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Annual Report 2019

BUILDING ON ASUSTAINABLE FOUNDATION

Registration No. 199501027397 (356602-W)Incorporated in Malaysia

• Integrity• Innovativeness• Commitment and follow through• Proactive and promptness• Loyalty• Teamwork• Cost consciousness

OUR VISIONTo be the recognised integrated global oil palm group of choice.

CORPORATE CULTURE BASED ON 7 VALUES

Since 1995, Kwantas Corporation Berhad has consistently growing from its humble beginning as a single company to as of today. The success of the Group has been achieved with the help of its strong, experienced and dedicated Management team who has gone through hard work, perseverance, tolerance and sheer determination. The Group built a solid foundation throughout the years of hardship, achieved a greater success and created value for its shareholders. As the visual of sustainable foundation built with its integrated business model, the Group is able to achieve a greater height of success with over twenty (20) years of experience.

BUILDING ON ASUSTAINABLE FOUNDATION

• Strive towards Quality and Excellence without compromise.• Endeavour to accelerate efficiency and operate an effective

management to achieve satisfactory results for our customers and investors.

• Enhance the lives of our employees, shareholders and community by establishing good business practices, making sound investments and undertaking social responsibilities.

• Pursue enviromentally friendly policies to help keep our world green for future generations.

OUR MISSION

02Notice of

Annual General Meeting

08Statement Accompanying

Notice of Annual General Meeting

105-Year

Group Financial Highlights

11Share Performance

125-Year Group Statistics

and Performances

15Corporate Information

16Corporate Structure

17Directors’ Profile

21Key Senior

Management’s Profile

23Management Discussions

and Analysis

28Sustainability Statement

46Corporate Governance

Overview Statement

55Statement of

Directors’ Responsibility

56Statement on

Risk Management and Internal Control

59Additional

Compliance Information

60Audit and Risk Management

Committee Report

64Financial Statements

207Properties of The Group

216Shareholdings Statistics Proxy Form

TABLE OF CONTENTS

KWANTAS CORPORATION BERHAD 02

NOTICE IS HEREBY GIVEN that the Twenty-Fourth Annual General Meeting of the members of the Company will be held at K-63A-3rd Floor, Signature Office, KK Times Square, Off Coastal Highway, 88100 Kota Kinabalu, Sabah on Friday, 29 November 2019 at 2.30 p.m. for the following purposes:

NOTICE OF ANNUAL GENERAL MEETING

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 30 June 2019 and the Directors’ and Auditors’ Reports thereon.

[Please refer to notes A(1)]

2. To approve the following payments to Non-Executive Directors:

(a) Directors’ fees up to an amount of RM180,000 from the 24th Annual General Meeting to the next Annual General Meeting of the Company; Resolution 1

(b) Meeting allowance up to an aggregate amount of not more than RM24,000 from the 24th Annual General Meeting to the next Annual General Meeting of the Company. Resolution 2

3. To re-elect the following Directors, who retire by rotation pursuant to Article 73 of the Company’s Constitution (Articles of Association) and being eligible, offer themselves for re-election:

(a) Ms Kwan Min Nyet Resolution 3

(b) Datuk Ismail Bin Abdullah Resolution 4

4. To re-elect Mr Kwan Ngen Wah, the Group Managing Director of the Company who retires by rotation pursuant to Article 106 of the Company’s Constitution (Articles of Association) and being eligible, offer himself for re-election. Resolution 5

5. To re-appoint Messrs PKF as Auditors of the Company and authorise the Directors to fix their remuneration. Resolution 6

ANNUAL REPORT 201903

NOTICE OF ANNUAL GENERAL MEETING (Cont’d)

6. As SPECIAL BUSINESS to consider and, if thought fit, pass the following resolutions:

ORDINARY RESOLUTION NO. 1 Resolution 7

AUTHORITY TO ALLOT AND ISSUE SHARES PURSUANT TO SECTIONS 75 AND 76 OF THE COMPANIES ACT 2016.

THAT pursuant to Sections 75 and 76 of the Companies Act 2016 and subject always to the approval of the relevant authorities, the Directors be and are hereby empowered to issue shares in the capital of the Company from time to time upon such terms and conditions and for such purposes as the Directors may in their discretion deem fit, provided that the total number of shares issued pursuant to this resolution does not exceed ten percent (10%) of the issued shares (excluding treasury shares) of the Company for the time being and that the Directors be and are also empowered to obtain the approval for listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.


PROPOSED RENEWAL OF AND NEW SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE.

THAT subject always to the compliance with the Companies Act 2016, the Company’s Constitution (Memorandum and Articles of Association), the Listing Requirements of Bursa Malaysia Securities Berhad and all other applicable laws, regulations and guidelines, approval be and is hereby given to the Company and its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature which are necessary for the day-to-day operations of the Company and its subsidiaries from time to time, the nature and the contracting party of which referred to under Sections 2.1.2 and 2.1.3 of the Circular to Shareholders dated 31 October 2019, provided that:

(i) the transactions are in the ordinary course of business on an arm’s length basis, on normal commercial terms and on terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company; and

(ii) disclosure is made in the Annual Report of the breakdown of the aggregate value of the transactions conducted pursuant to this shareholders’ mandate during the financial year of the Company.

AND THAT such authority shall commence upon the passing of this resolution and shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting of the Company following the general meeting at which such mandate was passed, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed; or

(b) the expiration of the period within which the next Annual General Meeting after the date it is required to be held pursuant to Section 340(2) of the Companies Act 2016 but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Companies Act 2016; or


(c) revoked or varied by resolution passed by the shareholders in a general meeting

whichever is earlier.

AND FURTHER THAT authority be and is hereby given to the Directors of the Company to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by this ordinary resolution.


PROPOSED RENEWAL OF AUTHORITY FOR THE COMPANY TO PURCHASE UP TO TEN PERCENT (10%) OF THE ISSUED SHARES OF THE COMPANY.

THAT subject always to the Companies Act 2016, provisions of the Company’s Constitution (Memorandum and Articles of Association) and the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant authorities, and other relevant approvals, the Directors of the Company be and are hereby authorized to renew the authority to purchase the Company’s ordinary shares (“Shares”) through Bursa Securities, subject to the following:-

(a) the maximum number of Shares that may be purchased by the Company shall not exceed ten percent (10%) of the issued shares of the Company at any point of time;

(b) the maximum fund to be allocated by the Company for purpose of purchasing its Shares shall not exceed the aggregate of the retained profits of the Company; and

(c) the Shares purchased are to be treated in either of the following manner:-

(i) cancel the Shares so purchased; or

(ii) retain the Shares so purchased as treasury shares; or

(iii) retain part of the Shares purchased as treasury shares and cancel the remainder.

The treasury shares may be distributed as dividends to the shareholders and/or resold through Bursa Securities and/or subsequently cancelled.



NOTICE OF ANNUAL GENERAL MEETING

AND THAT the authority conferred by this resolution shall commence upon the passing of this resolution until:

(i) the conclusion of the next Annual General Meeting, at which time it will lapse, unless the authority is renewed by a resolution passed at the meeting, either unconditionally or subject to conditions; or

(ii) the expiration of the period within which the next Annual General Meeting of the Company after that date is required to be held pursuant to Section 340(2) of the Companies Act 2016 (but shall not extend to such extensions as may be allowed pursuant to Section 340(4) of the Companies Act 2016); or

(iii) revoked or varied by ordinary resolution of the shareholders of the Company in a general meeting of the Company

whichever occurs first.

AND FURTHER THAT the Directors of the Company be and are hereby authorized to take such steps to give full effect to the aforesaid purchase with full power to assent to any conditions, modifications, variations and/or amendments as may be imposed by the relevant authorities and/or to do all acts and things as the Directors may deem fit and expedient in the best interest of the Company.


CONTINUING IN OFFICE AS INDEPENDENT NON-EXECUTIVE DIRECTOR.

THAT approval be and is hereby given to Mr Ooi Jit Huat who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than twelve (12) years, to continue in office as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting of the Company.

Mr Ooi Jit Huat was appointed on 09 March 2000 as an Independent Non-Executive Director of the Company and has therefore served as an Independent Non-Executive Director for a cumulative term of more than twelve (12) years. The proposed resolution, if passed, will allow Mr Ooi Jit Huat to be continued in office as an Independent Non-Executive Director of the Company. The details of the Board’s justification for the retention of Mr Ooi Jit Huat is set out in the Corporate Governance Overview Statement and Corporate Governance Report in the Company’s Annual Report and website www.kwantas.com.my respectively.

(Cont’d)


SPECIAL RESOLUTION Resolution 11

PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY.

THAT approval be and is hereby given to the Company to revoke the existing Memorandum and Articles of Association of the Company with immediate effect and in place thereof, the proposed new Constitution of the Company as set out in Appendix II of the Circular to Shareholders dated 31 October 2019 be and is hereby adopted as the new Constitution of the Company.

AND THAT the Board of Directors of the Company be and is hereby authorized with full power to assent any modifications, variations and/or amendments in any manner as may be required by the relevant authorities and to take all steps and do all acts and things as may be considered necessary to give full effect to the foregoing.

7. To transact any other business of the Company for which due notice shall have been given in accordance with the Companies Act 2016 and the Company’s Constitution (Memorandum and Articles of Association) of the Company.

By order of the BoardMS KWAN FEI FEN (MAICSA 7040966)MS KWAN CHIEW GIOK (LS 0007125)Company SecretariesKota Kinabalu, Sabah31 October 2019

A) NOTES

1. This Agenda is meant for discussion only as under the provision of Section 340(1) of the Companies Act 2016, the Audited Financial Statements do not require formal approval of the shareholders. Hence, this matter will not be put forward for voting.

2. A member of the Company entitled to attend and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and vote instead of him.

3. A proxy may but need not be a member of the Company.

4. Where two (2) proxies are appointed, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

5. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) Securities Account (“omnibus account”), there shall be no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds.

6. The instrument appointing a proxy must be deposited at the Registered Office of the Company at K-63A-3A, Signature Office, KK Times Square, Off Coastal Highway, 88100 Kota Kinabalu, Sabah, not less than forty-eight (48) hours before the time appointed for holding the meeting.

7. Where the Proxy Form is executed by a corporation, it must be either under seal or under the hand of any officer or attorney duly authorized.



B) EXPLANATORY NOTES ON SPECIAL BUSINESS

(i) Resolution 7

The proposed resolution is in relation to the authority to allot shares pursuant to Sections 75 and 76 of the Companies Act 2016 and if passed, will give the Directors of the Company from the date of the above general meeting, authority to issue and allot shares from the unissued capital of the Company for such purpose as the Directors may deem fit and in the interest of the Company. This authority, unless revoked or varied by the Company in general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to Directors at the last Annual General Meeting held on 30 November 2018 and accordingly no proceeds were raised.

The renewal of this general mandate will provide flexibility to the Company for any possible fund raising exercise, including but not limited to further placement of shares for purpose of funding investment projects, working capital and/or acquisitions and/or as consideration for acquisitions, and to avoid delay and cost in convening general meeting to approve such issue of shares.

(ii) Resolution 8

The proposed resolution is in relation to the renewal of and new shareholders’ mandate for recurrent related party transactions of a revenue or trading nature with related parties in the ordinary course of business which are necessary for the Company’s day-to-day operations.

(iii) Resolution 9

The proposed resolution is in relation to the renewal of authority for the Company to purchase up to ten percent (10%) of the issued shares of the Company.

(iv) Resolution 10

The proposed resolution, if passed, will allow Mr Ooi Jit Huat to be continued in office as Independent Non-Executive Director of the Company. Mr Ooi Jit Huat has met the independence criteria as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The length of his service does not interfere with his ability to continuously allowing him to exercise independent judgement as Independent Director. Therefore, the Board has recommended that the approval of the shareholders be sought through a two-tier voting process for Mr Ooi Jit Huat to continue to act as the Independent Non-Executive Director of the Company pursuant to Practice 4.2 of the Malaysian Code on Corporate Governance.

(v) Resolution 11

The proposed special resolution, if passed, will bring the Company’s new Constitution to be in line with the Companies Act 2016 and Main Market Listing Requirements of Bursa Malaysia Securities Berhad, prevailing laws, guidelines or requirements of the relevant authorities as well as to provide greater clarity and enhance administrative efficiency. Please refer to Part C of the Circular to Shareholders dated 31 October 2019 for further information.

C) MEMBERS ENTITLED TO ATTEND

For the purpose of determining who shall be entitled to attend this 24th Annual General Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a Record of Depositors as at 22 November 2019. Only depositors whose names appear in the Record of Depositors as at 22 November 2019 shall be entitled to attend, speak and vote at the 24th Annual General Meeting.



A. DETAILS OF INDIVIDUALS WHO ARE STANDING FOR ELECTION AS DIRECTORS

No individual is seeking election as a Director at the forthcoming Twenty-Fourth Annual General Meeting of the Company.

B. PARTICULARS OF DIRECTORS STANDING FOR RE-ELECTION AT THE TWENTY-FOURTH ANNUAL GENERAL MEETING

1. Directors who are standing for re-election at the Twenty-Fourth Annual General Meeting of the Company are as follows:-

(a) Ms Kwan Min Nyet(b) Datuk Ismail Bin Abdullah

The above Directors are retiring by rotation pursuant to Article 73 of the Company’s Constitution (Articles of Association).

(a) Mr Kwan Ngen Wah

The above Director who is the Group Managing Director of the Company is retiring pursuant to Article 106 of the Company’s Constitution (Articles of Association).

2. Attendance of Directors at Board of Directors’ Meetings.

Details of attendance at Board of Directors’ Meetings held in financial year ended 30 June 2019:

NAME OF DIRECTORS ATTENDANCE

(i) Datuk Ismail Bin Abdullah 6/6

(ii) Mr Kwan Ngen Wah 6/6

(iii) Dato’ Chong Kan Hiung 6/6

(iv) Ms Kwan Jin Nget 3/6

(v) Ms Kwan Min Nyet 5/6

(vi) Mr Ooi Jit Huat 6/6

(vii) Mr Petrus Gimbad 6/6

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING


STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

B. PARTICULARS OF DIRECTORS STANDING FOR RE-ELECTION AT THE TWENTY-FOURTH ANNUAL GENERAL MEETING (Cont’d)

3. Place, date and hour of Board of Directors’ Meetings held.

The Board of Directors’ Meetings during the year were held at the following date, time and venue:

No. Date Time Venue

(i) 23 August 2018 2:45 p.m. K-63A-3rd Floor, Signature OfficeKK Times Square, Off Coastal Highway88100 Kota Kinabalu, Sabah, Malaysia

(ii) 24 August 2018 2:35 p.m. K-63A-3rd Floor, Signature OfficeKK Times Square, Off Coastal Highway88100 Kota Kinabalu, Sabah, Malaysia

(iii) 12 October 2018 12:05 p.m. K-63A-3rd Floor, Signature OfficeKK Times Square, Off Coastal Highway88100 Kota Kinabalu, Sabah, Malaysia

(iv) 29 November 2018 1:30 p.m. K-63A-3rd Floor, Signature OfficeKK Times Square, Off Coastal Highway88100 Kota Kinabalu, Sabah, Malaysia

(v) 26 February 2019 12:05 p.m. K-63A-3rd Floor, Signature OfficeKK Times Square, Off Coastal Highway88100 Kota Kinabalu, Sabah, Malaysia

(vi) 23 May 2019 10:20 a.m. K-63A-3rd Floor, Signature OfficeKK Times Square, Off Coastal Highway88100 Kota Kinabalu, Sabah, Malaysia

4. Further details of Directors who are standing for re-election.

Details of Directors who are standing for re-election are set out in the Directors’ Profile appearing on pages 17 to 20 of the Annual Report.

(Cont’d)


5-YEAR GROUP FINANCIAL HIGHLIGHTS

Revenue(RM Million)

Total Assets(RM Million)

(Loss)/Profit Before Tax(RM Million)

Dividend(Sen)

Shareholders’ Fund(RM Million)

Basic (Loss)/Earnings Per Share (Sen)

20172015 2018 20192016

1,25

8

1,38

0

780

774

1,31

8

20172015 2018 20192016

300

1,800

1,500

1,200

900

600

2,26

3

2,18

3

1,87

7

1,86

3

2,26

0

500

3,000

2,500

2,000

1,500

1,000 (7.6

9)

12.5

0

(28.

56)

(29.

66)

(21.

89)

-21

-28

14

21

7

0

-7

-14

20172015 2018 20192016

300

1,800

1,500

1,200

900

600

1,20

1

1,27

5

1,19

6

1,13

5

1,21

9

(18)

60

(73)

(97)

(69)

-90

60

30

0

-30

-60

20172015 2018 20192016

0 0 0 00

2

10

8

6

4

20172015 2018 20192016 20172015 2018 20192016


SHARE PERFORMANCE

Share Volume Traded for Kwantas Corporation BerhadJuly 2018 – June 2019

Share Price Traded for Kwantas Corporation BerhadJuly 2018 – June 2019

1,189

1,802

425 473

1,083 1,0911,515

500810

5,430

4,025

740

SEP

SEP

FEB

FEB

JUL

JUL

DEC

DEC

OCT

OCT

MAC

MAC

MAY

MAY

NOV

NOV

APR

APR

JUN

JUN

AUG

AUG

JAN

JAN

1,000

6,000

5,000

4,000

3,000

2,000

1.281.21

1.131.08 1.01 0.90 0.84 0.89

0.81 0.82 0.78 0.73

0.50

1.50

1.00


UNIT 2019 2018 2017 2016 2015

PLANTATIONS

Oil Palm Area

Mature (16-25 Years) hectare 12,263 12,447 12,649 12,497 11,570

Mature - Prime (8-15 Years) hectare 1,877 1,659 2,837 3,128 3,778

Mature - Young (4-7 Years) hectare 2,168 1,643 1,492 1,542 1,086

Immature (1-3 Years) hectare 3,357 4,124 4,209 3,079 2,446

Total Planted Area hectare 19,665 19,873 21,187 20,246 18,880

Total Unplanted, Reserves and Infrastructure Areas hectare 37,252 37,044 37,263 38,204 39,570

Total Area hectare 56,917 56,917 58,450 58,450 58,450

FFB

Production tonne 288,671 333,333 375,624 346,556 371,658

Yield Per Mature Hectare tonne 17.7 21.2 22.1 20.2 22.6

Average Selling Price Per Tonne RM 348 498 469 420 386

MILLS

FFB Processed

Own tonne 286,726 326,623 373,069 342,850 368,425

Outside tonne 234,443 289,117 214,429 180,925 254,135

Total tonne 521,169 615,740 587,497 523,775 622,560

Production

Crude Palm Oil tonne 107,610 128,549 120,793 109,738 132,570

Palm Kernel tonne 26,394 31,008 28,926 24,473 29,513

Extraction Rates

Crude Palm Oil % 20.7 20.9 20.6 21.0 21.3

Palm Kernel % 5.1 5.0 4.9 4.7 4.7

Average Selling Price (Per Tonne)

Crude Palm Oil RM 1,979 2,638 2,884 2,260 2,248

Palm Kernel RM 1,351 2,214 2,674 1,622 1,473

5-YEAR GROUP STATISTICS AND PERFORMANCES


5-YEAR GROUP STATISTICS AND PERFORMANCES

UNIT 2019 2018 2017 2016 2015

DOWNSTREAM MANUFACTURING

Production

(Malaysia)

Crude Palm Kernel Oil tonne 25,842 26,676 24,573 27,379 27,364

Palm Kernel Expeller tonne 30,382 31,443 30,989 32,643 33,328

Refined Bleached Deodorised Palm Oil tonne 33,440 54,900 47,689 38,007 55,504

Palm Fatty Acid Distillate tonne 2,411 5,230 3,750 2,231 3,935

Refined Bleached Deodorised Olein tonne 13,133 9,179 7,741 15,433 14,349

Refined Bleached Deodorised Palm Kernel Oil tonne - - 493 - -

(China)

Oleochemical Products tonne 46,027 3,672 80,213 84,540 89,930

Extraction rates

(Malaysia)

Crude Palm Kernel Oil % 44.3 43.9 43.0 43.4 43.6

Palm Kernel Expeller % 52.0 51.8 54.3 51.8 53.1

Refined Bleached Deodorised Palm Oil % 92.8 90.8 92.2 94.4 93.7

Palm Fatty Acid Distillate % 6.7 8.7 7.3 5.5 6.6

Refined Bleached Deodorised Olein % 79.4 77.7 75.1 73.9 73.8

Refined Bleached Deodorised Palm Kernel Oil % - - 0.9 - -

(China)

Oleochemical Products % 95.7 96.0 96.2 96.0 94.9

Glycerine % 9.0 9.6 9.8 10.1 9.8

Average Selling Price (Per Tonne)

(Malaysia)

Crude Palm Kernel Oil RM 2,955 4,795 5,520 3,250 3,075

Palm Kernel Expeller RM 412 451 443 334 359

Refined Bleached Deodorised Palm Oil RM - - 2,789 2,564 2,125

Palm Fatty Acid Distillate RM 1,919 2,326 2,775 2,185 2,064

Refined Bleached Deodorised Olein RM 2,142 - 2,904 2,537 2,377

(Cont’d)


UNIT 2019 2018 2017 2016 2015

DOWNSTREAM MANUFACTURING (Cont’d)

Average Selling Price (Per Tonne) (Cont’d)

(China)

Refined Bleached Deodorised Olein RMB - - - - 4,551

Oleochemical Products RMB 4,895 5,614 5,685 4,648 5,452

Glycerine RMB 4,821 4,695 3,516 4,107 3,846

Refined Bleached Deodorised Stearin RMB 3,584 4,099 4,440 3,640 4,507

FINANCIAL PERFORMANCE

Revenue RM ’000 773,665 780,280 1,379,894 1,258,493 1,317,797

(Loss)/Profit from Operation RM ’000 (71,909) (48,414) 92,143 15,291 (36,982)

Finance Cost RM ’000 (24,753) (24,536) (31,998) (33,267) (32,295)

(Loss)/Profit Before Tax RM ’000 (96,662) (72,950) 60,145 (17,976) (69,277)

Taxation RM ’000 (2,986) (20,456) (23,621) (7,152) (39)

Non-controlling Interest RM ’000 (7,190) (4,376) 2,427 1,161 1,098

Net (Loss)/Profit RM ’000 (99,648) (93,406) 36,524 (25,128) (69,316)

Shareholders’ Fund RM ’000 1,135,063 1,196,458 1,274,729 1,201,328 1,219,256

Total Assets RM ’000 1,863,030 1,877,201 2,182,617 2,262,906 2,259,531

(Loss)/Earnings Per Share - Basic sen (29.66) (28.56) 12.50 (7.69) (21.89)

(Loss)/Earnings/Per Share - Diluted sen (29.66) (28.56) 12.50 (7.69) (21.89)

Gross Dividend Per Share sen - - - - 5.00

Net Tangible Assets Per Share RM 3.64 3.84 4.09 3.85 3.91

Share Price

High RM 1.34 1.69 1.72 1.76 2.12

Low RM 0.72 1.32 1.18 1.32 1.45

Closing RM 0.72 1.32 1.60 1.32 1.75

Others

* Net Debt/Equity number of times 0.37 0.31 0.39 0.50 0.51

* Net debt represents total bank borrowings less short term funds, deposits with financial institutions and cash and bank balances.

5-YEAR GROUP STATISTICS AND PERFORMANCES (Cont’d)


CORPORATE INFORMATION

Board of Directors

Datuk Ismail Bin AbdullahChairmanIndependent Non-Executive Director

Mr Kwan Ngen WahGroup Chief Executive OfficerNon-Independent Executive Director

Dato’ Chong Kan HiungNon-Independent Executive Director

Secretaries

Ms Kwan Fei Fen (MAICSA 7040966)

Ms Kwan Chiew Giok (LS 0007125)

Audit and Risk Management Committee

Mr Ooi Jit HuatChairman

Datuk Ismail Bin AbdullahMember

Mr Petrus GimbadMember

Auditors

Messrs PKF

Stock Exchange Listing

Main Market of Bursa Malaysia Securities Berhad

Stock Name: KWANTASStock Code: 6572

Registered Office

K-63A-3A, Signature OfficeKK Times SquareOff Coastal Highway88100 Kota Kinabalu, Sabah

T 088-486 555F 088-486 777

Registrars

Boardroom Share Registrars Sdn Bhd(formerly known as Symphony Share Registrars Sdn Bhd)11th Floor, Menara SymphonyNo. 5, Jalan Prof. Khoo Kay KimSeksyen 13 46200 Petaling Jaya Selangor Darul Ehsan

T 03-78904700F 03-78904670

Solicitors

Lind, Willie, Wong & ChinSzetu & CoLlinks Law Offices

Ms Kwan Jin NgetNon-Independent Executive Director

Ms Kwan Min NyetNon-Independent Executive Director

Mr Petrus GimbadIndependent Non-Executive Director

Mr Ooi Jit HuatIndependent Non-Executive Director

Bankers

Affin Bank Berhad Agricultural Bank of China AmBank (M) Berhad AmBank Islamic Berhad Bank of ChinaBank of Communications China Construction Bank China Merchants BankHSBC Bank Malaysia Berhad

Industrial and Commercial Bank of China

Malayan Banking Berhad Maybank International (L) Ltd. Standard Chartered Bank

Malaysia BerhadUnited Overseas Bank (M) BerhadDBS Bank Ltd.Bank of Ningbo


CORPORATE STRUCTURE

KWANTAS CORPORATION BERHAD (KCB) Registration No. 199501027397 (356602-W)Principal Activities: Investment Holding Company and Provision of Management Services to the Subsidiaries

Kwantas Land Development Sdn Bhd (KLDSB) Principal Activity: Operation of oil palm plantations

Kwantas Edible Oil (Bintulu) Sdn Bhd (KEOBSB) Principal Activity: Dormant

Kwantas Oleo Sdn Bhd (KOLEO)Principal Activity: Operation of oil palm plantation

Kwantas Commodity Trading Sdn Bhd (KCTSB) Principal Activity: Dormant

Haranky Sdn Bhd (HSB) Principal Activity: Operation of oil palm plantation

Green Green Grass Sdn Bhd (GGGSB) Principal Activity: Operation of a waste incineration plant

Palm Energy Sdn Bhd (PESB) Principal Activity: Dormant

Miracle Harvest Sdn Bhd (MHSB) Principal Activity: Rental of leasehold land

Kwantas Plantations Sdn Bhd (KPSB) Principal Activity: Operation of oil palm plantations

Kwantas Oil Sdn Bhd (KOSB) Principal Activities: - Operation of palm oil mills, kernel

crushing plant, palm oil refinery and trading of palm oils

- Wholesaling & supply of diesel and lubricants

100% 100%

100% 100%

100% 100%

100% 100%

100%

100%

100%

95%

100%

95%

60%

100%

100%

100%

100%

100%

100%

100%

95%

Gagasan Usahasama Sdn Bhd (GUSB) Principal Activity: Operation of oil palm plantation

Kwantas Pelita Plantation (Balingian) Sdn Bhd (KPPBSB)

Principal Activity: Operation of oil palm plantations

Aman Bersatu Sdn Bhd (ABSB) Principal Activity: Operation of oil palm plantations

Benar Bersatu Sdn Bhd (BBSB) Principal Activity: Operation of oil palm plantation

Kwantas International Inc (KII) Principal Activity: International trading

Kwantas International Singapore Pte Ltd (KIS) Principal Activity: Dormant

PT Kinabalu Invesdag Indonesia (PT KINABALU)Principal Activity: Investment Holding Company

Maximlink Enterprise Sdn Bhd (MESB) Principal Activity: Rental of leasehold land

Dongma Palm Industries (Zhangjiagang) Co Ltd (DMPI) Principal Activities: Operation of oleochemicals and glycerine

plants

Dongma Oils & Fats (Zhangjiagang Free Trade Zone) Co Ltd (DMZJGFTZ)

Principal Activities: - Operation of a bulking installation - Trading of palm oils products

Dongma Oils & Fats (Guangzhou Free Trade Zone) Co Ltd (DMGZFTZ)

Principal Activities: - Operation of a bulking installation, palm oil refinery and shortening plants

- Trading of palm oils products

PT Kalsum Pratama Perkasa (PT KPP)Principal Activity: Dormant

PT Gerbang Meranti Agrobisnis (PT GMA)

Principal Activity: Operation of oil palm plantations

Malaysian Companies

SubsidiariesForeign Companies


DIRECTORS’ PROFILE

Datuk Ismail Bin Abdullah graduated with a Bachelor of Arts (Hons) Economics from University of Sunderland, UK in 1982. He then later attached with Harvard University, USA for joining the Program on Investment Appraisal & Management (“PIAM”) in 1995.

Datuk Ismail Bin Abdullah was a Director and Permanent Secretary of several private companies and public sectors. He has had a distinguished career with the government sector primarily in the fields of industrial development and economic planning. He was the Director of Sabah State Planning Unit from 2009 to 2014. Prior to his appointment as Director of the State Planning Unit, he served as a Permanent Secretary to the Ministry of Industrial Development from 2000 to 2009. He was the Director of State Archives in 1998, Secretary to the State Secretary’s office from 1994 to 1998 and Chief Investment Officer/Assistant Secretary of Majlis Ugama Islam Sabah (“MUIS”) from 1988 to 1994. He was also the Assistant Director to the State Planning Unit from 1982 to 1988.

Datuk Ismail Bin Abdullah holds nil shares in Kwantas Corporation Berhad and does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Datuk Ismail Bin Abdullah is the Chairman of Nomination and Remuneration Committee and a member of Audit and Risk Management Committee of the Company.

Datuk Ismail Bin Abdullah attended 6 out of 6 Board meetings of the Company held during the financial year ended 30 June 2019.

Mr Kwan Ngen Wah is one of the co-founder Directors of the Company and on 23 July 2018, he has been redesignated as the Group Chief Executive Officer cum Group Managing Director of the Company. He received his tertiary education in the UK.

Mr Kwan Ngen Wah has been actively involved in the oil palm industry, stone quarry operation, road construction and property development projects for the past thirty (30) years and gained substantial knowledge and experience in these industries. The accumulated experience coupled with the close relationship with customers and suppliers provide adequate impetus for him to efficiently steer the Company to greater success.

Mr Kwan Ngen Wah holds 93,188,632 shares in Kwantas Corporation Berhad. He is the elder brother of Ms Kwan Jin Nget and Ms Kwan Min Nyet. Except for certain recurrent related party transactions of a revenue or trading nature which are necessary for day- to-day operations of the Company and its subsidiaries and for which he is deemed to be interested as disclosed on pages 159 to 163 of the Annual Report, there are no other business arrangements with the Company in which he has personal interests. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Mr Kwan Ngen Wah attended 6 out of the 6 Board meetings of the Company held during the financial year ended 30 June 2019.

DATUK ISMAIL BIN ABDULLAHChairman

Independent Non-Executive Director

Malaysian, aged 64, Male

MR KWAN NGEN WAHGroup Chief Executive Officer

Non-Independent Executive Director


Date Appointed : 23 August 1995Date Redesignated : 23 July 2018

Date Appointed: 25 March 2013



Dato’ Chong Kan Hiung is a Chartered Accountant of the Malaysian Institute of Accountants and a Fellow of the Chartered Association of Certified Accountant in the UK and also a member of the Malaysian Institute of Taxation.

Prior to joining the Kwantas Group in 1996, he was attached to an international public accountants firm. He has considerable experience in corporate finance and general management. Dato’ Chong Kan Hiung is also a certified member of the Financial Planning Association of Malaysia.

Dato’ Chong Kan Hiung holds 2,600,000 shares in Kwantas Corporation Berhad. He does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Dato’ Chong Kan Hiung attended 6 out of the 6 Board meetings of the Company held during the financial year ended 30 June 2019.

Ms Kwan Jin Nget graduated with a Bachelor Degree in Business Administration from University of Iowa, USA in 1989.

Ms Kwan Jin Nget is currently the Regional Director of the Group. Her responsibilities include the coordination for the efficient operations of the Regional Office, overseeing human resources management and general administration of the oil palm plantations business.

Ms Kwan Jin Nget holds 689,500 shares in Kwantas Corporation Berhad. She is the sister of Mr Kwan Ngen Wah and Ms Kwan Min Nyet. Except for certain recurrent related party transactions of a revenue or trading nature which are necessary for day-to-day operations of the Company and its subsidiaries and for which she is deemed to be interested as disclosed on pages 159 to 163 of the Annual Report, there are no other business arrangements with the Company in which she has personal interests. She has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Ms Kwan Jin Nget attended 3 out of the 6 Board meetings of the Company held during the financial year ended 30 June 2019.

(Cont’d)

DATO’ CHONG KAN HIUNGNon-Independent Executive Director


MS KWAN JIN NGETNon-Independent Executive Director

Malaysian, aged 52, Female

Date Appointed: 12 November 2001 Date Appointed: 23 August 1996


(Cont’d)

MS KWAN MIN NYETNon-Independent Executive Director

Malaysian, aged 50, Female

Ms Kwan Min Nyet graduated with a Bachelor Degree in Business Administration from University of Iowa, USA in 1989.

Ms Kwan Min Nyet is responsible for the finance and the marketing functions of the Company’s oil mill operations.

Ms Kwan Min Nyet holds 238,000 shares in Kwantas Corporation Berhad. She is the sister of Mr Kwan Ngen Wah and Ms Kwan Jin Nget. Except for certain recurrent related party transactions of a revenue or trading nature which are necessary for day-to-day operations of the Company and its subsidiaries and for which she is deemed to be interested as disclosed on pages 159 to 163 of the Annual Report, there are no other business arrangements with the Company in which she has personal interests. She has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Ms Kwan Min Nyet attended 5 out of the 6 Board meetings of the Company held during the financial year ended 30 June 2019.

Mr Ooi Jit Huat is a Chartered Accountant of Malaysian Institute of Accountants and the managing partner of public accounting firm, Russ Ooi & Associates since 1985. He is also a member of the Malaysian Institute of Taxation.

Mr Ooi Jit Huat has over thirty (30) years of experience in the financial industry having carved areas of expertise in corporate consultancy, financial management, management information systems and auditing and investigations. His professional assignments covered floatation exercises, investigations and due diligence reporting and the reverse takeover of several companies on the Bursa Malaysia Securities Berhad. He sits on the Board of Priceworth International Berhad.

Mr Ooi Jit Huat holds nil shares in Kwantas Corporation Berhad. He does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Mr Ooi Jit Huat is the Chairman of the Audit and Risk Management Committee and a member of Nomination and Remuneration Committee of the Company.

Mr Ooi Jit Huat attended 6 out of the 6 Board meetings of the Company held during the financial year ended 30 June 2019.


