Panther Metals Regulatory News (PALM)

RNS Number : 1220O

Asian Plantations Limited

24 June 2010

 

 

24 June 2010

 

Asian Plantations Limited

("Asian Plantations" or the "Company")

 

Final Results for the year ended 31 December 2009

and AGM Notice

 

Asian Plantations Limited (LSE: PALM), a palm oil plantation company with operations in Malaysia, is pleased to announce its audited results for the year ended 31 December 2009.

 

Highlights

 

·; Admission of ordinary share capital to trading on AIM in November 2009 following successful subscription to raise £5.26 million.

 

·; Completion of acquisition of 5,850 hectares in Sarawak, Malaysia taking the Company's total land bank to 10,645 hectares.

 

·; Over 5,000 hectares of planting completed and first fresh fruit bunches successfully harvested.

 

Post Balance Sheet events

 

·; Strengthening of the board of directors of the Company (the "Board") with the proposed appointment of Tan Sri Datuk Amar Leo Moggie, Chairman of Tenaga Nasional Berhad, the national power utility company of Malaysia, as an independent non-executive director, following shareholder approval.

 

 

Dennis Melka, Asian Plantations' Joint Chief Executive Officer, commented:

 

"2009 has been a transformational year for the Company. Following on from the successful listing on AIM, the Company has completed its first acquisition, doubling our land bank in Sarawak, and harvested our first fresh fruit bunches.

 

The Company aims to grow and develop in a sustainable and responsible manner, and considerable resources have been devoted to our community outreach initiative to those communities surrounding our land.

 

Excellent progress has been made in the first six months of 2010. Work has continued on preparing the ground for further planting and the Board is confident of increasing its land bank over the coming 12 months."

 

For further information contact:

 

Asian Plantations Limited Dennis Melka, Joint Chief Executive Officer Graeme Brown, Joint Chief Executive Officer	Tel: +65 9878 4171 Tel: +60 19 8560221
Strand Hanson Limited James Harris Paul Cocker	Tel: +44 (0)20 7409 3494
Mirabaud Securities LLP Rory Scott	Tel: +44 (0)20 7878 3360
Bankside Consultants Simon Rothschild Oliver Winters	Tel: +44 (0)20 7367 8871 Tel: +44 (0)20 7367 8874

 

 

Chairman's Statement

 

On behalf of the Board of Directors, I am pleased to present the first audited results of Asian Plantations Limited and its subsidiaries (collectively, the "Group") for the financial year ended 31 December 2009.

 

Investment Thesis & Strategic Objectives

Due to Malaysia's strict land titling and zoning regulations, which protects over 60% of the country's land mass as a Forest or Forest Reserve, the supply of agriculturally titled land, for the development of palm oil, is near exhausted in Malaysia. There is some land for purchase in the State of Sarawak; yet we estimate this supply will also be exhausted in a few years similar to the situation of peninsular Malaysia and the State of Sabah. Due to our on-the-ground presence in Kuching (Sarawak), we established Asian Plantations to acquire, consolidate and develop this remaining land supply in Sarawak. All land parcels that we purchase are mineral soil and have full agriculture title. We will not consider peat soil opportunities due to the higher development costs and negative environmental impact.

 

We are of the opinion that the development of properly titled green-field palm oil estates provides an attractive return on equity. Our all-in-cost of ownership and development in Sarawak, over a three year period, is approximately USD6,500 per hectare. Of this gross investment per hectare, we are able to leverage approximately two-thirds from local banks in local currency under long term (+10 years) financing arrangements. Our experience shows that well-run, mature Malaysian palm oil plantations can trade at up to a USD25,000 per hectare valuation in the public markets, a meaningful premium when compared to valuations in other Southeast Asian or African countries. As such, the directors believe that green-field land acquisition in Malaysia, at valuations of approximately USD2,000 per hectare, are highly accretive in value to all shareholders of the Company.

 

It is the intention of the Group to grow to a +20,000 hectare plantation by the end of 2011. We also seek to be a global leader in mill technology, via the construction of a vertical sterilizer crushing mill, with carbon-credit eligible components (via external funding), the planning and local approval process for which have already been initiated. This mill will incorporate a proprietary sterilization process and a carbon credit eligible methane recapture facility. We expect the mill to be operational in early 2012 and we intend to also process third party crop from small independent operators in the area.

 

Malaysia

We are of the opinion that Malaysia represents a superior location for the development of palm oil estates due to a variety of legal, operational, financial and valuation considerations. Malaysia is an "A" rated country that has welcomed foreign investment since the 1960s. It also benefits from a stable, multi-racial democratic system and an advanced land titling system for agriculture that protects the nation's forest reserves and indigenous rights to land. Malaysia's banking system is generally regarded as stable and liquid; the Group has enjoyed strong relations with its funding banks. The availability of leverage also dramatically changes the economic returns for plantation development when compared with alternative destinations in the emerging markets.

 

Financial Position

The Group's balance sheet as at 31 December 2009 showed a net assets position of USD13,259,000 compared to USD5,982,000 as at 31 December 2008. Cash and short term deposits totalled USD4,174,000 as at 31 December 2009 compared to USD74,000 as at 31 December 2008.

 

The Group had loans and borrowings with a local Malaysian Bank of USD22,479,000 as at 31 December 2009 compared to USD1,732,000 as at 31 December 2008.

