting and the Company and which enable them to ensure that the In presenting the annual financial statement and quarterly financial statements comply with Companies Act 1965. announcements to shareholders, the Directors aim to present a balanced and candid assessment of the Group’s position and The Directors have overall responsibilities for taking such steps prospects. This is in accordance to Principle 5 of the MCCG as are reasonably open to them to safeguard the assets of the 2012 and also applies to other price-sensitive public reports Group to prevent and detect fraud and other irregularities. 138 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT CORPORATE GOVERNANCE REPORT
Relationship with the External Auditors Communications are primarily effected through announcements The Board through the Audit Committee has maintained a via Bursa Securities Link, meetings, briefings, press releases formal procedure of carrying out an independent review of and conference calls. In addition, the Group has established all quarterly reports, annual audited financial statements, its official website at www.kulim.com.my which investors External Auditor’s audit plan, report, internal control issues and shareholders can access for information. The website is and procedures. The Committee meets with the External continuously improved to include more relevant information for Auditors without the presence of the Executive Board and investors and to better facilitate its navigation. Senior Management at least once a year. During the year, 2 meetings have been conducted without the presence of the Meetings and briefings are held regularly with shareholders, management. Representatives from the External Auditors are investors, research analysts, bankers and the press to also invited to attend every Annual General Meeting. explain and expand on Group’s latest performance results, current developments and future directions. During meetings, The role of the Audit Committee in relation to the External participants are encouraged to pose any question to the Board Auditors is described on page 153. members or the senior management team of the Group to seek any clarification or explanation on any issues rose. Whilst these RECOGNISE AND MANAGE RISKS forms of communications are important, the Group takes full cognisance of its responsibilities to not disclose any price- The Group recognised its obligation to systematically manage sensitive information. and regularly review its risk profile at a strategic, financial and operational level. The Group has done this by developing and Investor Relations Activities 2012 No. of times adopting risk management framework that determines the IR meetings 7 process and identifies tools for realising its objectives. Not only does it which is to minimise its risk but also maximises Conference calls 4 it opportunities. It enhances the Company’s capability to Company visits 5 respond timely to the changing environment and its ability to Foreign roadshow 1 make better decision. This is in accordance to Principle 6 of Roadshow in Malaysia 1 the MCCG 2012. Senior Management Personnel in Investor Relations activities The Board also has established an internal audit function which are:
SECTION 6 is led by the Certified Internal Auditor (“CIA”) who reports directly to the Board of Audit Committee and responsible • Ahamad Mohamad, Managing Director for providing independent assurance to the Board on the effectiveness of internal control. • Wong Seng Lee, Executive Director • Jamaludin Md Ali, Executive Director The Group’s Statement on Risk Management and Internal Control are set out on pages 140 to 150. • Azli Mohamed, Vice President - Finance • Md. Faizal Abdullah, Deputy General Manager, Corporate ENSURE TIMELY AND QUALITY DISCLOSURE; AND Affairs Department STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS Other than that, the Board believes that the Company’s Annual Report also serves as an important communication tool to the CORPORATE DISCLOSURE shareholders, investors and all stakeholders in general. As such, Communication and Investor Relations each year, the Company strives to produce a value-added and In line with the Group’s commitment as stated in Principle transparent reporting to its readers. 7 of the MCCG 2012, the Group continually ensures that it maintains a high level of disclosure and communication with The Company acknowledges that stakeholder’s engagement is its shareholders and stakeholders through various practicable crucial to sustainability and organisational success. Stakeholder and legitimate channels. The Group is duty-bound to keep engagement enhances accountability by allowing an organisation the shareholders and investors informed of any major to identify, understand and deliver the sustainable returns. Most developments and changes affecting the Group. importantly, it enables us to develop trust and transparency in our relationship with the stakeholders. The Stakeholders Engagement is contained on page 106 of this Annual Report. annual report 2012 139
CORPORATE GOVERNANCE REPORT GOVERNANCE STATEMENT
Annual General Meeting Related Party Transactions The AGM is a vital platform for dialogue and interaction with All related party transactions entered into by the Group were the shareholders of the Company. The shareholders are given made in the ordinary course of business and on substantially sufficient time through an early notice of AGM which allows the same terms as those prevailing at the time for comparable them to make a necessary arrangements to attend, participate transactions with other persons or charged on the basis of and opportunity to vote on the regular businesses of the equitable rates agreed between the parties. All related party meeting by show of hands. Each item of special business transactions are reviewed by the internal auditors and a report included in the notice of the meeting will be accompanied by on the reviews conducted is submitted to the Audit Committee detailed explanations. Separate resolutions are proposed for for their monitoring. substantially different issues at the meeting and the Chairman declares the number of proxy votes received both for and Details of the transactions entered into by the Group during the against each resolutions. The resolutions passed at the meeting financial year ended 31 December 2012 are set out on pages are released to Bursa Malaysia in a timely manner. 253 to 256 of this Annual Report.
Besides the usual agenda, the Board also presents the progress and performance of the Group at each AGM. Shareholders, including the minority shareholders, are encouraged to participate and raise questions during the question and answer session with the Directors. All Board members, senior management and the external auditors are present to respond This Statement is made in accordance with the Board of to questions from the shareholders during AGM. Where Directors’ Circular Resolution dated 6 May 2013. appropriate, the Chairman will undertake to provide a written answer to any significant question that cannot be readily answered at the meeting.
Other than the Board Chairman and the Managing Director, the shareholders or any stakeholders may convey any concerns that they may have to Tan Sri Dato’ Seri Utama Arshad Ayub, an Independent Non-Executive Director and Chairman of the Audit Dato’ Kamaruzzaman Abu Kassim
Committee. Chairman SECTION 6 140 Kulim (Malaysia) Berhad (23370-V) GOVERNANCE STATEMENT STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
INTRODUCTION BOARD’S RESPONSIBILITIES RISK MANAGEMENT FRAMEWORK The Board of Directors of Kulim (Malaysia) Berhad (“the The Board recognises the importance The Group adopts an Enterprise Risk Board”) is pleased to provide the of sound risk management and internal Management (“ERM”) framework Statement on Risk Management control system practices to good which incorporates the principles and Internal Control pursuant corporate governance with the objective and guidelines of ISO31000:2009 of safeguarding the shareholders’ Risk Management. The framework to paragraph 15.26(b) of Main investment and the Group’s assets. has been approved by the Board in Market Listing Requirements December 2012 and supersedes the which requires Directors of The Board affirms its overallprevious framework which was based listed companies to include responsibility and commitment to on principles and guidelines of AS/NZS a statement in their annual articulating, implementing and reviewing 4360:2004 - Risk Management. The reports on the state of their the effectiveness and efficiency of the framework determines the process and risk management and internal control. identifies tools for realising the Group’s internal control and it has been objectives aside from supporting and prepared in accordance with the The Group has in place an ongoing sustaining risk management throughout Statement on Risk Management control structure and process for the organisation. and Internal Control: Guidelines managing the significant risks affecting for Directors of Listed Issuers. the achievement of its business The Group recognises that it is obliged objectives throughout the financial year to systematically manage and regularly under review up to the date of approval review its risk profile at a strategic, The Board wishes to highlight of this statement, which includes financial, compliance and operational that the Group subsidiaries, actively identifying, evaluating, and level. The Group has established a which were listed on Bursa monitoring these risks. This process is Risk & Issues Management Committee Securities in 2012 (but have been regularly reviewed by the Board with (“RIMC”) in 2003. The Committee is delisted on 7 February 2013), assistance from the management. The chaired by the Executive Director/Vice namely QSR Brands Bhd and Board retains overall responsibility President of the Group; and represented for implementing and monitoring the by senior management members from all
SECTION 6 KFC Holdings (Malaysia) Bhd are internal control and risk management functions of the Group. The Committee also subject to similar disclosure process within the Group. met four (4) times in 2012. requirements as the Group in preparing this statement. These The Group’s system of internal control Apart from complying with the guidelines have not been applied is designed to manage, rather than governance requirement, this on the Group’s associates. eliminate the risk of failure to achieve Committee, which is cross-functional in business objectives which could arise nature, was formed to assist the Board from human error, the possibility of poor in implementing the processes for judgement in decision making, control identifying, evaluating, monitoring and process being deliberately circumvented reporting of risks and internal control by employees and others, management and to ensure proper management of overriding controls and the incidence risks to which the Group is exposed and of unforeseeable circumstances. Thus, to take appropriate and timely actions to it must be recognised that it can only manage such risks. provide reasonable and not absolute assurance against misstatement, In Kulim, the structure of the Group breaches of laws or regulations, fraud promotes the active participation of or losses. In addition, the management executive management in all of the needs to consider the expected cost operational and strategic decisions and benefits to be derived from the affecting their business units. A strong implementation of the internal control culture of ownership and accountability system. annual report 2012 141
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL GOVERNANCE STATEMENT
is built through a clear identification of specific roles and responsibilities from the Board, Audit Committee, Management Committee, RIMC, Risk Department, Risk Owner, Risk Co-Owner, Staff and Internal Audit Department. On an annual basis, the Internal Audit function assists the Audit Committee in reviewing the effectiveness of risk management and internal controls and providing an independent view on specific risks and control issues, the state of internal controls, trends and events.
The ERM risk reporting structure implemented in Kulim Group is as follows:
BOARD BOARD OF DIRECTORS
AUDIT COMMITTEE INTERNAL AUDIT
MANAGEMENT COMMITTEE RISK MANAGEMENT RIMC DEPT RISK AND ISSUES MANAGEMENT COMMITTEE
RISK OWNERS MARKETING & BUSINESS PLANTATION PROPERTY DEVELOPMENT OPERATION
CO-OWNERS AND STAFF NON MANAGEMENT AND SUPPORTING STAFF SECTION 6
Group risks are managed on an integrated basis and their evaluation is incorporated into the Group decision-making process such as the strategic planning and project feasibility studies. The management of Group risks is facilitated by the use of risk management software.
The Group has identified and implemented a systematic approach in managing the significant risks. This is done through the Risk Action Plan process which documents the detailed actions on how the approved chosen treatment options will be implemented as well as clearly identifies the priority order and designated person through which individual risk treatments should be implemented. Furthermore, to ensure that the agreed Risk Action Plan is being appropriately implemented, follow up processes are periodically performed on the Risk Owner until the agreed treatment options are executed successfully.
A risk management report is tabled to the Audit Committee on a quarterly basis and to the Board on a half-yearly basis. The report identifies the Top 10 risks affecting or likely to affect the Group and documents the implementation of appropriate actions to adequately manage those risks. In addition to the above, the Audit Committee and Board will be promptly updated with special risk reports or flash reports pertaining to any significant emerging risk issues that may arise from time to time during the year.
In ensuring the Group achieves its objectives, the risk management process and approach is tailored to Kulim’s structure and constantly changing environment to ensure that the Group can continuously monitor and review its risks and the effectiveness of its risk management over time. Accordingly, the following ERM phases are continuously practiced by the Group and based on the results of monitoring and reviews, decisions are made on how the risk management programme can be improved. These decisions should lead to improvements in the Group's management of risks and its risk management culture. 142 Kulim (Malaysia) Berhad (23370-V)
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PHASE 5 PHASE 1 Continuous Enhancing Monitoring & ERM Framework Communication
ERM IN KULIM
PHASE 4 PHASE 2 Risk Action Risk Assessment Monitoring Process
PHASE 3 Risk Action Implementation SECTION 6
A separate risk management function also exists within the Group’s significant listed subsidiaries with the establishment of Risk & Issue Management Committee within the respective companies to assess and evaluate the risk management process of the respective companies on a periodic basis.
In essence, the management of risks is treated as an iterative process. The benefits arising from the setting up of this committee is the creation of awareness among employees of different departments to take cognisance of risk on Group-wide basis. This enhances the Risk Ownership factor across the Group significantly.
Profile of key risks faced by the Group The Risk & Issue Management Committee shall report to the Audit Committee and the Board the profile of key risks that may create a significant or material adverse impact to the Group as well as impede the achievement of the established objectives. Among top risks for the Group are Fluctuation of Crude Palm Oil (“CPO”) Price and Dependency on Foreign Workers. Our recent sensitivity analysis on CPO Price variation indicates that a RM100 per tonne change in CPO price would have an approximate impact of RM25 million to the Group’s profit before tax. annual report 2012 143
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In conjunction with the recent downward trend in CPO prices, the Group has established short-term and long-term initiatives to manage the downside risk of CPO prices. Since the price volatility is beyond the Group’s control, steps taken focus on productivity improvement and cost efficiency without compromising quality and standards. The impact of declining CPO price can be managed through the following initiatives:
• expand mechanisation to increase productivity; • widen the application of labour saving technology to reduce cost per unit; • minimise wastages in all processes inclusive harvesting and milling; • maximise crop recovery during both peak and low crop seasons; • reprioritise or deferment of capital expenditure (primary and secondary); and • tightening up the security and internal controls to minimise losses.
Promotion of Risk AwarenesS The Group’s vision for future risk management is to have a culture in which risk is managed in an integrated manner that will enable the Group to:
• be recognised for best practice management; • achieve the Group’s Vision, Mission and Business Goals; • achieve financial and operational goals; and • be seen as a Group with high ethics and that is managing its risks responsibly.
reactive proactive adaptive
basic mature strategic SECTION 6 Kulim is committed Stay in compliance Become a management A strategic tool for to establishing an process Board / Management organisational philosphy and culture that ensure effective business risk Actions are in Focus on response to Shift from loss management as an response to what continuity of services prevention to revenue integral part of all group has just happened with the least amount of preservation and activities and a core interruptions possible generation management capability
In support of the Group’s vision to promote a risk awareness culture, the Group has conducted several training sessions during the year namely, ERM Awareness Workshop, Risk Assessment and Risk Action Plan Workshops and end-users training on risk management software.
During the annual induction programme for new employees, the Chief Risk Officer (“CRO”) will brief on the Group’s approach to risk management and internal controls across the various departments. This session will also enable new employees to understand the internal control process and their specific roles and responsibilities in managing the risks. 144 Kulim (Malaysia) Berhad (23370-V)
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CONTROL ENVIRONMENT AND CONTROL ACTIVITIES
Key to the Group’s Internal Control and Risk Management process is its Control Self-Assessment (“CSA”) process. The process is a recognised and flexible management tool for acquiring information about business process risks, while empowering the risk owners to undertake responsibility for managing those risks. Risk assessment and evaluation form an integral part of the annual strategic cycle. The Board, as part of the annual strategic review, considers and approves the Group’s risk structure.
The Board has adopted a control framework in ensuring the achievement of Group’s established objectives and that the Group’s business operations are effectively managed.
The key elements of the Group’s system of internal control are as follows:
Board and Management Committees Board and Management Committees are set up to promote corporate governance, transparency and accountability and to assist the Board in implementing and monitoring the system of internal controls within the Group with the aim of realising the vision, mission, strategies and objectives established for the Group.
The Committees oversee the areas assigned according to their Terms of Reference (“TOR”) which are carefully developed to ensure it is aligned with Group’s objectives, short-term and long-term strategic plans and to avoid overlapping activities and gaps in governance coverage.
AC BOD NRC MCM
MCM - SECTION 6 BOS EXCO Budget SQC Tender & AF
Appraisal, Palm Oil IV EXCO RIMC POC KPI & Bonus Marketing
Plantation Audit Agreement Training Budget OSH Review IV Review
Project Risk Credit Control Evaluation IV
Strategic Direction Direction Monitoring & Risk Control Performance Monitoring
Strategic & Business Direction Financial Operation & Business Risk annual report 2012 145
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BOARD COMMITTEE NAME OF COMMITTEE PRIMARY FUNCTION Audit Committee (“AC”) To assist the Board in maintaining a sound system of internal control by ensuring the openness, integrity and accountability of the Group’s activities so as to safeguard the rights and interest of the shareholders. Nomination and To oversee the selection and assessment of directors by development, maintenance Remuneration Committee and review of the criteria to be used in the recruitment process and annual assessment (“NRC”) of directors. The Committee is also responsible for establishing formal and transparent remuneration policies and procedures to attract and retain directors.
MANAGEMENT COMMITTEE NAME OF COMMITTEE PRIMARY FUNCTION Management Committee To review and evaluate the performance progress including the key policy and strategy (“MCM”) implementations of the various divisions, subsidiaries and operating units of the Group. Where authorised, to formulate and approve matters relating to Group policy, objectives and business strategy and projects, and where necessary to evaluate and recommend for Board’s approval. Executive Committee (“EXCO”) To coordinate departmental roles and administrative matters in relation to the various divisional operations and to review, recommend and seek Management’s approval on any related proposals. Management Committee - To recommend to the MCM the award of contracts for purchases and projects to suppliers/ Budget, Tender and Additional contractors in accordance with the Contract Administration Guidelines and Procedures of Capital & Revenue Expenditure the Company. (“MCM - Budget, Tender & AF”) To review the budget and all requests pertaining to capital and revenue spending and to recommend them for the ratification of the MCM. Risk & Issues Management To conduct risk identification, evaluation and review of risk treatment process on a periodic SECTION 6 Committee (“RIMC”) basis to ensure that the Group is managing risks effectively. Further details on the Committee are set out in page 140 - 143. Plantation Operation To ensure that estates and mills owned and managed by the Group operate in accordance Committee (“POC”) with Group’s requirements and at the best possible standards. Palm Oil Marketing Committee To review and decide on the appropriate selling arrangement, quantity and prices of the Group’s palm products. Board of Survey (“BOS”) To review all requests pertaining to write-off/back of fixed assets, debtors, stocks and creditors and recommend them for the ratification of the MCM. Sustainability and Quality To oversee and monitor the development, implementation, maintenance, compliance and Council (“SQC”) effectiveness of all matters relevant to sustainability and quality initiatives of the Group as well as ensuring compliance with the principles and criteria of RSPO. Appraisal, KPI and Bonus To deliberate on performance, KPIs, behavioural competencies and recommend appropriate Committee increments, promotions and merit of all executives and corporate office staff. Training Committee To formulate training plan to meet the objective of enhancing the knowledge, skill and competencies of Kulim’s employees. Plantation Budget Review To ensure the Plantation Operation budget is prepared with the objective of maximising the long-term profitability of the Group’s oil palm plantations, and at the same time, maintaining their sustainability. OSH Committee To foster cooperation and consultation between management and workers in identifying, evaluating and controlling hazards at workplaces. 146 Kulim (Malaysia) Berhad (23370-V)
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COMMITTEES FOR INTRAPRENEUR VENTURES NAME OF COMMITTEE PRIMARY FUNCTION IV Monitoring & Executive To monitor progress and development of all the IV companies with the objective of Committee (“IV EXCO”) strengthening their business and management capabilities by providing necessary business guidance and referrals. To evaluate viability of projects, proposals, funding, capital expenditure or capital adequacy of the IV companies. Credit Control Committee To appraise the financial health, performance of the IV companies and their compliance to accounting standards, Income Tax Act and internal controls by the IVs. Project Risk Evaluation To ensure that IV companies/projects of the Group are being run, coordinated and managed Committee at the best possible standards and in compliance with the Group’s requirements and risk management policies. Audit Review Committee To monitor the Internal Control System and recommend improvement of the Internal Control System and practices to achieve the company’s objectives. To ensure operations of IV companies are in compliance with laws and regulations and the Group’s Code of Conduct and Business Ethics and that the IV companies are being managed in line with the aspiration and expectations of Kulim. Agreement Committee To ensure that material agreements are forwarded for Committee discussion and/or approval. This is to ensure and safeguard the Group’s interest.
Organisation Structure The Board has established a formal organisation structure for the Group with delineated lines of authority, responsibility and accountability. It has put in place suitably qualified and experienced management personnel to head the Group’s diverse operating units with focus on delivering results. Their performance is measured against Key Performance Indicators which have been approved by the Board
SECTION 6 Internal Audit The Board recognises that the Internal Audit function is an integral component of the governance process. The Internal Audit Department operates within the Audit Charter approved by the Audit Committee and performs internal audit across the Group’s diverse areas and environment focusing on any management, accounting, financial and operational activities including the effectiveness of risk management process and internal control within the organisation.
The Group’s Internal Audit maintains a Quality Assurance and Improvement Programme (“QAIP”) and continuously monitors its overall effectiveness. In year 2012, a Quality Assurance Review (“QAR”) was conducted via an independent external reviewer to validate the conformance of internal audit activities with the International Standards for the Professional Practice of Internal Auditing.
The Group’s listed subsidiaries in Malaysia also have separate Internal Audit functions within their organisations which carry out the approved audit plan, risk evaluations, and review the adequacy and effectiveness of the internal control system. Similarly, the Internal Audits report directly to the Audit Committee of these companies.
External Auditors The External Auditors issue a Management Letter highlighting issues and weaknesses, which came to their attention during the conduct of their normal audit procedures. The Group’s Internal Audit subsequently performs follow-up reviews to determine the extent to which the recommendations have been implemented. annual report 2012 147
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL GOVERNANCE STATEMENT
The External Auditors are appointed by the Board to review this Statement on Risk Management and Internal Control and to report thereon.
This Statement on Risk Management and Internal Control has been reviewed by the External Auditors for the inclusion in the Annual Report of Kulim (Malaysia) Berhad for the year ended 31 December 2012. The External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of the internal controls.
OTHER ELEMENTS OF INTERNAL CONTROL
Apart from the committees and parties mentioned in the Corporate Governance Statement, the Audit Committee Report and sections above, the other elements of the Group’s Internal Controls are as follows:
Financial Authority Limit The Financial Authority Limit defines revenue and capital expenditure spending limits for each level of management within the Group. These limits cover authority for cheques signatories, major capital and revenue expenditure spending limits, purchasing and contract procedures and approval mechanism for budget.
Budget Approval Budget is an important control mechanism used by the Group to ensure an efficient allocation of Group’s resources and that the operational managers have sufficient guidance in making business decisions. Budgets are generated annually at each subsidiary and operating unit.
For the plantation units, budgets will be reviewed by the Regional Controllers followed by their presentation to a Plantation Budget Review Committee for further deliberation.
Significant subsidiaries will have their budgets reviewed by their own budget committee. All budgets will then be presented for deliberation of the MCM - Budget, Tender and AF Committee, and subsequently will be tabled to MCM for approval and
endorsement. Finally the budgets will be presented to the Board for final review and approval. SECTION 6
Procurement A centralised and coordinated procurement function is established at each of the Group’s key business division which enables the Group to leverage on economies of scale and ensures adherence to authority limits, policies and procedures.
Major contract and supply works of both capital and revenue natures exceeding the defined threshold amounts in the relevant contract procedure are required to be tendered out. Eligible bidders for contract works will need to attend a contract interview with the Contract Interview Committee, which is made up of representatives from several departments at the divisional head-quarter including the acquiring unit’s Manager. The Contract Interview Committee will then forward the recommendations to the MCM - Budget, Tender and AF Committee for further review and approval.
Plantation Operational Control Through meeting of the Plantation Operation Committee, which is held once every two months, the progress of Group’s estates and mills are monitored. During the meetings, reports and matters including monthly management reports, agronomists’ reports, plantation inspectorates’ reports, internal audit reports and manpower requirement assessment are tabled for discussion. Any major issues will be highlighted for corrective actions to be taken. 148 Kulim (Malaysia) Berhad (23370-V)
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The executives from the management office visit the Groups’ estates/mills regularly. Regular discussions are also carried out via phone, fax and e-mail. Regional Heads, Regional Controllers, Plantation Inspectorates and Agronomists separately visit the operating units. A detailed report on the state of affairs of the units is produced after each visit. Security teams visit the operating units on unscheduled basis to review the integrity of the security system. The visits also cover physical security on inventories, post-harvest crops and finished products up to point of delivery.
IV Operational Control Through internal committee meetings, the operational and financial performances as well as progress of projects undertaken by the respective IV companies are monitored. The reports on the financial performance of the IV companies are also submitted on monthly basis to the Group. Any major issues highlighted will be tabled at the Management Committee Meeting.
Operating and Procedural Manuals The Group has reference manuals covering agricultural practices, purchasing and contract procedures, financial operating system and financial policies and procedures. These will assist and guide employees on purchasing and contract awards, preparing of financial statements, observing the various internal control policies and procedures, as well as maintaining good management practices to ensure cost efficiencies, integrity of financial records and to safeguard the Group’s assets. The Board believes that all these control measures will significantly enhance the internal control of the Group.
The major Policy and Procedure Manuals include:
1) Agricultural Manual 2) Accounting Policies & Procedures 3) Executive and Staff Schemes of Service 4) Contract Administration and Purchasing Guidelines Procedures 5) RSPO Malaysia National Interpretation Working Group (RSPO - MY NIWG 5) 6) ERM Framework SECTION 6 7) Internal Audit Manual 8) Internet Access Policy and Notebook Accommodation Policy 9) Standard Operating Procedures
Forward Sales Policy The Group has in place a forward sales policy for its palm oil and biodiesel products which has been approved by the Board. For Malaysian palm oil products, the Group adopts a forward policy covering a maximum of 6 months and 90% of the Group’s own fruits, whereas Malaysian biodiesel products are allowed to be sold forward up to the maximum of 12 months ahead.
Regulatory Compliance The Group adheres strictly to health, safety and environmental regulations and is subject to regular inspections by the relevant government authorities.
For the Group’s Plantations division in Malaysia, the Sustainability Department is responsible to ensure that the plantation operations are conducted within the applicable laws, regulations and quality standards. annual report 2012 149
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Fraud Policy This policy was established to facilitate the development of controls which will aid in the detection and prevention of fraud against Kulim. The policy details responsibility, reporting and disclosure of fraud occurrences, and investigations relating to fraud. The policy applies to any fraud, or suspected fraud, involving employees as well as vendors, customers and partners who have business relationship with the Group. The Group has also established a Grievance Policy and Procedure as well as Women OnWards so as to allow employees to bring to the attention of management of Kulim any dissatisfaction or feeling of injustice which may exist in respect of the workplace. The management will attempt to resolve the grievance in a manner, which is acceptable to the employee concerned and the Group.
Code of Ethics This code of ethics defines the standards of conduct that are expected of employees to help them make the right decision in the course of performing their jobs to the highest standards of ethic, integrity and governance. Among others, the Code also requires the employees to ensure the following:
• maintaining full and accurate company records; • all assets and property of the company will be used only for the benefit of the company; • always dealing with customers and suppliers based on merit and fairness; • engage competitors in a fair manner and not to engage in any unfair or illegal practice in order to gain an unfair advantage; • always act to ensure a workplace environment that is free from harassment and discrimination; and • deal with all team members with respect, courtesy and fairness.
All employees are required to adhere to the Group’s code of ethics and to submit the Ethics Declaration Form annually. Employees are also encouraged to engage in an open dialogue with the Senior Management through the Group’s Roundtable Conference (“RTC”).
Maintaining Compliance to the RSPO Certification Requirement SECTION 6 Sustainability is a core value of the Group. Kulim has established its sustainability credentials by attaining RSPO certification. Safeguarding this reputation is critical to the organisation and the Group has put in place the control measures in the form of appropriate policies, monitoring systems and procedures so as to minimise, if not prevent the risks of non-compliance with the stringent requirements of RSPO. Among the key measures are:
• Site follow-up visits and inspections are conducted on periodic basis to review the status of compliance, weaknesses and gaps in the implementations of various programs, which is also in line with the requirement of Principle 8 of RSPO on Continuous Improvement;
• Key Performance Indicators (“KPI”) affecting key aspects of the certification requirements are developed to complement the economic indicators, which are subject to regular monitoring on their achievement progress;
• RSPO trainings and briefings are conducted regularly to ensure changes and updates on RSPO requirements are communicated to all affected employees; 150 Kulim (Malaysia) Berhad (23370-V)
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• In relation to the requirements of laws and regulation in the areas of safety and health, Kulim regularly collaborates with suppliers and contractors towards ensuring both parties’ responsibilities in complying with the relevant legislations. Kulim also engages third party OSH auditors to conduct independent verification on the Group’s compliance status;
• Proper documentation and reference systems are established. These include Kulim Sustainability Handbook that sets out all the relevant policies to guide employees. All system documentation are monitored and controlled through the Document Annual Review and all changes affecting the documents are traced through the Document Change Note System; and
• In relation to the social impact of the business on the various levels of stakeholders, internal social impact assessments, guided by the SA8000 Standard are conducted on all Operating Units to identify shortcomings which are monitored through the Social Register.
CONCLUSION
The Board is of the view that the system of internal controls instituted throughout the Group is sound and effective and provides a level of confidence on which the Board relies for assurance. During the year under review, there has been no significant control failure or weakness or any adverse compliance events that would result in any material losses, contingencies or uncertainties that would require separate disclosure in the Annual Report. The Board will ensure that the review of the internal control system of the Group be carried out continuously to ensure ongoing adequacy and effectiveness of the system of internal controls and risk management practices to meet the changing and challenging operating environment.
The Board’s view is arrived at after taking into consideration the followings:
• consistent internal audit and risk management reports
• periodic discussions and debates on the internal audit and risk management reports
• continuous risk and internal control reviews in the Risk & Issues Management Committee and Management Committee
SECTION 6 involving the CEO and CFO that are debated and presented to the Audit Committee and the Board
• assurance from the CEO and CFO that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group.
• periodic management reports on the state of the Group’s internal controls
The Board is therefore pleased to affirm that the state of internal controls of the Group is adequate, appropriate and effective and in line with the Malaysian Code of Corporate Governance and the Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. annual report 2012 151 AUDIT GOVERNANCE STATEMENT COMMITTEE REPORT
COMPOSITION AND ATTENDANCE For the financial year ended 31 December 2012, the Audit Committee comprised of 3 Directors, all of whom are also members of the Board of Kulim (Malaysia) Berhad.
