2017 - pwibhmalaysia.com.my Report/AR2017.pdf · 2017 Annual Report PRICEWORTH ... AmBank (M)...

20 1 7Ann u a lR e p o r t

PRICEWORTH INTERNATIONAL BERHAD399292-V

Sustainable Forest ManagementTransforming PWI to

Deliver Sustainable Result

Contents

CORPORATE INFORMATION 2

GROUP CORPORATE STRUCTURE 3

5 YEAR FINANCIAL HIGHLIGHTS 4

CHAIRMAN’S STATEMENT 5

MANAGEMENT DISCUSSION & ANALYSIS 6

DIRECTORS’ PROFILE 10

KEY SENIOR MANAGEMENT PROFILES 12

STATEMENT ON CORPORATE GOVERNANCE 13

STATEMENT OF DIRECTORS’ RESPONSIBILITY 24

CORPORATE SUSTAINABILITY STATEMENT 26

AUDIT COMMITTEE REPORT 27

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 29

ADDITIONAL COMPLIANCE INFORMATION 31

FINANCIAL STATEMENTS 32

LIST OF PROPERTIES 115

ANALYSIS OF SHAREHOLDINGS 117

NOTICE OF ANNUAL GENERAL MEETING 120

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING 122

PROXY FORM

Priceworth International Berhad (399292-V)2

BOARD OF DIRECTORS

Dr. Roslan Bin A Ghaffar (Independent Non-Executive Chairman)

Lim Nyuk Foh (Managing Director)

Koo Jenn Man (Executive Director)

Kwan Tack Chiong (Independent Non-Executive Director)

Ooi Jit Huat (Independent Non-Executive Director)

BOARD COMMITTEES

Audit Committees

Kwan Tack Chiong (Chairman)Ooi Jit HuatDr. Roslan Bin A Ghaffar

Nomination Committees

Ooi Jit Huat (Chairman)Kwan Tack Chiong Dr. Roslan Bin A Ghaffar

Remuneration Committees

Kwan Tack Chiong (Chairman)Ooi Jit Huat Dr. Roslan Bin A Ghaffar

COMPANY SECRETARY

Tan Tong Lang (MAICSA 7045482)Thien Lee Mee (LS0009760)

REGISTERED OFFICE

1st Floor, Lot 5, Block No. 4, Bandar Indah, Mile 4, Jalan UtaraP.O. Box 2848, 90732 Sandakan, SabahTel No. : 089 224771 / 221211 / 229370Fax No. : 089 223969 / 221213 / 223957

CORPORATE HEAD OFFICE

1st Floor, Lot 5, Block No. 4, Bandar Indah, Mile 4, Jalan Utara P.O. Box 2848, 90732 Sandakan, SabahTel No. : 089 224771 / 221211 / 229370 Fax No. : 089 223969 / 221213 / 223957Email : [email protected] : www.pwibhmalaysia.com.my

Corporate Information

SHARE REGISTRAR

Symphony Share Registrars Sdn. Bhd.Level 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul Ehsan

Tel No. : 03-7841 8000Fax No. : 03-7841 8151/03-7841 8152

PRINCIPAL BANKERS

AmBank (M) BerhadAmBank Islamic BerhadBank Kerjasama Rakyat Malaysia Berhad Malayan Banking BerhadRHB Bank Berhad

AUDITORS

PKFChartered Accountants Lot 23-1 & 25-11st Floor, Lintas PlazaLorong Lintas Plaza88300 Kota KinabaluSabah Tel No. : 088-266723Fax No. : 088-267721

STOCK EXCHANGE LISTING

Ordinary Shares

Main Market of Bursa Malaysia Securities Berhad Sector : Industrial ProductsStock Name : PWORTHStock Code : 7123

ANNUAL REPORT 2017 3

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Group Corporate Structure


5 Year Financial Highlights

2017 2016 2015 2014 2013 Turnover (RM'000) 168,488 166,938 203,771 162,136 188,420 Profit / (Loss) before Tax (RM'000) 2,200 1,641 61 (12,929) (72,128) Tax (RM'000) 2,060 (721) 1,781 (331) 14,854 Profit / (Loss) after Tax (RM'000) 4,260 920 1,842 (13,260) (57,274) Share Capital (RM'000) 168,994 65,460 46,670 32,276 93,139 Net Assets (RM'000) 307,561 274,551 254,063 233,580 221,998 Net Assets Per Share (RM) 0.33 0.42 0.54 0.72 1.19 Net Earnings / (Loss) Per Share (Basic) (sen) 0.6 0.2 0.6 (6) (33)

-

50,000

100,000

150,000

200,000

250,000

2013 2014 2015 2016 2017

TURNOVER (RM’000)

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

(80,000)

(70,000)

(60,000)

(50,000)

(40,000)

(30,000)

(20,000)

(10,000)

(10,000)

-

PROFIT / (LOSS) BEFORE TAX (RM’000)

NET ASSETS (RM’000)

(35.0)

(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

Net Earnings / (Loss) Per Share (Basic) (SEN)

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017


Chairman's Statement

Dear Valued Shareholders, On behalf of the Board of Directors (“the Board”), I am pleased to present the Annual Report and audited Financial Statements of Priceworth International Berhad (“PWI” or “the Group”) for the financial year ended 30 June 2017 (“FY 2017”). During the financial year, the Group continued to operate under a very competitive environment. Being affected by the shortage of raw materials supply for downstream processing amidst the structural challenge in the timber industry with the adoption of Sustainable Forest Management since 2010, PWI Group's operations have been adversely affected in spite of the strengthening of the US Dollar. Financial Results The Group recorded a profit of RM4.2 million for the financial year ended 30th June 2017 (FY 2016:RM920,527) mainly attributable to the favourable change of exchange rate on the Group’s export products and lower fuel costs. Outlook and Prospects China, Japan and other Asian countries have always been the major purchasers of plywood, sawn timber and round logs of the Group. Despite global economic conditions becoming increasingly challenging, these economies have maintained modest growth thanks to their domestic demand. The outlook for timber demand from China, Japan and other Asian countries is still promising with growth expected to arise from various positive factors and stabilizing economies. I am happy to report that, with the proposed acquisition of Forest Management Unit No. 5 (FMU 5), PWI expects to secure a larger source of sustainable timber supply soon, which should meet our needs for the foreseeable future. With such an additional supply of sustainable timber, together with the Group’s knowledge, installed machine capacity, competency and experience acquired and built up over the years, and coupled with the stable demand for our products from our long term major customers, there are still great opportunities for the Group. Acknowledgement On behalf of the Board of Directors, I wish to thank our valued shareholders, stakeholders, customers, suppliers, business associates, the regulatory authorities and financiers for their continuing support.

I would like to extend my appreciation to my fellow Board Members for their invaluable advice and contributions. To the management and employees, I give you my highest appreciation for your dedication and commitment in the company, especially in these challenging times. Dr. Roslan A. GhaffarIndependent Non-Executive Chairman


OVERVIEW

Introduction

We are an established Malaysian company with our head office and major factories located in Sandakan, Sabah. Among the earliest pioneers in sustainable timber in Malaysia, we are a fully integrated timber operator in both upstream and downstream sectors, with 25 years of experience in the industry. Upstream, we have 28,000 hectares of forestland under our management for replanting and harvesting, while downstream, we manufacture plywood and other timber products, trade our processed wood products and provide warehousing and delivery services.

Operations

Since 2007, we have transformed our operations to meet the requirements of Sabah’s Sustainable Forest Management (SFM) regime. Having invested in upgrading our equipment and facilities for sustainable timber, we are currently operating 28,000 hectares of Forest Management Units with 50 years’ tenure.

The key part of our fully fledged fleet of machinery and vehicles is 7 units of log fishers to comply with Reduced Impact Logging (RIL) under SFM, with a capacity to handle more than 500,000 cubic meter of logs per year.

Our upgraded plywood and sawn timber timber complexes are located on 100 acres of land each in Seguntor and Batu Sapi, Sandakan, respectively. We have the capacity to produce 240,000 cubic meters of sustainable plywood a year and 115,000 cubic meters of sawn timber a year.

The past decade has seen a major shift in policy and regulation in the forestry industry, with the Sabah Forest Department’s implementation of RIL and long-term licences under Sustainable Forest Management regime for the management, replanting and harvesting of Forest Management Units.

Having anticipated these changes, PWI has invested more than RM100 million in upgrading its equipment and machinery since 2008, in order to ensure the Group remains relevant in the new landscape for sustainable, renewable timber in Sabah.

In the interim, this policy shift to SFM has resulted in a shortage of mature acreage for harvesting, and as a consequence, the timber industry as a whole has experienced insufficient supply of timber to achieve optimal operational levels consistently. Due to this, PWI has experienced sub-optimal capacity utilisation which has resulted in operations achieving break-even performance.

Corporate Objectives and Strategies

In order to address this gap, the Board of Directors decided to undertake a proposed financial restructure and embark on a game-changing transformative acquisition of the 101,000 hectare Forest Management Unit no. 5 (FMU 5). In October 2017, PWI proposed to acquire Rumpun Capaian Sdn Bhd and its wholly-owned subsidiary Anika Desiran which holds a 99-year licence to manage, replant and harvest FMU 5.

The financial restructuring will position PWI on a sound footing with bigger capitalisation and lower gearing. The proposed acquisition of FMU 5 will ensure a stable, consistent supply of sustainable timber to feed the mills as well as to increase utilisation of the timber harvesting equipment.

Following approval from the Sabah Forest Department in June 2017 to begin operations in Compartment 57 and 58 in FMU 5, we have completed repair and upgrading works on the site including key infrastructure such as roads and bridges.

Management Discussion & Analysis


Products and Markets

We sell more than 80% of our plywood products to the Japanese market, as we manufacture premium products which meet stringent Japanese JAS standards. We have two other main products, namely round logs and sawn timber, which are sold in the Asean region as well as East Asia, particularly Japan and China.

In terms of contribution to revenue, the three largest contributing products are plywood, round logs and sawn timber. Plywood contributes 45 %, round log contributes 20%, while sawn timber contributes 17% for the current financial year. Our other products such as moulding contributes 3% and the remaining 15% contributed by timber service contracts for third parties.

Our plywood products are of the highest quality which meet JAS certification, a requirement for the Japanese market. Our plywood plant obtained certification for the ISO 9001-2008 standard for manufacturing processes, ensuring that products are of quality standard, and that process quality control measure and final quality inspection are complied with.

Management Discussion & Analysis(continued)

Customer Base

Our major buyers are established Japanese trading houses with whom we have maintained established relationships for more than 20 years. Meanwhile, we continue to receive inquires from new and existing customers for more timber products due to the regional shortage of tropical hardwood. However, we have not been able to produce sufficient quantity to meet this demand. We expect this to change once the supply of timber improves with the additional harvest from Compartments 57 and 58 of FMU 5.

The breakdown of our main customer markets for our different products is:● Plywood: Japan 80%, Malaysia 10% and others 10%;● Sawn Timber: China 30%, Thailand 30%, Malaysia 30%, others 10%;● Round Logs: China 70%, India 20%, Malaysia 10%;● Moulding: Taiwan 35%, Malaysia 35%, Korea 25%, others 5%.

FINANCIAL RESULTS

Despite global economic uncertainties during the financial year 2017, PWI performed relatively well on the strength of stable demand. Since our product prices are quoted in US Dollar, the weakening of exchange rate for Ringgit Malaysia to RM4.28 during the year contributed to a slightly higher revenue of RM168.5 million, from RM166.9 million as compared to the previous year.

Other Operating Income.

As the Group put more focus on its core business of sustainable forest management and downstream timber products manufacturing in Malaysia, the Group has disposed its assets in Solomon Islands since previous year which then generated gain on disposal, resulted slight decrease in the other operating income as compared to previous financial year.

Finance Costs.

One of the Group’s current main objectives is to reduce the gearing ratio and lowering its finance cost.



Income Tax Expenses.

During the financial year, the reversal of deferred tax liabilities was as a result of higher unutilised agricultural and capital allowance. The agricultural allowance is mainly from the replanting activities of the Group.

Foreign Currency Translation.

During the year, the foreign currency translation mainly arose from the financial position of foreign subsidiaries in the Solomon Islands. The Group has since then ceased its operation in the Solomon Islands and is focusing on the Forest Management Units operation in Sabah, Malaysia.

Review

The Group managed to maintain revenue and profit before tax in FY 2017 as compared to the previous year, despite of the overall shortage of raw materials in the industry. The supply of raw materials remain the crucial driver of performance for the Group. The Forest Management Unit FMU 5, currently being acquired, started harvesting in September 2017 and will only start to contribute positively in the FY2018.

PWI is seeking to recapitalise the Company and reduce its gearing through various fund raising exercises including the proposed Rights Issues.

Recapitalising the company is a first step towards repositioning PWI financially before the next step of raising the funds required for the RM260 million purchase consideration for the Proposed Acquisition of FMU 5.

Besides the purchase consideration of RM260 million for FMU 5, there will be no significant capital expenditure envisaged related to FMU 5 since PWI has been well equipped with plant and machinery. We envisage that once the operations in the FMU 5 is in full swing and running smoothly, there will be significant positive effects on the performance and cashflows of the company.

Malaysia Operations

In Malaysia, our focus is in Sabah which include operating Sustainable Forest Management (SFM) Units, timber harvesting, logs trading, saw milling and manufacturing of plywood.

Over the last 10 years, we have transformed internally to meet the requirements of the new SFM regime. Its key measure is Reduced Impact Logging (RIL), a forest harvesting technique which helps minimise the environmental impact on forests, soil and water quality, and is an important move to conserve and protect the natural resources of the State.

To date, we manage 28,000 hectares of FMU under the SFM regime. These are mostly newly planted and the lack of mature areas has limited our harvesting under the new regulations. Hence, most of our assets remain underutilised. This reduced timber supply has also impacted our plywood mill operations, and kept us just above our break-even point.

This is why during the financial year, we implemented a game-changing, transformative acquisition of FMU 5, a 101,000 hectares forest allocated for sustainable, renewable wood production. We received approval on 12 May 2017 to commence work in Compartments 57 and 58 starting with the repairing of bridges and main roads, setting up of offices and staff/workers quarters, construction of the base camp, workshop, stores, and stumping. It also included preparing the ground for a sawmill factory and a veneer plant. Harvesting started in early September 2017 and we have now almost 700 pieces of harvested timber at the stumping.

Once our FMU5 operations are in full swing, PWI will have a stable source of timber, which is expected to return the Group to full utilisation of its machinery and equipment for harvesting as well as manufacturing.



POTENTIAL RISKS

As mentioned earlier, PWI is implementing various fund raising exercises in view of the proposed transformative acquisition. We expect these proposed exercises to be successful barring unforeseen adverse global economic and financial circumstances beyond our control.

As mentioned earlier, the FMU 5 operations will have a significant positive impact to PWI, but there are challenges in operations under the SFM regime especially in terms of Regulatory Control on harvesting. However, PWI is confident of being able to meet these challenges as we have had sufficient experience in operating under Reduced Impact Logging condition whereby Comprehensive Harvesting Planning (CHP) is required prior to harvesting. We also have had experience in achieving high efficiency in deploying our 7 units of Log Fishers under this regime.

While the terms and conditions governing FMU 5 contains in the Sustainable Forest Management Licence Agreement (SFMLA) may be subject to adjustment, depending on Government Policies as well as other relevant bodies, PWI is of the view that the Sabah State Forestry Department has by now put in place good governance having implemented all the SFMLAs for 20 years, and that our constant dialogues and meetings with them would mitigate any adverse risks arising thereof.

FORWARD LOOKING

With the proposed Transformative Acquisition of FMU 5, PWI is bullish on its future outlook. We envisage that FMU 5, with 80 years remaining on its tenure, will be able to provide a sustainable supply of logs for the foreseeable future. Thus, the principal business segment of logs trading, sawmill operations and plywood manufacturing will be further enhanced with our margins improving beyond the breakeven level which we have been experiencing for the past few years.

In order to create value for our shareholders, the Board of Directors is always looking at related activities to shift the business up the value chain. With the sustainable logs supply from FMU 5, PWI will be looking at possibility of venturing into “Quality Engineered Wood Products” in the near future.

Quality Engineered Wood Products

While our main focus in manufacturing currently is in plywood, our next step will be to explore and expand into Quality Engineered Wood Products in the near future.


Directors’ Profile

Dr Roslan Bin A Ghaffar

Independent Non-Executive Chairman 65 years of age, Malaysian, MaleMember of Audit, Nomination and Remuneration Committees

Dr Roslan was appointed to the Board on 28 February 2017. He holds a Bachelor of Science degree from the Louisiana State University, Baton Rouge, USA and obtained his Ph.D. from University of Kentucky, Lexington, USA. He was attached to University Putra Malaysia as a Lecturer in 1984 and Associate Professor in 1991. In 1992 until 1993, he was with the University of Kentucky, Lexington as Visiting Professor. On various occasions while at the University Putra Malaysia, he had served as consultant to various international and national organisations which included the World Bank, Asian Development Bank, Winrock International and the Economic Planning Unit of the Prime Minister’s Department. On 1 August 1994, Dr. Roslan was appointed as Director, Investment and Economic Research Department, Employees’ Provident Fund (“EPF”). He was promoted to the position of Senior Director in 1996 and was Deputy Chief Executive Officer of the EPF from July 2002 until his retirement in 2007.

Apart from the Company, Dr. Roslan is an Independent Non-Executive Director of Cagamas Berhad, SYF Resources Berhad and MRCB-Quill Management Sdn Bhd. He is also an Independent Non-Executive Director and Chairman for Box-Pak (Malaysia) Berhad.

He does not have any family relationship with any Director and/or major shareholder of the Company. He has no conflict of interest with the Company and has had no convictions for offences within the past five (5) years other than traffic offences.

Lim Nyuk Foh

Managing Director53 years of age, Malaysian, Male

Mr Lim founded the PWI and group of companies (“PWI Group”) and was appointed to the Board of Directors of PWI (“Board”) on 2 November 2001.

He holds a Degree in Finance majoring in Investment from the University of Toledo, United States of America. He ventured into the trading of timber for the domestic and foreign market in 1989. In 1990 he founded Priceworth Industries Sdn. Bhd. to undertake the sawmilling and timber extraction business. He has more than 28 years of extensive experience in the timber industry.

Mr Lim also sits on the board of Bertam Alliance Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company. He has no conflict of interest with the Company and has had no convictions for offences within the past five (5) years other than traffic offences.

Koo Jenn Man

Executive Director 44 years of age, Malaysian, Male

Mr Koo was admitted to the Board on 25 May 2011. He graduated from University of Otago, Dunedin, New Zealand in 1996 with a Bachelor of Commerce major in Accountancy. He is members of the Malaysian Institute of Accountants and the Chartered Institute of Management Accountant (United Kingdom) respectively. He started his career as an audit assistant at PricewaterhouseCooper (Malaysia), Kota Kinabalu in 1997. He was made a Senior Associate in 2000 and held the position for 3 years. He joined PWI Group as an Accountant in 2003 and subsequent he was promoted as the Group Accountant overseeing the financial management of PWI Group. His other job function also covers the overall management of the operations of the PWI Group.

Mr Koo also sits on the board of Bertam Alliance Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company. He has no conflict of interest with the Company and has had no convictions for offences within the past five (5) years other than traffic offences.


Kwan Tack Chiong

Independent Non-Executive Director54 years of age, Malaysian, Male Chairman of Audit and Remuneration Committees Member of Nomination Committee

Mr Kwan was appointed to the Board on 2 November 2001. He graduated with a Bachelor of Business Administration from the University of Toledo, United States of America. He started his career as a supervisor in Pinayas Wood Products Sdn Bhd in 1989. He joined Trimwood Industrial Sdn Bhd in 1990 as a Manager until 1992. From 1992 until 1993 he was the Marketing Manager of Service Trading Sdn Bhd before admitted to the board of directors of Priceworth Industries Sdn Bhd from 1994 to 1995. Since then, he is a business entrepreneur and presently involves in food and beverage industry.

He has no other directorship or major shareholding in other public companies. He does not have any family relationship with any Director and/or major shareholder of the Company. He has no conflict of interest with the Company and has had no convictions for offences within the past five (5) years other than traffic offences.

Ooi Jit Huat

Independent Non-Executive Director66 years of age, Malaysian, MaleChairman of Nomination Committee Member of Audit and Remuneration Committees

Mr Ooi was appointed to the Board on 2 November 2001. He started his career at Peat Marwick Mitchell & Co in London and Kuala Lumpur from 1980 to 1982. He then founded his own public accounting firm, Russ Ooi & Associates in 1985. He has more than 32 years of experience in the financial industry specializing in corporate finance consultancy, auditing and investigations, corporate exercises involving public listed companies. He is a member of the Malaysian Institute of Certified Public Accountants, Malaysian Institute of Accountants and the Malaysian Institute of Taxation.

Mr Ooi is also a director of Kwantas Corporation Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company. He has no conflict of interest with the Company and has had no convictions for offences within the past five (5) years other than traffic offences.

Directors’ Profile(continued)


Key Senior Management Profiles

Lim Nyuk Foh53 years of age, Malaysian, MaleManaging Director

The management team is headed by our Managing Director, Mr Lim Nyuk Foh. His profile as set out in the Directors’ Profiles on page 10 of this Annual Report.

Koo Jenn Man 44 years of age, Malaysia, Male Executive Director

He joined PWI Group as an Accountant in 2003 and subsequent he was promoted as the Group Accountant overseeing the financial management of PWI Group. His other job function also covers the overall management of the operations of the PWI Group. His profile as set out in the Directors’ Profiles on page 10 of this Annual Report.

Fonny Tsen Lip Fon 53 years of age, Malaysian, FemaleDirector of Sinora Sdn Bhd

She graduated from Tunku Abdul Rahman College, Kuala Lumpur which partnered with Campell University USA in 1990, with a Bachelor of Science, majoring in Biology and Chemistry. She joined Sinora in 1992 as a Chemist and gained experience in marketing and plywood manufacturing. Having gained vast experience in the plywood manufacturing operation, she was promoted to Senior Manager in 2011 and was subsequently appointed as Director of Sinora in 2014. She oversees the marketing and plywood manufacturing of the Company.

She does not have any family relationship with any Director and/or major/substantial shareholder of the Company and she does not have any personal interest in any business arrangement involving the Company. She has not committed any offences within the past five (5) years other than traffic offences, if any. She does not hold any directorships in any other public companies and listed issuers other than disclosed above.

Wong Shu Kiew 60 years of age, Malaysian, Male Director of Maxland Sdn Bhd

He is a Director of Maxland Sdn Bhd cum Head of Operation of Sustainable Forest Management of the Group. He has extensive experience of almost 30 years in timber industry. He joined the Group in April 2001. In recent years, he has acquired in-depth knowledge on implementation of reduced impact logging and compliance with the current sustainable forest management regime.

He does not have any family relationship with any Director and/or major/substantial shareholder of the Company and he does not have any personal interest in any business arrangement involving the Company. He has not committed any offences within the past five (5) years other than traffic offences, if any. He does not hold any directorships in any other public companies and listed issuers other than disclosed above.


Statement on Corporate Governance

The Board of Directors (“the Board”) of Priceworth International Berhad (“PWI” or “the Company”) commits to ensure that a sound framework of best practices of good corporate governance as prescribed in the Malaysian Code on Corporate Governance 2012 (“the Code”) is generally implemented and in place at all levels of the Group’s businesses to protect and enhance long-term shareholders’ value and all stakeholders’ interest.

The Board is pleased to provide the following statement which explains how the Company and the Group have set out to ensure the application of the principles and recommendations of the Code and the extent of compliance with the Code as required under the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

ESTABLISH CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD AND MANAGEMENT

Establish clear functions of the Board and Management

The Board is responsible for the stewardship of business and affairs of the Company in order to enhance long-term shareholders’ value. The Board is fully aware and understand their collective responsibilities in guiding the business activities of the Group in reaching an optimum balance of a sound and sustainable business operation with an optimal corporate governance framework in order to safeguard shareholders’ value.

The Board also responsible for the oversight and overall management of the Group including assessing and agreeing with the Group’s corporate objectives, and the goals and targets to be met by management.

The Board has a formal schedule of matters reserved to itself for decision, which includes the overall Group strategy and direction, investment policy, major capital expenditures, consideration of significant financial matters and review of the financial and operating performance of the Group.

The management, including the Executive Directors of the Company, is responsible for managing the day-to-day running of the business activities in accordance with the direction and delegation of the Board. The management meets regularly to discuss and resolve operational issues. The Group Managing Director briefs the Board on business performance and operations as well as the management initiatives during quarterly Board’s meetings.

Clear Roles and Responsibilities

The Board is entrusted with the responsibility to promote the success of the Group by directing and supervising the Group’s affairs. Hence, to develope corporate objectives and position descriptions including the limits to management’s responsibilities, which the management are aware and are responsible for meeting. The Board understands the principal risks of all aspects of the business that the Group is engaged in recognising that business decisions require the incurrence of risk.

The principal roles and responsibility assumed by the Board are as follows:

• Review and Adopt Strategic Plan of the Group

The Board plays an active role in the development of the Group’s overall corporate strategy, marketing plan and financial plan. The Board is presented with the short and long term strategy of the Group together with its proposed business plans for the forthcoming year. The Board also monitor budgetary exercise which to supports the Group’s business plan and budget plan.

• Implementation of Internal Compliance Controls and Justify Measure to Address Principle Risks

The Board is fully alert of the responsibilities to maintain a proper internal control system. The Board’s responsibilities for the Group’s system of internal controls including financial condition of the business, operational, regulatory compliance as well as risk management matters.