 

Operations & Planting Strategy to 2012

We currently have two estates:

·; BJ Corporation 4,795 hectares

·; Incosetia 5,850 hectares

 

Total 10,645 hectares

(Approximately 26,300 acres)

 

"in-the-ground" plantings at BJ Corporation have been ongoing since 1H 2009 and we expect all planting operations to be concluded in 2011. Our acquisition of Incosetia on 30 December 2009, not only provided the Group with a large unplanted land resource but also recently planted estate of approximately 1,000 hectares. As such, we recorded our first revenue from fresh fruit bunch ("FFB") sales in January 2010. Immediately post-acquisition of Incosetia, we launched the Group's second nursery, which will provide seedlings for "in-the-ground" plantings at Incosetia by 4Q 2010. We expect that all the "in-the-ground" plantings at Incosetia can be concluded by 2012; this would coincide with the ramp-up in FFB production from the BJ estate. In 2012, we expect our crushing mill to open, thereby enabling the Group to maximise operating margins.

 

It is important to note that the Group's estates are in close proximity to each other, thereby simplifying operations and management. In addition, the estates are only 2.5 hours away, on a combination of paved and unpaved roads, from the deep water port of Bintulu. This port is the only deep-water port in Sarawak and the transit point for virtually all of Sarawak's CPO exports and refining.

Financing

On 30 November 2009, we completed our Initial Public Offering on the London Stock Exchange's AIM Market, during which we raised £5,257,500 in new equity capital from a group of experienced agricultural investors and investment funds. This capital injection allowed the Group to acquire the Incosetia estate on 30 December 2009.

 

Conclusions

We wish to thank all our staff who have worked to make the Group the success that it is today. We wish to thank our shareholders who share our vision of creating a best-of-breed, sustainable palm oil company in Malaysia. We take this opportunity to thank our bankers at Malayan Banking Berhad for their continued support of our operations.

 

Finally, we would like to announce the appointment of Tan Sri Amar Datuk Leo Moggie ("Tan Sri") as a Non-Executive Director of the Company, subject to shareholders' approval. Tan Sri comes with impeccable credentials including acting as a Federal Minister in Malaysia (1978-2004), and Chairman of Tenaga Nasional Berhad the integrated power utility company of Malaysia listed on the Kuala Lumpur Stock Exchange with a market capitalization in excess of USD10Billion.

 

Datuk Linggi

Non-Executive Chairman

 

Community Outreach Programme 2009

 

We are committed to improving the lives of the rural communities that are in the general vicinity of our estates. Approximately five to twenty kilometers from the Group's plantations, there are three villages totaling approximately 200 people. It is important to note that no native communities live or previously lived on the Group's land.

 

Malaysia has an advanced titling regime, established by the British prior to Malaysia's independence, which protects local and indigenous peoples' land rights under Native Customary Rights ("NCR") zoning. Agriculturally titled land for palm oil development cannot and does not overlap with NCR Land.

 

In addition, Malaysia has protected, via federal zoning, over 60% of its entire land mass as a "Forest" or "Forest Reserve"; in Western European countries, such as the United Kingdom or France, less than 30% of these countries' land is protected under a similar designation. Forest and Forest Reserve Land does not overlap with agricultural land and it is illegal to plant an agricultural crop, such as palm oil, on Forest Land. As such, we feel it important to re-iterate that there is no "clearing the virgin rainforest for palm oil" in Malaysia - this practice stopped well over 15 years ago.

 

We have undertaken a variety of initiatives in our Community Outreach Programme:

 

Medical services

The Group's medical specialist visits each community on a monthly basis. Services provided include general medical treatment, vaccinations for new-borns, provision of anti-biotics and emergency medical evacuation when required. Prior to the Group's involvement, there was no regular medical service in these communities.

 

Clean Water Supply

As of 1Q 2010, we are pleased to report that each of the three communities now has consistent, year-round clean water supply for the first time in their existence. We developed a gravity-feed water system utilizing mini-reservoirs and piping systems over 2km in length. The Group provided all equipment and materials and our staff worked hand-in-hand with the residents to build the water delivery system.

 

Employment Opportunities

We employ all village residents who seek to work with the Group. Approximately twenty residents are now employed in a variety of field and office roles.

 

Cash Crop Agriculture

The village residents seek to plant palm oil on their own land as they know the Group is planning construction of a Fresh Fruit Bunch ("FFB") Crushing Mill. This mill will provide a ready off-take for the villagers' own FFB production thereby allowing them to enjoy regular cash-crop incomes like thousands of other palm oil growing communities across Malaysia. As such, we have provided the villages with training and subsidized palm oil seedlings so they can begin planting their own fields.

We are pleased to report to shareholders that the initial phase of the Community Outreach Programme has been well-received by the villages. For example, our staff are regularly invited to all local celebrations and community events; some of the residents' have participated in a video documentary which is available on www.asianplantations.com. We strongly believe the foundation has been laid in 2009 for closer cooperation in the years ahead. All aspects of our community outreach have been and will be guided by our desire to improve local lives in a sustainable and respectful manner.

 

Our Community Outreach Programme is also important for the Group as it prepares for the Roundtable on Sustainable Palm Oil ("RSPO") certification process in 2010. RSPO certification is a two year process which includes many audits, including on the Group's community and village relations.