Date Appointed: 23 August 1996 Date Appointed: 09 March 2000

MR OOI JIT HUATIndependent

Non-Executive Director




MR PETRUS GIMBADIndependent

Non-Executive Director


Mr Petrus Gimbad is a Chartered Accountant of the Malaysian Institute of Accountants, a Fellow of the Association of Chartered Certified Accountants and an Associate of the Institute of Internal Auditors Malaysia. He holds a Master Degree in Business Administration and Advanced Business Practice. He is a member of the Energy Commission and also sits as independent member of the Board of Yayasan Innovasi Malaysia and Eastland Equity Berhad. He was a partner of Ernst & Young, based in the advisory practices of Malaysia and Vietnam. He has acted as Quality Director of Ernst & Young advisory practices for the Far East Region. Prior to joining Ernst & Young, he was an accountant with Petronas.

Mr Petrus Gimbad holds nil shares in Kwantas Corporation Berhad and does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Mr Petrus Gimbad is a member of Audit and Risk Management Committee, Nomination Committee and Remuneration Committee of the Company.

Mr Petrus Gimbad attended 6 out of the 6 Board meetings of the Company held during the financial year ended 30 June 2019.

Date Appointed: 24 March 2016

(Cont’d)


KEY SENIOR MANAGEMENT’S PROFILE

MR CHAI FOO YINGeneral Manager

Marketing


Mr Chai Foo Yin graduated with a Bachelor Degree in Business Studies from North East London Polytechnic, UK.

Prior to joining Kwantas Group in 1996 as a Marketing Manager, Mr Chai Foo Yin was a cocoa bean Procurement Officer in Sime Darby Commodities from 1983 to 1995. He was then promoted to General Manager of the Marketing Division in year 2002. He oversees the local packed cooking oil and marketing of crude palm oil, refine oil and palm kernel oil for the Group. Apart from managing the hedging process necessary for the refinery’s operation and other raw material, he has to ensure that there are sufficient raw materials of quality are ready for shipment. His responsibility also covers China Dongma Zhangjiagang’s raw material and stearic acid market.

Mr Chai Foo Yin holds 100 shares in Kwantas Corporation Berhad and does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

Mr Kwan Yean Yeow is the Group Advisor of Kwantas Group, having joined the Group since its incorporation and has over the years involved in major business development and operations.

Mr Kwan Yean Yeow started his career in the timber industry and has gained vast experience in plantation management, refinery and mill operations. In July 2018, he was appointed to lead the entire operations and management in China Dongma Group. He also holds directorships in several other private limited companies within Kwantas Group.

Mr Kwan Yean Yeow holds nil shares in Kwantas Corporation Berhad. He is the eldest brother of Kwan Ngen Wah, Kwan Jin Nget and Kwan Min Nyet. Except for certain recurrent related party transactions of a revenue or trading nature which are necessary for day-to-day operations of the Company and its subsidiaries and for which he is deemed to be interested as disclosed on pages 159 to 163 of the Annual Report, there are no other business arrangements with the Company in which he has personal interests. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

MR KWAN YEAN YEOWGroup Advisor


MR CHUA BAN HEGeneral Manager

Dongma Guangzhou

Singaporean, aged 69, Male

Mr Chua Ban He graduated with a Diploma in Supervisory & Management from National Productivity Board of Singapore. He has been an Associate Member of Singapore Institute of Management Since 1988.

Mr Chua Ban He has accumulated more than thirty (30) years of vast experience in oils and grains and also foreign trade management. Prior to joining Kwantas Group in March 2019, he was tasked to set up Southseas Oils and Fats in Shenzhen, China in 1988 and New Ocean Oils and Fats in Guangxi, China in 1992 for China Kerry Group and had successfully opened up the local China market with small packaging of edible cooking oil in 1995.

Mr Chua Ban He later joined Hunan Tangcheng Grains and Fats (Hunan Tangcheng) as a General Manager from year 2012 to 2018. Under his strong leadership style, both Hunan Tangcheng and he personally were accoladed with “Major Demonstration Enterprise of Science and Technology of Food Safety” and “Foreign Experts” in 2014 and 2013 respectively.

Mr Chua Ban He holds nil shares in Kwantas Corporation Berhad and does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.


KEY SENIOR MANAGEMENT’S PROFILE

MR HIEW YIN FOHGeneral Manager

Plantation (Sabah Region)


Mr Hiew Yin Foh graduated with a Certificate in Agriculture Vocational School in Malaysia.

Prior to joining Kwantas Group on 20 September 2018 as a General Manager in charge of the entire plantations in Sabah region, Mr Hiew Yin Foh was a Plantation Controller in IOI Plantation Service Sdn Bhd from 2016 to 2018 and a General Manager in Innoprise Plantation Bhd from 2011 to 2015. He has accumulated more than thirty (30) years of experience in the plantation industry, particularly in replanting of oil palm. Additionally, he also has experience in various crops planting such as cocoa, coconut, rubber, coffee and tea.

Mr Hiew Yin Foh holds nil shares in Kwantas Corporation Berhad and does not have any family relationship with any other Directors and/or other major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regulatory bodies during the financial year under review.

(Cont’d)

Mr Kwan Jin Min graduated with a Bachelor Degree in International Business from Curtin University of Technology, Australia.

Mr Kwan Jin Min has been trained to trade in palm kernel expeller in Kwantas Group since year 2010. On 01 July 2018, he has been assigned to manage the Group’s oleochemical business in Zhangjiagang, China.

Mr Kwan Jin Min’s primary role in Dongma Zhangjiagang is to oversee and improve the operation of the oleochemical plant by ensuring the production cost is maintained at its reasonable level as well as ensuring the production is running at maximum capacity. In addition, the health, safety and environment compliance issues are under his prerogative. He works closely with Dongma Zhangjiagang sales and marketing team for products pricing and building good rapport with customers.

Mr Kwan Jin Min holds nil shares in Kwantas Corporation Berhad. He is the eldest son of Mr Kwan Yean Yeow. Except for certain recurrent related party transactions of a revenue or trading nature which are necessary for day-to-day operations of the Company and its subsidiaries and for which he is deemed to be interested as disclosed on pages 159 to 163 of the Annual Report, there are no other business arrangements with the Company in which he has personal interests. He has not been convicted for any offences within the past five (5) years other than traffic offences and was not imposed with any public sanction or penalty by the relevant regular bodies during the financial year under review.

MR KWAN JIN MIN General Manager

Dongma Zhangjiagang


MANAGEMENT DISCUSSIONS AND ANALYSIS

Overview of Group’s Business and Operations

Financial year ended 30 June 2019 had been a very challenging year for Kwantas Corporation Berhad (“Kwantas” or ”the Group”). This year saw a change in leadership with the appointment of a new Group Chief Executive Officer after the unexpected demised of the former Group Chief Executive Officer. The Group was also affected by the lower performance of the plantation sector as a result of the high inventory level for palm oil stocks of above three (3) million MT in Malaysia in the second half of the financial year.

Kwantas is an integrated palm oil producer with its business activities ranging from upstream cultivation of oil palm to downstream resource-based manufacturing of refinery, palm oil mills, kernel crushing plant, cooking oil packaging and distribution as well as oleochemical plant operations.

The Group has a total of twenty five (25) estates which produce 288,671 MT of fresh fruit bunches (“FFB”). The FFB produced by the Group together with third parties’ FFB purchased were processed by the Group’s three (3) palm oil mills located in close proximity to its plantations.

The Group’s three (3) palm oil mills have a total production capacity of 180 tonnes per hour. A total of 521,169 MT of FFB during the financial year ended 30 June 2019, of which 55.02% of FFB was supplied by the Group’s own estates and the rest was from third party suppliers. A total of 107,610 MT of crude palm oil (“CPO”) and 26,394 MT of palm kernel (“PK”) were produced from the processing of FFB.

The Group is also involved in refined palm products trading during the financial year. Trading volume had increased significantly as compared to the preceding financial year despite the realised average unit CPO selling price has decreased.

FYE 2019recorded a revenue of

RM 773.67 Million



MANAGEMENT DISCUSSIONS AND ANALYSIS

Financial Overview

The financial statements of the Group for the financial year ended 30 June 2019 are the first set of financial statements prepared in accordance with the MFRS framework, including MFRS 1 – First-time Adoption of Malaysian Financial Reporting Standards. Subject to certain transition elections, the Group has consistently applied the same accounting policies in its opening MFRS Statements of Financial Position as at 01 July 2017, being the transition date, and throughout all years presented, as if these policies always been in effect.

Amendments to MFRS 141 (effective from 01 January 2018) which will be effective in conjunction with the adoption of MFRS framework, require a bearer plant, defined as a living plant, to be accounted for as property, plant and equipment in accordance with MFRS 116.

Prior to the adoption of the Amendments to MFRS 141, all new planting expenditure incurred from land clearing, planting, field upkeep and maintenance up to maturity were capitalised under biological assets and were not amortised. All expenses subsequent to maturity was charged to profit or loss account. Replanting expenditure which represents cost incurred in replanting old planted areas was charged to profit or loss as and when incurred. Biological assets-agricultural produce which form part of the bearer plants were not recognised separately.

With the adoption of the Amendments to MFRS 141, new planting expenditure and replanting expenditure are accounted for as property, plant and equipment in accordance with MFRS 116, whereas the produce growing on the bearer plants falls within the scope of MFRS 141 are measured at fair value less costs to sell. The adoption of the Amendments to MFRS 141 will result in additional depreciation on property, plant and equipment and replanting expenditure that were charged to profit or loss prior to the adoption of the Amendments to MFRS 141 will be reversed and capitalised under property, plant and equipment. Changes in fair value less costs to sell of the biological assets will be recognised in the profit or loss. The Group had to change its accounting policies and make certain retrospective adjustments following the adoption of Amendments to MFRS 141.

(Cont’d)

Total Planted Area

FFB Production (mt) & Yield per Mature Ha (mt/ha)

2017

2017

2015

2015

2018

2018

2019

2019

2016

2016

40

20

0

100,000

0

10

100

400,000

80

300,000 30

60

200,000 20

85%

346,

556

80%

375,

624

79%

333,

333

83%

288,

671

87%

*13%

Mature Area

FFB Production (mt)

* Immature Area

* Yield per Mature Ha (mt/ha)

*22.6MT

*15%

*20.2MT

*20%

*22.1MT

*21%

*21.2MT

*17%

*17.7MT

371,

658


Internal FFB

CPO Production (mt)

* External FFB

* Oil Extraction Rate for CPO (%)

Financial Overview (Cont’d)

The adoption of MFRS 9 which reflects all phases of financial instruments project and replaces MFRS 139 – Financial Instruments : Recognition and Measurement has introduced new requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. MFRS 9 introduces an expected credit loss (“ECL”) model on impairment. In the event of a significant increase in credit risk, allowance for impairment is required for ECL resulting from all possible default events over the expected life of the financial instrument. The assessment of credit risk, as well as the estimation of ECL, are required to be unbiased, probability-weighted and should incorporate all available information which is relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL should also take into account the time value of money.

For the financial year ended 30 June 2019, the Group recorded a revenue of RM773.67 million which was fairly consistent with FYE 2018 revenue at RM780.28 million. The marginal increase was mainly due to the increase in sales volume despite a significant drop in average unit CPO selling price to RM1,979 per MT( FYE 2018: RM2,638 per MT) which was mostly attributed to market forces including sluggish export demand coupled with high CPO inventory level in the palm oil market and the expectation of a continued upward trend in production.

The Group’s net loss for the financial year under review was RM99.65 million as against a loss of RM93.41 million in the preceding year. The Group had provided for impairment loss on property, plant and equipment, depreciation of property, plant and equipment, fair value loss on biological assets, property, plant and equipment written off and fair value loss on derivative financial instruments amounting to RM27.95 million, RM64.82 million, RM1.60 million, RM1.85 million and RM2.12 million respectively during the year under review.

Excluding the non-cash and provisional items, the Group underlying profit was RM1.53 million for financial year ended 30 June 2019 (FYE 2018: RM69.27 million) or a a profit margin of 0.20% (FYE 2018: 8.88%).

MANAGEMENT DISCUSSIONS AND ANALYSIS (Cont’d)

Total FFB Processed

CPO Production (mt) & Oil Extraction Rate for CPO (%)

2017

2017

2015

2015

2018

2018

2019

2019

2016

2016

20

0

20,000

0

10

80

80,000

100,000

120,000

140,000

60

60,000

30

40

40,000

20

66%

109,

738

64%

120,

793

53%

128,

549

55%

107,

610

59%

132,

570

*41% *34% *36% *47% *45%

*21.3%

*21.0%

*20.6%

*20.9%

*20.7%



For the financial year ended 30 June 2019, the Group’s net gearing ratio stood at 0.37 times compared with 0.31 times for the previous year. Higher gearing ratio was a result of decline in total equity and a higher total borrowing arising from RM64.82 million net drawdown of borrowings during the year. The overall increase in borrowing was mainly due to increase in trading volume from the oleochemical business operation in China. The Group’s finance cost increased by 0.86% to RM24.75 million (FYE 2018: RM24.54 million) during the year.

Plantations Operations

The Group’s oil palm plantations and palm products processing activities had contributed to more than 76.73% of the Group’s total earnings for the year ended 30 June 2019, equivalent to RM593.62 million, a decrease of 16.39% or RM116.40 million in value compared to RM710.02 million revenue reported in FYE 2018. The lower plantation revenue was mainly due to decline in average unit selling prices and volume of CPO and PK produced. This was attributed to market factors including sluggish export demand, coupled with high CPO inventory level in the palm oil market, and the expectation of continued upward trend in production.

As at 30 June 2019, the Group has a total land bank of 56,917 hectares (FYE 2018: 56,917 hectares). This included 15,800 hectares (planted area: 721 hectares) of agricultural land held by a subsidiary in Indonesia. To date, the renewal of certain licenses from the relevant Indonesia authority for the agriculture land is still pending and remains uncertain. The Group had provided for full impairment allowance in current financial year ended 30 June 2019 for this agriculture land and its biological assets. Efforts to appeal for renewal of the licenses with relevant Indonesia authority has been ongoing since FYE 2018.

The Group’s total planted area stood at 19,665 hectares, of which 82.93% or 16,308 hectares are matured and 17.07% or 3,357 hectares are classified as immature. For palms exceeding age of twenty five (25) years, the Group will continue with its replanting programme. The Group is targeting approximately 750 hectares for replanting with high-yielding clonal materials every year. This was started in year 2017 with the goal of achieving a desired palm age profile for the Group.

FFB production of the Group had decreased by 13.40% to 288,671 MT for the year ended 30 June 2019 as against 333,333 MT in FYE 2018. FFB yield per mature hectare (“YPMH”) achieved by the Group was 17.7 MT/YPMH as against 21.2 MT/YPMH in the preceding year. The decrease in FFB’s YPMH for the year under review was mainly due to the overaged palms of the Group as well as inefficiencies arising from labours shortage resulting in some crop losses.

The Group is committed to promoting sustainable palm oil practices. Kwantas has subscribed to Roundtable on Sustainable Palm Oil (“RSPO”) since 2014. A time-bound plan is in-place for all the Group’s plantation activities for its estates and oil mills to progress towards RSPO certification. In the interim, the Group is working towards the Malaysian Ministry of Plantation and Commodities mandate for all Malaysian palm oil producers to be Malaysian Sustainable Palm Oil (“MSPO”) certified by year 2019.


Milling Operations

The Group owns three (3) palm oil mills in Lahad Datu, Sabah - Haranky palm oil mill, Mewah palm oil mill and Pintasan palm oil mill. During the year, the three (3) palm oil mills had processed a total of 521,169 MT of FFB, a decrease of 15.36% compared to 615,740 MT in FYE 2018. Kwantas’s own FFB accounted for 55.02% of the total FFB processed.

Oil extraction rates (“OER”) and kernel extraction rates (“KER”) achieved by the Group were 20.65% and 5.06% respectively, a slight decrease of 0.25% and a slight increase of 0.06% respectively from the preceding year.

Oleochemical

Subsequent to the termination of the processing contract due to the non-fulfilment of terms and conditions as stipulated in the oleochemical processing contract entered into with a China customer, the Group’s oleochemical products segment has resumed the business in processing and sale of oleochemical products on its own during the year under review.

Oleochemical products segment accounted for 23.27% of the total Group’s revenue for the financial year ended 30 June 2019. Revenue reported from this segment increased by 193.90% to RM180.05 million during the year (FYE 2018: RM61.26 million), mainly due to increased production and trading of oleochemical products. The average selling price of the oleochemical products has also increased to RM2,178 per MT during the year (FYE 2018: RM1,981 per MT) due to the overall increase in certain palm product prices. The oleochemical segment has entered into forward sales commitment whereby higher production volume and realized trading volume is expected in the following year.

For the financial year ended 30 June 2019, oleochemical products segment incurred a loss before taxation of RM24.69 million and its results had been improved as compared to preceding year (FYE 2018: segment loss of RM44.33 million). The underlying loss excluding non-cash items (i.e. depreciation and amortization expenses) during the year was RM14.39 million, as compared to preceding year underlying loss of RM19.30 million. The main factor attributed to the losses was recommencement cost incurred coupled with loss incurred from trading.


Oleochemical operations remain challenging under present uncertain market condition. The business performance of the oleochemical segment is anticipated to be challenging for the financial year 2020 in view of the continuing difficult market conditions, sluggish demand, over capacities and higher raw material prices.

Prospects

Oil palm plantations and palm products trading segment remain as significant contributors to the overall profitability of the Group. With the palm prices expected to recover in the second half of year 2019 coupled with stronger palm oil consumption and demand, it is expected that the segment will contribute positive margins to the Group from trading and export activities. Furthermore, the segment’s profitability is currently managed by the Group through robust cost controls and cost management strategies as well as taking measures to improve its productivity.

Oleochemical business is anticipated to be challenging for the financial year 2020 in view of the continuing difficult market conditions, sluggish demand, over capacities and higher raw material prices coupled with the fluctuations in the USD/RMB currency which have attributed to the fluctuating margin. However, as palm prices are expected to recover, coupled with strong demand for these products in the local market, oleochemical segment is expected to contribute positive trading margins to the Group. In respect of the oleochemical plant in China, the Management has taken measures to enhance and improve the plant with the intent to achieve production and costs efficiencies and to be more competitive in terms of pricing and producing product quality.

The Group’s long-term plan is to reduce its overall borrowings to a gearing ratio of 0.2 times or lower by continuing with its on-going de-gearing initiatives to reduce capital commitments on low return assets.

Despite the challenging market conditions for the palm oil products, the Board of Directors is confident that the Group will continue to achieve positive and favourable performance with its forward sales commitment and sustainable business strategies.


Statement Overview

Stakeholders nowadays are increasingly vocal about the impact of business on sustainability issues concerning the economy, environment and society. The increasing impacts of interconnected sustainability related risks have driven businesses to embed sustainability considerations in the way of doing businesses. Kwantas Corporation Berhad and its subsidiaries (“Kwantas” or “the Group”) are of no exceptions. The Group makes continuous efforts to adopt sustainable practices and to integrate sustainability information into its reporting cycle. This Statement covered the Group’s business operations for the period from 01 July 2018 to 30 June 2019 and was prepared with reference to Sustainability Reporting Guide (2nd edition) recommended by Bursa Malaysia Securities Berhad.

Commitment to Sustainability

The Group is committed to support the global agenda to build a sustainable world by putting in place sustainable measures to address global concerns on the environment, contributing the economy and creating positive and enduring social impact in the business environment that the Group is involved in.

The Group’s sustainability governance structure remains consistent with the previous reporting year, in which it is set by the tone from the top. The Board of Directors is accountable for the overall overseeing sustainability-related strategies while the Group Chief Executive Officer provides stewardship towards incorporating sustainability into the Group’s strategies, directions, targets and goals. The head of each operating units will facilitate the implementation and execution of sustainability matters in accordance with the Group’s policies and practices.

Stakeholders’ Engagement

The Group recognizes that each stakeholder has a unique perspective of the impact of the Group’s business to them. The Group therefore maintains an open and transparent communications and engagement with stakeholders to understand their specific needs and expectations in relation to the Group’s sustainability performance. The following table summarises the engagement process with the Group’s key stakeholders:-

Key Stakeholder Engagement Channels Key Topics

Government Authorities and Regulators

• Meetings and dialogues• Site visits and audits• Briefings and trainings• Applications/submissions/

compliance/certifications

• Compliance with legal requirements and regulations

• Industry guidelines and best practices

Customers • Meetings• Customers visits• Contract negotiation

• Satisfaction in product and service quality

• Timely delivery/shipment• Sustainability updates

- certification, best management practices

SUSTAINABIL ITY STATEMENT


SUSTAINABIL ITY STATEMENT (Cont’d)

Stakeholders’ Engagement (Cont’d)

Key Stakeholder Engagement Channels Key Topics

Shareholders/Investors/Fund Managers

• Annual General Meetings• Company website• Annual reports• Announcements via Bursalink

• Business strategies and directions• Financial and operational

performances

Local Communities/Non-GovernmentalOrganisations/Associations/Local Tertiary Institutions

• Volunteering opportunities and charitable events

• Internship programmes• Donations/sponsorships• Meetings and dialogues

• Responsible corporate citizenships through community services

• Identify potential talent for future expansion

• Strategic partnerships

Employees • Internal portal• New staff orientation• Annual appraisal• Training and development

programme• Informal gathering to enhance

bonding• Welfare and remuneration

package

• Personal advancement and career development

• Employees’ welfare and benefits• Health and safety at work• Employees’ loyalty and team work

Contractors/Suppliers • Meetings and briefings• Tender and bidding process• Site visits• Contract negotiations

• Payment terms and timeliness• Long-term business relationship• Work ethics

Materiality Assessment

During the financial year under review, a Management workshop was conducted to identify and ascertain the material sustainability matters of concern to the Group and to the stakeholders on the environment, economy and social aspects relating to the Group’s business operations, namely in oil palm plantations, milling, trading of oils and fats products and China oleochemical operations.

Although stakeholders were not involved in the workshop, the key Management who were participants in the workshop has been in frequent contact with them through the periodic engagement process mentioned earlier. The knowledge on the concerns of the stakeholders gained from the interaction was used to identify the aspects of concern.



ECONOMIC SUSTAINABILITY

Economic Contribution

For financial year 2019, the Group recorded RM773.67 million in turnover, a decline by 0.85% from previous financial year 2018 which achieved RM780.28 million. The oil palm plantations and palm products segment contributed about 76.73% of the Group’s total earnings for the year ended 30 June 2019, equivalent to RM593.62 million and representing a decrease of 16.39% or RM116.40 million in value compared to RM710.02 million revenue reported in FYE 2018. As highlighted in the Management Discussions and Analysis:

(a) FFB production has decreased by 13.40% to 288,671MT (FYE 2018: 333,333MT). FFB yield per mature hectare of the Group has dropped to 17.7MT/YPMH as compared to 21.2MT/YPMH in preceding year. The decrease in FFB production and FFB yield per mature hectare were mainly due to certain oil palm plantation of the Group was replanted due to over-aged palms. The drop in FFB average unit selling price to RM348 per MT (FYE 2018: RM498 per MT) due to bearish palm oil market had severely resulted in the decrease in segmental revenue for the year under review.

(b) During the financial year, 56.36% of the Group’s revenue (FYE 2018: 57.44%) were generated from CPO sales. The realised average unit CPO selling price had dropped significantly to RM1,979 per MT (FYE 2018: RM2,638 per MT), despite CPO traded during the year had increased significantly by 30% or 50,000MT as compared to preceding year. The significant drop in average unit CPO selling price was mainly attributed by market factors including bearish market sentiment, coupled with higher than expected CPO production output and higher palm oil inventory level in the market.

(c) During the financial year, 10.20% of the Group’s revenue (FYE 2018: 14.87%) were generated from CPKO sales. The realised average CPKO selling price had decreased significantly to RM2,955 per MT (FYE 2018: RM4,795 per MT), despite CPKO traded during the year had increased by 2,500MT as compared to preceding year. The significant drop in average unit CPKO selling price was mainly due to bearish palm oil market which had severely affected the overall palm product prices.

(d) Palm products traded for the financial year ended 30 June 2019 stood at 8,000MT (FYE 2018: 30,000MT). Despite the palm products traded with external customers had dropped during the year, there was an increased demand for downstream palm products in China market. During the year, the average unit selling price of the palm products had dropped to RM2,054 per MT (FYE 2018: RM2,943 per MT), mainly due to the overall bearish market factors and intense competition from other vegetable oils.

Plantation activities also include the development of the community lands or Native Customary Rights (“NCR”) lands into oil palm plantations by way of joint venture with the local community in Sarawak. The scheme covers total land perimeter of 14,416 hectares. Presently, there were 3,304 hectares of NCR land owners participated in the scheme. Incentive payment will be paid twice to the NCR land owners every year after participating in the scheme. For the financial year ended 30 June 2019, 1,759 hectares of NCR lands had been planted.

Included in the Group’s total revenue of RM773.67 million for the financial year ended 30 June 2019 were RM180.05 million or 23.27% of the total revenue derived from the Group’s oleochemical business in China although the oleochemical business had incurred a segmental loss before tax of RM24.69 million.

During the year under review, the Group spent a total of RM18.16 million in its capital expenditure in which RM13.84 million was incurred in development of oil palm plantations, replanting activities, and acquisition of new tractors and vehicles for plantation activities, RM1.70 million was incurred in upgrading of oleochemical plant and bulking tanks in China, and RM2.62 million was incurred in upgrading staff quarters and infrastructure of the Group.



ECONOMIC SUSTAINABILITY (Cont’d)

Traceability and Supply Chain Management

Palm Oil Supply Chain Traceability Requirement is mandated under MSPO. Traceability refers to the possibility to trace production, use or location of an element of the supply chain. Such a requirement applies to every stage of supply chain such as smallholders, FFB dealers, palm oil mills, refineries, storage tank and transport. This is also in line with the growing expectation and demand on transparency and accountability by the customers. Kwantas is still working closely with its FFB suppliers and mills to track the origins and sources of palm products. Based on the record in 2018, Kwantas had achieved the following overall crop traceability:

Traceability and Supply Chain Management

Corporate Liability

On 05 April 2018, a new Section 17A on corporate liability offence was introduced by the Malaysian Anti-Corruption Commission Act 2009. This new provision establishes a new statutory corporate liability offence of corruption not only by a commercial organisation but any persons associated with it to be liable for the same offence, unless the relevant person can prove otherwise. The Group will put in place adequate procedures with parameters set to prevent the occurrence of bribery and corrupt practices.

Other Sources: 0.31%

Internal Sources (RSPO): 2.59%

Internal Sources: 62.2%

Third Party: 17.36%

Dealers: 15.39%

Independent and Schemed Smallholders:2.15%

Overall Crop Supply Chain Management (2018)


ECONOMIC SUSTAINABILITY (Cont’d)

Plantation Enhancement

Moving away from the conventional method of walking through the plantations to count the palm trees, the Group now relies on the unmanned vehicle or more commonly known as drone which couples with Global Positioning System to conduct oil palm tree census and surveys. Unlike the conventional method, information obtained was manually recorded. Censing and survey conducted using drones have provided a more reliable and accurate information to the Group for more effective plantation management and planning.

Besides, the Group is using drones for precise terracing in its replanting work and road alignment planning. The 3D digital elevation models will present a clear picture of all the slopes and contours. This intelligent automation can also be used to generate precise locations to eliminate empty spots and to identify the distance between each palm trees as well as to monitor the growth of nursery trees.




ENVIRONMENTAL SUSTAINABILITY

Certification

RSPO

Kwantas has been an ordinary member of RSPO under the category of Oil Palm Growers since 2014. The Group’s refinery and edible oil complex have obtained their RSPO Supply Chain certification for processing palm oil products segment since 2016. While the Group has had a RSPO time-bound plan to ensure all of its operations will be RSPO certified by 2021, this target has been postponed to 2022 due to complexity of the technical certification process.

MSPO

MSPO is initiated by the Government of Malaysia as a mandatory national sustainability certification for all oil palm industry players in Malaysia to comply by end of 2019. The Group’s refinery and edible oil complex, Haranky palm oil mill and Haranky estates have been MSPO certified since December 2018. All other plantations within the Group are working towards 100% MSPO certification before the deadline.

No Burning on New Development and Replanting

Kwantas has put in place a Zero Burning Policy and detailed in standard operating procedures on Good Agricultural Practices. No burning is allowed in all plantation activities, including that of new planting and replanting within the Group.

For replanting which involves land clearing, the trunks are chipped along with the frond and stacked in the field so that they could be decomposed and used as additional nutrients for new plants. This contributes to soil fertility, limits agrochemical use and also helps to reduce greenhouse gases emissions and air pollutions.

No Deforestation

The Group is committed to develop and implement No Deforestation Policy. Land area identified as High Carbon Stock will be conserved to protect endangered species found within the Group’s plantation boundaries. These areas include habitats of certain wildlife, riparian zones and areas that are of high cultural value to local communities. Such High Carbon Value (“HCV”) assessments by RSPO accredited auditors will be carried out for all the Group’s plantations.

High Conservation Value and Biodiversity

Most of the Group’s operations are established in degraded forests based on concession areas granted by the Government with relatively low biodiversity value and also considering as areas in need of protection.

Through the HCV assessment, endangered, rare and threatened species of flora and fauna within the Group’s operational concessions are identified as areas of significant value both regionally and globally. The operation teams will patrol and monitor these areas closely to ensure that there is no disturbance in their habitats. Other than identifying areas considered to be the habitat of endangered species and of certain wildlife, the Group also demarcates areas to conserve riparian/buffer zones and areas that are of high cultural value to local communities.

HCV areas considered socially valuable are erected with signboards to create awareness for the surrounding community such as prohibitions on encroaching, trapping, hunting and fishing as well as prohibition for outsiders trespassing with intention to damage the HCV areas.


ENVIRONMENTAL SUSTAINABILITY (Cont’d)

High Conservation Value and Biodiversity (Cont’d)

As of June 2019, there were one hundred eighteen (118) hectares and one hundred thirty (130) hectares of HCV area and Corporate Conservation area respectively within the Group.

Waste Management

At Kwantas, waste generated from all estates and mills will be treated with care as follows:-

• Solid waste such as palm fibers and palm shells are used as biomass fuel for boilers to run steam turbines in the Group’s oil mills, providing a renewable source of energy.

• Liquid waste is treated and monitored before releasing into the stream or onto land. Routine quality assessments will be conducted by external parties to ensure that the Group complies with all Malaysian laws and regulations. During the year under review, majority of the Group’s Biochemical Oxygen Demand (“BOD”) values are within standards. Should any BOD values exceed the standards, control measures will be taken to reduce such values.

• Scheduled waste generated from the operations are stored in a designated area and closely monitored. Only approved licensed providers by the Department of Environment are allowed to dispose waste as per regulation for the Group.

Greenhouse Gas Emissions (“GHG”)


EMISSION SOURCE AND SINKS

Land Conversion

CO2 Emission From Fertilizer

N2O Emission

Fuel Consumption

(Field)

Fuel Consumption

(Mill)

POME Net Emissions

Crop Sequestration

15000

10000

5000

0

-5000

-10000

-15000

30000

25000

20000 1715

9.8 24

532.

34

7975

.25

256.

22

189.

92

185.

18

485.

17

527.

58

1491

.79

156.

38

354.

42

138.

24

331.

01

461.

19

372.

01 4316

.11

3299

.23

3988

.97

-115

95.8

2

-115

95.8

2

-755

9.48

1110

8.87 17

768.

86

6591

.96

2016 2017 2018

Graph of GHG Emission Source and Sinks from year 2016 until 2018



ENVIRONMENTAL SUSTAINABILITY (Cont’d)

Greenhouse Gas Emissions (“GHG”) (Cont’d)

The Graph illustrates the comparison of GHG emission by emission source and sinks from year 2016 until year 2018. From the graph’s illustration, the most significant emission by source for 2018 was derived from N2O emission which is 1,491.79 tCO2e. From the mill side, emission from POME in 2018 indicated slight increase 3,988.97 tCO2e compared to a year before which was 3,299.23 tCO2e. However, comparison between year 2018 and 2017 for emission from land conversion shows significant decrease in emission for about 67% reduction. Compared to 2017 when the emission was 24,532.34 tCO2e, the emission in 2018 was only 7,975.25 tCO2e. This is due to about 35% of area planted since year 1992 and 1993 have already reached more than 25 years of planting cycle and where emissions from land conversion is therefore not required to be counted for according to Palm GHG Calculator. Management has in place a well-established Replanting Programme for these fields in the year 2019. Besides that, fuel consumption in the field and mill have also shown a decreasing sign. All these reduction in GHG emissions by source have contributed to the reduction about 63% on overall net emissions for the year 2018 which is 6,591.96 tCO2e compared to 17,768.86 tCO2e in the year 2017. This suggests that the Group has managed to bring down the total GHG emission in 2018 compared to previous years.

GHG mitigation measures and reduction strategy 2019

The Group is committed to maintain and reduce the GHG emission in the future by emphasizing GHG mitigation measures and continuously seeking proven methods to reduce its GHG footprint. Some of measures that were undertaken by the Group for the financial year under review to reduce GHG emissions included:-

• Increasing implementation of Integrated Pest Management to all the Group’s estates by planting beneficial plant to promote biological pest control and reduce chemical usage in the field;

• Regularly maintaining vehicles and machineries used to collect and transport fresh fruit bunches; • Avoiding development on peat soil; • Creating awareness on the climate change-related advances in science for the reduction of GHG emissions; • Recycling of palm biomass such as pruned fronds, old palm trunks and treated palm oil mill effluent back to the

soil as natural fertilizers; • Using palm oil shells and empty fruit bunches as renewable energy source to generate steam and electricity for

mill processing; • Maintaining the collaboration with external researches and consultants to explore alternative and innovative

means to reduce GHG emissions; and• Trial for alternative GHG emission reduction through solid separation by 2020. One (1) oil mill has completed its

testing and waiting approval for operational.


SOCIAL SUSTAINABILITY

Over the years, Kwantas has reported in its Annual Report the social responsibility programmes undertaken for the well-being of its employees, customers, supplies, local communities and other stakeholders. The Group humbly believes that its commitment to the society has a great impact on the performance and success of the Group. Proactive ways have always been taken in managing any adverse impacts on human rights and well-being of the society that may be related to the Group’s activities.

Human Capital Development

Kwantas employees are amongst its most valuable assets and are the key drivers to organizational success. Investing in staff development and training programmes to build the necessary strength, competencies, leadership skills and knowledge of its people are the long-term commitment of the Group to meet employees’ career aspirations with an emphasis on continuous learning. The Group emphasizes hiring and promoting employees with quality, competency and experience. All employees are treated fairly regardless of age, gender, identity, ethnicity, race or religion in the workplace. The Group’s workplace policies are aligned with the International Labour Organisation Declaration on Fundamental Principles and Rights at work as well as the UN Guiding Principles on Human Rights, which are outlined as follows:-

(i) Forced Labour

No employee may be compelled to work through force or intimidation of any form, as a mean of political coercion or as punishment for holding or expressing political views.