• Developing and Implementing an Investor Relations Program or Shareholder Communications Policy For The Group

The Board recognises that shareholder and other stakeholder are entitled to be informed in a timely and readily accessible manner of all material information concerning the Company through a series of regular disclosure events during the financial year. Hence, the Company website is the primary medium in providing information to all shareholders and stakeholders.


Statement on Corporate Governance(continued)

• Succession Planning

The Board has entrusted the Nomination Committee and Remuneration Committee with the duty to review candidates for the Board and key management positions and to determine remuneration packages for these appointments, and to formulate nomination, selection, remuneration and succession policies for the Group.

The Board, together with the Management, put in place informal structure and practice to ensure key roles within the Group are supported by competent and caliber second-in-line to reduce the impact of abrupt departure of key personnel to the minimum possible. The succession planning of the Group is enhanced by the policies and standard operating procedures as well as job descriptions established for key business processes within the Group. In addition, during the review of the performance and strategies presented, at times, the Board reviews on the adequacy of caliber and competent human resources that are put in place for daily management and control of operations as well as proper execution of approved strategies.

The roles and responsibilities of the Independent Non-Executive Directors and Executive Directors are clearly defined and properly segregated. All the Independent Non-Executive Directors are independent of the Executive Directors, management and major shareholders of the Company, and are free from any business or other relationship with the Group that could materially interfere with the exercise of their independent judgement. This offers a strong check and balance on the Board’s deliberations.

The Board will normally hold meetings at least four (4) times in each financial year to consider:-

i) relevant operational reports from the management;ii) reports on the financial performance;iii) specific proposals for capital expenditure and acquisitions, if any;iv) major issues and opportunities for the Company, if any; and v) quarterly financial statements for announcement to authorities.

Code of Conduct and Ethical Standards

The Group’s Code of Ethics and Conduct are set out in the Employee Handbook and the Code of Ethics and Conduct for Directors as references to govern the standards of ethics and good conduct expected of the Directors and the employees of the Group. The Code of Ethics and Conduct for Directors sets out the expected conduct of the Directors’ personal behaviour, communication with other Board members and employees, conflict of interest and the use of public resources. It also sets out the Board’s commitment to take responsibility for reporting improper conduct or misconduct which has been, or may be occurring in the workplace, reporting the details to the relevant people or agency, as well as to take responsibility for contributing in a constructive, courteous and positive way to enhance good governance and the reputation of the Board of the Company.

The Company did not make available its Code of Ethics and Conduct on its website as the Board views that it is not commercially beneficial to publish such information publicly.

Strategies Promoting Sustainability

The Board is aware of the importance of business sustainability and reviews operational practices which impact on sustainability of environment, governance and social aspects of its business on a regular basis. The Group is committed to the continuous efforts in maintaining a delicate balance between its sustainability agenda and other stakeholders’ interest. The details of the sustainability efforts are set out in the “Corporate Sustainability Statement” of this Annual Report.

Access of Information and Advice

Unless otherwise agreed, notice of each meeting confirming the venue, time, date and agenda of the meeting together with relevant Board papers shall be forwarded to each director no later than seven (7) days before the date of the meeting. This is to ensure that Board papers comprising of due notice of issues to be discussed and supporting information and documentations were provided to the Board sufficiently in advance. Furthermore, Directors are given sufficient time to read the Board paper and seek for any clarification as and when they may need advisers or further explanation from management and Company Secretaries. The deliberations of the Board in terms of the issues discussed during the meetings and the Board’s conclusions in discharging its duties and responsibilities are recorded in the minutes of meetings by the Company Secretaries.

The Board has access to all information within the Company as a full Board to enable them to discharge their duties and responsibilities and is supplied in a timely basis with information and reports on financial, regulatory and audit matters by way of Board papers for informed decision making and meaningful discharge of its duties.



In addition, all Directors have direct access to the advice and services of the Company Secretaries who is responsible for ensuring the Board’s meeting procedures are adhered to and that applicable rules and regulatory are complied with. External advisers are invited to attend meetings to provide insights and professional views, advice and explanation on specific items on the meeting agenda, when required. Senior management team from different business units will also be invited to participate in the Board meetings to enable all Board members to have equal access to the latest updates and developments of business operations of the Group presented by the senior management team. The Chairman of the Board Committees, namely, the Audit Committee, Remuneration Committee, Nomination Committee and Risk Management Committee briefs the Board on matters discussed as well as decisions taken at the meetings of their respective Board Committees meetings.

When necessary, Directors may whether as a full Board or in their individual capacity, seek independent professional advice, including the internal and external auditors, at the Company’s expense to enable the directors to discharge their duties with adequate knowledge on the matters being deliberated, subject to approval by the Chairman of the Board, and depending on the quantum of the fees involved.

Board Charter

The Company’s Board Charter sets out:

• the Board structure and protocols;• the Board’s strategic intent;• key values, principles and ethos of the Company;• the Board’s roles and responsibilities, outlining the division of the responsibilities and powers between Board and management;

the different Board committees and between the Chairman and Managing Director; and• the processes and procedures for convening Board meetings.

The Board will periodically review the Board Charter to ensure that it remains consistent with the Board’s objectives, meet the needs of the Company and is in line with applicable laws and regulatory requirements. The Board Charter was last reviewed by the Board on 20 October 2016.

The Code recommends that the Board Charter be published on the Company’s website. However, the Board has concluded that there is no commercial benefit to publicize such self-governance document. Instead, an abridged version of the current Charter is posted on the Company’s website at www.pwibhmalaysia.com.my.

STRENGTHEN COMPOSITION

Board Committees

To assist the Board to effectively discharge its roles and functions, the Board delegates certain of its role and functions of three (3) Board Committees which operate within clearly defined terms of reference.

The Chairman of the respective Committees will brief the Board on the matters discussed at the Committee meetings and minutes of these meetings are circulated to the Board. The Board committees are:-

a) Audit Committee;b) Nomination Committee; and c) Remuneration Committee

a) Audit Committee

The composition of the Audit Committee and summary of activities under taken are presented in the Audit Committee Report of this Annual Report 2017. The terms of reference of the Audit Committee are made available on the Company’s website.

b) Nomination Committee

As recommended by the Code, the Company has established the Nomination Committee comprising exclusively of Non-Executive Directors, with the responsibilities of assessing the balance composition of Board members, nominate the proposed Board member by looking into his skills and expertise for contribution to the Company on an ongoing basis.

The present Nomination Committee members are as follows:

Chairman : Ooi Jit Huat Member : Kwan Tack Chiong Member : Dr. Roslan Bin A Ghaffar


The Nomination Committee shall meet at least once a year unless otherwise determine by the Nomination Committee. The Quorum for meeting and/or for the sanction and endorsement of approvals in writing shall be at least two (2) members, of which at least one (1) shall be an independent director.

In fulfilling its primary objectives, the Nomination Committee shall undertake, amongst others, the following duties and responsibilities:

i) to regularly review the structure, size and composition of the Board and make recommendations to the Board with regard to any adjustments that are deemed necessary;

ii) to evaluate the effectiveness of the Board as a whole, the various Committees and each individual Director’s contribution to the effectiveness on the decision making process of the Board;

iii) give full consideration to succession planning for Directors and other senior executives in the course of its work, taking into account the challenges and opportunities facing the company, and the skills and expertise needed on the Board in the future;

iv) prepare a description of the role and capabilities required for a particular appointment;

v) identifying and nominating for the approval of the Board, candidates to fill board vacancies as and when they arise;

vi) in determining the process for the identification of suitable new candidates, the Nomination Committee will ensure that an appropriate review or search is undertaken by an independent third party to ensure the requirement and qualification of the candidate nominated;

vii) to make recommendations to the Board on candidates it considers appropriate for appointment; and

viii) to recommend to the Board concerning the re-election by shareholders of any director under the “retirement by rotation” provisions in the Company’s Article of Association.

The summary of activities undertaken by the Nomination Committee during the financial year included the following:

i) Reviewed the effectiveness of the Board, as a whole, Board Committees and individual Directors and make appropriate recommendation to the Board; and

ii) Reviewed and recommended the retirement and re-election of Directors at the forthcoming Annual General Meeting in accordance with the Company’s Articles of Association.

c) Remuneration Committee

In line with the best practices of the Code, the Board has set up a Remuneration Committee which would comprise a majority of Independent Non-Executive Directors in order to assist the Board for determining the Director’s remuneration.

The present members of the Remuneration Committee are as follow:-

Chairman : Kwan Tack Chiong Member : Ooi Jit Huat Member : Dr. Roslan Bin A Ghaffar

The Remuneration Committee is authorised by the Board to establish a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. The Remuneration Committee shall meet at least once a year and at such time, the Chairman of the Remuneration Committee may request for a meeting as and when deemed necessary. The quorum of the Remuneration Committee meeting shall be two (2) members, of which at least one (1) shall be an independent director.

The Terms of Reference of the Remuneration Committee can be viewed at the Company’s website at www.pwibhmalaysia.com.my.

The Board believes in a remuneration policy that fairly supports the Directors’ responsibilities and fiduciary duties in

steering the Group to achieve its long-term goals and enhance shareholders’ value. The Board’s offers a competitive remuneration package in order to attract, develop and retain talented individuals to serve as directors.



The Remuneration Committee’s principal objective is to evaluate, deliberate and recommend to the Board a remuneration policy for Executive Directors that is fairly guided by market norms and industry practice. The Remuneration Committee also recommends the Executive Directors’ remuneration and benefits based on their individual performances and that of the Group.

The determination of the remuneration for Non-Executive Directors is a matter of the Board as a whole. The level of remuneration for Non-Executive Directors reflects the amount paid by other comparable organizations, adjusted for the experience and levels of responsibilities undertaken by the particular Non-Executive Directors concerned. The remuneration package of Non-Executive Directors will be a matter to be deliberated by the Board, with the Director concerned abstaining from deliberations and voting on deliberations in respect of his individual remuneration. In addition, the Company also reimburses reasonable out-of-pocket expenses incurred by all the Non-Executive Directors in the course of their duties as Directors of the Company. The aggregate annual Directors’ fees and other benefits payable are to be approved by shareholders at the Annual General Meeting based on recommendations of the Board.

The summary of activities undertaken by the Remuneration Committee during the financial year included the following :

a) Reviewed and recommended the payment of Directors’ fees to Non-Executive Directors.

Appointments to the Board

The Nomination Committee makes independent recommendations for appointments to the Board. In making these recommendations, the Nomination Committee assesses the suitability of candidates, taking into account the character, integrity, competence, time commitment and other qualities of the candidates, before recommending their appointment to the Board for approval.

Criteria for Recruitment

The appointment of new Directors is the responsibility of the full Board after considering the recommendations of the Nomination Committee. As a whole, the Company maintains a very lean number of Board members. The Board appoints its members through a formal and transparent selection process which is consistent with Articles of Association of the Company. This process has been reviewed, approved and adopted by the Board. New appointees will be considered and evaluated by the Nomination Committee. The Nomination Committee will then recommend the candidates to be approved and appointed by the Board. The Company Secretary will ensure that all appointments are properly made, and that legal and regulatory obligations are met.

Generally, the Board adopts a flexible approach when selecting and appointing new directors depending upon the circumstances and timing of the appointment. The Nomination Committee will help assess and recommend to the Board, the candidature of directors, appointment of directors to board committees, review of Board’s succession plans and training programmes for the Board.

In assessing suitability of candidates, consideration will be given to the core competencies, commitment, contribution and performance of the candidates to ensure that there is a range of skills, experience and diversity (including gender diversity) represented in addition to an understanding of the Business, the Markets and the Industry in which the Group operates and the accounting, finance and legal matters.

In general, the process for the appointment of director to the Board is as follows:

(i) The Nomination Committee reviews the Board’s composition through Board assessment/evaluation;

(ii) The Nomination Committee determines skills matrix;

(iii) The Nomination Committee evaluates and matches the criteria of the candidates, and will consider diversity, including gender, where appropriate;

(iv) The Nomination Committee recommends to the Board for appointment; and

(v) The Board approves the appointment of the candidates.

Factors considered by the Nomination Committee when recommending a person for appointment as a director include: (i) the merits and time commitment required for a Non-Executive Director to effectively discharge his or her duties to the

Company;

(ii) the outside commitments of a candidate to be appointed or elected as a Non-Executive Director and the need for that person to acknowledge that they have sufficient time to effectively discharge their duties; and

(iii) the extent to which the appointee is likely to work constructively with the existing directors and contribute to the overall effectiveness of the Board.



Criteria for Board Assessment

The Nomination Committee would conduct an assessment of the performance of the Board, as a whole, Board Committees and individual Directors, based on a self-assessment approach on an annually basis. From the results of the assessment, including the mix of skills and experience possessed by Directors, the Board will consider and approve the recommendations on the re-election and re-appointment of Directors at the Company’s forthcoming Annual General Meeting, with a view to meeting current and future requirements of the Group.

The criteria used by the Nomination Committee in evaluating the performance of individual, including contribution to interaction, integrity, competency and time commitment of the members of the Board and Board Committees in discharging their duties, are in a set of questionnaires. Each of the Directors will perform a self-assessment on an annually basis. The Board did not engage any external party to undertake an independent assessment of the Directors.

Based on the assessment conducted for the financial year 2017, the Board and the Nomination Committee is satisfied with the current size, composition as well as the mix of qualifications, skills and experience among the Board members and the independence of its Independent Non-Executive Directors.

Re-election of Directors and re-appointment of Directors by rotation

In accordance with the Company’s Articles of Association, all Directors who are appointed by the Board may only hold office until the next following Annual General Meeting ("AGM") subsequent to their appointment and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at that AGM. The Articles of Association also provide that one-third of the Directors, or if their number is not three or a multiple of three, then the number nearest to one-third, are subject to retirement by rotation at every AGM but are eligible for re-election provided always that each Directors shall retire from office at least once in every three years.

Boardroom and Gender Diversity

The Board recognises the importance of diversity in its composition in ensuring its effectiveness and good corporate governance. Although the Board has yet to establish any diversity policy. However, the Board will consider females onto the Board in due course to bring about a more diverse perspective.

Directors’ remuneration procedures and policies

The Board believes that PWI should have a fair remuneration policy to attract, retain and motivate directors. It has established a Remuneration Committee (“RC”) to review and ensure that the remuneration of its members fairly reflect the Board’s and members’ responsibilities, the expertise required by PWI and the complexity of its operations. The said remuneration should also be in line with the business strategy and long term objectives of PWI.

Details of the Directors’ remuneration paid or payable to all Directors of the Company (both by the Company and the Group) and categorised into appropriate components for the financial year ended 30 June 2017 are as follows:

i) Aggregate Directors’ Remuneration

Company Group Salaries and Salaries and Fees * other emoluments Fees *other emoluments Director (RM) (RM) (RM) (RM)

Executive Directors - 110,762 147,200 914,752

Non-Executive Directors 132,000 2,700 132,000 2,700

Total 132,000 113,462 279,200 917,452

* Other emoluments include the meeting allowance for the Directors’ attendance in Board and Board’s Committee Meetings.



ii) Analysis of Directors’ Remuneration

The number of Directors whose remuneration falls into the following bands is as follows:

Number of Directors

Company Group

Range of Remuneration Executive Non-Executive Executive Non-Executive

Below RM50,000 - 4 1 4

RM100,001 to RM150,000 1 - 2 -

RM150,001 to RM300,000 - - 2 -

RM300,001 to RM450,000 - - 1 -

Details of the individual Director’s remuneration are not disclosed in this report as the Board is of the view that the above remuneration disclosure by band and analysis between Executive and Non-Executive Directors satisfies the accountability and transparency aspects of the Code.

REINFORCE INDEPENDENCE

Annual Assessment of Independence

The Board has set out policies and procedures to ensure effectiveness of the Independent Directors on the Board, including new appointment. The Board assesses the independence of the Independent Directors annually, taking into account the individual Director’s ability to exercise independent judgment at all times and to contribute to the effective functioning of the Board.

The Independent Directors are not employees and they do not participate in the day-to-day management as well as the daily business of the Company. They bring an external perspective, constructively challenge and help develop proposals on strategy, scrutinize the performance of Management in meeting approved goals and objectives, and monitor risk profile of the Company’s business and the reporting of monthly business performance.

Based on the assessment carried out during the financial year ended 30 June 2017, the Board is satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interests of the Company during the financial year under review, and that each of them continues to fulfill the definition of independence as set out in the MMLR of Bursa Securities.

Tenure of Independent Director

The Code recommends that if the tenure of Independent Directors exceeds a cumulative period of nine (9) years, such director should be re-designated as Non-Independent Director. The Code further recommends that if the Board desires to retain such director as an Independent Director, it may justify and seek the shareholders’ approval.

The Board is of the view that the length of tenure should not be a criterion affecting a director’s independence. As long serving directors, they have proved that their working experiences, networking and familiarization with the business operations and are able to contribute actively in the Board or Committee Meetings without compromising their independent judgement. The Board, through the Executive Directors, undertakes annual assessment of the independence of the affected Independent Directors as it believes the Executive Directors who have intimate working relationship amongst the Directors are well placed to ascertain their independence.

Subsequent to the financial year end, the Nomination Committee conducted an appraisal on the independence of Mr Kwan Tack Chiong and Mr Ooi Jit Huat, who have served more than nine years as Independent Directors and concluded that they met the independence criteria as set out in the MMLR of Bursa Securities. Both Mr Kwan Tack Chiong and Mr Ooi Jit Huat continue to maintain independent and objective views in rendering their services. The Board views that they can continue to contribute to the Board as independent directors and hence will be seeking shareholders’ approval at the forthcoming Annual General Meeting to retain them in this position.



Separation of the Positions of the Chairman and Managing Director

The code required the positions of Chairman and Managing Director to be held by two different individuals. The Chairman is responsible for the leadership of the Board and ensures effectiveness of the Board while the senior management of the Group guided by the Managing Director manages the day-to-day business and operations and also implements the Board’s directive, strategies and policies. The distinct and separate roles, with a clear division of responsibilities, ensure a balance of power and authority, such that no one individual has unfettered powers of decision-making.

There is a clear division of responsibilities at the head of the Group to ensure a balance of authority and power. The Board is led by Dr. Roslan Bin A Ghaffar, an Independent Non-Executive Chairman. The senior management of the Group was led by Mr Lim Nyuk Foh , the Managing Director of the Company.

Board Composition and Balance

The present Board comprises of members of good mix with different backgrounds, expertise in entrepreneurship, economics, administration and management, finance/accounting, internal audit, computer engineering and marketing with diverse skill to effectively lead and control the Company.

In year 2017, the Board of Directors comprises of five (5) Members, of whom one (1) Managing Director, one (1) Executive Director and three (3) Independent Non-Executive Directors. The Board is of the opinion that the current size and composition constitute an effective Board in view of the nature of business and the scale of its Group’s business operation.

The Board is led by the Chairman who is an Independent Non-Executive Director whose role is clearly separated from the role of the Managing Director to ensure a balance of power and authority. The Executive Director is responsible for implementing policies and decisions of the Board, overseeing operations as well as managing development and implementation of business and corporate strategies. The Non-Executive Directors are independent of management and free from any business relationship that could materially interfere with the exercise of their independent judgement and play an important role in ensuring that the strategies proposed by the management is objectively evaluated, thus provide a capable check and balance for the Executive Director.

FOSTER COMMITMENT

Time Commitment and Directorship in Other Public Listed Companies

Under the MMLR of Bursa Securities, the directorships in other public listed companies in Malaysia held by any Board member at any one time shall not exceed any number as may be prescribed by the relevant authorities. In addition, at the time of appointment, the Board shall obtain the Director’s commitment to devote sufficient time to carry out his responsibilities. Directors are required to notify the Chairman before accepting any new directorship(s). The notification would include an indication of time that will be spent on the new appointment(s). Any Director is, while holding office, at liberty to accept other Board appointment in other companies so long as the appointment is not in conflict with the Company’s business and does not affect the discharge of his/her duty as a Director of the Company. To ensure the Directors have the time to focus and fulfill their roles and responsibilities effectively, one (1) criterion as agreed by the Board is that they must not hold directorships at more than five (5) public listed companies as prescribed in Paragraph 15.06 of the MMLR of Bursa Securities.

Each Board member is expected to achieve at least 50% attendance of total Board Meetings in any applicable financial year with appropriate leave of absence be notified to the Chairman and/or Company Secretaries, where applicable.

The Directors have demonstrated their ability to devote sufficient time and commitment to their roles and responsibilities as Directors of the Company. The Board is satisfied with the level of time and commitment given by the Directors of the Company towards fulfilling their duties and responsibilities.

During the year under review, six (6) Board meetings were held during the financial year ended 30 June 2017. Set out below is the record of attendance of the Board Member:-

Name of Directors No. of Meetings Attended

Dr. Roslan Bin A Ghaffar 1/1(Appointed on 28 February 2017)

Mr Lim Nyuk Foh 5/6

Mr Koo Jenn Man 6/6

Mr Kwan Tack Chiong 6/6

Mr Ooi Jit Huat 4/6

Dato’ Sri Chee Hong Leong, JP 3/3 (Retired on 30 November 2016)



Additionally, in between Board meetings, the Directors also approved various matters requiring the sanction of the Board by way of circular resolutions. The Board meets on a quarterly basis, with amongst others, review the operations, financial performance, reports from the various Board Committees and other significant matters of the Group. Where any direction or decisions are required expeditiously or urgently from the Board between the regular meetings, special Board meetings maybe convened by the Company Secretaries, after consultation with the Chairman. Additionally, in between Board meetings, the Directors also approved various matters requiring the sanction of the Board by way of circular resolutions.

The tentative dates for Board and Board Committee meetings for the year will be circulated by the Company Secretaries well in advance towards the end of the previous year to ensure that each of the Directors is able to attend the planned Board and/or Board Committee meetings including that of the Annual General Meeting. At the end of each Board and Audit Committee meetings, the date of the next meetings is to be re-confirmed.

Qualified and Competent Secretary

The Board is supported by a professionally qualified company secretary who has experience in handling public listed companies. The Company Secretary is accountable to the Board on all matters connected with the proper functioning of the Board and responsibility includes:

• assisting the Chairman and the chairmen of the Board Committees in developing the agendas for the meetings; • administering, attending and preparing the minutes of meetings of the Board, Board Committees and shareholders, • acting as liaison to ensure good information flow within the Board, between the Board and its Committees as well as between

management and the Directors; • advising on statutory and regulatory requirements and the resultant implication of any changes that have bearing on the Company

and the Directors; • advising on matters of corporate governance and ensuring Board policies and procedures are adhered to;• monitoring compliance with the Companies Act, 2016, the MMLR and the Articles of Association of the Company; • facilitating orientation of new director; • disseminating suitable training courses and arranging for Directors to attend such courses when requested.

Every Director has full access to the advice and services of the Company Secretary. The Company Secretary and the senior management proactively monitor and guide the Board on the corporate disclosure requirements stipulated in the MMLR to ensure the Company is in compliance and makes timely disclosures.

Directors’ Training

The Board recognises the importance of training as a continuous education process for the Directors in order to ensure that the Directors stay abreast of the latest developments and changes in laws and regulations, business environment and new challenges and to equip the Directors with the necessary knowledge and skills to enable them to fulfill their responsibilities and to discharge their duties effectively.

All Directors have attended the Mandatory Accreditation Programme (“MAP”) prescribed by Listing Requirements. The Directors shall be committed to continuous education to equip themselves with the knowledge and understanding of various provisions, rules, regulations and the latest development in the industries to effectively discharge their duties and obligations.

The Directors are briefed by the Company Secretary on the letters and circulars issued by Bursa Securities at every Board meeting. The Directors also will continue to undergo training and education programmes in order to keep themselves abreast on the various issues facing the changing business environment within which the Company operates in order to discharge their duties and responsibilities more effectively.

Updates on the Code, Companies Act, 2016 and the MMLR were given by the Company Secretary to all Directors to facilitate knowledge enhancement in the areas of the Corporate Governance and relevant compliance areas.

All Directors have full opportunity to attend seminars, trainings, workshops and conference to update their knowledge and skills to contribute and to carry out their roles and duties in line with the directors’ responsibility.



All Directors have complied with the Continuous Training Programme prescribed by Bursa Securities. The Directors have participated in conferences, seminars and training programmes and during the financial year ended 30 June 2017, the following training programmes and seminars were attended by the Directors:-

Director Date of Training Title of Training

Dr. Roslan Bin A Ghaffar 20 September 2016 ASEAN Fixed Income Seminar Bangkok, Thailand 10 November 2016 Post 2017 Budget Tax Seminar 14 March 2017 Directors’ Continuous Learning Programme Challenges For Directors and Officers 6 April 2017 Release of The Malaysian Code on Corporate Governance (Securities Commission Malaysia)

Lim Nyuk Foh 4 November 2016 2017 Budget and Tax Conference

Koo Jenn Man 4 November 2016 2017 Budget and Tax Conference 10 November 2016 Seminar Percukaian Kebangsaan 2016

Ooi Jit Huat 3 November 2016 2017 Budget Seminar 12 September 2017 & Accounting for construction contracts, property development and real 13 September 2017 estate activities and borrowing costs.