 

Annual Report and Notice of Annual General Meeting

 

The Company's Annual Report and Accounts for the year ended 31 December 2009, together with a Notice of Annual General Meeting, were posted to shareholders today and copies are available to download from the Company's website www.asianplantations.com.

 

The Company's forthcoming Annual General Meeting will be held at 2.00 p.m. on Friday 16 July 2010 at 39 Stamford Road, #02-01 Stamford House, Singapore 178885.

 

 

 

 

 

 

Annual Financial Statements for the financial year ended 31 December 2009

 

The directors present their first report to the members together with the audited consolidated financial statements of Asian Plantations Limited (the "Company") and its subsidiaries (collectively, the "Group") for the financial year ended 31 December 2009.

 

 

Directors

 

The directors of the Company in office at the date of this report are:

 

Datuk Amar Leonard Linggi Anak Jugah

Dennis Nicholas Melka

Graeme Iain Brown

 

 

Arrangements to enable directors to acquire shares and debentures

 

Neither at the end of nor at any time during the financial period was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

 

 

Directors' interests in shares and debentures

 

The following directors, who held office at the end of the financial period, had, according to the register of directors' shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares in the Company and related corporations (other than wholly-owned subsidiaries) as stated below:

 

 

	Direct interest				Deemed interest
Name of director	At date of appointment		At end of financial period		At date of appointment		At end of financial period
Ordinary shares of the Company
Datuk Amar Leonard Linggi Anak Jugah	-		2,026,000		-		13,383,000
Dennis Nicholas Melka	-		-		-		4,052,002
Graeme Iain Brown	1		-		-		4,052,002

 

 

Except as disclosed in this report, no director who held office at the end of the financial period had interests in shares of the Company, or of related corporations, either at the date of incorporation, or at the end of the financial period.

 

Directors' contractual benefits

 

Since the incorporation of the Company, no director of the Company has received or become entitled to receive a benefit 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.

 

Auditors

 

Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.

 

 

On behalf of the board of directors,

 

 

Graeme Iain Brown

Director

 

 

Dennis Nicholas Melka

Director

 

Singapore

28 May 2010

 

 

Statement by Directors

 

 

We, Graeme Iain Brown and Dennis Nicholas Melka, being two of the directors of Asian Plantations Limited (the "Company"), do hereby state that, in the opinion of the directors,

 

(i) the accompanying consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group as at 31 December 2009 and the results of the business, changes in equity and cash flows of the Group for the year ended on that date; and

 

(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

 

 

 

On behalf of the board of directors,

 

 

Graeme Iain Brown

Director

 

 

Dennis Nicholas Melka

Director

 

Singapore

28 May 2010

 

 

Independent Auditors' Report

 

 

To the Members of Asian Plantations Limited

 

 

We have audited the accompanying financial statements of Asian Plantations Limited and its subsidiaries (the "Group"), which comprise the balance sheet of the Group as at 31 December 2009, the statement of changes in equity, consolidated income statement, consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.

 

Management's responsibility for the financial statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

 

Auditors' responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 management, 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 consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2009 and the results, changes in equity and cash flows for the financial year ended on that date in accordance with International Financial Reporting Standards.

 

 

 

 

Ernst & Young LLP

Public Accountants and

Certified Public Accountants

Singapore

 

28 May 2010

 

 

Consolidated Income Statement for the financial year ended 31 December 2009

 

 

 

	Note		2009		2008
			USD'000		USD'000
Other income	4		48		-
Other items of expenses
Administrative expenses	5		(1,306)		(229)
Other expenses	6		(107)		(174)
Finance expenses	7		(22)		-
Loss before taxation			(1,387)		(403)
Income tax expense	8		-		1
Loss for the year			(1,387)		(402)
Loss attributable to :
Owners of the parent			(1,371)		(373)
Minority interests			(16)		(29)
			(1,387)		(402)
Loss per share attributable to owners of the parent (cents per share)
Basic and diluted	9		(7)		(2)

 

 

 

 

Consolidated Statement of Comprehensive Income for the financial year ended

31 December 2009

 

 

 

			2009		2008
			USD'000		USD'000
Loss for the year			(1,387)		(402)
Other comprehensive income:
Foreign currency translation adjustments			(203)		14
Total comprehensive income for the year			(1,590)		(388)
Total comprehensive income attributable to:
Owners of the parent			(1,580)		(360)
Minority interests			(10)		(28)
			(1,590)		(388)

 

 

 

 

Consolidated Balance Sheet as at 31 December 2009

 

 

 

		Note		Group
				2009		2008
				USD'000		USD'000
Non-current assets
Property, plant and equipment		10		5,063		401
Biological assets		11		6,093		1,019
Land use rights		12		20,950		6,178
Goodwill on consolidation		13		534		192
Investment in subsidiaries		14		-		-
Total non-current assets				32,640		7,790
Current assets
Inventories		15		45		31
Trade and other receivables		16		180		52
Prepaid operating expenses				82		58
Cash and cash equivalents		17		4,174		74
Total current assets				4,481		215
Total assets				37,121		8,005
Current liabilities
Trade and other payables		18		1,383		291
Loans and borrowings		19		2,544		1,732
Total current liabilities				3,927		2,023
Non-current liability
Loans and borrowings		19		19,935		-
Total non-current liabilities				19,935		-
Total liabilities				23,862		2,023
Net assets				13,259		5,982