(ii) Freedom of Association and Collective Bargaining

Kwantas respects the legal rights of its employees to form and become members of workers’ organisations, including labour organisations or trade unions. Kwantas believes that the interests of the Company and the employees are best served through a favourable, collaborative work environment between employees and Management.

There are no unions representing the Group’s plantations workers as National Union of Plantations Workers and all Malaysian Estate Staff Union are not recognized in Sabah. Nevertheless, the Social Liaison will visit the plantations and mills regularly to gather feedback and brief employees on the latest Kwantas’ developments. Kwantas also has grievance procedure in place that allows all employees to raise issues and seek redress. In addition, the Board of Directors of Kwantas has formulated Whistleblowing Policies and Procedures to encourage employees to report any malpractice, wrongdoing or suspected breach of law or rules and regulations within the Group without fear of retaliation or victimisation.

(iii) Equal Opportunities

Kwantas supports the principle of fairness and non-discrimination with the aims to treat individuals with respect, free from unlawful and unethical discrimination. In particular, it aims not to discriminate gender, race, ethnic origin, disability, sexual orientation, age or faith, but to build a workforce that is based on meritocracy.

In Kwantas, the safety of the employees is important. The Group ensures that stringent safety policies and practices applying in workplace as required by applicable laws and regulations. During the year under review, no major incidents on safety and health issues were reported.




SOCIAL SUSTAINABILITY (Cont’d)

Community Services and Development

Kwantas believes that sustainability of its business goes hand-in-hand with giving back and building a cohesive community, to support and contribute to the local community wherever possible. During the year under review, the Group had made various contributions and donations to societies, associations, schools and non-profit making organisations through various community projects organized.

The Group also offers internships to assist trainees from various local universities, higher learning institutions and training centres to undergo practical training within the Group’s various department and subsidiaries. At the end of the internship programme, some suitable and potential candidates were offered to fill up available vacancies for the Group’s future expansion.

The Group has a joint venture project with Sarawak local land authority to develop Native Customary Rights (“NCR”) lands in Sarawak. As at 30 June 2019, total NCR land surrendered to the Group was 3,304 hectares, of which 1,759 hectares of NCR lands had been planted with oil palms. Annual incentive payments will be consistently paid out by Kwantas to those NCR landowners joining the NCR project. Besides that, the NCR project has also enabled the Group to provide job opportunities for the local landowners.

Disaster Relief Donation for the Fire Victims of Pulau Banggi, Kudat

In January 2019, a fire disaster struck an interior residential area at Pulau Banggi, Kudat, Sabah which destroyed over 80 houses including 2 teacher quarters, leaving over 300 people devastated without a roof over their heads and belongings which were all lost in the fire. In response to relief the ordeal faced by the fire victims, Kwantas staff collaborated with Majlis Belia Sabah to deliver assortment of food supplies and daily-use items to the victims in hope to ease the victims’ difficulty during their time of need.

(Cont’d)



Pre-Gawai Celebration & Incentive Give-Away Ceremony

In conjunction with the Gawai festival and as an appreciation to the landowners that participated in the Group’s joint-venture program in Sarawak, incentives were given away during a Pre-Gawai Celebration organized by the Group at its Sarawak-based operation where all of the staff and landowners came together to embrace the spirit of unity during the Gawai festival to which they were served with a variety of local food and provided with entertainments for their enjoyment.


Employees’ Engagement and Development

As part of Kwantas’ continuing effort in recognizing and acknowledging its employees contributions towards the continuous growth and success of the Group, as well as the need to develop and grow in line with the Group’s mission, Kwantas undertakes various activities including trainings, workshops and seminars to strengthen the employees’ competencies, leadership skills and knowledge. Not forgoing the importance of health and welfare of its employees, the Group also encourages its employees to participate in outdoor or physical activities to promote good health, better relationship and mutual understanding among the Management and staff.

Kwantas fosters the spirit of volunteerism by encouraging its employees to participate in the Group’s corporate social responsibility projects organized all year long in giving back to the community and those in needs as well as creating awareness of current issues, such as charity or donation visit to the less fortunate and various other community programmes to create awareness on health-related issues, environmental protection and other social issues.

(Cont’d)




The followings were some of the charity and social programmes organized or participated by the Group and its employees during the year under review:-

Visit To Holy Family Residence for Senior Citizens, Papar

Kwantas staff shared some quality moments with the residents during a charity visit to the Holy Family Residence located at Papar, a non-profit Christian organization that cares for the poor, aged, lost and outcast senior citizens. Both residents and Kwantas’ staff had a great time socializing with each other, and the presence of visitors brought much cheer and joy into the hearts of the elderlies which yearns for companionship and affections.

(Cont’d)



Visit To Sabah Society For The Deaf

Kwantas staff visited the special children of the Sabah Society For The Deaf, a non-government charitable organisation in Sabah that promotes the education, employment and general welfare of the deaf society in Sabah. Keeping up with the motto “Sharing is Caring”, Kwantas brought gifts, hope and cheers to the children and in appreciation, the children welcomed Kwantas staff with various interesting performances.




Visit to Asrama Desa Pukak, Kiulu

Kwantas visited Asrama Desa Pukak, Kiulu, a hostel for primary school children located in the village of Pukak, Kiulu, in the district of Tuaran in Sabah. The main objective of this hostel is to enable children from remote rural villages of nearby or surrounding Pukak, to have an opportunity to receive proper education and raise their academic standards so that they can complete their primary education successfully.

Without the hostel, these children would have to walk two and a half hours or more over the hilly terrains just to get to SK Pukak every day. Their attendance to the school would also be dictated by the weather conditions, not to mention the strength and health conditions of each child. Access to these villages is only possible by four-wheel drive vehicles traveling on gravel or mud tracks and only a handful of such vehicles are available in the villages.

The dedication and learning spirit of these children are admirable and with donations of school supplies and other amenities, Kwantas is hoping that it would contribute towards motivating the children to pursue education and not to give up on their hopes and dreams to achieve a greater goal in improving their quality of life.




Comfort Aged Care Centre, Likas

During a charity visit to the Comfort Aged Care Centre, which is a non-profit organization that cares for the senior citizens, Kwantas staff shared some quality moments with the residents. The presence of Kwantas staff brought much cheer and joy into the hearts of the elderlies which yearns for companionship and affections.

Kaamatan cum Raya Luncheon & Lucky Draw Session (Head Office)

A simple luncheon gathering was held in the Head Office in conjunction with the Kaamatan and Raya festival as to bring the Management and staff together in festive joy and in celebration of unity for the diversity within the Group itself. There were also lucky draw sessions for the staff presented by the Directors.




Hari Raya Open House and Luncheon (Refinery and Plantation)

To celebrate peace and harmony during the Ramadan season, Kwantas organized a Hari Raya Luncheon at Lahad Datu refinery where all staff and their family members from different races and backgrounds attended for a multi-racial get-together and to enjoy the food served as well as entertainment performed by the staff themselves.




CrossFit Session for Staff

Kwantas believes in promoting healthy body and healthy mind and recognizes the importance of the health of its employees. In support of the importance of its staffs’ health and fitness, multiple crossfit fitness sessions were organized at a local functional gym. The gym coach led the workout session where the staff enthusiastically completed each task with determination as well as a great sense of fulfillment.

Harbour SunSet 7KRun

As part of the Group’s continuous support in promoting health awareness among its staff and also contributed into charitable purposes, the Group has continued to show its support by sponsoring the staff to participate in Sutera Harbour Sunset Charity Run.




“I Love Sabah” Run

Keeping up with the Group’s mission to care for its staff welfare as well as promoting its strong support for patriotism awareness, the Group sponsored its staff to participate in the “I Love Sabah” Run which was held at Tanjung Lipat, Likas, Sabah. This sporting activity outside workplace has strengthened and improved inter-personal relationship between colleagues.

This Statement was reviewed and approved by the Board of Directors at a meeting held on 14 October 2019.

Environmental Awareness – Skip The Straw Poster Competition

In average, a person uses 1.6 straws per day. In fact, volunteers have picked up more than nine (9) million straws and stirrers from beaches and waterways over the 30+ year history of the International Coastal Cleanup. Unfortunately, many more continue to make their way into our ocean, and pose a real danger and threats to sea turtles, albatross, fish and other ocean wildlife.

In supporting of the awareness to protect the environment, the Group organized a “Skip the Straw” Poster Design Competition to encourage the staff to present their ideas on how to protect the earth and environment by using recyclable materials.

CSR Malaysia Awards 2019

In recognition of the tireless and continuous efforts in giving back to the community, Kwantas once again was awarded the “CSR Malaysia Awards 2019” from the CSR Malaysia publication. It is an annual event honouring outstanding SMEs and giant corporations that have excelled in the socio-economic transformation of Malaysia.



CORPORATE GOVERNANCE OVERVIEW STATEMENT

The Board of Directors (“the Board”) of Kwantas Corporation Berhad (“the Company”) recognises the importance of adopting good corporate governance throughout the Company and its subsidiaries (“the Group”) in building an environment of trust, transparency and accountability necessary in the conduct of the Group’s business and affairs.

The Board views good corporate governance practice as essential in fostering long-term business growth whilst balancing the interests of other stakeholders.

This Corporate Governance Overview Statement sets out a summary of the Group’s corporate governance practices during the financial year ended 30 June 2019 in accordance with the principles and best practices as prescribed by Malaysian Code on Corporate Governance (“the Code”) except as disclosed otherwise. It is to be read in tandem with the Corporate Governance Report (“CG Report”) which is available on the Company’s website at www.kwantas.com.my.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

i. Board Responsibilities

1.1. The Board is primarily responsible for fiduciary oversight, establishing goals and strategies, setting policies, reviewing performances and enhancing the long-term shareholders’ value of the Company and its stakeholders. The Board is tasked to review the strategic plans and budgets of the Group tabled by the Management during the meeting.

Recognising the need to provide guidance to the Board to effectively discharge its duties and responsibilities, the Board has formalised and adopted an approved Board Charter that sets out the roles and responsibilities which is available on the Company’s website at www.kwantas.com.my. The Board Charter is subject to review by the Board as and when needed to reflect the latest changes in rules and regulations and to remain relevant and effective.

1.2. The functions of Non-Independent Executive Director and Independent Non-Executive Director within the Board are clearly defined. The Non-Independent Executive Directors are responsible for managing and implementing the Group’s daily executive functions under the leadership of the Group Chief Executive Officer whilst the presence of Independent Non-Executive Directors is essential to exercise unbiased and independent views to ensure fair and objective deliberation on Management proposals and decisions.

1.3. The positions of Chairman and Group Chief Executive Officer are held by two (2) different individuals with clear segregation of roles and responsibilities. The Board believes that such division of powers and responsibilities will avoid any unfettered power of decision making in any one (1) individual.

1.4. The Board is supported by in-house suitably qualified and competent Company Secretaries. The Company Secretaries facilitate overall compliance with Companies Act 2016, the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and other laws and regulations as well as regulatory requirements in relation to the Board’s duties and responsibilities.

http://www.kwantas.com.my/



PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS (Cont’d)

i. Board Responsibilities (Cont’d)

1.5. The Board meets at least once every quarter, with additional meetings convened as and when the need arises. Prior to the Board meeting, all Directors are provided with an agenda and relevant meeting papers or reports to facilitate productive discussion and to enable them to seek additional information, should such a need arise.

Minutes of proceedings and resolutions passed are properly recorded and kept in the minutes book at the registered office of the Company. During the financial year ended 30 June 2019, the Board met six (6) times where pertinent issues in relation to the Group’s financial performances, future business planning, operational, corporate, annual budget, risk management, business development and activities were considered and deliberated. The attendance records of each Director at the Board meeting held during the financial year ended 30 June 2019 were as follows:-

Name of Directors No. of Board Meeting Attended Percentage of Attendance

Datuk Ismail Bin Abdullah 6/6 100%

Mr Kwan Ngen Wah 6/6 100%

Dato’ Chong Kan Hiung 6/6 100%

Ms Kwan Jin Nget 3/6 50%

Ms Kwan Min Nyet 5/6 83%

Mr Ooi Jit Huat 6/6 100%

Mr Petrus Gimbad 6/6 100%

All the Directors have complied with the minimum fifty percent (50%) attendance requirement in respect of Board meeting as stipulated in the MMLR.

In the intervals between Board meetings, where appropriate, approval on matters that requiring the immediate sanction of the Board could be sought by way of Directors’ Resolution In Writing, supported by full detail information. Such resolutions approved by the Board will be tabled for notation at the next Board meeting.

1.6. The Code of Conduct and Business Ethics is essential to set out the behavioural ethics and conducts expected of all Directors and employees of the Company in living up the Group’s ethical culture and standards of good practice within the Group’s business landscape. The Company also has in place Whistleblowing Policies and Procedures which serve as an avenue for raising concerns about possible improprieties, unethical or illegal activities within the Group. Both the Code of Conduct and Business Ethics and Whistleblowing Policies and Procedures are available via the Company’s website at www.kwantas.com.my.

(Cont’d)




ii. Board Composition

2.1. Currently, there are seven (7) members in the Board, comprising four (4) Non-Independent Executive Directors and three (3) Independent Non-Executive Directors. The composition of the Board fulfills the requirements as set out under MMLR of Bursa Securities whereby at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, must be Independent Directors. In the event if any vacancy in the Board resulting in non-compliance of the number of Independent Directors, such vacancy must be filled within three (3) months. The Independent Non-Executive Directors are made up to 42.9% of the Board’s current composition and the Board is aware that it has not complied with the fifty-fifty balance of Independent to Non-Independent Directors as required under Practice 4.1 of the Code.

The Board however is of the opinion that, though the existing Independent Non-Executive Directors do not form half of the Board composition, they are capable of providing a check and balance to ensure the interests of all shareholders and stakeholders are taken care by the Board. The Board endeavours to comply with the fifty-fifty balance as required under Practice 4.1 of the Code in times to come.

2.2. The Independent Non-Executive Directors plays a pivotal role in corporate accountability since they provide unbiased and independent views and advices in ensuring strategies proposed by the Non- Independent Executive Directors and Management are fully deliberated and examined objectively in the best interests of the shareholders and other stakeholders.

The Board takes cognisance of Practice 4.2 in the Code that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years unless the Board justifies his retention and shareholders’ approval are sought during the Annual General Meeting. Should the Board decide to retain the Independent Director after the twelfth year of a person’s appointment, the Board should seek shareholders’ approval through a two-tier voting process.

During the year under review, one (1) Independent Director namely, Mr Ooi Jit Huat has been serving the Board for more than twelve (12) years. In ascertaining the independence status of a Director, the Board holds the opinion that independence should not be compromised and impaired by the length of service and that the ability of an Independent Director to serve the Board effectively lies in his qualification, experience, calibre and personal qualities. The Board appreciates and values the contribution made by Mr Ooi Jit Huat and had benefited from his experience, valuable insights and knowledge throughout his tenure of service with the Company.

Based on the assessment conducted by Nomination Committee, Mr Ooi Jit Huat continues to fulfill the criteria and definition of an Independent Director as set out under Paragraph 1.01 of the MMLR. The Nomination Committee is hereby making recommendation to the Board to retain Mr Ooi Jit Huat as an Independent Director of the Company.

The Board will be seeking shareholders’ approval through a two-tier voting process in the forthcoming Annual General Meeting for Mr Ooi Jit Huat to continue as Independent Director of the Company.

CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d)




ii. Board Composition (Cont’d)

2.3 In order to assist the Board in the discharge of its stewardship role, the Board has delegated some of its authority and power to Audit and Risk Management Committee, Nomination Committee and Remuneration Committee (“Board Committees”). The Board Committees are entrusted by the Board to deal with and to deliberate on matters delegated to them within their respective Terms of Reference.

The Nomination Committee (“NC”) is entrusted by the Board to identify, recommend and appoint the right candidates to the Board, taking into consideration the required mix of skills, experience, expertise, knowledge and core competencies which Directors of the Company should bring to the Board. In accordance with the Company’s Constitution (Articles of Association), all Directors including the Group Managing Director shall retire and be eligible for re-election by rotation at least once in every three (3) years and one-third (1/3) of the Board shall retire by rotation and be eligible for re-election at each Annual General Meeting. Newly appointed Director shall hold office until the next Annual General Meeting and shall be eligible for re-election.

The NC comprises exclusively of Independent Non-Executive Directors. Members of the NC are:-

a) Datuk Ismail Bin Abdullah Chairmanb) Mr Petrus Gimbad Memberc) Mr Ooi Jit Huat Member

2.4. The Board does not establish a formal policy on its boardroom or gender diversity insofar. The criteria to be used by the NC in the selection and appointment process are very much dependent on the required blend of a candidate’s competency, knowledge, skills, expertise and potential contribution in supporting the attainment of the Group’s strategic objectives.

The Company is not classified as a Large Company as defined by the Code which requires at least 30% women Directors. Nonetheless, the Board currently has 28.6% of the Board’s composition represented by women Directors.

2.5. The Board, through its NC, had undertaken an annual assessment based on a set of predetermined criteria to assess the effectiveness of the Board as a whole, the Audit and Risk Management Committee and the performance of each individual Directors. The assessment of the Board covering areas such as Board composition and quality, Board development, Board strategy and risk management, Board and Management relations, succession planning as well as Board meetings and procedures. The process was conducted internally and facilitated by the Company Secretary. Each individual Directors also undertook self-assessment of their individual contributions and performances during the year. The summary of all assessments and evaluations conducted by the NC was properly documented and discussed at the NC meeting.

During the year under review, the NC met two (2) times to deliberate issue on restructuring the Board’s composition to meet the requirement under the Code and to report on the findings from the annual assessment exercise conducted by the NC. The NC was satisfied with the performances of the Board, the Audit and Risk Management Committee and each individual Directors.

(Cont’d)



ii. Board Composition (Cont’d)

2.6. The Board is mindful that Directors’ training are an on-going process and it is vital for all Directors to continuously attend talks, seminars, workshops and conferences to broaden their skills and knowledge, at the same time keeping abreast with the latest changes in laws, regulations, accounting standards and corporate governance developments.

For the financial year ended 30 June 2019, details of the training programmes attended by the Directors were as follows:-

Name of Director Training Programme Attended

Datuk Ismail Bin Abdullah • The Rising Voice of Compliance: Towards Greater Governance and Transparency

Mr Kwan Ngen Wah • SSM CDTP Fundamental and Cyber Security Awareness

Dato’ Chong Kan Hiung • Deep Dive into CG Cases in Malaysia: “What Went Wrong” and “What Could Be Done Better”

Ms Kwan Min Nyet • SSM CDTP Fundamental and Cyber Security Awareness

Ms Kwan Jin Nget • International Palm Oil Sustainability Conference 2018

Mr Ooi Jit Huat • Internal Audit for Board and Audit Committee• 2019 Budget Seminar

Mr Petrus Gimbad • Credit Risk Management – Banking Sector• Gearing Up For Corporate Liability• 2018 ACIIA Conference (Staying Relevant in A Digital Landscape)• Leadership Energy Summit Asia 2018• MIA’s Engagement Session with Audit Committee Members on

Integrating Reporting

The Company Secretary will constantly update the Directors with relevant training programmes available for their considerations. Records of training programmes attended by the Directors are kept by the Company Secretary.

iii. Remuneration

3.1. The Remuneration Committee (“RC”) was established on 15 November 2001 and the members were appointed by the Board from among the Directors of the Company, comprising solely of Independent Non-Executive Directors. The members of RC are as follows:-

a) Datuk Ismail Bin Abdullah Chairmanb) Mr Ooi Jit Huat Memberc) Mr Petrus Gimbad Member




iii. Remuneration (Cont’d)

3.2. The RC of the Company is established primarily for recommending the policies and procedures on matters relating to the remuneration of Directors and Senior Management to align with the business strategy and long-term objectives of the Company.

In order to advocate a fair and transparent remuneration system, the RC has formalised and adopted the Salary System and Administration Policy to provide a clear and guiding principle for determining the remuneration needed to attract and retain Directors and Senior Management to run the Group successfully.

The RC met once during the year under review with full attendance of the members to relook into the payment structure of Directors’ fees whether it was compatible with the market rates and reflected the level of responsibilities and contributions undertaken by the respective Independent Non-Executive Directors.

3.3. A summarised remuneration of the Directors received from the Company and subsidiary companies for the year ended 30 June 2019, distinguishing between Executive and Non-Executive Directors on named basis was set out as below:-

COMPANY SUBSIDIARIES

FeesRM

Salaries & Other

Emolument RM

Bonus RM

Benefits in-kind

RM

Salaries & Other

Emolument RM

Bonus RM

Benefits in-kind

RM

Group Total

RM

Executive Directors

Mr Kwan Ngen Chung (Demised on 23 July 2018) - 65,636 - - - - - 65,636

Mr Kwan Ngen Wah - 343,832 - - - - - 343,832

Dato’ Chong Kan Hiung - 393,539 55,414 - - - - 448,953

Ms Kwan Jin Nget - 512,219 - - - - - 512,219

Ms Kwan Min Nyet - 270,743 - - - - - 270,743

Total - 1,585,969 55,414 - - - - 1,641,383

Non-Executive Directors

Datuk Ismail Bin Abdullah 55,000 - - - - - - 55,000

Mr Ooi Jit Huat 33,000 - - - - - - 33,000

Mr Petrus Gimbad 33,000 - - - - - - 33,000

Total 121,000 - - - - - - 121,000




iii. Remuneration (Cont’d)

3.4. The Board disclosed the remuneration of the top five (5) Senior Management of the Company on aggregate basis and in each successive band of RM50,000 without being named during the financial year ended 30 June 2019 due to confidentiality and security reasons. The details were set out as below:-

Range of Remuneration Number of Top 5 Senior Management

RM150,001 to RM200,000 1

RM200,001 to RM250,000 3

RM250,001 to RM300,000 -

RM300,001 to RM350,000 1

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

i. Audit and Risk Management Committee

4.1. The Board combined the Audit Committee and Risk Management Committee of the Company together and renamed it as Audit and Risk Management Committee (“ARMC”) in order to better reflect the ARMC’s role in supporting the Board to discharge its responsibilities. The ARMC assists the Board in overseeing the financial reporting of the Group and ensuring the financial statements are drawn up in accordance with the applicable accounting standards in Malaysia and provisions of the Companies Act 2016. A detail report of the ARMC can be found on pages 60 to 63 of this Annual Report.

The ARMC currently comprises three (3) members, all of whom are Independent Non-Executive Directors and none of the members is a former key audit partner. The ARMC is chaired by Mr Ooi Jit Huat who is not the Chairman of the Board. The NC will review the composition and performance of the ARMC annually. It is imperative for the ARMC members to be financially literate in order to perform the duties entrusted by the Board. Trainings in accounting and auditing standards, practices and rules will continue be provided to all ARMC members in enhancing their professional development.

4.2. The ARMC had conducted an assessment via a set of predetermined questionnaires on the suitability and independence of the external auditors Messrs PKF. The external auditors were assessed in terms of the quality of their services, sufficiency of audit firm resources, communication and interaction as well as independence, objectivity and professionalism.

The external auditors Messrs PKF had confirmed in writing to the Group that they were, and had been independent throughout the conduct of their audit engagement in accordance with the terms of the relevant professional and regulatory requirements.

Based on the assessment carried out and the assurance provided by Messrs PKF, the ARMC is of the opinion that external auditors Messrs PKF are suitable and competent for re-appointment, subject to shareholders’ approval at the forthcoming Annual General Meeting.



PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT (Cont’d)

ii. Risk Management and Internal Control Framework

5.1 The Board affirms its overall responsibilities to maintain a sound system of risk management and internal control as an integral part of the Group’s business operations. The ARMC is tasked to assist the Board in reviewing the adequacy and operating effectiveness of the risk management framework rolled out in the Group. The details of the risk management reporting are outlined in the Statement on Risk Management and Internal Control on pages 56 to 58 of this Annual Report.

5.2 The internal audit function is facilitated by in-house internal audit team who performs the risk-based audit functions within the Group independently. Audit engagement is prioritised on high risk areas and in accordance with the annual audit plans approved by the ARMC. The internal audit team reports their audit findings directly to the ARMC during its quarterly meetings. Details of the internal audit functions and activities carried out are set out in the Audit and Risk Management Committee Report of this Annual Report.

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

i. Communication with Stakeholders

6.1. The Board acknowledges the importance of clear and timely dissemination of material information to the shareholders and stakeholders. Shareholders are informed of the financial performances and major corporate developments of the Group to make informed investment decisions. However, the Board will undertake extra care to ensure material and market sensitive information are not unduly disclosed before they are officially announced to Bursa Securities for public release.

The Board observes timely release of quarterly financial results, corporate proposal, annual report and circular to shareholders to Bursa Securities via Bursalink so that the shareholders and investors are provided with latest Group’s performance and prospect. The Company’s website at www.kwantas.com.my provides an alternative channel of communication to obtain information on the Group’s operations and business activities.

ii. Conduct of General Meetings

7.1. The Annual General Meeting of the Company serves as an important means of communication for the Board and Senior Management to actively engage with their shareholders. The Board will ensure its members attend the Annual General Meeting and to address any relevant questions and concerns raised by the shareholders. External auditors will also be invited to attend the Annual General Meeting to respond to any enquiries from shareholders relevant to their scope of work. Shareholders are provided at least twenty eight (28) days notice prior to the convening of the Company’s Annual General Meeting and the venue of the meeting will be held in the registered office address which is an easily accessible location.





PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS (Cont’d)

ii. Conduct of General Meetings (Cont’d)

7.2. In line with Paragraph 8.29A(1) of the MMLR, all resolutions set out in the notice of Annual General Meeting will be carried out by poll voting and the votes cast at the Annual General Meeting will be validated by an independent scrutineer. All shareholders or proxies will be briefed on the voting procedures prior to the poll voting. The Chairman, upon the verification of the poll results by an independent scrutineer, announces the results for each resolution voted in favour and against and declares whether the resolution is carried. The outcome of resolutions tabled and passed at the Annual General Meeting will be released to Bursa Securities on the same meeting day.

Given the existing number of shareholders which is considered within a ‘small scale’, the Company will continue to adopt manual polling for its forthcoming Annual General Meeting. The Company may consider the feasibility need of employing electronic means poll voting when the need arises.

COMPLIANCE STATEMENT

The Board has reviewed this Statement and is satisfied to the best of its knowledge that the Company has substantially applied and complied with the principles and best practices outlined in the Code saved for the non-application of the departed practices which is fully described in the CG Report.

This Corporate Governance Overview Statement was approved by the Board of Directors of the Company on 14 October 2019.



The Directors are required by the Companies Act 2016 (“the Act”) to ensure that the financial statements prepared for each financial year give a true and fair view of the financial position of the Group and of the Company as at the end of the financial year and of the financial performance and cash flows of the Group and of the Company for the year then ended. As required by the Act and the Listing Requirements of Bursa Malaysia Securities Berhad, the financial statements have been prepared in accordance with Malaysian Financial Reporting Standards in Malaysia and the provisions of the Act.

The Directors consider that in preparing the financial statements for the financial year ended 30 June 2019, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates and ensured that all applicable approved accounting standards have been followed.

The Directors have ensured that the accounting records kept by the Group and the Company have been properly kept in accordance with the provisions of the Act, which disclose with reasonable accuracy the financial position of the Group and of the Company.

STATEMENT OF DIRECTORS’ RESPONSIBIL IT IES


STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Introduction

Pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Board of Directors (“the Board”) of Kwantas Corporation Berhad (“the Company” or “the Group”) is pleased to present this Statement on Risk Management and Internal Control which is its commitment to maintain a sound risk management framework and internal control system within the Group for the financial year ended 30 June 2019.

The Group’s risk management framework and internal control procedures are prepared to provide systematic guidelines to mitigate but not to eliminate the risk in fulfilling the objectives and strategic priorities. The framework and control procedures prepared are consistent with the guidance provided to Directors as set out in the “Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers” (“Guidelines”).

The Board’s Responsibilities

The Board uphold its responsibilities and commitment in establishing the Group’s system of risk management and internal control which are fundamental to safeguard the shareholders’ interest and assets of the Group to enable the effective formulation of Group’s business strategies to smoothen the decision making processes.

The implementation of these controls is imperative and reviewed by the Audit and Risk Management Committee from time to time, which comprise the Board members.

The Board reviewed and recognized that the system is designed to manage the key risks within tolerable ranges, commensurate with the overall Group’s business nature. The system will only provide reasonable assurance but not absolute assurance against material misstatement, financial losses, operation failures or fraud.

Management’s Roles

The Management comprises of the relevant Head of Departments (“HOD”), Group Chief Executive Officer, Chief Financial Controller and all the Directors involved in the Management so that proper monitoring of the business can be achieved. Any changes to the business risk environment can then be prompted for the Board’s attention and appropriate actions can be taken, if any.

The Board is provided with the Management updates of key business activities such as operations and the financial updates in the quarterly Board meetings.

The Internal Audit Function

Internal audit is conducted by an in-house internal audit team. The Board relies on the internal audit function for assurance that the governance, risk management and internal control systems are adequate and effective in mitigating organizational risks in the course of pursuing the Group’s corporate objectives.

The Group Internal Audit Department (“GIA”) reaffirms the responsibility by ensuring regular and systematic review of risk management and internal control of key business processes in selected areas agreed to in the annual audit plan by the Audit and Risk Management Committee so as to provide the Board reasonable assurance that the internal control system and risk management are adequate and effective in addressing the risks identified.


STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

The Internal Audit Function (Cont’d)

During the year, the GIA covered selected areas which listed in page 63 of the Audit and Risk Management Report in the Annual Report. Except for areas of improvement in internal controls that deemed not significant as to have material impact on the business or operations of the Group, there were no major findings.

Review Effectiveness of Risk Management and Internal Control

I) Risk Assessment

A risk management workshop was held on 06, 07, 28 and 29 August 2019 with Board members, top Management and Group HODs to review and agree on the Group’s risk appetite, identify the major risks and discuss the adequacy of internal controls including agree on further mitigation measures where necessary. The risk appetite in terms of impact and likelihood and its acceptable risk tolerance was re-visited and re-established along financial, operation, regulatory, China operation and Sarawak operation. Based on the agreed risk appetite, the key risks of the Group are identified as follows:

1) Dependence on foreign workers;2) Palm oil prices in the international market; and,3) Dependence on key personnel and safety, health and environmental issues.

Management measures are in placed to mitigate these risks identified, to monitor and to manage them in ensuring that they are in line and within the acceptable risk appetite of the Group. The Group’s plantation infrastructure and labour line facilities are being upgraded to retain labours and training is provided to upgrade the skill set of workers and Management are some of the measures taken.

Palm prices in the international market are closely monitored and hedging measures are used to ensure palm products are sold at optimum price. The Group is committed to have all its estates to be MSPO certified by end of this year.

The Board is of the view that there is continuous process of identifying, evaluating, monitoring and managing significant risk identified throughout the financial year under review.

II) Control Environment and Activities

The Group has a system of internal control which includes segregation of duties in every department, lines and limits of authority and responsibility through the organization structure including the employees’ day-to-day operation to ensure the key controls are clearly established across the companies.

The control activities are incorporated with the Group’s policies and procedures to ensure the Management directives are carried out properly to meet its corporate objectives.

Decision making processes are executed within the current control environment and activities by the Senior Management are monitored and its performance is reviewed periodically.

(Cont’d)


Review Effectiveness of Risk Management and Internal Control (Cont’d)

III) Information and Communication

The respective HODs mainly Group Marketing Department (“GMD”) and Estate Operation (“EO”) will prepare respective monthly reports and the information is reverted to the Group. For EO, the estate management will prepare monthly progress report and send for the top Management’s perusal to monitor the overall business performance.

The important departments like GMD and EO will attend the quarterly meetings to update the Board on the current business performance and other relevant business updates. The overall risks will be closely monitored and be reported to the Management including new emerging risks associated to the business, if any.

The Group has established its Whistleblowing Policies and Procedures as a channel of communication for individuals to report suspected breach of law and regulations. Whistleblowers are guided to report directly to the Audit and Risk Management Committee for further investigation process. There were no reports received by the Audit and Risk Management Committee during the year.

IV) Monitoring

GIA conducts regular review of the Company and its subsidiaries’ operation via periodic audit to ensure all the Group’s policies and procedures have been adhered to. The risk owners, mainly HODs are responsible to provide assurance to the Board that the running of the departments been adhered and aligned with the risk management and internal control framework.

The current business plans and strategies are regularly assessed if there is change in the business and external environment which may necessitate the Group to respond. There were no unusual and unexpected changes in the Group’s business noted during the financial year.

Through the Audit and Risk Management Committee, the Board is informed of the GIA’s reports including progress of the mitigating measures to address the risks identified.

Review of Statement by External Auditors

The external auditors had reviewed this Statement for inclusion in the Annual Report of the Company for the financial year ended 30 June 2019 pursuant to Paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

Nothing has come to their attention that this Statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the system of risk management and internal control.

Conclusion

The Group Chief Executive Officer and Chief Financial Officer have provided assurance that the Group’s risk management and internal control systems have been operated adequately and effectively, in all material aspects, in line with the Group’s objectives during the financial year under review.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont’d)


ADDITIONAL COMPLIANCE INFORMATION

The following information is presented pursuant to Main Market Listing Requirements of Bursa Malaysia Securities Berhad:

1. Utilisation of proceeds

There were no proceeds raised by the Company from any corporate proposal during the financial year ended 30 June 2019.

2. Audit/Non-audit Fees

The external auditors and their affiliated firms/corporations are engaged to perform non-audit services that are not perceived to be in conflict with their roles as the external auditors.

Audit and non-audit fees paid by the Group and the Company for the financial year ended 30 June 2019 were as follows:

Fees Paid Group(RM)

Company(RM)

Audit 342,000 114,000

Non-audit 6,000 6,000

3. Material Contracts

There were no material contracts entered into by the Company and its subsidiaries which involve Directors’ and major shareholders’ interests that are still subsisting at the end of the financial year or which were entered into since the end of the previous financial year.

4. Recurrent Related Party Transactions

The details of related party transactions are set out in Note 30 to the financial statements. An Annual General Meeting will be held on 29 November 2019 to pass ordinary resolution to seek shareholders’ mandate for the renewal of and new recurrent related party transactions of a revenue or trading nature.

5. Analysis of Shareholdings

The analysis of shareholdings can be found on pages 216 to 218.

6. List of Properties

The list of properties for the Group can be found on pages 207 to 215.