Kwan Tack Chiong 4 November 2016 2017 Budget and Tax Conference

UPHOLD INTEGRITY IN FINANCIAL REPORTING

Compliance with Applicable Financial Reporting Standards

In presenting the annual audited financial statements and quarterly announcements of results to shareholders, the Board take responsibility to present a balanced and meaningful assessment of the Group’s position and prospect and to ensure that the financial statements are drawn up in accordance with the provision of Companies Act, 2016 and applicable accounting standards in Malaysia. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. The Responsibility Statement by the Directors pursuant to MMLR of Bursa Securities set out in this Annual Report.

In addition to the above, the Company also undertook an independent assessment of the internal control system and the Audit Committee has been assured that no material issue and major deficiency had been detected which posed a high risk to the overall internal control under review.

Assessment of Suitability and Independence of External Auditors The Company has established a transparent arrangement with the External Auditors to meet their professional requirements. From time to time, the External Auditors highlight to the Audit Committee and Board of Directors on matters that require the Board’s attention.

The Audit Committee is responsible for reviewing the audit, recurring audit-related and non-audit services provided by the External Auditors. The Audit Committee has been explicitly accorded the power to communicate directly with both the External Auditors and Internal Auditors. The terms of engagement for services provided by the External Auditors are reviewed by the Audit Committee prior to submission to the Board for approval. The effectiveness and performance of the External Auditors are reviewed annually by the Audit Committee.

In assess or determine the suitability and independence of the External Auditors, the Audit Committee has taken into consideration of the following:

i) the adequacy of the experience and resources of the External Auditors;

ii) the External Auditor’s ability to meet deadlines in providing services and responding to issues in a timely manner as contemplated in the external audit plan;

iii) the nature of the non-audit services provided by the External Auditors and fees paid for such services relative to the audit fee; and

iv) whether there are safeguards in place to ensure that there is no threat to the objectivity and independence of the audit arising from the provision of non-audit services or tenure of the External Auditors.

Annual appointment or re-appointment of the External Auditors is via shareholders’ resolution at the Annual General Meeting on the recommendation of the Board. The External Auditors are being invited to attend the Annual General Meeting of the Company to response and reply to the shareholders’ enquiries on the conduct of the statutory audit and the preparation and contents of the audited financial statement.



Where necessary, the Audit Committee will meet with the External Auditors without the presence of Executive Director and members of management to ensure that the independence and objectivity of the External Auditors are not compromised and matters of concerns expressed by the Audit Committee are duly recorded by the Company Secretaries.

In presenting the Audit Planning Memorandum to the Audit Committee, the External Auditors have highlighted their internal policies and procedures with respect to their audit independence and objectivity which include safeguards and procedures and independent policy adopted by the External Auditors. The External Auditors have also provided the required independence declaration to the Audit Committee and the Board for the financial year ended 30 June 2017.

The Audit Committee is satisfied with the competence and independence of the External Auditors for the financial year under review. Having regard to the outcome of the annual assessment of the External Auditors, the Board approved the Audit Committee’s recommendation for the shareholders’ approval to be sought at the Annual General Meeting on the re-appointment of Messrs PKF as the External Auditors of the Company for the financial year ending 30 June 2018.

RECOGNISE AND MANAGE RISKS

Risk Management and Internal Control

The Board is entrusted with the overall responsibility of continually maintaining a sound system of internal control, which covers not only financial controls but also operational and compliance controls as well as risk management, and the need to review its effectiveness regularly in order to safeguard shareholders’ investments and the Company’s assets. The internal control system is designed to access current and emerging risks, respond appropriate to risks of the Group.

As an effort to enhance the system of internal control, the Board together with the assistance of external professional Internal Audit firm adopted on-going monitoring and review to the existing risk management process in place within the various business operations, with the aim of formalising the risk management functions across the Group. This function also acts as a source to assist the Audit Committee and the Board to strengthen and improve current management and operating style in pursuit of best practices.

The information on the Group’s internal control is further elaborated in page 29 on the Statement on Risk Management and Internal Control of this Annual Report.

ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

Corporate Disclosure Policies

The Board recognises the importance of keeping the shareholders informed and updated of development concerning the Group. In this regard, the Group strictly adheres to the disclosure requirements of Bursa Securities. The Group practices open communication with its investors.

In order to maintain its commitment of effective communication with shareholders, the Group embrace the practice of comprehensive, timely and continuing disclosures of information to its shareholders as well as the general investing public.

The practice of disclosure of information is to adopt the best practices recommended in the Code with regard to strengthening engagement and communication with shareholders, it is not only established just to comply with the MMLR of Bursa Securities.

The Group also endeavour to provide additional disclosures of information on a voluntary basis, where necessary. The management believes that consistently maintaining a high level of disclosure and extensive communication is vital to shareholders and investors in making informed investment decisions.

Leverage on Information Technology for Effective Dissemination of Information

The Company’s website at www.pwibhmalaysia.com.my incorporates an Investor Relations section which provides all relevant information on the Company accessible to the public. This section enhances the Investor Relations function by including all announcements made by the Company and its annual reports.

The quarterly financial results are announced via Bursa LINK after the Board’s approval. This is important in ensuring equal and fair access to information by the investing public.



STRENGTHEN RELATIONSHIP BETWEEN THE COMPANY AND SHAREHOLDERS

Annual General Meeting

The Annual General Meeting (“AGM”) is the principal forum for dialogue with the shareholders. The shareholders will be notified of the meeting together with a copy of the Company’s Annual Report at least twenty one (21) days before the meeting. The Notice of AGM, which sets out the business to be transacted at the AGM, is also published in a major local newspaper. The Board will ensure that each item of special business included in the notices of the AGM or extraordinary general meeting is accompanied by a full explanation of the effects of any proposed resolution. At the AGM, the Board will present to the shareholders with a comprehensive report on the progress and performance of the Group and the shareholders are encouraged to participate in the questions and answers session there at, where they will be given the opportunity to raise questions or seek more information during the AGM. Informal discussions between the Directors, senior management staff, the shareholders and investors are always active before and after the general meetings.

Apart from contacts at general meetings, currently there is no other formal program or schedule of meetings with investors, shareholders, stakeholders and the public generally. However, the management has the option of calling for meetings with investors/analysts if it deems necessary. Thus far, the management is of the opinion that the existing arrangement has been satisfactory.

Poll Voting

In line with Paragraph 8.29A of the MMLR, the Company will ensure that any resolution set out in the notice of any general meeting, or in any notice of resolution which may properly be moved and is intended to be moved at any general meeting, is voted by poll. At the same time, the Company will appoint at least one (1) scrutineer to validate the votes cast at the general meeting.

Effective Communication and Proactive Engagement

The Group maintains its effective communication with shareholders by adopting timely, comprehensive, and continuing disclosures of information to its shareholders as well as the general investing public and adopts the best practices recommended by the Code with regards to strengthening engagement and communication with shareholders.

To this end, the Group relies on the following channels for effective communication with the shareholders and stakeholders:

i) Interim financial reports to provide updates on the Group’s operations and business developments on a quarterly basis;ii) Annual audited financial statements and annual report to provide an overview of the Group’s state of governance, state of affairs,

financial performance and cash flows for the relevant financial year;iii) Corporate announcements to Bursa Securities on material developments of the Group, as and when necessary and mandated

by the MMLR; andiv) Annual General Meetings.

Shareholders and stakeholders may raise their concerns and queries by contacting the Registered Office of the Group, the details of which as provided under the “Corporate Information” section of this Annual Report. The Share Registrar is also available to attend to administrative matters relating to shareholder interests.

STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS

The Directors are responsible for the preparation of financial statements prepared for each financial year to give a true and accurate view of the state of the Group and the Company of the results and cash flows of the Group and the Company for the financial year then ended.

In ensuring the preparation of these financial statements, the Directors have observed the following criteria:

i) Overseeing the overall conduct of the Company’s business and that of the Group;ii) Identifying principal risks and ensuring that an appropriate system of internal control exists to manage these risks;iii) Reviewing the adequacy and integrity of Internal Controls System and Management Information System in the Company and

within the Group;iv) Adopting suitable accounting policies and apply them consistently;v) Making judgments and estimates that are reasonable and prudent; and vi) Ensuring compliance with application Approved Accounting Standards in Malaysia.



The Directors are responsible for ensuring that proper accounting and other records which are closed with reasonable accuracy at any time the financial position of the Group and ensuring that the financial statements comply with the MMLR, the provisions of the Companies Act 2016 and applicable Approved Accounting Standards in Malaysia. The Directors are also responsible for taking such reasonable steps to safeguard the assets of the Group and to minimise fraud and other irregularities.

The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 30 June 2017, the Group has used the appropriate accounting policies and applied them consistently and supported by reasonable and prudent judgments and estimates. The Directors also consider that all applicable approved accounting standards have been complied with and further confirm that the financial statements have been prepared on a going concern basis.

COMPLIANCE STATEMENT

The Board has deliberated, reviewed and approved this Statement on Corporate Governance. The Board considers that the Statement on Corporate Governance provides the information necessary to enables shareholders to evaluate how the Code has been applied. The Board considers and is satisfied that the Company has fulfilled its obligation under the Code, the MMLR of Bursa Securities and all applicable laws and regulations throughout the financial year ended 30 June 2017.

This Statement is made in accordance with a resolution of the Board of Directors dated 3 October 2017.



Corporate Sustainability Statement

The Board of Directors acknowledge the importance of corporate social responsibility (“CSR”) and strive to fulfil the expectation of its stakeholders by enhancing its social environmental and economical performance while ensuring the sustainability and operational success of the company.

Sustainability is an integral part of our business and the Group’s corporate responsibility practices focus on four areas - Environment, Workplace, Market Place and Community which aim to deliver sustainable value to society at large.

I) Environment

The Group recognizes the impact of its day to day business on the environment. As such, the Group is committed by implementing environmentally friendly work processes while raising the environmental awareness among its staff.

II) Workplace

The Group believes that employees are key resources that drive long term and sustainable organizational successes. As such, the Group continuously create a safe, pleasant and conducive working environment for its employee.

The Group respects the different cultures, gender and religions of our stakeholders as we understand that the diversity and differences give us broader range of competence, skills and experience to enhance our capabilities to achieve business results which is important for the overall business sustainability. Thus, the Group is committed to provide our staff an environment of equal opportunity to strive while promoting diversity in workforce.

To optimize the employee talents and capacities, various in-house training, external training programmes and seminar are continuously provided to all employees to enhance their knowledge and skill while promoting a motivated working team and fostering a closer relationship with each other.

III) Market place

The Group is committed to ensure that the interests of all its important stakeholders – shareholders, analysts, bankers, customers, suppliers, authority bodies and public are being taken care of. The Group emphasizes on good corporate governance practices, transparency and accountability to meet shareholders’ expectations.

IV) Community

The Group recognizes the co-relationship between business growth and social well-being and welfare. Therefore, in fulfilling its corporate responsibility to the community in which it conducts its business, the Group is obligated to nourish and improve the quality of the society at large.

The Group shall continue to focus its corporate responsibility on enhancing community sustainability.


The Audit Committee of Priceworth International Berhad (“PWI” or “the Company”) is pleased to present the Audit Committee Report for the financial year ended 30 June 2017.

Composition

The Audit Committee presently comprises the following members:

Chairman : Mr Kwan Tack Chiong ( Independent Non-Executive Director)Members : Mr Ooi Jit Huat (Independent Non-Executive Director) : Dr. Roslan Bin A Ghaffar (Independent Non-Executive Director)

The Committee has clear written Terms of Reference defining its functions, qualifications for membership, scope of duties and responsibilities, governing the manner in which the Committee is to operated and how decisions are to be made.

The Terms of Reference are available on the Company’s website.

Key Functions and Roles of Audit Committee and Attendance

The functions of the Audit Committee are to assist the Board in fulfilling its fiduciary responsibilities, particularly in relation to the Group’s financial reporting and to examine the adequacy the Group’s internal control systems and corporate governance. The Audit Committee also performs the role as focal point of communication between the Board, external auditor, internal auditor and the management.

The duties of the Audit Committee shall include the following:

1. To review the nomination, appointment and re-appointment of external auditor, the audit fee and any questions of resignation and dismissal.

2. To review the external auditors’ audit plan, the nature and scope of audit, the evaluation of the system of internal controls of the Company and the Group, the external auditors’ management letter and management’s response.

3. To discuss the external auditors’ audit reports, areas of concern arising from the audit and any other matters the external auditors may wish to discuss (in the absence of management if necessary).

4. To review the extent of co-operation and assistance given by the employees to the external auditors.

5. To review the internal audit function on matters concerning:• the adequacy of the scope, functions, competency and resources of the internal audit functions and the necessary authority

to carry out its work;• the internal audit programme and results of the internal audit processes or investigation undertaken and, where necessary,

ensure that appropriate actions are taken on the recommendations of the internal audit function;• the appraisal or assessment of the performance of members of the internal audit function; • the approval for any appointment or termination of senior staff members of the internal audit function; and• take cognizance of resignation of internal audit staff members and provide the resigning staff member an opportunity to

submit his reasons for resigning.

6. To review the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:

• changes in or implementation of major accounting policy; • significant adjustment arising from audit and unusual events; • the going concern assumption; and • compliance with accounting standards and other legal requirements;

7. To review any related party transaction and conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity.

Audit Committee Report


Audit Committee Report (continued)

8. Any other duties and responsibilities as may be prescribed by the Board from time to time.

There were 5 meetings of the Audit Committee held during the financial year under review. The attendance record of the Audit Committee members are as follows:

Name of Members Designation No. of Meetings Attended Mr Kwan Tack Chiong Chairman 5/5

Mr Ooi Jit Huat Member 4/5

Dr. Roslan Bin A Ghaffar Member 1/1 (Appointed on 28 February 2017)

Dato’ Sri Chee Hong Leong, JP Member 2/2 (Retired on 30 November 2016)

Other Board members and senior management staff attended the meetings upon invitation of the Committee to provide clarifications on audit issues and information in relation to the operation of the Group. The internal auditor and the representatives of external auditors were also present in the meetings to provide inputs and advice.

Issues deliberated and decisions arrived at during the Audit Committee meetings were recorded by the Secretary. The minutes of preceding Audit Committee meetings were tabled for confirmation at the following Audit Committee meeting, of which it is presented at the Board for notation.

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR ENDED 30 JUNE 2017

The activities of the Audit Committee during the financial year ended 30 June 2017 include the following:

a) Reviewed the quarterly unaudited financial of the Group and the Company including the announcements pertaining thereto, before recommending to the Board for their approval and release of the Group’s results to Bursa Securities;

b) Reviewed with external auditors on their audit planning memorandum on the statutory audit of the Group for the financial year ended 30 June 2017;

c) Reviewed the annual audited financial statements of the Group before recommending to the Board for their approval and release of the Group’s results to Bursa Securities;

d) Reviewed and discussed with the external auditors of their audit findings inclusive of system evaluation, audit fees, issues raised, audit recommendations and management’s response to these recommendations;

e) Evaluated the performance of the external auditors for the financial year ended 30 June 2017 covering areas such as calibre, quality processes, audit team, audit scope, audit communication, audit governance and independence and considered and recommended the re-appointment of the external auditors;

f) Reviewed and assessed the adequacy of the scope and functions of the internal audit plan;

g) Reviewed the internal audit reports presented and considered the findings of internal audit through the review of the internal audit reports tabled and management responses thereof;

h) Reviewed the proposed fees for the external auditors and internal auditors in respect of their audit of the Company and the Group;

i) Reviewed related party transactions and conflict of interest situation that may arise within the Company or the Group;

j) Reviewed the Company’s compliance with the MMLR, applicable Approved Accounting Standards and other relevant legal and regulatory requirements;

k) Reviewed the Audit Committee Report and Statement on Risk Management and Internal Control before recommending to the Board for approval and inclusion in the Annual Report; and

l) Report to the Board on its activities and significant findings and results.


Introduction

Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors of the Company to make a statement in this Annual Report about the state of risk management and internal control in the Company as a Group. The Board of Directors recognises the importance of good practice of corporate governance and is committed to maintain a sound system of internal control to safeguard shareholders’ investments and Group’s assets. The Board is pleased to provide the following Statement on Risk Management and Internal Control which has been prepared in accordance with the “Statement on Risk Management and Internal Control – Guidelines for Directors of Listed Issuers”.

Board’s Responsibility

The Board acknowledges its overall responsibility for maintaining a sound risk management framework and system of internal control, and for reviewing its adequacy and integrity to safeguard shareholders’ investment and the Company’s assets. The review of the Group’s risk management and system of internal control is a concerted and continuing process. In the pursuit of this objective, the Directors are aware that the internal control system is designed to manage rather than eliminate the risk of failure to achieve the Group’s objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board has received assurance from the Executive Director that the Group’s risk management and internal control is operating adequately and effectively, in all material aspects based on the risk management and internal control system of the Group.

KEY ELEMENTS OF INTERNAL CONTROL

CONTROL ENVIROMENT AND CONTROL ACTIVITIES

• Organization structure with clearly defined lines of responsibility, authority and accountability;• Clearly defined authorization limits at appropriate levels are set out in an authority matrix for controlling and managing business

operations;• Experienced and competent staffs are placed in areas of responsibility to support and continuously monitor the effectiveness of

the Group’s system of internal control;• Policies and procedures for key business processes are formalized and documented for implementation and continuous

improvements. These policies are subject to regular reviews to meet new business required.

MONITORING AND COMMUNICATION

• Regular Board and Management meetings are held where information is provided to the Board and Management covering financial performance and operations;

• Regular visits to operating subsidiaries by Executive and Managing Director and Senior Management whenever appropriate;• Regular review of business processes to assess the effectiveness of internal controls by the independent internal auditor.

Reports on findings of the internal audit are presented to the Audit Committee and subsequently presented to the Board for consideration for necessary action to be carried out by management.

Risk Management Framework

The process of identification, evaluation and management of significant risks faced by the Group is carried out as part of the Group’s normal business operation and management activities. These processes are led by the Managing Director and Executive Director and supported by the senior management. Within the Group management team, the management organization structure and approval authority are defined by outlining the respective management areas of responsibility.

The Managing Director, Executive Director and senior management team conduct meeting every week. The weekly meetings serve as a monitoring tool and provide communication channel of reporting and feedback to all level of management, whereby, changes in business environment and operations are reviewed while operation performance is assessed with detailed corrective actions being identified and discussed. The Management has been entrusted to continuously monitor the principal risks of the Group that have been identified, evaluate existing controls and formulate necessary action plans with the respective process owners. The above process has been in place for the year under review and up to the date of approval of this statement.

The Group is in the midst of forming a risk management committee for managing risks affecting its business and operations. Within the framework, there will be an established process for the identifying, analyzing, evaluating, treating, monitoring as well as continual review of risks and the effectiveness of the Group’s risk mitigation strategies and controls at the departmental and corporate levels.

The review of the risk management and internal control system of the Group so as to determine its accuracy and effectiveness, and to recommend and assist in the implementation of any required improvement to the Group’s risk management and internal control system has been deferred till the completion of the formulation of the enterprise wide risk management framework.

Statement on Risk Managementand Internal Control


INTERNAL AUDIT FUNCTIONS

Independent reviews of internal control are essential in order to provide an objective assurance to the Board. At present, the review mechanism is under the purview of the Audit Committee. Functionally, the internal auditor report directly to the Audit Committee and are responsible to conduct reviews on the systems of risk management and internal control; report the weaknesses of the systems of risk management and internal control; and to provide recommendations for improvement to the management.

The Board has engaged an independent professional accounting firm to carry out the internal audit function of the Group which reports directly to the Audit Committee. The internal audit is on-going and is carried out based on the Internal Audit Plan that was reviewed by the Audit Committee and approved by the Board of Directors. The amount of internal audit fees payable to the internal auditors for the year is RM42,000.

Other key internal control

Certain subsidiaries of the Group have awarded with ISO 9001:2008 Standards and the Group regularly reviews, improves on and continuously manage and control the quality requirement of the Group’s manufacturing of timber products process in compliance with the ISO 9001:2008 Standards under the United Kingdom Accreditation Service (“UKAS”) Management Systems and the quality standards of Malaysia. The ISO 9001:2008 Standards specifies requirements for a quality management system where an organization:

• needs to demonstrate its ability to consistently provide product that meets customer and applicable statutory and regulatory requirements; and

• aims to enhance customer satisfaction through the effective application of the system, including processes for continual improvement of the system and the assurance of conformity to customer and applicable statutory and regulatory requirements.

REVIEW OF STATEMENT BY THE EXTERNAL AUDITORS

The External Auditors have reviewed this Statement for inclusion in the 2017 Annual Report, and have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the processes the Board has adopted in the review of the adequacy and integrity of the internal controls within the Group, nor is the Statement factually inaccurate.

CONCLUSION

The Executive Director and Managing Director are responsible for ensuring that the Group’s risk management and internal control measures are systematically assessed and continuously upgraded to cater for changing business and operational environment. The Board will continually assess the adequacy and effectiveness of the Group’s risk management and system of internal control and to strengthen it, as and when necessary. No material losses, contingencies or uncertainties have arisen from any inadequacy or failure of the Group’s internal control measures that would require a separate disclosure in this Annual Report.

This Statement on Risk and Internal Control Management is made in accordance with the resolution of the Board of Directors dated 3 October 2017.

Statement on Risk Managementand Internal Control (continued)


(a) AUDIT AND NON AUDIT FEES PAID TO EXTERNAL AUDITORS

During the financial year, the amount of audit and non-audit fees paid/payable to the external auditors by the Company and the Group respectively for the financial year ended 30 June 2017 were as follows:

Company Group (RM) (RM)

Audit Services Rendered

Current year 95,000 252,900 Under provision in prior year 30,000 31,700

Non-Audit Services Rendered

(a) Review of Statement on Risk Management and Internal Control 9,000 9,000 (b) Provision of assistance in preparation of projected income statement, cash flow and statement of financial position of FMU 5 88,000 88,000 (c) Reporting accountants in connection with the corporate exercise relates to private placement, special issue and two-call rights issue together with bonus issue 65,000 65,000

(b) RECURRENT RELATED PARTY TRANSACTIONS OF REVENUE OR TRADING NATURE

There was no recurrent related party transaction of revenue or trading nature during the financial year ended 30 June 2017.

(c) REVALUATION POLICY

The Company does not have a revaluation policy on landed properties.

(d) MATERIAL CONTRACTS AND CONTRACTS RELATING TO LOAN

There was no other material contract and/or contracts relating to loan entered into by the Company and/or its subsidiary companies involving Directors and Major Shareholders’ interests.

(e) UTILIzATION OF PROCEEDS FROM PRIVATE PLACEMENT

On 29 December 2016, the Company had completed its Private Placement exercise following the listing and quotation of 44,000,000 new ordinary shares on the Main Market of Bursa Malaysia Securities Berhad.

The Private Placement has raised total proceeds of RM4,620,000 and the fund utilization are stated below :

Purpose Proposed Actual Intended Utilisation Utilisation Timeframe (RM) (RM) for Utilisation

Part finance the payment of the Earnest Deposit of FMU 5 4,589,237 4,589,237 Within 1 month To defray expenses relating to the private placement 30,763 30,763 Within 1 month

Total 4,620,000 4,620,000

On 23 January 2017, the Company had completed its Private Placement exercise following the listing and quotation of 20,203,342 new ordinary shares on the Main Market of Bursa Malaysia Securities Berhad.

The Private Placement has raised total proceeds of RM2,020,334 and the fund utilization are stated below :


Partial payment of Earnest deposit of FMU 5 2,016,293 2,016,293 Within 1 month To defray expenses relating to the private placement 4,041 4,041 Within 1 month

Total 2,020,334 2,020,334

(f) UTILIzATION OF PROCEEDS FROM SPECIAL ISSUE

On 1 June 2017, the Company had completed its Special Issue exercise following the listing and quotation of 211,871,030 new ordinary shares on the Main Market of Bursa Malaysia Securities Berhad.

The Special Issue has raised proceeds of RM21,187,103 and the fund utilization are stated below:


Payment of Balance Deposit(1) 10,000,000 3,394,470 Within 1 month Working capital for the FMU 5 10,000,000 10,000,000 Within 6 months Other working capital and general expenses 837,000 837,000 Within 6 months Estimated Expenses 350,103 350,103 Within 1 month

Total 21,187,103 14,581,573

Note:(1) Refer to the Circular to Shareholders dated 11 May 2017 in respect of the Proposed Special Issue. The Balance Deposit is payable to the

Vendor upon all conditions precedent of the SPA for the Proposed Acquisition being met. In the event the Proposed Acquisition does not materialise, our Company will reassign the RM10.0 million proceeds which was intended to be utilised for the Balance Deposit to the working capital of our Group.

Additional Compliance Information


Financial Statements

DIrectors’ rePort 33

statement By DIrectors 38

statutory DeclaratIon 38

rePort of the InDePenDent auDItors 39

statements of ProfIt or loss anD other comPrehensIVe Income 43

statements of fInancIal PosItIon 44

statements of changes In equIty 45

statements of cash flows 47

notes to the fInancIal statements 49

annual rePort 2017 33

Directors' Report

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 30 June 2017.

Principal activities

The principal activity of the Company is investment holding.

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

There has been no significant change in the nature of these principal activities during the financial year ended 30 June 2017.

Results

Group Company RM RM Profit for the financial year attributable to: Owners of the Company 4,275,660 30,067,408 Non-controlling interests (15,122) -

4,260,538 30,067,408

Total comprehensive income for the financial year attributable to: Owners of the Company 5,774,966 30,067,408 Non-controlling interests (15,122) -

5,759,844 30,067,408

Reserves and provisions

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

Dividends

No dividend has been paid, declared or proposed since the end of the previous financial year. The Directors do not recommend any dividends for the current financial year ended 30 June 2017.