 

 

Consolidated Balance Sheet as at 31 December 2009 (cont'd)

 

 

 

		Note		Group
				2009		2008
				USD'000		USD'000
Attributable to owners of the parent
Share capital		20		35,459		5,849
Other reserves		21		(20,452)		13
Accumulated losses				(1,748)		(377)
				13,259		5,485
Minority interests				-		497
Total equity				13,259		5,982

 

 

 

Consolidated Statement of Changes in Equity for the financial year ended 31 December 2009

 

 

 

	Attributable to owners of the parent
Group 2009	Share Capital		Equity contribution by parent		Other reserves		Accumu-lated losses		Total share capital and reserves			Minority interests		Total equity
	USD'000		USD'000		USD'000		USD'000		USD'000			USD'000		USD'000
	(Note 20)				(Note 21)
At 1 January 2009	5,849		-		13		(377)		5,485			497		5,982
Loss for the year	-		-		-		(1,371)		(1,371)			(16)		(1,387)
Other comprehensive income for the year	-		-		(209)		-		(209)			6		(203)
Total comprehensive income for the year	-		-		(209)		(1,371)		(1,580)			(10)		(1,590)
Share issuance expense	(160)		-		-		-		(160)			-		(160)
Issuance of ordinary shares for cash	8,714		-		-		-		8,714			-		8,714
Issuance of new shares as consideration for acquisition of a subsidiary company	26,905		-		-		-		26,905			-		26,905
Adjustment due to pooling of interest method	(5,849)		-		(20,256)		-		(26,105)			-		(26,105)
Acquisition of minority interest in a subsidiary	-		-		-		-		-			(487)		(487)
At 31 December 2009	35,459		-		(20,452)		(1,748)		13,259			-		13,259

 

Consolidated Statement of Changes in Equity for the financial year ended 31 December 2009 (cont'd)

 

 

 

	Attributable to owners of the parent
Group 2008	Share Capital		Equity contribution by parent		Other reserves		Accumu-lated losses		Total share capital and reserves			Minority interests		Total equity
	USD'000		USD'000		USD'000		USD'000		USD'000			USD'000		USD'000
	(Note 20)				(Note 21)
At 1 January 2008	-*		5,849		-		(4)		5,845			525		6,370
Loss for the year	-		-		-		(373)		(373)			(29)		(402)
Other comprehensive income for the year	-		-		13		-		13			1		14
Total comprehensive income for the year	-		-		13		(373)		(360)			(28)		(388)
Settlement of amount owing to holding company	5,849		(5,849)		-		-		-			-		-
At 31 December 2008	5,849		-		13		(377)		5,485			497		5,982

 

 

* Amount less than USD 1,000 Consolidated Cash Flow Statement for the financial year ended 31 December 2009

 

 

 

	2009		2008
	USD'000		USD'000
Cash flows from operating activities
Loss before taxation	(1,387)		(403)
Adjustments for:
Amortisation of land use rights	88		92
Depreciation of property, plant and equipment	2		1
Interest expense	22		-
Currency realignment	303		100
Operating cash flows before changes in working capital	(972)		(210)
Increase in inventories	(13)		(31)
Increase in trade and other receivables	(69)		(109)
Increase in prepaid operating expenses	(24)		-
(Decrease)/increase in trade and other payables	(6,884)		242
Cash flows from operations	(7,962)		(108)
Interest paid	(165)		(46)
Net cash used in operating activities	(8,127)		(154)
Cash flows from investing activities
Net cash outflow arising from the acquisition of a subsidiary (Note 14)	(12,021)		(102)
Purchase of property, plant and equipment	(2,474)		(435)
Addition to biological assets	(1,919)		(968)
Acquisition of minority interest in a subsidiary	(487)		-
Net cash used in investing activities	(16,901)		(1,505)

 

 

Consolidated Cash Flow Statement for the financial year ended 31 December 2009 (cont'd)

 

 

 

	2009		2008
	USD'000		USD'000
Cash flows from financing activities
Proceeds from issuance of ordinary shares	8,714		-
Share issuance expenses	(160)		-
Drawdown of short term revolving credit	-		1,732
Drawdown of term loans	20,581		-
Repayment of finance lease	(9)		-
Net cash generated from financing activities	29,126		1,732
Net increase in cash and cash equivalents	4,098		73
Effect of exchange rates on cash and cash equivalents	2		-
Cash and cash equivalents, beginning balance	74		1
Cash and cash equivalents, ending balance (Note 17)	4,174		74

 

 

 

 

 

 

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

 

1. General

 

(a) Corporate information

 

Asian Plantations Limited (the "Company") is a limited liability company incorporated and domiciled in the Republic of Singapore and listed on the Alternative Investment Market ("AIM") of the London Stock Exchange.

 

The registered office and principal place of business of the Company is located at No. 14 Ann Siang Road, #02-01, Singapore 069694.

 

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are as disclosed in Note 1(b).