During the financial year under review, the Audit and Risk Management Committee had performed its duties and responsibilities in accordance with its Terms of Reference. The Board of Directors (“the Board”) of Kwantas Corporation Berhad (“the Company” or “the Group”) is pleased to present the Audit and Risk Management Committee Report for the financial year ended 30 June 2019 pursuant to Paragraph 15.15 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements (“MMLR”).

Composition

The Audit and Risk Management Committee (“ARMC”) presently comprises of three (3) members, namely:-

ARMC Member Designation

Mr Ooi Jit Huat (Chairman) Independent Non-Executive Director

Datuk Ismail Bin Abdullah (Member) Independent Non-Executive Director

Mr Petrus Gimbad (Member) Independent Non-Executive Director

All the ARMC members of the Company are Independent Non-Executive Directors. The Chairman of ARMC, Mr Ooi Jit Huat and member Mr Petrus Gimbad are members of the Malaysian Institute of Accountants. Hence, the Company complies with Paragraph 15.09(1)(c) of the MMLR. None of the members are alternate Director.

Attendance of Meetings

The ARMC meets at least four (4) times a year, with additional meetings held as and when necessary. There were altogether six (6) ARMC meetings held during the financial year ended 30 June 2019 and the attendance of the ARMC members was outlined as per following:-

ARMC Member Total No. of Meetings No. of Meetings Attended Percentage

Mr Ooi Jit Huat 6 6 100%

Datuk Ismail Bin Abdullah 6 6 100%

Mr Petrus Gimbad 6 6 100%

The ARMC meetings were convened with proper notices and agendas distributed to all ARMC members. The Group Chief Executive Officer, the Group Accountant, Head of Internal Audit and the Head of Risk Management shall normally attend ARMC meetings for presentation of financial reporting and audit findings. Other Board members and Senior Management may attend the ARMC meetings upon the invitation of the ARMC. Time is also allocated to the external auditors for private discussions with the ARMC in the absence of Management, if deemed necessary.

Minutes of the ARMC meetings were recorded and tabled for confirmation at the subsequent meeting.

AUDIT AND RISK MANAGEMENT COMMITTEE REPORT



Summary of Work

The ARMC is governed by its Terms of Reference which is accessible via the Company’s website at www.kwantas.com.my. The overall responsibilities undertaken by the ARMC during the year were as follows:-

1.0 Financial Reporting

(a) The ARMC reviewed the unaudited quarterly financial results to ensure that the quarterly financial reporting and disclosures presented a true and fair view of the Group’s financial performance in accordance with the Malaysian Financial Reporting Standards, the applicable disclosure provisions of the MMLR and Companies Act 2016. Clarifications or explanations were sought from the Management in particular on any significant changes to the items or transactions that would affect the financial positions of the Group before the ARMC recommends to the Board for their approval and subsequent release to Bursa Malaysia Securities Berhad.

(b) Prior to the issuance of the finalised audited financial statements of the Company, the ARMC had reviewed the audit status update presented by the external auditors comprising amongst others, areas of audit emphasis, audit materiality, significant adjustments resulting from the audit, going concern assumption and impairment arising from the audit during the year under review.

2.0 External Audit

(a) The external auditors had presented their audit planning memorandum to the ARMC members for review before the commencement of the Group’s audit during the year. The audit planning memorandum outlined the audit scope, key areas of audit, audit approach and timeline, audit materiality and audit fee structure of the external auditors.

(b) The ARMC together with the external auditors had discussed and considered the significant accounting and auditing issues arising from the Group’s interim and final audit before the final audited financial statements are issued. Having considered that all outstanding matters reported earlier in respect of the audit of the Group for that financial year were cleared, the external auditors had issued the audited financial statements together with the reports of the Auditors and Directors tabled for the ARMC’s review before recommending them to the Board for approval.

(c) The external auditors had provided annual written assurance of their ethical requirements regarding independence with regards to the audit of the Group in accordance with the terms of all professional and regulatory requirements. The ARMC having been satisfied with the independence, effectiveness and performance of the external auditors Messrs PKF, had recommended to the Board for approval, the re-appointment of Messrs PKF as external auditors of the Company. A resolution for their re-appointment will be tabled for shareholders’ approval at the forthcoming Annual General Meeting.

3.0 Internal Audit

(a) The ARMC reviewed and approved the annual audit plan proposed by the internal auditors at the beginning of each financial year to encompass the key risk areas of the business operations of the Group.

(b) The ARMC discussed and reviewed the internal audit reports presented by the internal auditors on their major findings and recommendations in respect of the Group’s system and control weaknesses noted in the course of their audit and Management’s responses thereto.

(Cont’d)



Summary of Work (Cont’d)

3.0 Internal Audit (Cont’d)

(c) The internal auditors monitored closely the implementation of the Management’s action plan on outstanding issues through follow-up reports to ensure all risks and internal control issues were adequately dealt with by the Management.

(d) The ARMC assessed the adequacy of resources, competencies and performance of the internal audit team through review of the internal audit reports.

4.0 Related Party Transactions

(a) Up to the date of this ARMC report, there were no related party transactions brought to the attention of the ARMC except for the renewal mandate on recurrent related party transactions of a revenue or trading nature and a new mandate on recurrent related party transaction which will be tabled at the forthcoming Annual General Meeting for shareholders’ approval as outlined in the Circular to Shareholders dated 31 October 2019.

(b) The ARMC reviewed the recurrent related party transactions and the established guidelines and procedures to ascertain that they have been complied with. The ARMC was of the view that the said procedures are sufficient to ensure that the recurrent related party transactions will be conducted at arm’s length and are on commercial terms not more favourable to the related parties and are not to the detriment of minority shareholders of the Company.

(c) The Management established a comprehensive framework to identify, evaluate, report and monitor any related party transactions and conflict of interest situations that might arise within the Group. All members of the Board had declared their interests, both direct and indirect by signing a Disclosure Form to ensure all related party transactions are property accounted for.

5.0 Risk Management and Internal Control

The ARMC had recommended the adoption of the COSO Enterprise Risk Management framework for the Group’s system of risk management and internal control.

However, due to the resignation of the Risk Facilitator during the year, the roll out of risk workshops on Group-wide basis could not be completed. Pending the appointment of a new Risk Facilitator, Group Internal Audit was tasked to assist and had conducted one risk workshop with Estate Managers of the Sarawak operations to review and update their risk register.

As mentioned in pages 56 to 58 of the Statement on Risk Management and Internal Control, a risk workshop was held on 06, 07, 28 and 29 August 2019 with Board members, top Management and Group HODs to review and agree on the risk appetite, identify the major risks and discuss the adequacy of internal controls including agree on further mitigation measures where necessary.

(Cont’d)


Internal Audit Functions and Activities

The Group internal audit is performed in-house by Group Internal Audit Department (“GIA”) which reports to the ARMC. The GIA is headed by Mr Harold Teo, who holds an Accounting Degree from Oxford Brookes University, England and is a Fellow of the Association of Chartered and Certified Accountant. The Head of GIA is assisted by an Assistant Manager, one (1) Senior Executive, both are MIA members and supported by one (1) Assistant who report directly to the ARMC.

The GIA adopts a risk based audit approach to focus on high risk areas to ensure the effectiveness of internal control, adequacy of corrective management actions in responding to risks that affects the Group. The GIA performs its internal audit functions in conformity with the annual audit plan approved by the ARMC during the year.

All internal control deficiencies will be reported to the appropriate level of Management. The Management is made responsible to implement corrective actions to rectify the reported deficiency areas within certain timeframe. Follow-up reviews will be performed by GIA to ensure the implementation of the agreed Management action plans.

The total cost incurred for the internal audit functions of the Group for the financial year ended 30 June 2019 were approximately RM380,700.

For the financial year ended 30 June 2019, the internal audit team had performed the following audit review:

• Review of the Group’s Sarawak operations, in terms of its current financial positions and Management internal control over payroll and inventories processes as well as understanding the latest update on Native Customary Right lands to ensure sustainability of the business and operation;

• Review of the Group’s Pintasan Estates 6,7 and 9 in terms of harvesting, evacuation management of fresh fruit bunches (“FFB”), loose fruit collection process, store and stock management, fertilizer application, diesel operation and payroll management;

• Review of the Group’s Pintasan Palm Oil Mill in terms of its annual budget costing, actual expenditures incurred, quality and quantity of its production of crude palm oil (“CPO”) and palm kernel (“PK”);

• Review of the Group’s refinery in terms of its annual budget costing, actual expenditures incurred, quality and quantity of overall Group’s mills production of CPO and PK, quality and quantity of refined bleached deodorized palm oil (“RBDPO”), refined bleached deodorized palm olein (“RBDOL”), refined bleached deodorized stearin (“RBDST”), crude palm kernel oil (“CPKO”) and palm kernel expeller (“PKE”);

• Review of the Group’s human resource management in terms of its internal control as established by the Management, ensuring the adequacy, integrity and effectiveness of Management’s control system are in place in terms of its payroll management, head count analysis and man power allocation;

• Review of the Group’s China operations in its wholly-owned subsidiary namely Dongma Oils & Fats (Guangzhou Free Trade Zone) Co Ltd in terms of its current operation activities, human resource matters and marketing;

• Review of the Group’s Pintasan Estate 3 and Sarawak operations (particularly on Lemai and Bawang Estate) in terms of its annual budget costing, actual expenditures incurred and estates’ overall production to ensure sustainability of the business and operation; and

• Review of the Group’s related party transactions to ensure that the methods and procedures are adequate to identify, keep track and monitor such related party transactions to comply with MMLR.

AUDIT AND RISK MANAGEMENT COMMITTEE REPORT (Cont’d)

TABLE OF CONTENTS

65Directors’ Report

70Statement by Directors

70Statutory Declaration

71Independent

Auditors’ Report

77Statements of

Profit or Loss and Other Comprehensive Income

79Statements of

Financial Position

81Statements of

Changes in Equity

84Statements of

Cash Flows

87Notes to the

Financial Statements

FINANCIAL STATEMENTS

64KWANTAS CORPORATION BERHAD


The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 30 June 2019.

Principal activities

The principal activities of the Company are investment holding and provision of management services to its subsidiaries.

The principal activities of the subsidiaries are set out in Note 17 to the financial statements.

There have been no significant changes in the nature of these principal activities during the financial year ended 30 June 2019.

Results

GroupRM’000

CompanyRM’000

Loss for the financial year attributable to:

Owners of the Company (92,458) (4,002)

Non-controlling interests (7,190) -

(99,648) (4,002)

Total comprehensive loss for the financial year attributable to:


Non-controlling interests (7,190) -

(68,585) (4,002)

Reserves and provisions

There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financial statements.

Dividends

No dividend has been paid, declared or proposed since the end of the previous financial year. The Directors do not recommend any dividends for the current financial year ended 30 June 2019.

DIRECTORS’ REPORT


DIRECTORS’ REPORT

Directors

The Directors who have held office during the financial year and up to the date of this report are:

Datuk Ismail Bin AbdullahKwan Ngen WahKwan Jin NgetKwan Min NyetDato’ Chong Kan HiungOoi Jit HuatPetrus Gimbad

Pursuant to Section 253 of the Companies Act, 2016 in Malaysia, the list of the Directors of the subsidiaries during the financial year and up to the date of this report is as follows:

Dato’ Chong Kan HiungDatu Sajeli Bin KipliKwan Bee GiokKwan Chiew GiokKwan Jin NgetKwan Min NyetKwan Ngen WahKwan Yean YeowRazali Bin ZainudinKwan Xin Ying (Appointed on 10 May 2019)

Directors’ interests in shares

The holdings and deemed holdings in the ordinary shares of the Company and its related corporations (other than wholly-owned subsidiaries) of those who were Directors at the end of the financial year, as recorded in the Register of Directors’ Shareholding kept under Section 59 of the Companies Act, 2016 in Malaysia are as follows:

Number of ordinary shares

Direct interest:At

1.7.2018 Bought SoldAt

30.6.2019

Kwan Ngen Wah 93,188,632 - - 93,188,632

Kwan Jin Nget 689,500 - - 689,500

Kwan Min Nyet 238,000 - - 238,000

Dato’ Chong Kan Hiung 2,600,000 - - 2,600,000

The Directors above, by virtue of their interests in shares in the Company are also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest, in accordance with Section 8 of the Companies Act, 2016.

None of the other Directors holding office at the end of the financial year had any interest in the ordinary shares of the Company and its related corporations.

(Cont’d)


DIRECTORS’ REPORT

Directors’ benefits

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as disclosed in the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, except as disclosed in Note 30 to the financial statements.

There were no arrangements during and at the end of the financial year, which had the object of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate.

Directors’ remuneration

The remuneration paid to or receivable by the Directors of the Group and Company during the financial year is amounted to RM2,360,000 and RM1,762,000 respectively.

Indemnity and insurance for directors and officers

There was no indemnity given to or liability insurance effected for any Director or officer of the Group or the Company during the financial year.

Subsidiaries

The details of the Company’s subsidiaries are disclosed in Note 17 to the financial statements.

Issues of shares and debentures

The Company did not issue any new shares or debentures during the financial year.

Options granted over unissued shares

No options were granted to any person to take up unissued shares of the Company during the financial year.

(Cont’d)


Other statutory information

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

(i) All known bad debts had been written off and adequate allowance had been made for doubtful debts; and

(ii) all current assets have been stated at the lower of cost and net realisable value.

At the date of this report, the Directors are not aware of any circumstances:

(i) which would render it necessary to write off any bad debts, or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(ii) which would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading; or

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or

(iv) not otherwise dealt with in this report or the financial statements, which would render any amount stated in the financial statements of the Group and of the Company misleading.

As at the date of this report, there does not exist:

(i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due other than disclosed in Note 31 to the financial statements.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 30 June 2019 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of the financial year and the date of this report.

DIRECTORS’ REPORT (Cont’d)


Auditors

The auditors, Messrs PKF, have indicated their willingness to continue in office.

During the financial year, the total amount of fees paid to or receivable by the auditors as remuneration for their services as auditors of the Group and the Company are amounted to RM348,000 and RM120,000 respectively.

Signed on behalf of the Directorsin accordance with a resolution of the Board,

______________________________ ______________________________DATO’ CHONG KAN HIUNG KWAN NGEN WAHDirector Director

Kota Kinabalu

Dated 25 October 2019

DIRECTORS’ REPORT (Cont’d)


STATEMENT BY DIRECTORSPURSUANT TO SECTION 251(2) OF THE COMPANIES ACT, 2016

In the opinion of the Directors, the accompanying financial statements set out on pages 77 to 206 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia so as to give a true and fair view of the financial positions of the Group and of the Company as at 30 June 2019 and of their financial performances and cash flows for the financial year ended on that date.

Signed on behalf of the Directorsin accordance with a resolution of the Board,

______________________________ ______________________________DATO’ CHONG KAN HIUNG KWAN NGEN WAHDirector Director

Kota Kinabalu


STATUTORY DECLARATION PURSUANT TO SECTION 251(1)(B) OF THE COMPANIES ACT, 2016

I, DATO’ CHONG KAN HIUNG, being the Director primarily responsible for the financial management of KWANTAS CORPORATION BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statements set out on pages 77 to 206 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 in Malaysia.

Subscribed and solemnly declared by )the abovenamed DATO’ CHONG KAN HIUNG )at Kota Kinabalu in the state of Sabah )on 25 October 2019 )

______________________________ DATO’ CHONG KAN HIUNG

Before me,

______________________________ COMMISSIONER FOR OATHS


REPORT ON THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of KWANTAS CORPORATION BERHAD, which comprise the statements of financial position as at 30 June 2019 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 77 to 206.

In our opinion, the accompanying financial statements give a true and fair view of the financial positions of the Group and of the Company as at 30 June 2019, and of their financial performances and their cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBER OF KWANTAS CORPORATION BERHAD


INDEPENDENT AUDITORS’ REPORTTO THE MEMBER OF KWANTAS CORPORATION BERHAD (Cont’d)

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our report.

Area of focus How our audit addressed the key audit matter

Impairment of property, plant and equipment for the Group’s subsidiaries in China

As highlighted in Note 17 to the financial statements, the Group has three (3) subsidiary companies incorporated in the People’s Republic of China. Two (2) companies are within the oil palm plantations and palm products segment and another one (1) company is within the oleochemical product segment. All the subsidiaries with non-current assets totalling RM179,489,000 as disclosed in Note 35 (ii) to the financial statements are loss making, which is an indicator that their non-current assets may be impaired.

We have assessed the recoverable amounts of property, plant and equipment of all the loss making subsidiary companies based on their fair value less costs to sell as follows:

• Obtained independence confirmation from the professional valuer;

• Obtained the valuations of property, plant and equipment prepared by the independent professional valuer and evaluated the valuation reports for appropriateness of the methodology used and reasonableness of the assumptions used; and

• Assessed the competency, capabilities and objectivity of the independent professional valuer.

Revaluation of land, buildings, bearer plants and investment properties

As highlighted in Note 4 (h) to the financial statements, land, buildings and bearer plants are measured at fair value less accumulated depreciation and accumulated impairment losses recognised after the date of revaluation. Investment properties are measured at fair value which reflects market condition as at the reporting date as highlighted in Note 4 (i).

The Group’s land, buildings, bearer plants and investment properties carried at revaluation account for 80% of the total assets of the Group.

We have performed the following procedures:

• Considered the objectivity, independence and expertise of the independent professional valuer engaged by the management;

• Obtained an understanding of the methodology adopted by the independent professional valuer in estimating the fair value of the abovementioned assets and assessed whether such methodology is consistent with those used in the prior year and in the industry;

• Discussion with the independent professional valuers to obtain understanding of market value used as input to the valuations models and of the adjustments made to the observable inputs;



Key Audit Matters (Cont’d)

Area of focus How our audit addressed the key audit matter

Revaluation of land, buildings, bearer plants and investment properties (Cont’d)

The valuation of these assets is subject to significant judgments and estimation uncertainty due to the absence of an active market, and is finally determined based on the valuation performed by independent professional valuers using a combination of discounted cash flow, replacement cost method and comparison method of valuation. The methods used are subjective and require the use of significant estimation relating to the discount rates used, estimates of future cash flows and adjustment factors to account for the specific characteristics of the assets as disclosed in Note 14 and 15 to the financial statements.

We have performed the following procedures: (Cont’d)

• Corroborating the key inputs to the model, including the commodity prices, yield and the area of land under cultivation of market data;

• Reviewed and assessed the source data, significant assumptions and estimates used by the independent professional valuer in determining their final numbers and found them to be reasonable, as well as tested the mathematical accuracy of all calculations included within the final valuation reports;

• Assessed the relevance and reasonableness of the professional valuers’ findings and their consistency with other audit evidence; and

• Evaluated the sales transactions values used by the professional valuer when determining the fair value of investment properties by comparing them against selling prices of similar assets from external market information.

Fair value of biological assets

As highlighted in Note 19, biological assets of the Group comprised produce growing on bearer plants, i.e. fresh fruit bunches (“FFB”) which are measured at fair value less costs to sell. The fair value less costs to sell of the biological assets is determined by the management based on the present value of the expected net cash flows from the biological assets, which are estimated using the expected output method and the estimated market price of the biological assets with the following inputs:

• Estimated selling price of less costs to sell

• Estimated quantity of unripe FFB and its oil content

• Risk attrition percentage based on the discount rate used by the professional independent valuer

We have performed the following procedures:

• Made enquiries with the appropriate personnel, reviewed and evaluated the reasonableness of the basis of yield per hectare determined;

• Verified expected output with subsequent productions to the production report;

• Performed stress tests and sensitivity analysis on the key assumptions used to evaluate the impact on the fair value of biological assets;

• Recomputed the fair value of biological assets based on market price of harvested FFB less harvesting, transportation and other costs to sell;

• Assessed the adequacy and reasonableness of the disclosures in the financial statements in accordance with Paragraph 55 of MFRS 141 Agriculture.


Information Other than the Financial Statements and Auditors’ Report Thereon

The Directors are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The Directors are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

(i) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

(ii) Obtain an understanding of internal control relevant to the audit 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 Group’s and the Company’s internal control.



Auditors’ Responsibilities for the Audit of the Financial Statements (Cont’d)

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (Cont’d)

(iii) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

(iv) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

(v) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

(vi) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In accordance with the requirement of Companies Act, 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors are disclosed in Note 17 to the financial statements.



Other Matters

(i) As stated in Note 2 to the financial statements, KWANTAS CORPORATION BERHAD adopted Malaysian Financial Reporting Standards on 1 July 2018 with a transition date of 1 July 2017. These standards were applied retrospectively by the Directors to the comparative information in these financial statements, including the Statements of Financial Position of the Group and of the Company as at 30 June 2018 and 1 July 2017, and the Statements of Profit or Loss and Other Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows of the Group and of the Company for the financial year ended 30 June 2018 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the financial year ended 30 June 2019, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 July 2018 do not contain misstatements that materially affect the financial position as at 30 June 2018 and the financial performance and cash flows for the year then ended.

(ii) This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act, 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PKF CHAU MAN KITAF 0911 02525/03/2020 JCHARTERED ACCOUNTANTS CHARTERED ACCOUNTANT

Kota Kinabalu




Group Company

Note

2019

RM’000

2018Restated

RM’000

2019

RM’000

2018

RM’000

Revenue 5 773,665 771,272 10,490 42,500

Cost of sales (752,337) (666,330) - -

Gross profit 21,328 104,942 10,490 42,500

Interest income 6 789 1,276 - 4,902

Other operating income 7 7,366 34,599 - 22,086

Selling expenses (24,682) (41,403) - -

Administrative expenses (45,043) (104,045) (14,466) (57,332)

Other operating expenses (31,667) (49,724) - -

Finance costs 8 (24,753) (24,536) - (18,583)

Loss before taxation from continuing operations 9 (96,662) (78,891) (3,976) (6,427)

Income tax expense 12 (2,986) (20,634) (26) -

Loss from continuing operations, net of tax (99,648) (99,525) (4,002) (6,427)

Discontinued operations

Profit from discontinued operations, net of tax 23 - 6,119 - -

Loss for the financial year (99,648) (93,406) (4,002) (6,427)

Other comprehensive (loss)/income

Item that to be reclassified in subsequent period to profit or loss:

Foreign currency translation differences for foreign operations (6,019) (6,601) - -

Item that will not be reclassified in subsequent period to profit or loss:

Net surplus on revaluation of leasehold land, buildings and bearer plants 37,082 17,360 - -

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019

Group Company

Note

2019

RM’000

2018Restated

RM’000

2019

RM’000

2018

RM’000

Other comprehensive income for the financial year, net of tax 31,063 10,759 - -

Total comprehensive loss for the financial year (68,585) (82,647) (4,002) (6,427)

(Loss)/income attributable to:

Owners of the Company

From continuing operations (92,458) (95,149) (4,002) (6,427)

From discontinued operations - 6,119 - -

(92,458) (89,030) (4,002) (6,427)

Non-controlling interests (7,190) (4,376) - -

(99,648) (93,406) (4,002) (6,427)

Total comprehensive (loss)/income attributable to:


From continuing operations (61,395) (84,390) (4,002) (6,427)

From discontinued operations - 6,119 - -

(61,395) (78,271) (4,002) (6,427)

Non-controlling interests (7,190) (4,376) - -

(68,585) (82,647) (4,002) (6,427)

(Loss)/Earnings per share attributable to owners of the Company (sen per share)

Basic

From continuing operations 13 (29.66) (30.52)

From discontinued operations 13 - 1.96

(29.66) (28.56)


(Cont’d)


Group Company

Note

30 June2019

RM’000

30 June2018

Restated

RM’000

1 July 2017

Restated

RM’000

30 June2019

RM’000

30 June2018

RM’000

1 July 2017

RM’000

ASSETS

Non-current assets

Property, plant and equipment 14 1,602,379 1,599,444 1,664,620 - - -

Investment properties 15 47,330 45,700 45,700 - - -

Land use rights 16 11,407 11,876 9,192 - - -

Investments in subsidiary companies 17 - - - 446,204 448,704 437,662

Non-trade receivables 20 - - 9,600 - - -

1,661,116 1,657,020 1,729,112 446,204 448,704 437,662

Current assets

Inventories 18 110,696 112,583 107,762 - - -

Biological assets 19 4,803 6,399 8,327 - - -

Trade and non-trade receivables 20 43,454 29,324 70,037 20,826 20,056 178,351

Tax recoverable 3,234 130 599 - - -

Derivative assets 21 - 1,636 - - - -

Cash and cash equivalents 22 39,727 25,171 71,943 240 2,523 28,861

201,914 175,243 258,668 21,066 22,579 207,212

Assets of disposal group classified as held for sale 23 - 44,938 194,837 - - 54,977

TOTAL ASSETS 1,863,030 1,877,201 2,182,617 467,270 471,283 699,851

STATEMENTS OF F INANCIAL POSIT IONAS AT 30 JUNE 2019



STATEMENTS OF F INANCIAL POSIT IONAS AT 30 JUNE 2019

Group Company

Note

30 June2019

RM’000

30 June2018

Restated

RM’000

1 July 2017

Restated

RM’000

30 June2019

RM’000

30 June2018

RM’000

1 July 2017

RM’000

EQUITY AND LIABILITIES

Equity attributable to owners of the Company

Share capital 24 209,566 209,566 209,566 209,566 209,566 209,566

Other reserves 25 639,899 597,496 566,412 - - -

Retained profits 26 285,598 378,056 396,930 257,367 261,369 267,796

Equity of disposal group classified as held for sale 23 - 11,340 101,821 - - -

1,135,063 1,196,458 1,274,729 466,933 470,935 477,362

Non-controlling interests (16,657) (9,467) (5,091) - - -

Total equity 1,118,406 1,186,991 1,269,638 466,933 470,935 477,362

Non-current liabilities

Loans and borrowings 27 23,205 26,853 156,590 - - 148,834

Deferred tax liabilities 28 234,868 228,715 221,016 - - -

258,073 255,568 377,606 - - 148,834

Current liabilitiesTrade and non-trade

payables 29 54,229 69,126 107,713 337 348 490

Loans and borrowings 27 431,835 363,280 411,196 - - 59,909

Derivative liabilities 21 487 - 14,208 - - 13,256

486,551 432,406 533,117 337 348 73,655

Liabilities of disposal group classified as held for sale 23 - 2,236 2,256 - - -

Total liabilities 744,624 690,210 912,979 337 348 222,489

TOTAL EQUITY AND LIABILITIES 1,863,030 1,877,201 2,182,617 467,270 471,283 699,851


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STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019

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(Cont’d)


Attributable to owners of the Company

Note

Non-distributableShare capital

RM’000

Distributable Retained profits

RM’000Total equity

RM’000

Company

At 1 July 2017 209,566 267,796 477,362

Total comprehensive loss for the financial year - (6,427) (6,427)

At 30 June 2018 209,566 261,369 470,935

Total comprehensive loss for the financial year - (4,002) (4,002)

At 30 June 2019 209,566 257,367 466,933


(Cont’d)



STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019

Group Company2019

RM’000

2018Restated

RM’000

2019

RM’000

2018

RM’000

Cash flows from operating activities(Loss)/Profit before taxation from: - continuing operations (96,662) (78,891) (3,976) (6,427)- discontinued operations - 5,941 - -

(96,662) (72,950) (3,976) (6,427)Adjustments for:Amortisation of land use rights 317 327 - -Bad debts written off 16 - - -Depreciation of property, plant and equipment 64,818 64,872 - -Loss on disposal of assets held for sale - 22,540 - -Fair value gain on investment properties (1,630) - - -Gain on disposal of property, plant

and equipment (235) (160) - -Property, plant and equipment written off 1,849 130 - -Impairment loss on investments in

subsidiary companies - - 2,500 43,935

Impairment loss on property, plant and equipment 27,948 49,471 - -

Fair value loss on biological assets 1,596 1,928 - -Interest expenses 24,753 24,536 - 18,583Interest income (789) (1,276) - (4,902)Allowance on receivables 1,470 8,443 - -Reversal of allowance for impairment

on receivables - (2) - -Net fair value loss/(gain) on derivative

financial instruments 2,123 (15,845) - (13,256)Unrealised (gain)/loss on foreign exchange (77) 10,518 - -

Operating profit/(loss) before working capital changes 25,497 92,532 (1,476) 37,933

Change in receivables (15,611) 41,870 1,468 4,505Change in inventories 1,887 (4,821) - -Change in payables (14,901) (38,587) (11) (142)

Cash (used in)/generated from operations (3,128) 90,994 (19) 42,296Income tax paid (11,675) (19,225) (26) -Income tax refunded 3,168 223 - -Interest paid (24,753) (24,536) - (18,583)

Net cash (used in)/generated from operating activities (36,388) 47,456 (45) 23,713



Group Company

2019

RM’000

2018Restated

RM’000

2019

RM’000

2018

RM’000

Cash flows from investing activities

Acquisition of property, plant and equipment (15,871) (12,838) - -

(Repayment from)/Advances to a subsidiary company - - (2,238) 153,790

Proceeds from disposal of assets held for sale - 96,472 - -

Proceeds from disposal of property, plant and equipment 350 162 - -

Interest received 789 1,276 - 4,902

Net cash (used in)/generated from investing activities (14,732) 85,072 (2,238) 158,692

(51,120) 132,528 (2,283) 182,405

Cash flows from financing activities

Drawdown of bankers’ acceptances and trust receipts 623,416 591,093 - -

Drawdown of revolving credits 2,788,000 2,119,000 - -

Drawdown of term loans 11,596 38,370 - -

Repayments of bankers’ acceptances and trust receipts (575,300) (654,012) - -

Repayment of revolving credits (2,763,000) (2,054,000) - -

Repayment of term loans (19,226) (206,706) - (208,743)

Repayment of hire purchase payables (671) (314) - -

Net cash generated from/(used in) financing activities 64,815 (166,569) - (208,743)

Net increase/(decrease) in cash and cash equivalents 13,695 (34,041) (2,283) (26,338)

Effect of exchange rate fluctuations on cash held 861 (12,731) - -

Cash and cash equivalents at beginning of financial year 25,171 71,943 2,523 28,861

Cash and cash equivalents at end of financial year (Note 22) 39,727 25,171 240 2,523


(Cont’d)




(Cont’d)

Non-cash transactions

* Acquisition of property, plant and equipment

During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM18,158,000 (2018: RM13,010,000) of which RM2,287,000 (2018: RM172,000) were acquired by means of hire purchase. Cash payments of RM15,871,000 (2018: RM12,838,000) were made to acquire property, plant and equipment.

Reconciliation of liabilities arising from financing activities:

1 July RM’000

Cash flows

RM’000

Non-cash changesRM’000

30 JuneRM’000

Group

2019

Banker acceptances’ and trust receipts 112,076 48,116 (2,195) 157,997

Hire purchase payables 449 (671) 2,287 2,065

Revolving credit 232,000 25,000 - 257,000

Term loan 45,608 (7,630) - 37,978

390,133 64,815 92 455,040

2018

Banker acceptances’ and trust receipts 175,433 (62,919) (438) 112,076

Hire purchase payables 591 (314) 172 449

Revolving credit 167,000 65,000 - 232,000

Term loan 224,762 (168,336) (10,818) 45,608

567,786 (166,569) (11,084) 390,133

Company

2019

Term loan - - - -

2018

Term loan 208,743 (208,743) - -



1. General information

The Company is a public limited liability company that is incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad.

The principal activities of the Company are investment holding and provision of management services to its subsidiaries.

The principal activities of the subsidiaries are set out in Note 17 to the financial statements.

There have been no significant changes in the nature of these principal activities during the financial year ended 30 June 2019.

The registered office and principal place of business of the Company are located at K-63A-3A, Signature Office, KK Times Square, Off Coastal Highway, 88100 Kota Kinabalu, Sabah, Malaysia and 1st Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah, Malaysia respectively.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Board of Directors dated 25 October 2019

2. Basis of preparation

The significant accounting policies adopted by the Group and the Company are consistent with those adopted in previous financial year unless otherwise stated.

The financial statements of the Group and of the Company are prepared on the historical cost convention, other than as disclosed in the notes to the financial statements, and in accordance with the Malaysian Financial Reporting Standards (“MFRSs”) issued by Malaysian Accounting Standards Board (“MASB”), International Financial Reporting Standards (“IFRSs”) and the requirements of the Companies Act, 2016 in Malaysia.

The financial statements of the Group and of the Company for the financial year ended 30 June 2019 are the first set of financial statements prepared in accordance with MFRS, including MFRS 1 – First-time Adoption of Malaysian Financial Reporting Standards. Subject to certain transition elections as disclosed in Note 37, the Group and the Company have consistently applied the same accounting policies in their opening MFRS Statements of Financial Position as at 1 July 2017, being the transition date, and throughout all years presented, as if these policies always been in effect. The impact of the transition to MFRS on the Group’s and the Company’s reported financial position, financial performance and cash flows, are disclosed in Note 37 to the financial statements.

The financial statements are prepared in Ringgit Malaysia (RM) which is the Company’s functional currency, and all values are rounded to the nearest thousand (RM’000) unless otherwise stated. Each entity in the Group determines its own company’s functional currency and items included in the financial statements of each entity are measured using that functional currency.

NOTES TO THE F INANCIAL STATEMENTSAT 30 JUNE 2019



(Cont’d)

2. Basis of preparation (Cont’d)

(a) Changes in accounting policies and effects arising from the adoption of new and revised MFRSs

MFRSs, Amendments to MFRSs and Interpretations

On 1 July 2018, the Group and the Company adopted the following new and amended MFRSs and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2018.

• MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards• MFRS 2 Share-based Payment• MFRS 3 Business Combinations• MFRS 4 Insurance Contracts• MFRS 5 Non-current Assets Held for Sale and Discontinued Operations• MFRS 6 Exploration for and Evaluation of Mineral Resources• MFRS 7 Financial Instruments: Disclosures• MFRS 8 Operating Segments• MFRS 9 Financial Instruments • MFRS 10 Consolidated Financial Statements• MFRS 11 Joint Arrangements• MFRS 12 Disclosure of Interests in Other Entities• MFRS 13 Fair Value Measurement• MFRS 14 Regulatory Deferral Accounts• MFRS 15 Revenue from Contracts with Customers • MFRS 101 Presentation of Financial Statements• MFRS 102 Inventories• MFRS 107 Statement of Cash Flows• MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors• MFRS 110 Events after the Reporting Period• MFRS 111 Construction Contracts• MFRS 112 Income Taxes• MFRS 116 Property, Plant and Equipment• MFRS 117 Leases• MFRS 118 Revenue• MFRS 119 Employee Benefits• MFRS 120 Accounting for Government Grants and Disclosure of Government Assistance• MFRS 121 The Effects of Changes in Foreign Exchange Rates• MFRS 123 Borrowing Costs• MFRS 124 Related Party Disclosures• MFRS 126 Accounting and Reporting by Retirement Benefit Plans• MFRS 127 Separate Financial Statements• MFRS 128 Investment in Associates and Joint Ventures • MFRS 129 Financial Reporting in Hyperinflationary Economies• MFRS 132 Financial Instruments: Presentation• MFRS 133 Earnings per Share• MFRS 134 Interim Financial Reporting• MFRS 136 Impairment of Assets• MFRS 137 Provisions, Contingent Liabilities and Contingent Assets• MFRS 138 Intangible Assets• MFRS 139 Financial Instruments: Recognition and Measurement• MFRS 140 Investment Property• MFRS 141 Agriculture



(a) Changes in accounting policies and effects arising from the adoption of new and revised MFRSs (Cont’d)

MFRSs, Amendments to MFRSs and Interpretations (Cont’d)

• Amendments to MFRSs:- MFRS 5 Non-current Assets Held for Sale and Discontinued Operation- MFRS 7 Mandatory Effective Date of MFRS 9 and Transition Disclosures- MFRS 7 Financial Instruments: Disclosure- MFRS 9 Mandatory Effective Date of MFRS 9 and Transition Disclosures- MFRS 9 Financial Instruments (Hedge Accounting)- MFRS 10 Investment Entities: Applying the Consolidation Exception- MFRS 11 Accounting for Acquisitions of Interests in Joint Operations - MFRS 12 Disclosure of Interests in Other Entities- MFRS 101 Disclosure Initiative- MFRS 107 Disclosure Initiative- MFRS 112 Recognition of Deferred Tax Assets for Unrealised Losses- MFRS 116 Clarification of Acceptable Methods of Depreciation and Amortisation- MFRS 116 Agriculture: Bearer Plants- MFRS 119 Employee Benefits- MFRS 127 Equity Method in Separate Financial Statements- MFRS 128 Investments in Associates and Joint Ventures - MFRS 128 Investment Entities: Applying the Consolidation Exception- MFRS 134 Interim Financial Reporting- MFRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation - MFRS 141 Agriculture: Bearer Plants

• IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities• IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments• IC Interpretation 4 Determining Whether an Arrangement contains a Lease• IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental

Rehabilitation Funds• IC Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and

Electronic Equipment• IC Interpretation 7 Applying the Restatement Approach under MFRS 129 Financial Reporting in

Hyperinflationary Economies• IC Interpretation 9 Reassessment of Embedded Derivatives• IC Interpretation 10 Interim Financial Reporting and Impairment• IC Interpretation 12 Service Concession Arrangements • IC Interpretation 13 Customer Loyalty Programmes• IC Interpretation 14 MFRS 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements

and their Interaction• IC Interpretation 15 Agreements for the Construction of Real Estate• IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation• IC Interpretation 17 Distributions of Non-cash Assets to Owners• IC Interpretation 18 Transfers of Assets from Customers• IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments• IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine • IC Interpretation 21 Levies• IC Interpretation 22 Foreign Currency Transactions and Advance Consideration


(Cont’d)



(Cont’d)



MFRSs, Amendments to MFRSs and Interpretations (Cont’d)

• IC Interpretation 107 Introduction of the Euro• IC Interpretation 110 Government Assistance – No Specific Relation to Operating Activities• IC Interpretation 115 Operating Leases - Incentives• IC Interpretation 125 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders• IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease• IC Interpretation 129 Service Concession Arrangements: Disclosures • IC Interpretation 131 Revenue – Barter Transactions Involving Advertising Services• IC Interpretation 132 Intangible Assets – Web Site Costs

Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except for possible changes on the adoption of the new and amended MFRSs as below:

• Agriculture: Bearer Plants (Amendments to MFRS 141)

• MFRS 9 Financial Instruments

• MFRS 15 Revenue from Contracts with Customers

The main effects of the adoption of the above are summarised below:

(i) Agriculture: Bearer Plants (Amendments to MFRS 141)

The amendments to MFRS 141 (effective from 1 January 2018) which will be effective in conjunction with the adoption of MFRS framework, require a bearer plant, defined as a living plant, to be accounted for as property, plant and equipment in accordance with MFRS 116.

Prior to the adoption of the Amendments to MFRS 141, all new planting expenditure incurred from land clearing, planting, field upkeep and maintenance up to maturity were capitalised under biological assets and was not amortised. All expenses subsequent to maturity was charged to profit or loss. Replanting expenditure which represents cost incurred in replanting old planted areas, was charged to profit or loss as and when incurred. Biological assets-agricultural produce which form part of the bearer plants were not recognised separately.

With the adoption of the Amendments to MFRS 141, new planting expenditure and replanting expenditure are accounted for as property, plant and equipment in accordance with MFRS 116, whereas the produce growing on the bearer plants falls within the scope of MFRS 141 are measured at fair value less costs to sell.

The adoption of the Amendments to MFRS 141 will result in additional depreciation on property, plant and equipment and replanting expenditure that were charged to profit or loss prior to the adoption of the Amendments to MFRS 141 will be reversed and capitalised under property, plant and equipment. Changes in fair value less costs to sell of the biological assets will be recognised in the profit or loss.




(i) Agriculture: Bearer Plants (Amendments to MFRS 141) (Cont’d)

The Group and the Company had to change its accounting policies and make certain retrospective adjustments following the adoption of amendments to MFRS 141. This is disclosed in Note 37(c) and 37(d).

(ii) MFRS 9 Financial Instruments

In November 2014, MASB issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The standard introduces new requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting.

(i) Classification and measurement

MFRS 9 has two (2) measurement categories – amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent solely payments of principal and interest. For financial liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the statement of profit or loss, unless this creates an accounting mismatch.

(ii) Impairment

The impairment requirements apply to financial assets measured at amortised cost and fair value through other comprehensive income, lease receivables and certain loan commitments as well as financial guarantee contracts. At initial recognition, allowance for impairment is required for expected credit losses (“ECL”) resulting from default events that are possible within the next twelve (12) months (“12 month ECL”). In the event of a significant increase in credit risk, allowance for impairment is required for ECL resulting from all possible default events over the expected life of the financial instrument. The assessment of whether credit risk has increased significantly since initial recognition is performed for each reporting period by considering the probability of default occurring over the remaining life of the financial instrument. The assessment of credit risk, as well as the estimation of ECL, are required to be unbiased, probability-weighted and should incorporate all available information which is relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL should also take into account the time value of money.


(Cont’d)



(Cont’d)



(ii) MFRS 9 Financial Instruments (Cont’d)

(iii) Hedge accounting

MFRS 9 establishes a more principle-based approach to hedge accounting and addresses inconsistencies and weaknesses in the current model in MFRS 139. The general hedge accounting requirements aim to simplify hedge accounting, creating a stronger link between hedge accounting and risk management strategy and permitting hedge accounting to be applied to a greater variety of hedging instruments and risks. The standard does not explicitly address macro hedge accounting, which is being considered in a separate project.

The Group and the Company had to change its accounting policies and make certain retrospective adjustments following the adoption of MFRS 9. This is disclosed in Note 37(e).

(iii) MFRS 15 Revenue from Contracts with Customers

The core principle of MFRS 15 is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to the performance obligations in the contract

• Recognise revenue when (or as) the entity satisfies a performance obligation.

The Group and the Company had to change its accounting policies and make certain retrospective adjustments following the adoption of MFRS 15. This is disclosed in Note 37(e).

(b) Standards issued but not yet effective

The Group and the Company have not adopted the following standards and interpretations that have been issued but not yet effective:

Effective for annual periods commencing on or after 1 January 2019

• MFRS 16 Leases

• IC Interpretation 23 Uncertainty over Income Tax Treatments



(Cont’d)


(b) Standards issued but not yet effective (Cont’d)

The Group and the Company have not adopted the following standards and interpretations that have been issued but not yet effective: (Cont’d)

Effective for annual periods commencing on or after 1 January 2019 (Cont’d)

• Amendments to MFRS 112 (Annual Improvements to MFRS Standards 2015-2017 Cycle)

• Amendments to MFRS 123 (Annual Improvements to MFRS Standards 2015-2017 Cycle)

Effective for annual periods commencing on or after 1 January 2020

• Definition of Material (Amendments to MFRS 101)

• Definition of Material (Amendments to MFRS 108)

A brief description on the Amendments to MFRSs and new MFRSs above that have been issued is set out below:

(i) MFRS 16 Leases

Under MFRS 16, a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly and the liability accrues interest. This will typically produce a front-loaded expense profile (whereas operating leases under MFRS 117 would typically have had straight-line expenses) as an assumed linear depreciation of the right-of-use asset and the decreasing interest on the liability will lead to an overall decrease of expense over the reporting period.

The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate.

As with MFRS 16’s predecessor, MFRS 117, lessors classify leases as operating or finance in nature. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise a lease is classified as an operating lease.

For finance leases a lessor recognises finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the net investment. A lessor recognises operating lease payments as income on a straight-line basis or, if more representative of the pattern in which benefit from use of the underlying asset is diminished, another systematic basis.



(Cont’d)



(i) MFRS 16 Leases (Cont’d)

Recognition exemptions: Instead of applying the recognition requirements of MFRS 16 described above, a lessee may elect to account for lease payments as an expense on a straight-line basis over the lease term or another systematic basis for the following two types of leases:

• leases with a lease term of twelve (12) months or less and containing no purchase options – this election is made by class of underlying asset; and

• leases where the underlying asset has a low value when new (such as personal computers or small items of office furniture) – this election can be made on a lease-by-lease basis.

The Group does not expect the adoption of MFRS 16 to have a material impact on its financial statements.

(ii) IC Interpretation 23 Uncertainty over Income Tax Treatments

IC Interpretation 23 provides guidance on how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. If an entity concludes that it is not probable that the tax treatment will be accepted by the tax authority, the effect of the tax uncertainty should be included in the period when such determination is made. An entity shall measure the effect of uncertainty using the method which best predicts the resolution of the uncertainty.

The Group does not expect the adoption of IC Interpretation 23 to have a material impact on its financial statements.

(iii) Amendments to MFRS 112 (Annual Improvements to MFRS Standards 2015-2017 Cycle)

Under MFRS 112, Amendments to MFRS 112 (Annual Improvements to MFRS Standards 2015-2017 Cycle), an entity shall recognise the income tax consequences of dividends as defined in MFRS 9 when it recognises a liability to pay a dividend. The income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.

Early application of these amendments is permitted provided that the entity discloses the fact. When an entity first applies these amendments, it shall apply them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.

The Group does not expect the amendments to have a material impact on its financial statements.



(Cont’d)



(iv) Amendments to MFRS 123 (Annual Improvements to MFRS Standards 2015-2017 Cycle)

The amendments are made on the borrowing costs eligible for capitalisation. MFRS 123 Borrowing Costs states that the capitalisation rate of borrowing costs shall be the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. Amendments to MFRS 123 (Annual Improvements to MFRS Standards 2015-2017 Cycle) has extended the statement by stating that an entity shall exclude from this calculation borrowing costs applicable to borrowings made specifically for the purpose of obtaining a qualifying asset until substantially all the activities necessary to prepare that asset for its intended use or sale are complete.

The adoption of the amendments did not have any financial impact to the financial statements of the Group.

(v) Definition of Material (Amendments to MFRS 101 and MFRS 108)

In October 2018, the IASB issued Definition of Material (Amendments to MFRS 101 and MFRS 108). The amendments clarify and align the definition of ‘material’ as and provide guidance to help improve consistency in the application of that concept whenever it is used in IFRS.

The term of materiality has been amended, and has defined as “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”

The materiality requirements of MFRS 101 have been amended to emphasise that information should not be aggregated or disaggregated in a way that obscures material information. The changes also highlight that materiality applies to all aspects of financial statements, including the primary financial statements, the notes and specific disclosures required by individual IFRSs. The purpose is to encourage entities (and others involved in the preparation and review of financial statements) to give careful consideration to presentation requirements, and to the items that need to be included in financial statements.

The content of primary statement line items has been clarified, including that as well as aggregating immaterial items, individual lines that contain significant items may need to be disaggregated. Additional guidance has also been added for the use of subtotals, requiring that these are derived using amounts that are reported in accordance with IFRS.

The amendments apply prospectively for annual period on or after 1 January 2020, with early application permitted. There is no potential effect on the amendments of these standards as the amendments only affect the disclosures of the financial statements of the Group and the Company.



(Cont’d)

3. Significant accounting judgements and estimates

The preparation of the Group’s and the Company’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 periods.

(a) Judgements made in applying accounting policies

In the process of applying the Group’s and the Company’s accounting policies, management has made the following judgement, apart from those involving estimations, which could have a significant effect on the amounts recognised in the consolidated financial statements.

(i) Discount rates used

Significant judgement is required in determining the appropriate rate to be used, which is based on the judgement of the professional independent valuer. In assessing the fair value of leasehold land, buildings and bearer plants, the discount rate applied ranges between 7.0% to 15.06% (2018: 8.0% to 15.06%).

(ii) Classification between investment properties and property, plant and equipment

The Group has developed certain criteria based on MFRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

(iii) Material non-controlling interests

In determining whether a subsidiary of the Group has a material non-controlling interests (NCI), the Group takes into consideration the relative size and dispersion of other vote holders, potential voting rights held by them or others and rights from other contractual arrangements. An assessment of control was performed by the Group based on whether the NCI has the practical ability to influence the relevant activities of the relevant subsidiaries. A subsidiary of the Group, namely, Kwantas Pelita Plantation (Balingian) Sdn. Bhd. (KPPBSB) is concluded as having material NCI as disclosed in Note 17 to the financial statements in view of the fact the NCI is comprised of a corporate shareholder which held a dominant voting interest of 40% in KPPBSB.



(Cont’d)

3. Significant accounting judgements and estimates (Cont’d)

(a) Judgements made in applying accounting policies (Cont’d)

(iv) Operating segments

The segments disclosed in Note 35 to the financial statements have been determined by distinguishing the business activities from which the Group earns revenues and incurs expenses. The economic characteristics of the operating segments have been reviewed and operating segments have been grouped based on the reporting to the chief operating decision maker.

(v) Revaluation policy

The Group’s accounting policy is to carry its land, buildings, investment properties and bearer plants at valuation, for which during the financial year, all land, buildings, investment properties and bearer plants of the Group were revalued except for certain land, buildings and bearer plants with a carrying value of RM2,536,000 (2018: RM2,513,000), RM12,332,000 (2018: RM12,130,000) and RM5,428,000 (2018: RM8,295,000) respectively which have always been carried at cost.

It is the Directors’ judgement that the fair value of these non-revalued land, buildings and bearer plants are not substantially different from their carrying value as the land and buildings concerned are generally in remote locations and have been in use for a substantial period of time. Also, the said bearer plants are still in the initial growth stage in which the impact of the bearer plants transformation on price is not expected to be material. It is unlikely that the fair value adjustment if the land, buildings and bearer plants are revalued would be material to the Group. For this reason, the Directors have decided not to revalue these assets on materiality grounds. The Directors do not consider this departure to be a breach of MFRS 116 as it has no material impact to the Group’s results and financial position.

(b) Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Depreciation of property, plant and equipment

The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group anticipates that the residual values of their property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount. The management estimates the useful lives of the property, plant and equipment to be within four (4) to fifty (50) years. These are common life expectancies applied in the palm oil industries. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.



(Cont’d)


(b) Key sources of estimation uncertainty (Cont’d)

(ii) Income taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group and the Company recognise tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made.

(iii) Impairment of non-financial assets

When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

(iv) Revaluation of properties

Certain properties of the Group are reported at valuation which is based on valuations performed by independent professional valuers.

The independent professional valuers have exercised judgement in determining discount rates, estimates of future cash flows, capitalisation rate, terminal year value, market freehold rental and other factors used in the valuation process. Also, judgement has been applied in estimating prices for less readily observable external parameters. Other factors, such as, model assumptions, market dislocations and unexpected correlations can also materially affect these estimates and the resulting valuation estimates.

(v) Carrying value of investments in subsidiary companies

Investments in subsidiary companies are reviewed for impairment annually in accordance with its accounting policy as disclosed in Note 4 (p)(ii) to the financial statements, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Significant judgement is required in the estimation of the present value of future cash flows generated by the subsidiaries, which involves uncertainties and are significantly affected by assumptions and judgements made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the carrying value of investments in subsidiary companies.

(vi) Fair value of biological assets

To arrive at the fair value of fresh fruit bunches (“FFB”), the management considered the oil content of the unripe FFB and derived the assumption that the net cash flow to be generated from FFB prior to more than twenty-one (21) days to harvest to be negligible, therefore quantity of unripe FFB on bearer plants of up to 21 days prior to harvest was used for valuation purpose. The value of the unripe FFB was estimated based on market approach which takes into consideration the market prices of harvested FFB less harvesting, transport and other costs to sell.



(Cont’d)


(b) Key sources of estimation uncertainty (Cont’d)

(vii) Impairment of financial assets

The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

(viii) Deferred tax assets and liabilities

Deferred tax implications arising from the changes in corporate income tax rates are measured with reference to the estimated realisation and settlement of temporary differences in the future periods in which the tax rates are expected to apply, based on the tax rates enacted or substantively enacted at the reporting date. While management’s estimates on the realisation and settlement of temporary differences are based on the available information at the reporting date, changes in business strategy, future operating performance and other factors could potentially impact on the actual timing and amount of temporary differences realised and settled. Any difference between the actual amount and the estimated amount would be recognised in the statements of profit or loss and other comprehensive income in the period in which actual realisation and settlement occurs.

(ix) Fair value estimates for certain financial assets and liabilities

The Group and the Company carry certain financial assets and liabilities at fair value, which require extensive use of accounting estimates and judgement. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Group and the Company use different valuation methodologies. Any changes in fair value of these assets and liabilities would affect profit and/or equity.

4. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies as at the reporting date. The financial statements of the subsidiary companies used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company.

(i) Subsidiaries

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.



(Cont’d)

4. Significant accounting policies (Cont’d)

(a) Basis of consolidation (Cont’d)

(i) Subsidiaries (Cont’d)

The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. Potential voting rights are considered when assessing control only when such rights are substantive.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

(ii) Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus• the recognised amount of any non-controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the existing equity interest in the

acquiree; less• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities

assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(iii) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as a financial asset depending on the level of influence retained.



(Cont’d)


(a) Basis of consolidation (Cont’d)

(iv) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company.

Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit and loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so caused the non-controlling interests to have a deficit balance.

(v) Transactions with non-controlling interests

Transactions with non-controlling interests are accounted for using the entity concept method, whereby, transactions with non-controlling interests are accounted for as transactions with owners.

On acquisition of non-controlling interests, the difference between the consideration and the Group’ share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currencies

(i) Functional and presentation currencies

The Group’s consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency. Each entity in the Group determines its own company’s functional currency and items included in the financial statements of each entity are measured using that functional currency.

(ii) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Group and of the Company and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates.



(Cont’d)


(b) Foreign currencies (Cont’d)

(ii) Foreign currency transactions (Cont’d)

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.

(iii) Foreign operations

The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting 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.

The closing rates used in the translation for foreign currency monetary assets and liabilities are as follows:

2019RM

2018RM

1 Renminbi 0.6026 0.6104

1 Rupiah 0.0003 0.0003

1 United States Dollar 4.1420 4.0385



(Cont’d)


(c) Discontinued operations and non-current assets held for sale

The results of discontinued operations are to be presented separately in the statement of profit or loss and other comprehensive income.

Non-current assets (or disposal group) classified as held for sale are measure at the lower of carrying amount and fair value less cost to sell.

Non-current assets (or disposal group) are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use.

This is the case, when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and the sale is considered to be highly probable.

A sale is considered to be highly probable if the appropriate level of management is committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan has been initiated. Further, the asset (or disposal group) has been actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale is expected to qualify for recognition as a completed sale within one (1) year from the date that it is classified as held for sale.

If the Group has classified an asset (or disposal group) as held for sale but subsequently the criteria for classification is no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale. The Group shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of:

(i) its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale; and

(ii) its recoverable amount at the date of the subsequent decision not to sell.

(d) Revenue recognition

Revenue from contracts with customers is recognised by reference to each distinct performance obligation promised in the contract with the customer when or as the Group transfers controls of the goods or services promised in a contract and the customer obtains control of the goods or services.

Revenue from contracts with customers is measured at its transaction price, being the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, net of discounts. The transaction price is allocated to each distinct good or service promised in the contract. Depending on the terms of the contract, revenue is recognised when the performance obligation is satisfied, which may be a point in time or over time.



(Cont’d)


(d) Revenue recognition (Cont’d)

The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:

- The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs.

- The Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.

- The Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

If any of the above conditions are not met, the Group recognises revenue at the point in time at which the performance obligation is satisfied.

(i) Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

(ii) Sale of goods

Revenue from sale of goods is recognised net of taxes and upon transfer of control of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(iii) Revenue from services

Revenue from services rendered is recognised net of taxes and discounts as and when the services are performed.

(iv) Rental income

Rental income is recognised on a time proportion and accrual basis.

(v) Interest income

Interest income is recognised on an accruals basis using the effective interest method.

Previously, the revenue of the Group is recognised net of taxes and upon transfer of significant risks and rewards of ownership to the buyer.



(Cont’d)


(e) Employee benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the profit or loss as incurred.

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 Employees Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension scheme are recognised as an expense in the period in which the related service is performed.

(f) Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the financial year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.



(Cont’d)


(f) Income taxes (Cont’d)

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(g) Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.

(h) 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.

Subsequent to recognition, property, plant and equipment, other than leasehold land, buildings and bearer plants, 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.

Leasehold land and buildings are measured at fair value less accumulated depreciation on buildings and accumulated impairment losses recognised after the date of the revaluation. Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value of the leasehold land, buildings and plantation infrastructure at the reporting date.

Any revaluation surplus is recognised in other comprehensive income and accumulated in equity under the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve.



(h) Property, plant and equipment (Cont’d)

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement or disposal of the asset.

Construction-in-progress is not depreciated until it is completed and ready for use.

Bearer plants are living plants that are used in the production or supply of agriculture produce for more than one period and have remote likelihood of being sold as agriculture produce, except for incidental scrap sales. The bearer plants that are available for use are measured at fair value less accumulated depreciation and accumulated impairment losses recognised after the date of the revaluation. Cost includes plantation expenditure incurred from land clearing to the stage of maturity. Bearer plants have an average life cycle of twenty-eight (28) years with the first three (3) years as immature bearer plants and the remaining years as mature bearer plants. The immature bearer plants are not depreciated until such time when they are available for use.

Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost or valuation of each asset to its residual value over the estimated useful life, at the following annual rates:

Leasehold land 57 – 99 years

Buildings 5% – 10%

Effluent ponds, infrastructure and jetties 2% – 10%

Plant, machinery and equipment 5% – 25%

Furniture, fixtures and fittings 10% – 20%

Tractors and vehicles 20%

Bearer plants 2 – 24 years

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.


(Cont’d)



(Cont’d)


(i) 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 condition as 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.

A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.

Investment properties are derecognised when either they have been disposed-off 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 as disclosed in Note 4 (h) up to the date change in use.

(j) Land use rights

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised on a straight-line basis over the lease term of fifty (50) years.

(k) Biological assets

Biological assets comprised produce growing on bearer plants. Biological assets are measured at fair value less costs to sell. Any gains or losses arising from changes in the fair value less costs to sell are recognised net in profit or loss. Fair value is determined based on the present value of expected net cash flows from biological assets. The expected net cash flows are estimated using the expected output method and the estimated market price of biological assets.



(Cont’d)


(l) Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

(i) Financial assets

Policy applicable from 1 July 2018

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s and the Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group and the Company has applied the practical expedient, the Group and the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group and the Company has applied the practical expedient are measured at the transaction price determined under MFRS 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group’s and the Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group and the Company commits to purchase or sell the asset.

For purposes of subsequent measurement, financial assets are classified in four categories:

• Financial assets at amortised cost (debt instruments) • Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt

instruments) • Financial assets designated at fair value through OCI with no recycling of cumulative gains and

losses upon derecognition (equity instruments) • Financial assets at fair value through profit or loss



(Cont’d)


(l) Financial instruments (Cont’d)

(i) Financial assets (Cont’d)

Policy applicable from 1 July 2018 (Cont’d)

Financial assets at amortised cost (debt instruments)

This category is the most relevant to the Group and the Company. The Group and the Company measure financial assets at amortised cost if both of the following conditions are met:

• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group’s and the Company’s financial assets at amortised cost includes trade and non-trade receivables, amounts due from subsidiary companies and cash and cash equivalents.

Financial assets at fair value through OCI (debt instruments)

The Group measures debt instruments at fair value through OCI if both of the following conditions are met:

• The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.

The Group has not designated any financial assets at fair value through OCI (debt instruments).

Financial assets designated at fair value through OCI (equity instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under MFRS 132 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.



(Cont’d)





Financial assets designated at fair value through OCI (equity instruments) (Cont’d)

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

The Group has not designated any financial assets at fair value through OCI (equity instruments).

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

The Group’s financial asset at fair value through profit or loss includes derivatives assets/(liabilities).



(Cont’d)





Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised when:

• The rights to receive cash flows from the asset have expired; or• Group and the Company have transferred its rights to receive cash flows from the asset or has

assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either:

(a) the Group and the Company have transferred substantially all the risks and rewards of the asset, or

(b) the Group and the Company have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group and the Company have transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group and the Company continue to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group and the Company could be required to repay.

Policy applicable before 1 July 2018

Financial assets are recognised in the statement of financial position when, and only when, the Company becomes 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.

The Company determines the classification of its financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets.

The subsequent measurement of financial assets depends on their classification as follows:



(Cont’d)





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.

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.

Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group and the Company have 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 twelve (12) months after the reporting date which are classified as current.

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 twelve (12) months after the reporting date which are classified as non-current.



(Cont’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 (3) preceding categories.

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’s and the Company’s right to receive payment is established.

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 twelve (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 Company commits to purchase or sell the asset.

(ii) 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 MFRS 9, 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 financial liabilities measured at amortised cost.



(Cont’d)



(ii) Financial liabilities (Cont’d)

The subsequent measurement of financial liabilities depends on their classification as follows:

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.

Financial liabilities measured at amortised cost

The Group’s and the Company’s financial liabilities measured at amortised cost include trade and non-trade payables and loan and borrowings.

Trade and non-trade payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

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.

(m) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and conditions are accounted for as follows:

(a) Palm oil products

The cost of raw materials comprises cost of purchase which is determined on the first-in, first-out (FIFO) method. The costs of finished goods and work-in-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity.



(Cont’d)


(m) Inventories (Cont’d)

(b) Oil palm seedlings

Oil palm seedlings, which represent the cost of seedlings remaining in nurseries for eventual field planting, are valued at cost which is determined on the first-in, first-out (FIFO) method.

(c) Stores and supplies

Stores and supplies are valued at the weighted average cost less allowances for obsolescence and deterioration.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

(n) Derivative instruments

The Group’s and the Company’s trade derivatives include commodity swaps and forward foreign exchange contracts.

Derivative instruments are initially recognised at fair value. For non-option derivatives, their fair value are normally zero or negligible at inception. For purchased or written options, their fair value are equivalent to the market premium paid or received. The derivatives are subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions and valuation techniques that include discounted cash flow models and option pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

(o) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, at banks, deposits with licensed banks with maturity not exceeding three (3) months and short-term, highly liquid investments which are readily convertible to cash with short periods to maturity and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts, if any.

(p) Impairment

(i) Impairment of financial assets

Policy applicable from 1 July 2018

The Group and the Company recognise an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group and the Company expect to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.



(Cont’d)


(p) Impairment (Cont’d)

(i) Impairment of financial assets (Cont’d)


For trade receivables and contract assets, the Group and the Company apply a simplified approach in calculating ECLs. Therefore, the Group and the Company do not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group and the Company have established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

ECLs for all other financial assets are recognised in two (2) stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For debt instruments measured at amortised cost, the Group and the Company may apply the low credit risk simplification. At every reporting date, the Group and the Company evaluate whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group and the Company reassess the internal credit rating of the debt instrument.

The Group and the Company consider a financial asset in default when contractual payments are one (1) year past due. However, in certain cases, the Group and the Company may also consider a financial asset to be in default when internal or external information indicates that the Group and the Company are unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group and the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Policy applicable before 1 July 2018

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset of the Group and the Company that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments. The probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.



(Cont’d)



(i) Impairment of financial assets (Cont’d)

Policy applicable before 1 July 2018 (Cont’d)

• Trade and non-trade 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.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based in similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

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 by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable 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 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.

(ii) Impairment of non-financial assets

The Group and the Company assess 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 and the Company make 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”)).



(Cont’d)



(ii) Impairment of non-financial assets (Cont’d)

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 except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

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 unless that asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.

(q) Equity instruments

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 classified as equity.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised as an appropriation of retained profits upon declaration, and are only taken up as liabilities upon the necessary approval being obtained.

(r) Borrowings 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 borrowings 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.



(Cont’d)


(s) Leases

(i) Classification

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification.

All leases that do not transfer substantially all the risks and rewards are classified as operating leases, except land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease.

(ii) Finance leases – the Group as lessee

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the Statements of Financial Position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine, otherwise, the Group’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

(iii) Operating leases – the Group as lessee

In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

(iv) Operating lease – the Group 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 depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 4 (h).



(Cont’d)


(t) 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 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.

(u) Provisions

Provisions are recognised when the Group and the Company have present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations, and a reliable estimate of the amount can be made.

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 resources embodying economic benefits will be required to settle the obligation, the provision will be reversed. Where the effect of the time value of money is material, provisions are discounted using a current per-tax rate that reflects, where appropriate, the risks specific to the liability and the present value of the expenditure expected to be required to settle the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

(v) Contingencies

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

Contingent liabilities and assets are not recognised in the statements of financial position of the Group.



(Cont’d)


(w) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components.

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 respective segments under their charge. The segment managers report directly to the Chief Operating Decision Maker of the Group who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each the segments are shown in Note 35 to the financial statements, including the factors used to identify the reportable segments and the measurement basis of segment information.

(x) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transactions to sell the asset or transfer the liability takes place either:

(i) In the principal market for the asset or liability, or(ii) In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group and the Company.

The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

(i) Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities

(ii) Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

(iii) Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable



(x) Fair value measurement (Cont’d)

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group and the Company determine whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

5. Revenue

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Revenue from contracts with customers:

Sales of palm oil products 589,545 703,150 - -

Sales of oleochemical products 179,748 61,232 - -

Sales of fresh fruits bunches 2,325 4,756 - -

771,618 769,138 - -

Revenue from other sources:

Dividend income - - - 32,000

Management fees from subsidiaries - - 10,490 10,500

Rental income 2,047 2,134 - -

773,665 771,272 10,490 42,500

Timing of the revenue from contracts with customers:

Point in time 773,665 771,272 10,490 10,500

Over time - - - -

773,665 771,272 10,490 42,500


(Cont’d)



(Cont’d)

6. Interest income

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Interest income from:

- Negotiable certificate of deposits 293 604 - 24

- Overdue accounts 496 672 - -

- Advances to a subsidiary company - - - 4,878

789 1,276 - 4,902

7. Other operating income

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Export throughput income 17 - - -

Gain on disposal of property, plant and equipment 235 160 - -

Tolling income - 2,356 - -

Income from rental of vehicles 231 315 - -

Income from rental of premises 2,755 560 - -

Miscellaneous 1,631 2,095 - 13

Realised gain on foreign exchange - 8,780 - 8,817

Road toll charges 166 163 - -

Insurance claim - 70 - -

Fair value gain on derivative financial instruments

- 15,845 - 13,256

Fair value gain on investment properties 1,630 - - -

Realised gain on derivative financial instruments 624 4,253 - -

Reversal of allowance for impairment on receivables (Note 20) - 2 - -

Unrealised gain on foreign exhchange differences 77 - - -

7,366 34,599 - 22,086



(Cont’d)

8. Finance costs

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Interest expenses:

- Bank overdrafts 106 48 - -

- Bankers’ acceptances 7,049 6,376 - -

- Hire purchase 73 29 - -

- Revolving credits 12,939 8,928 - -

- Term loans 2,606 9,155 - 18,583

- Overdue interest 1,980 - - -

24,753 24,536 - 18,583

9. Loss before taxation

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Other than those disclosed in Notes 6, 7 and 8, loss before taxation has been arrived at after charging:

Auditors’ remuneration

- Statutory audit

- Current year 342 342 114 114

- Other services 6 6 6 6

Allowance on receivables (Note 20) 1,470 8,443 - -

Amortisation of land use rights (Note 16) 317 327 - -

Bad debts written off 16 - - -

Depreciation of property, plant and equipment (Note 14) 64,818 64,872 - -

Fair value loss on derivative financial instruments 2,123 - - -

Impairment loss on investments in subsidiary companies (Note 17) - - 2,500 43,935



(Cont’d)

9. Loss before taxation (Cont’d)

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Fair value loss on biological assets (Note 19) 1,596 1,928 - -

Impairment loss on property, plant and equipment (Note 14) 27,948 49,471 - -

Property, plant and equipment written off (Note 14) 1,849 130 - -

Loss on disposal of assets held for sale - 22,540 - -

Unrealised loss on foreign exchange - 10,518 - -

Rental of premises - 542 148 129

10. Employee benefits expense

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Salaries and wages 61,755 62,285 8,503 10,396

Contributions to defined contribution plan 3,108 3,462 951 1,157

Social security contributions 247 228 70 75

Employment insurance system contribution 22 8 7 4

65,132 65,983 9,531 11,632

Included in employee benefits expense of the Group and of the Company are Executive Directors’ remuneration amounting to RM2,239,000 (2018: RM3,520,000) and RM1,641,000 (2018: RM2,820,000) respectively as further disclosed in Note 11 to the financial statements.



(Cont’d)

11. Directors’ remuneration

The details of remuneration receivable by Directors of the Group and of the Company during the financial year are as follows:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Executive Directors’ remuneration (Note 10)

- Salaries and other emoluments 1,970 2,556 1,428 2,023

- Bonus 55 604 55 502

- Contributions to defined contribution plan 214 360 158 295

2,239 3,520 1,641 2,820

Non-Executive Directors’ remuneration:

- Fees 121 66 121 66

Total Directors’ remuneration 2,360 3,586 1,762 2,886

The Directors’ remuneration represents remuneration for Directors of the Group, the Company and its subsidiaries to comply with the requirements of Companies Act, 2016 in Malaysia. The names of Directors of subsidiaries and their remuneration details are set out in the respective subsidiaries’ statutory financial statements and the said information is deemed incorporated herein by such reference and made a part hereof.