Directors

Directors who served since the date of the last report are:

Lim Nyuk FohKoo Jenn ManKwan Tack ChiongOoi Jit HuatDr. Roslan Bin A Ghaffar (Appointed on 28 February 2017)Dato’ Sri Chee Hong Leong (Retired on 30 November 2016)

The names of Directors of subsidiaries are set out in the respective subsidiary’s statutory accounts and the said information is deemed incorporated herein by such reference and made a part hereof.


Directors' Report(continued)

Directors’ interests in shares

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

Number of ordinary shares of RM0.10* each At AtDirect interest: 1.7.2016 Bought Sold 30.6.2017 Lim Nyuk Foh 68,322,511 11,558,400 - 79,880,911Koo Jenn Man 510 - - 510

* Upon the date the Companies Act, 2016 became effective on 31 January 2017, the ordinary shares do not have any par value.

Lim Nyuk Foh and Koo Jenn Man by virtue of their interests in shares and warrants in the Company are also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

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

Directors’ benefits

Since the end of the previous financial year, no director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as disclosed in the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except as disclosed in Note 29 to the Financial Statements.

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

Directors’ Remuneration

Details of Directors’ remuneration as required by the Fifth Schedule of the Companies Act, 2016 in Malaysia are set out in Note 10 to the financial statements.

Indemnity and Insurance for Directors and Officers

The Company maintains a corporate liability insurance for the Directors and officers of the Group throughout the financial year, which provides appropriate insurance cover for the Directors and officers of the Group. The amount of insurance premium paid by the Company for the financial year ended 30 June 2017 was RM16,600.

Issues of shares and debentures

During the financial year, the Company increased its issued and paid-up share capital from 654,596,259 ordinary shares to 930,670,631 ordinary shares by way of issuance of 276,074,372 ordinary shares of RM0.10 each by way of private placement and special issue converted at the following conversion price per ordinary share:


Issues of shares and debentures (continued)

(i) Private placement

Number of Conversion Ordinary Price per Conversion Date Shares in units Ordinary Share Total RM RM

29 December 2016 44,000,000 0.105 4,620,000 23 January 2017 20,203,342 0.100 2,020,334

64,203,342 6,640,334

(ii) special issue

Number of Conversion Ordinary Price per Conversion Date Shares in units Ordinary Share Total RM RM

1 June 2017 211,871,030 0.100 21,187,103

The new ordinary shares of RM0.10 each issued during the financial year rank pari passu in all aspects with the new ordinary shares of the Company, except that the conversion shares issued by the Company to the subscriber upon conversion will not be entitled to any dividends, rights, allotment and/or other forms of distribution that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the conversion shares.

There were no debentures issued during the financial year.

Options granted over unissued shares

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

Private placement

During the annual general meeting held during the financial year ended 30 November 2016, the Company’s shareholders approved the issuance of private placement of up to 64,203,342 new ordinary shares of RM0.10 each, representing up to 10% of the existing issued and paid up share capital of the Company at a conversion price to be determined either by the floating conversion price.

The placement shares will be placed to third party investors to be identified at a later date, where such investor(s) shall be person(s) who/which qualify under Schedule 7 of the Capital Market and Services Act, 2007 (“CMSA”). In accordance with Paragraph 6.04(c) of the Main Market Listing Requirements of Bursa Securities, the placement shares will not be placed to the following parties:

(i) A Director, major shareholder or chief executive of the Company (“Interested Person”); or

(ii) A person connected with an Interested Person; and

(iii) Nominee corporations, unless the names of the ultimate beneficiaries are disclosed.

The conversion price shall be determined based on the five (5)-day volume weighted average market price (VWAP) of the Company immediately prior to the price-fixing date to be determined later after obtaining all the relevant approvals for the private placement. The placement price will not be priced at more than 10% to the five (5)-day VWAP of the shares of the Company immediately prior to the price fixing date.

The conversion shares to be issued arising from the conversion of the shares will, upon allotment and issuance, rank pari passu in all aspects with the new ordinary shares of the Company, save and except that the conversion shares issued by the Company to the subscriber upon conversion will not be entitled to any dividends, rights, allotment and/or other forms of distribution that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the conversion shares.



Special issue

The Company has on 8 October 2016 and 19 October 2016 approved and announced the corporate proposals relating to the special issue, representing approximately 20% of the enlarged issued and paid-up share capital of the Company to third party investors to be identified later. The Proposed Special Issue is not expected to be implemented in tranches and are to be issued at an issue price of RM0.10 per special issue shares to be satisfied in cash.

In accordance with Paragraph 6.04(c) of the Listing Requirements, the special issue shares will not be placed to the following parties:

(i) Interested Person; or

(ii) A person connected with an Interested Person; and

(iii) Nominee corporations, unless the names of the ultimate beneficiaries are disclosed.

The proposed special issue will not require any prospectus to be issued should the issuance of the special issue shares falls under the relevant categories prescribed under Schedule 7 of the CMSA which includes inter-alia, the issuance where the purchase consideration is not less than RM250,000 and the issuance is made to high net worth individual whose personal net worth exceed RM3,000,000 or corporations with net assets exceeding RM10,000,000.

The conversion shares to be issued arising from the conversion of the shares will, upon allotment and issuance, rank pari passu in all aspects with the new ordinary shares of the Company, save and except that the conversion shares issued by the Company to the subscriber upon conversion will not be entitled to any dividends, rights, allotment and/or other forms of distribution that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the conversion shares.

Treasury shares

As at 30 June 2017, the Company held as treasury shares a total of 12,562,832 of its 930,670,631 issued ordinary shares. Such treasury shares are held at a carrying amount of RM10,324,612 and further relevant details are disclosed in Note 24 to the financial statements.

Other statutory information

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that: (i) all known bad debts had been written off and adequate allowance had been made for doubtful debts; and (ii) all current assets have been stated at the lower of cost and net realisable value.

At the date of this report, the Directors are not aware of any circumstances: (i) which would render the amount written off for bad debts, or the amount of the allowance for doubtful debts in the financial

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

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

Company misleading or inappropriate; or (iv) not otherwise dealt with in this report or the financial statements, which would render any amount stated in the financial

statements of the Group and of the Company misleading.



Other statutory information (continued)

As at the date of this report, there does not exist: (i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the

liabilities of any other person, except as disclosed in Notes 14, 15, 16 and 23 to the financial statements; or (ii) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 30 June 2017 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of the financial year and the date of this report.

Significant changes in regulatory requirements

On 31 August 2016, the Companies Bill 2015 received Royal Assent and was gazetted as the Companies Act 2016 (“CA 2016”). Subsequent to the Company’s financial year end, the Registrar of the Companies Commission of Malaysia announced that CA 2016 would be implemented on a staggered basis with the first phase to be effective on 31 January 2017. With the enforcement of the first phase of the CA 2016, the Companies Act 1965 (“CA 1965”) is repealed. Notwithstanding the repeal of CA 1965, the transitional provisions under the CA 2016 stipulate that obligations in respect of the CA 1965 shall not be affected with the implementation of the CA 2016 but shall continue to remain in force.

Significant events during the financial year

Details of significant events after the reporting period are disclosed in Note 34 to the financial statements.

Event after the reporting period

Details of significant event after the reporting period are disclosed in Note 35 to the financial statements.

Auditors

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

Details of Auditors’ remuneration are set out in Note 8 to the financial statements.

Signed on behalf of the Boardin accordance with a resolution of the Directors,

______________________________lIm nyuK fohDirector

______________________________KOO JENN MANDirector

Sandakan

Dated 3 october 2017



In the opinion of the Directors, the accompanying financial statements set out on pages 43 to 114 are drawn up in accordance with Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2017 and of their financial performance and cash flows for the financial year ended on that date.

The supplementary information set out in Note 36 to the financial statements has been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the Directors,

______________________________lIm nyuK fohDirector

______________________________KOO JENN MAN Director

Sandakan


Statutory Declaration Pursuant to Section 251(1)(B) of the Companies Act, 2016

I, KOO JENN MAN, being the Director primarily responsible for the financial management of PRICEWORTH INTERNATIONAL BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statements set out on pages 43 to 114 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by ) the abovenamed KOO JENN MAN )at Sandakan in the state of Sabah )on 3 october 2017 ) __________________________ KOO JENN MAN

Before me,

__________________________ commIssIoner for oaths

Statement By DirectorsPursuant to Section 251(2) of the Companies Act, 2016


REPORT ON THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of PRICEWORTH INTERNATIONAL BERHAD, which comprise the Statements of Financial Position as at 30 June 2017 of the Group and of the Company, and the Statements of Profit or Loss and Other Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 43 to 114.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 30 June 2017, and of their financial performance and their cash flows for the financial year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia.

Basis for Opinion

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

Independence and Other Ethical Responsibilities

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

Key Audit Matters

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

Area of focus How our audit addressed the key audit matter

Independent Auditors’ Report To the Members of Priceworth International Berhad(Incorporated in Malaysia)

Impairment of property, plant and equipment, biological assets and timber rights While the Group was profitable, as highlighted in Note 33, the shipyard operating segment with total assets of RM6,633,357 was loss making, incurring a total loss of RM6,001,347 for the financial year ended 30 June 2017. There are impairment indicators due to its history of losses. Additionally, the Group has substantial biological assets and timber rights (included within intangible assets), valued at RM99,969,394 and RM18,514,113 respectively. These assets were tested for impairment, and for which the recoverable amount is based on value in use (“VIU”) using the discounted cash flow (“DCF”) model, which is subject to numerous underlying assumptions that are subject to significant uncertainties and therefore considered a matter of most significance.

We obtained the Group’s impairment review performed for the loss making operating segment, biological assets and timber rights, relating to its subsidiary companies, Maxland Dockyard & Engineering Sdn. Bhd., Maxland Sdn. Bhd. and Beta Bumi Sdn. Bhd. respectively. we reviewed the recoverable amount which is based on the respective VIU using the DCF model and performed the following: • Reviewed the assumptions underlying the future cash flows

of the abovementioned companies;

• Tested the mathematical accuracy of the VIU calculations;

• Assessed the reasonableness of the discount rate applied by the Directors; and

• Reviewed sensitivity of key variables.


Independent Auditors’ Report To the Members of Priceworth International Berhad(Incorporated in Malaysia) (continued)

Key Audit Matters (continued)

Area of focus

Recognition of deferred tax assets

As disclosed in Note 19, the Group has recognised deferred tax assets in respect of certain entities to the extent that it is probable that historical assessed tax losses will be realised. This requires management judgement in estimating future taxable income and is accordingly a key audit matter.

The recoverability of recognised deferred tax assets is in part dependent on the Group’s ability to generate future taxable profits sufficient to utilise deductible temporary differences and tax losses.

We have determined this to be a key audit matter, due to the inherent uncertainty in forecasting the amount and timing of future taxable profits and the reversal of temporary differences.

How our audit addressed the key audit matter

our procedures in relation to management’s assessment about the recoverability of deferred tax assets included evaluating management’s assessment on the sufficiency of future taxable profits in support of the recognition of deferred tax assets by comparing management’s forecasts of future profits to historical results and evaluating the assumptions used in those forecasts.

Information Other than the Financial Statements and Auditors’ Report Thereon

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

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

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

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

Responsibilities of the Directors for the Financial Statements

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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


Auditors’ Responsibilities for the Audit of the Financial Statements (continued)

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

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

(ii) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

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

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

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

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

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

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

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

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 2016 in Malaysia (“the Act”), we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ report of the subsidiaries of which we have not acted as auditors, which are indicated in Note 17 to the financial statements as GSR Pte Ltd is audited by other auditors, unless no audited accounts were provided to us and we have performed sufficient procedures on figures reported by that company.

(c) We are satisfied that the accounts 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.

(d) Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 266(3) of the Act.



Other Reporting Responsibilities

The supplementary information set out in Note 36 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 266 of the Companies Act, 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the contents of this report.

PKf chau man KItAF 0911 2525/03/18(J/PH)chartereD accountants chartereD accountant

Kota Kinabalu




Group Company 2017 2016 2017 2016 Note RM RM RM RM Revenue 4 168,488,398 166,938,291 40,000,000 40,000,000Cost of sales (129,838,930) (127,297,067) - -

Gross profit 38,649,468 39,641,224 40,000,000 40,000,000Interest income 5 51,683 88,927 51,515 67,876Other operating income 6 9,141,452 15,731,833 25,410 -Other operating expenses 7 (6,466,670) (7,920,348) - -Selling expenses (11,193,465) (11,702,530) - -Administrative expenses (18,887,325) (16,916,032) (2,380,970) (890,632)

Profit from operations 8 11,295,143 18,923,074 37,695,955 39,177,244Finance costs 11 (9,094,772) (17,281,985) (7,600,582) (13,384,755)

Profit before taxation 2,200,371 1,641,089 30,095,373 25,792,489Income tax expense 12 2,060,167 (720,562) (27,965) -

Profit for the financial year 4,260,538 920,527 30,067,408 25,792,489Other comprehensive income Foreign currency translation 1,499,306 598,650 - -

Other comprehensive income for the financial year, net of tax 1,499,306 598,650 - -

Total comprehensive income for the financial year 5,759,844 1,519,177 30,067,408 25,792,489

Profit attributable to: Owners of the Company 4,275,660 1,169,834 30,067,408 25,792,489Non-controlling interests (15,122) (249,307) - -

4,260,538 920,527 30,067,407 25,792,489

Total comprehensive income attributable to: Owners of the Company 5,774,966 1,768,484 30,067,408 25,792,489Non-controlling interests (15,122) (249,307) - -

5,759,844 1,519,177 30,067,408 25,792,489

Earnings per share attributable to owners of the Company (sen per share)Basic 13 0.6 0.2

Diluted 13 0.6 0.2

Statements of Profit or Loss And Other Comprehensive Income For the Financial Year Ended 30 June 2017

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


Statements of Financial Position As at 30 June 2017


Group Company 2017 2016 2017 2016ASSETS Note RM RM RM RM Non-current assets Property, plant and equipment 14 225,414,522 246,942,992 37 37Land use rights 15 13,494,162 13,761,722 - -Intangible assets 16 33,681,780 36,888,990 - -Investments in subsidiary companies 17 - - 303,427,941 303,427,636Biological assets 18 99,969,394 80,902,235 - -Deferred tax assets 19 14,159,000 14,159,000 - -

386,718,858 392,654,939 303,427,978 303,427,673

Current assets Inventories 20 40,769,578 40,540,755 - -Trade and non-trade receivables 21 87,722,139 72,528,276 1,086,758 41,416Amounts due from subsidiary companies 22 - - 90,098,064 66,000,949Tax recoverable 9,868 18,942 - -Cash and bank balances 23 974,666 12,719,528 27,811 3,584,130

129,476,251 125,807,501 91,212,633 69,626,495

TOTAL ASSETS 516,195,109 518,462,440 394,640,611 373,054,168

EQUITY AND LIABILITIESEquity attributable to owners of the Company Share capital 24 168,994,182 65,459,626 93,067,063 65,459,626Share premium 24 - 76,033,947 75,927,119 76,033,947Treasury shares 24 (10,324,612) (10,324,612) (10,324,612) (10,324,612)Other reserves 25 76,085,198 74,585,892 74,511,248 74,511,248Retained profits 26 73,184,581 69,018,944 60,689,946 30,622,538

307,939,349 274,773,797 293,870,764 236,302,747Non-controlling interests (377,902) (222,803) - -

Total equity 307,561,447 274,550,994 293,870,764 236,302,747

Non-current liabilities Loans and borrowings 27 87,701,051 23,211,725 69,087,223 -Deferred tax liabilities 19 21,625,155 23,776,673 - -

109,326,206 46,988,398 69,097,223 -

Current liabilitiesLoans and borrowings 27 45,842,522 139,449,424 30,818,920 134,089,879Trade and non-trade payables 28 53,340,746 57,420,177 851,856 2,661,542Taxation 124,188 53,447 11,848 -

99,307,456 196,923,048 31,682,624 136,751,421

Total liabilities 208,633,662 243,911,446 100,769,847 136,751,421

TOTAL EQUITY AND LIABILITIES 516,195,109 518,462,440 394,640,611 373,054,168


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Group Company 2017 2016 2017 2016 Note RM RM RM RM Cash flows from operating activities Profit before taxation 2,200,371 1,641,089 30,095,373 25,792,489Adjustments for: Allowance for impairment on receivables 1,796,377 873,569 - -Allowance for impairment on receivables written back (127,751) - - -Amortisation of intangible asset 1,359,985 2,857,077 - -Amortisation of land use rights 267,560 267,560 - -Bad debts written off - 259,285 - -Depreciation of property, plant and equipment 29,375,869 34,130,363 - -Fair value adjustment for forest planting expenditure 333,072 (401,258) - -Gain on disposal of property, plant and equipment (3,117,567) (9,637,407) - -Fair value loss on derivative assets - 59,264 -- Impairment loss on property, plant and equipment 1,803,393 7,797,656 - -Impairment loss on inventories 2,262,180 - - -Impairment loss on intangible assets - 122,692 - -Interest expenses 9,094,772 17,281,985 7,600,582 13,384,755Interest income (51,683) (88,927) (51,515) (67,876)Inventories written off 553,872 727,274 - -Liabilities no longer in existence written back (25,410) (188,144) (25,410) -Timber rights written off 1,847,225 - - -Unrealised foreign exchange gain - (771,054) - -Operating profit before working capital changes 47,572,265 54,931,024 37,619,030 39,109,368Change in inventories (3,044,875) (1,624,874) - -Change in receivables (16,862,489) (19,783,246) (1,045,342) 6,805Change in payables (4,627,151) (12,924,144) (1,784,276) (392,603)

Cash generated from operations 23,037,750 20,598,760 34,789,412 38,723,570Income tax paid (11,536) (45,964) (16,117) -Income tax refunded - 34,170 - -Interest paid (8,889,063) (15,006,568) - -Net cash generated from operating activities 14,137,151 5,580,398 34,773,295 38,723,570

Cash flows from investing activities Acquisition of non-controlling interest (250,000) - - -Acquisition of property, plant and equipment 14 (14,715,547) (9,347,925) - -Interest received 168 21,051 - -Payment of forest planting expenditure (19,032,810) (21,272,254) - -Proceeds from disposal of property, plant and equipment 8,182,322 26,295,558 - -Withdrawal/(Placement) of fixed deposits with a licensed bank 3,619,391 (3,500,000) 3,619,391 (3,500,000)Increase in investment of subsidiary company - - (305) (2)

Net cash (used in)/generated from investing activities (22,196,476) (7,803,570) 3,619,086 (3,500,002) (8,059,325) (2,223,172) 38,392,381 35,223,568


Statements of Cash FlowsFor the Financial Year Ended 30 June 2017


Group Company 2017 2016 2017 2016 Note RM RM RM RM

Cash flows from financing activities Conversion of redeemable convertible notes - 20,000,000 - 20,000,000Proceeds from issuance of shares 27,827,437 - 27,827,437 -Share issuance expenses (326,828) (1,031,725) (326,828) (1,031,725)Increase in amounts due from subsidiary companies - - (24,097,115) (37,738,018)Interest paid - - (7,600,582) (11,109,338)Repayment of loans and borrowings (30,279,011) (12,350,442) (34,183,736) (5,348,642)Loans and borrowings drawndown 1,161,435 - - - Net cash (used in)/generated from financing activities (1,616,967) 6,617,833 (38,380,824) (35,227,723) Net (decrease)/increase in cash and cash equivalents (9,676,292) 4,394,661 11,557 (4,155) Effect of exchange rate fluctuations on cash held 1,499,306 941,528 - -Cash and cash equivalents at beginning of financial year 9,151,652 3,815,463 16,254 20,409 Cash and cash equivalents at end of financial year 23 974,666 9,151,652 27,811 16,254


Statements of Cash FlowsFor the Financial Year Ended 30 June 2017 (continued)


1. Basis of preparation

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

The financial statements of the Group and of the Company are prepared on the historical cost convention, other than as disclosed in the notes to the financial statements, and in accordance with the Financial Reporting Standards (“FRS”) and the requirements of the Companies Act, 2016 in Malaysia.

On 19 November 2011, the MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (“MFRS”) framework. The MFRS framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities subject to the application of MFRS 141 Agriculture and/or IC Interpretation 15 Agreements for the Construction of Real Estate, including its parent, significant investor and venturer (herein called “Transitioning Entities”). Transitioning Entities will be allowed to defer adoption of the new MFRS framework for an additional Six (6) years. Consequently, adoption of the MFRS framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January 2018.

The Group and the Company fall within the scope definition of Transitioning Entities and accordingly, will be required to prepare financial statements using the MFRS framework in their first MFRS financial statements for the financial year ended 30 June 2019. In presenting their first MFRS financial statements, the Group and the Company will be required to restate the comparative financial statements to amounts reflecting the application of MFRS framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained earnings.

As at the date of these financial statements, the Group and the Company have not completed their quantification of the financial effects of the differences between FRS and accounting standards under the MFRS framework due to the ongoing assessment by the project team. Accordingly, the financial performance and financial position as disclosed in these financial statements for the financial year ended 30 June 2017 could be different if prepared under the MFRS Framework. The Group and the Company expect to be in a position to fully comply with the requirements of the MFRS framework in the financial year ended 30 June 2019.

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

(a) Adoption of new and revised FRS

On 1 December 2016, the Group and the Company adopted the following new and amended FRSs and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2016.

The main effect of the adoption of the above is summarised below:

Disclosure Initiative (Amendments to FRS 101)

Disclosure Initiative (Amendments to FRS 101) made the following changes:

• Materiality. The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial information; (2) materiality considerations apply to the all parts of the financial statements; and (3) even when a standard requires a specific disclosure, materiality considerations do apply.

• Statement of Financial Position and Statement of Profit or Loss and Other Comprehensive Income. The amendments: (1) introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements; and (2) clarify that an entity's share of Other Comprehensive Income (OCI) of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.

• Notes. The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of FRS 101. The International Accounting Standards Board (IASB) also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.

The adoption of this amendment has resulted in significantly reduced disclosures in certain sections of the financial statements of the Group and the Company.

Notes to the Financial Statements At 30 June 2017


Notes to the Financial Statements At 30 June 2017 (continued)

1. Basis of preparation (continued)

(b) Standards issued but not yet effective

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

Effective for annual periods commencing on or after 1 January 2017

• Disclosure Initiative (Amendments to FRS 107)

• Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to FRS 112)

Effective for annual periods commencing on or after 1 January 2018

• Financial Instruments (FRS 9)

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

(i) Disclosure Initiative (Amendments to FRS 107)

The amendments come with the objective that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.

To achieve this objective, the MASB requires that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes.

The MASB defines liabilities arising from financing activities as liabilities "for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities". It also stresses that the new disclosure requirements also relate to changes in financial assets if they meet the same definition.

The amendments state that one way to fulfil the new disclosure requirement is to provide a reconciliation between

the opening and closing balances in the statement of financial position for liabilities arising from financing activities.

Finally, the amendments state that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.

Since the amendments are being issued less than one year before the effective date, entities need not provide comparative information when they first apply the amendments

Apart for certain changes to the disclosures, this adoption will not have any impact on the financial statements of the Group and of the Company.

(ii) Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to FRS 112)

The amendments clarify the following aspects:

• Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.

• The carrying amount of an asset does not limit the estimation of probable future taxable profits.

• Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.

• An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.


Notes to the Financial StatementsAt 30 June 2017 (continued)


(b) Standards issued but not yet effective (continued)

(ii) Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to FRS 112) (continued)

As transition relief, an entity may recognise the change in the opening equity of the earliest comparative period in opening retained earnings on initial application without allocating the change between opening retained earnings and other components of equity. The Board has not added additional transition relief for first-time adopters.

The Group has not yet assessed the impact of these amendments.

(iii) Financial instruments

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

• Classification and measurement

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

• Impairment

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

• Hedge accounting

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

FRS 9 introduces significant changes in the way the Group and the Company accounts for financial instruments. Due to the complexity of the standard and its requirements, the financial effects of its adoption are still being assessed by the Group and the Company.




(c) Significant changes in regulatory requirements

On 31 August 2016, the Companies Bill 2015 received Royal Assent and was gazetted as the Companies Act 2016 (“CA 2016”). Subsequent to the Company’s financial year end, the Registrar of the Companies Commission of Malaysia announced that CA 2016 would be implemented on a staggered basis with the first phase to be effective on 31 January 2017. With the enforcement of the first phase of the CA 2016, the Companies Act 1965 (“CA 1965”) is repealed. Notwithstanding the repeal of CA 1965, the transitional provisions under the CA 2016 stipulate that obligations in respect of the CA 1965 shall not be affected with the implementation of the CA 2016 but shall continue to remain in force.

2. Significant accounting judgements and estimates

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

(a) Critical accounting estimates and judgments

In the application of the Group’s and of the Company’s accounting policies, the Directors of the Group and of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. These estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revisions affect both current and future periods.

(i) Discount rates used

In assessing the net realisable value of property, plant and equipment, timber rights and biological assets, the Group uses a discount rate of 5.20% (2016: 6.00%), which is based on the Company’s weighted average cost of capital (WACC) for the financial year.

(ii) Operating segments

The segments disclosed in Note 33 to the financial statements have been determined by distinguishing the business activities from which the Group earns revenues and incurs expenses. The economic characteristics of the operating segments have been reviewed and operating segments have been grouped based on the assessment made by the chief operating decision maker.