The composition of the Audit Committee was as follows:
1. Tan Sri DATO’ SERI UTAMA Arshad Ayub Chairman / Independent Non-Executive Director
2. dR. Radzuan A. Rahman
Member / Independent Non-Executive Director SECTION 6
3. Leung Kok Keong (appointed w.e.f. 23.5.2012) Member / Independent Non-Executive Director
4. kua Hwee Sim (resigned w.e.f. 23.5.2012) Member / Independent Non-Executive Director
The attendance record of the members of the Audit Committee during the financial year 2012 was as follows:
28.2.2012 23.5.2012 15.8.2012 20.11.2012 Tan Sri Dato’ Seri Utama Arshad Ayub Dr. Radzuan A. Rahman Leung Kok Keong - - 152 Kulim (Malaysia) Berhad (23370-V)
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TERMS OF REFERENCE 2. No alternate directors shall be Authority Primary Purpose appointed to the Committee. The Committee for the performance The primary purposes of the Audit of its duties shall in accordance to the Committee are: 3. At least one member of the Audit same procedures adopted by the Board Committee: and at the cost of the Group: 1. To ensure openness, integrity and accountability in the Group’s i. must be a member of 1. Have the authority to investigate activities so as to safeguard the rights the Malaysian Institute of any activity within its Terms of and interests of the shareholders; Accountants (“MIA”); or Reference;
2. To provide assistance to the Board in ii. if he is not a member of MIA, 2. Have the resources which are fulfilling its fiduciary responsibilities he must have at least 3 years of required to perform its duties; relating to corporate accounting working experience and: and reporting practices; 3. Have full and unrestricted access • he must have passed the to any employee and information 3. To improve the Group’s business examinations specified in pertaining to the Group. All efficiency, the quality of accounting Part I of the 1st Schedule in documents of the Group shall be and audit function and strengthening the Accountants Act, 1967; made accessible to the Committee; of public’s confidence in the Group’s or reported results; 4. Have direct communication channels • he must be a member of with the External Auditors and 4. To maintain a direct line of one of the associations of person(s) carrying out the Internal communication between the Board accountants specified in Audit function or activity for the and the External and Internal Part II of the 1st Schedule in Group; Auditors; the Accountants Act, 1967; or 5. Have the authority to direct the 5. To enhance the independence of Internal Audit Department (both the External And Internal Audit • fulfils such other requirement corporate, subsidiaries, associates, functions; and as prescribed or approved joint ventures, where applicable) in
SECTION 6 by the Exchange. its activities, including approval of 6. To create a climate of discipline appointments of senior executives and control, this will reduce the 4. The Committee Members shall and budget in these functions; and opportunity for fraud. collectively have: 6. To be able to engage independent Membership i. knowledge of the industries in professional advisors or other 1. The members of the Committee which the Group operates; advisors and to secure attendance shall be appointed by the Board of of outsiders with relevant experience Directors of Kulim and shall consist ii. the ability to read and understand and expertise if it considers this of not less than 3 members, all fundamental financial statements, necessary. of whom must be non-executive including a company’s balance directors, with a majority of them sheet, income statement of Functions and Duties being independent directors. If cash flow and key performance The Committee shall carry out the membership for any reason falls indicators; and following responsibilities: below 3 members, the Board of Directors shall, within 3 months of iii. the ability to understand key Financial Statements that event, appoint such number of business and financial risks 1. Review and recommend acceptance new members as may be required and related controls and control or otherwise of major accounting to fulfil the minimum requirement. processes. policies, principles and practices. annual report 2012 153
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2. Review the Group’s quarterly results 4. Review Internal Audit reports External Audit and annual financial statements of (including those of the Group) and 1. Review External Audit plans and the Company and the Group before the management’s response and scope of work before the audit submission to the Board. The review ensure that appropriate action is commences. should focus primarily on: taken in respect of these reports and the Committee’s resolutions. 2. Discuss problems and reservations i. any changes in or implementation Where actions are not taken arising out of external audits, of major accounting policy within adequate time frame by including assistance given by the changes management, the Committee will employees and any matters the ii. major judgmental areas, report to the Board for its decision. Auditors may wish to discuss, significant and unusual events in the absence of Management 5. Review External Auditors’ and the or Executive Directors where iii. significant adjustments resulting management’s response and ensure necessary. from audit that appropriate action is taken in iv. the going concern assumptions respect of these reports and the 3. Nominate the External Auditors Committee’s resolutions. together with such other functions as v. compliance with accounting may be agreed to by the Committee standards Internal Audit and the Board, and recommend vi. compliance with stock exchange 1. Approve the Corporate Audit Charter for approval of the Board the and legal requirements and charters of the Internal Audit external audit fees, and consider functions in the Group and ensure any questions of resignation or 3. Review with management and the that the Internal Audit functions dismissal, experience, resources external auditors, the results of are adequately resourced and and capability. the audit, including any difficulties have appropriate standing in the encountered. Group. This includes a review of the Compliance organisational structure, resource 1. Review the effectiveness of the 4. Review, with the Group’s Counsel, budgets and qualifications of the system for monitoring compliance any legal matter that could Internal Audit functions. with laws and regulations and have a significant impact on the the results of the management’s organisation’s financial statements.
2. Review the adequacy of the Internal investigation and follow-up of any SECTION 6 Audit plans and the scope of instances of non-compliance. Internal Control audits and that the Internal Audit 1. Assess the quality and effectiveness Department has the necessary 2. Review the findings of any of the systems of internal control authority, competency and examinations by regulatory authorities. and the efficiency of the Group’s resources to carry out its work. operations, particularly those 3. Obtain regular updates from the relating to areas of significant risks. 3. Approve the appointment of Head management and Group’s legal To evaluate the process the Group of Internal Audit. counsel regarding compliance has in place for assessing and matters. continuously improving internal 4. Review appraisals or assessments controls. of members of the Internal Audit 4. Review any related party functions. transactions and conflict of interest 2. Assess the internal processes for situation that may arise within the determining and managing key 5. Inform itself of resignations of Company or the Group including any risks other than those that are Internal Audit staff members and transaction, procedure or course of dealt with by other specific Board provide the resigning staff member conduct that raises questions of the Committees. an opportunity to submit his reasons management integrity. for resigning. 3. Review the scope of Internal and External Auditors’ review of internal 6. Direct any special investigations to control over the Group. be carried out by the Internal Audit. 154 Kulim (Malaysia) Berhad (23370-V)
GOVERNANCE STATEMENT AUDIT COMMITTEE REPORT
5. Where the Committee is of the view 4. The meetings of the Committee an actual or perceived conflict of that a matter reported by it to the shall be governed by the provisions interest situation for the member. Board has not been satisfactorily contained in the Memorandum Where this cause insufficient resolved, resulting in a breach to the and Articles of Association of the directors to make up a quorum, the Main Market Listing Requirements, Company for regulating the meetings Committee has the right to appoint the Committee must promptly and proceedings of Directors unless another director(s) which meets the report such matters to the Bursa otherwise provided in this Terms of membership criteria. Securities. Reference. 10. The Secretary of the Committee Other Responsibilities 5. The Non-Executive Directors of the shall be the Company Secretary 1. Review and reassess, with the Board who are not members of the or his/her appointed nominee with assistance of the management, the Committee may also attend the the appropriate qualifications and External Auditors and legal counsel, meeting of the Committee, but they experience. the adequacy of the Terms of shall not have any voting rights. Reference of the Committee at least 11. The agenda for the Committee annually. 6. The meetings of the Committee meeting shall be the responsibility shall normally be attended by the of the Committee Chairman 2. Confirm annually that all Head of Internal Audit and the with input from the Committee responsibilities outlined in the Terms Management of the Company shall members. The Chairman may also of Reference have been carried out. be represented by the Managing ask the management and others to Director and the Head of Finance, participate in this process. 3. Perform other duties as directed by or their nominated person(s), at the Board. the invitation of the Committee and 12. The notice and agenda of each shall excuse themselves from the meeting shall be circulated at least Meetings meeting when so directed by the 7 working days before each meeting 1. Meetings of the Committee shall be Committee. to the Committee members and all held not less than 4 times during the those who are required to attend the financial year of the Company. 7. The Committee may request meeting. Written materials including other Directors, Members Of information requested by the
SECTION 6 2. Upon the request of any member of Management, Counsels, Internal Committee, from the management, the Committee, the Head of Internal Auditors (including subsidiaries) internal auditors and external Audit or the External Auditor, the and External Auditors, applicable auditors shall be received together Chairman of the Committee shall to participate in the Committee with the agenda for the meetings. convene a special meeting of the meetings, as necessary and Committee to consider any matter when so invited, to carry out the 13. Reports of the Committee meeting brought up by them. Committee’s responsibilities. shall be tabled at the meeting of the Board Directors of the Company. 3. The quorum for the meeting of the 8. The Committee shall meet the Committee shall be 2 members and External Auditors, the Internal 14. The Committee, through its the majority of the members present Auditors or both, excluding the Chairman, shall report to the Board shall be Independent Directors. attendance of other directors and after each meeting. In the absence of the Chairman, employees, whenever deemed the members present shall elect necessary. 15. The Chairman of the Committee shall a chairman for the meeting from be available to answer questions amongst the members present. 9. A Committee member shall excuse about the Committee’s work at the himself/herself from the meeting AGM of the Company. during discussions or deliberation of any matter which gives rise to annual report 2012 155
AUDIT COMMITTEE REPORT GOVERNANCE STATEMENT
Summary of Activities 8. Review of related party transactions Other IAD activities carried out during During the period, the Audit Committee entered into by the Group; the year are summarised as below: carried out its duties and responsibilities in accordance with its Terms of 9. Review of the extent of the 1. Conducted roadshows/workshops Reference: Group’s compliance with the with the estate/mill management relevant provisions set out deliberating on the new Control The main activities undertaken by the under the Malaysian Code on Self-Assessment (“CSA”) topic at all Audit Committee were as follows: Corporate Governance for the regions. purpose of preparing the Corporate 1. Review and approval of the annual Governance Statement and 2. Worked together with the estates internal audit plan for the year Statement on Risk Management and mills on specific risk and control 2012/2013; and Internal Control pursuant to the review through CSA programmes. Main Market Listing Requirements; 2. Review of the External Auditors’ and 3. Participated in Corporate Social audit observations, the audit report Responsibility (“CSR”) programmes and recommendations in respect 10. Review of the risk management organised by management. of control weaknesses noted in the development presented by Chief course of their audit; Risk Officer. 4. Performed internal self-assessment on conformance with the 3. Review of the audited financial Internal Audit Function International Standards for the statements for the financial year The Group’s Internal Audit function Professional Practise of Internal ended 31 December 2012 before is carried out by the Internal Audit Auditor (“Standard”). The Quality recommending the same to the Department (“IAD”) and led by a Certified Assurance Review (“QAR”) has Board of Directors for approval; Internal Auditor (“CIA”). IAD is established been conducted via independent separately at the Group Corporate Office. external reviewer to validate the 4. Review of the Company’s The IAD reports directly to the Audit conformance of internal audit compliance, in particular the Committee and is guided by its Internal activities with the Standards. quarterly and year-end financial Audit Charter. The IAD assists the Board statements with the Main Market in fulfilling its fiduciary responsibilities 5. Conducted special review based on
Listing Requirements of Bursa over the areas of financial, operational, requests from the Audit Committee SECTION 6 Securities and the applicable information systems, investigations, risk and/or management approved accounting standard management and governance process issued by the Malaysian Accounting in accordance with the approved The total cost incurred for the Internal Standard Board; Risk-Based Annual Audit Plan. Audit function at the Group Corporate Office level for the financial year ended 5. Review of the quarterly unaudited On quarterly basis, the IAD provides the 31 December 2012 was approximately financial results announcements Audit Committee with independent and RM1,350,000. before recommending them for the objective reports on the state of internal Board of Directors’ approval; control, highlighting any areas for improvement and updates on the extent 6. Review of the Internal Audit to which the recommendations have activities related to management been implemented. The management and operations, capacity, internal is responsible to ensure that corrective audit framework and of the analytical actions on reported weaknesses as process and reporting procedures; recommended are taken within the required time frame to ensure that all 7. Review of the audit reports potential weaknesses in system and presented by the Internal risks under reviewed area are mitigated Auditors and management’s or remain within manageable levels. responses thereto and reviewing management’s assurance that significant finding are adequately addressed; 156 Kulim (Malaysia) Berhad (23370-V) GOVERNANCE STATEMENT ADDITIONAL COMPLIANCE INFORMATION
The following information is provided in compliance with the Main Market Listing Requirements of Bursa Securities for the financial year ended 31 December 2012:
Utilisation of Proceeds from Corporate Proposals Sanctions and/or Penalties There was no corporate proposal specifically intended to There were no material sanctions and/or penalties imposed raise funds undertaken during the financial period ended 31 on the Company and its subsidiary companies, directors or December 2012, which has resulted in the receipt of proceeds management arising from any significant breach of rules/ for utilisation. guidelines/legislations by the relevant regulatory bodies during the financial year. Share Buy-Backs The Company had, on 20 June 2005, obtained the shareholders’ Non-Audit Fees approval to purchase up to 10% of its issued and paid-up During the financial period under review, non-audit fees paid to share capital. the external auditors of the Group amounted to RM1,151,000 (please refer to page 197 of the audited financial statements). During the financial year, the Company has acquired 9,880,000 units of its own shares pursuant to the renewed mandate for Variation in Results the share buy-back as approved by the shareholders of the There is no material variance between the results for the Company at the 37th AGM held on 26 June 2012. financial year and the unaudited results previously announced by the Group. As at 31 December 2012, a total of 9,880,000 ordinary shares were held as treasury shares. The details of the buy-backs are Profit Guarantee set out in page 37. The Company did not issue any profit forecast or profit guarantee for the financial year ended 31 December 2012. Options, Warrants or Convertible Securities Exercised In 2011, a total of 156,174,319 free warrants were issued by Material Contracts the Company in conjunction with the share split and bonus Other than those disclosed in the financial statements from issue on 28 February 2011. The warrants have an exercise page 253 to page 256, there was no material contract including SECTION 6 period of 5 years commencing 28 February 2011 and expiring contracts relating to any loans entered into by the Group and on 27 February 2016. its subsidiaries involving Directors and major shareholders’ interest. As at 31 December 2012, 20,511,611 warrants have been exercised and converted into new ordinary shares. Recurrent Related Party Transactions of Revenue and/or Trading Nature The Company has not issued any other convertible securities At the AGM held on 26 June 2012, the Company obtained in respect of the financial year ended 31 December 2012. a shareholders’ mandate to allow the Group to enter into recurrent related party transactions of revenue and/or trading Depository Receipt Programme nature from even date up to the forthcoming AGM. The Company has not sponsored any depository receipt programme for the financial year ended 31 December 2012. The list of significant recurrent related party transactions entered into by the Group is described on page 157 of the Annual Report. annual report 2012 157 ADDITIONAL DISCLOSURE GOVERNANCE STATEMENT PURSUANT TO THE LISTING REQUIREMENTS
RECURRENT RELATED PARTY TRANSACTIONS OF REVENUE AND/ OR TRADING NATURE The aggregate value of the recurrent transactions of revenue and/or trading nature conducted pursuant to the Shareholders’ Mandate during the financial year ended 31 December 2012 between the Company and/ or its subsidiary companies with related parties are set out below:
Related Parties Involved with the Nature of Aggregate Company and/ Relationship Value of or Subsidiary Interested Director and/or with Kulim Transaction Companies Major Shareholder Group Type of Transaction (RM) 1. Johor Dato’ Kamaruzzaman Abu Kulim is Sale of FFB 3,636,000 Corporation Kassim a 60.02% (“JCorp”) Ahamad Mohamad owned Purchasing and sales commission on oil 1,952,000 Datin Paduka Siti Sa’diah Sh subsidiary of palm products Bakir JCorp Rozan Mohd Sa’at Sales of agriculture machinery equipment 2,903,000 Zulkifli Ibrahim Jamaludin Md Ali 2. Johor Foods Sdn Dato’ Kamaruzzaman Abu JFSB is a Sale of FFB 13,823,000 Bhd (“JFSB”) Kassim wholly-owned Ahamad Mohamad subsidiary of Purchasing and sales commission on oil 726,000 Datin Paduka Siti Sa’diah Sh JCorp palm products Bakir Rozan Mohd Sa’at Sales of agriculture machinery equipment 686,000 Zulkifli Ibrahim Jamaludin Md Ali Sales of oil palm seedling and biocompost 364,000 SECTION 6
JCorp 3. Johor Franchise Dato’ Kamaruzzaman Abu JFDSB is a Sales of agriculture machinery equipment 1,316,000 Development Sdn Kassim wholly-owned Bhd (“JFDSB”) Ahamad Mohamad subsidiary of Datin Paduka Siti Sa’diah Sh JCorp Bakir Rozan Mohd Sa’at Zulkifli Ibrahim Jamaludin Md Ali
JCorp 4. Johor Land Berhad Dato’ Kamaruzzaman Abu JLand is a Purchase of FFB 3,238,000 (“JLand”) Kassim wholly-owned Ahamad Mohamad subsidiary of Datin Paduka Siti Sa’diah Sh JCorp Bakir Rozan Mohd Sa’at Zulkifli Ibrahim Jamaludin Md Ali
JCorp FINANCIAL STATEMENTS
159 Directors’ Report 164 Statement by Directors 164 Statutory Declaration 165 Independent Auditors’ Report 167 Statements of Comprehensive Income 169 Statements of Financial Position 171 Statements of Changes In Equity 174 Statements of Cash Flows 177 Notes to the Financial Statements 275 Supplementary Information annual report 2012 159 DIRECTORS’ FINANCIAL STATEMENTS REPORT
The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2012.
Principal activities
The Company is principally engaged in oil palm plantation, investment holding and property investment in Malaysia whilst the principal activities of the subsidiaries are as stated in Note 17 to the financial statements.
There have been no significant changes in the nature of the principal activities during the financial year.
Results Group Company RM'000 RM'000
Profit net of tax 1,011,267 173,082
Profit attributable to : Owners of the Company 831,651 173,082 Non-controlling interests 179,616 - 1,011,267 173,082
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.
In the opinion of the directors, the results of the operations of the Group and of the Company were not substantially affected by any item, transaction or event of a material and unusual nature other than as disclosed in Note 11, Note 18 and Note 32 to the financial statements
Dividends
The amounts of dividends paid by the Company since 31 December 2011 were as follows:
RM'000 In respect of the financial year ended 31 December 2012: SECTION 7 Interim tax exempt (single-tier) dividend of 7.50 sen per share, totalling approximately RM95,992,000 declared on 5 October 2012 and paid on 16 November 2012 95,992
Special tax exempt (single-tier) dividend of 90.94 sen per share, totalling approximately RM1,158,450,000 declared on 27 December 2012 and paid on 25 January 2013 1,158,450
Total dividends paid by the Company since 31 December 2011 1,254,442 160 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Directors’ Report
Directors
The names of the directors of the Company in office since the date of the last report and at the date of this report are:
Dato' Kamaruzzaman Abu Kassim Tan Sri Dato' Seri Arshad Ayub Ahamad Mohamad Wong Seng Lee Datin Paduka Siti Sa'diah Sh Bakir Datuk Haron Siraj Dr Radzuan A. Rahman Rozan Mohd Sa'at Zulkifli Ibrahim Leung Kok Keong Jamaludin Md Ali (appointed on 1 July 2012) Kua Hwee Sim (resigned on 23 May 2012) Datuk Ahmad Zaki Zahid (resigned on 4 December 2012) Wan Mohd Firdaus Wan Mohd Fuaad (resigned on 3 January 2013) Natasha Kamaluddin (resigned on 28 February 2013)
Directors' benefits
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 30 to the financial statements.
Directors' interests
According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:
Number of ordinary shares of RM0.25 each SECTION 7 As at As at Company 1.1.2012 Acquired Disposed 31.12.2012
Direct interest Tan Sri Dato' Seri Arshad Ayub 1,643,800 1,972,800 (1,639,800) 1,976,800 Ahamad Mohamad 963,400 - - 963,400 Wong Seng Lee 251,200 - - 251,200 Datin Paduka Siti Sa'diah Sh Bakir 278,000 - - 278,000 Rozan Mohd Sa'at 8,800 - - 8,800
Deemed interest Tan Sri Dato' Seri Arshad Ayub 4,800,800 - - 4,800,800 annual report 2012 161
Directors’ Report FINANCIAL STATEMENTS
Directors' interests (cont’d)
Number of ordinary shares of RM0.50 each 1.1.2012 Acquired Disposed 31.12.2012 In subsidiaries KFC Holdings (Malaysia) Bhd. Tan Sri Dato' Seri Arshad Ayub 200,000 - - 200,000
In related companies Damansara Realty Berhad
Direct interest Ahamad Mohamad 9,600 - - 9,600 Datin Paduka Siti Sa'diah Sh Bakir 320 - - 320
Deemed interest Ahamad Mohamad 3,200 - - 3,200
Number of ordinary shares of RM1.00 each 1.1.2012 Acquired Disposed 31.12.2012 In subsidiary QSR Brands Bhd.
Direct interest Tan Sri Dato' Seri Arshad Ayub 150,000 - - 150,000 Datin Paduka Siti Sa'diah Sh Bakir 1,000 - - 1,000
Deemed interest Tan Sri Dato' Seri Arshad Ayub 100,000 - - 100,000
None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.
Issue of shares
During the financial year, the Company increased its issued and paid-up ordinary share capital from RM315,509,000 to RM320,637,000 by way of the issuance of 20,512,000 ordinary shares of RM0.25 each upon the conversion of 20,512,000 warrants at the exercise price of RM3.85 per new ordinary share. SECTION 7
The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. 162 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Directors’ Report
Treasury shares
During the financial year, the Company repurchased 9,880,000 of its issued ordinary shares from the open market at an average price of RM4.64 per share. The total consideration paid for the repurchase including transaction costs was RM45,829,000. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.
During the financial year, the Company sold 27,482,200 of its repurchased ordinary shares to the open market at an average price of RM5.20 per share. The total consideration received for the resale including transaction costs was RM142,476,000.
At 31 December 2012, the Company held as treasury shares a total of 9,880,000 of its 1,262,037,000 issued ordinary shares. Such treasury shares are held at a carrying amount of RM45,829,000 and further relevant details are disclosed in Note 27(h) to the financial statements.
Other statutory information
(a) 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:
(i) 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
(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.
(b) At the date of this report, the directors are not aware of any circumstances which would render:
(i) the amount written off for bad debts or the amount of allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and
(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.
(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. SECTION 7
(e) As at the date of this report, there does not exist:
(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or
(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. annual report 2012 163
Directors’ Report FINANCIAL STATEMENTS
Other statutory information (cont’d)
(f) In the opinion of the directors:
(i) 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 will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and
(ii) 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 the operations of the Group or of the Company for the financial year in which this report is made.
Significant events
Details of significant events are disclosed in Note 32 to the financial statements.
Subsequent event
Details of subsequent events are disclosed in Note 33 to the financial statements.
Auditors
The auditors, Ernst & Young, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the directors dated 12 March 2013
Dato' Kamaruzzaman Abu Kassim Ahamad Mohamad SECTION 7 164 Kulim (Malaysia) Berhad (23370-V) FINANCIAL STATEMENTS STATEMENT BY DIRECTORS Pursuant to Section 169(15) of the Companies Act, 1965
We, Dato' Kamaruzzaman Abu Kassim and Ahamad Mohamad, being two of the directors of Kulim (Malaysia) Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 167 to 274 are 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 at 31 December 2012 and of their financial performance and cash flows for the year then ended.
The information set out in Note 40 to the financial statements have been prepared in accordance with the 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.
Signed on behalf of the Board in accordance with a resolution of the directors dated 12 March 2013
Dato' Kamaruzzaman Abu Kassim Ahamad Mohamad
STATUTORY DECLARATION Pursuant to Section 169(16) of the Companies Act, 1965
I, Azli Mohamed, being the officer primarily responsible for the financial management of Kulim (Malaysia) Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 167 to 275 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.
Subscribed and solemnly declared by the ) abovenamed Azli Mohamed at Johor ) SECTION 7 Bahru in the State of Johor on 12 March 2013 ) ) ) Azli bin Mohamed
Before me, annual report 2012 165 INDEPENDENT FINANCIAL STATEMENTS AUDITORS’ REPORT To the members of Kulim (Malaysia) Berhad (Incorporated in Malaysia)
Report on the financial statements
We have audited the financial statements of Kulim (Malaysia) Berhad, which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, 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 notes, as set out on pages 167 to 274.
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 control 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 about 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 our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we 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 the 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 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 at 31 December 2012 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 the following: SECTION 7
(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 financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 17 to the financial statements, being financial statements that have been included in the consolidated financial statements. 166 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Independent Auditors’ Report To the members of Kulim (Malaysia) Berhad (Incorporated in Malaysia)
Report on other legal and regulatory requirements (cont’d)
(c) We are satisfied that the financial statements 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 the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
(d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidated financial statements and did not include any comment required to be made under Section 174(3) of the Act.
Other matters
The supplementary information set out in Note 40 to the financial statements on page 275 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. 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 Disclosure 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.
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 to any other person for the content of this report.