(Cont’d)

11. Directors’ remuneration (Cont’d)

The number of Directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

Number of Directors

2019 2018

Executive Directors:

RM1 – RM100,000 1 -

RM100,001 – RM300,000 1 -

RM300,001 – RM350,000 1 1

RM350,001 – RM400,000 - -

RM400,001 – RM450,000 1 1

RM450,001 – RM500,000 - 1

RM500,001 – RM550,000 1 -

RM600,001 – RM650,000 - 1

RM650,001 – RM800,000 - -

RM800,001 – RM950,000 - -

RM950,001 – RM1,000,000 - 1

Non-executive Directors:

RM1 – RM50,000 2 3

RM50,001 – RM100,000 1 -

12. Income tax expense

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Current taxation 5,365 20,553 - -

Deferred tax liabilities (Note 28) (2,417) 1,163 - -

2,948 21,716 - -

Under/(Over) provision in prior years

- Current taxation 38 (1,082) 26 -

2,986 20,634 26 -



(Cont’d)

12. Income tax expense (Cont’d)

A reconciliation of income tax expense applicable to loss 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

2019RM’000

2018RM’000

2019RM’000

2018RM’000

(Loss)/Profit before taxation:

- continuing operations (96,662) (78,891) (3,976) (6,427)

- discontinued operations - 5,941 - -

(96,662) (72,950) (3,976) (6,427)

Taxation at Malaysian statutory tax rate of 24% (2018: 24%) (23,199) (17,508) (954) (1,542)

Effect of current year’s losses incurred in other countries 11,122 6,995 - -

Non-taxable income (481) (9,586) 954 1,542

Non-tax deductible expenses 14,313 41,459 - -

Utilisation of previously unrecognised capital allowances (79) (116) - -

Effect of deductible temporary differences arising from tax benefits previously not recognised as deferred tax assets 1,272 472 - -

2,948 21,716 - -

Under/(Over) provision in prior years

- Current taxation 38 (1,082) 26 -

2,986 20,634 26 -



(Cont’d)

13. Loss per share

(a) Basic

Basic loss per share amounts are calculated by dividing loss for the financial year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year.

Group

2019 2018

(Loss)/Profit net of tax attributable to owners of the Company (RM’000)

From continuing operations (92,458) (95,149)

From discontinued operations - 6,119

(92,458) (89,030)

Weighted average number of ordinary shares in issue (’000) 311,678 311,678

Basic (loss)/earnings per share (sen)

From continuing operations (29.66) (30.52)

From discontinued operations - 1.96

(29.66) (28.56)

(b) Diluted

There is no dilution in the earnings per share of the current and previous year end as there are no dilutive potential ordinary shares outstanding at the end of the reporting period.


14.

Pro

per

ty, p

lant

and

eq

uip

men

t

Gro

up

2019

Long

te

rmle

aseh

old

land

RM

’000

Bui

ldin

gs

RM

’000

Effl

uent

p

ond

s,in

fras

truc

ture

and

jett

ies

RM

’000

Pla

nt,

mac

hine

ry

and

eq

uip

men

tR

M’0

00

Furn

itur

e,fi

xtur

es

and

fi

ttin

gs

RM

’000

Trac

tors

an

d

vehi

cles

RM

’000

Co

nstr

ucti

on

wo

rk in

p

rog

ress

RM

’000

Bea

rer

pla

nts

RM

’000

Tota

l R

M’0

00

Co

st o

r va

luat

ion

At

1 Ju

ly 2

018,

as

pre

vio

usly

rep

ort

ed76

6,92

232

3,32

219

,973

375,

627

8,51

139

,759

78,4

87-

1,61

2,60

1

Eff

ects

of

tran

siti

on

fro

m F

RSs

to

MFR

Ss

(No

te 3

7)-

--

--

--

421,

226

421,

226

At

1 Ju

ly 2

018,

as

res

tate

d-

At

cost

6,09

021

,981

19,9

7337

5,62

78,

511

39,7

5978

,487

8,29

555

8,72

3-

At

valu

atio

n 76

0,83

230

1,34

1-

--

--

412,

931

1,47

5,10

4

766,

922

323,

322

19,9

7337

5,62

78,

511

39,7

5978

,487

421,

226

2,03

3,82

7

Ad

dit

ions

-1,

111

-95

113

84,

685

2,12

19,

152

18,1

58D

isp

osa

ls-

--

--

(518

)-

-(5

18)

Wri

tten

off

-(7

75)

-(6

,554

)(1

,256

)(7

02)

(12,

003)

-(2

1,29

0)R

ecla

ssifi

cati

on

--

-27

6-

-(2

76)

--

Tran

sfer

fro

m a

sset

s o

f d

isp

osa

l gro

up

clas

sifie

d a

s he

ld

for

sale

19,6

6727

5-

--

--

24,3

9844

,340

Rev

alua

tio

n su

rplu

s/(d

efici

t)9,

146

1,69

8-

--

--

(16,

088)

(5,2

44)

Exc

hang

e d

iffer

ence

s -

(687

)-

(2,9

33)

(35)

(2)

(900

)(3

,394

)(7

,951

)

At

30 J

une

2019

795,

735

324,

944

19,9

7336

7,36

77,

358

43,2

2267

,429

435,

294

2,06

1,32

2

Rep

rese

ntin

g:

- A

t co

st6,

214

22,4

3619

,973

367,

367

7,35

843

,222

67,4

299,

656

543,

655

- A

t va

luat

ion

789,

521

302,

508

--

--

-42

5,63

81,

517,

667

795,

735

324,

944

19,9

7336

7,36

77,

358

43,2

2267

,429

435,

294

2,06

1,32

2


(Cont’d)



(Cont’d)14

. P

rop

erty

, pla

nt a

nd e

qui

pm

ent

(Co

nt’d

)

Gro

up

2019

Long

te

rmle

aseh

old

land

RM

’000

Bui

ldin

gs

RM

’000

Effl

uent

p

ond

s,in

fras

truc

ture

and

jett

ies

RM

’000

Pla

nt,

mac

hine

ry

and

eq

uip

men

tR

M’0

00

Furn

itur

e,fi

xtur

es

and

fi

ttin

gs

RM

’000

Trac

tors

an

d

vehi

cles

RM

’000

Co

nstr

ucti

on

wo

rk in

p

rog

ress

RM

’000

Bea

rer

pla

nts

RM

’000

Tota

l R

M’0

00

Acc

umul

ated

d

epre

ciat

ion

and

im

pai

rmen

t lo

sses

At

1 Ju

ly 2

018,

as

pre

vio

usly

rep

ort

ed3,

577

9,85

17,

353

297,

158

6,68

837

,446

21,5

87-

383,

660

Eff

ect

of

tran

siti

on

fro

m F

RSs

to

MFR

Ss

(No

te 3

7)-

--

--

--

50,7

2350

,723

At

1 Ju

ly 2

018,

as

res

tate

d3,

577

9,85

17,

353

297,

158

6,68

837

,446

21,5

8750

,723

434,

383

Cha

rge

for

the

finan

cial

yea

r 10

,266

15,0

9561

56,

799

243

917

-30

,883

64,8

18

Imp

airm

ent

for

the

finan

cial

yea

r -

--

--

--

27,9

4827

,948

Dis

po

sals

--

--

-(4

03)

--

(403

)

Wri

tten

off

-

(200

)-

(6,5

34)

(1,0

50)

(690

)(1

0,96

7)-

(19,

441)

Wri

tten

bac

k o

n re

valu

atio

n(1

0,16

5)(1

4,63

2)-

--

--

(24,

876)

(49,

673)

Exc

hang

e d

iffer

ence

s-

(10)

-94

5(3

0)(3

)40

9-

1,31

1

At

30 J

une

2019

3,67

810

,104

7,96

829

8,36

85,

851

37,2

6711

,029

84,6

7845

8,94

3

Net

bo

ok

valu

e

- A

t co

st2,

536

12,3

3212

,005

68,9

991,

507

5,95

556

,400

5,42

816

5,16

2

- A

t va

luat

ion

789,

521

302,

508

--

--

-34

5,18

81,

437,

217

At

30 J

une

2019

792,

057

314,

840

12,0

0568

,999

1,50

75,

955

56,4

0035

0,61

61,

602,

379



(Cont’d)

14.

Pro

per

ty, p

lant

and

eq

uip

men

t (C

ont

’d)

Gro

up

2018

Long

te

rmle

aseh

old

land

RM

’000

Bui

ldin

gs

RM

’000

Effl

uent

p

ond

s,in

fras

truc

ture

and

jett

ies

RM

’000

Pla

nt,

mac

hine

ry

and

eq

uip

men

tR

M’0

00

Furn

itur

e,fi

xtur

es

and

fi

ttin

gs

RM

’000

Trac

tors

an

d

vehi

cles

RM

’000

Co

nstr

ucti

on

wo

rk in

p

rog

ress

RM

’000

Bea

rer

pla

nts

RM

’000

Tota

l R

M’0

00

Co

st o

r va

luat

ion

At

1 Ju

ly 2

017,

as

pre

vio

usly

rep

ort

ed79

6,01

927

4,37

529

,054

351,

488

8,12

439

,871

82,7

69-

1,58

1,70

0E

ffec

t o

f tr

ansi

tio

n fr

om

FR

Ss t

o M

FRSs

--

--

--

-43

7,77

943

7,77

9

At

1 Ju

ly 2

017,

as

res

tate

d-

At

cost

3,24

09,

836

29,0

5435

1,48

88,

124

39,8

7182

,769

7,66

653

2,04

8-

At

valu

atio

n 79

2,77

926

4,53

9-

--

--

430,

113

1,48

7,43

1

796,

019

274,

375

29,0

5435

1,48

88,

124

39,8

7182

,769

437,

779

2,01

9,47

9

Ad

dit

ions

-1,

716

-62

229

1,20

01,

028

8,41

513

,010

Dis

po

sals

--

-(2

09)

-(2

,013

)-

-(2

,222

)W

ritt

en o

ff-

(25)

-(2

3)(2

83)

--

-(3

31)

Rec

lass

ifica

tio

n 19

611

,868

(9,0

81)

(908

)(1

18)

476

(2,4

83)

-(5

0)Tr

ansf

er f

rom

ass

ets

of

dis

po

sal g

roup

cl

assi

fied

as

held

fo

r sa

le-

22,0

82-

33,4

7186

629

918

9-

56,9

07R

eval

uati

on

(defi

cit)

/su

rplu

s(2

5,26

0)14

,809

--

--

-(2

0,72

4)(3

1,17

5)E

xcha

nge

diff

eren

ces

(4,0

33)

(1,5

03)

-(8

,814

)(1

07)

(74)

(3,0

16)

(4,2

44)

(21,

791)

At

30 J

une

2018

766,

922

323,

322

19,9

7337

5,62

78,

511

39,7

5978

,487

421,

226

2,03

3,82

7

Rep

rese

ntin

g:

- A

t co

st6,

090

21,9

8119

,973

375,

627

8,51

139

,759

78,4

878,

295

558,

723

- A

t va

luat

ion

760,

832

301,

341

--

--

-41

2,93

11,

475,

104

766,

922

323,

322

19,9

7337

5,62

78,

511

39,7

5978

,487

421,

226

2,03

3,82

7



(Cont’d)14

. P

rop

erty

, pla

nt a

nd e

qui

pm

ent

(Co

nt’d

)

Gro

up

2018

Long

te

rmle

aseh

old

land

RM

’000

Bui

ldin

gs

RM

’000

Effl

uent

p

ond

s,in

fras

truc

ture

and

jett

ies

RM

’000

Pla

nt,

mac

hine

ry

and

eq

uip

men

tR

M’0

00

Furn

itur

e,fi

xtur

es

and

fi

ttin

gs

RM

’000

Trac

tors

an

d

vehi

cles

RM

’000

Co

nstr

ucti

on

wo

rk in

p

rog

ress

RM

’000

Bea

rer

pla

nts

RM

’000

Tota

l R

M’0

00

Acc

umul

ated

d

epre

ciat

ion

and

im

pai

rmen

t lo

sses

At

1 Ju

ly 2

017,

as

pre

vio

usly

rep

ort

ed62

66,

568

8,70

926

3,69

35,

877

37,8

3511

,028

-33

4,33

6E

ffec

t o

f tr

ansi

tio

n fr

om

FR

Ss t

o M

FRSs

--

--

--

-20

,523

20,5

23

At

1 Ju

ly 2

017,

as

res

tate

d62

66,

568

8,70

926

3,69

35,

877

37,8

3511

,028

20,5

2335

4,85

9C

harg

e fo

r th

e fin

anci

al y

ear

10,4

5415

,224

616

7,35

227

41,

209

-29

,743

64,8

72Im

pai

rmen

t fo

r th

e fin

anci

al y

ear

2,38

1-

-5,

647

275

-10

,968

30,2

0049

,471

Dis

po

sals

--

-(2

09)

-(2

,011

)-

-(2

,220

)

Wri

tten

off

-

(9)

-(1

9)(1

73)

--

-(2

01)

Rec

lass

ifica

tio

n46

92,

856

(1,9

72)

(1,4

31)

(254

)28

2-

-(5

0)

Tran

sfer

fro

m a

sset

s o

f d

isp

osa

l gro

up

clas

sifie

d a

s he

ld

for

sale

--

-27

,945

781

189

--

28,9

15W

ritt

en b

ack

on

reva

luat

ion

(10,

718)

(14,

702)

--

--

-(2

9,74

3)(5

5,16

3)

Exc

hang

e d

iffer

ence

s 36

5(8

6)-

(5,8

20)

(92)

(58)

(409

)-

(6,1

00)

At

30 J

une

2018

3,57

79,

851

7,35

329

7,15

86,

688

37,4

4621

,587

50,7

2343

4,38

3

Net

bo

ok

valu

e

- A

t co

st2,

513

12,1

3012

,620

78,4

691,

823

2,31

356

,900

8,29

517

5,06

3

- A

t va

luat

ion

760,

832

301,

341

--

--

-36

2,20

81,

424,

381

At

30 J

une

2018

763,

345

313,

471

12,6

2078

,469

1,82

32,

313

56,9

0037

0,50

31,

599,

444



(Cont’d)

14.

Pro

per

ty, p

lant

and

eq

uip

men

t (C

ont

’d)

Gro

up

Long

te

rmle

aseh

old

land

RM

’000

Bui

ldin

gs

RM

’000

Effl

uent

p

ond

s,in

fras

truc

ture

and

jett

ies

RM

’000

Pla

nt,

mac

hine

ry

and

eq

uip

men

tR

M’0

00

Furn

itur

e,fi

xtur

es

and

fi

ttin

gs

RM

’000

Trac

tors

an

d

vehi

cles

RM

’000

Co

nstr

ucti

on

wo

rk in

p

rog

ress

RM

’000

Bea

rer

pla

nts

RM

’000

Tota

l R

M’0

00

At

30 J

une

2019

Co

st/V

alua

tio

n79

5,73

532

4,94

419

,973

367,

367

7,35

843

,222

67,4

2943

5,29

42,

061,

322

Acc

umul

ated

d

epre

ciat

ion

and

im

pai

rmen

t lo

sses

(3,6

78)

(10,

104)

(7,9

68)

(298

,368

)(5

,851

)(3

7,26

7)(1

1,02

9)(8

4,67

8)(4

58,9

43)

Net

bo

ok

valu

e79

2,05

731

4,84

012

,005

68,9

991,

507

5,95

556

,400

350,

616

1,60

2,37

9

At

30 J

une

2018

Co

st/V

alua

tio

n76

6,92

232

3,32

219

,973

375,

627

8,51

139

,759

78,4

8742

1,22

62,

033,

827

Acc

umul

ated

d

epre

ciat

ion

and

im

pai

rmen

t lo

sses

(3,5

77)

(9,8

51)

(7,3

53)

(297

,158

)(6

,688

)(3

7,44

6)(2

1,58

7)(5

0,72

3)(4

34,3

83)

Net

bo

ok

valu

e76

3,34

531

3,47

112

,620

78,4

691,

823

2,31

356

,900

370,

503

1,59

9,44

4

At

1 Ju

ly 2

017

Co

st/V

alua

tio

n79

6,01

927

4,37

529

,054

351,

488

8,12

439

,871

82,7

6943

7,77

92,

019,

479

Acc

umul

ated

d

epre

ciat

ion

and

im

pai

rmen

t lo

sses

(626

)(6

,568

)(8

,709

)(2

63,6

93)

(5,8

77)

(37,

835)

(11,

028)

(20,

523)

(354

,859

)

Net

bo

ok

valu

e79

5,39

326

7,80

720

,345

87,7

952,

247

2,03

671

,741

417,

256

1,66

4,62

0

The

Gro

up’s

co

nstr

ucti

on

wo

rk-in

-pro

gre

ss r

epre

sent

s ex

pen

dit

ure

for

bui

ldin

gs,

pla

nt a

nd m

achi

nery

und

er c

ons

truc

tio

n.



(Cont’d)

14. Property, plant and equipment (Cont’d)

Depreciation of property, plant and equipment during the financial year was taken up in the financial statements as follows:

Group

2019RM’000

2018RM’000

Recognised in profit or loss (Note 9)

- Cost of sales 58,320 58,010

- Administrative expenses 6,498 6,862

64,818 64,872

The effective date of the revaluation for leasehold land, buildings and bearer plants was 30 June 2019. The valuation was performed by independent professional valuers using a combination of discounted cash flow, replacement cost method and comparison method of valuation.

Had the leasehold land, buildings and bearer plants been carried under the cost model, the carrying amount would have been RM401,677,516 (2018: RM423,329,556).

During the financial year ended 30 June 2019, the Group has sub-let an insignificant portion of vacant office space but has decided not to treat this portion as an investment property because of its insignificant portion in proportion to the whole building. Accordingly, this portion is still classified as property, plant and equipment.

Included in property, plant and equipment of the Group are motor vehicles with net carrying amount of RM2,514,834 (2018: RM424,843) held under hire purchase arrangements.

Property, plant and equipment of the Group with an aggregate carrying value of RM256,886,000 (2018: RM250,881,000) are pledged to licensed banks to secure the loans and borrowings granted to the Group as disclosed in Note 27 to the financial statements.

15. Investment properties

Group

2019RM’000

2018RM’000

At valuation

At 1 July 45,700 45,700

Gain from fair value adjustments recognised in profit or loss 1,630 -

At 30 June 47,330 45,700



(Cont’d)

15. Investment properties (Cont’d)

The followings are recognised in profit or loss in respect of investment properties:

Group

2019RM’000

2018RM’000

Rental income 24 18

Direct expense (1) (1)

23 17

Investment properties are stated at fair value, which has been determined based on valuations performed as at 30 June 2019. The valuations were performed by an independent professional valuer with a recognised and relevant professional qualification and with recent experience in the location and category of the properties being valued.

The valuations were mainly based on comparison method that makes reference to comparable properties which have been sold or being offered for sale in the open market.

16. Land use rights

Group

2019RM’000

2018RM’000

Cost

At 1 July 16,004 11,750

Exchange differences (206) (616)

Transfer from assets of disposal group classified as held for sale - 4,870

At 30 June 15,798 16,004

Accumulated amortisation

At 1 July 4,128 2,558

Charge for the financial year (Note 9) 317 327

Exchange differences (54) (154)

Transfer from assets of disposal group classified as held for sale - 1,397

At 30 June 4,391 4,128



(Cont’d)

16. Land use rights (Cont’d)

Group

2019RM’000

2018RM’000

Net book value

At 30 June 11,407 11,876

Amount to be amortised:

- Within one year 320 320

- Between one to five years 1,280 1,280

- More than five years 9,807 10,276

11,407 11,876

17. Investments in subsidiary companies

Company

2019RM’000

2018RM’000

Unquoted shares, at cost 544,989 490,012

Less: Transfer from assets of disposal group classified as held for sale - 54,977

544,989 544,989

Less: Allowance for impairment (98,785) (96,285)

446,204 448,704


17. Investments in subsidiary companies (Cont’d)

The allowance account in respect of investment in subsidiary companies is used to record impairment losses.

Company

2019RM’000

2018RM’000

Movement in allowance account for investments in subsidiary companies:

At 1 July 96,285 52,350

Impairment loss for the financial year (Note 9) 2,500 43,935

At 30 June 98,785 96,285

Details of the subsidiaries are as follows:

Proportion of ownership interest hold by the Group

Name of subsidiary companies

Country of incorporation

2019%

2018% Principal activities

Held by the Company

Kwantas Oil Sdn. Bhd. Malaysia 100 100 Operation of palm oil mills, kernel crushing plant, palm oil refinery plant, wholesaling and supply of diesel and lubricants, and trading of palm oil

Kwantas Plantations Sdn. Bhd. Malaysia 100 100 Operation of oil palm plantations

Haranky Sdn. Bhd. Malaysia 100 100 Operation of oil palm plantation

Palm Energy Sdn. Bhd. Malaysia 100 100 Dormant

Kwantas International Inc Malaysia 100 100 International trading

Kwantas Oleo Sdn. Bhd. Malaysia 100 100 Operation of oil palm plantation

Kwantas Commodity Trading Sdn. Bhd.

Malaysia 100 100 Dormant


(Cont’d)



(Cont’d)





2019%


Held by the Company (Cont’d)

Dongma Oils & Fats (Guangzhou Free Trade Zone) Co. Ltd.*

People’s Republic of

China

100 100 Operation of a bulking installation, palm oil refinery and shortening plants, and trading of palm oils products

Dongma Oils & Fats (Zhangjiagang Free Trade Zone) Co. Ltd.*

People’sRepublicof China

100 100 Operation of a bulking installation and trading of palm oils products

Dongma Palm Industries (Zhangjiagang) Co. Ltd.*

People’s Republic of

China

100 100 Operation of oleochemicals and glycerine plants

Kwantas Land Development Sdn. Bhd.

Malaysia 100 100 Operation of oil palm plantations

Miracle Harvest Sdn. Bhd. Malaysia 100 100 Rental of leasehold land

Kwantas Edible Oil (Bintulu) Sdn. Bhd.

Malaysia 100 100 Dormant

Green Green Grass Sdn. Bhd. Malaysia 100 100 Operation of a waste incineration plant

PT Kinabalu Invesdag Indonesia*

Indonesia 95 95 Investment holding

Kwantas International Singapore Pte. Ltd. #

Singapore 100 - Dormant

Held through Kwantas Oil Sdn. Bhd.

Maximlink Enterprise Sdn. Bhd.

Malaysia 100 100 Rental of leasehold land



(Cont’d)





2019%


Held through Kwantas Plantations Sdn. Bhd.

Aman Bersatu Sdn. Bhd. Malaysia 100 100 Operation of oil palm plantations

Benar Bersatu Sdn. Bhd. Malaysia 100 100 Operation of oil palm plantation

Kwantas Pelita Plantation (Balingian) Sdn. Bhd.

Malaysia 60 60 Operation of oil palm plantations

Held through Miracle Harvest Sdn. Bhd.

Gagasan Usahasama Sdn. Bhd. Malaysia 100 100 Operation of oil palm plantation

Held through PT Kinabalu Invesdag Indonesia:

PT Kalsum Pratama Perkasa* Indonesia 95 95 Dormant

PT Gerbang Meranti Agrobisnis*

Indonesia 95 95 Operation of oil palm plantations

* Audited by firms of auditors other than PKF Malaysia# No legal requirement to appoint auditors

The proportion of voting rights held by non-controlling interests equals to their proportion of ownership interest held.



(Cont’d)


The non-controlling interests in respect of the subsidiaries of the Group are not material to the Group other than those disclosed below:

Group

2019RM’000

2018RM’000

Kwantas Pelita Plantation (Balingian) Sdn. Bhd.

Current assets 1,692 1,139

Non-current assets 18,189 29,124

Current liabilities 54,614 47,336

Non-current liabilities - -

Equity attributable to owners of the Company (20,840) (10,244)

Non-controlling interests (13,893) (6,829)

Revenue 1,130 1,401

Other Income 324 2,081

Expenses (19,264) (9,452)

Loss for the financial year (17,810) (5,970)

Loss attributable to:



Loss for the financial year (17,810) (5,970)

Other comprehensive loss attributable to:

Owners of the Company - -

Non-controlling interests - -

Total comprehensive loss for the financial year - -



(Cont’d)


The non-controlling interests in respect of the subsidiaries of the Group are not material to the Group other than those disclosed below: (Cont’d)

Group

2019RM’000

2018RM’000

Total comprehensive loss attributable to:



Total comprehensive loss for the financial year (17,810) (5,970)

Dividends paid to non-controlling interest - -

Net cash inflow from operating activities 3,438 2,607

Net cash outflow from investing activities (3,330) (2,742)

Net cash outflow from financing activities (50) (47)

Net cash inflow/(outflow) 58 (182)

The summarised financial information represents amounts before intragroup eliminations.

Acqusition of Subsidiary Company

2019

The Group acquired 100% equity interests in Kwantas International Singapore Pte. Ltd. on 10 May 2019 for a total cash consideration of SGD100.



(Cont’d)

18. Inventories

Group

2019RM’000

2018RM’000

Cost

Raw materials 82,607 95,440

Stores and supplies 13,550 12,285

96,157 107,725

Net realisable value

Semi-finished goods 8,456 612

Finished goods 6,083 4,246

14,539 4,858

110,696 112,583

19. Biological assets

Group

2019RM’000

2018RM’000

At fair value

At 1 July 6,399 8,327

Net loss from fair value adjustments recognised in profit or loss (1,596) (1,928)

At 30 June 4,803 6,399

The biological assets of the Group comprise fresh fruit bunches (“FFB”) prior to harvest. The valuation model adopted by the Group considers the present value of net cash flows expected to be generated from the sale of FFB. To arrive at the fair value, the management has considered the oil content of the unripe FFB and derived at the assumption that the net cash flows to be generated from FFB prior to more than twenty one (21) days to harvest is negligible, therefore quantity of unripe FFB on bearer plant of up to twenty one (21) days prior to harvest was used for valuation purpose. The value of the unripe FFB was determined with reference to the market value of FFB based on Malaysian Palm Oil Board (“MPOB”) reference price as at reporting date, adjusted for harvesting costs, transportation costs and other costs to sell.



(Cont’d)

19. Biological assets (Cont’d)

Sensitivity analysis of FFB

The sensitivity analysis below indicates the approximate change in the Group’s fair value of FFB and profit for the financial year that would arise if the following key estimates and assumptions adopted in the valuation model had changed at the reporting date, assuming all other estimates, assumptions and other variables remained constant.

Increase/(Decrease) in price and volume

2019RM’000

2018RM’000

Selling price 10% 480 640

(10%) (480) (640)

Production volume 10% 492 640

(10%) (492) (640)

20. Trade and non-trade receivables

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Non-current

Non-trade receivable

Third party 8,443 8,443 - -

Less: Allowance for impairment (8,443) (8,443) - -

Non-trade receivable, net - - - -

Current

Trade receivables

Third parties 28,096 13,490 - -

Less: Allowance for impairment (287) (287) - -

Trade receivables, net 27,809 13,203 - -



(Cont’d)

20. Trade and non-trade receivables (Cont’d)

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Non-trade receivables

GST input tax receivable 3,302 5,044 3,301 4,757

Advances 1,579 1,789 - 1

Prepayments 1,790 1,337 - -

Deposits 859 1,493 - 11

Other receivables

- Related party 6,004 2,711 - -

- Third parties 33,691 33,857 - -

47,225 46,231 3,301 4,769

Less: Allowance for impairment (31,580) (30,110) - -

Non-trade receivables, net 15,645 16,121 3,301 4,769

Amount due from a subsidiary company - - 17,525 15,287

- - 17,525 15,287

Total trade and non-trade receivables 43,454 29,324 20,826 20,056

Amount due from a subsidiary company is unsecured, interest free and non-trade in nature. This balance is repayable on demand and to be settled in cash.

Amount due from a related party is unsecured, interest bearing at 5.5% (2018: 8%) and repayable on demand.

Trade receivables are non-interest bearing and the normal credit terms granted by the Group are 30 to 90 days (2018: 30 to 90 days). Other credit terms are assessed and approved on a case-by-case basis. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

The credit risk management objectives, policy and the exposure of the Group are described in Note 32 to the financial statements.



(Cont’d)

20. Trade and non-trade receivables (Cont’d)

During the financial year, the following losses were recognised in profit or loss in relation to impaired financial assets:

Group

Tradereceivables

RM’000

Non-tradereceivables

RM’000Total

RM’000

At 1 July 2017 981 30,112 31,093

Charge for the financial year (Note 9) - 8,443 8,443

Reversal during the financial year (Note 7) - (2) (2)

Written off (694) - (694)

At 30 June 2018 287 38,553 38,840

Effect of adoption of MFRS 9 - - -

At 30 June 2018, restated 287 38,553 38,840

Charge for the financial year (Note 9) - 1,470 1,470

At 30 June 2019 287 40,023 40,310

21. Derivative (liabilities)/assets

Group CompanyPrincipal Fair value Principal Fair value

AmountUSD’000

AssetsRM’000

LiabilitiesRM’000

AmountUSD’000

AssetsRM’000

LiabilitiesRM’000

2019

CurrentForward currency contracts 17,623 - (131) - - -Commodity swap contracts - - (356) - - -

Total derivatives liabilities - (487) - -

2018

CurrentForward currency contracts 41,455 364 - - - -

Commodity swap contracts 31 1,272 - - - -

Total derivatives assets 1,636 - - -



(Cont’d)

21. Derivative (liabilities)/assets (Cont’d)

The Group and the Company classified derivatives as financial assets/liabilities at fair value through profit or loss. The Group and the Company do not apply hedge accounting.

(a) Forward currency contracts

The Group uses forward currency contracts to manage some of the transaction exposures. These contracts are not designated as cash flow or fair value hedges and are entered into for periods consistent with currency transaction exposure and fair value changes exposure.

(b) Commodity forward contract and swap contracts

The commodity forward contracts and swap contracts are entered into with the objective of managing the Group’s exposures to the adverse price movements in the commodities.

22. Cash and cash equivalents

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Cash in hand 40 16 - -

Cash at banks 21,587 20,655 240 2,523

Cash and bank balances 21,627 20,671 240 2,523

Short-term deposits with licensed banks 18,100 4,500 - -

Cash and cash equivalents 39,727 25,171 240 2,523

Short-term deposits with licensed banks

Short-term deposits are made for varying periods of between one (1) day and three (3) months depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates.

The weighted average effective interest rate as at the financial year end for short-term deposits was 1.50% to 3.00% (2018: 1.50% to 3.00%) per annum.



(Cont’d)

23. Discontinued operation and disposal group classified as held for sale

At 30 June 2018, the disposal group classified as held for sale relates to the commitment of the Group’s management to a plan to sell a subsidiary company that operate an oil palm plantation in Malaysia. Efforts to sell the disposal group have commenced, and the disposal was originally expected to be completed by June 2019.

The sale of a subsidiary company was aborted as both parties fail to reach an agreement in negotiating the terms in the contract. Subsequently, the management is no longer committed to sell the subsidiary company and no active programme to locate a buyer is initiated. Therefore, the subsidiary company has ceased to be classified as assets held for sale during the financial year.

The major classes of assets and liabilities classified as held for sale as at 30 June are as follows:

Group

2019RM’000

2018RM’000

Assets:

Property, plant and equipment** - 44,340

Inventories - 598

Assets of disposal group classified as held for sale - 44,938

Liabilities:

Payables and accruals - 24

Deferred tax liabilities (Note 28) - 2,212

Liabilities of disposal classified as held for group sale - 2,236

Net assets of disposal group classified as held for sale - 42,702

** The property, plant and equipment are carried at fair value less costs to sell.



(Cont’d)

23. Discontinued operation and disposal group classified as held for sale (Cont’d)

The movements of the equity of disposal group classified as held for sale for the current and previous financial year are as follows:

Group

Revaluation reserves

Foreign exchange translation reserve Total

2019RM’000

2018RM’000

2019RM’000

2018RM’000

2019RM’000

2018RM’000

As at 1 July, as previously reported 12,531 86,329 - 16,959 12,531 103,288

Effect of transition from FRSs to MFRSs (Note 37) (1,191) (1,467) - - (1,191) (1,467)

As at 1 July, as restated 11,340 84,862 - 16,959 11,340 101,821

Transfer to other reserves (Note 25) (11,340) (493) - (16,090) (11,340) (16,583)

Revaluation deficit, net of deferred tax

- Property, plant and equipment - (2,873) - - - (2,873)

Arising during the financial year - - - (869) - (869)

Realisation of revaluation reserve - (70,156) - - - (70,156)

As at 30 June - 11,340 - - - 11,340

The results of disposal group for the financial year ended 30 June are as follows:

Group

2019RM’000

2018RM’000

Revenue - 9,008

Cost of sales - (3,067)

Profit before taxation from discontinued operations - 5,941

Income tax expense - 178

Profit from discontinued operations, net of tax - 6,119


23. Discontinued operation and disposal group classified as held for sale (Cont’d)

The cash flows attributable to disposal group is as follows:

Group

2019RM’000

2018RM’000

Cash generated from operating activities - 6,119

Net cash inflows - 6,119

24. Share capital

Group/Company

No. of shares

2019 2018

Issued and fully paid:

Ordinary shares 311,677,264 311,677,264

Group/Company

No. of shares

2019RM’000

2018RM’000

Issued and fully paid:

Ordinary shares

At 1 July/30 June 209,566 209,566

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company and are entitled to one vote per share without restrictions at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.


(Cont’d)



(Cont’d)

25. Other reserves

Group

Revaluation reserve

Property, plant and

equipmentRM’000

Biological assets

RM’000

Fair valueadjustment

reserveRM’000

Foreignexchange

translationreserveRM’000

TotalRM’000

At 1 July 2017, as previously reported 584,093 157,595 4,193 23,261 769,142

Effects of transition from FRSs to MFRSs (Note 37) (21,874) (157,595) - (23,261) (202,730)

At 1 July 2017, as restated 562,219 - 4,193 - 566,412

Revaluation surplus net of deferred tax 20,233 - - - 20,233

Arising during the financial year - - - (5,732) (5,732)

Transfer from equity of disposal group classified as held for sale (Note 23) 493 - - 16,090 16,583

At 30 June 2018 582,945 - 4,193 10,358 597,496

Revaluation surplus net of deferred tax 37,082 - - - 37,082

Arising during the financial year - - - (6,019) (6,019)

Transfer from equity of disposal group classified as held for sale (Note 23) 11,340 - - - 11,340

At 30 June 2019 631,367 - 4,193 4,339 639,899

(a) Revaluation reserve

This reserve includes the cumulative net change, net of deferred tax effects, arising from the revaluation of leasehold land, buildings and bearer plants.

(b) Fair value adjustment reserve

This reserve represents the cumulative fair value changes, net of tax.

(c) Foreign exchange translation reserve

The foreign exchange translation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.



(Cont’d)

26. Retained profits

As at 30 June 2019, the entire retained profits of the Company are distributable as single-tier tax exempt dividends under the single-tier system.

