STATEMENT ON DIRECTORS RESPONSIBILITIES

Transcription

1 101 Financial Statement 102 Statement on Directors Responsibilities 103 Directors Report 104 Statement by Directors 109 Statutory Declaration 110 Independent Auditors Report 112 Statements of Comprehensive Income 113 Statements of Financial Position 115 Statements of Changes In Equity 117 Statements of Cash Flows 119 Notes to the Financial Statements 177 Supplementary Information

2 102 STATEMENT ON DIRECTORS RESPONSIBILITIES The Companies Act, 1965 requires the Directors to prepare financial statements (which include the consolidated statements of financial position and the consolidated statements of comprehensive income of the Group) for each financial year in accordance with Malaysian Accounting Standards Board (MASB) approved accounting standards in Malaysia for entities other than private entities and the provisions of the Companies Act, 1965 and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Malaysia), and to lay these before the Company at its Annual General Meeting. Incorporated on pages 102 to 177 of this Annual Report, are the financial statements of the Company and the Group for the financial year ended 31 December The Companies Act, 1965 places responsibility on the Directors to ensure that the consolidated statements of financial position provides a true and fair view of the state of affairs of the Group as at 31 December 2012 and the consolidated statement of comprehensive income provides a true and fair view of the results of the Group for the financial year ended 31 December In undertaking the responsibility placed upon them by law, the Directors have relied upon the Group s system of internal control to provide them with reasonable grounds to believe that the Group s accounting records, as well as other relevant records, have been maintained by the Group in a manner that enables them to sufficiently explain the transactions and financial position of the Group. This also enables the Directors to ensure that a true and fair consolidated statements of financial position and statement of comprehensive income and documents required by the Companies Act, 1965 to be attached are prepared for the financial year to which these financial statements relate. The Companies Act, 1965 also requires the Directors to cause the Company to keep such accounting and other records in such manner that enables the Directors to sufficiently explain the transactions and financial position of the Company and the Group, and to prepare a true and fair statements of comprehensive income and statements of financial position and any documents required to be attached, as well as to enable such accounting records to be audited conveniently and properly. The Directors also have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and of the Company and to prevent and detect fraud and other irregularities.

3 DIRECTORS REPORT 103 The Directors have pleasure in submitting their directors report to the members together with the audited financial statements of the Group and the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activity of the Company is of investment holding. The principal activities of the subsidiaries are set out in Note 18 to the financial statements. There have been no significant changes in the nature of these activities of the Group and the Company during the financial year. FINANCIAL RESULTS Group Company Profit for the financial year 202, ,845 DIVIDENDS Dividends on ordinary shares paid or declared by the Company since 31 December 2011 were as follows: In respect of the financial year 31 December 2011: Final single tier dividend of 11 sen per share, paid on 12 July ,328 In respect of the financial year 31 December 2012: Interim tax exempt dividend of 8 sen per share, paid on 28 December , ,566 The Board of Directors are recommending the payment of a final single tier dividend of 11.0 sen per share amounting to RM77.33 million which is not taxable in the hands of the shareholders pursuant to paragraph 12B of Schedule 6 of the Income Tax Act 1967, subject to the approval of the shareholders at the forthcoming Annual General Meeting of the Company. RESERVES AND PROVISIONS All material transfers to and from reserves or provisions during the financial year are disclosed in the financial statements.