(b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting 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:

(i) Depreciation of property, plant and equipment

The Group and the Company anticipate that the residual values of their property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount. The management estimates the useful lives of the property, plant and equipment to be within three (3) to fifteen (15) years. These are common life expectancies applied in the timber operations.

Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.



2. Significant accounting judgements and estimates (continued)

(b) Key sources of estimation uncertainty (continued)

(ii) Amortisation of timber rights

The Group estimates the amortisation of timber rights based on budgeted production volume from the timber concession areas. The amortisation of the production volume is based on a professional valuation performed within estimate on the availability of logs to be harvested from concession areas. The future results of the operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated total production volume from the concession areas would increase the amortisation charge and decrease the carrying value of timber rights.

(iii) Income taxes

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

(iv) Deferred tax assets and liabilities

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

(v) Impairment of non-financial assets

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

(vi) Impairment of goodwill

Goodwill is tested for impairment annually and at other times when such indicators exist. This requires management to estimate the expected future cash flows of the cash-generating unit to which goodwill is allocated and to apply a suitable discount rate in order to determine the present value of those cash flows.

Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are disclosed in Note 16 to the financial statements.

(vii) Carrying value of investments in subsidiary companies

Investments in subsidiary companies are reviewed for impairment annually in accordance with its accounting policy as disclosed in Note 3(n)(ii) to the financial statements, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

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



2. Significant accounting judgements and estimates (continued)

(b) Key sources of estimation uncertainty (continued)

(viii) Impairment of trade and non-trade receivables

An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loan and receivables financial assets and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgement to evaluate the adequacy of the allowance for impairment losses.

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. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.

(ix) Allowance for inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgment and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

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

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

3. Significant accounting policies

(a) Basis of consolidation

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

(i) Subsidiaries

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

Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In the previous financial years, control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Potential voting rights are considered when assessing control only when such rights are substantive. In the previous financial years, potential voting rights are considered when assessing control when such rights are presently exercisable.

The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. In the previous financial years, the Group did not consider de facto power in its assessment of control.

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



3. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(ii) Business combinations

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

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

• the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

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

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

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

(iii) Loss of control

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

(iv) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of comprehensive income as an allocation of the profit and loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

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

(v) Transactions with non-controlling interests

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

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

(vi) Transactions eliminated on consolidation

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




(a) Basis of consolidation (continued)

(vii) Joint venture

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

On acquisition of an investment in joint venture, any excess of the cost of investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill and included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities of the investee over the cost of investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the joint venture’s profit or loss for the period in which the investment is acquired.

A joint venture is equity accounted for from the date on which the investee becomes a joint venture.

Under the equity method, on initial recognition the investment in a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the joint venture after the date of acquisition. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint venture.

Profits and losses resulting from upstream and downstream transactions between the Group and its joint venture are recognised in the Group’s financial statements only to the extent of unrelated investors’ interests in the joint venture. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The financial statements of the joint venture are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group applies FRS 139 Financial Instruments: Recognition and Measurement to determine whether it is necessary to recognise any additional impairment loss with respect to its net investment in the joint venture. When necessary, the entire carrying amount of the investment is tested for impairment in accordance with FRS 136 Impairment of Assets as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss is recognised in profit or loss. Reversal of an impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

In the Company’s separate financial statements, investment in joint venture is accounted for at cost less impairment losses. On disposal of such investment, the difference between net disposal proceeds and its carrying amount is included in profit or loss.

(b) Foreign currencies

(i) Functional and presentation currencies

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

(ii) Foreign currency transactions

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

Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.




(b) Foreign currencies (continued)

(ii) Foreign currency transactions (continued)

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(iii) Foreign operations

The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.

The closing rates used in the translation for foreign currency monetary assets and liabilities are as follows: 2017 2016 RM RM 1 Japanese Yen 0.0383 0.0393 1 Papua New Guinea Kina 1.3227 1.2408 1 Singapore Dollar 3.1133 2.9839 1 Solomon Islands Dollar 0.5544 0.5057 1 United States Dollar 4.2974 4.0292 1 Hong Kong Dollar 0.5500 0.5193

(c) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

(i) Dividend income Dividend income is recognised when the Group’s right to receive payment is established.

(ii) Sale of goods

Revenue from sale of goods is recognised net of taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(iii) Revenue from services

Revenue from services rendered is recognised net of taxes and discounts as and when the services are performed.

(iv) Rental income

Rental income is recognised on a time proportion and accrual basis.




(d) Employee benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the profit or loss as incurred.

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employees Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension scheme are recognised as an expense in the period in which the related service is performed.

(e) Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the financial year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent

that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(f) Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.




(g) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when 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. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

The leasehold land and buildings of the Group have not been revalued since they were first revalued in 1996. The Directors have not adopted a policy of regular revaluation of such assets. As permitted under the transitional provisions of International Accounting Standard 16 (Revised) Property, Plant and Equipment, these assets continue to be stated at their revalued amount in 1996 less accumulated depreciation and impairment loss.

Any revaluation surplus is recognised in other comprehensive income and accumulated in equity under the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated on the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset is transferred directly to retained profits on retirement or disposal of the asset.

Leasehold land with lease period of equal or less than fifty (50) years is classified as short leasehold land whereas leasehold land with lease period of more than fifty (50) years is classified as long leasehold land ranging from fifty one (51) to seventy one (71) years. Leasehold land is amortised over the period of the lease.

Property, plant and equipment are depreciated on a straight line basis to write off the cost of the property, plant and equipment over the term of their estimated useful lives.

The principal annual rates of depreciation used are as follows:

% Buildings 2 – 10 Heavy equipment, motor vehicles and motor launches 10 – 20 Plant and machinery 7 Furniture, fittings and equipment 10 – 33 1/3 Aircraft 10 tug boat and scow 10 Camp infrastructure and slipway 15

The residual values, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the term of property, plant and equipment.

Construction work-in-progress is not depreciated as these assets are not available for use. Depreciation will commence on these assets when they are ready for their intended use.

Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in profit or loss.

(h) Land use rights

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over their lease terms.



3. Significant accounting policies (continued) (i) Intangible assets

(i) 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-generated units that are expected to benefit from the synergies of the combination.

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

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 operation on or after 1 January 2006 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 3(b).

(ii) Timber rights

This represents the exclusive rights of certain subsidiaries to extract and purchase all commercial timber logs extractable from a designated timber concession area.

Timber rights are stated at cost less accumulated amortisation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n)(ii).

The timber rights are amortised on the basis of the volume of timber logs extracted during the financial year as a proportion of the total volume of timber logs extractable over the remaining period from the timber concession area.

(iii) License

License are stated at cost and amortised on a straight-line basis over the estimated economic useful life of five (5) years.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

(j) Biological assets

Forest planting expenditure

All direct and related expenses incurred on the development of the Group’s Sustainable Forest Management Project under a Sustainable Forest Management License Agreement with the State Government of Sabah and Silvicultural Treatment and Mosaic Restoration and Enrichment Planting and Management System Project under an Integrated Mosaic Planting Agreement with a government body are stated at cost and capitalised as biological assets. The expenditure will be amortised upon commencement of log extraction on the basis of the volume of logs extracted during the financial year as a proportion of the estimated volume available.

(k) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, at banks, deposits with licensed banks with maturity not exceeding three (3) months and short-term, highly liquid investments which are readily convertible to cash with short periods to maturity and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts, if any.




(l) Financial assets

Financial assets are recognised in the Statements of Financial Position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets.

The subsequent measurement of financial assets depends on their classification as follows:

(i) Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any

gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas financial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date.

(ii) Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group and the Company have the positive intention and ability to hold the investment to maturity.

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

Held-to-maturity investments are classified as non-current assets, except for those having maturity within twelve (12) months after the reporting date which are classified as current.

(iii) Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loans and receivables are classified as current assets, except for those having maturity dates later than twelve (12) months after the reporting date which are classified as non-current.




(l) Financial assets (continued) (iv) Available-for-sale financial assets

Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes

in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within twelve (12) months after the reporting date.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.

(m) Inventories

Inventories comprise raw materials, finished goods and work-in-progress.

Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:-

(i) The costs of raw materials and consumables and spares are determined using the first-in-first-out (FIFO) method. The cost of raw materials comprises costs of purchase.

(ii) The costs of finished goods and work-in-progress are determined on a weighted average basis. The costs of finished goods and work-in-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(n) Impairment

(i) Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset of the Group and of the Company that can be reliably estimated.




(n) Impairment (continued)

(i) Impairment of financial assets (continued)

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments. The probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

• Trade and non-trade receivables and other financial assets carried at amortised cost

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

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based in similar risk characteristics.

Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

(ii) Impairment of non-financial assets

The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).

In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation

was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless that asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.




(o) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are classified as equity.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised as an appropriation of retained profits upon declaration, and are only taken up as liabilities upon the necessary approval being obtained.

(p) Treasury shares

When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

(q) Warrants reserve

Proceeds from the issuance of warrants, net of issue costs, are credited to warrants reserve which is non-distributable. Warrants reserve is transferred to the share premium account upon the exercise of warrants and the warrants reserve in relation to unexercised warrants at the expiry of the warrants period will be transferred to retained profits.

(r) Borrowings costs

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

All other borrowings costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

(s) Leases

(i) Classification

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases, except land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease.

(ii) Finance leases – the Group as lessee

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the statements of financial position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine, otherwise, the Group’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.




(s) Leases (continued)

(iii) Operating leases – the Group as lessee

In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 3(g).

(t) Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of FRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost.

The subsequent measurement of financial liabilities depends on their classification as follows:

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences.

(ii) Financial liabilities measured at amortised cost

The Group’s and the Company’s financial liabilities measured at amortised cost include trade payables, non-trade payables and loans and borrowings.

Trade and non-trade payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least twelve (12) months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(u) Government grants

Government grants are recognised initially at their fair value in the Statements of Financial Position as a deduction in arriving at the carrying value of the assets where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Grants that compensate the Group for expenses incurred are recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Grants that compensate the Group for the cost of an asset are recognised as a deduction in arriving at the carrying value of the assets.




(v) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Financial guarantee contracts are recognised initially as a liability at fair value, net transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

(w) Provisions

Provisions are recognised when the Group and the Company have present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations, and a reliable estimate of the amount can be made.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision will be reversed. Where the effect of the time value of money is material, provisions are discounted using a current per-tax rate that reflects, where appropriate, the risks specific to the liability and the present value of the expenditure expected to be required to settle the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

(x) Contingencies

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

Contingent liabilities and assets are not recognised in the Statements of Financial Position of the Group.

(y) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the chief operating decision maker, which in this case is the Group Managing Director, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

(z) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transactions to sell the asset or transfer the liability takes place either:

(i) In the principal market for the asset or liability, or (ii) In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.




(z) Fair value measurement (continued)

The fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

(i) Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities(ii) Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is

directly or indirectly observable(iii) Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is

unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

4. Revenue Group Company 2017 2016 2017 2016 RM RM RM RM Barge hire income 96,811 113,583 - - Contract fee 549,301 7,135,661 - - Dividend income from a subsidiary company - - 40,000,000 40,000,000 Road tolls 2,812,912 2,957,156 - - Sale of processed wood products 109,472,819 126,468,593 - - Sale of logs 35,706,801 15,915,751 - - Services income 19,849,754 14,347,547 - -

168,488,398 166,938,291 40,000,000 40,000,000

5. Interest income

Group Company 2017 2016 2017 2016 RM RM RM RM Interest income from: Deposits with licensed banks 51,683 88,927 51,515 67,876



6. Other operating income

Group Company 2017 2016 2017 2016 RM RM RM RM Allowance for impairment on receivables written back (Note 21) 127,751 - - - Discount received 417 7,505 - - Gain on disposal of property, plant and equipment 3,117,567 9,637,407 - - Gain on foreign exchange - Realised 2,438 129,224 - - - Unrealised - 771,054 - - Gate pass income 664,125 725,900 - - Insurance claim 32,987 31,960 - - Liabilities no longer in existence written back 25,410 188,144 25,410 - Miscellaneous income 1,076,561 452,334 - - Rebate of royalty 2,428,925 2,091,121 - - Rental income 1,445,534 1,435,560 - - Reversal of bad debts written off 2,275 57,923 - - Sale of bare core 41,496 - - - Sale of log core 51,086 20,839 - - Sale of saw dust 89,252 164,692 - - Sale of scrap iron 35,628 18,170 - -

9,141,452 15,731,833 25,410 -

7. Other operating expenses

Group 2017 2016 RM RM Inventories written off 553,872 - Impairment loss on intangible assets - 122,692 Impairment loss on inventories 2,262,180 - Impairment loss on property, plant and equipment 1,803,393 7,797,656 Timber rights written off 1,847,225 -

6,466,670 7,920,348



8. Profit from operations Group Company 2017 2016 2017 2016 RM RM RM RM Other than those disclosed in Note 5, 6 and 7, and 7, profit from operations have been arrived at after charging: Allowance for impairment on receivables (Note 21) 1,796,377 873,569 - - Amortisation of intangible asset (Note 16) 1,359,985 2,857,077 - - Amortisation of land use rights (Note 15) 267,560 267,560 - - auditors’ remuneration - Statutory audit - Current year 252,900 218,900 95,000 65,000 - Under provision in prior year 31,700 2,000 30,000 - - Other services 130,035 14,630 42,035 14,630 Bad debts written off - 259,285 - - Depreciaion of property, plant and equipment (Note 14) 26,132,014 30,484,919 - - Fair value adjustment for forest planting expenditure (Note 18) 333,072 - - - Fair value loss on derivatives asset - 59,264 - -

And crediting: Fair value adjustment forforest planting expenditure (Note 18) - 401,258 - -

9. Employee benefits expense

Group Company 2017 2016 2017 2016 RM RM RM RM Salaries and wages 25,052,655 27,513,752 173,550 103,439 Contributions to defined contribution plan 900,026 1,193,316 19,216 13,208 Social security contributions 121,948 121,025 1,805 1,327

26,074,629 28,828,094 194,571 117,974 Capitalised in camp infrastructure (2,426,923) - - - Capitalised in biological assets (Note 18) (2,141,981) (5,282,558) - -

21,505,725 23,545,536 194,571 117,974

Included in employee benefits expense of the Group and of the Company are executive directors’ remuneration amounting to RM1,058,952 (2016: RM793,266) and RM110,762 (2016: RM70,420) respectively as further disclosed in Note 10 to the financial statements.



10. Directors’ remuneration

The details of remuneration received and receivable by Directors of the Group and of the Company during the financial year are as follows:

Group Company 2017 2016 2017 2016 RM RM RM RM

Executive directors’ remuneration (Note 9)

- Salaries and other emoluments 959,950 708,009 96,112 62,620 - Bonus 3,000 - 3,000 - - Contributions to defined contribution plan 96,002 85,257 11,650 7,800

1,058,952 793,266 110,762 70,420

Non-executive directors’ remuneration :

- Fees 132,000 127,650 132,000 127,650 - Other emoluments 2,700 3,000 2,700 3,000

134,700 130,650 134,700 130,650

Total directors’ remuneration 1,196,652 923,916 245,462 201,070

The directors’ remuneration in the current financial year represents remuneration for Directors of the Group, the Company and its subsidiaries to comply with the requirements of Companies Act 2016. The names of directors of subsidiaries and their remuneration details are set out in the respective subsidiaries’ statutory accounts and the said information is deemed incorporated herein by such reference and made a part hereof.

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

Number of Directors 2017 2016

Executive directors:

RM100,001 – RM150,000 - 1 RM150,001 – RM300,000 1 - RM300,001 – RM450,000 1 1

Non-executive directors:

Below RM50,000 4 3



11. Finance costs Group Company 2017 2016 2017 2016 RM RM RM RM

Interest expenses:

- Bank overdraft 9,982 - - - - Obligations under finance leases 911,078 1,110,675 - - - Term loans 7,968,003 13,733,940 7,600,582 13,384,755 - Others 573,130 2,786,555 - -

9,462,193 17,631,170 7,600,582 13,384,755 Less: Capitalised in biological asset (Note18) (367,421) (349,185) - -

9,094,772 17,281,985 7,600,582 13,384,755

12. Income tax expense


Current taxation 119,096 53,447 11,848 - Deferred tax assets/(liabilities) (Note 18) (2,151,518) 1,171,057 - -

(2,032,422) 1,224,504 11,848 - (Over)/Under provision in prior year (27,745) (503,942) 16,117 -

(2,060,167) 720,562 27,965 -

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and the Company is as follows:


Profit before taxation 2,200,371 1,641,089 30,095,373 25,792,489

Taxation at Malaysian statutory tax rate of 23% (2016: 24%) 506,085 393,861 6,921,936 6,190,197 Effect of tax rate in foreign jurisdictions at 30% (2016: 30%) 3,961,599 593,883 - - Non-tax deductible expenses 4,123,511 12,679,713 2,295,757 3,409,803 Non-taxable income (8,089,959) (10,650,805) (9,205,845) (9,600,000) Effect of deductible temporary differences arising from initial recognition of assets but not recognised as deferred tax assets (2,533,658) (1,792,148) - -

(2,032,422) 1,224,504 11,848 - (Over)/Under provision in prior year (27,745) (503,942) 16,117 -

(2,060,167) 720,562 27,965 -



13. Earning per share

(a) Basic

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

Group 2017 2016 RM RM

Profit net of tax attributable to owners of the Company 4,275,660 1,169,834

Weighted average number of ordinary shares in issue 702,992,046 568,384,387

2017 2016 Sen Sen

Basic earning per share 0.6 0.2

(b) Diluted

Diluted earning per share amounts are calculated by dividing profit for the financial year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year after adjustment for the effects of all dilutive potential ordinary shares.


Profit net of tax attributable to owners of the Company 4,275,660 1,169,834

Weighted average number of ordinary shares in issue (basic) 702,992,046 568,384,387 Effect of warrant on issue - 72,381,369

Weighted average number of ordinary shares in issue (diluted) 702,992,046 640,765,756

2017 2016 Sen Sen

Diluted earning per share 0.6 0.2


Notes to the Financial StatementsAt 30 June 2017 (continued)14

. P

rope

rty,

plan

t an

d eq

uipm

ent

H

eavy

eq

uipm

ent,

Gr o

up

mot

or

Fu

rnit

ure,

Lo

ng t

erm

v

ehic

les

and

Pla

nt

fitti

ng

Tu

g bo

at

Cam

p C

onst

ruct

ion

20

17

leas

ehol

d

mot

or

and

and

an

d in

fras

truc

ture

w

ork-

in-

land

B

uild

ings

la

unch

es

mac

hine

ry e

quip

men

t

Air

craf

t

scow

an

d sl

ipw

ay

prog

ress

To

tal

C

ost

or v

alua

tion

R

M

RM

R

M

RM

R

M

RM

R

M

RM

R

M

RM

A

t 1

July

201

6

- At

cost

23

,815

,398

95

,740

,866

14

7,27

1,48

5 22

3,56

6,65

0 12

,305

,336

16

,433

,565

4,

666,

509

72,1

30,5

38

3,30

2,60

8 59

7,49

7,89

7

- At

valu

atio

n

10

,477

,307

13

,505

,605

-

- -

- -

- -

23,9

82,9

12

34

,293

,705

10

9,24

6,47

1 14

7,27

1,48

5 22

3,56

6,65

0 12

,305

,336

16

,433

,565

4,

666,

509

72,1

30,5

38

3,30

2,60

8 62

3,21

6,86

7

A

d diti

on

- -

5,02

6,05

1 1,

226,

781

51,5

62

- -

6,26

8,62

0 2,

142,

533

14,7

15,5

47

D

ispo

sal/w

ritt

en o

ff

- (1

56,7

38)

(7,6

04,8

93)

- (1

,901

,540

) -

(3,4

04,7

50)

(17,

695,

675)

(1

01,2

10)

(30,

864,

806)

Rec

lass

ifica

tion

- 2,

175,

425

- -

- -

- -

(2,1

75,4

25)

-

A

t 30

June

201

7 34

,293

,705

11

1,26

5,15

8 14

4,69

2,64

3 22

4,79

3,43

1 10

,455

,358

16

,433

,565

1,

261,

759

60,7

03,4

83

3,16

8,50

6 60

7,06

7,60

8

R

epre

sent

ing:

- At

cost

23

,815

,398

97

,759

,553

14

4,69

2,64

3 22

4,79

3,43

1 10

,455

,358

16

,433

,565

1,

261,

759

60,7

03,4

83

3,16

8,50

6 58

3,08

4,69

6

- At

valu

atio

n

10

,477

,307

13

,505

,605

-

- -

- -

- -

23,9

82,9

12

34

,293

,705

11

1,26

5,15

8 14

4,69

2,64

3 22

4,79

3,43

1 10

,455

,358

16

,433

,565

1,

261,

759

60,7

03,4

83

3,16

8,50

6 60

7,06

7,60

8

A

ccum

ulat

ed d

epre

ciat

ion

and

impa

irm

ent

loss

es

A

t 1

July

201

6

4,27

1,65

3 25

,763

,382

11

7,53

1,60

7 14

4,83

3,19

4 10

,726

,904

16

,433

,564

3,

006,

078

53,7

03,7

64

3,72

9 37

6,27

3,87

5

Cha

rge

for

the

finan

cial

yea

r

361,

477

2,46

7,89

4 7,

791,

848

13,0

82,5

26

235,

013

- 47

0,76

9 4,

966,

342

- 29

,375

,869

Wri

tten

bac

k

-

(253

,218

) (6

,724

,603

) -

(576

,761

) -

(3,3

94,9

58)

(14,

850,

511)

-

(25,

800,

051)

Impa

irm

ent

char

ge fo

r th

e

fin

anci

al y

ear

-

- 1,

460,

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- 12

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-

- 33

0,39

9 -

1,80

3,39

3

A

t 30

June

201

7 4,

633,

130

27,9

78,0

58

120,

059,

517

157,

915,

720

10,3

97,4

85

16,4

33,5

64

81,8

89

44,1

49,9

94

3,72

9 38

1,65

3,08

6


Notes to the Financial Statements At 30 June 2017 (continued)14

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d eq

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(con

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tal

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et b

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cost

20

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24

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66

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57

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1

1,17

9,87

0 16

,553

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3,

164,

777

215,

497,

894

- A

t va

luat

ion

8,86

2,65

8 1,

053,

970

- -

- -

- -

- 9,

916,

628

A

t 30

June

201

7 29

,660

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83

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24

,633

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66

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57

,873

1

1,17

9,87

0 16

,553

,489

3,

164,

777

225,

414,

522



. P

rope

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plan

t an

d eq

uipm

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(con

tinue

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eq

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up

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RM

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A

t 1

July

201

5

- At

cost

24

,318

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99

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16

6,33

0,30

9 22

5,60

4,04

8 13

,390

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16

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8,

248,

998

67,6

95,2

41

3,19

0,48

0 62

4,60

6,55

7

- At

valu

atio

n

10

,477

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13

,505

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-

- -

- -

- -

23,9

82,9

12

34

,796

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11

2,89

9,80

6 16

6,33

0,30

9 22

5,60

4,04

8 13

,390

,825

16

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8,

248,

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67,6

95,2

41

3,19

0,48

0 64

8,58

9,46

9

A

d diti

on

10,0

00

- 5,

815,

447

88,8

89

203,

571

- 63

,717

6,

174,

485

135,

316

12,4

91,4

25

D

ispo

sal

(538

,832

) (3

,843

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) (2

6,05

9,89

2)

(2,1

43,8

42)

(1,0

82,0

13)

- (3

,646

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) -

- (3

7,31

4,38

4)

R

ecla

ssifi

catio

n

- -

23,1

88

- -

- -

- (2

3,18

8)

-

Exch

ange

diff

eren

ces

26

,340

19

0,26

4 1,

162,

433

17,5

55

(207

,047

) -

- (1

,739

,188

) -

(549

,643

)

A

t 30

June

201

6 34

,293

,705

10

9,24

6,47

1 14

7,27

1,48

5 22

3,56

6,65

0 12

,305

,336

16

,433

,565

4,

666,

509

72,1

30,5

38

3,30

2,60

8 62

3,21

6,86

7

R

epre

sent

ing:

- At

cost

23

,815

,398

95

,740

,866

14

7,27

1,48

5 22

3,56

6,65

0 12

,305

,336

16

,433

,565

4,

666,

509

72,1

30,5

38

3,30

2,60

8 59

7,49

7,89

7

- At

valu

atio

n

10

,477

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13

,505

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-

- -

- -

- -

23,9

82,9

12

34

,293

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10

9,24

6,47

1 14

7,27

1,48

5 22

3,56

6,65

0 12

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16

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4,

666,

509

72,1

30,5

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2,60

8 62

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6,86

7

A

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an d

impa

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A

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5

3,92

4,09

8 23

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12

2,27

8,67

0 13

1,78

8,39

8 10

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16

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3,

438,

441

39,3

10,4

20

3,72

9 35

1,02

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1

Cha

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f or

the

finan

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2,62

4,34

0 12

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13

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8,90

9 -

1,10

1,93

5 7,

779,

568

- 38

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Wri

tten

bac

k

-

(234

,309

) (1

8,05

2,81

1)

(522

,960

) (3

11,8

55)

- (1

,534

,298

) -

- (2

0,65

6,23

3)

Im

pair

men

t ch

arge

for

the

finan

cial

yea

r

- 45

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38

9,56

2 -

17,0

06

- -

7,34

5,09

6 -

7,79

7,65

6

Exch

ange

diff

eren

ces

-

2,05

9 49

6,54

9 40

,654

(1

4,70

7)

- -

(731

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) -

(206

,765

)

A

t 30

June

201

6 4,

271,

653

25,7

63,3

82

117,

531,

607

144,

833,

194

10,7

26,9

04

16,4

33,5

64

3,00

6,07

8 53

,703

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3,

729

376,

273,

875



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plan

t an

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(con

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eq

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20,8

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78

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33,4

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8,43

2 1

1,66

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1 18

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3,

298,

879

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785,

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- A

t va

luat

ion

9,14

8,79

6 4,

008,

624

- -

- -

- -

- 13

,157

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A

t 30

J une

201

6 30

,022

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83

,483

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29

,739

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78

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1,

578,

432

1 1,

660,

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18,4

26,7

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3,29

8,87

9 24

6,94

2,99

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con

stru

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14. Property, plant and equipment (continued)

Company Furniture, 2017 Motor fittings and vehicles equipment Total Cost RM RM RM

At 1 July 2016/30 June 2017 348,600 234,742 583,342

Accumulated depreciation

At 1 July 2016/30 June 2017 348,599 234,706 583,305

Net book value

At 30 June 2017 1 36 37

Furniture, 2016 Motor fittings and vehicles equipment Total Cost RM RM RM

At 1 July 2015/30 June 2016 348,600 234,742 583,342

Accumulated depreciation

At 1 July 2015/30 June 2016 348,599 234,706 583,305

Net book value At 30 June 2016 1 36 37

Depreciation of property, plant and equipment during the financial year was taken up in the financial statements as follows:


Recognised in profit or loss (Note 8)

- Cost of sales 25,413,993 29,773,798 - Administrative expenses 718,021 711,121

26,132,014 30,484,919

Capitalised in biological assets (Note 18) 3,243,855 4,188,683 Capitalised in camp infrastructure - 3,645,444

29,375,869 38,319,046




The leasehold land and buildings in certain subsidiaries were revalued in 1996 by an independent valuer. Valuation was made on the basis of open market values on existing use basis.