Ernst & Young Abraham Verghese A/L T.V. Abraham AF 0039 1664/10/14(J) Chartered Accountants Chartered Accountant
Johor Bahru, Malaysia Date: 12 March 2013 SECTION 7 annual report 2012 167 STATEMENTS OF FINANCIAL STATEMENTS COMPREHENSIVE INCOME For the financial year ended 31 December 2012
Group Company Note 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Continuing operations Revenue 4 906,819 1,042,171 325,836 262,765 Cost of sales (631,434) (704,475) (89,372) (89,916)
Gross profit 5 275,385 337,696 236,464 172,849 Other income 1,942,111 56,906 6,492 78,736 Distribution expenses (1,636) (2,677) (1,089) (2,358) Administrative expenses (129,194) (131,469) (37,533) (26,854) Other expenses (1,337,872) (21,811) (11,541) (58,710)
Profit from operating activities 748,794 238,645 192,793 163,663 Interest income 6 11,050 9,523 5,777 8,379 Finance costs 7 (60,062) (33,912) (17,752) (20,062) Share of results of associates 63,717 497 - -
Profit before tax 8 763,499 214,753 180,818 151,980 Income tax expense 10 (33,287) (72,617) (7,736) (22,896)
Profit from continuing operations 730,212 142,136 173,082 129,084 Discontinued operations Gain from discontinued operations, net of tax 11(g) 281,055 865,730 - -
Profit for the year 1,011,267 1,007,866 173,082 129,084
Other comprehensive income, net of tax Foreign currency translation differences for foreign operations (141,954) 486,229 - - Transfer (from)/to: - reserve 1,972 (22,930) - - - retained profits - 22,930 - - Cash flow hedges 5 120,801 - - SECTION 7 Fair value changes on available-for-sale financial assets (4,343) (2,213) (1,780) (3,025)
Other comprehensive income for the year, net of tax (144,320) 604,817 (1,780) (3,025) 168 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Statements of Comprehensive Income For the financial year ended 31 December 2012
Group Company Note 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Total comprehensive income for the year 866,947 1,612,683 171,302 126,059
Profit attributable to: Owners of the Company 831,651 565,013 173,082 129,084 Non-controlling interests 179,616 442,853 - -
Profit for the year 1,011,267 1,007,866 173,082 129,084
Total comprehensive income attributable to: Owners of the Company 763,236 871,728 171,302 126,059 Non-controlling interests 103,711 740,955 - -
Total comprehensive income for the year 866,947 1,612,683 171,302 126,059
Basic earnings per ordinary share (sen): - from continuing operations 12 57.17 10.74 - from discontinued operations 12 9.17 35.16
66.34 45.90 Diluted earnings per ordinary share (sen): - from continuing operations 12 51.59 10.74 - from discontinued operations 12 8.27 35.16
59.86 45.90 SECTION 7
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. annual report 2012 169 STATEMENTS OF FINANCIAL STATEMENTS FINANCIAL POSITION As at 31 December 2012
Group Company Note 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Assets Non-current assets Property, plant and equipment 13 3,149,132 7,667,603 1,100,483 1,072,403 Investment properties 14 95,602 98,296 95,602 94,602 Intangible assets 16 27,778 1,097,799 - - Investments in subsidiaries 17 - - 1,100,347 1,316,634 Investments in associates 18 1,868,694 24,334 216,390 - Other investments 19 83,761 52,479 62,852 5,778 Deferred farm expenditure 15 - 9,501 - 4,208 5,224,967 8,950,012 2,575,674 2,493,625
Current assets Other investments 19 23,860 97,369 22,344 95,204 Inventories 21 82,387 934,732 2,312 1,892 Trade and other receivables 22 226,894 808,357 302,425 308,550 Prepayments 1,704 65,532 499 234 Current tax assets 28,858 6,502 13,579 3,822 Cash and bank balances 23 222,336 644,702 107,228 79,664 586,039 2,557,194 448,387 489,366 Assets of disposal group classified as held for sale 11(f) 3,408,193 13,032 - - 3,994,232 2,570,226 448,387 489,366 Total assets 9,219,199 11,520,238 3,024,061 2,982,991
Equity and liabilities Current liabilities Trade and other payables 25 153,089 797,120 157,874 207,676 Derivative financial instruments - 2,104 - - Current tax liabilities 466 135,946 - - Loans and borrowings 24 655,647 571,843 130,000 - Employee benefits 29 - 301 - - SECTION 7 Dividend payable 1,158,450 - 1,158,450 - 1,967,652 1,507,314 1,446,324 207,676 Liabilities of disposal group classified as held for sale 11(f) 1,295,060 - - - 3,262,712 1,507,314 1,446,324 207,676
Net current assets/(liabilities) 731,520 1,062,912 (997,937) 281,690 170 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Statements of Financial Position As at 31 December 2012
Group Company 2012 2011 2012 2011 Note RM’000 RM’000 RM’000 RM’000
Non-current liabilities Loans and borrowings 24 470,722 2,049,101 - 273,171 Deferred tax liabilities 20 166,170 1,040,424 66,770 83,655 Employee benefits 29 - 2,700 - -
636,892 3,092,225 66,770 356,826 Total liabilities 3,899,604 4,599,539 1,513,094 564,502
Net assets 5,319,595 6,920,699 1,510,967 2,418,489
Equity attributable to owners of the Company Share capital 26 320,637 315,509 320,637 315,509 Reserves 27 1,573,541 1,540,087 1,157,621 1,035,201 Retained profits 28 2,038,526 2,436,500 32,709 1,067,779 Reserves of disposal group classified as held for sale 11(f) 2,404 - - -
3,935,108 4,292,096 1,510,967 2,418,489 Non-controlling interests 1,384,487 2,628,603 - -
Total equity 5,319,595 6,920,699 1,510,967 2,418,489
Total equity and liabilities 9,219,199 11,520,238 3,024,061 2,982,991 SECTION 7
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. annual report 2012 171 STATEMENTS OF FINANCIAL STATEMENTS CHANGES IN EQUITY For the financial year ended 31 December 2012 - - 5 (185) Total 1,972 (4,343) equity 91,033 78,969 (32,973) (45,829) RM'000 142,476 866,947 (144,320) (141,954) 5,319,595 1,011,267 6,920,699 (1,254,442) (1,447,100) ------(185) Non- (1,046) 95,386 17,120 (32,973) RM'000 (74,859) (75,905) 103,711 179,616 interests 1,384,487 2,628,603 (1,427,175) controlling - - - 5 Total 1,972 (4,353) (3,297) 78,969 (19,925) (17,120) (45,829) RM'000 (67,095) (68,415) 142,476 763,236 831,651 3,935,108 4,292,096 (1,254,442) ------(4,353) profits 46,290 (17,120) RM'000 831,651 831,651 Retained 2,038,526 2,436,500 (1,254,442) Distributable ------2,404 2,404 RM'000 Reserve classified as classified held for sale ------Equity reserve (32,597) RM'000 (32,597) transaction ------shares 96,186 (45,829) (45,829) RM'000 (96,186) Treasury ------Other 4,933 4,933 reserve RM'000 ------(310) 5,237 1,972 1,972 1,972 reserve RM'000 1,344,656 1,337,757 Revaluation ------1,256 (2,041) (3,297) (3,297) (3,297) reserve RM'000 Fair value Fair Non-distributable ------5 5 5 743 (748) Hedge Attributable to shareholders of the Company reserve RM'000 ------620 (2,094) 95,714 reserve (25,905) (67,095) (67,095) RM'000 (67,095) Translation ------SECTION 7 98,979 reserve (14,966) RM'000 Warrant 113,945 ------Share 88,807 RM'000 204,820 116,013 premium ------5,128 Share capital RM'000 320,637 315,509
to disposal group held for classifiedas sale controlling interest cancelled by subsidiary controlling interests of subsidiaries shareholders owners controlling interest in subsidiary income for the year comprehensive income for the year available- for-sale available- for-sale financial assets reserves translation differences 1 January 2012 At 31 December 2012 Disposal of subsidiaries Reserve attributable Acquisition by non- Treasury shares Treasury Dividends to non- Dividends to Treasury shares disposed Treasury Treasury shares acquired Treasury Transactions with Transactions Conversion of warrants Acquisition of non- Total comprehensive Total Profit for the year Total other Total Fair value changes on Fair Cash flow hedges Adjustment to revaluation Foreign exchange Foreign Opening balance at Group 172 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Statements of Changes in Equity For the financial year ended 31 December 2012 - - - 2 254 (435) Total (4,653) (2,213) equity 15,032 (50,496) (61,728) (45,873) (86,829) RM'000 120,801 486,229 604,817 6,920,699 5,542,742 1,007,866 1,612,683 ------(36) 333 Non- (4,653) 53,767 15,032 (45,873) (54,232) RM'000 244,038 442,853 298,102 740,955 interests 2,628,603 1,977,374 controlling - - - - - 2 36 254 (435) Total (2,546) 67,034 (61,728) (32,597) RM'000 (50,496) 242,191 565,013 306,715 871,728 4,292,096 3,565,368 ------(435) profits 51,815 22,930 74,745 (61,728) RM'000 565,013 639,758 (113,945) Retained 2,436,500 1,972,850 Distributable ------Equity (32,597) (32,597) reserve RM'000 transaction ------shares (96,186) (45,690) RM'000 (50,496) Treasury ------Other 4,933 4,933 reserve RM'000 ------254 (313) (313) (313) reserve RM'000 1,337,757 1,337,816 Revaluation ------1,256 55,617 (54,361) (54,361) (54,361) reserve RM'000 Fairvalue ------(748) Hedge 67,034 67,034 67,034 Non-distributable (67,782) reserve RM'000 Attributable to shareholders of the Company ------95,714 (22,581) reserve RM'000 242,191 219,610 219,610 (123,896) Translation ------reserve RM'000 113,945 113,945 Warrant SECTION 7 ------2 Share RM'000 116,013 272,184 (156,173) premium ------Share capital RM'000 315,509 156,173 159,336
controlling interest in subsidiary acquired controlling interest shareholders controlling interests of subsidiaries subsidiaries 1 January 2011 translation differences to retained profits available-for-sale financial assets comprehensive income for the year income for the year owners Group Issue of free warrants Conversion of warrants Reversal of deferred tax Acquisition of non- Acquisition of subsidiary shares Treasury Increase in non- Dividends to Dividends to non- Share buy-back by At 31 December 2011 Opening balance at exchange Foreign from reserves Transfer Cash flow hedges value changes on Fair other Total Profit for the year comprehensive Total with Transactions Bonus issue annual report 2012 173
Statements of Changes in Equity FINANCIAL STATEMENTS For the financial year ended 31 December 2012 - - 2 Total (3,025) (1,780) 78,970 (50,497) (61,728) (45,829) RM'000 129,084 126,059 173,082 171,302 142,477 2,404,653 2,418,489 1,510,967 (1,254,442) ------51,814 46,290 32,709 profits (61,728) RM'000 129,084 180,898 173,082 173,082 (113,944) Retained 1,062,553 1,067,779 (1,254,442) Distributable ------96,187 shares (45,690) (50,497) (96,187) (45,829) (45,829) RM'000 Treasury ------4,165 4,165 4,165 Other reserve RM'000 ------(313) (1,780) (1,780) (2,093) 54,526 (54,839) (54,839) reserve RM'000 Fair value ------reserve RM'000 897,579 897,579 897,579 Revaluation Non-distributable ------98,979 Attributable to shareholders of the Company Attributable to shareholders (14,965) reserve RM'000 113,944 113,944 Warrant ------2 Share 88,807 RM'000 272,184 116,013 204,820 (156,173) premium ------5,128 Share capital RM'000 159,336 156,173 315,509 320,637 SECTION 7 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. The accompanying accounting policies and explanatory notes form for-sale financial assets, for-sale total other representing income comprehensive the year for-sale financial assets, for-sale total other representing income comprehensive the year Company At 1 January 2011 Fair value changes on available- Profit for the year Profit Total comprehensive income for comprehensive Total Bonus issue Issue of free warrants Issue of free Exercise of warrants Exercise Treasury shares acquired shares Treasury Dividends to shareholders At 31 December 2011 Fair value changes on available- Profit for the year Profit Total comprehensive income for comprehensive Total Exercise of warrants Exercise Treasury shares acquired shares Treasury Treasury shares disposed shares Treasury Dividends to shareholders At 31 December 2012 174 Kulim (Malaysia) Berhad (23370-V) FINANCIAL STATEMENTS STATEMENTS OF CASH FLOWS For the financial year ended 31 December 2012
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Operating activities Profit before tax - continuing operations 763,499 214,753 180,818 151,980 - discontinued operations 391,182 1,150,043 - -
Adjustments for: Impairment loss on: - assets held for sale - 1,500 - - - investment in subsidiaries - - - 455 - investment in associates 1,275,900 - - - - property, plant and equipment - 4,811 - - Fair value changes on other investments (6,529) (18,572) (4,900) (18,572) Allowance for slow moving inventories 6 103 - - Net (reversal of)/provision for allowances for impairment losses on receivables (453) 5,540 - - Amortisation and depreciation of: - deferred farm expenditure 1,468 767 - - - intangible assets 9,758 9,372 - - - property, plant and equipment 333,356 415,555 11,915 10,636 Change in fair value of investment properties (717) 7,717 (717) 8,051 Dividend income (2,683) (1,930) (170,925) (61,498) (Gain)/loss on: - disposal of subsidiary (6,718) - - - - Remeasurement of remaining interest arising on deemed disposal of subsidiary (1,858,218) - - - - disposal of other investments (11,433) (18,630) 766 (18,351) - disposal of property, plant and equipment 8,057 8,395 51 (9) - disposal of investment properties (306) - - - - partial disposal of subsidiaries - - - (49) Group’s share of net results in associates (63,717) (6,992) - - SECTION 7 Interest expense on: - continuing operations 60,062 33,912 17,752 20,062 - discontinued operations 39,205 57,563 - - Interest income from: - continuing operations (11,050) (9,523) (5,777) (8,379) - discontinued operations (6,952) (3,068) - - Defined benefit plan 401 86 - - Unrealised foreign exchange loss/(gain), net 1,896 (151,322) 921 - annual report 2012 175
Statements of Cash Flows FINANCIAL STATEMENTS For the financial year ended 31 December 2012
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Operating activities (cont'd) Write off of: - Deferred farm expenditure - 939 - 939 - Property, plant and equipment 4,236 1,144 2 145 - Intangible assets 814 - - - Write down of inventories - 223 - - Operating profit before changes in working capital 921,064 1,702,386 29,906 85,410
Changes in working capital: Inventories 581,879 (234,042) (421) 14 Payables (148,686) (267,252) (49,803) 130,689 Receivables and prepayments 390,760 322,541 4,940 (38,955) Cash generated from/(used in) operations 1,745,017 1,523,633 (15,378) 177,158 Employee benefits paid (55) (642) - - Tax paid (159,890) (82,091) (35,418) (22,952) Tax refunded 1,929 963 - -
Net cash generated from/(used in) operating activities 1,587,001 1,441,863 (50,796) 154,206
Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired - (16,681) - - Dividends received 2,683 1,930 170,925 61,498 Interest received from: - continuing operations 11,050 9,523 5,777 8,379 - discontinued operations 6,952 3,068 - - Additions to deferred farm expenditure (11,953) (2,329) - (1,534) Additions to: - equity interest in subsidiaries (185) (104,648) (103) (96,516) - other investments (61,291) (214,761) (46,411) (203,207) - property, plant and equipment (814,262) (1,592,643) (36,032) (11,161) - intangible assets (22,568) (8,431) - - - investment properties (283) (8,150) (283) (8,150) Net cash outflow on disposal of subsidiaries (84,152) - - - Proceeds from: - disposal of other investment 141,764 454,889 65,593 450,551 SECTION 7 - disposal of property, plant and equipment 2,642 4,023 192 25 - disposal of investment properties 4,000 - - - - partial disposal of subsidiaries - 185 - 161
Net cash flows (used in)/generated from investing activities (825,603) (1,474,025) 159,658 200,046 176 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Statements of Cash Flows For the financial year ended 31 December 2012
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Cash flows from financing activities Dividends paid to: - shareholders of the Company (95,992) (178,858) (95,992) (178,858) - minority shareholders of subsidiaries (32,973) (25,920) - - Proceeds from term loans - 1,482,532 - - Proceeds from short-term borrowings 644,773 - 130,000 - Repayment of term loans (884,950) (869,224) (273,171) - Repayment of short-term borrowings (560,969) (100,091) - (100,000) Issue of shares arising from conversion of warrants 78,971 107 78,970 2 Sale of treasury shares 142,476 - 142,476 - Purchase of treasury shares (45,829) (50,496) (45,829) (50,496) Purchase of treasury shares by subsidiary - (24,596) - - Issue of shares to non-controlling interests - 38,365 - - Withdrawal of pledged deposits 1,096 14 - 16 Interest paid - continuing operations (60,062) (33,912) (17,752) (20,062) - discontinued operations (39,205) (57,563) - - Net cash flows (used in)/generated from financing activities (852,664) 180,358 (81,298) (349,398) Net (decrease)/increase in cash and cash equivalents (91,266) 148,196 27,564 4,854 Effect of exchange rate fluctuations on cash held 23,741 2,088 - - Cash and cash equivalents at 1 January 556,718 406,434 79,314 74,460 Cash and cash equivalents at 31 December (Note 23) 489,193 556,718 106,878 79,314 SECTION 7
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. annual report 2012 177 NOTES TO THE FINANCIAL STATEMENTS FINANCIAL STATEMENTS As at 31 December 2012
1. Corporate information
The Company is a public limited liability company incorporated and domiciled in Malaysia and is listed on the Main Board of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Company are as follows:
Principal place of business Ulu Tiram Estate 81800 Ulu Tiram Johor
Registered office Suite 12B, Level 12 Menara Ansar 65 Jalan Trus, 80000 Johor Bahru, Johor.
The Company’s ultimate holding corporation is Johor Corporation (“JCorp”), a body corporate established under the Johor Corporation Enactment (No. 4, of 1968) (As amended by Enactment No.5, 1995).
The principal activities of the Company consist of oil palm plantation, investment holding and property investment in Malaysia. The principal activities of the subsidiaries are described in Note 17. There have been no significant changes in the nature of the principal activities during the financial year.
2. Summary significant accounting policies
2.1 basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. At the beginning of the current financial year, the Group and the Company adopted new and revised FRSs which are mandatory for financial periods beginning on or after 1 January 2012 as described fully in Note 2.2.
The financial statements have been prepared on the historical basis, except as disclosed in the accounting policies below.
The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.
2.2 Changes in accounting policies SECTION 7 The accounting policies adopted are consistent with those of the previous financial year except as follows:
On 1 January 2012, the Group and the Company adopted the following new and amended FRS and IC Interpretations:
FRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 July 2011 IC Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments Amendments to IC Interpretation 14: Prepayments of a Minimum Funding Requirement
178 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.2 Changes in accounting policies (cont’d)
FRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 January 2012 FRS 124: Related Party Disclosures Amendments to FRS 1: Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Amendments to FRS 7: Transfers of Financial Assets Amendments to FRS 112: Deferred Tax: Recovery of Underlying Assets
The adoption of the above new and amended standards and interpretations did not have any significant effect on the financial performance or position of the Group and the Company.
2.3 Standards issued but not yet effective
The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective.
Effective for annual periods Description beginning on or after
FRS 101 Presentation of Items of Other Comprehensive Income (Amendments to FRS 101) 1 July 2012 Amendments to FRS 101: Presentation of Financial Statements (Improvements to FRSs (2012)) 1 January 2013 FRS 10 Consolidated Financial Statements 1 January 2013 FRS 11 Joint Arrangements 1 January 2013 FRS 12 Disclosure of interests in Other Entities 1 January 2013 FRS 13 Fair Value Measurement 1 January 2013 FRS 119 Employee Benefits 1 January 2013 FRS 127 Separate Financial Statements 1 January 2013 FRS 128 Investment in Associate and Joint Ventures 1 January 2013 Amendment to IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments (Improvements to FRSs (2012)) 1 January 2013 IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Amendments to FRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities 1 January 2013 SECTION 7 Amendments to FRS 1: First-time Adoption of Malaysian Financial Reporting Standards - Government Loans 1 January 2013 Amendments to FRS 1: First-time Adoption of Malaysian Financial Reporting Standards (Improvements to FRSs (2012)) 1 January 2013 Amendments to FRS 116: Property, Plant and Equipment (Improvements to FRSs (2012)) 1 January 2013 Amendments to FRS 132: Financial Instruments: Presentation (Improvements to FRSs (2012)) 1 January 2013 Amendments to FRS134: Interim Financial Reporting (Improvements to FRSs (2012)) 1 January 2013 annual report 2012 179
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.3 Standards issued but not yet effective (cont’d)
Effective for annual periods Description beginning on or after
Amendments to FRS 10: Consolidated Financial Statements: Transition Guidance 1 January 2013 Amendments to FRS 11: Joint Arrangements: Transition Guidance 1 January 2013 Amendments to FRS 12: Disclosure of Interests in Other Entities: Transition Guidance 1 January 2013 Amendments to FRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014 Amendments to FRS 10, FRS 12 and FRS 127: Investment Entities 1 January 2014 FRS 9 Financial Instruments 1 January 2015
The directors are in the midst of assessing the impact on the financial statements arising from the adoption of the above standards and interpretations. Based on the directors’ preliminary assessment, the financial statements may potentially be affected by the adoption of the following standards:
FRS 10 Consolidated Financial Statements
FRS 10 replaces part of FRS 127 Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation - Special Purpose Entities.
Under FRS 10, an investor controls an investee when (a) the investor has power over an investee, (b) the investor has exposure, or rights, to variable returns from its involvement with the investee, and (c) the investor has ability to use its power over the investee to affect the amount of the investor’s returns. Under FRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
FRS 10 includes detailed guidance to explain when an investor has control over the investee. FRS 10 requires the investor to take into account all relevant facts and circumstances.
FRS 12 Disclosures of interests in Other Entities
FRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Group’s financial position or performance. SECTION 7
FRS 127 Separate Financial Statements
As a consequence of the new FRS 10 and FRS 12, FRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial statements.
FRS 128 Investments in Associates and Joint Ventures
As a consequence of the new FRS 11 and FRS 12, FRS 128 is renamed as FRS 128 Investments in Associates and Joint Ventures. This new standard describes the application of the equity method to investments in joint ventures in addition to associates. 180 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.3 Standards issued but not yet effective (cont’d)
FRS 13 Fair Value Measurement
FRS 13 establishes a single source of guidance under FRS for all fair value measurements. FRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted.
Upon adoption of FRS 13, the Group will take into consideration the highest and best use of certain properties in measuring the fair value of such properties.
Amendments to FRS 101: Presentation of Financial Statements (Annual Improvements 2009-2011 Cycle)
The amendments to FRS 101 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, exchange differences on translation of foreign operations and net loss or gain on available-for-sale financial assets) would be presented separately from items which will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Group’s financial position and performance.
FRS 9 Financial Instruments: Classification and Measurement
FRS 9 reflects the first phase of the work on the replacement of FRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in FRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of FRS 9 might have an effect on the classification and measurement of the Group’s financial assets. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.
Malaysian Financial Reporting Standards (MFRS Framework)
On 19 November 2011, the Malaysian Accounting Standards Board (MASB) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (MFRS Framework).
The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including its parent, significant investor and venturer (herein called ‘Transitioning Entities’). SECTION 7
Transitioning Entities will be allowed to defer adoption of the new MFRS Framework for an additional one year. Consequently, adoption of the MFRS Framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January 2014.
The Group falls within the scope definition of Transitioning Entities and has opted to defer adoption of the new MFRS Framework. Accordingly, the Group will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the year ending 31 December 2014. In presenting its first MFRS financial statements, the Group will be required to restate the comparative financial statements to amounts reflecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profits. annual report 2012 181
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.3 Standards issued but not yet effective (cont’d)
Malaysian Financial Reporting Standards (MFRS Framework) (cont’d)
The Group is in the process of assessing the financial effects of the differences between Financial Reporting Standards and accounting standards under the MFRS Framework. Accordingly, the financial performance and financial position as disclosed in these financial statements for the year ended 31 December 2012 could be different if prepared under the MFRS Framework.
2.4 basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.
Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.
In business combinations achieved in stages, previously held equity interests in the acquiree are re-measured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifiable assets.
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of financial position. The accounting policy for goodwill is set out in Note 2.9(a). In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profit or loss on the acquisition date. SECTION 7 Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
2.5 Transactions with non-controlling interest
Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company.
182 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.5 Transactions with non-controlling interest (cont’d)
Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.
2.6 Foreign currency
(a) Functional and presentation currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.
(b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.
Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.
(c) Foreign operations The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting SECTION 7 date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.
annual report 2012 183
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.7 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Freehold and leasehold plantation lands of the Group have not been revalued since they were last revalued in 1997. The directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. As permitted under the transitional provisions of IAS 16 (Revised) Property, Plant and Equipment, these assets continue to be stated at their 1997 valuation less accumulated depreciation.
All expenditure relating to the development of oil palm field (immature field) is classified under estate development expenditure. This cost will be amortised over the useful life when the field reaches maturity. The maturity date for estate development expenditure is the point in time when such new planting areas achieve yields of at least 8.60 tonnes of fresh fruit bunches per hectare per annum or 48 months from the date of initial planting, whichever is earlier. Estate overhead expenditure is apportioned to profit or loss and estate development expenditure on the basis of proportion of mature to immature areas.
Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:
Leasehold land 33 - 904 years Leasehold improvements and renovations 10 years Estate development expenditure 17 - 22 years from year of maturity Buildings 4 - 50 years Other assets, comprising: - Vessels, plant and machinery 3 - 25 years - Restaurants and office equipment 5 - 15 years - Furniture and fittings 2 - 15 years - Motor vehicles 3 - 5 years
SECTION 7 Assets under construction included in plant and equipment are not depreciated as these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised. 184 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.8 Investment properties
Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value which reflects market conditions at the reporting date. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the year in which they arise.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2.7 up to the date of change in use.
2.9 Intangible assets
(a) Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.
The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.
(b) Other intangible assets Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a SECTION 7 business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.
Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss. annual report 2012 185
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.9 Intangible assets (cont’d)
(b) Other intangible assets (cont’d) Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.
2.10 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).”
In assessing value in use, the estimated future cash flows expected to be generated by the asset 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.
Impairment losses are recognised in profit or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss. Impairment loss on SECTION 7 goodwill is not reversed in a subsequent period.
2.11 Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. 186 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.12 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.
The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is measured in the statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss for the period in which the investment is acquired.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.
The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.
2.13 Financial assets
Financial assets 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 instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. SECTION 7
The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.
(a) Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. annual report 2012 187
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.13 Financial assets (cont’d)
(a) Financial assets at fair value through profit or loss (cont’d) Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.
Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas financial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date.
(b) Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.
Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.
(c) held-to-maturity investments Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity.
Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.
Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current.
(d) Available-for-sale financial assets Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. SECTION 7
After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group and the Company’s right to receive payment is established. 188 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.13 Financial assets (cont’d)
(d) Available-for-sale financial assets (cont’d) Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.
Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.
A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.
2.14 Impairment of financial assets
The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.
(a) Trade and other receivables and other financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.
If any such evidence exists, the amount of impairment loss is measured as 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 impairment loss is recognised in profit or loss.
The carrying amount of the financial asset is reduced through the use of an allowance account. When the asset becomes uncollectible, it is written off against the allowance account.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively SECTION 7 to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.
(b) unquoted equity securities carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods. annual report 2012 189
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.14 Impairment of financial assets (cont’d)
(c) Available-for-sale financial assets Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.
Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income.
2.15 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.
2.16 Inventories
Inventories are measured at the lower of cost and net realisable value. Cost is determined using the weighted average cost method other than inventories relating to the Group’s quick service restaurant business segment. These inventories, comprising raw materials, groceries, poultry and consumables, equipment and spares and finished goods, are determined on the first-in, first out method.
The cost of agricultural produce is based on the weighted average method and includes the cost of direct materials and an appropriate proportion of estate revenue expenditure, manufacturing costs and overhead costs based on normal operating capacity.
Agricultural produce consist mainly of palm oil products and sugar stocks. Inventories of palm oil products comprises processed and refined palm oil products in tanks awaiting shipment at the end of the reporting period. The cost of palm oil produce includes direct materials and labour and an appropriate proportion of overheads relating to the milling and refining process. Cost of sugar stocks include all direct expenses and an appropriate proportion of manufacturing overheads based on normal operating capacity. SECTION 7
The cost of materials, consumables and livestocks is based on the weighted average method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.
In the case of nursery seed stocks and manufactured finished goods, cost includes direct materials and labour and an appropriate share of fixed and variable overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. 190 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.17 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2.18 Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.
Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
(a) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences.
The Group and the Company have not designated any financial liabilities as at fair value through profit or loss.
(b) Other financial liabilities The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans and borrowings.
Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. SECTION 7 Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.
A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. annual report 2012 191
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.19 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.
2.20 Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.
2.21 Employee benefits
(a) Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.
(b) Defined benefit plans The Group’s net obligation in respect of defined benefit retirement plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting period on 7 year high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed by a qualified actuary conducted every 2 years with the last actuarial report dated 13 January 2012 using the SECTION 7 projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.
In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realisable during the life of the plan, or any settlement of the plan liabilities. 192 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.21 Employee benefits (cont’d)
(b) Defined benefit plans (cont’d) When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in the profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.
The Group recognises all actuarial gains and losses arising from defined benefit plans in other comprehensive income and all expenses related to defined benefit plans in personnel expenses in profit or loss.
The Group recognises gains and losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains and losses and past service cost that had not previously been recognised.
2.22 Leases
(a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
(b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy SECTION 7 for rental income is set out in Note 2.24(e).
2.23 Discontinued operation
A component of the Group is classified as a “discontinued operation” when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single coordinated major line of business or geographical area of operations. A component is deemed to be held for sale if its carrying amounts will be recovered principally through a sale transaction rather than through continuing use.
Upon classification as held for sale, non-current assets and disposal groups are not depreciated and are measured at the lower of carrying amount and fair value less costs to sell. Any differences are recognised in profit or loss. annual report 2012 193
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.24 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognised:
(a) Sale of palm-based products Sale revenue represents revenues earned from sales of the Group’s products, net of trade allowance and duties and taxes paid. Revenue is recognised when there has been a passing of the title and risk to the customer, and:
• The produce is in a form suitable for delivery and sale and no further processing is required;
• The quantity and quality of the product can be determined with reasonable accuracy;
• The product has been despatched to the customer and is no longer under the physical control of the Group; and
• The selling price can be determined with reasonable accuracy.
(b) Sale of restaurant food and beverages Sales revenue represents retail sales at the Group’s restaurants and is recognised at the point of sales. The Group presents sales revenue net of sales tax.
(c) Freight and time charter hire income Freight income is recognised when the goods are delivered and services rendered and accepted by customers. The results of ships employed and voyages chartered and that of other services rendered are recognised when goods are delivered and services rendered.
(d) Services Revenue from parking management, bulk mailing and printing and plantation management services, are recognised as and when the services are rendered.
(e) Rental income Rental income from investment properties is recognised in the profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
(f) Dividend income SECTION 7 Dividend income is recognised when the right to receive payment is established.
2.25 Income taxes
(a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. 194 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.25 Income taxes (cont’d)
(b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
2.26 Segment reporting
For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the
SECTION 7 respective segments under their charge. The segment managers report to the Group Managing Director who regularly reviews the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 37, including the factors used to identify the reportable segments and the measurement basis of segment information.
2.27 Share capital and share issuance expenses
An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.
Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. annual report 2012 195
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
2. Summary significant accounting policies (cont’d)
2.28 Treasury shares
When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.
2.29 Contingencies
A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.
Contingent liabilities and assets are not recognised in the statements of financial position of the Group.
3. Significant accounting estimates and judgements
The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
(a) Impairment of goodwill, brandname and franchise rights Goodwill, brands and other indefinite life intangibles are tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which goodwill and brands are allocated.
When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill, brands and franchise rights are given in Note 16.
(b) Impairment of loans and receivables SECTION 7 The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount and details of the Group’s receivables at the reporting date are disclosed in Note 22. 196 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
4. revenue
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Sales of goods: Palm-based products 716,276 841,493 138,847 186,696 Livestocks and meats 226 728 - - Rubber-based manufactured products 5,798 8,304 - - Banana products 11,229 8,533 6,354 6,368 Equipment, agricultural and other related products 19,562 29,322 - - Others - - 1,066 3 Intrapreneur ventures: Freight time-charter hire and related services 108,899 104,388 - - Sales of wood-based products 2,722 6,488 - - Insurance brokerage 5,521 4,998 - - Plantation management services and sales of related goods 25,259 27,787 - - Rental income from investment properties 8,644 8,200 8,644 8,200 Dividend income 2,683 1,930 170,925 61,498 906,819 1,042,171 325,836 262,765
5. GROSS profit
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Sales of goods: Palm-based products 211,848 269,784 61,539 106,038 Biodiesel (4,509) (4,108) - - Rubber-based products 66 253 - - Banana products 8,180 7,608 1,727 1,626 Livestocks and meats (309) 303 - -
SECTION 7 Equipment, agricultural and other related products (322) 8,544 - - Others - - (848) - Intrapreneur ventures: Freight time-charter hire and related services 43,137 32,165 - - Sales of wood-based products 225 1,476 - - Insurance brokerage 3,713 3,116 - - Plantation management services 7,074 12,938 - - Rental income from investment properties 3,609 3,687 3,121 3,687 Dividend income 2,683 1,930 170,925 61,498 275,385 337,696 236,464 172,849 annual report 2012 197
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
6. INTEREST income Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Interest income on: Deposits with licensed banks 11,050 7,493 3,312 3,564 Amount due from ultimate holding corporation - 2,022 - 2,022 Amount due from subsidiaries - - 2,449 2,772 Others - 8 16 21 11,050 9,523 5,777 8,379
7. FINANCE costs Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Interest expense on: Bank overdraft 93 110 5 26 Loans 46,820 31,207 13,240 16,924 Other borrowings 13,149 2,595 515 - Amount due to subsidiaries - - 3,992 3,112 60,062 33,912 17,752 20,062
8. PROFIT before tax Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Profit before tax and net gain from discontinued operations is arrived at after charging: Allowance for slow moving inventories 6 103 - - Allowance for impairment losses on: - Trade and other receivables 654 5,585 - - Amortisation and depreciation of: - Intangible assets 9,758 9,372 - - - Property, plant and equipment 333,356 415,555 11,915 10,636 - Deferred farm expenditure 1,468 767 - - Auditors' remuneration: SECTION 7 - Statutory audit - Ernst & Young 778 781 93 90 - Other auditors 1,868 2,992 - 4 - Other services - Ernst & Young 306 259 215 - - Other auditors 845 1,572 - 405 Fees paid/payable to ultimate holding corporation for services of 272 12 - - directors Fair value loss on investment properties - 7,717 - 8,051 Impairment loss on: - Investments in subsidiaries - - - 455 - Investments in associates 1,275,900 - - - - Property, plant and equipment - 4,811 - - - Assets held for sale - 1,500 - - 198 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
8. PROFIT before tax (cont’d) Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Loss on disposal of property, plant and equipment 8,057 8,409 51 - Loss on disposal of other investment - - 766 - Foreign exchange loss: - Realised 167 - - - - Unrealised 1,916 41 921 - Technology transfer fee payable to corporate shareholder of a subsidiary 200 200 - - Write down of inventories - 223 - - Write off of: - Deferred farm expenditure - 939 - 939 - Property, plant and equipment 4,236 1,144 2 145 - Intangible assets 814 - - - Rental of land and building paid to: - Ultimate holding corporation 629 629 629 629 - Others 252,352 278,203 - - Staff costs (excluding key management personnel): - Salaries, wages, allowances and bonuses 655,610 783,301 24,026 21,790 - Defined contribution plan 72,46 58,467 914 680 - Defined benefit plan 401 86 - - - Other employee benefits 196,979 170,374 2,044 1,043 and after crediting: Franchise fee income - 297 - - Dividend income from: - Unquoted shares in Malaysia 2,683 491 2,623 491 - Shares quoted in Malaysia - 1,439 7,056 26,823 - Shares quoted outside Malaysia - - 67,208 34,184 - Subsidiaries (unquoted shares in Malaysia) - - 94,038 - Gain on: - Disposal of subsidiary (Note 11(b)) 6,718 - - - - Remeasurement of remaining interest arising on deemed 1,858,218 - - - disposal of subsidiary (Note 11(b)) - Disposal of property, plant and equipment - 14 - 9 - Disposal of other investments 11,433 18,630 - 18,351 - Disposal of investment properties 306 - - - SECTION 7 - Partial disposal of subsidiaries - - - 49 Foreign exchange gain: - Realised 236 466 - 466 - Unrealised 20 151,363 - - Rental income 3,109 2,815 1,145 1,215 Reversal of allowance for impairment losses: - Trade and other receivables 1,107 45 - - Fair value gain on investment properties 717 - 717 - Fair value changes on other investments 6,529 18,572 4,900 18,572 Guaranteed return on car park concession 2,552 2,953 - - annual report 2012 199
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
9. DIRECTORS’ remuneration
The details of remuneration receivable by directors of the Company during the year are as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Executive Directors - Fees 832 652 418 200 - Salaries, allowances and bonuses 4,715 2,652 3,780 2,193 - Estimated money value of benefits-in-kind 517 182 296 116 - Defined contribution plan 721 396 614 342 - Other emoluments 416 138 146 85 7,201 4,020 5,254 2,936
Non-executive Directors - Fees 428 639 245 195 - Salaries, allowances and bonuses 440 526 - - - Estimated money value of benefits-in-kind 28 54 - - - Defined contribution plan 45 71 - - - Other emoluments 87 268 56 45 1,028 1,558 301 240
Independent non-executive Directors - Fees 319 468 277 215 - Other emoluments 100 132 87 88 419 600 364 303
Total directors' remuneration 8,648 6,178 5,919 3,479 SECTION 7 200 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
10. INCOME tax expense
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Statement of comprehensive income
Current income tax - Malaysian income tax 107,975 134,035 18,223 25,305 - Foreign tax 48,811 143,071 - - - Under/(over)provision in prior year 5,719 (18,216) 7,439 (2,758) 162,505 258,890 25,662 22,547
Deferred tax (Note 20) : - Origination and reversal of temporary differences 2,466 80,297 3,363 321 - (Over)/under provision in prior years (21,557) 17,743 (21,289) 28 (19,091) 98,040 (17,926) 349 Income tax expense recognised in profit or loss 143,414 356,930 7,736 22,896 Less: Income tax attributable to discontinued operations (110,127) (284,313) - - (Note 11) Income tax attributable to continuing operations 33,287 72,617 7,736 22,896
A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and the Company is as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Profit before tax from continuing operations 763,499 214,753 180,818 151,980 Profit before tax from discontinued operations (Note 11) 391,182 1,150,043 - - 1,154,681 1,364,796 180,818 151,980
Taxation at Malaysian statutory tax rate of 25% (2011: 25%) 288,670 341,199 45,205 37,995 Different tax rates in other countries 14,642 39,442 - - Effect of non-deductible expenses 371,150 49,400 2,579 14,488 Effect of income exempt from tax (495,520) (79,960) (26,198) (26,857)
SECTION 7 Utilisation of previously unrecognised deferred tax assets (2,174) (580) - - Deferred tax assets not recognised - 7,902 - - Under/(over)provision of income tax in prior year 5,719 (18,216) 7,439 (2,758) (Over)/underprovision of deferred tax in prior years (21,557) 17,743 (21,289) 28 Share of results of associates (17,516) - - - 143,414 356,930 7,736 22,896 annual report 2012 201
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
11. Discontinued operations and disposal group classified as held for sale
(a) Deemed disposal of New Britain Palm Oil Ltd (“NBPOL”)
On 25 April 2012, NBPOL announced the issuance of 3,337,147 new ordinary shares allotted to The Independent Public Business Corporation of Papua New Guinea (“IPBC”) as consideration for the acquisition of the remaining 20% interest in a subsidiary, Kula Palm Oil Limited (“KPOL”). Following the issuance of new shares, the Group’s shareholdings in NBPOL decreased from 50.68% to 49.54%, thereby rendering NBPOL an associate of the Group.