4 104 DIRECTORS REPORT ISSUE OF SHARES The Company did not issue any shares or debentures during the financial year. DIRECTORS The Directors who have held office since the date of last report are as follows: Tan Sri Mohd Isa Dato Hj Abdul Samad Dato Sabri Ahmad Dato Zainal Hj Ismail Raja Anuar Raja Abu Hassan Dato Hjh Rosni Hj Zahari Datuk Noor Ehsanuddin Mohd Harun Narrashid (Appointed on 1 March 2013) Datuk Faizoull Ahmad (Appointed on 1 March 2013) Dr. Mohd Emir Mavani Abdullah (Appointed on 1 March 2013) Dr. Suzana Idayu Wati Osman (Appointed on 1 March 2013) Dato Lim Chee Wah (Resigned on 1 February 2013) Dato Dzulkifli Abd. Wahab (Vacation of office on 13 July 2012) Datuk R. Sharifuddin Hizan R. Zainal Abidin (Resigned on 10 July 2012) In accordance with Article 93 of the Company s Articles of Association, Dato Hjh Rosni Hj Zahari retires by rotation at the forthcoming Annual General Meeting, and being eligible offers herself for re-election at the Annual General Meeting. In accordance with Article 99 of the Company s Articles of Association, Datuk Noor Ehsanuddin Mohd Harun Narrashid, Datuk Faizoull Ahmad, Dr. Mohd Emir Mavani Abdullah and Dr. Suzana Idayu Wati Osman shall retire at the forthcoming Annual General Meeting, and being eligible offer themselves for re-election at the Annual General Meeting. In accordance with Section 129 of the Companies Act, 1965, Dato Zainal Haji Ismail shall retire from the Board at the forthcoming Annual General Meeting, and being eligible offers himself for re-election at the Annual General Meeting. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling 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. Since the end of previous financial year, no Director has received or become entitled to receive a benefit (other than as disclosed in Note 10 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in Note 35 to the financial statements.

5 105 DIRECTORS INTEREST IN SHARES AND DEBENTURES According to the Register of Director s Shareholdings, the Directors who held office at the end of the financial year and their interests in shares of the Company are as follows: Number of ordinary shares of RM0.50 each At Granted/ At Company acquired Disposed Tan Sri Mohd Isa Dato Hj Abdul Samad 20, ,000 Dato Sabri Ahmad 20, ,000 Dato Lim Chee Wah 20, ,000 Dato Zainal Hj Ismail 20, ,000 Raja Anuar Raja Abu Hassan 20, ,000 Dato Hjh Rosni Hj Zahari 20, ,000 Number of ordinary shares of RM0.50 each At Granted/ At Felda Global Ventures Holdings Bhd acquired Disposed Tan Sri Mohd Isa Dato Hj Abdul Samad - 180, ,000 Dato Sabri Ahmad - 180, ,000 Dato Lim Chee Wah - 150, ,000 Dato Zainal Hj Ismail- - 40,000-40,000 Raja Anuar Raja Abu Hassan - 25,000 (25,000) - Dato Hjh Rosni Hj Zahari - 25,000 (25,000) -

6 106 DIRECTORS REPORT STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the statement of comprehensive income and statement of financial positions of the Group and the Company were made out, the Directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and the Company had been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) (b) (c) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Group and the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and the Company misleading or inappropriate. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Group and the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Group and the Company which has arisen since the end of the financial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors, (a) (b) the results of the Group s and the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or the Company for the financial year in which this report is made.

7 107 ULTIMATE HOLDING COMPANY The Directors regard Felda Global Ventures Holdings Bhd., a company incorporated in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad, as the ultimate holding company. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with a resolution dated 22 April TAN SRI MOHD ISA DATO HJ ABDUL SAMAD CHAIRMAN DATO SABRI AHMAD DIRECTOR Kuala Lumpur

8 108 STATEMENT BY DIRECTORS We, Tan Sri Mohd Isa Dato Hj Abdul Samad and Dato Sabri Ahmad, two of the Directors of MSM Malaysia Holdings Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 10 to 80 are drawn up so as to give true and fair view of the state of affairs of the Group and Company as at 31 December 2012 and of the results and cash flows of the Group and the Company for the financial year then ended in accordance with Financial Reporting Standards in Malaysia and the provisions of the Companies Act, The supplementary information set out in Note 42 on page 80 have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board of Directors in accordance with a resolution dated 22 April TAN SRI MOHD ISA DATO HJ ABDUL SAMAD DIRECTOR DATO SABRI AHMAD DIRECTOR Kuala Lumpur