Had the leasehold land and buildings been carried under the cost model, the carrying amount would have been RMNil (2016: RM216,211).

Leasehold land and buildings of the Group have not been revalued since they were first revalued in 1996. The Directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. As permitted under the transitional provisions of IAS 16 (Revised) Property, Plant and Equipment, these assets continue to be stated at their 1996 valuation less accumulated depreciation.

Plant and equipment of the Group acquired under finance leases are as follows:

Group Accumulated Net book At cost depreciation value 2017 RM RM RM

Heavy equipment, motor vehicles and trucks 8,883,038 (2,420,470) 6,462,568 Plant and machinery 38,192,386 (27,533,461) 10,658,925

47,075,424 (29,953,931) 17,121,493

2016 Heavy equipment, motor vehicles and trucks 8,883,038 (1,263,760) 7,619,278 Plant and machinery 38,192,386 (24,851,974) 13,340,412

47,075,424 (26,115,734) 20,959,690

During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM14,715,547 (2016: RM12,491,425) of which RMNil (2016: RM3,143,500) were financed by hire purchase arrangements.

The carrying value of the property, plant and equipment of the Group pledged to licensed banks to secure the loans and borrowings granted to the Group as disclosed in Note 27 to the financial statements are as follows:


Long term leasehold land 17,189,398 17,550,875 Buildings 82,781,424 83,284,269 Heavy equipment, motor vehicles and motor launches 22,535,901 27,793,975 Plant and machinery 62,054,329 73,591,377 Furniture, fittings and equipment 880,844 1,186,084 Aircraft 1 1 Tug boat and scow 601,274 1,660,431 Camp infrastructure and slipway 23,281,927 18,426,774 Construction work-in-progress 3,154,247 3,288,810

212,479,345 226,782,596




Property, plant and equipment is assessed at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount by comparing the carrying amount with the recoverable amount of the CGUs based on estimation of the value-in-use by the management. Value-in-use is determined by discounting the future cash flows to be generated from the continuing use of the property, plant and equipment based on the following assumptions:

(i) Cash flows are projected based on the management’s plantation and extraction plan and extrapolated to a period of eight (8) years for all companies, except for non-timber related company. For non-timber company, cash flows are projected based on the project secured by the management.

(ii) Discount rates used for cash flows discounting purpose is the Group’s weighted average cost of capital adjusted for specific risks relating to the relevant segments. The average discount rate applied for cash flow projections is 5.20% (2016: 6.00%).

(iii) Selling price of the timber products are based on the average of four (4) years.

With regard to the assessment of value-in-use of the timber operation, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying values of the units to materially exceed their recoverable amounts, save the assumptions on sales and logs/timber supply.

The management recognises that any significant changes in the market selling price for its timber products and logs/timber supply can have a significant impact on the sales and logs/timber supply assumptions made in the projections.

15. Land use rights

Group 2017 2016 Cost RM RM

At 1 July/30 June 14,790,634 14,790,634

Accumulated amortisation At 1 July 1,028,912 761,352 Charge for the financial year (Note 8) 267,560 267,560

At 30 June 1,296,472 1,028,912

Net book value At 30 June 13,494,162 13,761,722

Amount to be amortised:

- Within one year 267,560 267,560 - Between one to five years 1,070,240 1,070,240 - More than five years 12,156,362 12,423,922

13,494,162 13,761,722

The land use rights of the Group are pledged to secure the loans and borrowings granted to the Group as disclosed in Note 27 to the financial statements.



16. Intangible assets

Group

2017 Goodwill Timber rights License Total RM RM RM RM Cost

At 1 July 2016 20,323,572 58,171,223 303,830 78,798,625 Written off - (4,900,000) - (4,900,000)

At 30 June 2017 20,323,572 53,271,223 303,830 73,898,625

Accumulated amortisation and impairment losses At 1 July 2016 5,155,905 36,449,900 303,830 41,909,635 Charge for the financial year (Note 8) - 1,359,985 - 1,359,985 Written off - (3,052,775) - (3,052,775)

At 30 June 2017 5,155,905 34,757,110 303,830 40,216,845

Net book value

30 June 2017 15,167,667 18,514,113 - 33,681,780

Group 2016 Goodwill Timber rights License Total RM RM RM RM Cost

At 1 July/30 June 20,323,572 58,171,223 303,830 78,798,625

Accumulated amortisation and impairment losses

At 1 July 2015 5,155,905 33,653,589 120,372 38,929,866 Charge for the financial year - 2,796,311 60,766 2,857,077 Impairment charge for the financial year - - 122,692 122,692

At 30 June 2016 5,155,905 36,449,900 303,830 41,909,635

Net book value

30 June 2016 15,167,667 21,721,323 - 36,888,990

The timber rights and license of the Group are pledged to secure the loans and borrowings granted to the Group as disclosed in Note 27 to the financial statements.



16. Intangible assets (continued)

Impairment test of intangible assets

Allocation of goodwill

Goodwill is related to timber operation.

Goodwill and timber rights are tested for impairment on an annual basis by comparing the carrying amount with the recoverable amount of the CGUs based on estimation of the value-in-use by the management. Value-in-use is determined by discounting the future cash flows to be generated from the continuing use of the CGUs based on the following assumptions:

(i) Cash flows are projected based on the management’s extraction plan and extrapolated to a period of eight (8) years for all companies.

(ii) Discount rates used for cash flows discounting purpose is the Group’s weighted average cost of capital adjusted for specific risks relating to the relevant segments. The average discount rate applied for cash flow projections is 5.20% (2016: 6.00%).

(iii) Selling price of the timber products are based on the average of four (4) years.

With regard to the assessment of value-in-use of the timber operation, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying values of the units to materially exceed their recoverable amounts, save the assumptions on sales and logs/timber supply.

The management recognises that any significant changes in the market selling price for its timber products and logs/timber supply can have a significant impact on the sales and logs/timber supply assumptions made in the projections.

17. Investments in subsidiary companies

Company 2017 2016 RM RM

Unquoted shares, at cost 183,427,941 183,427,636 Amounts due from subsidiary companies 120,000,000 120,000,000

303,427,941 303,427,636

The amounts due from subsidiary companies is non-trade in nature, unsecured and interest free. The settlement of this amount is neither planned nor likely to occur in foreseeable future. As this amount is, in substance, a part of the Company’s net investment in the subsidiary, it is stated at cost less impairment loss, if any.



17. Investments in subsidiary companies (continued)

Details of the subsidiaries are as follows:

Proportion of ownership Name of subsidiary interest companies Country of 2017 2016 Principal incorporation % % activities

Held by the Company

Priceworth Industries Sdn. Bhd. Malaysia 100 100 Manufacture and sale of processed wood products, trading of logs and provision of wood processing services Maxland Dockyard & Engineering Malaysia 100 100 Provision of repair and maintenance Sdn. Bhd. services for marine vessels

Cergas Kenari Sdn. Bhd. Malaysia 100 100 Ceased operations Sinora Sdn. Bhd. Malaysia 100 100 Manufacture and sale of wood products and trading of logs Innora Sdn. Bhd. Malaysia 100 100 Manufacture and sale of processed wood products Maju Sinar Network Sdn. Bhd. Malaysia 100 100 Trading of logs Beta Bumi Sdn. Bhd. Malaysia 100 100 Extraction of timber and trading of logs

Harvest Element Sdn. Bhd. Malaysia 100 100 Investment holding

gsr Pte ltd* singapore 100 - Dormant

Held through Priceworth Industries Sdn. Bhd. Maxland Sdn. Bhd. Malaysia 100 100 Extraction and trading of timber logs, provision of barging services and undertaking of construction contract Cabaran Cerdas Sdn. Bhd. Malaysia 100 100 Investment holding Rimbunan Gagah Sdn. Bhd. Malaysia 100 64.5 Ceased operations

Held through Maxland Dockyard & Engineering Sdn. Bhd.

Semaring MDE JV Sdn. Bhd. Malaysia 60 60 Undertaking onshore and offshore mechanical and all other marine related works and renting out its plant and equipment Held through Sinora Sdn. Bhd. sino golden star limited hong Kong 100 100 Dormant sar Kekal Eramaju Sdn. Bhd. Malaysia 100 100 Extraction and sale of logs Held through Maju Sinar Network Sdn. Bhd. Maxland Congo S.A.R.L.U Congo 100 100 Dormant




Details of the subsidiaries are as follows:

Proportion of ownership Name of subsidiary interest companies Country of 2017 2016 Principal incorporation % % activities

Held through Harvest Element Sdn. Bhd.

Maxland Gabon S.A.R.L.U Gabon 100 100 Dormant

Held through Cabaran Cerdas Sdn. Bhd. Maxland (SI) Limited * Solomon 100 100 Ceased operation Islands PWP (SI) Limited * Solomon 100 100 Trading of logs Islands ligreen (sI) limited * solomon 100 100 ceased operation Islands Priceworth Sawmill (SI) Limited * Solomon 100 100 Manufacture and sale of Islands processed wood products Held through Maxland Sdn. Bhd. ligreen (Png) limited Papua new 100 100 Dormant guinea

* Audited by PKF, Malaysia for consolidation purposes.

The proportion of voting rights held by non-controlling interests equals to their proportion of ownership interest held.

Acquisition of subsidiaries

(i) On 3 September 2015, a subsidiary company, Maju Sinar Network Sdn. Bhd. acquired one hundred (100) ordinary shares of 1 United States Dollar (USD) each, representing one hundred percent (100%) equity interest in Maxland Congo S.A.R.L.U, for a total purchase consideration of RM421. As a result of that, Maxland Congo S.A.R.L.U became a wholly owned subsidiary company of the Group.

(ii) On 17 December 2015, the Company acquired two (2) ordinary shares of of RM1 each, representing one hundred percent (100%) equity interest in Harvest Element Sdn. Bhd., for a total purchase consideration of RM2. As a result of that, Harvest Element Sdn. Bhd. became a wholly owned subsidiary of the Company.

(iii) On 5 January 2016, a subsidiary company of the Group , Harvest Element Sdn. Bhd., acquired one hundred (100) ordinary shares of 10,000 CFA Francs (XAP) each, representing one hundred percent (100%) equity interest in Maxland Gabon S.A.R.L.U, for a total purchase consideration of RM7,196. As a result of that, Maxland Gabon S.A.R.L.U became a wholly owned subsidiary company of the Group.

(iv) On 15 June 2016, a subsidiary company of the Group, Sinora Sdn. Bhd., acquired two (2) ordinary shares of RM1 each, representing one hundred percent (100%) equity interest in Kekal Eramaju Sdn. Bhd., for a total purchase consideration of RM2. As a result of that, Kekal Eramaju Sdn. Bhd. became a wholly owned subsidiary of the Group.

(v) The Company has on 28 September 2016 incorporated a new subsidiary company, namely GSR Pte. Ltd., a private limited company in Singapore with the issued share stands at SGD100. Hence, GSR Pte. Ltd. is now the wholly subsidiary of the company. At present, GSR Pte. Ltd. is a dormant Company. The intended principal activity of the GSR Pte. Ltd. is investment holding which complement the present business activities of the Group.




Change in stake

On 2 December 2016, a subsidiary of the Group, Priceworth Industries Sdn. Bhd., acquired thirty-five and half percent (35.5%) non-controlling equity interest in Rimbunan Gagah Sdn. Bhd. for a cash consideration at RM250,000. As a result of that, Rimbunan Gagah Sdn. Bhd. became a wholly owned subsidiary of the Group.

18. Biological assets

Forest planting expenditure

Group Cost 2017 2016 RM RM

At 1 July 80,902,235 55,040,040 Addition 19,400,231 25,460,937 Fair value adjustment (333,072) 401,258

At 30 June 99,969,394 80,902,235

The forest planting expenditure is in respect of expenditure incurred on the development of the Group’s Sustainable Forest Management Project of 1,798 hectares of timber land under a Sustainable Forest Management License Agreement signed with the State Government of Sabah at Pinangah Forest Reserve with Fifty (50) years concession and Silvicultural Treatment and Mosaic Restoration and Enrichment Planting and Management System Project under an Integrated Mosaic Planting Agreement with a government body.

The Group has been granted a loan of RM13,232,000 for the purpose of development of forest plantation by the Forest Plantation Development Sdn. Bhd. (FPD) at an interest rate of 3% per annum. FPD is a special purpose vehicle incorporated by Malaysian Timber Industry Board (Incorporation) Act, 1973 for managing funds allocated by the Government of Malaysia for the implementation of forest plantation development programme. The benefit of a government loan at a below-market rate of interest is treated as a government grant. The amount of the loan drawn down during the financial year was RM1,161,435 (2016: RMNil). The difference between the initial carrying amount of the loan determined in accordance with FRS 139 and the proceeds of the loan (paid)/received of RM333,072 (2016: RM401,258) has been recognised against the carrying amount of the biological assets.

Included in biological assets expenditure capitalised during the financial year were as follows:

2017 2016 RM RM

Depreciation of property, plant and equipment (Note 14) 3,243,855 4,188,683 Employee benefits expense (Note 9) 2,141,981 5,282,558 Interest on bank loan (Note 11) 367,421 349,185



19. Deferred tax (assets)/liabilities


At 1 July 9,617,673 8,446,616 Recognised in profit or loss (Note 12) (2,151,518) 1,171,057

At 30 June 7,466,155 9,617,673

Presented after appropriate offsetting as follows: Deferred tax liabilities 21,625,155 23,776,673 Deferred tax assets (14,159,000) (14,159,000)

7,466,155 9,617,673

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Property, Group plant and Land use Timber equipment rights rights Inventories Total Deferred tax liabilities: RM RM RM RM RM At 1 July 2016 33,673,674 3,929,167 5,680,006 (18,138) 43,264,709 Recognised in profit or loss (2,181,838) (65,863) (198,246) - (2,445,947)

At 30 June 2017 31,491,836 3,863,304 5,481,760 (18,138) 40,818,762

At 1 July 2015 33,206,553 3,995,342 5,933,138 (18,138) 43,116,895 Recognised in profit or loss 467,121 (66,175) (253,132) - 147,814

At 30 June 2016 33,673,674 3,929,167 5,680,006 (18,138) 43,264,709

Unutilised tax losses and Unabsorbed unabsorbed Unabsorbed forest and capital reinvestment agriculture allowances allowances allowances Total Deferred tax assets: RM RM RM RM

At 1 July 2016 (30,399,344) (3,130,223) (117,479) (33,647,036) Recognised in profit or loss (2,835,794) 3,130,223 - 294,429

At 30 June 2017 (33,235,138) - (117,479) (33,352,617)

At 1 July 2015 (29,253,227) (5,299,573) (117,479) (34,670,279) Recognised in profit or loss (1,146,107) 2,169,350 - 1,023,243

At 30 June 2016 (30,399,344) (3,130,223) (117,479) (33,647,036)



19. Deferred tax (assets)/liabilities (continued)

The Group and the Company measure a deferred tax liability/(asset) using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Pursuant to the 2017 Malaysian Budget announced on 21 October 2016, resident companies with paid-up capital of above RM2,500,000 are taxed at the rate of 24% while those with paid-up capital of RM2,500,000 or less (and not part of a group of companies where any of their related companies have a paid-up capital of more than RM2,500,000) are taxed at the following scale rates:

• Chargeable income for the first RM500,000 at 18% with effect from Year of Assessment 2017• Chargeable income in excess of RM500,000 at 23%

In determining the rate to be applied for deferred tax measurement, the Company applies the average rate applicable to the Company, determined by dividing the current tax charge over the chargeable income, or if the Company has no chargeable income, at the lower rate.

The amount of temporary differences for which no deferred tax asset has been recognised in the statements of financial position is as follows:


Unutilised tax losses and unabsorbed capital allowances 48,966,298 36,014,259 Unabsorbed reinvestment allowances 36,512,272 6,135,158 Unabsorbed forest and agriculture allowances 976,591 976,591

7,466,155 9,617,673

Subject to the approval by the tax authority, the temporary differences of the deferred tax assets are available for offsetting against future taxable profits of the respective subsidiaries.

As disclosed in Note 2(b)(iv) to the financial statements in respect of critical accounting estimates and judgements, the deferred tax assets of unutilised tax losses and unutilised reinvestment allowances of a subsidiary amounting to RM19,310,521 (2016: RM19,100,015) and RMNil (2016: RM3,253,181) respectively are recognised on the basis of the subsidiary’s previous history of recording profits, and to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Estimating the future taxable profits involves significant assumptions, especially in respect of market price of plywood and logs, manufacturing costs and currency movement. These assumptions have been built based on past performance and adjusted for non-recurring circumstances and a reasonable inflation rate.



20. Inventories

Group 2017 2016 Cost RM RM

Consumable and spares 5,517,097 5,559,024 Construction work-in-progress - 2,542,012 Finished goods 6,927,185 7,864,623 Goods in transit - 36,252 Logging contract work-in-progress 14,569,564 11,614,434 Nursery 913,211 857,178 Production supplies 1,967,823 1,660,569 Raw materials 3,932,680 3,305,966 Timber logs 2,832,079 532,288 Work-in-progress 2,531,604 4,252,711

39,191,243 38,225,057

Net realisable value Finished goods 1,578,335 2,315,698

40,769,578 40,540,755

Included in work-in-progress are the following expenses incurred and capitalised during the financial year:

2017 2016 RM RM

Depreciation of property, plant and equipment 380,809 334,925 Employee benefits expense 282,852 235,944

21. Trade and non-trade receivables Group Company 2017 2016 2017 2016 RM RM RM RM

Trade receivables

Amount due from a company in which a person connected to a director of the Company has financial interests 73,486 - - - Third parties 53,267,582 38,552,909 - -

53,341,068 38,552,909 - - Less: Allowance for impairment (2,636,222) (862,118) - -

Trade receivables, net 50,704,846 37,690,791 - -



21. Trade and non-trade receivables (continued)


Non-trade receivables Deposits for log supplies 2,000,000 2,600,000 - - Other deposits 12,815,821 2,321,558 82,259 36,320 Prepayments 2,351,987 2,201,026 1,000,000 - other receivables - amounts due to companies which have common directors with the Company and in which a director of the Company has financial interests 102,811 102,859 - - - Amounts due from companies in which a person connected to a director of the Company has financial interests 82,726 27,790 - - - Third parties 20,127,195 28,152,977 4,498 5,096

37,480,540 35,406,210 1,086,758 41,416 Less: Allowance for impairment (463,247) (568,725) - -

Non-trade receivables, net 37,017,293 34,837,485 1,086,758 41,416

Total trade and non-trade receivables 87,722,139 72,528,276 1,086,758 41,416

Trade receivables are non-interest bearing and the normal credit terms granted by the Group are 60 to 90 days (2016: 60 to 90 days). Other credit terms are assessed and approved on a case-by-case basis.

They are recognised at their original invoice amounts which represent their fair values on initial recognition.

As at the reporting date, the Group has significant concentration of credit risk in the form of outstanding balance due from 4 (2016: 12) customers representing 54% (2016: 69%) of total receivables.

The ageing analysis of the Group’s trade receivables as at the reporting date is as follows:

Group Gross Individual Carrying amount impairment value 2017 RM RM RM

Not past due 20,970,875 - 20,970,875 Past due:

- less than 30 days 4,884,100 - 4,884,100 - between 31 to 60 days 85,662 - 85,662 - between 61 to 90 days 2,596,639 - 2,596,639 - more than 90 days 24,803,792 (2,636,222) 22,167,570

32,370,193 (2,636,222) 29,733,971

53,341,068 (2,636,222) 50,704,846



21. Trade and non-trade receivables (continued)

Gross Individual Carrying amount impairment value 2016 RM RM RM Not past due 6,139,625 - 6,139,625 Past due:

- less than 30 days 2,119,728 - 2,119,728 - between 31 to 60 days 5,201,942 - 5,201,942 - between 61 to 90 days 1,315,013 - 1,315,013 - more than 90 days 23,776,601 (862,118) 22,914,483 32,413,284 (862,118) 31,551,166

38,552,909 (862,118) 37,690,791

Trade receivables that are neither past due nor impaired are creditworthy receivables with good payment records with the Group.

None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

The Group has trade receivables amounting to RM29,733,971 (2016: RM31,551,166) that are past due but not impaired at the reporting date. These balances are unsecured in nature.

The Directors have reviewed the recoverability of the receivables and are of the opinion that no provision is required in respect of these debts.

Amounts due from related parties are unsecured, interest free and repayable on demand. Group 2017 2016 RM RM

Movement in allowance account for trade receivables : At 1 July 862,118 161,498 Charge for the financial year (Note 8) 1,774,104 700,620

At 30 June 2,636,222 862,118

Movement in allowance account for non-trade receivables : At 1 July 568,725 395,776 Charge for the financial year (Note 8) 22,273 172,949 Written back (Note 6) (127,751) -

At 30 June 463,247 568,725

The allowance account in respect of receivables is used to record impairment losses. Unless the Group is satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the receivable directly.

Deposits for log supplies

Deposits for log supplies represent advances paid to log suppliers for logs to be purchased.



22. Amounts due from subsidiary companies

Amounts due from subsidiary companies are unsecured, interest free and repayable on demand.

23. Cash and cash equivalents


Bank overdraft (unsecured) (150) (150) - - Cash in hand and at banks 974,816 9,151,802 27,811 16,254 Deposits with licensed banks - 3,567,876 - 3,567,876

Cash and bank balances 974,666 12,719,528 27,811 3,584,130 Less: Deposits with maturity of more than three (3) months - (3,567,876) - (3,567,876)

Cash and cash equivalents 974,666 9,151,652 27,811 16,254

The weighted average effective interest rate of deposits with licensed banks at the end of the previous financial year of the Group was 3.85% per annum.

Deposits with licensed banks at the end of the previous financial year of the Group had a weighted average maturity of 5 year.

24. Share capital, share premium and treasury shares

No. of shares Group/Company 2017 2016 2017 2016 unit unit RM RM

Authorised:

2,000,000,000 ordinary shares with no par value (2016: RM0.10 each) - 2,000,000,000 - 200,000,000

Group/Company Share Treasury Share capital premium shares unit RM RM RM

Issued and fully paid:

930,670,631 ordinary shares with no par value (2016: RM0.10 each)

At 1 July 2015 466,704,149 46,670,415 75,854,883 (10,324,612) Share issuance expense - - (1,031,725) - Conversion of redeemable convertible notes 187,892,110 18,789,211 1,210,789 -

At 30 June 2016 654,596,259 65,459,626 76,033,947 (10,324,612) Share issuance expense - - (326,828) - Issuance of shares 276,074,372 27,607,437 220,000 - transition to no par value regime under Companies Act 2016 - 75,927,119 (75,927,119) -

At 30 June 2017 930,670,631 168,994,182 - (10,324,612)



24. Share capital, share premium and treasury shares (continued)

The Company’s issued and fully paid-up share capital comprises ordinary shares with a par value of RM0.10 each. The new Companies Act 2016 (“the Act”), which came into operation on 31 January 2017, introduces the “no par value” regime. Accordingly, the concepts of “authorised share capital” and “par value” have been abolished. Therefore, the share premium account now effectively forms part of the Company’s share capital effective 31 January 2017 and at the end of the financial year.

Prior to 31 January 2017, the application of the share premium account was governed by Section 60 and 61 of the Companies Act 1965. In accordance with the transitional provisions set out in Section 618 (2) of the Act, on 31 January 2017 any amount standing to the credit of the Group and the Company’s share premium account has become part of the Group and the Company’s share capital. Notwithstanding this provision, the Group and the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM75,927,119 for purposes as set out in Section 618 (3) of the Act.