The Group has taken up the above transaction as a deemed disposal of a subsidiary. As NBPOL constitutes a separate major geographical area of operations in Papua New Guinea and the Solomon Islands, the Group has regarded the disposal as a discontinued operation and the results are presented separately on the statement of comprehensive income as “Gain from discontinued operations, net of tax”.
(b) Disposal of Metro Parking (M) Sdn Bhd and its subsidiaries (“Metro”)
On 9 May 2012, the Group announced that it had entered into an agreement for the disposal of its subsidiary, Metro which was previously reported in the parking management services segment. This decision is consistent with the Group’s strategy to focus on its main core businesses in oil palm plantations. The disposal was completed on 30 September 2012.
The results of Metro are presented separately on the statement of comprehensive income as “Gain from discontinued operation, net of tax”.
The disposals of NBPOL and Metro had the following effects on the financial position of the Group as at 31 December 2012:
NBPOL Metro Total RM'000 RM'000 RM'000
Property, plant and equipment 3,322,444 13,154 3,335,598 Intangible assets 176,251 1,763 178,014 Deferred tax assets - 276 276 Inventories 538,210 2,035 540,245 Trade and other receivables 564,369 11,036 575,405 Cash and cash equivalents 86,248 10,104 96,352 Derivatives (2,090) - (2,090) Deferred tax liabilities (776,442) (1,174) (777,616) Trade and other payables (181,283) (21,695) (202,978) Loans and borrowings (894,623) (9,713) (904,336) Taxation (113,430) (304) (113,734) Reserves (19,925) - (19,925) SECTION 7 Net assets 2,699,729 5,482 2,705,211 Non-controlling interests (1,427,175) - (1,427,175)
Net assets attributable to the Group 1,272,554 5,482 1,278,036 Revaluation of remaining interest in entity (3,130,772) - (3,130,772) Proceeds from disposal (cash) - (12,200) (12,200)
Gain on disposal to the Group (1,858,218) (6,718) (1,864,936)
Cash outflow arising on disposals: Cash consideration - 12,200 12,200 Cash and cash equivalents of subsidiaries disposed (86,248) (10,104) (96,352)
Net cash outflow on disposals (86,248) 2,096 (84,152) 202 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
11. Discontinued operations and disposal group classified as held for sale (cont’d)
(c) Planned disposal of foods and restaurants business under QSR Brands Bhd and its subsidiaries (“QSR”)
On 18 May 2012, QSR announced that it had entered into an agreement to dispose substantially all of its businesses and undertakings to QSR Brands (M) Holdings Sdn Bhd (formerly known as Triple Platform Sdn Bhd) (“QSRB”), a wholly-owned subidiary of Massive Equity Sdn Bhd (“MESB”).
QSR’s foods and restaurants business represents a separate major line of business of the Group and this decision was made as part of a internal restructuring of operations at the holding corporation (JCorp) level.
On 21 January 2013, QSR announced that the disposals were completed. Following the completion of the disposals, QSR was delisted from the Main Board of Bursa Malaysia Securities Berhad on 7 February 2013.
As at 31 December 2012, the assets and liabilities related to QSR have been presented in the statement of financial position as “Assets of disposal group classified as held for sale” and ”Liabilities directly associated with disposal group classified as held for sale”, and its results are presented separately on the statement of comprehensive income as “Gain from discontinued operation, net of tax”.
(d) Planned disposal of Orkim Sdn Bhd (“Orkim”)
On 30 November 2012, the Group announced that it had entered into an agreement for the disposal of its subsidiary, Orkim which is involved in the provision of shipping and forwarding services. This decision is consistent with the Group’s strategy to focus on its main core businesses in oil palm plantations.
As at 31 December 2012, the assets and liabilities related to Orkim have been presented in the statement of financial position as “Assets of disposal group classified as held for sale” and ”Liabilities directly associated with disposal group classified as held for sale”, and its results are presented separately on the statement of comprehensive income as “”Gain from discontinued operation, net of tax”.
(e) Planned disposal of Pro Office Sdn Bhd (“Pro Office”) and General Access Sdn Bhd (“General Access”)
During the financial year, the Group entered into agreements to dispose of its interest in Pro Office and General Access which are respectively involved in bulk mailing and printing as well as construction services. This decision is consistent with the Group’s strategy to focus on its main core businesses in oil palm plantations.
As at 31 December 2012, the assets and liabilities related to Pro Office and General Access have been presented in the statement of financial position as “Assets of disposal group classified as held for sale” and ”Liabilities directly associated with disposal group classified as held for sale”, and their results are presented separately on the statement of comprehensive income as ” Gain from discontinued operation, net of tax”. SECTION 7 annual report 2012 203
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
11. Discontinued operations and disposal group classified as held for sale (cont’d)
(f) Statements of financial position disclosures
The major classes of assets and liabilities of subsidiaries classified as held for sale and the related reserves as at 31 December 2012 are as follows:
Group 2012 QSR Orkim Others Total RM'000 RM'000 RM'000 RM'000
Assets: Property, plant and equipment 1,457,910 196,547 2,084 1,656,541 Intangible assets 893,570 7,318 1,931 902,819 Investment in associates - 26,485 - 26,485 Inventories 270,254 - 206 270,460 Trade and other receivables 184,096 63,032 7,856 254,984 Current tax assets 14,294 634 327 15,255 Cash and bank balances 250,910 29,117 1,622 281,649 Assets of disposal group classified as held for sale 3,071,034 323,133 14,026 3,408,193
Liabilities: Trade and other payables (469,188) (22,423) (3,789) (495,400) Deferred tax liabilities (88,809) (66) (444) (89,319) Employee benefits (3,347) - - (3,347) Current tax liabilities (13,334) (231) - (13,565) Loans and borrowings (495,730) (196,490) (1,209) (693,429) Liabilities directly associated with disposal group classified as held for sale (1,070,408) (219,210) (5,442) (1,295,060)
Net assets directly associated with disposal group classified as held for sale 2,000,626 103,923 8,584 2,113,133
Reserves:
Revaluation reserve 310 - - 310 SECTION 7 Translation reserve 2,094 - - 2,094 2,404 - - 2,404
Group 2011 RM'000
Investment in associate 12,000 Property, plant and equipment 1,032 13,032 204 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
11. Discontinued operations and disposal group classified as held for sale (cont’d)
(f) Statements of financial position disclosures (cont’d)
As at the end of the previous financial year, the investment in associate relates to the proposed disposal of MM Vitaoils Sdn Bhd, which has been terminated during the current financial year as the associate has entered into receivership status. The investment in associate has been impaired in full during the current financial year.
(g) Statement of comprehensive income disclosures
The results of the discontinued operations for the years ended 31 December are as follows:
Group 2012 NBPOL Metro QSR Orkim Others Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 (4 months) (9 months)
Revenue 797,868 85,832 3,619,003 76,008 25,111 4,603,822 Expenses (661,101) (82,642) (3,357,344) (56,704) (22,233) (4,180,024) Profit from operations 136,767 3,190 261,659 19,304 2,878 423,798 Finance costs (11,587) (732) (18,422) (8,464) - (39,205) Share of results of associate - - - 6,589 - 6,589 Profit before tax from discontinued operations 125,180 2,458 243,237 17,429 2,878 391,182 Taxation (31,295) (460) (78,000) (179) (193) (110,127) Gain from discontinued operations, net of tax 93,885 1,998 165,237 17,250 2,685 281,055
Group 2011 NBPOL Metro QSR Orkim Others Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Revenue 2,646,108 111,789 3,349,914 65,605 30,417 6,203,833 Expenses (1,749,942) (108,716) (3,066,014) (48,470) (29,580) (5,002,722) SECTION 7 Profit from operations 896,166 3,073 283,900 17,135 837 1,201,111 Finance costs (33,307) (820) (13,972) (9,154) (310) (57,563) Share of results of associate - - - 6,495 - 6,495 Profit before tax from discontinued operations 862,859 2,253 269,928 14,476 527 1,150,043 Taxation (194,779) (1,308) (87,524) (585) (117) (284,313) Gain from discontinued operations, net of tax 668,080 945 182,404 13,891 410 865,730 annual report 2012 205
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
11. Discontinued operations and disposal group classified as held for sale (cont’d)
(h) Statement of cash flows disclosures
The cash flows attributable to the discontinued operations are as follows:
Group 2012 NBPOL Metro QSR Orkim Others Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Operating 445,948 5,161 293,590 13,841 283 758,823 Investing (494,460) (2,244) (261,871) 17,903 5,125 (735,547) Financing (183,839) (3,171) 53,466 (26,386) (6,459) (166,389) Net cash (outflows)/inflows (232,351) (254) 85,185 5,358 (1,051) (143,113)
Group 2011 NBPOL Metro QSR Orkim Others Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Operating 493,512 10,775 369,423 15,884 (48) 889,546 Investing 375,294 (3,206) (416,575) (40,045) (364) (84,896) Financing 45,927 (3,731) 56,297 34,802 (1,244) 132,051 Net cash inflows/(outflows) 914,733 3,838 9,145 10,641 (1,656) 936,701
12. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year.
The following reflect the profit and share data used in the computation of basic earnings per share for the years ended 31 December:
Group 2012 2011 SECTION 7 RM’000 RM’000
Profit for the year attributable to shareholders - continuing operations 716,695 132,226 - discontinued operations 114,956 432,787 831,651 565,013 206 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
12. Earnings per share (cont’d)
Group 2012 2011 RM’000 RM’000
Weighted average number of ordinary shares 1,253,612 1,230,853
Group 2012 2011 Sen Sen
Basic earnings per share - continuing operations 57.17 10.74 - discontinued operations 9.17 35.16 66.34 45.90
The diluted earnings per share is calculated based on the profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:
Group 2012 2011 RM’000 RM’000
Weighted average number of ordinary shares 1,253,612 1,230,853 Effect of dilution arising from conversion of warrants 135,663 - 1,389,275 1,230,853
Group 2012 2011 RM’000 RM’000
Diluted earnings per share: - continuing operations 51.59 10.74 - discontinued operations 8.27 35.16
SECTION 7 59.86 45.90 annual report 2012 207
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012 - - Total Total (7,094) (44,962) (10,421) (85,527) 22,832 (55,937) 814,262 RM'000 476,660 171,285 3,890,093 (2,546,536) (4,164,974) 9,905,419 1,600,272 7,720,233 ------(3,032) 53,739 60,253 (97,062) Capital work in RM'000 470,503 172,275 329,435 304,059 (488,945) (223,244) progress progress - Other (6,084) (5,942) 94,414 assets (29,449) (82,860) (33,943) RM'000 788,528 306,656 151,529 122,639 374,572 171,285 3,205,817 2,425,677 (1,482,064) (1,217,902) - - (1) (482) (258) 2,648 (1,152) 22,682 75,493 43,331 (11,213) 169,446 RM'000 177,152 (280,417) (971,087) B uildings 1,415,022 1,128,162 ------(1,268) (3,855) Estate 22,832 RM'000 800,638 121,396 121,878 512,543 2,148,573 1,514,152 (1,487,040) expenditure expenditure development ------(85) 353 and 7,345 2,444 (3,778) (20,349) RM'000 461,644 103,869 379,458 (468,551) Leasehold renovation renovation improvement improvement ------271 (695) land (88,615) RM'000 771,267 168,525 691,357 209,951 481,830 leasehold Long term ------(271) (692) land (2,581) 15,383 26,571 RM'000 (226,889) Freehold Freehold 1,298,416 1,512,503 1,486,895 SECTION 7 farm expenditure operations 1 January 2012 Reclassification deferred Reclassification from Exchange differences At 31 December 2012 Attributable to discontinued Disposal of subsidiaries Write off Write Additions Disposals At 31 December 2011/ Reclassification Exchange differences Write off Write Additions Disposals Acquisition of subsidiaries Group Cost At 1 January 2011 y, plant and e qu ipment y, P ropert 13. 208 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012 - Total Total 4,811 2,846 4,065 (6,185) (5,950) 50,472 19,555 (95,243) (11,664) (32,673) (74,828) (43,505) RM'000 157,379 690,489 152,568 333,356 415,555 (794,752) (817,712) 7,667,603 3,149,132 2,080,437 1,690,717 ------940 237 940 703 52,799 Capital work in RM'000 469,563 progress progress - - 16 4,574 4,065 Other (1,267) (5,454) (5,177) 49,019 50,286 45,712 12,147 assets (21,115) (74,722) (25,993) RM'000 425,333 314,176 252,116 286,792 (582,701) (552,371) 1,857,108 1,298,423 1,026,573 - - - - - (85) (13) (334) (265) (773) 2,289 (5,394) 82,444 30,867 30,867 94,708 23,855 35,290 (30,867) (37,072) RM'000 241,746 205,218 (128,008) B uildings 1,142,409 ------513 (397) 2,846 3,393 (6,164) Estate 12,177 12,177 45,897 48,715 (11,664) RM'000 568,352 231,773 326,924 274,816 (137,333) 1,809,472 expenditure expenditure development ------92 41 (21) 261 and (732) 1,276 1,276 1,726 (1,276) 40,429 (16,804) RM'000 289,819 170,549 145,930 (170,477) Leasehold renovation renovation improvement improvement ------540 540 981 (540) (695) land 4,329 (4,502) 49,740 11,447 42,795 38,180 RM'000 721,527 648,022 leasehold Long term ------(cont’d) land 61,293 61,293 (61,293) RM'000 Freehold Freehold 1,298,416 1,451,210 SECTION 7 operations losses farm expenditure operations 1 January 2012 At 31 December 2012 Net carrying amount: At 31 December 2011 At 31 December 2012 At 31 December 2011 Disposal of subsidiaries Attributable to discontinued Accumulated impairment At 1 January 2011 Impairment loss for the year At 31 December 2012 Reclassification from deferred deferred Reclassification from Exchange differences Disposal of subsidiaries Attributable to discontinued Write off Write Disposals Charge for the year Charge At 31 December 2011/ Reclassification Exchange differences Write off Write Disposals Charge for the year Charge Group Accumulated depreciation At 1 January 2011 Acquisition of subsidiaries y, plant and e qu ipment y, P ropert 13. annual report 2012 209
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
13. Property, plant and equipment (cont’d)
Long term Estate Capital Freehold leasehold development Other work in land land expenditure Buildings assets progress Total Company RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cost
At 1 January 2011 774,737 207,768 130,819 48,394 28,234 3,612 1,193,564 Additions - - 6,105 11 1,651 3,394 11,161 Disposals - - - - (66) - (66) Write off - - - (163) (1,236) (108) (1,507) Transfer - - - 2,574 - (2,574) -
At 31 December 2011/ 1 January 2012 774,737 207,768 136,924 50,816 28,583 4,324 1,203,152 Additions - - 24,997 357 4,154 6,524 36,032 Disposals - - - - (335) - (335) Write off - - (1,285) (35) (626) (1) (1,947) Reclassification - - - 2,045 68 (2,113) - Reclassification from deferred farm expenditure - - 4,208 - - - 4,208
At 31 December 2012 774,737 207,768 164,844 53,183 31,844 8,734 1,241,110
Accumulated depreciation
At 1 January 2011 - 10,909 60,394 28,232 21,990 - 121,525 Charge for the year - 1,218 5,875 1,570 1,973 - 10,636 Disposals - - - - (50) - (50) Write off - - - (131) (1,231) - (1,362)
At 31 December 2011/ 1 January 2012 - 12,127 66,269 29,671 22,682 - 130,749 SECTION 7 Charge for the year - 1,218 6,678 1,697 2,322 - 11,915 Disposals - - - - (92) - (92) Write off - - (1,285) (35) (625) - (1,945)
At 31 December 2012 - 13,345 71,662 31,333 24,287 - 140,627
Net carrying amount:
At 31 December 2011 774,737 195,641 70,655 21,145 5,901 4,324 1,072,403 At 31 December 2012 774,737 194,423 93,182 21,850 7,557 8,734 1,100,483 210 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
13. Property, plant and equipment (cont’d)
Other assets can be further analysed as follows :
Vessels, Restaurant Furniture plant and and office and Motor machinery equipment fittings vehicles Total Group RM'000 RM'000 RM'000 RM'000 RM'000
Cost At 1 January 2011 1,675,950 624,121 42,316 83,290 2,425,677 Acquisition of subsidiaries 169,579 12 459 1,235 171,285 Additions 168,922 149,889 40,644 15,117 374,572 Disposals (1,077) (20,737) (1,165) (10,964) (33,943) Write off (2,947) - (396) (2,599) (5,942) Reclassification 151,295 234 - - 151,529 Exchange differences 120,922 1,679 - 38 122,639 At 31 December 2011/1 January 2012 2,282,644 755,198 81,858 86,117 3,205,817 Additions 128,266 157,135 6,377 14,878 306,656 Disposals (22,797) (57,176) (1,002) (1,885) (82,860) Write off (2,919) - (1,710) (1,455) (6,084) Disposal of subsidiaries (1,209,833) - (6,248) (1,821) (1,217,902) Attributable to discontinued operations (573,536) (854,389) (1,861) (52,278) (1,482,064) Reclassification 94,316 - 98 - 94,414 Exchange differences (29,449) - - - (29,449)
At 31 December 2012 666,692 768 77,512 43,556 788,528 SECTION 7 annual report 2012 211
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
13. Property, plant and equipment (cont’d)
Vessels, Restaurant Furniture plant and and office and Motor machinery equipment fittings vehicles Total Group RM'000 RM'000 RM'000 RM'000 RM'000
Accumulated depreciation At 1 January 2011 680,768 257,179 30,184 58,442 1,026,573 Acquisition of subsidiaries 3,166 3 184 712 4,065 Charge for the year 208,372 65,320 4,669 8,431 286,792 Disposals (248) (14,947) (1,117) (9,681) (25,993) Write off (2,217) - (394) (2,566) (5,177) Reclassification - 16 - - 16 Exchange differences 10,862 1,236 - 49 12,147 At 31 December 2011/1 January 2012 900,703 308,807 33,526 55,387 1,298,423 Charge for the year 138,420 100,828 3,098 9,770 252,116 Disposals (19,184) (55,245) (481) 188 (74,722) Write off (2,456) - (972) (2,026) (5,454) Disposal of subsidiaries (546,016) - (5,214) (1,141) (552,371) Attributable to discontinued operations (192,662) (354,080) (1,352) (34,607) (582,701) Exchange differences (21,115) - - - (21,115)
At 31 December 2012 257,690 310 28,605 27,571 314,176
Accumulated impairment losses At 1 January 2011 44,435 1,267 - 10 45,712 Impairment loss for the year 4,574 - - - 4,574 At 31 December 2011/1 January 2012 49,009 1,267 - 10 50,286 Attributable to discontinued operations - (1,267) - - (1,267)
At 31 December 2012 49,009 - - 10 49,019
Carrying amount
At 31 December 2011 1,332,932 445,124 48,332 30,720 1,857,108 SECTION 7 At 31 December 2012 359,993 458 48,907 15,975 425,333 212 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
13. Property, plant and equipment (cont’d)
Furniture Plant and and Motor machinery fittings vehicles Total Group RM'000 RM'000 RM'000 RM'000
Cost At 1 January 2011 12,508 7,123 8,603 28,234 Additions 325 438 888 1,651 Disposals (33) (33) - (66) Write off (281) (250) (705) (1,236)
At 31 December 2011/ 1 January 2012 12,519 7,278 8,786 28,583 Additions 1,291 1,248 1,615 4,154 Disposals - - (335) (335) Write off (137) (81) (408) (626) Transfer 68 - - 68
At 31 December 2012 13,741 8,445 9,658 31,844
Accumulated depreciation At 1 January 2011 10,338 5,435 6,217 21,990 Charge for the year 527 616 830 1,973 Disposals (32) (18) - (50) Write off (276) (250) (705) (1,231)
At 31 December 2011/ 1 January 2012 10,557 5,783 6,342 22,682 Charge for the year 667 686 970 2,323 Disposals - - (92) (92) Write off (137) (81) (408) (626)
At 31 December 2012 11,087 6,388 6,812 24,287
SECTION 7 Carrying amount
At 31 December 2011 1,962 1,495 2,444 5,901
At 31 December 2012 2,654 2,057 2,846 7,557 annual report 2012 213
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
13. Property, plant and equipment (cont’d)
Assets held under finance lease
During the year, the Group and the Company acquired property, plant and equipment with an aggregate cost of approximately RM814,262,000 (2011 : RM1,600,272,000) and RM36,032,000 (2011 : RM11,161,000) respectively, of which RM309,000 (2011 : RM7,629,000) of the Group were acquired by means of finance lease.
Included in property, plant and equipment of the Group are assets acquired under lease arrangements at net book value of RMNil (2011: RM7,629,000). The leased assets consist of equipments and motor vehicles which secure lease obligations (Note 24).
Assets pledged as security for borrowings
Group Company 2012 2011 2012 2011 RM'000 RM'000 RM'000 RM'000
Carrying amount of assets pledged as security for borrowings : - freehold lands 55,338 500,792 44,953 44,953 - long term leasehold lands - 126,470 126,470 126,470 - estate development expenditure 6,532 633,329 1,251 1,251 - buildings - 857,989 - - - other property, plant and equipment 342,837 1,094,076 - - 404,707 3,212,656 172,674 172,674
Acquisition of oil palm plantations from ultimate holding corporation
On 16 August 2011, the Company made an announcement to Bursa Malaysia in relation to the proposed acquisition through its wholly owned subsidiary, Mahamurni Plantations Sdn Bhd, of six estates (together with all buildings and mills erected thereon) owned by the ultimate holding corporation, Johor Corporation, for a cash consideration of RM700 million. During the current financial year, the Company acquired Palong, Mungka and Kemedak estates for RM253,317,000 (2011: Sungai Papan and Siang Estates were acquired for RM374,900,000). As at the reporting date, the cumulative cost of the acquired estates amounted to RM628,217,000. The balance of RM71,783,000 attributable to the other unacquired estate have been acquired in January 2013.
Impairment loss
During the previous financial year, the Group recognised impairment losses of RM4,811,000. This was mainly in respect of its bio-diesel plant and machinery. SECTION 7 14. Investment properties Group Company 2012 2011 2012 2011 RM'000 RM'000 RM'000 RM'000
At 1 January 98,296 97,863 94,602 94,503 Additions from subsequent expenditure 283 5,248 283 5,248 Acquired during the year - 2,902 - 2,902 Disposal (3,694) - - - Net gain/(loss) from fair value adjustments recognised in profit or loss (Note 8) 717 (7,717) 717 (8,051) At 31 December 95,602 98,296 95,602 94,602
214 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
14. Investment properties (cont’d)
Investment properties comprise a number of commercial properties that are leased to third parties. Subsequent renewals are negotiated with the lessee and no contingent rents are charged.
The fair values of investment properties of the Group and of the Company are determined using the investment and comparison method.
Security
As at the end of the previous financial year, investment properties of the Group and of the Company with carrying amounts of RM93,570,000 and RM90,000,000 are charged to licensed banks for term loan facilities granted to the Group. As at the reporting date, the charge on the investment properties have been uplifted following the full repayment of the term loan during the year.
15. Deferred farm expenditure
Group Company 2012 2011 2012 2011 RM'000 RM'000 RM'000 RM'000
Cost
At 1 January 10,879 9,489 4,208 3,613 Addition 11,953 2,329 - 1,534 Write off - (939) - (939) Reclassification to property, plant and equipment (22,832) - (4,208) - At 31 December - 10,879 - 4,208
Accumulated amortisation
At 1 January 1,378 611 - - Amortisation for the year 1,468 767 - - Reclassification to property, plant and equipment (2,846) - - - At 31 December - 1,378 - - SECTION 7 Net carrying amount
At 31 December - 9,501 - 4,208 annual report 2012 215
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012 (75) Total Total 2,062 8,431 (7,747) (1,184) 13,405 37,134 22,568 37,900 RM'000 (178,014) (949,096) 1,090,416 1,151,373 ------465 (251) 1,261 2,062 3,788 3,537 Others RM'000 ------(1,184) 37,134 RM'000 140,301 177,435 (176,251) Supplier relationship relationship ------(75) fees 7,798 (6,933) 74,775 82,498 22,361 (97,926) RM'000 Franchise ------207 rights 14,198 14,198 14,405 RM'000 Concession - - - - - 633 (563) (1,763) 47,577 12,940 61,150 19,958 (38,866) RM'000 Goodwill ------rights RM'000 725,852 725,852 (725,852) Franchise ------86,452 86,452 (86,452) B rands RM'000 SECTION 7 1 January 2012 operations Group Cost At 1 January 2011 Acquisition of subsidiaries Reclassification Additions Write off Write Exchange difference At 31 December 2011/ Additions Write off Write Disposal of subsidiary Attributable to discontinued Exchange difference At 31 December 2012 16. b le assets INTANGI 216 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012 (75) 756 Total Total 9,372 9,758 (6,933) 43,521 53,574 10,122 27,778 (46,277) RM'000 1,097,799 - - - 245 756 482 692 1,483 2,175 2,305 1,362 Others RM'000 ------RM'000 177,435 Supplier relationship relationship - - - (75) fees 7,814 7,899 (6,933) 37,572 45,311 37,187 (46,277) RM'000 Franchise - - - - 3,000 1,000 4,000 1,167 5,167 9,238 rights 10,198 RM'000 Concession - - - - - 76 2,704 2,780 2,780 58,370 17,178 RM'000 Goodwill ------rights RM'000 725,852 Franchise ------86,452 B rands RM'000 SECTION 7 (cont’d) impairment 1 January 2012 operations Group Accumulated amortisation and At 1 January 2011 Reclassification Amortisation for the year Write off Write At 31 December 2011/ Amortisation for the year Write off Write Attributable to discontinued At 31 December 2012 Net carrying amount At 31 December 2011 At 31 December 2012 16. b le assets INTANGI annual report 2012 217
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
16. Intangible assets (cont’d)
Brands and franchise rights
The Group's brands and franchise rights were acquired through business combinations. Brands relate to the Group's Integrated Poultry and Ancillary segments whereas franchise rights relate to the Group's Restaurant segment. As at 31 December 2012, the Group's brands and franchise rights have been presented as assets of disposal group held for sale.
Concession rights
The concession rights arose from a 15 year Concession Agreement with the ultimate holding corporation for a subsidiary to manage, operate and maintain a multi-storey car park together with other parking facilities at Persada Johor International Convention Centre. The Group anticipates that the cost will be recovered through future income derived from the car park operations. The income is guaranteed by the ultimate holding corporation pursuant to the Concession Agreement. The Concession Agreement has a remaining amortisation period of 4.8 years (2011 : 5.8 years).
Franchise fees
Franchise fees consists of the initial franchise fee paid for the set up of new restaurants and renewal franchise fees which are paid upon the expiry of the initial franchise period. Franchise fees are amortised on a straight-line basis over a period of 10 years. As at 31 December 2012, the franchise fees have been have been presented as assets of disposal group held for sale.
Supplier relationship
The supplier relationship arose from the acquisition of palm oil plantations in Papua New Guinea and reflect the net present value of the future income stream from purchasing of fresh fruit bunches produced by neighbouring smallholders. These assets have an indefinite useful life and are tested annually for impairment. During the financial year, this asset was disposed in conjunction with the deemed disposal of NBPOL.