9 STATUTORY DECLARATION 109 I, Raja Faridah Raja Ahmad, the officer primarily responsible for the financial management of MSM Malaysia Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 10 to 80 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, RAJA FARIDAH RAJA AHMAD Subscribed and solemnly declared before me by the above named Raja Faridah Raja Ahmad at Kuala Lumpur on 22 April 2013, before me. COMMISSIONER FOR OATHS

10 110 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF MSM MALAYSIA HOLDINGS BERHAD (Incorporated in Malaysia) (Company No K) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of MSM Malaysia Holdings Berhad on pages 10 to 79 which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, and the statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 41. Directors Responsibility for the Financial Statements The Directors of the Group and the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards in Malaysia and the Companies Act, 1965, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards in Malaysia and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2012 and of their financial performance and cash flows for the year then ended. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following: (a) (b) (c) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

11 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF MSM MALAYSIA HOLDINGS BERHAD (Incorporated in Malaysia) (Company No K) 111 OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 42 on page 80 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (MIA Guidance) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF-1146) Chartered Accountants THAYAPARAN A/L S. SANGARAPILLAI (No. 2085/09/14 (J)) Chartered Accountant Kuala Lumpur 22 April 2013

12 112 STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 Group Company Period from Year ended Year ended Year ended to Notes Revenue 6 2,301,319 2,299, ,756 63,361 Cost of sales (1,927,133) (1,845,576) (4,880) (4,328) Gross profit 374, , ,876 59,033 Other operating income 7 3, Other gain/ (losses) net (1,494) - - Selling and distribution expenses (53,608) (54,312) - - Administrative expenses (43,529) (38,421) - - Other operating expenses (299) (355) - - Profit from operations 280, , ,876 59,033 Finance income 9 15,371 11, Finance costs 9 (11,049) (12,303) - - Profit before zakat and taxation , , ,876 59,033 Zakat 11 (16,580) - (6,398) - Taxation 12 (66,551) (95,557) (633) (1,116) Profit for the financial year/period 202, , ,845 57,917 Other comprehensive income Total comprehensive income for the financial year/period 202, , ,845 57,917 Profit for the financial year and total comprehensive income attributable to: Owners of the Company 202, ,397 Non-controlling interest , ,816 Basic earnings per share attributable to equity holders of the Company (sen)

13 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER Group Company As at As at As at As at Notes ASSETS Non-current assets Property, plant and equipment , , Prepaid lease payments Intangible assets , , Investment in subsidiaries ,022,929 2,022,929 Biological assets 19 11, Receivables, deposits and prepayments 20 8, Total non-current assets 1,071,746 1,064,279 2,023,320 2,022,982 Current assets Inventories , , Biological assets 19-11, Receivables, deposits and prepayments , , Tax recoverable 6,773 4,005 1,239 - Amounts due from subsidiaries ,043 Amounts due from other related parties 23 2,885 2, Loans to subsidiaries , ,000 Derivative financial assets , Fixed deposits , , , ,040 Cash and bank balances 27 34,273 62, Total current assets 1,269,304 1,048, , ,175 Assets held for sale 28 1, TOTAL ASSETS 2,342,991 2,112,504 2,455,665 2,454,157

14 114 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2012 Group Company As at As at As at As at Notes EQUITY AND LIABILITIES Share capital , , , ,490 Share premium , , , ,765 Reorganisation deficit 30 (1,039,632) (1,039,632) - - Merger relief reserve 30 1,733,939 1,733,939 1,733,939 1,733,939 Retained earnings , ,122 1,958 1,679 Equity attributable to owners of the Company 1,749,146 1,680,684 2,454,152 2,453,873 Total equity 1,749,146 1,680,684 2,454,152 2,453,873 Non-current liabilities Deferred tax liabilities 31 81,773 92, Provision for defined benefits Total non-current liabilities 81,773 93, Current liabilities Payables and accruals 33 43,456 36, Amounts due to subsidiaries Amounts due to other related parties 23 1, Amount due to ultimate holding company 24 1, Borrowings , , Current tax liabilities 5,240 13, Total current liabilities 512, ,433 1, Total liabilities 593, ,820 1, TOTAL EQUITY AND LIABILITIES 2,342,991 2,112,504 2,455,665 2,454,157