(i) Private placement

Conversion Date Number of Conversion Ordinary Price per Shares in units Ordinary Share Total RM RM

29 December 2016 44,000,000 0.105 4,620,000 23 January 2017 20,203,342 0.100 2,020,334

64,203,342 6,640,334

(ii) special issue

Conversion Date Number of Conversion Ordinary Price per Shares in units Ordinary Share Total RM RM

1 June 2017 211,871,030 0.100 21,187,103

The new ordinary shares of RM0.10 each issued during the financial year rank pari passu in all aspects with the new ordinary shares of the Company, except that the conversion shares issued by the Company to the subscriber upon conversion will not be entitled to any dividends, rights, allotment and/or other forms of distribution that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the conversion shares.

(a) Share capital

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company’s residual assets.

(b) Treasury shares

Of the total 930,670,631 (2016: 654,596,259) issued and fully paid ordinary shares as at 30 June 2017, 12,562,832 (2016: 12,562,832) are held as treasury shares by the Company. There was no cancellation, resale or reissuance of treasury shares during the financial year. As at 30 June 2017, the number of outstanding ordinary shares in issue after the setoff is therefore 918,107,799 (2016: 642,033,427) ordinary shares of RM0.10 each.



25. Other reserves

Foreign currency Capital translation Warrant redemption reserve reserve reserve Total Group RM RM RM RM At 1 July 2016 74,644 - 74,511,248 74,585,892 Foreign currency translation 1,499,306 - - 1,499,306

At 30 June 2017 1,573,950 - 74,511,248 76,085,198

At 1 July 2015 (524,006) 4,342,882 74,511,248 78,330,124 Foreign currency translation 598,650 - - 598,650 Transferred to retained profits - (4,342,882) - (4,342,882)

At 30 June 2016 74,644 - 74,511,248 74,585,892

Capital Company Warrant redemption reserve reserve Total 2017 RM RM RM

At 1 July 2016/30 June 2017 - 74,511,248 74,511,248

2016

At 1 July 2015 4,342,882 74,511,248 78,854,130 Transferred to retained profits (4,342,882) - (4,342,882)

At 30 June 2016 - 74,511,248 74,511,248

(a) Foreign currency translation reserve

The foreign currency translation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

(b) Warrant reserve

The warrants are constituted under a Deed Poll executed on 17 March 2011 and each warrant entitles the registered holder the right at any time during the exercise period from 29 April 2011 to 28 April 2016 to subscribe in cash for one (1) new ordinary share of RM0.10 each of the Company at an exercise price of RM0.50 each.

The main features of the warrants are as follows:

(i) Each warrant will entitle the registered holder to subscribe for one (1) new ordinary share at par value of RM0.10 each in the Company at an exercise price of RM0.50 each subject to adjustment in accordance with the conditions stipulated in the Deed Poll;



25. Other reserves (continued)

(b) Warrant reserve

(ii) The warrants may be exercised at any time on or before the maturity date falling five (5) years (2011/2016) from the date of issue of the warrants on 17 March 2011. Warrants not exercised after the exercise period will thereafter lapse and cease to be valid; and

(iii) The new shares to be issued pursuant to the exercise of the warrants shall, upon allotment and issue, rank pari passu in all respects with the existing ordinary shares of the Company in issue except that they will not be entitled to any dividends, rights, allotments and/or any other forms of distributions, the entitlement date of which is before the allotment and issuance of the new shares.

During the financial year ended 30 June 2016, the unexercised warrants lapsed after its expiry date on 18 April 2016.

(c) Capital redemption reserve

The capital redemption reserve represents the residual amount of the par value reduction of each existing ordinary share of RM0.50 to RM0.10 each.

26. Retained profits

The Company’s policy is to treat all gains and losses that pass through the statement of comprehensive income (i.e. non-owner transactions or events) as revenue reserves. Other than retained profits, all other revenue reserves are regarded as non-distributable in the form of cash dividends to shareholders. Accumulated losses is the opposite of retained profits and when an entity is in an accumulated loss position, it is prohibited from distributing cash dividends to shareholders.

27. Loans and borrowings Group Company 2017 2016 2017 2016 Non-current RM RM RM RM

Secured: Obligations under finance leases 4,970,149 10,763,830 - - Term loans 82,730,902 12,447,895 69,087,223 -

87,701,051 23,211,725 69,087,223 -

Current

Secured: Bank overdraft 10,000,000 - - - Obligations under finance leases 5,023,602 5,359,544 - - Term loans 30,818,920 134,089,880 30,818,920 134,089,879

45,842,522 139,449,424 30,818,920 134,089,879



27. Loans and borrowings (continued)


Total loans and borrowings

Secured: Bank overdraft 10,000,000 - - - Obligations under finance leases 9,993,751 16,123,374 - - Term loans 113,549,822 146,537,775 99,906,143 134,089,879

133,543,573 162,661,149 99,906,143 134,089,879

Maturity structure of loans and borrowings Within one year 45,842,522 139,449,424 30,818,920 134,089,879 Between one to two years 39,402,703 7,018,356 36,440,747 - Between two to five years 34,654,669 3,682,474 32,646,476 - More than five years 13,643,679 12,447,895 - -

133,543,573 162,661,149 99,906,143 134,089,879

The interest rate structures are as follows:

Nominal interest rate Effective interest rate 2017 2016 2017 2016 Bank overdraft FD rate+0.5% - 3.35% - Obligations under finance leases 7.66% 4.66% 7.66% 5.44% Term loan 1 BFR+3.5% BFR+3.5% 10.35% 10.35% Term loan 2 3.00% 3.00% 3.00% 3.00%

(a) Bank overdraft The bank overdraft of RM10,000,000 (2016: RMNil) is secured by a third party letter of set-off in the form and substance

over the sum of RM10,000,000 together with interest thereon placed with the bank by a person connected of a director of the Company.

(b) Obligations under finance leases These obligations are secured by a charge over the leased assets as disclosed in Note 14 to the financial statements.



27. Loans and borrowings (continued)

(c) Term loan 1

This loan with a total outstanding balance of RM99,906,143 (2016: RM134,089,879) is secured by:

(i) a first legal charge over leasehold land and timber rights of certain subsidiary companies as disclosed in Notes 13 and 15 to the financial statements;

(ii) a debenture over fixed and floating assets of a third party; and(iii) a debenture over all fixed and floating assets of certain subsidiary companies.

As at 30 June 2016, the Company has not complied with the repayment terms of its bank borrowings and has short paid its instalments totalling RM8,400,000. Pursuant to FRS 101 Presentation of Financial Statements, a breach of a provision of long-term loan would result in the entire liability being classified as current unless the lender had agreed by the end of the reporting period to provide a grace period of at least twelve (12) months after the reporting period. As no grace period has been obtained by the Company as at 30 June 2016 and the date of last report, the entire liability was reclassified as current.

During the financial year, the Company regularised its repayment term and there are no arrears as at 30 June 2017. Therefore, the carrying amount of the term loan has been reclassified as current and non-current respectively on the face of Statement of Financial Position, according to FRS 101 Presentation of Financial Statements.

(d) Term loan 2

This loan with a total outstanding balance of RM13,643,679 (2016: RM12,447,896) is secured by:

(i) irrevocable and unconditional individual guarantee and indemnity duly issued by the Directors; and(ii) first party deed of assignment of a subsidiary’s harvesting rights of the planted timber.

28. Trade and non-trade payables Group Company 2017 2016 2017 2016 RM RM RM RM

Trade payables

amounts due to companies which have common directors with the Company and in which a director of the Company has financial interests - 49,036 - - Third parties 20,051,069 21,371,604 - -

20,051,069 21,420,640 - -



28. Trade and non-trade payables (continued)


None-trade payables

Accruals 21,018,902 24,879,314 107,474 2,356,018 Deposits 16,500 16,500 - - Other payables - amounts due to companies which have common directors with the Company and in which a director of the Company has financial interests 29,835 8,809 29,835 8,809 - Amount due to a company in which a person connected to a director of the Company has financial interests 71,628 66,645 55,801 41,809 - Third parties 12,102,812 11,028,269 658,746 254,906

33,239,677 35,999,537 851,856 2,661,542

Total trade and non-trade payables 53,290,746 57,420,177 851,856 2,661,542

Trade and non-trade payables are non-interest bearing and the normal credit terms granted to the Group are 30 to 90 days (2016: 30 to 90 days).

Amounts due to related parties are unsecured, interest free and repayable on demand.

29. Significant related party transactions

(a) Identities of related parties

Parties are considered to be related to the Group and the Company if the Group and the Company have the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties could be individuals or other entities.

The Group and the Company have related party relationships with its Directors, key management personnel, companies which have common Directors with the Company and in which a Director of the Company has financial interests, companies in which a person connected to a Director of the Company has financial interests, a person connected to a Director of the Company and entities within the same group of companies.



29. Significant related party transactions (continued)

(b) The aggregate value of transactions and outstanding balances of the related parties of the Group and of the Company were as follows:

Group Transaction value Balance outstanding as at 30 June Type of 2017 2016 2017 2016 Name of related party transaction RM RM RM RM

with companies which have common Directors with the Company and in which a Director of the Company has financial interests: Layang-layang Udara Sdn. Bhd. - - - - (49,036)

Integral Acres Sdn. Bhd. Rental income 98,520 102,859 102,811 (102,859) Sales of wood - 28,877 products Contract fee - 23,802

Jurubina Cekap Sdn. Bhd. Service income - 120,907 - - Rental of equipment 4,770 295,435 Bertam Alliance Berhad Rental fee 41,457 7,008 (29,835) (8,809)

with companies in which a person connected to a Director of the Company has financial interests: Sikap Hajat Sdn. Bhd. Transportation income 58,990 - - - Maxland Enterprise Sdn. Professional - 740 (62,285) (51,182) Bhd. fee Rental of office 98,376 183,664

Green Edible Oil Sdn. Bhd. Rental income 63,000 72,000 - 12,720

Barigos Sdn. Bhd. Purchase of spare parts 10,418 15,362 73,383 (393) Payment on behalf 291 144,359




(b) The aggregate value of transactions and outstanding balances of the related parties of the Group and of the Company were as follows: (continued)

Company

Transaction value Balance outstanding as at 30 June Type of 2017 2016 2017 2016 Name of related party transaction RM RM RM RM

with a person connected to a Director of the Company:

Lim Nyuk Foh Rental of land 30,000 36,000 - -

With subsidiary companies:

Sinora Sdn. Bhd. Dividend income 40,000,000 40,000,000 76,926,616 55,382,631

Priceworth Indutries Sdn. Bhd. - - - 13,073,964 10,618,318

GSR Pte Ltd Payment on behalf 97,484 - 97,484 -

with companies which have common Directors with the Company and in which a Director of the Company has financial interests: Bertam Alliance Berhad Rental fee 41,457 7,008 (29,835) (8,809)

with companies in which a person connected to a Director of the Company has financial interests: Maxland Enterprise Sdn. Bhd. Rental 13,776 15,264 (55,801) (41,809)




(c) The remuneration of directors and other members of key management during the financial year was as follows:


Short-term employee benefits 962,950 708,009 99,112 62,620 Contributions to defined contribution plan 96,002 85,257 11,650 7,800

1,058,952 793,266 110,762 70,420

Included in the key management personnel are: Directors’ remuneration (Note 10) 1,058,952 793,266 110,762 70,420

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company either directly or indirectly. The key management personnel comprise all the Directors of the Group and of the Company and members of senior management of the Group.

The terms and conditions and prices of the above transactions are mutually agreed between the parties.

30. Commitments and contingencies

(a) Capital commitments


Capital expenditure commitments

Approved and contracted for: - Acquisition of property, plant and equipment - 493,851 - Acquisition of timber rights 250,000,000 260,400,000

250,000,000 260,893,851

The capital commitment relates to the balance purchase consideration of RM250,000,000 for the acquisition of timber rights arising from the acquisition of the entire issued and paid up share capital of Rumpun Capaian Sdn. Bhd. (Rumpun) by GSR Pte. Ltd. (GSR), a wholly own subsidiary of the Company. The Sale and Purchase Agreement (SPA) has been signed on 19 October 2016.

Concurrently with the execution of the SPA, Sinora Sdn. Bhd (Sinora), a wholly owned subsidiary of the Company, would also enter into a Log Extraction and Timber Sale Agreement with Anika Desiran Sdn. Bhd. (Anika), 99.99% owned subsidiary of Rumpun, to allow Sinora (by way of an irrevocable power of attorney in favour of Sinora) to extract all commercial logs within the forest reserve area.

Log extraction and timber sale agreement dated 19 October 2016 entered into between Sinora and Anika allows Sinora to extract and remove at the contractor’s own cost, all commercial logs and/or merchantable timber within the areas identified in the coupe permits as Compartment 57 (733.6 hectares) and Compartment 58 (1,026.2 hectares) within the industrial tree plantation area with a combined area of 1,759.8 hectares and such other areas covered under any other new coupe permits issued for other compartments within Licensed Area from the date of the relevant coupe permits.

The commitment will be expected to be made by first half of 2018, funded by the proceeds arising from the Proposed Listing of GSR on the Singapore Exchange, cash from internally generated funds and/or bank borrowings (if necessary).



30. Commitments and contingencies (continued)

(b) Operating lease commitments – as lessee

Details of land use rights and the amortisation of land use rights recognised in profit or loss are disclosed in Note 14 to the financial statements.

(c) Finance lease commitments – as lessee

The Group has finance leases for certain items of plant and equipment as disclosed in Note 14 to the financial statements. These leases do not have terms of renewal but have purchase options at nominal values at the end of the lease term.

(d) Contingent liabilities

Company 2017 2016 RM RM Financial guarantee contract given to the subsidiaries 9,993,751 16,123,374

31. Financial instruments

(a) Categories of financial instruments

Group 2017 Carrying Loans and amount receivables Financial assets RM RM

Trade and non-trade receivables 87,722,139 87,722,139 Cash and bank balances 974,666 974,666

88,696,805 88,696,805

Financial liabilities Carrying measured at amount amortised cost Financial liabilities RM RM Loans and borrowings 133,543,573 133,543,573 Trade and non-trade payables 53,290,746 53,290,746

186,834,319 186,834,319



31. Financial instruments (continued)

(a) Categories of financial instruments (continued)

2016 Carrying Loans and amount receivables Financial assets RM RM

Trade and non-trade receivables 72,528,276 72,528,276 Cash and bank balances 12,719,528 12,719,528

85,247,804 85,247,804

Financial liabilities Carrying measured at amount amortised cost Financial liabilities RM RM

Loans and borrowings 162,661,149 162,661,149 Trade and non-trade payables 57,420,177 57,420,177

220,081,326 220,081,326

Company 2017 Carrying Loans and amount receivables Financial assets RM RM

Trade and non-trade receivables 1,086,758 1,086,758 Amounts due from subsidiary companies 90,098,064 90,098,064 Cash and bank balances 27,811 27,811

91,212,633 91,212,633


Loan and borrowings 99,906,143 99,906,143 Trade and non-trade payables 851,856 851,856

100,757,999 100,757,999




(a) Categories of financial instruments (continued)

2016 Carrying Loans and amount receivables Financial assets RM RM

Trade and non-trade receivables 41,416 41,416 Amounts due from subsidiary companies 66,000,949 66,000,949 Cash and bank balances 3,584,130 3,584,130

69,626,495 69,626,495


Loan and borrowings 134,089,879 134,089,879 Trade and non-trade payables 2,661,542 2,661,542

136,751,421 136,751,421

(b) Net gains/(losses) arising from financial instruments


Net gains/(losses) arising from: loans and receivables - Bad debts written off - (259,285) - - - Impairment loss (1,668,626) (873,569) - - - Realised and unrealised gain on foreign exchange 2,438 900,278 - - - Interest income 51,683 88,927 51,515 67,876 - Reversal of bad debts written back 2,275 57,923 - -

Financial assets at fair value through profit or loss - Reversal of fair value gain of derivative assets - (59,264) - - financial liabilities at amortised cost - Liabilities no longer in existence written back 25,410 188,144 25,410 - - Interest expense (9,462,193) (17,631,170) (7,600,582) (13,384,755)

(11,049,058) (17,588,016) (7,523,657) (13,316,79)




(c) Financial risk management

The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk.

The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Group’s finance department overseen by an Executive Director. The audit committee provides independent oversight to the effectiveness of the risk management process.

It is, and has been throughout the current and previous financial year, the Group’s policy that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-efficient. The Group does not apply hedge accounting.

The following sections provide details regarding the Group’s and the Company’s exposure to the above-mentioned financial

risks and the objectives, policies and processes for the management of these risks.

(i) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and non-trade receivables. For other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of Managing Director.

As at the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by:

- the carrying amount of each class of financial assets recognised in the Statements of Financial Position; and- a nominal amount of RM9,993,751 (2016: RM16,123,374) relating to corporate guarantees provided by the

Company to the banks to secure obligations under finance leases granted to certain subsidiaries.

As at the reporting date, the Group has significant concentration of credit risk in the form of outstanding balance due from 4 (2016: 12) customers representing 54% (2016: 69%) of total receivables.

Financial assets that are neither past due nor impaired

Information regarding trade receivables that are neither past due nor impaired is disclosed in Note 21 to the financial statements. Deposits with banks and other financial institutions, and short-term investment that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Note 21 to the financial statements.

Financial guarantees

The fair value of financial guarantees provided by the Company to banks to secure obligations under finance lease granted to certain subsidiaries with nominal amount of RM9,993,751 (2016: RM16,123,374) are negligible because the actual interest charged by the banks are not materially different from the borrowing costs of the subsidiaries and the outstanding borrowings are adequately secured by plant and equipment of the subsidiaries in which their market values upon realisation are expected to be higher than the outstanding borrowing amounts.




(c) Financial risk management (continued)

(ii) Liquidity risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from financial institutions and balances its portfolio with some short-term funding so as to achieve overall cost effectiveness.

The following table sets out the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period):

Weighted Group average Contractual effective Carrying undiscounted Within 1 – 5 Over rate p.a. amount cash flows 1 year years 5 years 2017 % RM RM RM RM RM loans and borrowings 8.7 133,543,573 150,717,084 55,614,417 79,369,385 15,733,282 trade and non-trade payables - 53,290,746 53,290,746 53,290,746 - -

186,834,319 204,007,830 108,905,163 79,369,385 15,733,282

2016 loans and borrowings 9.3 162,661,148 197,129,056 173,241,546 11,439,615 12,447,895 trade and non-trade payables - 57,420,177 57,420,177 57,470,177 - -

220,081,325 254,549,233 230,711,723 11,439,615 12,447,895





(ii) Liquidity risk (continued)

Weighted Company average Contractual effective Carrying undiscounted Within 1 – 5 Over rate p.a. amount cash flows 1 year years 5 years 2017 % RM RM RM RM RM loans and borrowings 10.35 99,906,143 116,392,285 40,200,000 76,192,285 - trade and non-trade payables, excluding financial guarantees - 851,856 851,856 851,856 - -

100,757,999 117,244,141 41,051,856 76,192,285 -

2016 loans and borrowings 10.35 134,089,879 167,132,402 167,132,402 - - trade and non-trade payables, excluding financial - - guarantees - 2,661,542 2,661,542 2,661,542

136,751,421 169,793,944 169,793,944 - -

As highlighted in Note 27, as at 30 June 2016, the Company has not complied with the repayment terms of one of its borrowings which resulted in the entire outstanding balance of RM134,089,879 being classified as current. This reclassification resulted in the net current assets of the Group and of the Company of RM38,942,168 and RM42,834,777 respectively changing to net current liabilities of RM71,115,547 and RM67,124,926 respectively.

During the financial year, the Company regularised its repayment term and there are no arrears as at 30 June 2017. Therefore, the carrying amount of the borrowings have been reclassified according to its maturity period with the satisfaction of its obligation.

At the reporting date, the counterparty to the financial guarantees does not have a right to demand cash as the default has not occurred. Accordingly, financial guarantees under the scope of FRS 139 Financial Instruments: Recognition and Measurement are not included in the above maturity profile analysis.





(iii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from its loans and borrowings. The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts.

The following table details the sensitivity analysis to a reasonably possible change in the interest rates as at the end of the reporting period, with all other variables held constant:

Group/Company Increase/(Decrease) 2017 2016 RM RM

Effects on profit after taxation

Increase of 30bp (230,783) (402,269) Decrease of 30bp 230,783 402,269

(iv) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in foreign exchange rate.

The Group is exposed to currency translation risk arising from its net investments in foreign operations, including Hong Kong, Singapore, Solomon Islands and Papua New Guinea. These investments are not hedged as currency positions in Hong Kong Dollar (HKD), Singapore Dollar (SGD), Solomon Islands Dollar (SBD), Papua New Guinea Kina (PGK) and are considered to be long-term in nature.

The Group is also exposed to foreign currency risk on transactions and balances that are denominated in currencies

other than Ringgit Malaysia (RM). The currencies giving rise to this risk are primarily Japanese Yen (JPY), Singapore Dollar (SGD) and United States Dollar (USD).

Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level.

The net unhedged financial assets and financial liabilities of the Group that are not denominated in their functional

currencies are as follows:





(iv) Foreign currency risk (continued)

United 2017 Japanese Singapore States Yen Dollar Dollar Total Financial assets RM RM RM RM Trade and non-trade receivables 5,090 7,966 1,382,086 1,395,142 Cash and bank balances - - 1,099 1,099

5,090 7,966 1,383,185 1,396,241

Financial liability

Trade and non-trade payables - (30,219) (99,213) (129,432)

- (30,219) (99,213) (129,432)

Net financial assets/ (liabilities) held in non-functional currencies 5,090 (22,253) 1,283,972 1,266,809

United 2016 Japanese Singapore States Yen Dollar Dollar Total Financial assets RM RM RM RM trade and non- trade receivables 4,203 7,966 20,296,691 20,308,860 Cash and bank balances - - 11,433 11,433

4,203 7,966 20,308,124 20,320,293

Financial liability

trade and non- trade payables - (30,219) (28,158) (58,377)

Net financial assets/(liabilities) held in non- functional currencies 4,203 (22,253) 20,279,966 20,261,916





(iv) Foreign currency risk (continued)

The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies as at the end of the reporting period, with all other variables held constant:

Group Increase/(Decrease) 2017 2016 RM RM

Effects on profit after taxation

SGD/RM Strengthened by 4.2% (2016: 6.2%) (935) 1,062 Weakened by 4.2% (2016: 6.2%) 935 (1,062)

JPY/RM Strengthened by 2.7% (2016: 21.6%) 106 (690) Weakened by 2.7% (2016: 21.6%) (106) 690

USD/RM Strengthened by 6.2% (2016: 6.2%) 61,297 (945,326) Weakened by 6.2% (2016: 6.2%) (61,297) 945,326

(d) Fair value information

Fair value is defined as the amount at which the financial instrument could be exchanged in a current transaction between knowledgeable wiling parties in an arm’s length transaction, other than in a force sale or liquidation.

The Group and the Company use the following fair value hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active market for identical assets or liabilities Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable,

either directly or indirectly Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on

observable market data

The financial assets and financial liabilities maturing within the next twelve (12) months approximated their fair values due to the relatively short-term maturity of the financial instruments.

The fair values of obligations under finance leases and fixed rate term loan are determined by discounting the relevant cash flows using current interest rates for similar instruments as at the end of the reporting period.

The carrying amount of the variable rate term loan approximated its fair value as the instrument bears interest at variable

rates. The fair value of financial guarantees is determined based on probability weighted discounted cash flow method. The

probability has been estimated and assigned using the following key assumptions:- The likelihood of the guaranteed party defaulting within the guaranteed period;- The exposure on the portion that is not expected to be recovered due to the guaranteed party’s default; and- The estimated loss exposure if the party guaranteed were to default.

Fair value is defined as the amount at which the financial instrument could be exchanged in a current transaction between knowledgeable wiling parties in an arm’s length transaction, other than in a force sale or liquidation.



32. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. To achieve this objective, the Group may make adjustments to the capital structure in view of changes in economic conditions, such as adjusting the amount of dividend payment, returning of capital to shareholders or issuing new shares. The Group’s strategies were unchanged from the previous financial year.

The gearing ratio of the Group and of the Company as at the end of the reporting period was as follows:


Loans and borrowings 133,543,573 162,661,149 99,906,143 134,089,879 Less: Cash and cash equivalents 974,666 9,151,652 27,811 16,254

Net debt 132,568,907 153,509,497 99,878,332 134,073,625

Total equity 307,561,447 274,550,994 293,870,764 236,302,747

Gearing ratio 0.43 0.56 0.34 0.57

The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings less cash and cash equivalents.

Under the requirements of Bursa Malaysia Practice Note 17, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid up capital (excluding treasury shares). The Group has complied with this requirement.

The Group is not subject to any other externally imposed capital requirements.

33. Segment information

(i) Operating segment

For management purposes, the Group is organised into business units based on their products and services, and has four (4) reportable operating segments as follows:

(a) The logging segment is involved in extraction, sale of logs and tree planting (reforestation);

(b) The manufacturing segment is in the business of manufacturing and sale of plywood, veneer, raw and laminated particleboard, sawn timber and finger joint moulding;

(c) The shipyard segment is involved in the provision of marine services, including repair and maintenance of tugboat and barge amongst others; and

(d) The others segment is involved in investment holding and the provision of hiring services.

Except as indicated above, no operating segment has been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain aspects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.