Amortisation expense
The amortisation of concession rights and franchise fees are included in the "Gain from discontinued operations, net of tax" line item in the statements of comprehensive income. SECTION 7 218 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012 2011 1,931 3,336 5,660 1,642 3,584 2,694 14,464 12,545 RM'000 750,943 123,565 177,435 1,097,799 - - - - - Total 2012 9,238 5,903 5,660 1,642 3,584 1,751 27,778 RM'000 ------2011 2,305 37,187 10,198 49,690 RM'000 ------with finite 2012 useful lives 9,238 1,362 10,600 RM'000 Intangible assets ------2011 RM'000 177,435 177,435 ------Supplier 2012 relationship RM'000 - 389 2011 3,607 1,931 2,347 3,336 5,660 1,642 3,584 25,091 10,783 58,370 RM'000 ------389 Goodwill 2012 5,903 5,660 1,642 3,584 17,178 RM'000 ------2011 RM'000 725,852 725,852 ------2012 RM'000 Franchise rights ------2011 75,595 10,857 SECTION 7 86,452 RM'000 ------2012 B randname (cont’d) RM'000 printing services forwarding agent forwarding transportation and services related trading and biotechnology and research development Impairment testing of intangible assets with indefinite useful lives For the purpose of impairment testing, intangible assets with indefinite useful lives have been allocated to following cash- generating units (“CGU”). Group Restaurants Integrated poultry Ancillary Bulk-mailing and Parking operator Shipping and Provision of sea Provision Insurance broker Agricultural fertilizer Palm oil milling Others
16. b le assets INTANGI annual report 2012 219
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
16. Intangible assets (cont’d)
Key assumptions used in value-in-use calculations
The recoverable amounts of the intangible assets attributable to discontinued operations were determined based on fair value less costs to sell. The minimum disposal considerations from the respective planned disposals (as discussed in Note 11 and Note 32) were used to derive the fair value less costs to sell. Since the recoverable amounts of the respective CGUs exceed their carrying amounts, no impairment loss were recognised in respective of these intangible assets.
In respect of the other intangible assets not attributable to discontinued operations, the recoverable amount of the CGUs have been determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management.
The key assumptions on which management has based its cash flow projections are as follows:
Other segments
• Cash flows were projected based on actual operating results covering a five year period.
• Revenue was projected to grow at approximately 5% - 25% per annum.
• Budgeted gross profit margins were projected at between of 4% - 44% per annum.
• A pre-tax discount rate of 10% was applied in determining the recoverable amount of the CGU. The discount rate was estimated based on the CGU’s existing rates of borrowing.
The values assigned to the key assumptions represent management’s assessment of future trends in the industry.
17. Investment in subsidiaries
Company 2012 2011 RM'000 RM'000
At cost : Unquoted shares in Malaysia 577,024 576,921 Less : Impairment losses (21,705) (21,705) 555,319 555,216 SECTION 7 Quoted shares in Malaysia 545,028 545,028 Quoted shares outside Malaysia - 216,390 1,100,347 1,316,634 Market value: Quoted shares in Malaysia 1,130,402 1,087,065 Quoted shares outside Malaysia - 2,559,965
The investments in quoted shares in subsidiaries are pledged to the bank for borrowings as further disclosed in Note 24 to the financial statements. 220 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Details of the subsidiaries are as follows:
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % % Held by the Company :
Mahamurni Plantations Sdn. Bhd. Malaysia 100 100 Oil palm plantation
Selai Sdn. Bhd. Malaysia 100 100 Oil palm plantation
Ulu Tiram Manufacturing Company Malaysia 100 100 Oil palm plantation (Malaysia) Sdn. Bhd.
Kumpulan Bertam Plantations Berhad Malaysia 94.49 94.49 Oil palm plantation
EPA Management Sdn. Bhd. Malaysia 100 100 Investment holding, provision of management services and consultancy, and mechanical equipment assembler
Skellerup Industries (Malaysia) Sdn. Bhd. Malaysia 100 100 Manufacturer of rubber-based products
Kulim Topplant Sdn. Bhd. Malaysia 60 60 Production of oil palm clones
JTP Trading Sdn. Bhd. Malaysia 100 80 Trading/distribution of tropical fruits
Kulim Energy Sdn. Bhd. Malaysia 100 100 Investment holding
Pristine Bay Sdn. Bhd. Malaysia 51 51 Investment holding
Kulim Plantations (Malaysia) Sdn. Bhd. Malaysia 100 100 Oil palm plantation
SECTION 7 +@^ New Britain Palm Oil Limited Papua New 48.97 50.68 Oil palm plantation Guinea
+# QSR Brands Bhd. Malaysia 56.83 53.92 Investment holding
Sindora Berhad Malaysia 100 100 Investment holding, operations of oil palm mill and rubber estates
Cita Tani Sdn. Bhd. Malaysia 100 90 Dormant
annual report 2012 221
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % % Held by the Company : (cont’d)
Renown Value Sdn. Bhd. Malaysia 75 75 Cultivation of pineapples and other agricultural produce
Kulim Nursery Sdn. Bhd. Malaysia 75 75 Oil palm nursery and other related services
The Secret of Secret Garden Sdn. Bhd. Malaysia 100 100 Marketing of personal care products
Held through Mahamurni Plantations Sdn. Bhd. :
Pembangunan Mahamurni Sdn. Bhd. Malaysia 100 100 Investment holding
United Malayan Agricultural Malaysia 100 100 Oil palm plantation Corporation Berhad
Held through Ulu Tiram Manufacturing Company (Malaysia) Sdn. Bhd. :
EPA Futures Sdn. Bhd. Malaysia 100 100 Dormant
Held through EPA Management Sdn. Bhd. :
Akli Resources Sdn. Bhd. Malaysia 95 95 Provider of in-house and external training programmes
Edaran Badang Sdn. Bhd. Malaysia 75 75 Dealer in agricultural machinery and parts
Kulim Civilworks Sdn. Bhd. Malaysia 75 75 Facilities maintenance, project and construction works SECTION 7 Panquest Ventures Limited British Virgin 100 100 Dormant Island
Kulim Livestocks Sdn. Bhd. Malaysia 100 90 Breeding and sale of cattle
Special Appearance Sdn. Bhd. Malaysia 90 90 Production house and event management
Superior Harbour Sdn. Bhd. Malaysia 78 78 Aquaculture
Extreme Edge Sdn. Bhd. Malaysia 75 100 Computer equipment supplier and services
222 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % % Held through EPA Management Sdn. Bhd. : (cont’d)
Pinnacle Platform Sdn. Bhd. Malaysia 95 100 Software maintenance and supplier
Kulim Safety Training & Services Sdn. Bhd. Malaysia 100 100 Dormant (formely known as Palma Bumimas Sdn. Bhd.)
+PT Kulim Agro Persada Indonesia 100 100 Management services
Held through Kulim Livestocks Sdn. Bhd. :
Exquisite Livestock Sdn. Bhd. Malaysia 100 90 Commercial cattle farming
Held through Edaran Badang Sdn. Bhd. :
Perfect Synergy Trading Sdn. Bhd. Malaysia 90 100 Fertilizer supplier
Optimum Status Sdn. Bhd. Malaysia 100 100 Mill maintenance
Held through Kulim Civilworks Sdn. Bhd. :
KCW Hardware Sdn. Bhd. Malaysia 100 100 Hardware supplier
KCW Kulim Marine Services Sdn. Bhd. Malaysia 100 100 Port services
KCW Electrical Sdn. Bhd. Malaysia 100 100 Electrical installation services
KCW Roadworks Sdn. Bhd Malaysia 100 100 Dormant
Held through Skellerup Industries (Malaysia) Sdn. Bhd. :
SECTION 7 Skellerup Foam Products (Malaysia) Malaysia 100 100 Dormant Sdn. Bhd.
Skellerup Latex Products (M) Sdn. Bhd. Malaysia 100 100 Dormant
SIM Manufacturing Sdn. Bhd. Malaysia 90 90 Investment holding and manufacturers and dealers in rubber and rubber products of all kinds
Held through Kulim Energy Sdn. Bhd. :
Nexsol (Malaysia) Sdn. Bhd. Malaysia 51 51 Dormant
annual report 2012 223
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through JTP Trading Sdn. Bhd. :
JTP Montel Sdn. Bhd. Malaysia 100 75 Trading and distribution of tropical fruits
Held through New Britain Palm Oil Limited :
+Dami Australia Pty. Limited Australia - 50.68 Research and production of oil palm seeds
+New Britain Nominees Limited Papua New - 50.68 Operate as legal entity for Guinea New Britain Palm Oil Limited Share Ownership Plan
+Guadalcanal Plains Oil Limited Solomon - 40.54 Operate as legal entity for Islands New Britain Palm Oil
+New Britain Plantation Services Singapore - 50.68 Sale of germinated oil Pte. Limited palm seeds
+Ramu Agri-Industries Limited Papua New - 50.68 Oil palm, cultivation of Guinea sugar cane and other agriculture produce
+Dumpu Limited Papua New - 50.68 Landholding Guinea
+New Britain Oils Limited United - 50.68 Refinery Kingdom
+Kula Palm Oil Limited Papua New - 40.54 Oil palm cultivation and processing Guinea SECTION 7 +Plantation Contracting Services Limited Papua New - 50.68 Contractual earthworks Guinea and roadworks projects
+Poliamba Limited Papua New - 32.94 Oil palm cultivation Guinea
Held through QSR Brands Bhd. :
+Pizza Hut Holdings (Malaysia) Sdn. Bhd. Malaysia 100 100 Investment holding
+QSR Ventures Sdn. Bhd. Malaysia 100 100 Investment holding
224 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through QSR Brands Bhd. : (cont’d)
+# KFC Holdings (Malaysia) Bhd. (“KFCH”) Malaysia 51.1 51.1 Investment holding
+Kampuchea Food Corporation Cambodia 55 55 Restaurants
+Efinite Value Sdn. Bhd. Malaysia 100 100 Customer service call centre
+Pizza Hut Delco Sdn. Bhd. Malaysia 100 100 Dormant
+SBC Coffee Holdings Sdn. Bhd. Malaysia 100 100 Dormant
+Sterling Distinction Sdn. Bhd. Malaysia 100 100 Dormant
+Pizza Hut Restaurants Sdn. Bhd. Malaysia 100 100 Restaurants
+PH Property Holdings Sdn. Bhd. Malaysia 100 100 Dormant
+Multibrand QSR Holdings Pte. Ltd. Singapore 100 100 Investment holding
+QSR Captive Insurance Limited Labuan 100 100 Captive insurer
+Integrated Poultry Industry Cambodia 100 100 Dormant (Kampuchea) Private Limited
Held through KFCH:
+PHD Delivery Sdn. Bhd. Malaysia 100 100 Restaurants
+Cilik Bistari Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Gratings Solar Sdn. Bhd. Malaysia 51.1 51.1 Trading of solar equipment SECTION 7
+Integrated Poultry Industry Sdn. Bhd. Malaysia 51.1 51.1 Poultry processing plant
+KFC Events Sdn. Bhd. Malaysia 51.1 51.1 Sales of food product vouchers
+KFC India Holdings Sdn. Bhd. Malaysia 51.1 51.1 Investment holding
+Pizza Hut Singapore Pte. Ltd. Singapore 100 100 Restaurants
+Pizza (Kampuchea) Private Limited Cambodia 55 55 Restaurants
+Ayamas Food Corporation Sdn. Bhd. Malaysia 51.1 51.1 Poultry processing and investment holding
annual report 2012 225
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through KFCH: (cont’d)
+Ayamas Integrated Poultry Industry Malaysia 51.1 51.1 Breeder, broiler farms, Sdn. Bhd. hatchery, feedmill and investment holding
+QSR Manufacturing Sdn. Bhd. Malaysia 51.1 51.1 Bakery, trading in formely known as KFC Manufacturing consumables and Sdn. Bhd. investment holding
+KFC Restaurants Holdings Malaysia 51.1 51.1 Investment holding Sdn. Bhd.
+KFCH Education (M) Sdn. Bhd, Malaysia 51.1 51.1 College/learning institute (formerly known as Paramount Holdings (M) Sdn. Bhd.)
+KFCIC Assets Sdn. Bhd Malaysia 51.1 51.1 Property holding (formerly known as Paramount Management Sdn. Bhd.)
+Region Food Industries Sdn. Bhd. Malaysia 51.1 51.1 Sauce manufacturing plant
+Roaster’s Chicken Sdn. Bhd. Malaysia 51.1 51.1 Investment holding
+WP Properties Holdings Sdn. Bhd. Malaysia 51.1 51.1 Investment holding
+Ayamas Shoppe Sdn. Bhd. Malaysia 51.1 51.1 Poultry retail, convenience food store chain and investment holding
+Ayamazz Sdn. Bhd. Malaysia 38.3 46 Push-cart selling food and refreshment SECTION 7
+Kentucky Fried Chicken Malaysia 51.1 51.1 Restaurants (Malaysia) Sendirian Berhad
+KFC (East Malaysia) Sdn. Bhd. Malaysia 51.1 51.1 Investment holding
+KFC (Peninsular Malaysia) Malaysia 51.1 51.1 Restaurants, commissary Sdn. Bhd. and investment holding
+KFC (Sarawak) Sdn. Bhd. Malaysia 51.1 51.1 Restaurants
+Ladang Ternakan Putihekar (N.S.) Sdn. Bhd. Malaysia 51.1 51.1 Breeder farm 226 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through KFCH: (cont’d)
+MH Integrated Farm Berhad Malaysia 51.1 51.1 Property holding
+Pintas Tiara Sdn. Bhd. Malaysia 51.1 51.1 Property holding
+Rasamas Holdings Sdn. Bhd. Malaysia 51.1 51.1 Restaurants
+Rasamas Bangi Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+SPM Restaurants Sdn. Bhd. Malaysia 51.1 51.1 Meals on wheels and property holding
+Usahawan Bistari Ayamas Sdn. Bhd. Malaysia 51.1 51.1 Operation of “Sudut Ayamas”
+Ayamas Farms & Hatchery Sdn. Bhd. Malaysia 51.1 46 Dormant
+KFC (Sabah) Sdn. Bhd. Malaysia 51.1 46 Restaurants
+Rasamas BC Sdn. Bhd. Malaysia 51.1 46.1 Dormant
+Rasamas Bukit Tinggi Sdn. Bhd. Malaysia 51.1 46 Dormant
+Rasamas Butterworth Sdn. Bhd. Malaysia 51.1 46 Dormant
+Rasamas Kota Bharu Sdn. Bhd. Malaysia 51.1 46 Dormant
+Rasamas Melaka Sdn. Bhd. Malaysia 51.1 46 Dormant
+Rasamas Nilai Sdn. Bhd. Malaysia 51.1 46 Dormant
SECTION 7 +Rasamas Subang Sdn. Bhd. Malaysia 51.1 46 Dormant
+Rasamas Wangsa Maju Sdn. Bhd. Malaysia 51.1 46 Dormant
+Rasamas Tebrau Sdn. Bhd. Malaysia 45.6 45.6 Restaurants
+Rasamas Terminal Larkin Sdn. Bhd. Malaysia 45.6 45.6 Dormant
+Rasamas Taman Universiti Sdn. Bhd. Malaysia 51.1 45.5 Dormant
+Ayamas Feedmill Sdn. Bhd. Malaysia 51.1 43.4 Dormant annual report 2012 227
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through KFCH: (cont’d)
+Semangat Juara Sdn. Bhd. Malaysia 51.1 38.3 Dormant
+Tepak Marketing Sdn. Bhd. Malaysia 28.1 28.1 Contract packing
+Kentucky Fried Chicken Singapore 51.1 51.1 Restaurants Management Pte. Ltd
+Kernel Foods Pvt. Ltd. India 51.1 51.1 Restaurants
+KFCH Restaurants Pvt. Ltd. India 51.1 51.1 Restaurants
+Mauritius Food Corporation Pvt. Ltd. Mauritius 51.1 51.1 Restaurants
+Pune Chicken Restaurants Pvt. Ltd. India 51.1 51.1 Restaurants
+WQSR Holdings (S) Pte. Ltd. Singapore 51.1 51.1 Investment holding
+KFC (B) Sdn. Bhd. Brunei 23.5 23.5 Restaurants Darussalam
+Rasamas Sdn. Bhd. Brunei 23.5 23.5 Restaurants Darussalam
+Asbury’s (Malaysia) Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Ayamas Contract Farming Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Ayamas Franchise Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Ayamas Marketing (M) Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Ayamas Selatan Sdn. Bhd. Malaysia 51.1 51.1 Dormant SECTION 7
+Bakers’ Street Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Cemerlang Sinergi Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Chippendales (M) Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Efinite Revenue Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Rangeview Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Rasamas Batu Caves Sdn. Bhd. Malaysia 51.1 51.1 Dormant 228 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through KFCH: (cont’d)
+Rasamas Endah Parade Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Rasamas Larkin Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Rasamas Mergong Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Restoran Keluarga Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Restoran Sabang Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Seattle’s Best Coffee Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Signature Chef Dining Services Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Signature Chef Foodservices Malaysia 51.1 51.1 Dormant & Catering Sdn. Bhd.
+Wangsa Progresi Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Hiei Food Industries Sdn. Bhd. Malaysia 41.4 41.4 Dormant
+Yes Gelato Sdn. Bhd. Malaysia 40.9 40.9 Dormant
+Ayamas Food Corporation (S) Pte. Ltd. Singapore 51.1 51.1 Dormant
+Ayamas Shoppe (S) Pte. Ltd. Singapore 51.1 51.1 Dormant
+Helix Investments Limited Hong Kong - 51.1 Dormant
SECTION 7 +Ayamas Shoppe (Brunei) Sdn. Bhd. Brunei 23.5 23.5 Dormant Darussalam
+Southern Poultry Farming Sdn. Bhd. Malaysia 51.1 43.3 Dormant
+Ventures Poultry Farm Sdn. Bhd. Malaysia 51.1 46 Dormant
+Ayamas Shoppe Sabah Sdn. Bhd. Malaysia 33.2 33.2 Convenience food store
+Agrotech Farm Solutions Sdn. Bhd. Malaysia 51.1 51.1 Dormant
+Felda Ayamas Ventures Sdn. Bhd. Malaysia 51.1 - Dormant annual report 2012 229
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through Sindora Berhad:
Sindora Wood Products Sdn. Bhd. Malaysia 100 100 Property letting
Sindora Timber Products Sdn. Bhd. Malaysia 100 100 Dormant
Sindora Trading Sdn. Bhd. Malaysia 100 100 Dormant
Sindora Development Sdn. Bhd. Malaysia 100 100 Dormant
Sindora Timber Sdn. Bhd. Malaysia 82.03 90 Timber logging, processing and sale of sawn timber, timber doors, laminated timber scantling and trading of wood products
Granulab (M) Sdn. Bhd. Malaysia 90 90 Trading of GranuMas, a granular synthetic bone graft
Pro Office Solutions Sdn. Bhd. Malaysia 75 75 Bulk mailing and printing services
Epasa Shipping Agency Sdn. Bhd. Malaysia 100 75 Shipping and forwarding agent
E.A. Technique (M) Sdn. Bhd. Malaysia 51 51 Provision of sea transportation and related services
Metro Parking (M) Sdn. Bhd. Malaysia - 75 Parking operations and the provision of related consultancy services
SECTION 7 Microwell Bio Solutions Sdn. Bhd. Malaysia 60 60 Trading of agricultural fertilizers, water treatment, biotechnology research and development
MIT Insurance Brokers Sdn. Bhd. Malaysia 90 90 Insurance broking and consultancy
Orkim Sdn. Bhd. Malaysia 51 35.86 Provision of sea transportation and related services
230 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % %
Held through Metro Parking (M) Sdn. Bhd.:
+ Metro Parking (S) Pte. Ltd. Singapore - 40.05 Parking operator and consultancy services
+ Metro Parking (B) Sdn. Bhd. Brunei - 68.66 Parking operator and Darussalam consultancy services
Metro Equipment Systems (M) Sdn. Bhd. Malaysia - 52.26 Trading in parking and other related equipments
Metro Parking (Sabah) Sdn. Bhd. Malaysia - 57.22 Parking operator and other transport related services
Smart Parking Management Sdn. Bhd. Malaysia - 42.91 Parking operator and trading in related equipments
+Metro Parking (HK) Limited Hong Kong - 31.47 Parking operator and other transport related services
+Metro Parking Services India - 57.22 Parking operator and (India) Private Limited consultancy services
Held through Sindora Timber Sdn. Bhd.:
General Access Sdn. Bhd. Malaysia 71.98 71.98 Field clearing, earthwork, road construction and resurfacing
Tiram Fresh Sdn. Bhd. Malaysia 82.03 82.03 Cultivation and trading of mushroom and related products
SECTION 7 Jejak Juara Sdn. Bhd. Malaysia 72.92 72.92 Manufacturers and dealers in rubber products
Held through E.A. Technique (M) Sdn. Bhd.:
Johor Shipyard & Engineering Sdn. Bhd. Malaysia 51 51 Shipbuilding, fabrication of steel structures, engineering services and consultancy
Held through Microwell Bio Solutions Sdn. Bhd.:
Julang Sempurna Sdn. Bhd. Malaysia 60 60 Trading of biochemical fertilizer annual report 2012 231
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
17. Investment in subsidiaries (cont’d)
+ Audited by firms other than Ernst & Young
@ Listed on Port Moresby Stock Exchange (“POMSOX”) and London Stock Exchange
# Delisted from the Main Board of Bursa Malaysia Securities Berhad on 7 February 2013
^ Become an associate during the current financial year (Note 11)
Acquisition of subsidiaries in 2012
(i) During the year, QSR subscribed for additional ordinary shares of RM1.00 each, in the following companies at par:
i) 999,998 ordinary shares in Efinite Value Sdn Bhd, satisfied by cash. ii) 265,158,316 ordinary shares in QSR Ventures Sdn Bhd, satisfied by settlement of intercompany balances.
Disposal of subsidiaries in 2012
(i) As disclosed in Note 11(a), the Group and Company’s shareholdings in NBPOL were diluted to below 50% following the decision not to participate in NBPOL’s new issue of shares during the year. Accordingly, NBPOL is now an associate of the Group. The effect of the deemed disposal on the financial position of the Group is disclosed in Note 11.
(ii) As disclosed in Note 11(b), the Group via its subsidiary, Sindora Berhad disposed of its equity interest in Metro for a total consideration of RM12,200,000 during the year. The effect of the disposal on the financial position of the Group is disclosed in Note 11.
Acquisition of additional interest in subsidiaries in 2011
During the previous financial year, the Group and Company acquired an additional 22,076,182 ordinary shares in Sindora Berhad (“Sindora”) representing 23.71% of the issued and paid-up share capital of Sindora for a total purchase consideration of RM70,598,000. Following the acquisition, Sindora became a wholly owned subsidiary of the Group.
Acquisition of subsidiaries in 2011
(i) On 1 November 2010, the Group via its subsidiary, KFCH announced that it had via its wholly-owned subsidiary, Ayamas Food Corporation Sdn. Bhd., entered into Sale and Purchase of Shares Agreements for the acquisition of:
a. 90.0% of the issued and paid up share capital of Southern Poultry Farming Sdn. Bhd.;
SECTION 7 b. 84.8% of the issued and paid up share capital of Synergy Poultry Farming Sdn. Bhd.;
c. 90.0% of the issued and paid up share capital of Ventures Poultry Farm Sdn. Bhd.; and
d. 100% of the issued and paid-up share capital of Agrotech Farm Solutions Sdn. Bhd.
for a total cash consideration of RM1,111,951. These acquisitions were completed on 14 January 2011 and did not have any significant impact on the financial position of the Group.
(ii) On 11 March 2011, KFCH announced that it had via its wholly-owned subsidiary, Ayamas Shoppe Sdn. Bhd., incorporated a company, i.e. Ayamas Shoppe (Sabah) Sdn. Bhd. pursuant to the Joint Venture Agreement dated 27 October 2010 with Rastamas Trading Sdn. Bhd. for the purpose of operating Kedai Ayamas businesses in Sabah. 232 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
17. Investment in subsidiaries (cont’d)
Acquisition of subsidiaries in 2011 (cont’d)
(iii) During the previous financial year, the Group through its subsidiary, E.A. Technique Sdn. Bhd. acquired an additional 380,000 ordinary shares in Orkim Sdn. Bhd. (“Orkim”) representing 1.1% of the issued and paid up share capital of Orkim Sdn. Bhd. for a total purchase consideration of RM866,000. Following the acquisition of the additional interest, Orkim became a subsidiary of the Group. The acquisition of Orkim had the following effect on the Group’s assets and liabilities on the acquisition date:
Recognised values on acquisition RM’000
Property, plant and equipment 167,202 Goodwill 518 Investment in associates 14,877 Deferred tax assets 24 Cash and cash equivalents 13,118 Receivables 6,181 Current tax assets 93 Non-controlling interest (19,186) Borrowings (128,043) Payables (6,444) Current tax liabilities (349) Net identifiable assets 47,991 Less : Non-controlling interest on acquisition (30,781) Group’s share of net assets 17,210 Goodwill on acquisition 12,589 Consideration paid, satisfied in cash 29,799 Cash and cash equivalents acquired (13,118) Net cash outflow 16,681
Book values at the date of these acquisitions were determined based on the applicable FRSs immediately before these acquisitions. The book value at the date of acquisition of identifiable assets and liabilities recognised on acquisition approximated their fair values. Orkim contributed RM12,784,000 to the Group’s profit net of tax during the previous financial year. The effect of net profits contributed by the other acquired companies were not material in relation to the Group’s profit net of tax during the previous financial year. SECTION 7
Disposal of interest in subsidiary in 2011
On 2 August 2011, KFCH announced that it had through KFC Marketing Sdn. Bhd. entered into a Sale and Purchase of Shares incorporating Shareholders’ Agreement with Ayamazz Sdn. Bhd. and Mohamed Hashim bin Mohd Kamil (“Intrapreneur”).
The agreement enables the Intrapreneur to subscribe/purchase ordinary shares representing up to 25% equity interest in Ayamazz Sdn Bhd arising from the implementation of the Group’s Intrapreneur Scheme.
During the previous financial year, the Group disposed off 10% of its interest in Ayamazz Sdn. Bhd. for a cash consideration of RM50,000.” annual report 2012 233
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
18. Investments in associates
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000 At cost Quoted shares outside Malaysia 3,130,772 - 216,390 - Unquoted shares in Malaysia - 16,622 - - 3,130,772 16,622 216,390 - Share of post-acquisition reserves 13,822 7,712 - - 3,144,594 24,334 216,390 - Less: Accumulated impairment losses (1,275,900) - - - 1,868,694 24,334 216,390 - At fair value: Quoted shares 1,868,694 - 1,868,694 -
Details of the significant associates are as follows:
Effective ownership Country of interest Name of subsidiaries incorporation 2012 2011 Principal activities % % held directly by the Company
+@ New Britain Palm Oil Limited Papua New 48.97 50.68 Oil palm plantation Guinea
held through Orkim Sdn Bhd
Orkim Discovery Sdn Bhd Malaysia 14.32 14.32 Ship owning company
Orkim Reliance Sdn Bhd Malaysia 14.32 14.32 Ship owning company
Orkim Challenger Sdn Bhd Malaysia 14.32 14.32 Ship owning company
As disclosed in Note 11(a), NBPOL became an associate during the financial year following the dilution of the Group’s SECTION 7 interest in its shares. Subsequent to the deemed disposal, an impairment loss of RM1,275,900,000 was recognised on the Group’s investment in NBPOL due to the significant decline in the quoted share price of NBPOL after the deemed disposal. The recoverable amount of the investment in NBPOL was determined based on fair value less costs to sell.
As Orkim Sdn Bhd has been classified as held for sale, the investment in its associates are now presented under assets of disposal group classified as held for sale.
The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group is as follows:
234 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
18. Investments in associates (cont’d)
Net Total Total Total revenues profit assets liabilities Group RM’000 RM’000 RM’000 RM’000
2012 New Britain Palm Oil Limited 2,018,610 186,416 4,639,228 2,001,032 Orkim Challenger Sdn Bhd 15,006 5,502 68,178 46,263 Orkim Discovery Sdn Bhd 15,006 5,650 69,845 47,547 Orkim Reliance Sdn Bhd 14,592 5,426 64,759 43,384
2011 Orkim Challenger Sdn Bhd 14,965 5,509 68,578 51,615 Orkim Discovery Sdn Bhd 14,965 5,822 68,542 51,537 Orkim Reliance Sdn Bhd 13,999 5,995 66,898 50,449
+ Audited by firms other than Ernst & Young
@ Listed on Port Moresby Stock Exchange (“POMSOX”) and London Stock Exchange SECTION 7 annual report 2012 235
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
19. Other investments
Equity instrument Warrants in outside Shares in Malaysia Malaysia Malaysia Fund Total Unquoted Quoted Quoted Unquoted investment Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
2012
Non-current Available-for-sale financial assets 83,761 4,639 33,192 - 45,930 -
Current Available-for-sale financial assets 3,698 - 2,516 - - 1,182 Held for trading 20,162 - - 20,162 - - 23,860 - 2,516 20,162 - 1,182
107,621 4,639 35,708 20,162 45,930 1,182
Representing items: At cost/amortised cost 50,569 4,639 - - 45,930 - At fair value 57,052 - 35,708 20,162 - 1,182 107,621 4,639 35,708 20,162 45,930 1,182
2011
Non-current Available-for-sale financial assets 52,479 10,787 41,692 - -
Current Available-for-sale financial assets 33,384 - 2,777 - 30,607 Held for trading 63,985 - - 63,985 - 97,369 - 2,777 63,985 30,607
149,848 10,787 44,469 63,985 30,607
Representing items: SECTION 7 At cost/amortised cost 10,787 10,787 - - - At fair value 139,061 - 44,469 63,985 30,607 149,848 10,787 44,469 63,985 30,607 236 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
19. Other investments (cont’d)
Equity instrument outside Warrants in Shares in Malaysia Malaysia Malaysia Fund Total Unquoted Quoted Unquoted Quoted investment Company RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
2012
Non-current Available-for-sale financial assets 62,852 768 16,154 45,930 - -
Current Available-for-sale financial assets 2,182 - 1,000 - - 1,182 Held for trading 20,162 - - - 20,162 - Available-for-sale financial assets 22,344 - 1,000 - 20,162 1,182
85,196 768 17,154 45,930 20,162 1,182
Representing items: At cost/amortised cost 46,698 768 - 45,930 - - At fair value 38,498 - 17,154 - 20,162 1,182 85,196 768 17,154 45,930 20,162 1,182
2011
Non-current Available-for-sale financial assets 5,778 3,842 1,936 - - -
Current Available-for-sale financial assets 31,219 - 1,200 - - 30,019 Held for trading 63,985 - - - 63,985 - 95,204 - 1,200 - 63,985 30,019
100,982 3,842 3,136 - 63,985 30,019
SECTION 7 Representing items: At cost/amortised cost 3,842 3,842 - - - - At fair value 97,140 - 3,136 - 63,985 30,019 100,982 3,842 3,136 - 63,985 30,019 annual report 2012 237
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012 24 276 Total Total 19,091 89,319 (11,772) (98,040) (58,807) RM'000 777,340 (166,170) (690,859) (192,742) (1,040,424) (1,040,424) - - - 24 276 (1,358) (6,431) 38,272 Others (63,470) (44,578) (12,485) (63,470) RM'000 102,824 ------497 4,625 (1,041) (12,546) (13,587) (17,668) (12,546) RM'000 financial gains on Fair value instruments ------(168) (168) 6,736 10,899 52,400 H edge (10,731) (59,304) reserve reserve RM'000 ------and 5,029 5,029 5,029 5,029 RM'000 U nutilised investment allowances reinvestment - - - - 1,165 3,244 (2,450) (6,499) 34,091 26,307 18,175 12,672 34,091 carried RM'000 forward forward Tax losses Tax - - - - 17,926 97,176 RM'000 666,067 (222,191) (699,188) (113,935) (190,237) Property, Property, plant and (1,003,360) (1,003,360) equipment SECTION 7 Deferred tax (liabilities)/assets as at 31 December relates to the following : tax (liabilities)/assets as at 31 December relates Deferred x assets and lia b ilities D eferred ta Group At 1 January 2012 Recognised in profit or loss Recognised in profit Recognised in other comprehensive income Recognised in other comprehensive Disposal of subsidiaries Translation exchange difference Translation Attributable to discontinued operations At 31 December 2012 At 1 January 2011 Acquisition in business combination Recognised in profit or loss Recognised in profit Recognised in other comprehensive income Recognised in other comprehensive Translation exchange difference Translation At 31 December 2011 20. 238 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
20. Deferred tax assets and liabilities (cont’d)
Fair value Property, gains on plant and financial equipment instruments Others Total RM’000 RM’000 RM’000 RM’000
Company
At 1 January 2011 (66,460) (17,658) 315 (83,803) Recognised in profit or loss (227) - (122) (349) Recognised in other comprehensive income - 497 - 497
At 31 December 2011 (66,687) (17,161) 193 (83,655) Recognised in profit or loss 17,926 - - 17,926 Recognised in other comprehensive income - (1,041) - (1,041)
At 31 December 2012 (48,761) (18,202) 193 (66,770)
At the reporting date, deferred tax assets have not been recognised in respect of the following items:
Group 2012 2011 RM’000 RM’000
Unutilised tax losses 44,231 59,133 Unabsorbed capital allowances 52,692 67,899 96,923 127,032
The availability of the above tax losses and allowances for offsetting against future taxable profits of the respective subsidiaries in Malaysia are subject to no substantial changes in shareholdings of those subsidiaries under the Income Tax Act, 1967 and other guidelines issued by the tax authority.