15 STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER Reorgani- Merger Share isation relief Retained Share premium deficit reserve earnings capital (Note 30) (Note 30) (Note 30) (Note 30) Total Group At 1 January , ,765 (1,039,632) 1,733, ,122 1,680,684 Transactions with owners: Dividends (Note 14) (133,566) (133,566) Total comprehensive income for the year ended 31 December , ,028 At 31 December , ,765 (1,039,632) 1,733, ,584 1,749,146 Equity attributable Reorgani- Merger to equity Share sation relief Retained holders Non- Share premium deficit reserve earnings of the controlling capital (Note 30) (Note 30) (Note 30) (Note 30) Company interest Total Group At 1 January ,889 - (618,613) 1,625,331 60,963 1,338,570 40,271 1,378,841 Incorporation of Company * * - * Transactions with owners: Dividends (Note 14) - - (317,500) - (56,238) (373,738) (17,500) (391,238) Accretion of interest in KGFP (Note 30) 18,101 - (103,519) 108,608-23,190 (23,190) - Issuance of shares (Notes 29 and 30) 62, , , ,500 Share issue expenses (Note 30(i)) - (8,235) (8,235) - (8,235) Total comprehensive income for the year ended 31 December , , ,816 At 31 December , ,765 (1,039,632) 1,733, ,122 1,680,684-1,680,684 * Issued and paid up capital of RM 100 comprising of 200 issued shares at RM 0.50 each

16 116 STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2012 Merger Share relief Retained Share premium reserve earnings capital (Note 30) (Note 30) (Note 30) Total Company At 1 January , ,765 1,733,939 1,679 2,453,873 Transactions with owners: Dividends (Note 14) (133,566) (133,566) Total comprehensive income for the year ended 31 December , ,845 At 31 December , ,765 1,733,939 1,958 2,454,152 Company At 1 January Incorporation of Company * * Transactions with owners: Dividends (Note 14) (56,238) (56,238) Issuance of shares (Notes 29 and 30) 351, ,000 1,733,939-2,460,429 Share issue expenses (Note 30(i)) - (8,235) - - (8,235) Total comprehensive income for the period ended 31 December ,917 57,917 At 31 December , ,765 1,733,939 1,679 2,453,873

17 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER Group Company As at As at As at As at Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit for the financial year 202, , ,845 57,917 Adjustments for: Taxation 66,551 95, ,116 Depreciation of property, plant and equipment 39,649 38, (Gain)/Loss on disposal of property, plant and equipment (1,197) Property, plant and equipment written off Amortisation of prepaid lease payments Amortisation of intangible assets 3,226 3, Unrealised fair value (gain)/losses on derivatives (189) 1, Dividend income - - (131,972) (56,528) Interest income (15,371) (11,538) (13,784) (6,833) Interest expense 11,049 12, (Reversal of) / provision for retirement benefits (178) Bad debts written off (Reversal of)/ impairment on property, plant and equipment (529) 3, Unrealised gain on foreign exchange - (103) - - Share based payment 30(i) - 3,374-3,374 Biological assets written off 11, Zakat 16,580-6,398 - Operating profit before working capital changes 333, ,469 (4,868) (949) Inventories (162,314) 50, Receivables (9,963) 9,782 (28) (8) Payables 8,813 5, Related party balances 1, ,354 (1,036) Cash generated from operations 171, ,529 (3,059) (1,919) Retirement benefits paid (290) (618) - - Zakat paid (16,580) - (6,398) - Tax paid (88,777) (106,692) (2,076) (913) Net cash generated from operating activities 66, ,219 (11,533) (2,832)