27. Loans and borrowings

Group

2019RM’000

2018RM’000

Non-current

Secured:

Hire purchase payables 984 203

Term loans 22,221 26,650

23,205 26,853

Current

Secured:

Bankers’ acceptances 157,997 112,076

Hire purchase payables 1,081 246

Revolving credits 257,000 232,000

Term loans 15,757 18,958

431,835 363,280

Total loans and borrowings

Secured:

Bankers’ acceptances 157,997 112,076

Hire purchase payables 2,065 449

Revolving credits 257,000 232,000

Term loans 37,978 45,608

455,040 390,133



(Cont’d)

27. Loans and borrowings (Cont’d)

Group

2019RM’000

2018RM’000

Maturity structure of loans and borrowings

Within one year 430,521 363,280

Between one to two years 15,109 16,310

Between two to five years 9,410 10,543

455,040 390,133

The interest rate structures are as follows:

Effective interest rate

2019 2018

Bankers’ acceptances 3.79%-5.18% 3.72%-4.22%

Hire purchase payable 4.52%-7.50% 4.52%-7.50%

Short term revolving credit 4.82%-5.90% 3.83%-5.78%

Term loans 5.07%-6.94% 4.72%-7.05%

(a) Hire purchase payables

The hire purchase payables obligations are secured by a charge over the leased assets as disclosed in Note 14 to the financial statements.

The hire purchase facilities shall be repaid in full by 2021.



(Cont’d)


(a) Hire purchase payables (Cont’d)

Future minimum payments under hire purchase payables together with the present value of the net minimum payments are as follows:

Group

2019RM’000

2018RM’000

Minimum hire purchase payables:

Repayable within one year 1,185 264

Repayable between one to two years 725 210

Repayable between two to five years 310 -

2,220 474

Less: Future finance charges (155) (25)

Present value of hire purchase liabilities 2,065 449

Present value of hire purchase liabilities:

Repayable within one year 1,081 246

Repayable between one to two years 683 203

Repayable between two to five years 301 -

2,065 449

Representing hire purchase liabilities:

Current 1,081 246

Non-current 984 203

2,065 449



(Cont’d)


(b) Bankers’ acceptances, revolving credits and term loans

These loans and borrowings of the Group are secured by the following:

(i) Bankers’ acceptances of certain subsidiary companies are secured by corporate guarantees from the Company, a letter of negative pledge from the Company, and a letter of undertaking from the Company.

(ii) Revolving credits of a subsidiary company are secured by corporate guarantee from the Company and first party legal charge over certain oil palm plantations of the subsidiaries.

(iii) Term loans of the Group amounting to RM37,978,000 (2018: RM45,608,000) are secured by way of:

(a) corporate guarantees issued by the Company and by a subsidiary company; (b) negative pledge over properties of a subsidiary company; (c) third party legal charge over landed properties of certain subsidiaries;(d) a first party legal charge over certain oil palm plantations of the subsidiaries; and(e) a letter of undertaking from the Company and a subsidiary company.

28. Deferred tax liabilities

Group

2019RM’000

2018RM’000

At 1 July, as previously reported 225,716 219,881

Effects of transition from FRSs to MFRSs (Note 37) 2,999 1,135

At 1 July, as restated 228,715 221,016

Recognised in profit or loss (Note 12) (2,417) 1,163

Recognised in other comprehensive income 6,358 8,748

Transfer from/(to) disposal group classified as held for sale (Note 23) 2,212 (2,212)

At 30 June 234,868 228,715



(Cont’d)

28. Deferred tax liabilities (Cont’d)

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Group

Property, plant and

equipmentRM’000

Biologicalassets

RM’000Total

RM’000

Deferred tax liabilities:

At 1 July 2018 237,290 - 237,290

Recognised in profit or loss (3,219) - (3,219)

Recognised in other comprehensive income 6,358 - 6,358

Transfer from disposal group classified as held for sale 2,212 - 2,212

At 30 June 2019 242,641 - 242,641

At 1 July 2017, as previously reported 205,451 25,393 230,844

Effects of transition of FRSs to MFRSs (Note 37) 26,528 (25,393) 1,135

At 1 July, as restated 231,979 - 231,979

Recognised in profit or loss (1,225) - (1,225)

Recognised in other comprehensive income 8,748 - 8,748

Transfer to disposal group classified as held for sale (2,212) - (2,212)

At 30 June 2018 237,290 - 237,290

Unutilised tax losses

RM’000

Unabsorbed capital

allowancesRM’000

Unutilised investment

taxRM’000

Total RM’000

Deferred tax assets:

At 1 July 2018 (4,487) (3,369) (719) (8,575)

Recognised in profit or loss 394 (512) 920 802

At 30 June 2019 (4,093) (3,881) 201 (7,773)



(Cont’d)

28. Deferred tax liabilities (Cont’d)

Unutilised tax losses

RM’000

Unabsorbed capital

allowancesRM’000

Unutilised investment

taxRM’000

Total RM’000

Deferred tax assets:

At 1 July 2017 (6,824) (3,369) (770) (10,963)

Recognised in profit or loss 2,337 - 51 2,388

At 30 June 2018 (4,487) (3,369) (719) (8,575)

No deferred tax asset has been recognised for the following items:

Group

2019RM’000

2018RM’000

Unutilised tax losses (39,455) (15,225)

Unabsorbed capital allowances (26,093) (19,951)

Unutilised investment tax allowances (55,122) (39,062)

(120,670) (74,238)

Deferred tax assets at 24% (2018: 24%) not recognised in the financial statements (28,961) (17,817)

Under the Malaysia Finance Act, 2018, which was gazetted on 27 December 2018, the Group’s tax losses with no expiry period amounting to RM39,455,000 as at 30 June 2019 will be imposed with a time limit of utilisation. Any accumulated unutilised tax losses brought forward from year of assessment 2018 can be carried forward for another seven (7) consecutive years of assessment (i.e. from year of assessments 2019 to 2025). The unabsorbed capital allowances and unutilised investment tax allowances can be carried forward indefinitely to be utilised against income from the same business source, subject to no substantial change in shareholders of the subsidiaries.


29. Trade and non-trade payables

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Current

Trade payables

Third parties 29,228 49,678 - -

29,228 49,678 - -

Non-trade payables

Accruals 3,915 2,322 114 114

Deposits 4,792 1,329 1 1

Other payables

- Third parties 16,294 15,797 222 233

25,001 19,448 337 348

Total trade and non-trade payables 54,229 69,126 337 348

Trade payables are non-interest bearing and the normal credit terms granted to the Group are 30 to 90 days (2018: 30 to 90 days).

30. Significant related party transactions

(a) Identities of related parties

Parties are considered to be related to the Group and the Company if the Group and the Company have 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 or the Company and the party are subject to common control or common significant influence. Related parties could be individuals or other entities.


(Cont’d)



(Cont’d)

30. Significant related party transactions (Cont’d)

(b) The aggregate value of transactions and outstanding balances of the related parties of the Group and of the Company were as follows:

Group Transaction valueBalance outstanding

as at 30 June

Name of related partiesType of

transaction2019

RM’0002018

RM’0002019

RM’0002018

RM’000

With companies which have common Directors with the Company and in which certain Directors of the Company have financial interests:

Fordeco Plantations Sdn. Bhd.

Purchase of fresh fruit bunches (1,971) (1,982) - -

Miyasa Sdn. Bhd. Purchase of fresh fruit bunches (2,862) (3,609) - -

Lahad Datu Tyres Sdn. Bhd.

Purchase of tyres, batteries and

lubricants (1,487) (1,738) - -

Sri Bandaran Sdn. Bhd. Purchase of fresh fruit bunches (911) (3,269) 2,571 -

Fordeco Sdn. Bhd. Provision of general servicing

and supply of spare parts (6,807) (7,679) - -



(Cont’d)


(b) The aggregate value of transactions and outstanding balances of the related parties of the Group and of the Company were as follows: (Cont’d)

Group Transaction valueBalance outstanding

as at 30 June


transaction2019

RM’0002018

RM’0002019

RM’0002018

RM’000

With companies which have common Directors with the Company and in which certain Directors of the Company have financial interests: (Cont’d)

Fordeco Construction Sdn. Bhd.

Construction costs/materials (5,078) (3,385) 2,865 2,711

Petrolmax Borneo Sdn. Bhd.

Purchase of diesel (9,020) (8,048) - -

Cindai Development Sdn. Bhd.

Purchase of fresh fruit bunches (1,475) (2,337) 568 -

Bina Segama Sdn. Bhd.Purchase of lubricants (717) (919) - -

Kwan Ah Hee & Sons Realty Sdn. Bhd. Rental (380) (402) - -

Company

With subsidiary companies:

Kwantas Plantations Sdn. Bhd.

Management feeInterest income

2,550 -

3,100 4,878 - -

Kwantas Land Development Sdn. Bhd.

Management feeDividend income

2,150-

2,15032,000

- -



(Cont’d)


(b) The aggregate value of transactions and outstanding balances of the related parties of the Group and of the Company were as follows: (Cont’d)

Company Transaction valueBalance outstanding

as at 30 June


transaction2019

RM’0002018

RM’0002019

RM’0002018

RM’000

With subsidiary companies: (Cont’d)

Gagasan Usahasama Sdn. Bhd Management fee 100 - - -

Maximlink Enterprise Sdn. Bhd. Management fee 80 - - -

Miracle Harvest Sdn. Bhd. Management fee 80 - - -

Green Green Grass Sdn. Bhd. Management fee 80 - - -

Kwantas Oil Sdn. Bhd. Management fee 2,200 2,400 17,525 15,287

Aman Bersatu Sdn. Bhd. Management fee 550 450 - -

Kwantas Pelita Plantation (Balingian) Sdn. Bhd. Management fee 1,000 1,000 - -

Haranky Sdn. Bhd. Management fee 600 500 - -

Kwantas Oleo Sdn. Bhd. Management fee 550 450 - -

Benar Bersatu Sdn. Bhd. Management fee 550 450 - -



(Cont’d)


(c) The remuneration of Directors and other members of key management during the financial year were as follows:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Short-term employee benefits 2,146 3,226 1,604 2,591

Contributions to defined contribution plan 214 360 158 295

2,360 3,586 1,762 2,886

Included in the key management personnel are:

Directors’ remuneration (Note 11) 2,360 3,586 1,762 2,886

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company either directly or indirectly. The key management personnel comprise all the Directors of the Group and of the Company and members of senior management of the Group.

The terms and conditions and prices of the above transactions are mutually agreed between the parties.

31. Commitments and contingencies

(a) Capital commitments

Group

2019RM’000

2018RM’000

Capital expenditure commitments

Approved and contracted for:

- Acquisition of property, plant and equipment 1,847 1,847

(b) Operating lease commitments – as lessee

The Group has entered into non-cancellable operating lease agreements for the use of land, buildings and certain plant and machinery. The leases typically run for an average period of two (2) and three (3) years, with no renewal or purchase option. There are no restrictions placed upon the Group by entering into these leases.



(Cont’d)

31. Commitments and contingencies (Cont’d)

(b) Operating lease commitments – as lessee (Cont’d)

The Group also leases various tractors and vehicles under cancellable operating lease arrangements. The Group is required to give a six (6) months’ notice for the termination of those agreements.

(c) Contingent liability

Group

2019RM’000

2018RM’000

Legal claims (Note 36(ii)) 14,847 -

32. Financial instruments

(a) Categories of financial instruments

Group2019

Carrying amountRM’000

Financialassets

measured atamortised

costRM’000

Fair valuethrough profit or

lossRM’000

Financial assets

Trade and non-trade receivables 41,664 41,664 -

Cash and cash equivalents 39,727 39,727 -

81,391 81,391 -


Financialliabilities


costRM’000


lossRM’000

Financial liabilities

Loans and borrowings 455,040 455,040 -

Trade and non-trade payables 54,229 54,229 -

Derivative liabilities 487 - 487

509,756 509,269 487



(Cont’d)

32. Financial instruments (Cont’d)

(a) Categories of financial instruments (Cont’d)

Group2018



RM’000


lossRM’000

Financial assets


Derivative assets 1,636 - 1,636


54,794 53,158 1,636

CarryingamountRM’000



costRM’000


lossRM’000


Loans and borrowings 390,133 390,133 -

Trade and non-trade payables 69,126 69,126 -

459,259 459,259 -

Company 2019


Financialassets


costRM’000


lossRM’000

Financial assets


Cash and cash equivalents 240 240 -

21,066 21,066 -



(Cont’d)



Company 2019



measured at amortised

costRM’000


lossRM’000

Financial liability

Trade and non-trade payables 337 337 -

337 337 -

Company2018



RM’000


lossRM’000

Financial assets



22,579 22,579 -




costRM’000


lossRM’000

Financial liability

Trade and non-trade payables 348 348 -

348 348 -



(Cont’d)



A reconciliation of trade and non-trade receivables financial assets to the amounts reflected in the statements of financial position is as follows:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Trade and non-trade receivables

As reflected in the statements of financial position (Note 20) 43,454 29,324 20,826 20,056

Less: Prepayments (1,790) (1,337) - -

41,664 27,987 20,826 20,056

(b) Net (loss)/gain arising from financial instruments

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Net (loss)/gain arising from:

Financial assets at amortised costLoans and receivables

- Allowance on receivables (1,470) (8,443) - -

- Realised and unrealised gain/(loss) on foreign exchange 77 (1,738) - 8,817

- Reversal of allowance for impairment on receivables - 2 - -

- Interest income 789 1,276 - 4,902

Fair value through profit or loss

- Fair value (loss)/gain on derivative financial instruments (1,499) 15,845 - 13,256

Financial liabilities at amortised cost

- Interest expense (24,753) (24,536) - (18,583)

(26,856) (17,594) - 8,392



(Cont’d)


(c) Financial risk management

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 commodity 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 and the Company do not apply hedge accounting.

The following sections provide details regarding the Group’s and the Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(i) 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 non-trade receivables. For other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

As at the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by:

- the carrying amount of each class of financial assets recognised in the statements of financial position; and

- a nominal amount of RM341,000,000 (2018: RM321,126,000) relating to corporate guarantees provided by the Company to the banks to secure loans and borrowings granted to certain subsidiaries.



(c) Financial risk management (Cont’d)

(i) Credit risk (Cont’d)

Trade receivables

At each reporting date, the Group assesses whether any of the trade receivables are credit impaired.

The gross carrying amounts of credit impaired trade receivables are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay amounts subject to the write-off. Nevertheless, trade receivables and contract asset that are written off could still be subject to enforcement activities.

The Group has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables.

The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the reporting date are as follows:

2019 2018

RM’000%

of total RM’000%

of total

By country:

Singapore - - 192 2

Malaysia 15,482 56 10,991 83

People’s Republic of China 12,327 44 2,020 15

27,809 100 13,203 100

By industry sectors:

Palm products 15,482 56 11,183 85

Oleo-chemical products 12,327 44 2,020 15

27,809 100 13,203 100


(Cont’d)



(Cont’d)




Trade receivables (Cont’d)

The ageing analysis of the Group’s trade receivables as at the reporting date is as follows:

Group

2019RM’000

2018RM’000

Not past due 26,827 11,809

Past due:

- Less than 30 days 353 764

- Between 31 to 60 days 13 7

- Between 61 to 90 days 5 8

- Between 91 to 120 days 90 -

- More than 120 days 521 615

982 1,394

Impaired 287 287

28,096 13,490

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables without repayment are written off if past due for more than one (1) year and are not subject to enforcement activity.

As at the end of the reporting period, the Group did not recognise any additional allowance for impairment losses.

Inter-company advances

The Company provides advances to subsidiaries. The Company monitors the ability of the subsidiaries to repay the advances on an individual basis and considers advances to subsidiaries to have low credit risks.



(Cont’d)




Inter-company advances (Cont’d)

The Company determines the probability of default for these advances individually using internal information available.

Advances provided are not secured by any collateral or supported by any other credit enhancements.

Cash and cash equivalents

The cash and cash equivalents are held with banks and financial institutions. These banks and financial institutions have low credit risks. Consequently, the Group and the Company are of the view that loss allowance is not material and hence, it is not provided for.

Other receivables

The impairment for estimated irrecoverable amount from other receivables of RM40,023,000 (2018: RM38,553,000) by the Group. The Group measures the allowance for impairment for other receivables using a lifetime expected credit loss using the general 3 stage ECL model.

Financial guarantees

The fair value of financial guarantees provided by the Company to the banks to secure banking facilities granted to certain subsidiaries with nominal amount of RM341,000,000 (2018: RM321,126,000) are negligible as the probability of the financial guarantees being called upon is remote due to the following factors:

(a) Most of the outstanding loans and borrowings are adequately secured over the assets of the respective subsidiaries in which their market values upon realisation are higher than the outstanding loans and borrowing amounts; and

(b) For short term loans and borrowings which are not secured by the assets of the subsidiaries, the respective subsidiaries will be able to meet their short term loans and borrowings obligations as and when they are due as they are in net current assets position.

(ii) 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 the maturities 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.



(Cont’d)



(ii) Liquidity risk (Cont’d)

As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

The following table sets out the maturity profile of the Group’s and the Company’s financial assets and liabilities as at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period):

Group30 June 2019


Contractual undiscounted

cash flowsRM’000

Within1 year

RM’000

1 – 5years

RM’000

Over5 yearsRM’000

Financial assets

Trade and non-trade receivables 41,664 41,664 41,664 - -

Cash and cash equivalents 39,727 39,727 39,727 - -

81,391 81,391 81,391 - -


Loans and borrowings 455,040 457,852 432,224 25,628 -

Trade and non-trade payables 54,229 54,229 54,229 - -

Derivative liabilities 487 487 487 - -

509,756 512,568 486,940 25,628 -

Total net undiscounted financial liabilities (428,365) (431,177) (405,549) (25,628) -



(Cont’d)




Group30 June 2018



cash flowsRM’000

Within1 year

RM’000

1 – 5years

RM’000

Over5 yearsRM’000

Financial assets


Derivative assets 1,636 1,636 1,636 - -


54,794 54,794 54,794 - -


Loans and borrowings 390,133 397,746 364,763 32,983 -


459,259 466,872 433,889 32,983 -

Total net undiscounted financial liabilities (404,465) (412,078) (379,095) (32,983)

-



(Cont’d)




Group1 July 2017



cash flowsRM’000

Within1 year

RM’000

1 – 5years

RM’000

Over5 yearsRM’000

Financial assets

Trade and non-trade receivables 78,804 78,804 69,204 9,600 -


150,747 150,747 141,147 9,600 -


Loans and borrowings 567,786 588,611 419,953 53,996 114,662


Derivative liabilities 14,208 14,208 14,208 - -

689,707 710,532 541,874 53,996 114,662

Total net undiscounted financial liabilities (538,960) (559,785) (400,727) (44,396) (114,662)



(Cont’d)




Company30 June 2019



cash flowsRM’000

Within1 year

RM’000

1 – 5years

RM’000

Over5 yearsRM’000

Financial assets


Cash and cash equivalents 240 240 240 - -

21,066 21,066 21,066 - -

Financial liability

Trade and non-trade payables 337 337 337 - -

337 337 337 - -

Total net undiscounted financial assets 20,729 20,729 20,729 - -



(Cont’d)




Company30 June 2018



cash flowsRM’000

Within1 year

RM’000

1 – 5years

RM’000

Over5 yearsRM’000

Financial assets



22,579 22,579 22,579 - -

Financial liability


348 348 348 - -

Total net undiscounted financial assets 22,231 22,231 22,231 - -





Company1 July 2017



cash flowsRM’000

Within1 year

RM’000

1 – 5years

RM’000

Over5 yearsRM’000

Financial assets



207,212 207,212 207,212 - -


Loans and borrowings 208,743 228,597 68,118 45,939 114,540


Derivative liabilities 13,256 13,256 13,256 - -

222,489 242,343 81,864 45,939 114,540

Total net undiscounted financial (liabilities)/assets (15,277) (35,131) 125,348 (45,939) (114,540)

As at the reporting date, the counterparty to the financial guarantees does not have a right to demand cash as the default has not occurred. Accordingly, financial guarantees under the scope of MFRS 9 Financial Instruments are not included in the above maturity profile analysis.

(iii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from its loans and borrowings with floating interest rate. The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts.


(Cont’d)



(Cont’d)



(iii) Interest rate risk (Cont’d)

The following table details the sensitivity analysis to a reasonably possible change in the interest rates as at the end of the reporting period, with all other variables held constant:

Group Company

(Increase)/Decrease (Increase)/Decrease

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Effects on loss after taxation

Increase of 25bp/25bp (865) (741) - -

Decrease of 25bp/25bp 865 741 - -

(iv) 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 change in foreign exchange rate.

The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than Ringgit Malaysia (RM). The currencies giving rise to this risk are primarily Renminbi (RMB) and United States Dollar (USD).

The Group uses forward currency contracts to eliminate the currency exposures on any individual transactions for which payment is anticipated more than one (1) month after the Group has entered into a firm commitment for a sale or purchase. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy not to enter into forward contracts until a firm commitment is in place. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness.

Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level.



(Cont’d)



(iv) Foreign currency risk (Cont’d)

The net unhedged financial assets and financial liabilities of the Group and the Company that are not denominated in their functional currencies are as follows:

Group2019

RenminbiRM’000

United States Dollar

RM’000Total

RM’000

Financial asset

Cash and cash equivalents 15 683 698

15 683 698

Financial liability

Loans and borrowings - 34,063 34,063

- 34,063 34,063

Net financial asset/(liability) held in non-functional currencies 15 (33,380) (33,365)

Group2018

RenminbiRM’000


RM’000Total

RM’000

Financial assets

Trade and non-trade receivables - 191 191

Cash and cash equivalents 102 2,877 2,979

102 3,068 3,170

Financial liability

Trade and non-trade payables - 102 102

- 102 102

Net financial assets held in non-functional currencies 102 2,966 3,068



(Cont’d)



(iv) Foreign currency risk (Cont’d)

Company2019

RenminbiRM’000


RM’000Total

RM’000

Financial asset

Cash and cash equivalents - 9 9

Net financial asset held in non-functional currencies - 9 9

Company2018

RenminbiRM’000


RM’000Total

RM’000

Financial asset

Cash and cash equivalents - 2,019 2,019

Net financial asset held in non-functional currencies - 2,019 2,019

The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies as at the end of the reporting period, with all other variables held constant:

Group Company

Increase/(Decrease) Increase/(Decrease)

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Effects on loss after taxation

RM/USD

Strengthened by 5% (2018: 5%) 1,267 117 1 76

Weakened by 5% (2018: 5%) (1,267) (117) (1) (76)



(Cont’d)



(v) Commodity price risk

The Group is exposed to commodity price risk arising from price fluctuations on FFB, crude palm oil, palm kernel and oleochemical products. Management reviews these risks and takes proactive measures to mitigate its effects by monitoring the market condition and maximising production and operational efficiencies on a regular basis. The Group has entered into commodity forward contracts and swap contracts to manage the Group’s exposures to the adverse price movements in the commodities.

33. Fair value information

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Group and the Company use the following fair value hierarchy for determining and disclosing the fair value by valuation technique:

Level 1: quoted (unadjusted) prices in active market for identical assets or liabilitiesLevel 2: other techniques for which all inputs that have a significant effect on the recorded fair value are

observable, either directly or indirectlyLevel 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based

on observable market data

As at the reporting date, the Group and the Company held the following at fair value in the statements of financial position:

Group2019


Level 1RM’000

Level 2RM’000

Level 3RM’000

Non-financial assets

Property, plant and equipment

- Long term leasehold land 789,521 - - 789,521

- Buildings 302,508 - - 302,508

- Bearer plants 345,188 - - 345,188

Investment properties 47,330 - - 47,330

Biological assets 4,803 - - 4,803

1,489,350 - - 1,489,350



(Cont’d)

33. Fair value information (Cont’d)

Group2019


Level 1RM’000

Level 2RM’000

Level 3RM’000

Financial assets

Derivatives

- Forward currency contracts 131 - 131 -

- Commodity swap contracts 356 - 356 -

487 - 487 -

Group2018


Level 1RM’000

Level 2RM’000

Level 3RM’000

Non-financial assets

Property, plant and equipment

- Long term leasehold land 760,832 - - 760,832

- Buildings 301,341 - - 301,341

- Bearer plants 362,208 - - 362,208

Investment properties 45,700 - - 45,700

Biological assets 6,399 - - 6,399

1,476,480 - - 1,476,480


Derivatives

- Forward currency contracts 364 - 364 -

- Commodity swap contracts 1,272 - 1,272 -

1,636 - 1,636 -



(Cont’d)

33. Fair value information (Cont’d)

(i) Derivatives

Forward currency contracts, cross currency interest rate swaps, commodity forward and swaps contracts are valued using a valuation technique with market observable inputs. The most frequency applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporated various inputs including foreign exchange spot and forward rates, zero-coupon yield curves and forward rate curves.

(ii) Long term leasehold land, buildings, investment properties and bearer plants

The valuation of long term leasehold land, buildings, investment properties and bearer plants are based on a combination of comparable market transactions adjusted to account for the specific characteristic of the asset, and the discounted cash flow model. Significant unobservable inputs are used by the independent valuer in determining the fair value of the asset, which include the discount rate use in the discounted cash flow model and adjustment factors to account for the specific characteristics of the asset when using the comparable market transactions and replacement cost methods. The resulting fair value based on the independent valuer’s professional opinion is therefore sensitive to these unobservable inputs, and changes to these inputs may result in a significantly higher or lower fair value measurement.

The financial assets and financial liabilities maturing within the next twelve (12) months approximated their fair values due to the relatively short-term maturity of the financial instruments.

The Group has no fixed rate financial liabilities (other than finance leases which is outside the scope of MFRS 9) and therefore the fair value of its loans and borrowings are not materially different from their carrying values, as floating rate instruments are re-priced to market interest rates on or near the reporting date.

The fair value of financial guarantees is determined based on probability weighted discounted cash flow method. The probability has been estimated and assigned using the following key assumptions:

- The likelihood of the guaranteed party defaulting within the guaranteed period;- The exposure on the portion that is not expected to be recovered due to the guaranteed party’s default;

and- The estimated loss exposure if the party guaranteed were to default.

The financial guarantees have not been recognised in the financial statements of the Group as the requirements to reimburse are remote and the Group does not expect to incur material losses under these corporate guarantees. As at 30 June 2019, there was no indication that the subsidiaries would default on payments.

34. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a good credit rating and healthy capital ratios in order to support a balanced growth objective in its business and to maximise shareholder value. To achieve this objective, the Group may make adjustments to the Group internal plans in its expansion of plantation areas and plantation program in view of changes in economic conditions and the free cash flow position.



(Cont’d)

34. Capital management (Cont’d)

The Group monitors its capital by reference to the gearing ratio. The Group’s strategies were unchanged from the previous financial year. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as loans and borrowings less cash and cash equivalents. The Group intends to manage its gearing ratio at below 0.70 level over the near to medium term.

The gearing ratio of the Group and of the Company as at the end of the reporting period was as follows:

Group Company 2019

RM’0002018

RM’0002019

RM’0002018

RM’000

Loans and borrowings 455,040 390,133 - -Less: Cash and cash equivalents (39,727) (25,171) (240) (2,523)

Net debt/(asset) 415,313 364,962 (240) (2,523)

Total equity 1,118,406 1,186,991 465,533 470,935

Gearing ratio 0.37 0.31 - -

Under the requirement of Bursa Malaysia Practice Note 17, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than the twenty five percent (25%) of the issued and paid-up capital and such shareholders’ equity is not less than RM40 million. The Group has complied with this requirement.

35. Segment information

(i) Operating segment

For management purposes, the Group is organised into business units based on products and services, and has three (3) reportable operating segments as follows:

(a) Oil palm plantations and palm products segment is in the business of management and operation of plantations, manufacturing and sale of palm oils and fats products, and operation of bulking installations.

(b) Oleochemical products processing segment is in the business of manufacturing and sale of oleochemical, glycerine and stearic acid products.

(c) The other segment is in the business of letting of commercial properties, generating and supply of steam, and purchase and sale of diesel.

Except as indicated above, no operating segment has been aggregated to form the above reportable operating segments.

The Group’s Chief Operating Decision Maker monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Income taxes are managed on a group basis and are not allocated to operating segments.



(Cont’d)

35.

Seg

men

t in

form

atio

n (C

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(i)

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t (C

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Rev

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593,

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--

(a)

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--

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(Cont’d)35

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(Co

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)

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35. Segment information (Cont’d)

(i) Operating segment (Cont’d)

Notes: Nature of adjustment and eliminations to arrive at amounts reported in the consolidated financial statements.

(a) Inter-segment revenue are eliminated on consolidation.

(b) Additions to non-current assets consist of:

Group

2019RM’000

2018RM’000

Property, plant and equipment 18,158 13,010

(c) The following items are added to segment assets to arrive at total assets reported in the consolidated statement of financial position:

Reconciliation of assets

Group

2019RM’000

2018RM’000

Tax recoverable 3,234 130

(d) The following items are added to segment liabilities to arrive at total liabilities reported in the consolidated statement of financial position:

Group

2019RM’000

2018RM’000

Deferred tax liabilities 234,868 228,715

Loans and borrowings 455,040 390,133

689,908 618,848


(Cont’d)



(Cont’d)

35. Segment information (Cont’d)

(ii) 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

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Malaysia 506,709 229,917 1,481,163 1,463,366

The People’s Republic of China 185,905 209,943 179,489 191,102

Indonesia - 127 464 2,552

Europe 32,543 26,710 - -

India 41,118 289,082 - -

South Korea 7,390 11,624 - -

United States - 3,869 - -

773,665 771,272 1,661,116 1,657,020

Non-current assets information presented above consist of the following items as presented in the consolidated statement of financial position:

2019RM’000

2018RM’000

Property, plant and equipment 1,602,379 1,599,444

Investment properties 47,330 45,700

Land use rights 11,407 11,876

1,661,116 1,657,020

(iii) Major customers

Revenue from 2 (2018: 2) major customers amounted to RM366,176,000 (2018: RM404,297,000) representing 47% (2018: 52%) arising from sale of crude palm oil, crude palm kernel oil, refined bleached deodorised stearin and olein.



(Cont’d)

36. Material litigation

(i) A Writ of Summons dated 27 June 2014 was filed by Inno Integrasi Sdn. Bhd. (Plaintiff or Appellant) and served to Kwantas Oil Sdn. Bhd. (KOSB or Respondent), a wholly-owned subsidiary of the Company, whereby the Plaintiff claimed for loss of profit of approximately RM66,900,000 for the alleged breached/repudiation of agreements entered into by Plaintiff with KOSB in relation to the supply of organic palm wastes together with land leased by KOSB to the Plaintiff, and in return, Plaintiff will process the organic palm wastes to become bio-organic fertilizer (BF) and re-sell to KOSB. KOSB filed its Statement of Defence and Counterclaim on 5 August 2014.

KOSB has however Counterclaimed against the Plaintiff for outstanding rental, dismantling of Plaintiff’s plant and possession of the land being occupied by the Plaintiff, and damages and declarative reliefs against the Plaintiff.

Based on the Court order dated 21 December 2017, the High Court adjudged that the Plaintiff’s claim is dismissed and shall forthwith pay the defendant costs of RM150,000 subject to payment of allocator fee. The Plaintiff is appealing against the High Court’s decision in dismissing the RM66,900,000 claims against KOSB and in allowing KOSB’s Counterclaim. In respect of the above appeal, KOSB has filed a Notice of Motion on 10 January 2019 to strike out the appeal from the Plaintiff.

The application to strike out the Record of Appeal as a whole or alternatively part of the Record of Appeal was heard on 19 March 2019. The Court of Appeal has ordered for the Record of the Appeal to be amended by the Appellant, indicating the objection made by the Respondent of the disputed documents. Further, the Court of Appeal has ordered the Appellant to give further Supplementary Record of Appeal to include the exhibits, namely the MPOB licenses of the Respondent that were improperly excluded from the Record of Appeal within 14 days from the hearing day. However, the Court of Appeal did not award any costs.

The legal counsel is of the opinion that KOSB has a stay of the High Court order and accordingly, no further provision for liability has been made in these financial statements.

(ii) A Writ of Summons dated 11 September 2018 was filed by Shanghai Hengtong Energy Development Co. Ltd. (“SHT”) and served to Dongma Palm Industries (Zhangjiagang) Co. Ltd. (“DMPI”), a wholly-owned subsidiary of the Company, whereby SHT claimed for loss of profit on termination of contract plus interest of RMB33,718,397 (equivalent to approximately RM20,399,360) in respect of a Processing Contract and its Supplemental Agreement (together “the Contract”) entered into between SHT and DMPI on 27 September 2017 and 19 December 2017 respectively to process 10,000 MT of palm stearin per month on behalf of SHT by DMPI.

The legal proceedings have commenced on 24 October 2018 and DMPI has appointed a solicitor in Shanghai, People’s Republic of China to represent DMPI in the legal suit.

On 10 December 2018, DMPI has filed a Counterclaim of RMB26,715,303 (equivalents to approximately RM16,184,130) against SHT to claim for processing fee, interest loss, damages, marketing fee, storage fee, and anticipatory processing fee due to SHT’s failure to deliver palm oil timely and sufficiently.

Based on the judgement of the Court received on 24 October 2019, the Court adjudged that DMPI shall compensate SHT RMB24,436,768 (equivalent to approximately RM14,725,596) as damages within 10 days after the judgement takes effect and the Court costs of RMB201,862 (equivalent to approximately RM121,642) shall be borne by DMPI.

The Group had on the same day, received the judgement of the Court regarding the Counterclaim filed on 10 December 2018.



(Cont’d)

36. Material litigation (Cont’d)

(ii) The Court adjudged that SHT shall compensate DMPI the processing fee and interest loss amounted to RMB734,690 (equivalent to approximately RM442,724) within 10 days after the judgement takes effect and DMPI should bear the Court costs of RMB164,228 (equivalent to approximately RM98,964).

The legal counsel is of the opinion that DMPI has good grounds to file an appeal on both of the judgements received on 24 October 2019 and DMPI is in the process of filing an appeal against the Court’s decision. Accordingly, contingent liability has been disclosed in the financial statements.

(iii) A Writ of Summons and Statement of Claim dated 28 February 2019 was filed by Technopalm Resources Sdn. Bhd. (“TRSB”) and served to Kwantas Plantations Sdn. Bhd. (“KPSB”), a wholly-owned subsidiary of the Company, whereby TRSB claimed for outstanding sum of work done being RM557,089 plus interest at the rate of 5% per annum calculated from the date of judgement to the date of full payment and to recover other costs incurred for the filing of this Writ. KPSB filed its Statement of Defence and Counterclaim against TRSB for loss and damages suffered as a result of the unsatisfactory works by TRSB for land and oil palm nursery development on 29 April 2019.

The hearing of the case has yet to be fixed by the court.