21. Inventories
Group Company
SECTION 7 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000 At cost: Agricultural produce 18,066 637,511 - - Finished goods 32,612 88,651 - - Materials and consumables 30,630 168,758 2,312 1,892 Livestocks 1,079 39,680 - - Work-in-progress - 132 - - 82,387 934,732 2,312 1,892 annual report 2012 239
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
22. Trade and other receivables
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Current Trade receivables Third parties 158,061 522,777 503 847 Subsidiaries - - 49,927 25,050 Ultimate holding corporation 31,792 53,510 16,346 49,841 Related companies 12,103 5,461 2,198 1,993 201,956 581,748 68,974 77,731 Less : Allowance for impairment losses Third parties (5,666) (6,855) - - Related companies (4,137) (4,432) (1,650) (1,650) (9,803) (11,287) (1,650) (1,650)
Trade receivables, net 192,153 570,461 67,324 76,081
Current Other receivables Third parties 32,905 151,796 8,458 11,981 Subsidiaries - - 338,306 331,998 Deposits 6,442 90,409 1,481 1,634 39,347 242,205 348,245 345,613 Less : Allowance for impairment losses Third parties (4,551) (4,254) (4,057) (4,057) Subsidiaries - - (109,087) (109,087) Deposits (55) (55) - - (4,606) (4,309) (113,144) (113,144)
34,741 237,896 235,101 232,469
Total trade and other receivables 226,894 808,357 302,425 308,550 SECTION 7 240 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
22. Trade and other receivables (cont’d)
(a) Trade receivables
Third party trade receivables are non-interest bearing and payment terms range from payment in advance to 90 days (2011: payment in advance to 90 days). They are recognised at their original invoice amounts which represent their fair values on initial recognition.
Ageing analysis of trade receivables
The ageing analysis of the Group’s and the Company’s trade receivables is as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Neither past due nor impaired 45,471 394,698 70 48 1 to 30 days past due not impaired 61,720 90,225 14,160 10,781 31 to 60 days past due not impaired 43,780 19,893 13,488 4,029 61 to 90 days past due not impaired 3,927 9,343 1,163 4,791 91 to 120 days past due not impaired 3,808 3,428 4,093 2,335 More than 121 days past due not impaired 33,447 52,874 34,350 54,097 146,682 175,763 67,254 76,033 Impaired 9,803 11,287 1,650 1,650 201,956 581,748 68,974 77,731
Receivables that are neither past due nor impaired
Receivables that are neither past due nor impaired are mainly from regular customers that have been transacting with the Group. None of these balances have been renegotiated during the financial year.
Receivables that are past due but not impaired
The Group and Company have trade receivables amounting to RM146,682,000 (2011: RM175,763,000) and RM67,254,000 (2011: RM76,033,000) respectively that are past due at the reporting date but not impaired. These balances are not secured. SECTION 7 annual report 2012 241
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
22. Trade and other receivables (cont’d)
(a) Trade receivables (cont’d)
Receivables that are impaired
The Group’s and the Company’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Trade receivables - nominal amounts 9,803 11,287 1,650 1,650 Less: Allowance for impairment (9,803) (11,287) (1,650) (1,650) - - - -
Movement in allowance accounts:
At 1 January 11,287 6,862 1,650 1,650 Charge for the year 160 5,585 - - Reversal of impairment losses (1,107) (45) - - Written off (537) (1,115) - - At 31 December 9,803 11,287 1,650 1,650
Trade receivables that are determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on repayments. These receivables are not secured by any collateral or credit enhancements.
(b) Amount due from subsidiaries
These amounts are unsecured, non-interest bearing and repayable on demand except for an amount of RM39,571,000 (2011: RM37,039,000) which bears interest of 4.97% to 6.50% (2011: 5.13% to 6.50%) per annum.
(c) Amount due from ultimate holding corporation and related companies
Other than an amount of RM43,098,000 as at the end of the previous financial year which bears interest of 5.13% to 5.14% per annum, these amounts are unsecured, non-interest bearing and repayable on demand.
(d) Other receivables that are impaired
The Group’s and the Company’s other receivables that are impaired at the reporting date and the movement of the SECTION 7 allowance accounts used to record the impairment are as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Movement in allowance accounts:
At 1 January 4,309 7,592 113,144 113,144 Charge for the year 494 - - - Written off (197) (3,283) - - At 31 December 4,606 4,309 113,144 113,144
242 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
23. Cash and bank balances
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Cash and bank balances 147,095 561,726 43,878 9,272 Deposits placed with licensed banks 75,241 82,976 63,350 70,392 222,336 644,702 107,228 79,664
Included in deposits placed with licensed banks of the Group and of the Company are amounts of RM12,760,000 (2011 : RM61,865,000) and RM350,000 (2011 : RM350,000) respectively, pledged for bank facilities granted to the Group and the Company.
For the purposes of the statements of cash flows, cash and cash equivalents comprise the following at the reporting date:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000 Cash and short-term deposits - Continuing operations 222,336 644,702 107,228 79,664 - Discontinued operations (Note 11) 281,649 - - - 503,985 644,702 107,228 79,664 Less : Deposits pledged (12,760) (61,865) (350) (350) Bank overdrafts (Note 24) (2,032) (26,119) - - Cash and cash equivalents 489,193 556,718 106,878 79,314
SECTION 7 annual report 2012 243
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
24. Loans and borrowings
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Current
Secured: Obligations under finance leases 265 2,614 - - Bank overdrafts - 17,080 - - Revolving credit 30,000 30,000 - - Term loans 41,066 135,522 - - 71,331 185,216 - - Unsecured: Obligations under finance leases 277 150 - - Bank overdrafts 2,032 9,039 - - Bankers’ acceptances 1,280 35,431 - - Revolving credit 579,727 163,747 130,000 - Term loans 1,000 178,260 - - 584,316 386,627 130,000 -
Current loans and borrowings 655,647 571,843 130,000 -
Non-current
Secured: Obligations under finance leases - 1,872 - - Term loans 196,892 1,627,283 - 273,171 196,892 1,629,155 - 273,171 Unsecured: Obligations under finance leases 484 362 - - Term loans 273,346 419,584 - - 273,830 419,946 - - SECTION 7 Non-current loans and borrowings 470,722 2,049,101 - 273,171
Total loans and borrowings Obligations under finance leases 1,026 4,998 - - Bank overdrafts (Note 23) 2,032 26,119 - - Bankers’ acceptances 1,280 35,431 - - Revolving credit 609,727 193,747 130,000 - Term loans 512,304 2,360,649 - 273,171 1,126,369 2,620,944 130,000 273,171
244 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
24. Loans and borrowings (cont’d)
Details of the Group’s and Company’s term loans are as follows:
2013 2014 2015 - 2017 >2017 Year of Carrying Under 1 1 - 2 2 - 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000
Group 2012 Term loan: 1 2013 1,000 1,000 - - - 2 2016 5,090 848 4,242 - - 3 2016 5,078 848 4,230 - - 4 2014 2,590 1,665 925 - - 5 2014 6,279 6,279 - - - 6 2014 3,188 1,563 1,625 - - 7 2016 14,415 3,927 10,488 - - 18 2020 54,775 6,118 8,360 25,080 15,217 19 2020 41,582 4,236 8,737 26,211 2,398 20 2020 37,941 4,042 8,737 25,162 - 25 2015 3,160 960 2,200 - - 26 2015 9,019 2,740 6,279 - - 27 2014 2,540 2,180 360 - - 35 2018 273,346 - 55,000 165,000 53,346 36 2020 13,373 1,433 11,940 - - 37 2020 13,373 1,433 11,940 - - 38 2020 13,373 1,433 11,940 - - 39 2020 12,182 1,360 10,822 - - 512,304 42,065 157,825 241,453 70,961
SECTION 7 annual report 2012 245
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
24. Loans and borrowings (cont’d)
2013 2014 2015 - 2017 >2017 Year of Carrying Under 1 1 - 2 2 - 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000
Group 2011 Term loan: 1 2013 5,000 4,000 1,000 - - 2 2016 5,952 1,228 1,228 3,496 - 3 2016 5,951 1,228 1,228 3,495 - 4 2014 4,520 1,957 1,957 606 - 5 2012 7,984 7,984 - - - 6 2014 4,855 1,886 1,886 1,083 - 7 2016 18,349 5,463 5,177 7,709 - 8 2013 682 341 341 - - 9 2013 904 452 452 - - 10 2018 2,294 296 337 1,167 494 11 2021 76,330 8,253 8,253 24,753 35,071 12 2020 42,478 4,471 4,471 13,414 20,122 13 2016 273,171 - 30,000 243,171 - 14 2014 2,980 1,192 1,192 596 - 15 2013 9,094 7,275 1,819 - - 16 2014 45,000 - - 45,000 - 17 2013 677 369 308 - - 18 2020 59,034 - 8,360 25,080 25,594 19 2020 47,279 - 8,737 26,211 12,331 20 2020 44,314 6,952 8,737 26,211 2,414 21 2017 183,000 6,863 9,150 135,878 31,110 22 2014 4,500 2,000 2,000 500 - 23 2015 39,900 11,400 11,400 17,100 - 24 2015 31,778 2,701 5,402 23,675 -
25 2015 4,116 1,241 1,181 1,694 - SECTION 7 26 2015 11,792 3,544 3,372 4,876 - 27 2012 2,464 2,464 - - - 28 2013 10,080 5,847 4,233 - - 29 2012 119,692 119,692 - - - 30 2016 735,216 81,675 77,296 576,245 - 31 2018 46,400 - 580 13,340 32,480 32 2016 23,200 - 5,800 17,400 - 33 2016 6,436 - 644 5,792 - 34 2016 5,266 - 527 4,739 - 246 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
24. Loans and borrowings (cont’d)
2013 2014 2015 - 2017 >2017 Year of Carrying Under 1 1 - 2 2 - 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000
Group 2011 Term loan:
35 2018 275,000 - - 165,000 110,000 36 2020 12,800 1,544 2,059 6,177 3,020 37 2020 12,800 1,544 2,059 6,177 3,020 38 2020 9,600 1,544 2,059 5,997 - 39 2020 6,200 1,447 1,930 2,823 - 40 2022 39,284 4,027 8,055 12,082 15,120 41 2022 39,770 4,027 8,054 12,081 15,608 42 2020 36,572 4,100 8,200 12,300 11,972 43 2021 37,945 4,100 8,200 12,300 13,345 44 2018 8,757 - 2,877 2,879 3,001 45 2013 785 562 223 - - 46 2015 448 112 148 188 - 2,360,649 313,781 250,932 1,461,235 334,702
Company 2011 Term loan:
13 2016 273,171 - - 185,000 88,171
Securities
The term loans are secured by the following:
SECTION 7 (a) Charges over certain property, plant and equipment of the Group and Company as disclosed in Note 13;
(b) Charges over certain investment properties of the Group and Company as disclosed in Note 14;
(c) Charges over the quoted shares in subsidiaries as disclosed in Note 17;
(d) Charges over certain fixed deposits of the Group and Company as disclosed in Note 23; and
(e) Corporate guarantee from the Company.
annual report 2012 247
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
24. Loans and borrowings (cont’d)
Significant covenants
In connection with the significant term loan facilities, the Group and the Company have agreed on the following significant covenants with the lenders:
(i) The ratio of the consolidated total borrowings to the consolidated shareholders’ funds does not exceed 125% at all times;
(ii) The Company will continue to maintain at least 50.1% of the issued and paid-up capital of QSR; and
(iii) The Company will procure and ensure that each of its subsidiary companies does not and/or will not enter into any agreements which impose restrictions on each of the subsidiary companies ability to make or pay dividend or other forms of distributions to the shareholders.
The loans and borrowings of the Group and Company bear interest at the following rates:
Group Company 2012 2011 2012 2011 % % % %
Weighted average effective interest rates at the end of reporting period: - Obligations under finance leases 3.30 5.49 - - - Bank overdrafts 6.95 8.77 - - - Revolving credit and bankers’ acceptances 3.07 4.31 4.18 - - Term loans 4.82 3.89 - 5.23
25. Trade and other payables
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Current
Trade SECTION 7 Third parties 58,737 363,951 4,743 4,754 Ultimate holding corporation 10,635 4,072 - - Subsidiaries - - 118,766 98,558 Related companies 2,347 14,940 279 747 71,719 382,963 123,788 104,059 Non-trade Third parties 81,370 414,157 6,794 6,302 Subsidiaries - - 27,292 97,315 81,370 414,157 34,086 103,617
Total trade and other payables 153,089 797,120 157,874 207,676
248 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
25. Trade and other payables (cont’d)
(a) Third parties
Trade and other payables due to third parties are generally unsecured and non-interest bearing. Credit terms range from payment in advance to 90 days (2011: payment in advance to 90 days).
(b) Amounts due to ultimate holding corporation and related companies
These amounts which arose mainly from normal trade transactions are unsecured, non-interest bearing and subject to normal trade terms.
(c) Amounts due to subsidiaries
These amounts which arose mainly from advances and payments on behalf are unsecured, non-interest bearing and repayable on demand except for an amount of RM90,930,000 (2011: RM42,517,000) which is subject to interest at rates ranging from 3.11% to 3.64% (2011: 2.76% to 3.36%) per annum.
26. Share capital
Number of ordinary shares Amount 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Authorised At 1 January 2,000,000 400,000 500,000 200,000 Effect of share split - 400,000 - 200,000 Created during the year - 1,200,000 - 100,000 At 31 December 2,000,000 2,000,000 500,000 500,000
Issued and fully paid At 1 January 1,262,037 318,670 315,509 159,336 Effect of share split - 318,670 - - Bonus issue - 624,697 - 156,173 Conversion of warrants 20,512 - 5,128 - SECTION 7 At 31 December 1,282,549 1,262,037 320,637 315,509
(a) Share capital
The holders of the ordinary shares are entitled to receive dividends, as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. annual report 2012 249
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
26. Share capital (cont’d)
(b) Share split and bonus issue
During the previous financial year, the Company increased its authorised share capital from RM200,000,000 comprising 400,000,000 shares of RM0.50 each to RM500,000,000 comprising 2,000,000,000 shares of RM0.25 each;
During the previous financial year, the Company also increased its issued and paid-up ordinary share capital from RM159,336,000 to RM315,509,000 by way of:
(i) Share split involving the subdivision of every one (1) existing ordinary share of RM0.50 each held in the Company into two (2) ordinary shares of RM0.25 each (“sub-divided share(s)”) (Share Split); and
(ii) Bonus issue of new sub-divided shares on the basis of one (1) bonus share for every one (1) sub-divided share held after the share split (“Bonus Issue”).
The Share Split and Bonus Issue were completed on 28 February 2011.
The above new shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.
(c) Issue of shares
During the financial year, the Company increased its issued and paid-up ordinary share capital from RM315,509,000 to RM320,637,000 by way of the issuance of 20,512,000 ordinary shares of of RM0.25 each upon the conversion of 20,512,000 warrants at the exercise price of RM3.85 per new ordinary share.
The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.
27. Other reserves
Group Company 2012 2011 2012 2011 Note ’000 ’000 RM’000 RM’000
Reserves SECTION 7 Non-distributable Share premium reserve (a) 204,820 116,013 204,820 116,013 Translation reserve (b) 620 95,714 - - Hedge reserve (c) - (748) - - Fair value reserve (d) (2,041) 1,256 (2,093) (313) Revaluation reserve (e) 1,344,656 1,337,757 897,579 897,579 Other reserve (f) 4,933 4,933 4,165 4,165 Warrant reserve (g) 98,979 113,945 98,979 113,944 Treasury shares (h) (45,829) (96,186) (45,829) (96,187) Equity transaction reserve (i) (32,597) (32,597) - - 1,573,541 1,540,087 1,157,621 1,035,201
250 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
27. Other reserves (cont’d)
The movements of each category of the reserves during the financial year are disclosed in the statements of changes in equity.
The nature and purpose of each category of reserves are as follows :
(a) Share premium reserve This reserve comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.
(b) Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations where functional currencies are different from that of the Group’s presentation currency.
(c) hedge reserve The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedged transactions that have not yet occurred.
(d) Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired.
(e) Revaluation reserve The revaluation reserve relates to the revaluation of the Group’s freehold and leasehold lands in Malaysia on 31 December 1997.
(f) Other reserve Other reserves consist mainly of reserves arising from the scheme of reconstruction, amalgamation and liquidation of a former subsidiary in 1975.
(g) Warrant reserve A total of 156,174,319 free warrants were issued by the Company in conjunction with the share split and bonus issue on 28 February 2011. Each warrant entitles the holder to subscribe for one (1) new sub-divided share at the exercise price of RM3.85 per share at any time during the exercise period. The warrants have an exercise period of
SECTION 7 five (5) years commencing 28 February 2011 and expiring on 27 February 2016. On 28 December 2012, the Company announced that the exercise price of the warrants would be adjusted to RM3.13 following the declaration of the special dividend of RM0.9094 per share (Note 38). The adjustment to the exercise price was effected on 12 January 2013.
As at the reporting date, 20,512,111 (2011: 500) warrants have been exercised and the number of outstanding warrants was 135,662,208 (2011: 156,173,819). annual report 2012 251
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
27. Other reserves (cont’d)
(h) Treasury shares Treasury shares relate to ordinary shares of the Company that are held by the Company. The amount consists of the acquisition costs of treasury shares net of the proceeds received on their subsequent sale or issuance. Rights on treasury shares are suspended until those shares are reissued.
The Company acquired 9,880,000 (2011: 14,840,000) shares in the Company through purchases on Bursa Malaysia Securities Berhad during the financial year. The total amount paid to acquire the shares was RM45,829,000 (2011: RM50,496,000) and this was presented as a component within shareholders’ equity.
During the financial year, the Company also sold 27,482,200 of its repurchased ordinary shares to the open market at an average price of RM5.20 per share. The total consideration received for the resale including transaction costs was RM142,476,000.
The Directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. The repurchase transactions were financed by internally generated funds. The shares repurchased are being held as treasury shares.
At 31 December 2012, the Company held 9,880,000 of its own shares of RM0.25 each (2011 : 27,482,000 shares of RM0.25 each). The number of outstanding ordinary shares of RM0.25 each in issue after the set-off is 1,272,669,000 (2011 : 1,234,555,000 ordinary shares of RM0.25 each).
(i) Equity transaction reserve The equity transaction reserve comprises the differences between the share of non-controlling interests in subsidiaries acquired/disposed and the consideration paid/received.
28. Retained earnings
The entire retained earnings of the Company as at 31 December 2012 may be distributed as dividends under the single tier system. SECTION 7 252 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
29. Employee benefits
Certain subsidiaries operate an unfunded, defined Retirement Benefit Scheme (“”the Scheme””) for its eligible employees. Under the Scheme, eligible employees are entitled to retirement benefits calculated by reference to their length of service and earnings. Provision for retirement benefits is calculated based on the pre-determined rate of basic salaries and length of service.
The following tables summarise the components of net benefit expense recognised in profit or loss and the amounts recognised in the statement of financial position for the Scheme.
Net benefit expense Group 2012 2011 RM’000 RM’000
Current service costs 116 126 Interest cost on benefit obligation 148 155 Past service cost 137 (195) Net benefit expense 401 86
The net benefit expense has been included in gain from discontinued operations, net of tax.
benefit liabilities
Group 2012 2011 RM’000 RM’000
Defined benefit obligation - Current - 301 - Non-current - 2,700 - 3,001
Changes in present value of defined benefit obligations are as follows:
Group SECTION 7 2012 2011 RM’000 RM’000
At 1 January 3,001 3,557 Current service costs and interest 401 86 Benefits paid (55) (642) Attributable to discontinued operations (3,347) - At 31 December - 3,001
annual report 2012 253
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
29. Employee benefits (cont’d)
The principal actuarial assumptions used in determining the retirement benefit obligations at the end of the reporting period (expressed as weighted averages) are as follows:
Group 2012 2011 % %
Discount rates 5.1 5.1 Future salary increases 4.0 4.0
30. Related party transactions
(a) Sale and purchase of goods and services
For the purposes of the 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.
All entities within the Johor Corporation Group are considered related companies/parties.
In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place at terms agreed between the parties during the financial year:
Transaction value for the year ended 31 December 2012 2011 RM’000 RM’000
Group
Ultimate holding corporation Johor Corporation SECTION 7 - Agency fees received 223 334 - Sales of oil palm fresh fruit bunches 3,636 531 - Purchase and sales commission received 1,952 2,335 - Planting advisory and agronomy fees received 118 173 - Computer charges received 123 97 - Inspection fees received 30 30 - Training, seminar and course fees received 53 60 - Sales of goods 3,975 2,909 - Construction work and maintenance fees received 442 608 - Event management fees & replanting services received 563 122 - Rental income 340 159 - Sales of oil palm seedling and bio compost fertilizer 540 871 - Rental payable (629) (629) 254 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
30. Related parties (cont’d)
Transaction value for the year ended 31 December 2012 2011 RM’000 RM’000
Group
Other related companies
Johor Foods Sdn. Bhd. - Agency fees received 130 392 - Sales of oil palm fresh fruit bunches 13,823 23,570 - Purchase and sales commission received 726 2,059 - Planting advisory and agronomy fees received 39 95 - Computer charges received 44 69 - Inspection fees received 30 30 - Training, seminar and course fees received 28 35 - Sales of goods 686 836 - Construction work and maintenance fees received 52 657 - Sales of oil palm seedling and bio compost fertilizer 399 1,738
Jcorp Hotels And Resorts Sdn. Bhd. - Agency fees received - 139 - Purchase and sales commission received - 529 - Planting advisory and agronomy fees received - 60 - Computer charges received - 27 - Training, seminar and course fees received - 17 - Sales of goods - 1,004 - Construction work and maintenance fees received - 61 - Sales of oil palm seedling and bio compost fertilizer - 61
Johor Franchise Development Sdn. Bhd. - Agency fees received 201 207 - Purchase and sales commission received 712 774 - Planting advisory and agronomy fees received 83 85
SECTION 7 - Computer charges received 48 39 - Training, seminar and course fees received 31 19 - Sales of goods 1,831 1,812 - Construction work and maintenance fees received 55 61 - Sales of oil palm seedling and bio compost fertilizer 21 72
Pro Biz Solution Sdn. Bhd. - Rental income 60 60 annual report 2012 255
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
30. Related parties (cont’d)
Transaction value for the year ended 31 December 2012 2011 RM’000 RM’000
Group
Other related companies (cont’d)
Pro Corporate Management Services Sdn. Bhd. - Secretarial and share registration fees paid (1,462) (1,266)
Damansara Assets Sdn. Bhd. - Management fees and services payable (11) (10) - Rental commission payable (662) (617)
Johor Land Berhad - Purchase of oil palm fresh fruit bunches (3,238) (4,777) - Management fees received 511 367
Kelab Bolasepak Perbadanan Johor - Donation paid (6,072) (5,330)
Tanjung Langsat Port Sdn. Bhd. - Computer charges received 303 89
IPPJ Sdn. Bhd. - Event management and booth rental received - 164
Pacific Rim Plantation Services Pte Limited - Sales and marketing agency commission - 15,706 - Project management service fees received - 2,356 SECTION 7 - Interest and other charges received - 353 256 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
30. Related parties (cont’d)
Transaction value for the year ended 31 December 2012 2011 RM’000 RM’000
Company
Ultimate holding corporation
Johor Corporation - Sales of oil palm fresh fruit bunches - 531
Other related companies
Kelab Bolasepak Perbadanan Johor - Donation (6,072) (5,330)
Johor Foods Sdn. Bhd. - Sales of oil palm fresh fruit bunches 6,562 21,052
Damansara Assets Sdn. Bhd. - Management fees and services payable - (10) - Rental commission payable (662) (617)
Subsidiaries and associates
New Britain Palm Oil Limited - Dividend income 33,566 34,184
Pro Biz Solution Sdn. Bhd. - Rental income 60 60
(b) Compensation of key management personnel
Key management personnel are defined as those persons having authority and responsibility for planning, directing
SECTION 7 and controlling the activities of the Group either directly or indirectly. The key management personnel includes all the Directors of the Group, and certain members of senior management of the Group.
The compensation of directors of the Company are disclosed in Note 9. The compensation of other members of senior management considered as key management personnel (excluding directors of the Company) are as follows:
Group 2012 2011 RM’000 RM’000
Salaries, allowance and bonuses 1,816 1,877 Defined contribution plan 199 236 Other employee benefits 110 103 2,125 2,216
annual report 2012 257
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
31. Commitments
(a) Capital commitments
Committed capital expenditure as at the reporting date is as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000 Authorised capital expenditure in respect of property, plant and equipment not provided for in the financial statements at the end of the year: - Contracted for 92,799 388,461 - 3,873 - Not contracted for 285,286 351,934 - 1,176 378,085 740,395 - 5,049
(b) Operating lease commitments - as lessee
The Group’s food and restaurants business segment has entered into non-cancellable operating lease agreements for the use of land and buildings. These leases have an average tenure of 15 years with no renewal or purchase options included in the contracts of the leases. Certain contracts also include escalation clauses or contingent rental arrangements computed based on sales achieved while others include fixed rentals for an average of 3 years. There are no restrictions placed upon the Group by entering into these leases.
As at the end of the previous financial year, NBPOL, a former subsidiary NBPOL, had entered into non-cancellable operating lease agreements for the use of mini estate land, for terms of 20 or 40 years, and state-owned land for terms of 99 years. These leases are renewable.
Future minimum rentals payable under non-cancellable operating leases at the reporting date are as follows:
Group 2012 2011 RM’000 RM’000
Not later than one year - 139,105 Later than 1 year but not later than 5 years - 166,614 Later than 5 years - 104,613
- 410,332 SECTION 7
258 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
31. Commitments (cont’d)
(c) Finance lease commitments
Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:
Group 2012 2011 RM’000 RM’000
Minimum lease payments Not later than one year 568 3,031 Later than 1 year but not later than 5 years 651 2,462 Total minimum lease payments 1,219 5,493 Less: Amounts representing finance charges (193) (495) Present value of minimum lease payments 1,026 4,998
Present value of payments Not later than one year 542 2,764 Later than 1 year but not later than 5 years 484 2,234 Present value of minimum lease payments 1,026 4,998 Less: Amount due within 12 months (542) (2,764) Amount due after 12 months 484 2,234
32. Significant events
Kulim (Malaysia) Berhad
(i) The Company had on 16 August 2011 announced the proposed acquisition of plantation assets from its ultimate holding corporation, Johor Corporation (“JCorp”) by Mahamurni Plantations Sdn Bhd (“MPSB”), a wholly-owned subsidiary of Kulim, of six (6) estates (together with all buildings and mills (including their plant and machineries erected thereon)), all located in the state of Johor with a total land area measuring approximately 13,687 hectares for a total cash consideration of RM700 million.
Of the above proposed acquisition, the following was completed as at year end:
(i) The SPA between MPSB and JCorp for the acquisition of the oil palm plantation land (together with all buildings SECTION 7 erected thereon together with assets, equipments, appliances, and plant and machineries located within the oil palm plantation) known as “Sungai Papan Estate” for a total cash consideration of RM183,300,000 and SPA between MPSB and JCorp Hotels and Resorts Sdn Bhd (“JHRSB”) (formerly known as Kumpulan Penambang (J) Sdn Bhd), a wholly-owned subsidiary of JCorp, for the acquisition of the oil palm plantation land (together with all buildings erected thereon together with assets, equipments, appliances, and plant and machineries located within the oil palm land) known as “Part of Siang Estate” for a total cash consideration of RM191,600,000. Payments were effected on 31 December 2011.
(ii) The SPA between MPSB and Johor Foods Sdn Bhd (“JFSB”), a wholly-owned subsidiary of JCorp, for the proposed acquisition of the land currently planted with oil palm cultivation (together with all buildings and the palm oil mill (“Palong Mill”) erected thereon (together with assets, equipments appliances, and plant and machineries located within the land and Palong Mill)) known as “Mungka, Kemedak and Palong Estate” for a total cash consideration of RM253,317,000. Payments were effected on 31 May 2012. annual report 2012 259
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
32. Significant events (cont’d)
Kulim (Malaysia) Berhad (cont’d)
The proposed acquisitions that are yet to be completed as at year end are as follows:
(i) The SPA between MPSB and JCorp for the proposed acquisition of the land currently planted with oil palm cultivation (together with all buildings and the palm oil mill (“Pasir Panjang Mill”)) erected thereon (together with assets, equipments, appliances, and plant and machineries located within the land and Pasir Panjang Mill)) known as “Part of Pasir Panjang Estate” for a total cash consideration of RM71,783,000.