18 118 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 Group Company As at As at As at As at Notes CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (34,813) (31,240) (350) (58) Proceeds from disposal of property, plant and equipment 3, Biological assets new planting costs (11,800) (4,385) - - Interest received 15,371 11,538 13,784 6,833 Decrease/(increase) in fixed deposits pledged 53 (2) - - Dividend received ,972 56,528 Net cash (used in)/ generated from investing activities (27,792) (23,957) 145,406 63,303 CASH FLOWS FROM FINANCING ACTIVITIES Repayment from/ (loan to) subsidiaries ,000 (110,000) Issue of shares - 425, ,891 Drawdown of borrowings 1,035, , Repayment of borrowings (862,700) (822,000) - - Dividends paid (133,566) (391,238) (133,566) (56,238) Interest paid (11,049) (12,303) - - Net cash generated from/(used in) financing activities 28,085 93,650 (43,566) 259,653 NET INCREASE IN CASH AND CASH EQUIVALENTS 66, ,912 90, ,124 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR/PERIOD 527,916 87, ,124 * CASH AND CASH EQUIVALENT AT END OF THE FINANCIAL YEAR/PERIOD , , , ,124 Significant non-cash transaction during the previous financial year and period for the Group and Company was the issue of 577,979,800 new ordinary shares for the acquisition of entire equity interests in Malayan Sugar Manufacturing Company Bhd and Kilang Gula Felda Perlis Sdn Bhd on 20 May *less than RM1,000

19 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER GENERAL INFORMATION The Company was incorporated in Malaysia under the Companies Act 1965 as a public limited company. The registered office of the Company is located at Level 42, Menara Felda, Platinum Park, No.11, Persiaran KLCC, Kuala Lumpur. The principal place of business of the Company is located at Level 44, Menara Felda, Platinum Park, No.11, Persiaran KLCC, Kuala Lumpur. The principal activity of the Company is of investment holding. The principal activities of the subsidiaries are set out in Note 18 of the financial statements. The Company is public limited liability company, incorporated and domiciled in Malaysia. The ultimate holding company is Felda Global Ventures Holdings Bhd (FGVH), a company incorporated and domiciled in Malaysia, and listed on the Main Market of Bursa Malaysia Securities Berhad. 2 BASIS OF PREPARATION The financial statements of the Group and Company have been prepared in accordance with the provisions of the Companies Act 1965 and Financial Reporting Standards (FRS). The Group includes a transitioning entity and has elected to continue to apply FRS during the financial year. In the next financial year, the Group will continue to apply FRS. The Group will be adopting the new IFRS-compliant framework, Malaysian Financial Reporting Standards (MFRS) from financial year beginning on 1 January In adopting the new framework, the Group will be applying MFRS 1 First-time adoption of MFRS. The financial statements have been prepared under the historical cost convention unless otherwise indicated in the individual policy statements in Note 3 to the financial statements. The preparation of financial statements in conformity with FRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgment in the process of applying the Group and Company s accounting policies. Although these estimates and judgment are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 5. (a) Standards, amendments to published standards and interpretations that are effective: The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Group and Company s financial year beginning 1 January 2012 are as follows: FRS 124 Related Party Disclosures Amendment to FRS 1 - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Amendment to FRS 7 Disclosure - Transfers of Financial Assets Amendment to FRS Deferred Tax: Recovery of Underlying Assets IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments Amendment to IC 14: Prepayment of a Minimum Funding Requirement The adoption of the above new/revised/amended standards and interpretations did not have a significant financial impact on the Group and Company and did not result in substantial changes in the Group and Company s accounting policies.