 

(b) Subsidiaries

 

As of 31 December 2009, the details of subsidiaries are as follows:

 

 

					Proportion of ownership interest
Subsidiaries	Country of incorporation		Activities		2009		2008
					%		%
Arus Plantation Sdn. Bhd. ("Arus") (1)	Malaysia		Investment holding		100		100
Held through Arus:
BJ Corporation Sdn. Bhd. ("BJ") (1)	Malaysia		Oil-palm plantation		100		90
Jubilant Paradise Sdn. Bhd. ("JP") (1)	Malaysia		Investment holding		100		-
Held through JP:
Incosetia Sdn. Bhd. ("Incosetia") (1)	Malaysia		Oil-palm plantation		100		-

(1) Audited by member firm of Ernst & Young Global in Malaysia.

 

 

2. Summary of significant accounting policies

 

2.1 Basis of preparation

 

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

 

The financial statements have been prepared on the historical cost basis, except as disclosed in the accounting policies below.

 

The financial statements are presented in United States Dollars ("USD") to facilitate the comparison of financial results with companies in the Oil-palm industry and all values are rounded to the nearest thousand ("USD'000") except when otherwise indicated.

 

2.2 Standards issued but not yet effective

 

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

 

Description	Effective for annual periods beginning on or after
Revised IFRS 3 Business Combinations	1 July 2009
Revised IAS 27 Consolidated and Separate Financial Statements	1 July 2009
Amendments to IAS 39 Financial Instruments: Recognition and Measurement- Eligible Hedged Item	1 July 2009
IFRIC 17 Distributions of Non-cash Assets to Owners	1 July 2009
Improvement to IFRSs issued in 2009:
- Amendments to IAS 38 Intangible Assets	1 July 2009
- Amendments to IFRS 2 Share-based Payment	1 July 2009
- Amendments to IFRIC 9 Reassessment of Embedded Derivatives	1 July 2009
- Amendments to IFRIC 16 Hedges of a Net Investment in a Foreign Operation	1 July 2009
- Amendments to IAS 1 Presentation of Financial Statements	1 January 2010
- Amendments to IAS 7 Statement of Cash Flows	1 January 2010
- Amendments to IAS 17 Leases	1 January 2010
- Amendments to IAS 36 Impairment of Assets	1 January 2010
- Amendments to IAS 39 Financial Instruments: Recognition and Measurement	1 January 2010
- Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations	1 January 2010
- Amendments to IFRS 8 Operating Segments	1 January 2010
IAS 32 Financial Instruments: Presentation - Amendments relating to accounting for rights issues	1 February 2010
IFRS 2 Share-based Payment - Group cash-settled share-based payment transactions	1 July 2010
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments	1 July 2010

 

2.2 Standards issued but not yet effective (cont'd)

 

Description	Effective for annual periods beginning on or after
Improvement to IFRSs issued in 2010:
- Amendments to Transitions requirements for amendments arising as a result of IAS 27 Consolidated and Separate Financial Statements Amendments IFRS 1 First-time Adoption of International Financial Reporting Standards	1 July 2010
- Amendments IFRS 3 Business Combinations	1 July 2010
- Amendments IFRS 7 Financial Instruments Disclosures	1 January 2011
- Amendments to IAS 1 Presentation of Financial Statements	1 January 2011
- Amendments IFRS 1 First-time Adoption of International Financial Reporting Standards	1 January 2011
- Amendments to IAS 34 Interim Financial Reporting	1 January 2011
- Amendments to IFRIC 13 Customer Loyalty Programmes	1 January 2011
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction	1 January 2011
Revised IAS 24 Related Party Disclosures	1 January 2011
IFRS 9 Financial Instruments	1 January 2013

 

The directors expect that the adoption of the standards and interpretations above will have no material impact on the financial statements in the period of initial application.

 

2.3 Basis of consolidation

 

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

 

All intra-group balances, transactions, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

 

Purchase method

Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity.

 

Any excess of the cost of the business combination over the Group's share in the net fair value of the acquired subsidiary's identifiable assets, liabilities and contingent liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.10. Any excess of the Group's share in the net fair value of the acquired subsidiary's identifiable assets, liabilities and contingent liabilities over the cost of the business combination is recorded as income in profit or loss on the date of acquisition.

 

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

2. Summary of significant accounting policies (cont'd)

 

2.3 Basis of consolidation (cont'd)

 

Pooling of interest method

 

Business combinations involving entities under common control are accounted for by applying the pooling of interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the "acquired" entity is reflected within equity as "merger reserve". The statement of comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination takes place. Comparatives are presented as if the entities had always been combined since the date the entities had come under common control.

 

Transactions with minority interests

 

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the consolidated balance sheet, separately from parent shareholders' equity. Transactions with minority interests are accounted for using the parent entity extension method, whereby, on acquisition of minority interests, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill. Gain or loss on disposal to minority interests is recognised in profit or loss.

 

2.4 Foreign currency

 

a) Functional currency

 

The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be in Ringgit Malaysia ("RM"). Revenues and major costs of providing services including major operating expenses are primarily influenced by fluctuations in RM.

 

b) Foreign currency transactions

 

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

2. Summary of significant accounting policies (cont'd)

 

2.4 Foreign currency (cont'd)

 

b) Foreign currency transactions (cont'd)

 

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the 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 in the consolidated balance sheet. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

 

The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the balance sheet date and their statement of comprehensive income are translated at the weighted average exchange rates for the year. 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 relating to that particular foreign operation is recognised in profit or loss of the Group.

 

c) Presentation currency

 

The results and financial position of the Group are translated into USD using the following procedures:

 

·; Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheet date; and

·; Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions.