QSR Brands Bhd (“QSR”)
(i) Reference is made to the announcement made by QSR in relation to the letter of offer by Massive Equity Sdn Bhd (“MESB”) dated 14 December 2011, wherein MESB stated its intention to acquire substantially all businesses and undertakings of QSR, including substantially all the assets and liabilities of QSR, at an aggregate cash consideration equivalent to:-
(a) RM6.80 per ordinary share of RM1.00 each held in QSR (“QSR Share”) multiplied by the total outstanding QSR Shares (less treasury shares, if any) at a date to be determined later; and
(b) RM3.79 per warrant of QSR (“QSR Warrant”) multiplied by the total outstanding number of QSR Warrants in issue at a date to be determined later.
(herein after referred to as the “QSR Offer”)
MESB had also on even date made an offer to acquire the entire businesses and undertakings of KFC Holdings (Malaysia) Bhd (“KFC”), including all of the assets and liabilities of KFC (“KFC Offer”). The QSR Offer and the KFC Offer are inter-conditional. On 18 May 2012, QSR Brands (M) Holdings Sdn Bhd (formerly known as Triple Platform Sdn Bhd) (“QSRB”), a wholly owned subsidiary of MESB, in place of MESB, entered into a Business Sale Agreement with QSR in relation to the QSR Offer (“QSR Transaction”). QSRB also entered into a Business Sale Agreement with KFC in relation to the KFC Offer (“KFC Transaction”). The QSR Transaction and the KFC Transaction are inter-conditional.
Both transactions were approved by the shareholders at Extraordinary General Meetings held on 5 and 6 November 2012 respectively and both transactions were completed on 21 January 2013. Following the completion of the transactions, QSR and KFC were delisted from the Main Board of Bursa Securities Berhad on 7 February 2013. SECTION 7 260 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
33. Subsequent event
Further to the announcement made by the Company on the planned disposal of Orkim Sdn Bhd (“Orkim”) on 30 November 2012 as disclosed in Note 11(d), the Company announced on 4 March 2013 that its wholly owned subsidiary, Sindora Berhad had entered into a Sale and Purchase Agreement with GMV-Orkim Sdn Bhd to dispose of its entire equity interest in Orkim for a total consideration of RM110,000,000.
34. Financial risk management objectives and policies
The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk.
The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the management team. The audit committee provides independent oversight to the effectiveness of the risk management process.
It is, and has been throughout the current and previous financial year, the Group’s policy that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-efficient. The Group applies cash flow hedge accounting on those hedging relationships that qualify for hedge accounting.
The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.
(a) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investments, cash and bank balances and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.
The Group seeks to invest cash assets safely and profitably. The Group has no significant concentration of credit risk and it is not the Group’s policy to hedge its credit risk. The Group has in place, for significant operating subsidiaries, policies to ensure that sales of products and services are made to customers with an appropriate credit history and sets limits on the amount of credit exposure to any one customer. The management does not expect any material losses from non-performance by counterparties.
Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by: SECTION 7
- The carrying amount of each class of financial assets recognised in the statements of financial position;
- Guarantees given by the Group and Company to banks in favor of the ultimate holding corporation and various related companies amounting to RM3,940,000 (2011: RM14,469,000).
- Corporate guarantees provided by the Company to banks for credit facilities granted to subsidiaries. The amount outstanding on such facilities was RM839,039,000 (2011: RM428,246,000) as at the reporting date. annual report 2012 261
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
34. Financial risk management objectives and policies (cont’d)
(a) Credit risk (cont’d)
Financial guarantees have not been recognised in the financial statements as the directors are of the opinion that the fair value on initial recognition was not material and that it is not probable that a future sacrifice of economic benefits will be required.
Credit risk concentration profile Other than the amounts due from the subsidiaries to the Company, the Group and the Company is not exposed to any significant concentration of credit risk in the form of receivables due from a single debtor or from groups of debtors.
Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 22. Deposits with banks and other financial institutions and investments are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 22.
(b) Liquidity risk
Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group and the Company’s liabilities (excluding those attributable to discontinued operations) at the reporting date based on contractual undiscounted repayment obligations.
On demand or One to Over within one year five years five years Total RM’000 RM’000 RM’000 RM’000
Group
At 31 December 2012 Financial liabilities: Trade and other payables 153,089 - - 153,089 SECTION 7 Loans and borrowings 694,418 389,019 145,393 1,228,830 Dividend payable 1,158,450 - - 1,158,450 Total undiscounted financial liabilities 2,005,957 389,019 145,393 2,540,369
At 31 December 2011 Financial liabilities: Trade and other payables 797,120 - - 797,120 Loans and borrowings 595,595 2,156,848 374,212 3,126,655 Forward commodity contracts settled gross - Gross payments (392,048) - - (392,048) - Gross receipts 78,618 - - 78,618 Total undiscounted financial liabilities 1,079,285 2,156,848 374,212 3,610,345 262 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
34. Financial risk management objectives and policies (cont’d)
(b) Liquidity risk (cont’d)
Analysis of financial instruments by remaining contractual maturities (cont’d)
On demand or One to Over within one year five years five years Total RM’000 RM’000 RM’000 RM’000
Company
At 31 December 2012 Financial liabilities: Trade and other payables 157,874 - - 157,874 Loans and borrowings 135,431 - - 135,431 Dividend payable 1,158,450 - - 1,158,450 Total undiscounted financial liabilities 1,451,755 - - 1,451,755
At 31 December 2011 Financial liabilities: Trade and other payables 207,676 - - 207,676 Loans and borrowings - 296,057 - 296,057 Total undiscounted financial liabilities 207,676 296,057 - 503,733
Financial guarantees have not been included in the above maturity analysis as no default has occurred.
(c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk whereas those issued at fixed rates expose the Group to fair value interest rate risk.The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings.
Sensitivity analysis for interest rate risk
SECTION 7 At the reporting date, a change of 50 basis points (“bp”) in interest rates would have increased/(decreased) post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
50 bp increase in interest rates (5,632) (13,105) (650) (1,366) 50 bp decrease in interest rates 5,632 13,105 650 1,366
annual report 2012 263
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
34. Financial risk management objectives and policies (cont’d)
(d) 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 operates internationally and is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group entities. The foreign currency in which these transactions are denominated is principally United States Dollars (“USD”).
It is not the Group’s policy to hedge its transactional foreign currency risk exposure.
The Group’s exposure to foreign currency risk, based on carrying amounts as at the end of the reporting period was:
Group 2012 2011 RM’000 RM’000
Denominated in USD As at 31 December Trade receivables - 347,176 Trade payables - (56,271) Loans and borrowings (108,909) (999,945) Derivative financial instruments - (2,104) Net exposure in the statement of financial position (108,909) (711,144)
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s profit net of tax and other comprehensive income net of tax (“OCI”) to a reasonably possible change in the USD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.
Other comprehensive Profit net of tax income net of tax 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
USD SECTION 7 - strengthen 5% (2011: 5%) (4,084) (160,483) - 318 - weaken 5% (2011: 5%) 4,084 160,483 - (318)
264 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
34. Financial risk management objectives and policies (cont’d)
(e) Market price risk
Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates).
The Group is exposed to equity price risk arising from its investment in quoted equity instruments which are mainly listed on Bursa Malaysia.
The management monitors the equity investments on a portfolio basis. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Risk Management Committee of the Group.
Sensitivity analysis for market price risk
At the reporting date, a 5% (2011: 5%) strengthening in the FTSE Bursa Malaysia KLCI would have increased the Group’s pre-tax profit by RM1,008,000 (2011: RM3,199,000) and its other comprehensive income by RM1,785,000 (2011: RM2,224,000). A 5% weakening in the FTSE Bursa Malaysia KLCI would have an equal but opposite effect on the Group’s pre-tax profit and other comprehensive income.
(f) Commodity price risk
The Group derives a significant proportion of its revenues from the sale of palm oil products. The Group uses derivative financial instruments (forward sales and purchases of Malaysian palm oil) to guarantee a minimum price for the sale of its own palm oil and to close out positions previously taken out. Cash flow hedge accounting is applied on such derivatives.
At the reporting date, a 10% fluctuation on palm oil prices would have the following effect on the Group’s hedge reserve within equity:
(Decrease)/Increase 2012 2011 RM’000 RM’000
10% increase in palm oil prices - (15,889) 10% decrease in palm oil prices - 15,889
(g) Fair value SECTION 7
Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair values
The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximations of fair values:
Note
Trade and other receivables 22 Loans and borrowings 24 Trade and other payables 25
annual report 2012 265
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
34. Financial risk management objectives and policies (cont’d)
(g) Fair value (cont’d)
The carrying amounts of these financial assets and liabilities are reasonable approximations of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.
The fair values of borrowings are estimated by discounting expected future cash flows at the market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date.
Quoted equity instruments
Fair value is determined directly by reference to their published market bid price at the reporting date.
Derivatives
Fair values of forward commodity contracts are calculated by reference to forward rates quoted at the reporting date for contracts with similar maturity profiles.
Financial guarantees
The Company provides financial guarantees to banks for credit facilities granted to certain subsidiaries. The fair value of such guarantees is not expected to be material as the probability of the subsidiaries defaulting is remote.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly.
- Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data. SECTION 7 266 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
34. Financial risk management objectives and policies (cont’d)
(g) Fair value (cont’d)
As at 31 December 2012, the Group held the following financial instruments carried at fair value in the statement of financial position:
Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000
Group At 31 December 2012
Financial assets measured at fair value Quoted shares 35,708 - - 35,708 Quoted warrants 20,162 - - 20,162 Fund investments - 1,182 - 1,182 55,870 1,182 - 57,052 At 31 December 2011
Financial assets measured at fair value Quoted shares 44,469 - - 44,469 Quoted warrants 63,985 - - 63,985 Fund investments - 30,607 - 30,607 108,454 30,607 - 139,061
Financial liabilities measured at fair value Derivative financial instruments - 2,104 - 2,104
Company At 31 December 2012
Financial assets measured at fair value Quoted shares 17,154 - - 17,154 Quoted warrants 20,162 - - 20,162 Fund investments - 1,182 - 1,182 37,316 1,182 - 38,498 At 31 December 2011 SECTION 7
Financial assets measured at fair value Quoted shares 3,136 - - 3,136 Quoted warrants 63,985 - - 63,985 Fund investments - 30,019 - 30,019 67,121 30,019 - 97,140 annual report 2012 267
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
35. Financial instruments
The financial instruments of the Group and the Company as at 31 December are categorised into the following classes:
2012 2011 Note RM’000 RM’000 Group
(a) Loans and receivables Trade and other receivables 22 226,894 808,357 Cash and cash equivalents 23 222,336 644,702 449,230 1,453,059 (b) Financial assets at fair value through profit or loss-held for trading Other investments 19 20,162 63,985
(c) Available-for-sale financial assets Other investments (at fair value) 19 36,890 75,076 Other investments (at cost less impairment) 19 50,569 10,787 87,459 85,863
(d) Financial liabilities measured at amortised cost Trade and other payables 25 153,089 797,120 Loans and borrowings 24 1,126,369 2,620,944 Dividend payable 1,158,450 - 2,437,908 3,418,064 (e) Derivative liabilities designated as hedging instruments Derivative financial instruments - 2,104
Company
(a) Loans and receivables Trade and other receivables 22 302,425 308,550 Cash and cash equivalents 23 107,228 79,664 409,653 388,214
(b) Financial assets at fair value through profit or loss-held for trading SECTION 7 Other investments 19 20,162 63,985
(c) Available-for-sale financial assets Other investments (at fair value) 19 18,336 33,155 Other investments (at cost less impairment) 19 46,698 3,842 65,034 36,997 (d) Financial liabilities measured at amortised cost Trade and other payables 25 157,874 207,676 Borrowings 24 130,000 273,171 Dividend payable 1,158,450 - 1,446,324 480,847 268 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
36. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong capital base and healthy capital ratios in order to support its business and maximise shareholder 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 2012 and 31 December 2011.
A subsidiary of the Group which is involved in insurance broking and consultancy is required by Bank Negara Malaysia to maintain a minimum shareholders’ fund of RM600,000 at any point in time. This externally imposed capital requirement has been complied with by the above-mentioned subsidiary for the financial years ended 31 December 2012 and 2011.
Bursa Malaysia Practice Note No. 17/2005 imposes a requirement on the Company to maintain a consolidated shareholders’ equity equal to or not less than the 25 percent of the issued and paid up capital (excluding treasury shares) and such shareholders’ equity is to be not less than RM40 million. The Company has complied with this requirement.
The Group monitors capital using the debt-to-equity ratio. The Group’s policy, which is unchanged from 2011, is to maintain the debt-to-equity ratio at the lower bound of the band between 0.5:1 and 0.8:1. The debt-to-equity ratios at 31 December 2012 and at 31 December 2011 were as follows:
Group 2012 2011 RM’000 RM’000
Total borrowings (Note 24) 1,126,369 2,620,944 Less: Cash and bank balances (Note 23) (222,336) (644,702) Net debt 904,033 1,976,242
Total equity 5,319,595 6,920,699
Debt-to-equity ratios 0.17 0.29
37. Segment information
For management purposes, the Group is organised into strategic business units based on their products and services, and has five reportable segments. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. The Group Managing Director (Group MD) reviews internal management reports for each of the strategic business units on a monthly basis. The operations of each of the Group’s reportable segments are summarised below: SECTION 7 • Plantation operations - Oil palm planting, crude palm oil processing and plantation management services and consultancy
• Food and service restaurants - Pizza Hut, Ayamas and Kentucky Fried Chicken outlets
• Intrapreneur ventures - Sea transportation, parking management, sales of wood based products and bulk mailing and printing
• Property investment - Rental of office building
Performance is measured based on segment profit before tax and interest as included in the internal management reports that are reviewed by the Group MD. Management believes that segment profits are the most relevant measure by which it can assess the results of the segments against those of other entities operating in the same industries.
Other operations of the Group mainly comprise investment holding and other miscellaneous activities which are not of sufficient size to be reported separately. annual report 2012 269
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012 9,758 11,050 60,062 27,778 RM'000 906,819 333,356 748,794 814,262 1,868,694 9,219,199 3,899,604 Consolidated A A A B C Notes - - - - - and (2,179) 83,761 (30,009) RM'000 (398,426) (893,570) (4,416,871) eliminations Adjustments - 870 692 Other 2,335 5,368 8,440 18,000 11,625 49,735 RM'000 557,880 463,512 operations ------8,644 3,121 95,602 RM'000 Property investment - - 1,167 15,160 30,565 30,919 25,630 16,153 RM'000 167,980 528,441 377,399 ventures Intrapreneur - 2,074 7,899 18,422 RM'000 159,716 261,659 300,730 893,570 Food and 3,619,003 3,071,034 1,070,408 restaurants (discontinued) - - - 105 11,587 56,823 Islands RM'000 797,868 136,767 146,160 Solomon Guinea & 1,868,694 1,868,694 Papua New Papua (discontinued) - - - Plantation 8,715 44,032 80,884 RM'000 712,195 156,874 333,302 SECTION 7 Malaysia 3,521,932 1,988,285 (cont’d) S egment information 31 December 2012 Segment revenue Results Interest income Finance costs Finance Depreciation of property, Depreciation of property, plant and equipment Amortisation of intangible assets Segment profit Assets Investments in associates Additions to non-current assets Intangible assets Segment assets Segment liabilities 37. 270 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012 9,523 9,372 4,811 33,912 24,334 RM'000 415,555 238,645 1,042,171 1,097,799 1,600,272 4,599,539 11,520,238 Consolidated A A A B C Notes ------and (3,068) 52,479 (47,279) RM'000 (5,996,022) (1,189,324) eliminations Adjustments 122 412 Other 1,955 5,484 4,811 2,694 4,102 (6,234) 27,555 24,334 82,897 RM'000 465,809 operations ------8,200 (4,364) 94,602 RM'000 Property investment - - 1,146 (1,019) 11,719 22,632 21,899 28,698 RM'000 184,931 137,624 533,306 439,520 ventures Intrapreneur - - 984 7,814 13,972 RM'000 135,764 283,900 888,972 393,088 Food and 3,349,914 2,686,468 1,034,260 restaurants (discontinued) - - - 2,950 33,307 Islands RM'000 163,398 896,166 177,435 654,525 Solomon Guinea & 2,646,108 4,665,389 2,024,830 Papua New Papua (discontinued) - - - - Plantation 7,721 22,071 88,277 RM'000 821,485 236,602 410,933 635,120 SECTION 7 Malaysia 3,405,097 (cont’d) equipment 31 December 2011 Segment revenue S egment information Results Interest income Finance costs Finance Depreciation of property, plant and Depreciation of property, Amortisation of intangible assets Impairment of non-financial assets Segment profit/(loss) Assets Investments in associates Intangible assets Additions to non-current assets Segment assets Segment liabilities 37. annual report 2012 271
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012 Total Total 1,167 25,630 16,153 30,565 30,919 15,160 venture RM'000 377,399 528,441 167,980 intrapreneur B A A Notes ------and (9,196) (25,869) RM'000 (186,951) eliminations Adjustments - 700 6,569 5,226 9,052 (1,737) Others 57,745 12,345 58,818 RM'000 - - - - and Bulk 2,367 2,878 1,931 14,026 23,148 mailing RM'000 printing (discontinued) - - 12 36 (81) 196 2,917 2,226 Wood Wood based 23,043 RM'000 products - - - 750 732 480 3,190 1,167 85,832 RM'000 Parking Parking management (discontinued) - Sea 8,996 52,538 18,299 22,888 20,837 RM'000 294,244 499,153 184,907 transportation SECTION 7 (cont’d) Segment liabilities Segment assets Segment profit/(loss) Additions to non-current assets Amortisation of intangible assets Assets Intangible assets Results costs Finance plant and equipment Depreciation of property, 31 December 2012 Segment revenue The intrapreneur venture business segment can be further analysed as follows: venture The intrapreneur S egment information 37.
272 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012 Total Total 1,146 (1,019) 28,698 21,899 22,632 11,719 venture RM'000 439,520 533,306 137,624 184,931 intrapreneur B A A Notes ------and (21,045) (10,284) RM'000 (207,811) eliminations Adjustments - 970 392 5,226 4,211 Others (1,019) 66,181 62,138 39,319 74,114 RM'000 - - 354 991 271 809 and Bulk 4,643 1,931 15,027 30,416 mailing RM'000 printing (discontinued) - - - - 82 280 236 4,662 6,488 Wood Wood based 23,872 RM'000 products - 820 5,660 3,073 1,146 3,314 44,402 47,468 12,545 RM'000 Parking Parking 111,789 management (discontinued) - - Sea 8,996 92,291 37,630 20,438 14,062 RM'000 300,422 404,011 169,935 transportation SECTION 7 (cont’d) Segment liabilities Segment assets Additions to non-current assets Segment profit Assets Intangible assets Amortisation of intangible assets unsold Finance costs Finance Depreciation of property, plant and equipment Depreciation of property, Results Interest income 31 December 2011 Segment revenue S egment information 37. annual report 2012 273
Notes to the Financial Statements FINANCIAL STATEMENTS As at 31 December 2012
37. Segment information (cont'd)
Notes Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements
A The amounts relating to discontinued operations have been excluded to arrive at the amounts shown in the consolidated statement of comprehensive income as they are presented separately in the statement of comprehensive income within one line item, "Gain from discontinued operations, net of tax".
B The following items are added to / (deducted from) segment profit to arrive at "Profit before tax from continuing operations" presented in the consolidated statement of comprehensive income:
2012 2011 RM'000 RM'000
Share of results of associates 63,717 497 Interest income 11,050 9,523 Finance costs (60,062) (33,912) 14,705 (23,892)
C This amount comprises of other items which cannot be allocated to any operating segment.
Geographical information Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:
Revenue Non-current assets 2012 2011 2012 2011 RM'000 RM'000 RM'000 RM'000
Malaysia 906,819 1,042,171 3,356,273 5,592,816 Papua New Guinea - - 1,868,694 2,931,097 Europe (mainly United Kingdom and Netherlands) - - - 413,413 Others - - - 12,686 906,819 1,042,171 5,224,967 8,950,012
Non-current assets information presented above consist of the following items as presented in the consolidated statement of financial position:
SECTION 7 2012 2011 RM'000 RM'000
Property, plant and equipment 3,149,132 7,667,603 Investment properties 95,602 98,296 Intangible assets 27,778 1,097,799 Investments in associates 1,868,694 24,334 Other investments 83,761 52,479 Deferred farm expenditure - 9,501 5,224,967 8,950,012 274 Kulim (Malaysia) Berhad (23370-V)
FINANCIAL STATEMENTS Notes to the Financial Statements As at 31 December 2012
38. Dividends
Group and Company 2012 2011 RM'000 RM'000
Recognised during the financial year:
Dividends on ordinary shares: - Interim tax exempt (single-tier) dividend for 2012: 7.50 sen (2011: 5 sen) per share 95,992 61,728 - Special tax exempt (single-tier) dividend for 2012: 90.94 sen per share 1,158,450 - 1,254,442 61,728
39. Authorisation of financial statements for issue
The financial statements for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors on 12 March 2013. SECTION 7 annual report 2012 275 SUPPLEMENTARY FINANCIAL STATEMENTS INFORMATION
40. Supplementary information on the breakdown of realised and unrealised profits and losses
On 25 March 2011, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed entities pursuant to Paragraph 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the unappropriated profits or accumulated losses as at the end of the reporting period, into realised and unrealised profits or losses.
On 20 December 2011, Bursa Malaysia further issued another directive on the disclosure and the prescribed format of presentation.
The breakdown of the retained earnings of the Group and of the Company as at 31 December 2011, into realised and unrealised profits, pursuant to the directive, is as follows:
Group Company 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000
Total retained earnings of the Company and its subsidiaries: - realised 3,231,357 4,244,855 96,755 1,119,132 - unrealised (792,250) (681,525) (64,046) (51,353) 2,439,107 3,563,330 32,709 1,067,779 Total share of retained earnings associates: - realised 13,822 7,712 - - 2,452,929 3,571,042 32,709 1,067,779 Add: Consolidated adjustments (414,403) (1,134,542) - - Total retained earnings 2,038,526 2,436,500 32,709 1,067,779
The determination of realised and unrealised profits is based on the Guidance of 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, issued by Malaysian Institute of Accountants on 20 December 2011. SECTION 7 276 Kulim (Malaysia) Berhad (23370-V) OTHER CORPORATE INFORMATION LOCATIONS OF THE GROUP’S PALM OILS DIVISION OPERATION
PAPUA NEW GUINEA AND SOLOMON MALAYSIA ISLANDS
JOHOR
New Britain Oils Refinery UNITED KINGDOM Liverpool SECTION 8 annual report 2012 277 LOCATIONS OF THE GROUP’S Locations of the Group’s Palm Oil Division Operation OTHER CORPORATE INFORMATION PALM OILS DIVISION OPERATION
Pahang ESTATES AND MILLS: 1. Bukit Layang Estate 13. Sungai Tawing Estate Negeri Sembilan 21 18 2. Basir Ismail Estate 14. Selai Estate 22 17 3. REM Estate 15. Sungai Sembrong Estate 23 4. Ulu Tiram Estate 16. Labis Bahru Estate 16 15 13 14 5. Sedenak Estate and Mill 17. Sepang Loi Estate Melaka 12 10 11 9 6. Kuala Kabung Estate 18. UMAC Estate JOHOR 7. Rengam Estate 19. Sungai Papan Estate 8 7 8. Sindora Estate and Mill 20. Siang Estate 5 6 9. Tereh Selatan Estate 21. Palong Estate 3 4 20 2 10. Enggang Estate 22. Kemedak Estate and Palong Cocoa Mill 1 19 11. Mutiara Estate 23. Mungka Estate
Singapore 12. Tereh Utara Estate and Tereh Mill
NEW IRELAND Poliamba
KULA PALM WEST NEW BRITAIN OIL LTD
Main Area of NBPOL Operations
Ramu Agri- Industries Ltd
Higaturu
SOLOMON ISLANDS
Guadalcanal Plains SECTION 8 Milne Bay Palm Oil Ltd
PAPUA NEW GUINEA 278 Kulim (Malaysia) Berhad (23370-V) OTHER CORPORATE INFORMATION PROPERTIES OF THE GROUP
MALAYSIA
Net Book Value @ Year of 31.12.2012 Acquisition/ Tenure Hectares Description RM’000 Revaluation
Kulim (Malaysia) Berhad Labis Bahru Estate Freehold 2,109 Oil palm and 43,950 1997* K B 517 rubber estate 85009 Segamat, Johor
Mutiara Estate Leasehold expiring 1,619 Oil palm estate 29,716 1997* P O Box 21 20.06.2085 324 Kahang New Village 26.09.2085 607 86700 Kahang, Johor 04.11.2074
Basir Ismail Estate Freehold 2,875 Oil palm estate 432,330 1997* K B 502 81909 Kota Tinggi, Johor
REM Estate Freehold 1,583 Oil palm estate 204,045 1997* K B 501 Leasehold expiring 81909 Kota Tinggi, Johor 12.03.2911 988 Oil palm estate 15.04.2093 4 Staff training centre 14.03.2100 1 (Building age: 14 years)
Sg. Sembrong Estate Leasehold expiring Oil palm estate 14,625 1997* P O Box 21 05.05.2074 607 Kahang New Village 25.11.2082 607 86700 Kahang, Johor 13.10.2102 29
Ulu Tiram Estate Freehold 502 Oil palm estate 93,491 1997* K B 710 80990 Johor Bahru, Johor
Kuala Kabung Estate Leasehold expiring 1,693 Oil palm estate 9,189 1997* No 70, Jalan Ria 3 16.08.2081 Taman Ria, Bukit Batu 81020 Kulai, Johor
Mukim of Plentong, Johor Vacant land 17,458 1997* Lot 1581 Freehold 5 Lot 2222 Freehold 8 Lot 2223 Freehold 66 Lot 2226 Freehold 4 Lot 2227 Freehold 5
Menara Ansar Leasehold expiring - 21-storey intelligent 92,700 1998 SECTION 8 65, Jalan Trus 18.12.2080 office building 80000 Johor Bahru (Building age: 14 years) comprising 3-level basement carpark, 5-level podium and 16-level tower annual report 2012 279
PROPERTIES OF THE GROUP OTHER CORPORATE INFORMATION
MALAYSIA (continued)
Net Book Value @ Year of 31.12.2012 Acquisition/ Tenure Hectares Description RM’000 Revaluation kulim (malaySia) berhad (continued) Mukim Sungai Tiram Leasehold expiring 16.01.2068 20 Factory and vacant land 24,593 2008 PTD 3932 HSD 454418 13,656 962,097
Kulim Plantations (Malaysia) Sdn Bhd Tereh Selatan Estate Freehold 1,929 Oil palm estate 44,770 1997* K B 537 Leasehold expiring 27.08.2078 869 86009 Kluang, Johor
Tereh Utara Estate Freehold 834 Oil palm estate 44,400 1997* K B 536 Leasehold expiring 27.08.2078 1,560 86009 Kluang, Johor Leasehold expiring 27.06.2079 607
5,799 89,170
Mahamurni Plantations Sdn Bhd Rengam Estate Freehold 2,439 Oil palm estate 165,533 1997* K B 104 86300 Rengam, Johor
Sedenak Estate Freehold 2,861 Oil palm estate 188,433 1997* K B 726 80990 Johor Bahru, Johor
UMAC Estate Leasehold expiring Oil palm estate 17,054 1997* P O Box 64 17.03.2070 228 86007 Segamat, Johor 29.08.2071 237 11.12.2071 324 28.11.2072 346 25.02.2074 481
Siang Estate Leasehold expiring 23.01.2087 3,414 Oil palm estate 101,703 2011 K B 515 81909 Kota Tinggi, Johor
Sg. Papan Estate Leasehold expiring 22.09.2090 3,026 Oil palm estate 93,728 2011 Peti Surat 15, Bandar Penawar 81909 Kota Tinggi, Johor
Palong Estate Leasehold expiring Oil palm estate 55,257 2012+ K B 530, 85009 20.10.2045 806 SECTION 8 Segamat, Johor 18.08.2044 1,119
Mungka Estate Leasehold expiring 18.08.2044 1,929 Oil palm estate 60,480 2012+ K B 525, 85009 Segamat, Johor 280 Kulim (Malaysia) Berhad (23370-V)
OTHER CORPORATE INFORMATION PROPERTIES OF THE GROUP
MALAYSIA (continued)
Net Book Value @ Year of 31.12.2012 Acquisition/ Tenure Hectares Description RM’000 Revaluation
Mahamurni Plantations Sdn Bhd (continued) Kemedak Estate Leasehold expiring 18.08.2044 1,789 Oil palm estate 51,158 2012+ K B 525, 85009 Segamat, Johor 18,999 733,274
Ulu Tiram Manufacturing Company (Malaysia) Sdn Bhd Bukit Layang Estate Freehold 401 Oil palm estate 52,383 1997* K B 502 81909 Kota Tinggi, Johor 401 52,383
Selai Sdn Bhd Enggang Estate Freehold 1,735 Oil palm estate 25,872 1997* K B 503 86009 Kluang, Johor
Selai Estate Freehold 1,800 Oil palm estate 23,618 1997* K B 529 86009 Kluang, Johor 3,535 49,490
Kumpulan Bertam Plantations Berhad Sepang Loi Estate Freehold 1,016 Oil palm estate 9,644 2003 K B 520 85009 Segamat 1,016 9,644
Sindora Berhad Sindora Estate Leasehold expiring 24.01.2086 3,919 Oil palm and rubber estate 53,935 1987 K B 539 86009 Kluang, Johor
Sg. Tawing Estate Leasehold expiring 27.06.2079 2,226 Oil palm estate 32,969 2009 K B 531 86009 Kluang Johor 6,145 86,904
Total - Plantation 49,551 1,982,962
SECTION 8 + These lands are in the process of being converted into 99-year lease, pending issuance of land titles from Department of Land and Mines, Johor. * These properties were revalued in 1997. The accounting policy on revaluation is disclosed in Note 2.7 to the Financial Statements. annual report 2012 281
PROPERTIES OF THE GROUP OTHER CORPORATE INFORMATION
MALAYSIA (continued)
Net Book Value @ Year of Hectares/ 31.12.2012 Acquisition/ Tenure ’000 Sq.Ft. Description RM’000 Revaluation
Sindora Berhad Sindora Timber Complex 60 years lease expiring on 2.56/ Industrial land and 120 2000 Lot 1384 Industrial Area Phase 1 24.11.2059 building Bandar Tenggara (Building age: 13 years) 81000 Kulai, Johor 60 years lease expiring on /2,344 Industrial land and 7,045 1983 30.01.2041 building for office (Building age: 30 years) and factory
60 years lease expiring on /5 Factory building 41 1986 30.01.2041 (Building age: 27 years)
No 1, Jalan Temenggong 10 Leasehold expiring on /6 1 unit of double-storey 53 1987 Bandar Tenggara 18.04.2085 bungalow (staff residence) 81000 Kulai, Johor (Building age: 26 years)
No 17, Jalan Resam Leasehold 0.5699/ 1 unit of double-storey 583 1990 Green Plains, Taman Bukit Tiram (Building age: 23 years) bungalow (staff residence) 81800 Ulu Tiram, Johor 7,842
E.A. Technique (M) Sdn Bhd Setiawangsa Business Suites Freehold /6.402 Office building 1,501 2006 Unit C-3A-3A (Building age: 7 years) No 2, Jalan Setiawangsa II Taman Setiawangsa 54200 Kuala Lumpur 1,501
Total - Intrapreneur Ventures 9,343 SECTION 8 282 Kulim (Malaysia) Berhad (23370-V)
OTHER CORPORATE INFORMATION PROPERTIES OF THE GROUP
PAPUA NEW GUINEA
Net Book Mature Value @ Year of Hectares 31.12.2012 Acquisition/ Tenure Description 31.12.2012 K’000 Revaluation
New Britain Palm Oil Limited Mosa Group Bebere Freehold Mature Oil Palm and 1,716 4,312 1968-1990, 2005 Kumbango Development Costs 2,317 6,372 1972-1985, 2005 Togulo 1,364 8,036 1979-1985, 2005 Dami and Waisisi 866 1,947 1969-2000, 2005 6,263 20,667
Numundo Group Numundo Freehold 1,617 3,184 1996-2001, 2005 Mature Oil Palm and Haella 2,732 7,974 1999-2001, 2005 Development Costs Garu 2,562 2,993 1998-2000 Navarai 687 3,287 1980-1988 7,599 17,438
Kapiura Group Kautu Freehold 3,054 15,496 1986-2000 Kaurausu Freehold 1,584 4,748 1996-1999 Mature Oil Palm and Bilomi Freehold 2,013 17,132 1995-1999 Development Costs Malilimi Freehold 2,318 10,567 1983-1998 Moroa Leasehold 807 2,092 2003 Rigula Leasehold 2,520 14,388 2005 12,296 64,423
Talasea Group Lotogam 204 1,049 2002 Natupi 163 677 2003 Mature Oil Palm and Volupai Leasehold 1,060 6,213 2004-2005 Development Costs Gororu 66 2,385 2008 Silovuti 287 15,586 2009 Lolokoru 2,025 21,939 2005 3,804 47,849
Kulu-Dagi Group Mature Oil Palm and Dalaivu Leasehold 2,059 6,275 2003 Development Costs Sapuri 1,773 9,390 2004-2005 3,832 15,665
Total - New Britain Palm Oil Limited 33,794 166,042 SECTION 8 annual report 2012 283
PROPERTIES OF THE GROUP OTHER CORPORATE INFORMATION
PAPUA NEW GUINEA (continued)
Net Book Mature Value @ Year of Hectares 31.12.2012 Acquisition/ Tenure Description 31.12.2012 K’000 Revaluation
Ramu Agri-Industries Limited Gusap Leasehold Mature Oil Palm and 5,647 23,630 2008 Dumpu Leasehold Development Costs 2,160 15,265 2008 Total - Ramu Agri-Industries Limited 7,807 38,895
Kula Palm Oil Limited Higaturu Leasehold 6,706 16,932 2010 Mature Oil Palm and Milne Bay Leasehold 8,609 42,828 2010 Development Costs Poliamba Leasehold 4,753 1,780 2010 Total - Kula Palm Oil Limited 20,068 61,540
Grand Total - Papua New Guinea 61,668 266,477
SOLOMON ISLANDS
Net Book Mature Value @ Year of Hectares 31.12.2012 Acquisition/ Tenure Description 31.12.2012 K’000 Revaluation
Guadalcanal Plains Palm Oil Limited Tetere 1,352 4,358 2004 Mature Oil Palm and Ngalimbiu Leasehold 1,564 5,726 2004 Development Costs Mbalisuna 2,162 9,607 2004 Grand Total - Solomon Islands 5,078 19,691 SECTION 8 284 Kulim (Malaysia) Berhad (23370-V) OTHER CORPORATE INFORMATION NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Thirty Eighth (38th) Annual General Meeting of Kulim (Malaysia) Berhad will be held at Tanjung Puteri 302, Level 3, Persada Johor International Convention Centre, Jalan Abdullah Ibrahim, Johor Bahru, Johor, Malaysia on Thursday, 20 June 2013 at 12:00 noon, for the following purposes:
ORDINARY BUSINESS
1. To receive and adopt the Directors’ and Auditors’ Reports and Audited Financial Statements in Resolution 1 respect of the year ended 31 December 2012.