20 120 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER BASIS OF PREPARATION (continued) (b) Standards early adopted During the financial year, the Group and Company have early adopted Amendment to FRS 119 Employee Benefits (effective from 1 January 2013) and have applied this standard from financial year beginning 1 January Amendment to FRS 119 Employee Benefits (effective from 1 January 2013) makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. FRS 119 shall be withdrawn on application of this amendment. There were no significant effects arising from early adoption of this standard to the Group and Company. (c) Standards, amendments to published standards and interpretations issued but not yet effective and not early adopted (i) Financial year beginning 1 January 2013 FRS 10 Consolidated financial statements (effective from 1 January 2013) changes the definition of control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. It establishes control as the basis for determining which entities are consolidated in the consolidated financial statements and sets out the accounting requirements for the preparation of consolidated financial statements. It replaces all the guidance on control and consolidation in FRS 127 Consolidated and separate financial statements and IC Interpretation 112 Consolidation special purpose entities. The adoption of FRS 10 will result in additional disclosure requirements for the Group and Company. The Group and Company will apply this standard from the financial period beginning on 1 January FRS 12 Disclosures of interests in other entities (effective from 1 January 2013) sets out the required disclosures for entities reporting under the two new standards, FRS 10 and FRS 11, and replaces the disclosure requirements currently found in FRS 128 Investments in associates. It requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. The adoption of FRS 12 will result in additional disclosure requirements for the Group and Company. The Group and Company will apply this standard from the financial period beginning on 1 January FRS 13 Fair value measurement (effective from 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across FRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in FRS 7 Financial instruments: Disclosures, but apply to all assets and liabilities measured at fair value, not just financial ones. The adoption of FRS 13 will result in additional disclosure requirements for the Group and Company. The Group and Company will apply this standard from the financial period beginning on 1 January 2013.

21 121 2 BASIS OF PREPARATION (continued) (c) Standards, amendments to published standards and interpretations issued but not yet effective and not early adopted (continued) (i) Financial year beginning 1 January 2013 (continued) The revised FRS 127 Separate financial statements (effective from 1 January 2013) includes the provisions on separate financial statements that are left after the control provisions of FRS 127 have been included in the new FRS 10. The Group and Company will apply this standard from the financial period beginning on 1 January The revised FRS 128 Investments in associates and joint ventures (effective from 1 January 2013) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of FRS 11. The Group and Company will apply this standard from the financial period beginning on 1 January Amendment to FRS 101 Presentation of items of other comprehensive income (effective from 1 July 2012) requires entities to separate items presented in other comprehensive income (OCI) in the statement of comprehensive income into two groups, based on whether or not they may be recycled to statement of comprehensive income in the future. The amendments do not address which items are presented in OCI. The adoption of FRS 101 will result in additional disclosure requirements for the Group and Company. The Group and Company will apply this standard from the financial period beginning on 1 January Amendment to FRS 7 Financial instruments: Disclosures (effective from 1 January 2013) requires more extensive disclosures focusing on quantitative information about recognised financial instruments that are offset in the statement of financial position and those that are subject to master netting or similar arrangements irrespective of whether they are offset. The Group and Company will apply this standard from the financial period beginning on 1 January Amendment to FRS 116 Property, Plant and Equipment requires that servicing equipment should be classified as property, plant and equipment when it is used during more than one period and as inventory otherwise. The Group and Company will apply this standard from the financial period beginning on 1 January 2013.

22 122 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER BASIS OF PREPARATION (continued) (c) Standards, amendments to published standards and interpretations issued but not yet effective and not early adopted (continued) (ii) Financial year beginning 1 January 2014 Amendment to FRS 132 Financial instruments: Presentation (effective from 1 January 2014) does not change the current offsetting model in FRS 132. It clarifies the meaning of currently has a legally enforceable right of set-off that the right of set-off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business. It clarifies that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the FRS 132 offsetting criteria. The Group and Company will apply this standard from the financial period beginning on 1 January (iii) Financial year beginning 1 January 2015 FRS 9 Financial instruments - classification and measurement of financial assets and financial liabilities (effective from 1 January 2015) replaces the multiple classification and measurement models in FRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated from FRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss (FVTPL). Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in the liability s credit risk directly in other comprehensive income (OCI). There is no subsequent recycling of the amounts in OCI to statement of comprehensive income, but accumulated gains or losses may be transferred within equity. The guidance in FRS 139 on impairment of financial assets and hedge accounting continues to apply. FRS 7 requires disclosures on transition from FRS 139 to FRS 9. The Group and Company will apply this standard from the financial period beginning on 1 January 2015.