 

All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve.

 

Rates used in the translation of results and financial position of the Group from its functional currency to its presentation currency for the respective years end are as follows:

	2009	2008
RM/USD
Assets and liabilities	3.4245	3.4640
Income and expenses	3.5233	3.3362

 

2. Summary of significant accounting policies (cont'd)

 

2.5 Subsidiaries

 

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

 

In the Company's separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

 

2.6 Biological assets

 

Biological assets, which include mature and immature oil palm plantations, are stated at fair value less estimated costs to sell. Gains or losses arising on initial recognition of plantations at fair value less estimated costs to sell and from the changes in fair value less estimated costs to sell of plantations at each reporting date are included in the profit or loss for the period in which they arise.

 

Oil palm trees have an average life of 28 years; with the first three as immature and the remaining as mature. Oil palm plantation is classified as mature when 60% of oil palm per block is bearing fruits with an average weight of 3 kilograms or more per bunch. Biological assets also include land preparation costs which is the cost incurred to clear the land and to ensure that the plantations are in a state ready for the planting of seedlings.

 

The fair value of the oil palm plantation is estimated by using the discounted cash flows of the underlying biological assets. The expected cash flows from the whole life cycle of the oil palm plantations is determined using the market price and the estimated yield of the agricultural produce, being fresh fruit bunches ("FFB"), net of maintenance and harvesting costs and any costs required to bring the oil palm plantations to maturity. The estimated yield of the oil palm plantations is affected by the age of the oil palm trees, the location, soil type and infrastructure. The market price of the fresh fruit bunches is largely dependent on the prevailing market price of the processed products after harvest, being crude palm oil and palm kernel.

 

Cost is taken to approximate fair value when little biological transformation has taken place since initial cost incurrence and the impact of the biological transformation on price is not expected to be material. Cost includes employee benefits expenses and depreciation of certain property, plant and equipment.

 

 

 

 

2. Summary of significant accounting policies (cont'd)

 

2.7 Property, plant and equipment

 

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

 

Subsequent to initial recognition, property, plant and equipment are stated 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 property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the profit or loss as incurred.

 

Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset at the following annual rates:

 

Building	-	6.67% - 20%
Infrastructure	-	4%
Office equipment	-	20%
Furniture and fittings	-	10-20%
Plant and machinery	-	20%
Motor vehicles	-	20%
Computers	-	20%

 

Depreciation of property, plant and equipment related to the plantations are allocated proportionately based on the area of mature and immature plantations.

 

Assets under construction included in property, plant and equipment is stated at cost and not depreciated as these assets are not yet available for use.

 

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

 

The residual value, useful life and depreciation method are reviewed at each financial year-end and adjusted prospectively, if appropriate.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

 

 

2. Summary of significant accounting policies (cont'd)

 

2.8 Land use rights

 

Land use rights arise from the acquisition of the subsidiaries. The subsidiaries were granted a provisional lease in accordance with the provisions of the Land Code of Sawawak, Malaysia, for the use of the leasehold land for a period of 60 years by the relevant government agency.

 

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation. The land use rights are amortised over the period of 60 years.

 

2.9 Intangible assets - Goodwill

 

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

 

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group's cash-generating units that are expected to benefit from the synergies of the combination.

 

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit maybe be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

 

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

 

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 in accordance with the accounting policy set out in Note 2.4.

 

2. Summary of significant accounting policies (cont'd)

 

2.10 Impairment of non-financial assets

 

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If such an indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount.

 

An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets. 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. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount.

 

Impairment losses are recognised in the 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 recognized 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 recognised for an asset 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 the profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.

 

2.11 Financial assets

 

Financial assets are recognised on the balance sheet when, and only when, the Group 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.

 

A financial asset is derecognised where 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.

 

2. Summary of significant accounting policies (cont'd)

 

2.11 Financial assets (cont'd)

 

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e. the date that the Group commits to purchase or sell the asset. 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.

 

The Group has only one class of financial assets, namely loans and receivables.

 

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.

 

2.12 Impairment of financial assets

 

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired.

 

Assets carried at amortised cost

 

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss.

 

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

 

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred; the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

 

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.

 

 

2. Summary of significant accounting policies (cont'd)

 

2.13 Inventories

 

Inventories are stated at the lower of cost and net realisable value.

 

Inventories comprise consumable supplies, chemicals and fertilisers. Cost is determined using the weighted average method. The cost of the consumable supplies, chemicals and fertilisers includes expenses incurred in bringing them into store.

 

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.

 

2.14 Cash and cash equivalents

 

Cash and cash equivalents comprise cash on hand and at banks, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

2.15 Financial liabilities 

 

Financial liabilities within the scope of IAS 39 are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

 

Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs.  

 

Subsequent to initial recognition, derivatives are measured at fair value. Other financial liabilities (except for financial guarantee) are measured at amortised cost using the effective interest method.

 

For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from the changes in fair value of derivatives are recognized in profit or loss. Net gains or losses on derivatives include exchange differences.

 

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 the profit or loss.