2. To re-elect the following Directors who retire in accordance with the Company’s Articles of Association:
(i) Wong Seng Lee Resolution 2 (ii) Zulkifli Ibrahim Resolution 3 (iii) Dr. Radzuan A. Rahman Resolution 4 (iv) Jamaludin Md Ali Resolution 5
3. To consider, and if thought fit, to pass the following resolution pursuant to Section 129(6) of the Resolution 6 Companies Act, 1965 (“Act”);
“THAT Tan Sri Dato’ Seri Utama Arshad Ayub, who is over the age of seventy (70) years, be hereby re-appointed as Director of the Company to hold office until the next Annual General Meeting (“AGM”) of the Company.”
4. To approve the payment of Directors’ fees in respect of the financial year ended 31 December Resolution 7 2012.
5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors Resolution 8 to fix their remuneration.
6. SPECIAL BUSINESS
To consider and, if thought fit, to pass the following resolutions:
6.1 Ordinary Resolution Resolution 9 In line with Recommendation 3.2 and 3.3 of the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”), the Nomination Committee (“NC”) had conducted an assessment of independence under the nomination and election process of Independent Non-Executive Directors (“INED”), whereby the NC reviewed whether the nominated candidate had satisfied the criteria for an independent director as prescribed in Bursa Malaysia Securities Berhad (“Bursa Securities”) Main Market Listing Requirements (“Main Market LR”) and its Practice Note 13 prior to seeking shareholders’ approval at the 38th AGM on the appointment as INED. SECTION 8 To consider, and if thought fit, to pass the following resolution pursuant to Practice Note 13 of the Bursa Securities Main Market LR;
“THAT Tan Sri Dato’ Seri Utama Arshad Ayub, whose tenure on the Board exceeds a cumulative term of more than nine (9) years be hereby re-appointed as Independent Non- Executive Director of the Company.” (See Explanatory Note 1 on Special Business below) annual report 2012 285
NOTICE OF ANNUAL GENERAL MEETING OTHER CORPORATE INFORMATION
6.2 Ordinary Resolution Authority to Allot and Issue Shares Pursuant to Section 132D of the Act Resolution 10
“THAT pursuant to Section 132D of the Act, full authority be and is hereby given to the Directors to issue shares of the Company from time to time upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the issued share capital of the Company and that such authority shall continue in force until the conclusion of the next AGM of the Company, and that the Directors be and is hereby empowered to obtain the approval of the Bursa Securities for the listing and quotation for the new shares so issued.” (See Explanatory Note 2 on Special Business below)
6.3 Ordinary Resolution Proposed Renewal of Shareholders’ Mandate to Enable the Company to Purchase up Resolution 11 to 10% of its Issued and Paid-up Share Capital (“Proposed Renewal of Share Buy-Back Authority”)
“THAT subject to the Act, rules, regulations and orders made pursuant to the Act, provisions of the Company’s Memorandum and Articles of Association and Bursa Securities Main Market LR and any other relevant authority, the Company be and is hereby authorised to purchase and/or hold such amount of ordinary shares of RM0.25 each in the Company’s issued and paid-up share capital through Bursa Securities upon such terms and conditions as the Directors may deem fit in the interest of the Company provided that:-
(a) the aggregate number of shares so purchased and/or held pursuant to this ordinary resolution (“Purchased Shares”) does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company at any one time; and
(b) the maximum amount of funds to be allocated for the Purchased Shares shall not exceed the aggregate of the retained profits and/or share premium of the Company;
AND THAT the Directors be and are hereby authorised to decide at their discretion either to retain the Purchased Shares as treasury shares (as defined in Section 67A of the Act) and/or to cancel the Purchased Shares and/or to retain the Purchased Shares as treasury shares for distribution as share dividends to the shareholders of the Company and/or be resold through Bursa Securities in accordance with the relevant rules of Bursa Securities and/or cancelled subsequently and/or to retain part of the Purchased Shares as treasury shares and/or cancel the remainder and to deal with the Purchased Shares in such other manner as may be permitted by the Act, rules, regulations, guidelines, requirements and/ or orders of Bursa Securities and any other relevant authorities for the time being in force;
AND THAT the Directors be and are hereby empowered to do all acts and things (including the opening and maintaining of a central depositories account(s) under the Securities Industry (Central Depositories) Act, 1991 and to take such steps and to enter into and
execute all commitments, transactions, deeds, agreements, arrangements, undertakings, SECTION 8 indemnities, transfers, assignments, and/or guarantees as they may deem fit, necessary, expedient and/or appropriate in the best interest of the Company in order to implement, finalise and give full effect to the Proposed Renewal of the Share Buy-Back Authority with full powers to assent to any conditions, modifications, variations (if any) as may be imposed by the relevant authorities; 286 Kulim (Malaysia) Berhad (23370-V)
OTHER CORPORATE INFORMATION NOTICE OF ANNUAL GENERAL MEETING
AND FURTHER THAT the authority conferred by this ordinary resolution shall be effective immediately upon passing of this ordinary resolution and shall continue in force until the conclusion of the next AGM of the Company or the expiry of the period within which the next AGM of the Company is required by law to be held (whichever is earlier), unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, but shall not prejudice the completion of purchase(s) by the Company before that aforesaid expiry date and in any event in accordance with provisions of the Listing Requirements and other relevant authorities.” (See Explanatory Note 3 on Special Business below)
6.4 Ordinary Resolution
Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Resolution 12 Transactions (“RRPT”) of a Revenue and/or Trading Nature and New Mandate for Additional RRPT of a Revenue and/or Trading Nature (“Proposed Shareholders’ Mandate for RRPT”)
“THAT authority be and is hereby given in line with Paragraph 10.09 of the Listing Requirements, for the Company, its subsidiaries or any of them to enter into any of the transactions falling within the types of the RRPT, particulars of which are set out in the Circular to Shareholders dated 29 May 2013 (“the Circular”), with the Related Parties as described in the Circular, provided that such transactions are of revenue and/or trading nature, which are necessary for the day-to-day operations of the Company and/or its subsidiaries, within the ordinary course of business of the Company and/or its subsidiaries, made on an arm’s length basis and on normal commercial terms which those generally available to the public and are not detrimental to the minority shareholders of the Company;
AND THAT such authority shall commence immediately upon the passing of this ordinary resolution until:-
(a) the conclusion of the next AGM of the Company following the general meeting at which the ordinary resolution for the Proposed Shareholders’ Mandate for RRPT is passed, at which time it shall lapse, unless the authority is renewed by a resolution passed at the next AGM; or
(b) the expiration of the period within which the next AGM after the date it is required by law to be held; or
(c) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting of the Company,
whichever occurs first;
AND FURTHER THAT the Directors of the Company be authorised to complete and do
SECTION 8 all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary or give effect to the Proposed Shareholders’ Mandate for RRPT.” (See Explanatory Note 4 on Special Business below) annual report 2012 287
NOTICE OF ANNUAL GENERAL MEETING OTHER CORPORATE INFORMATION
6.5 Special Resolution
Proposed Amendments to the Company’s Articles of Association Resolution 13
“THAT the Articles of Association of the Company be and are hereby amended in the manner as set out in Section 4 of the Circular to Shareholders dated 29 May 2013;
AND THAT the Directors of the Company be and are hereby authorised to give effect to the said amendments, alteration, modification and deletion to the Articles of Association of the Company as may be required by any relevant authorities as they deem fit, necessary or expedient in order to give full effect to the Proposed Amendments to the Company’s Articles of Association.” (See Explanatory Note 5 on Special Resolution below)
7. To transact any other business of which due notice shall have been given.
BY ORDER OF THE BOARD
IDHAM JIHADI ABU BAKAR. ACIS (MAICSA 7007381) NURALIZA A. RAHMAN (LS 0008565) Company Secretaries
Johor Bahru, Johor 29 May 2013 SECTION 8 288 Kulim (Malaysia) Berhad (23370-V)
OTHER CORPORATE INFORMATION NOTICE OF ANNUAL GENERAL MEETING
NOTES: term of more than nine (9) years since his appointment date. Pursuant to Recommendation 3.2 and 3.3 of the MCCG 2012, he may be regarded Proxy as Non-Independent Non-Executive Director, for continuing to hold office as a Director of the Company exceeding nine (9) years from his date of 1. A proxy may but need not be a member of the Company, an advocate, appointment. an approved company auditor or a person approved by the Registrar of Companies, and the provisions of Section 149(1)(b) of the Companies Act The Board, subject to the assessment of the NC is satisfied with the level 1965 shall not apply to the Company. of independence of Tan Sri Dato’ Seri Utama Arshad Ayub and based on 2. In the case of a corporate member, the instrument appointing a proxy shall the justification above, hereby recommends that Tan Sri Dato’ Seri Utama be (a) under its Common Seal or (b) under the hand of a duly authorised Arshad Ayub be re-appointed as INED of the Company until the next AGM officer or attorney and in the case of (b), be supported by a certified true of the Company. copy of the resolution appointing such officer or certified true copy of the power of attorney. 2. Ordinary Resolution 10 - Proposed Renewal of the Authority for 3. A member shall not, subject to Paragraphs (4) and (5) below, be entitled to Directors to Issue Shares appoint more than two (2) proxies to attend and vote at the same meeting. The proposed Ordinary Resolution 10, is proposed for the purpose of Where a member appoints more than one (1) proxy to attend and vote at granting a renewed general mandate for issuance of shares by the Company the same meeting, each proxy appointed shall represent a minimum of 100 under Section 132D of the Act. The Ordinary Resolution 10, if passed, will shares and such appointment shall be invalid unless the member specifies give the Directors of the Company authority to issue ordinary shares in the proportion of his shareholding to be represented by each proxy. the Company at any time in their absolute discretion without convening 4. Where a member is an authorised nominee, as defined under the Securities a General Meeting. The authorisation, unless revoked or varied by the Industry (Central Depositories) Act 1991, it may appoint at least one Company at a General Meeting, will expire at the conclusion of the next (1) proxy but not more than two (2) proxies in respect of each securities AGM of the Company. account it holds which is credited with ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account The Company had, at the 37th AGM held on 26 June 2012, obtained its shall be invalid unless the authorised nominee specifies the proportion of its shareholders’ approval for the general mandate for issuance of shares shareholding to be represented by each proxy. pursuant to Section 132D of the Companies Act, 1965 (“the Act”). The 5. Where a member is an exempt authorised nominee (“EAN”) as defined under Company did not issue any new shares pursuant to this mandate obtained the Securities Industry (Central Depositories) Act 1991 which holds ordinary as at the date of this notice. The Ordinary Resolution 10 proposed under shares in the Company for multiple beneficial owners in one securities item 6.1 of the Agenda is a renewal of the general mandate for issuance account (omnibus account), there is no limit to the number of proxies which of shares by the Company under Section 132D of the Act. At this juncture, the EAN may appoint in respect of each omnibus account it holds. there is no decision to issue new shares. If there should be a decision to 6. Any alteration to the instrument appointing a proxy must be initialised. The issue new shares after the general mandate is obtained, an announcement instrument appointing a proxy must be deposited at the registered office will be made by the Company in respect of the purpose and utilisation of at Suite 12B, Level 12, Menara Ansar, 65 Jalan Trus, 80000 Johor Bahru, proceeds arising from such issue. Johor not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in The general mandate if granted will provide flexibility to the Company for such instrument proposes to vote; otherwise the person so named shall not any possible fund raising activities, including but not limited to further be entitled to vote in respect thereof. placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s). Abstention from Voting 3. Ordinary Resolution 11 - Proposed Renewal of the Share Buy-Back 1. All the Non-Executive Directors (“NED”) of the Company who are Authority shareholders of the Company shall abstain from voting on Resolution 7 concerning remuneration to the NED at the 38th AGM. Ordinary Resolution 11, if passed will enable the Company to utilise any of 2. Any Director referred to in Resolutions 2, 3, 4 and 5, who is a shareholder its surplus financial resources to purchase its own shares through Bursa of the Company shall abstain from voting on the resolution in respect of Securities up to 10% of the issued and paid-up capital of the Company. his election or re-appointment at the 38th AGM. This authority will, unless revoked or varied at a General Meeting, expire at 3. Any Director or Directors who is the appointed nominee of the the conclusion of the next AGM of the Company. shareholder(s) of the Company as set out in the Circular to Shareholders dated 29 May 2013 shall abstain from voting on Resolution 12 in respect Further information on the Proposed Renewal of the Share Buy-Back of RRPT at the 38th AGM. Authority are set out in the Circular to Shareholders of the Company dated 29 May 2013, which is dispatched together with the Company’s Annual Explanatory Notes for Special Business Report for the year ended 2012.
1. Ordinary Resolution 9 - Re-appointment of Director pursuant to 4. Ordinary Resolution 12 - Proposed Shareholders’ Mandate for RRPT Recommendation 3.2 and 3.3 of the MCCG 2012 The proposed Ordinary Resolution 12 if passed is primarily to authorise The NC is satisfied with the skills, contribution and independent judgment the Company and/or its unlisted subsidiaries to enter arrangements or that Tan Sri Dato’ Seri Utama Arshad Ayub delivers to the Board. Tan transactions with Related Parties, particulars of which are set out in Section Sri Dato’ Seri Utama Arshad Ayub has satisfactorily demonstrated that 3.2, 3.3 and 3.4 of the Circular to Shareholders of the Company dated 29 he is independent of management and free from any business or other May 2013, which is dispatched together with the Company’s Annual Report relationship which could interfere with the exercise of independent for year ended 2012, which are necessary for the day-to-day operations of judgement, objectivity or the ability to act in the best interests of the the Group and are based on normal commercial terms that are not more Company. In view thereof, the Board recommends and supports the re- favorable to the Related Parties than those generally made available to the appointment of Tan Sri Dato’ Seri Utama Arshad Ayub, as he has offered public. himself for re-appointment as INED of the Company, to be approved by shareholders at the 38th AGM of the Company as follows :- 5. Special Resolution - Proposed Amendments to the Company’s Articles
SECTION 8 of Association “THAT Tan Sri Dato’ Seri Utama Arshad Ayub, whose tenure on the Board The Special Resolution proposed under item 6.5 if passed, will give authority exceeds a cumulative term of more than nine (9) years be hereby re- to the Directors to amend the Company’s Articles of Association in order to appointed as Independent Non-Executive Director of the Company.” be in line with the new Listing Requirements of Bursa Malaysia Securities Berhad, prevailing statutory and regulatory requirements as well as to Tan Sri Dato’ Seri Utama Arshad Ayub, aged 85, was appointed on 31 update the Articles of Association of the Company. Further explanatory January 1987 as INED of the Company. His profile is as set out in page 51 notes on Resolution 13 are set out in the Circular to Shareholders of the Section 2 of the Annual Report for the year ended 2012. Tan Sri Dato’ Seri Company dated 29 May 2013, which is dispatched together with the Utama Arshad Ayub has exceeded his tenure on the Board a cumulative Company’s Annual Report for the year ended 2012. annual report 2012 289 STATEMENT ACCOMPANYING OTHER CORPORATE INFORMATION NOTICE OF ANNUAL GENERAL MEETING
Pursuant to Paragraph 8.28(2) of the Listing Requirement of the Bursa Malaysia
1. Directors who are standing for re-election at the 38th Annual General Meeting (“AGM”) are as follows:
(i) Wong Seng Lee (ii) Zulkifli Ibrahim (iii) Dr. Radzuan A. Rahman (iv) Jamaludin Md Ali
Particulars of Directors seeking re-election at the AGM are set out below:
Resolution 2 Resolution 3 Wong Seng Lee Zulkifli Ibrahim Nationality/Age : Malaysian / 63 Malaysian / 55 Academic/Professional • Certified Accountant, ACCA • Fellow of the ACCA, United Kingdom Qualification(s) : • Fellow of the ACCA, United Kingdom • Member of the Malaysian Institute of Accountants
Present Directorship(s) : • Member of the Board of Directors of • Chairman and Director of several other several other companies within the Kulim companies within the JCorp Group Group Present Appointment(s) : Executive Director Executive Director Appointed to the Board of 8 January 1996 1 July 2011 the Company
Resolution 4 Resolution 5 Dr. Radzuan A. Rahman Jamaludin Md Ali Nationality/Age : Malaysian / 70 Malaysian / 55 Academic/Professional • Bachelor in Agricultural Science (Honours) • Bachelor of Economics (Honours) degree, Qualification(s) : degree, University of Malaya University of Malaya • Master and PhD in Resource Economics, • Master of Business Administration from Cornell University, New York University of Strathclyde, Glasgow, Scotland Present Directorship(s) : • Idaman Unggul Berhad • Chairman and Director of several other • Inch Kenneth Kajang Rubber Pte Ltd companies within the JCorp Group • Marditec Sdn Bhd • Kenanga Cergas Sdn Bhd • Maep Management Sdn Bhd • Green Capital Sdn Bhd Present Appointment(s) : Independent Non-Executive Director Executive Director Appointed to the Board of 1 November 2006 1 July 2012 the Company Re-designated as Executive Director on 4 December 2012 SECTION 8 290 Kulim (Malaysia) Berhad (23370-V)
OTHER CORPORATE INFORMATION STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING
Pursuant to Paragraph 8.28(2) of the Listing Requirement of the Bursa Malaysia (continued)
2. Further details of Director who is standing for re-apppointment as per Agenda 3 and 6 of the Notice of 38th AGM are as follows:
Resolution 6 and 9 Tan Sri Dato’ Seri Utama Arshad Ayub Nationality/Age : Malaysian / 85 Academic/Professional • Diploma in Agriculture, College of Agriculture, Serdang Qualification(s) : • Bachelor of Science degree in Economics and Statistics, University College of Wales, Aberystwyth, United Kingdom • Diploma in Business Administration, IMEDE Lausanne (now IMD), Switzerland Present Directorship(s) : • Malaysian Rubber Products Manufacturers Association (“MRPMA”) • Pro Chancellor of UiTM • Chancellor of KPJ International University College • Chairman of University of Malaya Board • Chairman of Malayan Flour Mills Berhad • Chairman of Tomypak Holdings Berhad • Director of Top Glove Corporation Berhad Present Appointment(s) : Independent Non-Executive Director Appointed to the Board of 31 January 1987 the Company
3. The 37th Annual General Meeting of the Company was held at Lecture Hall 1 & 2, Level 1, KFCH International College, Johor Bahru Campus, No. 1, Jalan Dato’ Onn 1, Bandar Dato’ Onn, Johor Bahru, Johor, Malaysia on Tuesday, 26 June 2012 at 12:00 noon.
4. A total of eight (8) Board meetings were held during the financial year ended 31 December 2012. Details of attendance of Directors at Board meetings held during the financial year ended 31 December 2012 are as follows:
Special Special 269th Special Special 270th 271st 272nd BOD BOD BOD BOD BOD BOD BOD BOD % 16.1.2012 16.2.2012 22.3.2012 18.5.2012 23.5.2012 26.6.2012 4.10.2012 13.12.2012 Dato’ Kamaruzzaman Abu Kassim / / / / / / / / 100 Ahamad Mohamad / / / / / / / / 100 Tan Sri Dato’ Seri Utama Arshad Ayub X / / X / / / X 62.50 Datin Paduka Siti Sa’diah Sh Bakir / / / / / / / / 100 Zulkifli Ibrahim / / / / / / / / 100 Jamaludin Md Ali ------/ / 100 Wong Seng Lee / / / / / / / / 100 Kua Hwee Sim / / / x - - - - 75 Datuk Haron Siraj / X / / / / X / 75 Dr. Radzuan A. Rahman / / / / / / / / 100 Rozan Mohd Sa’at / X / / / / / / 87.50 Datuk Ahmad Zaki Zahid / / / / / / / - 100 Leung Kok Keong / / / / / / / / 100
SECTION 8 Wan Mohd Firdaus Wan Mohd Fuaad / / / / X / / / 87.50 Natasha Kamaluddin X / / / / / / / 87.50
Notes:- • Kua Hwee Sim - resigned on 23.5.2012 • Jamaludin Md Ali - appointed as Non-Independent Non-Executive Director on 1.7.2012 and re-designated as Executive Director on 4.12.2012 • Datuk Ahmad Zaki Zahid - resigned on 4.12.2012 • Wan Mohd Firdaus Wan Mohd Fuaad - resigned on 3.1.2013 • Natasha Kamaluddin - resigned on 28.2.2013 annual report 2012 291
STATEMENT ACCOMPANYING NOTICE OF OTHER CORPORATE INFORMATION ANNUAL GENERAL MEETING
Pursuant to Paragraph 8.28(2) of the Listing Requirement of the Bursa Malaysia (continued)
Meeting Date Venue Special BOD Meeting 16 January 2012 Meeting Room, Level 11, Menara JCorp, No. 249 Jalan Tun Razak, Kuala Lumpur Special BOD Meeting 16 February 2012 Meeting Room, Level 11, Menara JCorp, No. 249 Jalan Tun Razak, Kuala Lumpur 269th BOD Meeting 22 March 2012 The Executive Meeting Room, Level 1, KFCH International College, No. 1 Jln Dato’ Onn 1, Bandar Dato’ Onn, Johor Bahru Special BOD Meeting 18 May 2012 Meeting Room, Level 11, Menara JCorp, No. 249 Jalan Tun Razak, Kuala Lumpur Special BOD Meeting 23 May 2012 Berlian Room, Level B2, The Puteri Pacific Hotel, Jalan Abdullah Ibrahim, Johor Bahru 270th BOD Meeting 26 June 2012 The Executive Meeting Room, Level 1, KFCH International College, No. 1 Jln Dato’ Onn 1, Bandar Dato’ Onn, Johor Bahru 271st BOD Meeting 4 October 2012 Meeting Room, Level 11, Menara JCorp, No. 249 Jalan Tun Razak, Kuala Lumpur 272nd BOD Meeting 13 December 2012 Office of Kulim (Malaysia) Berhad, Ulu Tiram Estate, Ulu Tiram, Johor SECTION 8 This page has been intentionally left blank. FORM OF PROXY
No. of ordinary CDS account no. of shares held authorised nominee (i)
I/We * (Full name and NRIC No. / Company No. in block letters) of (Full address in block letters) being a member(s) of KULIM (MALAYSIA) BERHAD hereby appoint
(Full address in block letters) of (Full address in block letters) or failing him/her (Full address in block letters) of (Full address in block letters) or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us* on my/our* behalf at the 38th Annual General Meeting of the Company to be held at Tanjung Puteri 302, Level 3, Persada Johor International Convention Centre, Jalan Abdullah Ibrahim, Johor Bahru, Johor, Malaysia on Thursday, 20 June 2013 at 12:00 noon and at any adjournment thereof in respect of my/our holdings of shares in the manner indicated below:
Resolution Description For Against 1 To adopt the Directors’ and Auditors’ Reports and Audited Financial Statements 2012 2 To re-elect Director - Wong Seng Lee 3 To re-elect Director - Zulkifli Ibrahim 4 To re-elect Director - Dr. Radzuan A. Rahman 5 To re-elect Director - Jamaludin Md Ali 6 To re-appoint Director - Tan Sri Dato’ Seri Utama Arshad Ayub 7 To approve payment of Directors’ fees 8 To re-appoint Messrs Ernst & Young as auditors 9 To re-appoint Independent Non-Executive Director - Tan Sri Dato’ Seri Utama Arshad Ayub 10 Authority to allot and issue shares 11 Proposed Renewal of Share Buy-Back Authority 12 Proposed Shareholders’ Mandate for RRPT 13 Proposed Amendments to the Company’s Articles of Association Any other business
(Please indicate with a (√) in the appropriate box whether you wish your vote to be cast for or against the resolution. In the absence of specific direction, your proxy will vote or abstain as he/she thinks fit. However, if more than one proxy is appointed, please specify in the table below the number of shares represented by each proxy, failing which the appointment shall be invalid)
For appointment of two proxies, percentage of shareholdings to be presented by the proxies :- No. of shares Percentage Proxy 1 Signature(s)/Common Seal of Shareholder(s) Proxy 2 Total 100% Dated this day of 2013 NOTE: i. Applicable to shares held through a nominee account. ii. A proxy may but need not be a member of the Company, an advocate, an approved company auditor or a person approved by the Registrar of Companies, and the provisions of Section 149(1)(b) of the Companies Act 1965 shall not apply to the Company. iii. In the case of a corporate member, the instrument appointing a proxy shall be (a) under its Common Seal or (b) under the hand of a duly authorised officer or attorney and in the case of (b), be supported by a certified true copy of the resolution appointing such officer or certified true copy of the power of attorney. iv. A member shall not, subject to Paragraphs (v) and (vi) below, be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. Where a member appoints more than one (1) proxy to attend and vote at the same meeting, each proxy appointed shall represent a minimum of 100 shares and such appointment shall be invalid unless the member specifies the proportion of his shareholding to be represented by each proxy. v. Where a member is an authorised nominee, as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account shall be invalid unless the authorised nominee specifies the proportion of its shareholding to be represented by each proxy.
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Stamp
The Secretary KULIM (MALAYSIA) BERHAD Suite 12B, Level 12 Menara Ansar 65 Jalan Trus 80000 Johor Bahru Johor, Malaysia
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vi. Where a member is an exempt authorised nominee (“EAN”) as defined under the Securities Industry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the EAN may appoint in respect of each omnibus account it holds. vii. Any alteration to the instrument appointing a proxy must be initialised. The instrument appointing a proxy must be deposited at the registered office at Suite 12B, Level 12, Menara Ansar, 65 Jalan Trus, 80000 Johor Bahru, Johor not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in such instrument proposes to vote; otherwise the person so named shall not be entitled to vote in respect thereof.
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Kulim (Malaysia) Berhad (23370-V) Suite 12B, Level 12, Menara Ansar, 65 Jalan Trus 80000 Johor Bahru, Johor, Malaysia Tel : +607 226 7692 / +607 226 7476 Fax : +607 222 3044