37. Transition to the new MFRS Framework

As stated in Note 2 to the financial statements, these are first financial statements of the Group and of the Company prepared in accordance with MFRSs. Adoption of the new MFRS Framework requires that all the standards in MFRSs to be applied to the Group’s and the Company’s financial statements for the current financial year ended 30 June 2019, the comparative financial statements for the previous financial year ended 30 June 2018, and to the opening statement of financial position at the date of transition to MFRS. MFRS provides for some mandatory exceptions and non-mandatory exceptions to the retrospective application of some standards.

(a) Non-mandatory exemptions

As provided in MFRS 1, first-time adoption of MFRSs can elect optional exemptions from full retrospective application of MFRSs. The Group and the Company have elected to apply MFRS 3 Business Combinations prospectively from the date FRS 3 Business Combination was adopted and to deem the carrying amount of investment in each subsidiary to be the cost of the investment in the separate financial statements as at the date of transition to MFRSs.

(b) Exceptions to the retrospective application of other MFRSs

At the date of transition, the Group and the Company did not retrospectively change the accounting policies that it followed under the previous FRS framework for the following transactions:

(i) Derecognition of financial assets and financial liabilities

For financial assets and financial liabilities derecognised under the previous FRS Framework before the date of transition, the Group and the Company did not recognise them upon adoption of the MFRS Framework. Conversely, for financial assets and liabilities that would have been derecognised under the MFRS Framework, the Group and the Company chose to continue to recognise them until they are disposed or settled.



(Cont’d)

37. Transition to the new MFRS Framework (Cont’d)

(b) Exceptions to the retrospective application of other MFRSs (Cont’d)

(ii) Accounting estimates

Prior to 1 July 2017, the Group and the Company used its judgement to provide for bad and doubtful debts of trade and non-trade receivables. Specific provisions were made when a debt was assessed as bad. Upon adoption of the MFRS Framework, the Group’s and the Company’s assessment of impairment of financial assets is based on incurred loss event, where individual impairment and collective impairment are recognised based on objective evidences of impairment. However, the amount of allowances for bad and doubtful debts at the date of transition were not adjusted retrospectively on that date.

(c) Property, plant and equipment – previous revaluation as deemed cost exemption

Under FRS, valuation adjustments on certain property, plant and equipment were incorporated into the financial statements. The Group has elected to use the previous revaluation as deemed cost under MFRS to measure bearer plants at the date of transition. Accordingly, the carrying amounts of these property, plant and equipment as at 1 July 2017 have not been restated. The revaluation surplus of the Group as at 1 July 2017 of RM157,595,000 was reclassified to retained profits.

(d) Bearer plants and biological assets

Under FRS, all the new planting expenditure incurred from land clearing, planting, field upkeep and maintenance to the point of maturity was capitalised under biological assets and was not amortised. Replanting expenditure which represents cost incurred in replanting old planted areas, was charged to profit or loss as and when incurred. Biological assets-agricultural produce which form part of the bearer plants were not recognised separately.

Upon transition to MFRS, new planting expenditure and replanting expenditure are accounted for as property, plant and equipment in accordance with MFRS 116 and measured at fair value less accumulated depreciation and accumulated impairment losses recognised after the date of the revaluation whereas biological assets-agricultural produce within the scope of MFRS 141 are measured at fair value less costs to sell.

The transition will also result in additional depreciation on property, plant and equipment and replanting expenditure that were charged to profit or loss prior to the adoption of the Amendments will be reversed and capitalised under property, plant and equipment. Changes in fair value less costs to sell of the biological assets-agricultural produce will be recognised in profit or loss as disclosed in Note 19 to the financial statements.



(Cont’d)


(e) Changes in accounting policies

Adoption of MFRS also requires that the Group changes its accounting policies for recognition and measurement of some items. The effects of adopting the MFRS is discussed below:

(i) MFRS 15 Revenue from Contracts with Customers

MFRS 15 supersedes MFRS 111 Construction Contracts, MFRS 118 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. MFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

MFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The Group adopted MFRS 15 using the modified retrospective method of adoption with the date of initial application of 1 July 2018. Under this method, the standard can be applied either to all contracts at the date of initial application or only to contracts that are not completed at this date. The Group elected to apply the standard only to contracts that are not completed as at 1 July 2018.

The cumulative effect of initially applying MFRS 15 is recognised at the date of initial application as an adjustment to the opening balance of retained earnings. Therefore, the comparative information was not restated and continues to be reported under MFRS 111, MFRS 118 and related Interpretations.

However, there is no financial impact on the adoption of MFRS 15 to the Group as there is no past record on the variable consideration, such as right of return and volume rebates to its customers. The Group has recognised its revenue based on the performance obligation satisfied at a point in time in prior years.

(ii) MFRS 9 Financial Instruments

MFRS 9 Financial Instruments replaces MFRS 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three (3) aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group and the Company applied MFRS 9 retrospectively, with an initial application date of 1 July 2018. The Group and the Company have not restated the comparative information, which continues to be reported under MFRS 139. Differences arising from the adoption of MFRS 9 have been recognised directly in retained earnings and other components of equity.

The following table and the accompanying notes below explain the original measurement categories under MFRS 139 and the new measurement categories under MFRS 9 for each class of the Group’s and the Company’s financial assets and financial liabilities as at 1 July 2018.



(e) Changes in accounting policies (Cont’d)


The effect of adopting MFRS 9 on the carrying amounts of financial assets at 1 July 2018 relates solely to the new impairment requirements.

• Classification and measurement of financial assets and financial liabilities

Note

Original classification under MFRS

139

New classification

under MFRS 9

Original carrying

amount under MFRS 139

RM’000

New carrying

amount under MFRS 9RM’000

Group

Financial assets

Trade and non-trade receivables (a)


Amortised cost 29,324 29,324

Derivative assets

(b)

Fair value through profit

or loss

Fair value through profit

or loss 1,636 1,636




Company

Financial assets

Trade and non-trade receivables (a)







(Cont’d)



(Cont’d)


(e) Changes in accounting policies (Cont’d)


• Classification and measurement of financial assets and financial liabilities (Cont’d)

(a) Trade and non-trade receivables that were classified as loans and receivables under MFRS 139 are now classified at amortised cost. Trade and non-trade receivables financial assets (i.e., Loan to subsidiaries) classified as Loans and receivables as at 30 June 2018 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest.

(b) Derivative assets which will continue to be measured at fair value through profit and loss under MFRS 9.

The classification is based on two (2) criteria: (i) the Group’s business model for managing the assets; and (ii) whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding.

The assessment of the Group’s business model was made as of the date of initial application, 1 July 2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

There are no changes in classification and measurement for the Group’s and the Company’s financial liabilities.

The classification and measurement requirements of MFRS 9 did not have a significant impact to the Group and to the Company other than as disclosed above.

• Impairment

MFRS 9 replaces the ‘incurred loss’ model in MFRS 139 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at fair value through other comprehensive income (FVOCI), but not to investments in equity instruments. Under MFRS 9, credit losses are recognised earlier than under MFRS 139. For assets in the scope of the MFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile.

• Hedge accounting

There is no impact on the changes in hedge accounting as the Group does not apply hedge accounting.



(Cont’d)


Reconciliations of financial statements

The accounting policies and the optional exemption elected by the Group and the Company have been applied in the opening MFRS Statement of Financial Position as at 1 July 2017 and throughout all periods presented in the financial statements.

The effects of the change in policy on the line items are as follows:

(a) Reconciliation of Statement of Profit or Loss and Other Comprehensive Income

Statement of Profit or Loss and Other Comprehensive Income For the Financial Year Ended 30 June 2018

30 June 2018 Note

Previously stated under

FRSsRM’000

Effects of transition to

MFRSsRM’000

Restated under

MFRSsRM’000

Revenue 771,272 - 771,272

Cost of sales (i) (638,961) (27,369) (666,330)

Gross profit 132,311 (27,369) 104,942

Interest income 1,276 - 1,276

Other operating income 34,599 - 34,599

Selling and distribution expenses (41,403) - (41,403)

Administrative and other expenses (104,045) - (104,045)

Other operating expenses (ii) (39,604) (10,120) (49,724)

Finance costs (24,536) - (24,536)

Loss before taxation from continuing operations (41,402) (37,489) (78,891)

Income tax expense (20,634) - (20,634)

Loss from continuing operations, net of tax (62,036) (37,489) (99,525)

Discontinued operations

Profit from discontinued operations, net of tax 6,119 - 6,119

Loss for the financial year (55,917) (37,489) (93,406)



(Cont’d)


Reconciliations of financial statements (Cont’d)

(a) Reconciliation of Statement of Profit or Loss and Other Comprehensive Income (Cont’d)

Statement of Profit or Loss and Other Comprehensive Income For the Financial Year Ended 30 June 2018 (Cont’d)

30 June 2018 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

Other comprehensive loss

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operation (6,601) - (6,601)

Items that will not be reclassified in subsequent period to profit or loss:

Net (deficit)/surplus on revaluation of leasehold land, buildings and Biological assets (15,976) 33,336 17,360

Other comprehensive (loss)/income for the financial year, net of tax (22,577) 33,336 10,759

Total comprehensive loss for the financial year (78,494) (4,153) (82,647)



(Cont’d)





30 June 2018 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

(Loss)/Profit attributable to:


From continuing operations (58,128) (37,021) (95,149)

From discontinued operations 6,119 - 6,119

(52,009) (37,021) (89,030)

Non-controlling interests (3,908) (468) (4,376)

(55,917) (37,489) (93,406)

Total comprehensive (loss)/profit attributable to:


From continuing operations (80,705) (3,685) (84,390)

From discontinued operations 6,119 - 6,119

(74,586) (3,685) (78,271)


(78,494) (4,153) (82,647)

(Loss)/Earnings per share attributable to owners of the Company (sen per share)

Basic

From continuing operations (18.65) (11.87) (30.52)

From discontinued operations 1.96 - 1.96

(16.69) (28.56)



(Cont’d)





Note:

(i) The MFRS adjustments comprise the recognition of the additional depreciation on bearer plants of RM29,743,000 and reversal of replanting expenditure which are to be capitalised under property, plant and equipment amounted to RM2,374,000 in accordance with the requirements of MFRS 116 Property, plant and equipment.

(ii) The MFRS adjustments comprise the recognition of the changes in the fair value of biological assets, reversal of impairment loss on biological assets and additional impairment loss on bearer plants amounted to RM1,928,000, RM1,689,000 and RM9,881,000 respectively in accordance with the requirements of Amendments to MFRS 141 Agriculture and MFRS 116 Property, plant and equipment.

Statement of Financial Position as at 1 July 2017

1 July 2017 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

ASSETS

Non-current assets

Property, plant and equipment 1,247,364 417,256 1,664,620

Investment properties 45,700 - 45,700

Land use rights 9,192 - 9,192

Biological assets 413,912 (413,912) -

Non-trade receivables 9,600 - 9,600

1,725,768 3,344 1,729,112



(Cont’d)




Statement of Financial Position as at 1 July 2017 (Cont’d)

1 July 2017 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

ASSETS

Current assets

Inventories 107,762 - 107,762

Biological assets - 8,327 8,327

Trade and non-trade receivables 70,037 - 70,037

Tax recoverable 599 - 599

Cash and cash equivalents 71,943 - 71,943

250,341 8,327 258,668

Assets of disposal group classified as held for sale 194,837 - 194,837

TOTAL ASSETS 2,170,946 11,671 2,182,617



Share capital and share premium 209,566 - 209,566

Other reserve 769,142 (202,730) 566,412

Retained profits 181,419 215,511 396,930

Equity of disposal group classified as held for sale 23 103,288 (1,467) 101,821

1,263,415 11,314 1,274,729


Total equity 1,258,739 10,899 1,269,638



(Cont’d)




Statement of Financial Position as at 1 July 2017 (Cont’d)

1 July 2017 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000



Loans and borrowings 156,590 - 156,590

Deferred tax liabilities 28 219,881 1,135 221,016

376,471 1,135 377,606

Current liabilities

Trade and non-trade payables 107,713 - 107,713


Derivative liabilities 14,208 - 14,208

533,117 - 533,117

Liabilities of disposal group classified as held for sale 2,619 (363) 2,256

Total liabilities 912,207 772 912,979

TOTAL EQUITY AND LIABILITIES 2,170,946 11,671 2,182,617





Statement of Financial Position as at 30 June 2018

30 June 2018 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

ASSETS

Non-current assets

Property, plant and equipment 1,228,941 370,503 1,599,444

Investment properties 45,700 - 45,700

Land use rights 11,876 - 11,876

Biological assets 367,157 (367,157) -

1,653,674 3,346 1,657,020

Current assets

Inventories 112,583 - 112,583

Biological assets - 6,399 6,399

Trade and non-trade receivables 29,324 - 29,324

Tax recoverable 130 - 130

Derivative assets 1,636 - 1,636

Cash and cash equivalents 25,171 - 25,171

168,844 6,399 175,243

Assets of disposal group classified as held for sale 44,938 - 44,938

TOTAL ASSETS 1,867,456 9,745 1,877,201


(Cont’d)



(Cont’d)




Statement of Financial Position as at 30 June 2018 (Cont’d)

30 June 2018 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000



Share capital and share premium 209,566 - 209,566

Other reserve 767,166 (169,670) 597,496

Retained profits 199,566 178,490 378,056

Equity of disposal group classified as held for sale 12,531 (1,191) 11,340

1,188,829 7,629 1,196,458


Total equity 1,180,245 6,746 1,186,991



Deferred tax liabilities 28 225,716 2,999 228,715

252,569 2,999 255,568



(Cont’d)




Statement of Financial Position as at 30 June 2018 (Cont’d)

30 June 2018 Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000


Current liabilities

Trade and non-trade payables 69,126 - 69,126


432,406 - 432,406

Liabilities of disposal group classified as held for sale 2,236 - 2,236

Total liabilities 687,211 2,999 690,210

TOTAL EQUITY AND LIABILITIES 1,867,456 9,745 1,877,201



(Cont’d)



(b) Reconciliation of Statement of Cash Flows

Statement of Cash Flows For the Financial Year Ended 30 June 2018

Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

Cash flows from operating activities

(Loss)/Profit before taxation:

- continuing operations (41,402) (37,489) (78,891)

- discontinued operations 5,941 - 5,941

(35,461) (37,489) (72,950)

Adjustments for:

Allowance on receivables 8,443 - 8,443

Amortisation of land use rights 327 - 327

Depreciation of property, plant and equipment 35,129 29,743 64,872

Loss on disposal of assets held for sale 22,176 364 22,540

Gain on disposal of property, plant and equipment (160) - (160)

Property, plant and equipment written off 130 - 130

Impairment loss on property, plant and equipment 19,271 30,200 49,471

Impairment loss on biological assets 22,372 (22,372) -

Fair value loss on biological assets - 1,928 1,928

Interest expenses 24,536 - 24,536

Interest income (1,276) - (1,276)

Reversal of allowance for impairment on receivables (2) - (2)

Net fair value gain on derivative financial instruments (15,845) - (15,845)

Unrealised loss on foreign exchange 10,518 - 10,518



(Cont’d)





Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

Operating profit before working capital changes 90,158 2,374 92,532

Change in receivables 41,870 - 41,870

Change in inventories (4,821) - (4,821)

Change in payables (38,587) - (38,587)

Cash generated from operations 88,620 2,374 90,994

Income tax paid (19,225) - (19,225)

Income tax refunded 223 - 223

Interest paid (24,536) - (24,536)

Net cash generated from operating activities 45,082 2,374 47,456

Cash flows from investing activities

Acquisition of biological assets (6,041) 6,041 -

Acquisition of property, plant and equipment (4,423) (8,415) (12,838)

Proceeds from disposal of assets held for sale 96,472 - 96,472

Proceeds from disposal of property, plant and equipment 162 - 162

Interest received 1,276 - 1,276

Net cash generated from investing activities 87,446 (2,374) 85,072

132,528 - 132,528



(Cont’d)





Note


FRSsRM’000


MFRSsRM’000

Restated under

MFRSsRM’000

Cash flows from financing activities

Drawdown of bankers’ acceptances and trust receipts 591,093

-591,093

Drawdown of revolving credits 2,119,000 - 2,119,000

Drawdown of term loans 38,370 - 38,370

Repayments of bankers’ acceptances and trust receipts (654,012) - (654,012)

Repayment of revolving credits (2,054,000) - (2,054,000)

Repayment of term loans (206,706) - (206,706)

Repayment of hire purchase payables (314) - (314)

Net cash used in financing activities (166,569) - (166,569)

Net decrease in cash and cash equivalents (34,041) - (34,041)

Effect of exchange rate fluctuations on cash held (12,731) - (12,731)

Cash and cash equivalents at beginning of financial year 71,943 - 71,943

Cash and cash equivalents at end of financial year 25,171 - 25,171


PROPERTIES OF THE GROUP

Title (Location)

Registered Owner

Land Area (Built-up) Tenure

Age of Building

Existing Usage

Net Book Value

RM’000

Date of Acquisition or

Revaluation

CL 095317196 Lamag, District of Kinabatangan, Sabah

KPSB 5,259.81 ha Leasehold expiring

31/12/2077

- Oil Palm Plantation

255,610 30 June 2019

PL 096290069 Koyah Locality, Off KM 39, Jln Lahad Datu-Sandakan, District of Kinabatangan, Sabah

HSB 1,122.90 ha Leasehold expiring

31/12/2077


99,420 30 June 2019

CL 095318504 CL 095318513 CL 095318522 CL 095318531 CL 095318540 CL 095318559 Sg. Pin Locality, KM 50, Jln Lahad Datu-Sandakan, District of Kinabatangan, Sabah

KPSB 1,768.70 ha Leasehold expiring

31/12/2087 except CL

095318559 expiring

31/12/2086


109,500 30 June 2019

CL 075376117 District of Sandakan, Sabah

KPSB 2.43 ha Leasehold expiring

31/12/2062

- Vacant Land

1,000 30 June 2019

CL 115379336 New Wharf Road, District of Lahad Datu, Sabah

MESB 14.15 ha Leasehold expiring

31/12/2088

18 years

Palm Oil Product

Processing Complex (Refinery & Kernel

Crushing)

40,000 30 June 2019

CL 095319065 Kinabatangan, District of Kinabatangan, Sabah

ABSB 282.60 ha Leasehold expiring

31/12/2087


15,850 30 June 2019

CL 095317007 Latangan, District of Kinabatangan, Sabah

BBSB 202.70 ha Leasehold expiring

31/12/2086


11,350 30 June 2019



Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation

TL 117509832 New Wharf Road, District of Lahad Datu, Sabah

KOSB 5.00 ha Leasehold expiring

31/12/2094

- Jetty 1,080 30 June 2019

CL 095327147 Kinabatangan Locality, Off KM 50, Jln Lahad Datu-Sandakan, District of Kinabatangan, Sabah

ABSB 1,360.00 ha Leasehold expiring

31/12/2095


83,910 30 June 2019

CL 015493697 Kuala Menggatal, Sepangar Bay, Kota Kinabalu, Sabah


31/12/2081

- Industrial Land

3,900 30 June 2019

CL 075339954 Mile 8, Jln Labuk, Sandakan, Sabah

KOSB 3.84 acres Leasehold expiring

09/07/2887

- Vacant Land

3,000 30 June 2019

CL 095332184 Sg. Latangan, Kinabatangan, Sabah


31/12/2098


103 30 June 2019

CL 095330662 Sg. Lokan, Kinabatangan, Sabah


31/12/2096


72 30 June 2019

Title: (2002) No. 1 No. 15, Jinqiao Road, Guangzhou Free Trade Zone, Guangzhou, China

DMGZFTZ 9,990 m2 Leasehold expiring

30/01/2052

- Bulking Installation

1,223 30 June 2019

Title: C6073342 No. 68, Baojin Road, Guangzhou Free Trade Zone, Guangzhou, China


26/03/2054

- Bulking Installation and Edible

Oil Complex

18,713 30 June 2019

(Cont’d)



Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation

Title: (2003) No. 92 No. BSQ-F2, Guangzhou Free Trade Zone, Guangzhou, China


21/08/2053

- Bulking Installation and Edible

Oil Complex

470 30 June 2019

Title: (2011) No. 350286 Zhangjiagang Free Trade Zone, Zhangjiagang, China

DMZJGFTZ 20,006 m2 Leasehold expiring

13/08/2052

- Bulking Installation

1,514 30 June 2019

Title: (2009) No. 380018 No. 15, Beijing Road (s), Jiangsu Yangtze River International Chemical Industrial Park, Zhangjiagang, China

DMPI 134,040 m2 Leasehold expiring

30/10/2056

- Oleochemical Plant

40,850 30 June 2019

CL 115415631 CL 115415640 CL 115415659 CL 115415668 CL 115415677 Ulu Segama, District of Lahad Datu, Sabah


31/12/2098


53 30 June 2019

CL 115311138 Mile 2 1/2, Jln Kastam Baru, District of Lahad Datu, Sabah

PESB 6.94 acres Leasehold expiring

31/12/2058

- Power Plant

11,950 30 June 2019

CL 015331932 Luyang, District of Kota Kinabalu, Sabah

KOSB 0.59 acres Leasehold expiring

31/12/2912

- Vacant Land

4,350 30 June 2019

Lot 1239, Block 20 Kemena Land District, Bintulu Port, Sarawak


17/06/2062

- Vacant Land

32,000 30 June 2019

(Cont’d)


Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation

Ladang Pintasan 4 Latangan Locality, District of Kinabatangan, Sabah

KLDSB 1,597.57 ha Leasehold expiring

from 31/12/2093

- 31/12/2095


81,660 30 June 2019



from 31/12/2093

- 31/12/2096


111,600 30 June 2019


KLDSB 917.99 ha Leasehold expiring

from 24/06/2034

- 19/09/2099


41,810 30 June 2019



from 31/12/2093

- 31/12/2100


125,440 30 June 2019

Ladang Sg Koyah Koyah Locality, District of Kinabatangan, Sabah


from 31/12/2083

- 31/12/2096


1,350 30 June 2019

Ladang Haranky 2 Ulu Segama, Jalan Lahad Datu-Sandakan, District of Kinabatangan, Sabah


31/12/2091


8,810 30 June 2019

KM28 & 30 Jalan Lahad Datu, Sabah


N/A


560 30 June 2019

PROPERTIES OF THE GROUP (Cont’d)


Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation

Ladang Pintasan 9 Sg. Lamag/Sg. Kinabatangan, District of Kinabatangan, Sabah


31/12/2096


70,780 30 June 2019

Koyah Lands Koyah Locality, District of Kinabatangan, Sabah


19/09/2099


3,990 30 June 2019

CL 115414161 KM 14.5 of Jalan Lahad Datu, Sabah


31/12/2098


12,420 30 June 2019

CL 095330000 Ladang BikasjayaDistrict of Kinabatangan, Sabah

KOLEO 202.30 ha Leasehold expiring

31/12/2097


15,400 30 June 2019

CL 095332442 Kg. Kinabatangan, District of Kinabatangan, Sabah


31/12/2098


51 30 June 2019

CL 095331696 CL 095331703 Sg. Latangan, District of Kinabatangan, Sabah


31/12/2098


110 30 June 2019

CL 095332451 Kg. Kinabatangan, District of Kinabatangan, Sabah


31/12/2098


36 30 June 2019



Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation

CL 095334142 Sg. Latangan, District of Kinabatangan, Sabah


31/12/2100


28 30 June 2019



31/12/2096


74 30 June 2019

CL 095332719 Sg. Lamag, District of Kinabatangan, Sabah


31/12/2099


57 30 June 2019

Lot 14-15, 17-19, 28Buloh Land, Ulu Balingian, Sarawak

MHSB 4,795.00 ha Leasehold expiring

13/08/2066


59,121 30 June 2019

Lot 26-28 Arip Land, Ulu Balingian, Sarawak

MHSB 2,541.00 ha Leasehold expiring

13/08/2066


30,879 30 June 2019

PI/K/63 and PI/K/64 KK Times Square, Kota Kinabalu, Sabah

KOSB 21,640 sq.ft Pending for strata title

12 years

Office Building

16,716 30 June 2019

CL095337572 Sg. Tabalin, District of Kinabatangan, Sabah


31/12/2104


496 30 June 2019

Lot 2, Block 204 Oya-Dalat L.D, Mukah, Sarawak

GUSB 1,300.00 ha Leasehold expiring

23/04/2072


45,968 30 June 2019



Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation



31/12/2101


30 30 June 2019



31/12/2101


51 30 June 2019



31/12/2101


21 30 June 2019



31/12/2101


21 30 June 2019



31/12/2101


21 30 June 2019



31/12/2099


19 30 June 2019



31/12/2101


21 30 June 2019



Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation



31/12/2101


21 30 June 2019



31/12/2101


21 30 June 2019



31/12/2101


21 30 June 2019



31/12/2101


21 30 June 2019

CL 095332353 & CL 095332362 Sg. Pin, District of Kinabatangan, Sabah


31/12/2098


53 30 June 2019



31/12/2101


21 30 June 2019



31/12/2101


24 30 June 2019




Title (Location)

Registered Owner


Age of Building

Existing Usage

Net Book Value

RM’000


Revaluation



31/12/2101


21 30 June 2019

Desa Manamang Kanan & Kiri Kecamatan Muarakaman, Kutai Kartanegara, Kalimantan Timur, Indonesia

PT GMA 15,800 ha Leasehold expiring

N/A


- * 30 June 2019

Lot 53, Phase 2 POIC, Lahad Datu, Sabah

KOSB 87,120 sq.ft Leasehold expiring

31/12/2049

- Vacant Land

2,000 30 June 2019

Native Customary Rights on Ulu Balingian Mukah Division, Sibu, Sarawak

KPPBSB 1,537.30 ha Leasehold expiring

15/11/2065


7,860 30 June 2019

CL 095336182 Kg. Latangan, District of Kinabatangan, Sabah


31/12/2101


48 30 June 2019

* To date, the renewal of certain licenses from the relevant Indonesia authority for the agriculture land is still pending and remains uncertain. Current total planted area was 721 hectares. The Group had provided for full impairment allowance in current financial year ended 30 June 2019 for this agriculture land and its biological assets. Efforts to appeal for renewal of the licenses with relevant Indonesia authority has been ongoing since FYE 2018.


SHAREHOLDINGS STATISTICSAS AT 14 OCTOBER 2019

Total Number of Issued Shares : 311,677,264 sharesClass of Shares : Ordinary sharesVoting Right : One (1) vote per ordinary share

Analysis of Shareholdings

Size of HoldingsNumber of

Holders %Number of

Shares %

Less than 100 13 0.76 372 0.00

100-1,000 284 16.48 151,278 0.05

1,001-10,000 1,140 66.16 4,626,250 1.48

10,001-100,000 240 13.93 6,873,100 2.21

100,001-15,583,862 (*) 40 2.32 57,033,600 18.30

15,583,863 and above (**) 6 0.35 242,992,664 77.96

Total 1,723 100.00 311,677,264 100.00

Remark: * Less than 5% of issued holdings ** 5% and above of issued holdings

Substantial Shareholders (5% and above)

No NameNumber of

Shares Held %

1. Kwan Ngen Chung (Deceased) 94,188,632 30.22

2. Kwan Ngen Wah 93,188,632 29.90

3. UOB Kay Hian Nominee (Asing) Sdn Bhd 40,208,000 12.90

4. HSBC Nominees (Asing) Sdn Bhd 39,726,000 12.75

Directors’ Shareholdings

No Name Number of Shares Held

Direct % Indirect %

1. Kwan Ngen Wah 93,188,632 29.90 - -

2. Dato’ Chong Kan Hiung 2,600,000 0.83 - -

3. Kwan Jin Nget 689,500 0.22 - -

4. Kwan Min Nyet 238,000 0.08 - -


List of Top 30 Shareholders as at 14 October 2019

No Name Shareholdings %

1. KWAN NGEN CHUNG (Deceased) 78,188,632 25.09

2. KWAN NGEN WAH 48,188,632 15.46

3. MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR KWAN NGEN WAH 45,000,000 14.44

4. HSBC NOMINEES (ASING) SDN BHDEXEMPT AN FOR BNP PARIBAS SINGAPORE BRANCH (A/C CLIENTS- FGN) 39,726,000 12.75

5. MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK INTERNATIONAL (L) LTD FOR KWAN NGEN CHUNG 16,000,000 5.13

6. UOB KAY HIAN NOMINEES (ASING) SDN BHDFOR NEW MERCHANT LIMITED 15,889,400 5.10

7. UOB KAY HIAN NOMINEES (ASING) SDN BHDEXEMPT AN FOR UOB KAY HIAN PTE LTD (A/C CLIENTS) 15,440,300 4.95

8. CITIGROUP NOMINEES (TEMPATAN) SDN BHDEMPLOYEES PROVIDENT FUND BOARD 11,431,000 3.67

9. UOB KAY HIAN NOMINEES (ASING) SDN BHDFOR ALPHA WEALTH LIMITED 8,873,300 2.85

10. CIMB GROUP NOMINEES (ASING) SDN BHDEXEMPT AN FOR DBS BANK LTD (SFS) 3,327,100 1.07

11. PIONEER MARK SDN BHD 2,564,500 0.82

12. RHB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR HO SUI KHYUN 2,179,800 0.70

13.

HLIB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR NGUI KON NYUK 1,715,100 0.55

14. MERCSEC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR SIOW WONG YEN @ SIOW KWANG HWA 1,560,000 0.50

15. CIMSEC NOMINEES (TEMPATAN) SDN BHDCIMB BANK FOR DATO’ CHONG KAN HIUNG 1,300,000 0.42

16. LIM HUA KUANG 854,000 0.27

17. DATO’ CHONG KAN HIUNG 736,000 0.24

18. KWAN JIN NGET 689,500 0.22

19. MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR DATO’ CHONG KAN HIUNG 564,000 0.18

20. LIM WENG HO 541,200 0.17


(Cont’d)



(Cont’d)

List of Top 30 Shareholders as at 14 October 2019 (Cont’d)

No Name Shareholdings %

21. KWAN CHIEW GIOK 499,600 0.16

22. HLIB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR YAP QWEE BENG 388,300 0.12

23. MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR YONG FOO FAH 313,000 0.10

24. TAY AH KOU @ TAY HWA LANG 280,500 0.09

25. UOBM NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR CHIAT CHEONG HOLDING SDN BHD 263,900 0.08

26. AFFIN HWANG NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TEE KIM TEE @ TEE CHING TEE 263,000 0.08

27. HO SUI KHYUN 256,000 0.08

28. CHONG MEI PIN 253,600 0.08

29. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR KWAN MIN NYET 238,000 0.08

30. LEE KENG FAH 215,000 0.07

I/We, ________________________________________________________________________________________________________(FULL NAME IN BLOCK LETTERS)

of ___________________________________________________________________________________________________________(ADDRESS)

being a member of Kwantas Corporation Berhad, hereby appoint:

1) Name of Proxy: ____________________________________________________ NRIC No.: ______________________________

Address: _________________________________________________________________________________________________

_____________________________________ Number of Shares Represented _______________________________

2) Name of Proxy: ____________________________________________________ NRIC No.: ______________________________

Address: _________________________________________________________________________________________________

_____________________________________ Number of Shares Represented _______________________________

or failing him/her, the Chairman of the meeting, as my/our own proxy, to vote for me/us on my/our behalf at the Twenty-Fourth Annual General Meeting of the Company to be held at K-63A-3rd Floor, Signature Office, KK Times Square, Off Coastal Highway, 88100 Kota Kinabalu, Sabah on Friday, 29 November 2019 at 2.30 p.m. or at any adjournment thereof, in the manner indicated below:

RESOLUTION DESCRIPTION FOR AGAINST

1. To approve the payment of Directors’ fees up to an amount of RM180,000 to Non-Executive Directors from the 24th Annual General Meeting to the next Annual General Meeting of the Company.

2. To approve the payment of Directors’ meeting allowance up to an aggregate amount of not more than RM24,000 to Non-Executive Directors from the 24th Annual General Meeting to the next Annual General Meeting of the Company.

3. To re-elect Ms Kwan Min Nyet who retires by rotation pursuant to Article 73 of the Company’s Constitution (Articles of Association) and being eligible, offer herself for re-election.

4. To re-elect Datuk Ismail Bin Abdullah who retires by rotation pursuant to Article 73 of the Company’s Constitution (Articles of Association) and being eligible, offer himself for re-election.

5. To re-elect Mr Kwan Ngen Wah who retires by rotation pursuant to Article 106 of the Company’s Constitution (Articles of Association) and being eligible, offer himself for re-election.

6. To re-appoint Messrs PKF as Auditors of the Company and authorise the Directors to fix their remuneration.

7. To approve the authority to allot and issue shares pursuant to Sections 75 and 76 of the Companies Act 2016.

8. To propose renewal of and new shareholders’ mandate for recurrent related party transactions of a revenue or trading nature.

9. To propose renewal of authority for the Company to purchase up to ten percent (10%) of the issued shares of the Company.

10. To propose continuing in office as Independent Non-Executive Director for Mr Ooi Jit Huat who has served as an Independent Non-Executive Director for a cumulative term of more than twelve (12) years.

11. To approve the proposed adoption of the new Constitution of the Company.

(Please indicate with an ‘X’ in the appropriate box of each Resolution how you wish to cast your vote. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion.)

Sign this day of 2019 Signature of Shareholder(s)

PROXY FORMRegistration No. 199501027397 (356602-W)

Incorporated in Malaysia

NOTES:

1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and vote instead of him.

2. A proxy may but need not be a member of the Company.

3. Where two (2) proxies are appointed, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

4. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) Securities Account (“omnibus account”), there shall be no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds.

5. The instrument appointing a proxy must be deposited at the Registered Office of the Company at K-63A-3A, Signature Office, KK Times Square, Off Coastal Highway, 88100 Kota Kinabalu, Sabah, not less than forty-eight (48) hours before the time appointed for holding the meeting.

6. Where the Proxy Form is executed by a corporation, it must be either under seal or under the hand of any officer or attorney duly authorized.

7. Only depositors whose names appear in the Record of Depositors as at 22 November 2019 shall be entitled to attend, speak and vote at the 24th Annual General Meeting.

The Company SecretariesKWANTAS CORPORATION BERHADRegistration No. 199501027397 (356602-W)

K-63A-3A, Signature OfficeKK Times Square

Off Coastal Highway88100 Kota Kinabalu, Sabah

Please fold here

Please fold here

STAMP/SETEM

K-63A-3A, Signature Office, KK Times Square,Off Coastal Highway, 88100 Kota Kinabalu, Sabah, Malaysia.

Tel: +(60) 88-486 555 Fax: +(60) 88-486 777Email: [email protected]

www.kwantas.com.my

Registration No. 199501027397 (356602-W)Incorporated in Malaysia

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