 

 

2. Summary of significant accounting policies (cont'd)

 

2.16 Provisions

 

Provisions are recognised when the Group has a present obligation (legal or constructive), as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

 

Provisions are reviewed at each balance sheet 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 is reversed. If the effect of time value of money is material, provisions are discounted using a current pre tax rate that, reflects where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

 

2.17 Borrowing costs

 

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

 

2.18 Share capital and share issue expenses

 

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

 

2.19 Employment benefits

 

(a) Defined contribution plans

 

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Such contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

 

In particular, the Singapore company in the Group makes contribution to the Central Provident Fund ("CPF") scheme in Singapore, a defined contribution scheme. Subsidiary companies in Malaysia make contribution to the Employees Provident Fund ("EPF").

 

 

2. Summary of significant accounting policies (cont'd)

 

2.19 Employment benefits (cont'd)

 

(b) Employee leave entitlement

 

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to the balance sheet date.

 

(c) Bonus plans

 

The expected cost of bonus plans is recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by the employees and a reliable estimate of the obligation can be made. Liabilities for bonus plans are expected to be settled within 12 months of the balance sheet date and are measured at the amounts expected to be paid when they are settled.

 

2.20 Leases

 

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

 

As lessee

 

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

 

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

 

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

 

2. Summary of significant accounting policies (cont'd)

 

2.21 Income taxes

 

(a) Current tax

 

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date.

 

Current taxes are recognised in profit or loss except that tax relating to items recognised outside the profit or loss is recognised either in other comprehensive income or directly in equity.

 

(b) Deferred tax

 

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax liabilities are recognised for all temporary differences, except:

 

- where the deferred tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

 

- in respect of temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax credits and unused tax losses can be utilised except:

 

- where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

 

- in respect of deductible temporary differences associated with investments in subsidiaries, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

 

 

2. Summary of significant accounting policies (cont'd)

 

2.21 Income taxes (cont'd)

 

(b) Deferred tax (cont'd)

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has became probable that future taxable income will allow the deferred tax assets to be utilised.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised on the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

 

Deferred income tax relating to items recognised outside the profit or loss is recognised outside the profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred income taxes relate to the same taxation entity and the same taxation authority.

 

(c) Sales tax

 

Revenues, expenses and assets are recognised net of the amount of sales tax except:

 

- where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

 

- receivables and payables that are stated with the amount of sales tax included.

 

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables respectively in the balance sheet.

 

 

2. Summary of significant accounting policies (cont'd)

 

2.22 Segment reporting

 

The Group is organized and managed as one segment and the Chief Operating Decision Makers ("CODM")reviews the profit or loss of the entity as a whole. Thus it does not present separate segmental information.

 

2.23 Contingencies

 

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

 

Contingent liabilities and assets are not recognised on the balance sheet.

 

 

3. Significant accounting judgements and estimates

 

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

 

3.1 Judgements made in applying accounting policies

 

In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements:  

 

(a) Determination of functional currency

 

The Group measures foreign currency transactions in the respective functional currencies of the Company and its subsidiaries. In determining the functional currencies of the entities in the Group, judgement is required to determine the currency that mainly influences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services. The functional currencies of the entities in the Group, which have been determined to be RM, are based on management's assessment of the economic environment in which the entities operate and the entities' process of determining sales prices.

 

(b) Fair value of biological assets (immature plantation)

 

The Group's biological assets are stated at fair value. Management made the judgment that cost approximates fair value of the biological asset for immature plantation because it involved a new oil palm plantation and that little biological transformation has taken place since its initial cost incurrence. The carrying amount of the Group's immature plantation as at 31 December 2009 is USD 4,537,000 (2008: USD 658,000).

 

3. Significant accounting judgements and estimates (cont'd)

 

3.2 Key sources of estimation uncertainty

 

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that 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.

 

(a) Biological assets (mature plantation)

 

The Group measured its mature plantation included in the biological assets at fair value less estimated costs to sell, based on a discounted cash flow model. The inputs to the cash flow model are derived from management's assumptions of the crude palm oil prices, fresh fruit bunches yield and oil extraction ratio based on observable market data over the remaining useful life of the mature plantation. The cash flow model does not include cash flows from financing assets, taxation or re-establishing biological assets after harvest.

 

The amount of changes in fair values would differ if there are changes to the assumptions used. Any changes in fair values of these plantations would affect the profit or loss and equity. The carrying amount of the Group's mature plantation as at 31 December 2009 is USD 847,000 (2008: nil). Further details of the key assumptions used are disclosed in Note 11.

 

(b) Useful lives of property, plant and equipment

 

The cost of property, plant and equipment is depreciated on a straight-line basis over the property, plant and equipment's estimated economic useful lives. Management estimates the useful lives of these property, plant and equipment to be within 5 to 20 years. These are common life expectancies applied in the oil palm industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore, future depreciation charges could be revised. The carrying amount of the Group's property, plant and equipment at the balance sheet date is disclosed in Note 10.

 

(c) Impairment of non-financial assets

 

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other intangible assets with indefinite useful lives are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

 

When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

 

3. Significant accounting judgements and estimates (cont'd)

 

3.2 Key sources of estimation uncertainty (cont'd)

 

(c) Impairment of non-financial assets (cont'd)

 

The Group's impairment test for goodwill acquired in a business combination is based on a value in use calculation using cash flow projections covering 25 productive years of oil palms and do not include restructuring activities that the Group has yet to commit to or significant future activities that will enhance the asset base of the cash generating units being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model, Crude Palm Oil price as well as the expected further cash-inflows and the growth rate used for extrapolation purposes. Further details of the key assumptions applied in the impairment assessment of goodwill are given in Note 13.