23 123 3 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of consolidation The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to the end of year. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The restructuring of the Group during the prior financial year involved a share for share exchange, which introduced a new holding company, MSM Malaysia Holdings Berhad. The relative rights of the former shareholder, i.e. Felda Global Ventures Holdings Bhd were not altered and this restructuring was accounted for using the predecessor method of accounting. Under the predecessor method of accounting, the results of entities or businesses under common control are presented as if the merger had been effected throughout the current and previous financial years or from the date when these entities came under the control of the common controlling party (if shorter). The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the difference between the carrying value of the investment in the subsidiaries over the nominal value of the shares acquired is taken to merger relief reserve and regarded as a non-distributable reserve. The difference between the cost of acquisition and the carrying amounts of the net assets acquired is taken directly to reorganisation deficit. Although MSM Malaysia Holdings Berhad was only incorporated on 10 March 2011, the consolidated financial statements have been prepared as if the Group had always been in existence in its current form and the prior period comparative presented accordingly. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated, unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency with the policies adopted by the Group. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Under the purchase method of accounting, the cost of an acquisition is measured as the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of the non-controlling interests. The excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in statement of comprehensive income. The consideration transferred for acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

24 124 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Basis of consolidation (continued) Non-controlling interests is the equity in a subsidiary not attributable, directly or indirectly, to a parent. On an acquisition-by-acquisition basis, the Group measures any non-controlling interests in the acquiree at the noncontrolling interests proportionate share of the acquiree s identifiable net assets. At the end of reporting period, non-controlling interests consists of amount calculated on the date of combinations and its share of changes in the subsidiary s equity since the date of combination. The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences or other reserves that relate to the subsidiary and is recognised in statement of comprehensive income. All earnings and losses of the subsidiary are attributed to the parent and the non- controlling interests, even if the attribution of losses to the non-controlling interests results in a debit balance in the shareholders equity. Statement of comprehensive income attributed to non-controlling interests for prior years is not restated. (b) Investment in subsidiaries In the Company s financial statements, investments in subsidiaries are shown at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount in accordance with Note 3(k). On disposal of investment in subsidiaries, the difference between disposal proceeds and the carrying amounts of the investments are recognised in the statement of comprehensive income. (c) Non-controlling interests For purchases or disposals from or to non-controlling interests, the accretion or dilution of the Group s interests is treated as an equity transaction between the subsidiary and its shareholders. The difference between the Group s share of net assets immediately before and immediately after the change in stake and any consideration received or paid is adjusted to or against the Group s retained earnings. (d) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of acquisition of subsidiaries, associates and jointly controlled entities over the group s share of the fair value of their identifiable net assets including contingent liabilities at the date of acquisition. Goodwill on acquisition in respect of a subsidiary is included in the consolidated statement of financial position as intangible assets, or if arising in respect of an associate or jointly controlled entity, is included in investments in associate or jointly controlled entity. Separately recognised goodwill is tested annually for impairment or if events or circumstances occur indicating that impairment may exist and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

25 125 3 SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Intangible assets (continued) (ii) Brand name The acquired brand relating to a sugar brand Prai was recognised at fair value at the acquisition date. The brand has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over the expected life of the brand of 20 years. (e) Financial assets Classification The Group considers the classification of their financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (i) Financial assets at fair value through profit or loss Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held for trading. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date the date on which the Group commit to purchase or sell the asset. All financial assets not carried at fair value through profit or loss are initially recognised at fair value plus transaction costs. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of comprehensive income within other (losses)/gains net in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of other income when the Group s right to receive payments is established.

26 126 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Financial assets (continued) Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (f) Impairment of financial assets Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: Significant financial difficulty of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principal payments; The Group, for economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; The disappearance of an active market for that financial asset because of financial difficulties; or Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: a) Adverse changes in the payment status of borrowers in the portfolio; and b) National or local economic conditions that correlate with defaults on the assets in the portfolio. The Group first assess whether objective evidence of impairment exists. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised in statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument s fair value using an observable market price. 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 (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income.