 

(d) Impairment of loans and receivables

 

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

 

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group's loans and receivables at the balance sheet date is disclosed in Note 16.

 

(e) Deferred tax assets

 

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

 

The carrying amount of net deferred tax assets not recognised at 31 December 2009 was USD 2,628,000 (2008: USD 191,000). Further details of the carrying amount of net deferred tax assets not recognised is disclosed in Note 8.

 

 

4. Other income

 

		Group
		2009		2008
		USD'000		USD'000
Exchange gain		48		-

 

 

5. Administrative expenses

 

		Group
		2009		2008
		USD'000		USD'000
Professional fees		793		209
Stamp duty on agreements		168		-
Bank charges		119		-
Employee benefit expenses		30		3
Directors' fees (Note 23)		10		1
Depreciation of property, plant and equipment (Note 10)		2		1
Others		184		15
		1,306		229

 

Employee benefit expenses comprises:

 

		Group
		2009		2008
		USD'000		USD'000
Salaries, bonus and allowances		338		164
Contribution to defined contribution plan		40		20
Social security costs		2		1
		380		185
Less: Capitalised to biological assets (Note 11)		(350)		(182)
		30		3

 

 

6. Other expenses

 

		Group
		2009		2008
		USD'000		USD'000
Amortisation of land use rights (Note 12)		105		111
Stamp duties incurred related to plantation		2		63
		107		174

 

7. Financial expenses

 

		Group
		2009		2008
		USD'000		USD'000
Interest expense on:
- Loans and borrowings		22		-

 

 

8. Income tax expense

 

(a) Major components ofincome tax benefit

 

The major components of income tax benefit for the financial years ended 31 December are as follows:

 

		Group
		2009		2008
		USD'000		USD'000
Over-provision of current income tax in prior years		-		1
-

 

(b) Relationship between tax benefit and accounting loss

 

The reconciliation between tax benefit and the product of accounting loss multiplied by the applicable corporate tax rate for the financial years ended 31 December is as follows:

 

	Group
	2009		2008
	USD'000		USD'000
Loss before taxation	(1,387)		(403)
Tax benefit at domestic rate applicable to losses in the countries where the Group operates	(276)		(105)
Adjustments:
Income not subject to tax	(8)		-
Non-deductible expenses	220		73
Deferred tax assets not recognized	100		44
Over-provision of tax in prior years	-		(1)
Others	(36)		(12)
Income tax benefit recognised in profit or loss	-		(1)

 

 

8. Income tax expense (cont'd)

 

(b) Relationship between tax expense and accounting loss (cont'd)

 

For year of assessment 2010, the corporate income tax rate applicable to the Singapore company in the Group was 17%. The corporate income tax rate applicable to the Malaysian companies of the Group was reduced from 27% to 26% and 25% for the year of assessment 2008 and the year of assessment 2009 onwards respectively.

 

The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.

 

(c) Deferred tax assets and liabilities

 

	Group
	2009		2008
	USD'000		USD'000
Deferred tax assets have not been recognised in respect of the following items:
- Unutilised tax losses	3,146		392
- Unabsorbed capital allowances	170		45
- Unabsorbed agricultural allowances	6,252		181
- Other deductible temporary differences	965		148
	10,533		766

 

The availability of the unutilised tax losses and unabsorbed capital and agricultural allowances for offsetting against future taxable profits of the subsidiaries are subject to the provisions of the Malaysian Income Tax Act, 1967.

 

 

8. Income tax expense (cont'd)

 

(c) Deferred tax assets and liabilities (cont'd)

 

Deferred tax assets and liabilities comprise the following:

 

	Balance sheets				Statement of comprehensive income
	2009		2008		2009		2008
	USD'000		USD'000		USD'000		USD'000
Deferred tax liability
Differences in depreciation on property, plant and equipment	(25)		(7)		18		7
Deferred tax assets
Unutilised tax losses	781		98
Unabsorbed capital and agricultural allowances	1,612		56
Other deductible temporary differences	260		44		(18)		(7)
Gross deferred tax assets	2,653		198
Deferred income tax expenses					-		-
Net deferred tax assets not recognised	2,628		191

 

 

9. Loss per share

 

Basic loss per share amounts are calculated by dividing loss for the year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year.

 

Diluted loss per share amounts are calculated by dividing loss for the year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There is no dilutive potential ordinary share as at year ended 2008 and 2009.

 

The following tables reflect the loss and share data used in the computation of basic and diluted loss per share for the years ended 31 December:

 

		Group
		2009		2008
		USD'000		USD'000
Loss, net of tax, attributable to owners of the parent		(1,371)		(373)
-
		No. of shares		No. of shares
		'000		'000
Weighted average number of ordinary shares for basic and diluted loss per share computation*		20,019		20,019
-

 

 

* The weighted average number of shares takes into account the allotment of shares arising from the Share Swap Agreement for the acquisition of the entire and issued paid-up share capital of Arus Plantation Sdn Bhd during the year.

 

For the purpose of basic and diluted loss per share computation, the weighted average number of ordinary shares outstanding is assumed to be 20,019,000 for the year ended 2008 for comparative purpose.