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33. Segment information (continued)

(ii) Geographical information

Revenue and total assets information based on the geographical location of customers and assets respectively are as follows:

Revenue Total assets 2017 2016 2017 2016 RM RM RM RM Malaysia 33,130,044 53,645,385 505,262,914 496,024,236 Mid East - 325,266 - - Solomon Islands 26,938,380 25,870,690 405,469 22,006,921 Hong Kong - 245,897 421,131 421,131 Papua New Guinea - - 2,535 2,535 congo - - 421 421 Gabon - - 7,196 7,196 Korea 8,381,385 1,925,923 - - Thailand 6,662,500 11,174,532 - - Japan 65,107,315 92,206,472 - - Taiwan 3,586,012 3,435,861 - - Singapore 18,132,963 769,733 10,095,443 - China 6,294,236 2,703,013 - - Canada 255,563 309,232 - - Kuwait - 241,975 - -

168,488,398 166,983,291 516,195,109 518,462,440

Total assets information presented above consist of the following items as presented in the consolidated Statement of Financial Position:

2017 2016 RM RM Property, plant and equipment 225,414,522 246,942,992 Land use rights 13,494,162 13,761,722 Intangible assets 33,681,780 36,888,990 Biological assets 99,969,394 80,902,235 Deferred tax assets 14,159,000 14,159,000 Inventories 40,769,578 40,540,755 Tax recoverable 9,868 18,942 Trade and non-trade receivables 87,722,139 72,528,276 Cash and bank balances 974,666 12,719,528

516,195,109 518,462,440

(iii) Major customers

Revenue from 4 (2016: 5) major customers amounted to RM88,870,630 (2016: RM94,568,812) representing 53% (2016: 57%) arising from sale of wood products.



34. Significant events during the financial year

(i) GSR Pte. Ltd. (GSR), a wholly own subsidiary of the Group, has entered into a Sale and Purchase Agreement (SPA) with Transkripsi Pintar Sdn. Bhd. (Transkripsi) for the acquisition of the entire issued and paid up share capital of Rumpun Capaian Sdn. Bhd. (Rumpun) for a total purchase consideration of RM260,000,000. Concurrently with the execution of SPA, Sinora Sdn. Bhd (Sinora), a wholly owned subsidiary of the Group, had also entered into a Log Extraction and Timber Sale Agreement with Anika Desiran Sdn. Bhd. (Anika), a company which has been awarded a 100-years concession by the Sabah State Government on 10 September 1997 to carry out harvesting, forest management and rehabilitation, and industrial tree planting under the principles of sustainable forest management and environmental conservation for economic, environmental and social purposes within the forest reserve area comprising 101,161 hectares in Trus Madi, Sabah, known as Forest Management Unit 5 (FMU5), a 99.99% owned subsidiary of Rumpun, in order to allow Sinora to extract and remove all commercial logs and/or merchantable timber within the areas identified in the coupe permits as Compartment 57 and Compartment 58 within the Industrial Tree Plantation (ITP) area, with a combined area of 1,759.8 hectares and such other areas covered under any other new coupe permits issued for other compartments within FMU5 from the date of the relevant coupe permits. The purchase consideration shall be paid to Transkripsi by cash and/or in kind by way of issuance of shares in GSR in the event that GSR has obtained the requisite approval from Singapore Exchange Securities Trading Limited (SGX) and/or any other relevant authorities for the listing and quotation of the entire issued share capital of GSR on the Official List of SGX within a stipulated time frame.

(ii) During the financial year, the Company has completed a First Tranche of Private Placement for 44,000,000 new ordinary shares, and Second and Final Tranche of Private Placement for 20,203,342 ordinary shares of the Company following the listing of and the quotation for the said Placement Shares on the Main market of Bursa Malaysia Securities on 29 December 2016 and 23 January 2017 respectively.

(iii) On 1 June 2017, the Company has completed the Special Issue by way of the issuance of 211,871,030 ordinary shares following the listing of and quotation for the said Special Issue shares on the Main market of Bursa Malaysia Securities Berhad on the same date pursuant to the Subscription Agreement entered into between the Company and Tan Sri Abdul Rashid Hussain, Puan Sri Emilahani Yang Binti Mohd Yatim and Maha Gayabina Sdn. Bhd. for the part financing of the acquisition of the entire issued and paid up share capital of Rumpun.

35. Event after the reporting period

On 3 July 2017, the Company has submitted an application in relation to the proposed acquisition of the entire issued and paid up share capital of Rumpun and also proposed renounceable two-call Rights Issue of up to 1,861,341,262 rights shares at an issue price of RM0.10 per ordinary share, together with a Bonus Issue of up to 930,670,631 Bonus Shares to be credited as fully paid-up, on the basis of two (2) Rights Shares for every one (1) existing ordinary shares held and one (1) Bonus Share for every two (2) rights shares subscribed.



36. Supplementary financial information on the breakdown of realised and unrealised profits or losses

The breakdown of the retained profits of the Group and of the Company as at 30 June, into realised and unrealised profits/(losses), pursuant to Paragraphs 2.06 and 2.23 of the Bursa Malaysia Main Market Listing Requirements, is as follows:

Group Company 2017 2016 2017 2016 RM RM RM RM Total retained profits of the Company and its subsidiaries - Realised 96,460,967 89,350,506 60,689,946 30,622,538 - Unrealised 7,466,155 9,617,673 - -

103,927,122 98,968,179 60,689,946 30,622,538 Add: Consolidation adjustments (30,742,541) (29,949,235) - -

Total retained profits as per Statements of Financial Position 73,184,581 69,018,944 60,689,946 30,622,538

The determination of realised and unrealised profits or losses is compiled based on Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant of Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

The disclosure of realised and unrealised profits or losses above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and should not be applied for any other purposes.

37. General

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

The principal activity of the Company is investment holding.

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

There has been no significant change in the nature of these principal activities during the financial year ended 30 June 2017.

The registered office and principal place of business of the Company are located at 1st Floor, Lot 5, Block No. 4, Bandar Indah, Mile 4, Jalan Utara, P.O. Box 2848, 90732, Sandakan, Sabah, Malaysia.

The financial statements are presented in Ringgit Malaysia.

These financial statements were authorised for issue by the Directors in accordance with a resolution of the Board of Directors dated 3 October 2017.


List of Properties

No.

1.

2.

3.

4.

5.

6.

7.

8.

Location

Priceworth Industries Sdn Bhd

CL 075365794Mile 3.4 Jalan Ulu Sibuga, Kuala Seguntor,Sandakan,Sabah.

CL 075203726Mile 3.4Jalan Ulu Sibuga,Kuala Seguntor,Sandakan, Sabah.


cl 075170277Mile 3.4Jalan Ulu Sibuga,Kuala Seguntor,Sandakan, Sabah.



cl 085318485Kolapis,District of Labuk &sugutBeluran, Sabah.

CL 075170268Mile 3.4 Jalan Ulu Sibuga,Kuala Seguntor,Sandakan, Sabah.

Description and Existing Use

- generating sets room- Kiln Dry- Sawmill & sawroom- warehouse

moulding PlantMain Factory

- Impregnation Plant- warehouse- Workshop- Dockyard / fabrication- Brick Warehouse

labour quarters

agriculture land

labour quarters

- Sawmill Factory- labour quarters- Office Building- Workshop- genset room- Store & Saw- Doctor room

Lake

Land Area

(acres)

15.12

11.64

15.29

14.06

17.88

7.03

49.00

15.03

Built-upArea

(sq. ft.)

3,858

65,00032,620

121,000

104,840

4,500

20,0004,800

54,000

-

12,000

100,3593,7541,0681,2362,089

-

Lease Tenure

from / to

01-01-1979/31-12-2077

01-01-1964/ 31-12-2063

01-01-1979/ 21-12-2077

01-01-1960/ 31-12-2059

01-01-1979/31-12-2077

01-01-1961/ 31-12-2060

30-12-1986/ 31-12-2084

06-12-1961/06-12-2060

Approximate Age of Building

(Years)

20

2020

19

20

17

1919

20

N/A

20

2222222222

N/A

Net Book Value

(RM’000)

8,274

4,107

4,599

1,369

175

192

1,140

14


List of Properties(continued)

No.

9.

10.

11.

12.

13.

.

Location

Priceworth Industries Sdn Bhd

CL 075170062 Mile 3.4-Lake Jalan Ulu Sibuga,Kuala Seguntor,Sandakan, Sabah.

Maxland Sdn Bhd

cl 075313398Mile 17,Labuk Road,Sandakan, Sabah.

Sinora Sdn Bhd

CL 075376153Mile 6.5 Batu Sapi, Sandakan, Sabah.

cl 075472338Mile 6.5 Batu Sapi, South-West of Sandakan, Sabah.

Rimbunan Gagah Sdn Bhd

cl 085319820Off Mile 78, Labuk SugutTelupid- Sandakan Road,Sandakan, Sabah.

Description and Existing Use

labour quarter

agriculture land

- Plywood Main Factory- 2nd Plywood Factory- warehouse - Boiler house- Workshop- Main sawmill + Office- Main Office- canteen- Moulding Factory- moulding warehouse- Kiln Drying Building

log Pond

- Sawmill/ Timber Storage Factory- 2 storey dwelling house- Office Building- 2 storey Labour quarters with Kitchen, Dining & canteen- 4 Blocks Labour quarters- sawdoctoring house- Generator House & store

Land Area

(acres)

9.89

13.90

38.28

80.46

38.45

Built-upArea

(sq. ft.)

-

-

103,95037,4463,2285071,22625,50010,7346,6424,82884,87217,743

-

121,426

4,064

1,3685,758

4,116

3,0251,025

Lease Tenure

from / to

02-02-1962/02-02-2061

01-01-1970/ 31-12-2069

01-01-1980/ 31-12-2078

01-01-1994/31-12-2053

01-01-1982/ 31-12-2080

Approximate Age of Building

(Years)

20

N/A

3421263434343434242424

N/A

23

23

2323

23

2323

Net Book Value

(RM’000)

12

109

11,357

1,696

706


Total Number of Issued Shares : 930,670,631 (including 12,562,832 treasury shares)Issued Share Capital : 93,067,063.100Class of shares : Ordinary shares Voting rights : One vote per share

DISTRIBUTION OF SHAREHOLDINGS AS AT 25 SEPTEMBER 2017

% of issued Shareholdings No. of Shareholders Total shares held share capital

less than 100 441 16,396 0.00100 to 1,000 313 135,239 0.011,001 to 10,000 2,887 14,817,588 1.6110,001 to 100,000 3,348 131,452,227 14.32100,001 to less than 5% of issued shares 885 671,686,349 73.165% and above of issued shares 1 100,000,000 10.89

Total 7,875 918,107,799 100.00

SUBSTANTIAL SHAREHOLDERS

No. of shares held Direct IndirectName of Shareholder Interest % Interest %

Lim Nyuk Foh 79,880,911 8.70 - -Tan Sri Abdul Rashid Hussain 45,199,153 4.92 25,424,524 2.77(a)

Puan Sri Emilahani Yang binti Mohd Yatim 25,424,524 2.77 45,199,153 4.92(a)

Maha Gayabina Sdn Bhd 141,247,353 15.38 - -

(a) Deemed interested by virtue of his/her spouse interest pursuant to Section 8 and Section 136 of the Companies Act, 2016.

DIRECTORS’ SHAREHOLDINGS

No. of shares held Direct IndirectName of Director Interest % Interest %

Dr. Roslan Bin A Ghaffar - - - -Lim Nyuk Foh 79,880,911 8.70 - -Koo Jenn Man 510 0.00 - -Kwan Tack Chiong - - - -Ooi Jit Huat - - - -

Analysis of ShareholdingsAs at 25 September 2017


LIST OF TOP 30 LARGEST SHAREHOLDERS

No. Name No. of Shares %

1. Maybank Nominees (Tempatan) Sdn Bhd 100,000,000 10.89 [Pledged securities account for Maha Gayabina Sdn. Bhd.]

2. Abdul Rashid Hussain 45,199,153 4.92

3. RHB Nominees (Tempatan) Sdn Bhd 41,247,353 4.49 [Pledged securities account for Maha Gayabina Sdn. Bhd.]

4. Kenanga Nominees (Tempatan) Sdn Bhd 35,741,865 3.89 [Pledged securities account for Lim Nyuk Foh]

5. Emilahani Yang Binti Mohd Yatim 25,424,524 2.77

6. Kenanga Nominees (Tempatan) Sdn Bhd 21,500,000 2.34 [Pledged securities account for Lim Nyuk Foh]

7. Amsec Nominees (Tempatan) Sdn Bhd 12,200,000 1.33 [Pledged securities account for Joan Yong Mun Ching]

8. Alliancegroup Nominees (Tempatan) Sdn Bhd 11,347,000 1.24 [Pledged securities account for Lim Nyuk Foh]

9. Sabah Development Nominees (Tempatan) Sdn Bhd 11,292,000 1.23 [Pledged securities account for Lim Nyuk Foh]

10. Tam Cheng Yau 10,082,000 1.10

11. Public Nominees (Tempatan) Sdn Bhd 10,000,000 1.09 [Pledged securities account for Chong Vun Kon @ Chung Vun Kon (E-Twu)]

12. Amsec Nominees (Tempatan) Sdn Bhd 9,000,000 0.98 [Pledged securities account for Koh Pee Leong]

13. HLIB Nominees (Tempatan) Sdn Bhd 8,960,000 0.98 Hong Leong Bank Bhd for Chuan Hong Hang Sdn Berhad

14. Cimsec Nominees (Tempatan) Sdn Bhd 8,636,200 0.94 CIMB Bank for Ng Wai Yuan

15. Sabah Development Nominees (Tempatan) Sdn Bhd 8,048,150 0.88 [Pledged securities account for Sukmah Binti Bidu]

16. Amsec Nominees (Tempatan) Sdn Bhd 7,970,000 0.87 [Pledged securities account for Chin Fun Ming]

17. RHB Capital Nominees (Tempatan) Sdn Bhd 7,100,000 0.77 Ching Vun Kon @ Chung Vun Kon

18. Anis Bin Affandi 6,600,300 0.72

19. HLIB Nominees (Tempatan) Sdn Bhd 6,000,000 0.65 Hong Leong Bank Bhd for Lim Soon Aik

20. Woon Chuan Keong 5,400,000 0.59

Analysis of ShareholdingsAs at 25 September 2017 (continued)


LIST OF TOP 30 LARGEST SHAREHOLDERS (continued)

No. Name No. of Shares %

21. Kenanga Nominees (Tempatan) Sdn Bhd 5,000,000 0.54 [Pledged securities account for Chin Fun Ming]

22. Ng Boo Kean @ Ng Beh Kian 4,750,000 0.52

23. HLIB Nominees (Tempatan) Sdn Bhd 4,500,000 0.49 [Pledged securities account for Tan Choon Piew]

24. Luxurious Vicinity Sdn. Bhd. 4,500,000 0.49

25. HLIB Nominees (Tempatan) Sdn Bhd 4,380,000 0.48 [Hong Leong Bank Bhd for Chuan Hong Hang Propoerties Sdn Bhd]

26. Amsec Nominees (Tempatan) Sdn Bhd 4,320,000 0.47 [Pledged securities account for Lee Kian Chung]

27. Kenaga Nominees (Tempatan) Sdn Bhd 4,000,000 0.44 [Pledged securities account for Ho Phea Keat]

28. Diong Siew Gi 3,750,000 0.41

29. Public Nominees (Tempatan) Sdn Bhd 3,500,000 0.38

30. Sukdarshen Singh A/L Sarjit Singh 3,040,700 0.33

Analysis of ShareholdingsAs at 25 September 2017 (continued)


NOTICE IS HEREBY GIVEN THAT the Twenty-First (21st) Annual General Meeting of the Company will be convened and held at The Pacific Sutera Hotel, Level 3, Function Room 8, 1 Sutera Harbour Boulevard, Sutera Harbour, 88100 Kota Kinabalu, Sabah on Friday, 3 November 2017 at 9.00 a.m. to transact the following business:

AGENDA

Notice of Twenty-FirstAnnual General Meeting

1. To receive the Audited Financial Statements for the financial year ended 30 June 2017 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees and other benefits for an amount of not exceeding RM206,000 payable to the Directors of the Company for the financial year ending 30 June 2018.

3. To re-elect the Director, Mr Lim Nyuk Foh who retires pursuant to Article 86 of the Company’s Articles of Association and being eligible, has offered himself for re-election.

4. To re-elect the Director, Dr Roslan Bin A Ghaffar who retires pursuant to Article 93 of the Company’s Articles of Association and being eligible, has offer himself for re-election.

5. To re-appoint Messrs. PKF as the Company’s Auditors until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

6. As Special Business

To consider and if thought fit, with or without any modification, to pass the following resolutions:

(a) Ordinary Resolution - Authority To Issue and Allot Shares Pursuant To Sections 75 and 76 Of The

Companies Act, 2016

“THAT subject always to the Companies Act, 2016 (“the Act”), the Articles of Association of the Company and approvals from Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other governmental / regulatory authorities, the Directors of the Company be and are hereby empowered, pursuant to Sections 75 and 76 of the Act, to issue and allot shares in the capital of the Company from time to time at such price and upon such terms and conditions, for such purposes and to such person or persons whomsoever the Directors may in their absolute discretion deem fit provided always that the aggregate number of shares issued pursuant to this resolution does not exceed ten per centum (10%) of the total number of issued shares of the Company for the time being; AND THAT the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Securities; AND FURTHER THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company.”

(b) Ordinary Resolution - Proposed Renewal of Share Buy-Back Authority for the Company to Purchase of

its Own Ordinary Shares

“THAT subject always to the Act, the Articles of Association of the Company, the Listing Requirements of Bursa Securities and all other applicable laws, guidelines, rules and regulations, the Company be and is hereby authorised to purchase such amount of ordinary shares in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities as the Directors may deem fit and expedient in the interest of the Company, provided that:-

i) the aggregate number of shares purchased or held as treasury shares does not exceed 10% of the total issued and paid-up share capital of the Company as quoted on Bursa Securities as at the point of purchase;

ii) the maximum fund to be allocated by the Company for the purpose of purchasing the shares be backed by an equivalent amount of retained profits; and

iii) the Directors of the Company may decide either to retain the shares purchased as treasury shares, or cancel the shares, or retain part of the shares so purchased as treasury shares and cancel the remainder, or to resell the shares, or distribute the shares as dividends;

Please refer to Explanatory Note 1

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6


Notice of Twenty-FirstAnnual General Meeting (continued)

Resolution 7

Resolution 8

AND THAT the authority conferred by this resolution will commence after the passing of this ordinary resolution and will continue to be in force until:-

i) the conclusion of the next AGM at which time it shall lapse unless by ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; or

ii) the expiration of the period within which the next AGM of the Company is required by law to be held; or

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

whichever occurs first.

AND THAT the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient to implement or to effect the purchase(s) of the shares with full power to assent to any condition, modification, variation and/or amendment as may be imposed by the relevant authorities and to take all such steps as they may deem necessary or expedient in order to implement, finalise and give full effect in relation thereto.”

(c) Ordinary Resolution - Retention of Mr Kwan Tack Chiong as Independent Non-Executive Director

“THAT approval be and is hereby given to retain Mr Kwan Tack Chiong as an Independent Non-Executive Director of the Company until the conclusion of the next AGM of the Company, who has served as an Independent Non-Executive Director of the Company for a cumulative term of office of more than nine (9) years in accordance with the Malaysian Code on Corporate Governance.”

(d) Ordinary Resolution - Retention of Mr Ooi Jit Huat as Independent Non-Executive Director

THAT approval be and is hereby given to retain Mr Ooi Jit Huat as an Independent Non-Executive Director of the Company until the conclusion of the next AGM of the Company, who has served as an Independent Non-Executive Director of the Company for a cumulative term of office of more than nine (9) years in accordance with the Malaysian Code on Corporate Governance.”

7. To transact any other ordinary business for which due notice have been given.

BY ORDER OF THE BOARD

tan tong lang (maIcsa 7045482)THIEN LEE MEE (LS0009760)Company Secretaries

Sandakan11 october 2017

Notes:

1. A member of the Company who is entitled to attend and vote at this meeting is entitled to appoint proxy/proxies to attend, speak and vote in his/her stead. A proxy may but need not be a member of the Company.

2.. A member shall not be entitled to appoint not more than two (2) proxies to attend the same meeting and such appointment shall be invalid unless he/she specifies the proportions of his/her shareholdings to be represented by each proxy

3. In the case of corporate member, the instrument appointing a proxy shall either under its Common Seal or under the hand of an officer or attorney duly authorised.

4. Where a member of the Company is an authorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

6. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.


7. To be valid, this form duly completed must be deposited at the Company’s Registered Office at 1st Floor, Lot 5, Block No.4, Bandar Indah, Mile 4, Jalan Utara, P.O. Box 2848, 90732, Sandakan, Sabah, Malaysia, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

8. Only a depositor whose name appears on the Record of Depositors as at 23 October 2017 shall be regarded as member of the Company entitled to attend, speak and vote at the Extraordinary General Meeting or appoint proxy/proxies to attend and vote on his/her behalf.

9. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the Resolutions set out in this Notice will be put to vote by poll.

Explanatory Notes:

1. AuditedFinancialStatementsforthefinancialyearended30June2017

The Agenda No. 1 is meant for discussion only as Section 340(1) (a) of the Companies Act, 2016 provide that the audited financial statements are to be laid in the general meeting and do not require a formal approval of the shareholders. Hence, this Agenda item is not put forward for voting.

2. Resolution 5 – Authority To Issue and Allot Shares Pursuant To Sections 75 and 76 Of The Companies Act, 2016

The proposed adoption of the Ordinary Resolution No. 5, if passed, will empower the Directors of the Company to issue and allot new shares at any time to such persons, in their absolute discretion, deem fit (“General Mandate”), provided that the number of shares issued pursuant to this General Mandate, when aggregated with the nominal value of any such shares issued during the preceding twelve (12) months, does not exceed 10% of the total issued share capital of the Company at the time of issue. This renewed General Mandate, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company.

With this renewed General Mandate, the Company will be able to raise funds expeditiously for the purpose of funding future investment, working capital and/or acquisition(s) at any time without convening a general meeting as it would be both costs and time consuming to organise a general meeting.

As at the date of this Notice, the Company issued 64,203,342 new ordinary shares at issue price of RM0.105 per share by way of private placement pursuant to the General Mandate granted to the Directors at the 20th Annual General Meeting held on 30 November 2016 and which will lapse at the conclusion of the 21st AGM.

3. Resolution6 -ProposedRenewalofShareBuy-BackAuthority for theCompanytoPurchaseof itsOwnOrdinary

Shares Resolution 6, if passed, will provide the mandate for the Company to buy back its own shares up to a limit of 10% of the issued share

capital of the Company (“Proposed Share Buy-Back Renewal”). Detailed information on the Proposed Share Buy-Back Renewal is set out under Statement to Shareholders dated 6 October 2017 which is despatched together with the Company’s Annual Report 2017.

4. Resolutions7and8–RetentionasIndependentNon-ExecutiveDirectorsoftheCompanypursuanttotheMalaysianCodeonCorporateGovernance(“MCCG”)

Resolutions 7 & 8 are proposed pursuant to Recommendation 3.3 of the Malaysian Code of Corporate Governance and if passed, will allow

Mr Kwan Tack Chiong and Mr Ooi Jit Huat to be retained and continue to act as an Independent Non-Executive Director of the Company. The full details of the Board’s justifications for their retention are set out in the Statement on Corporate Governance in the Company’s Annual Report 2017.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

(pursuant to Paragraph 8.27(2) of Main Market Listing Requirements of Bursa Malaysia Securities Berhad)

Further details of Directors who are standing for re-election and retention as Directors

The profiles of the Directors who are standing for re-election and re-appointment at the 21st AGM are set out in the Directors’ Profile on pages 10 to 11 of the Annual Report 2017.

No individual seeking for election as a Director other than the Directors are seeking for re-election and retention as a Director at the 21st AGM.

Notice of Twenty-FirstAnnual General Meeting (continued)

Please indicate with an “x” in the spaces provided whether you wish your votes to be cast for or against the resolutions. In the absence of specific directions, your proxy will vote or abstain as he/ she thinks fit.

Resolution 2 To re-elect Mr Lim Nyuk Foh as Director

As Special Business:

Proxy FormNo. of shares held

I/We,……………………………………………………………………………………………………………………………………………..

of…………………………………………………………………………………………………………………………………………………

being a Member of Priceworth International Berhad hereby appoint …………………………………………………………………

…………………………………………………………………………………………………………………………………………………

of …………………………………………………………………………………………………………………………………………………

…………………………………………………………………………………………………………………………………………………..

or failing him/her ……………………………………………………………………………………………………………………………….

of…………………………………………………………………………………………………………………………………………………

My/Our proxy to vote as indicated below:No. Resolutions For AgainstResolution 1

Resolution 3 To re-elect Dr Roslan Bin A Ghaffar as DirectorResolution 4 To re-appoint Messrs. PKF as Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 5 Authority to allot shares pursuant to Sections 75 and 76 of the Companies Act, 2016

Resolution 6 Proposed Renewal of Share Buy-Back Authority for the Company to Purchase of its Own Ordinary Shares

Resolution 7 Retention of Mr Kwan Tack Chiong as Independent Non-Executive Director

Resolution 8 Retention of Mr Ooi Jit Huat as Independent Non-Executive Director

CDS Account No

Dated this ………… day of ……………………………………… 2017

………………………………………………….Signature:Shareholder or Common Seal

Notes:

as my/our proxy to vote for me/us on my/our behalf at the Twenty-First (21st) Annual General Meeting of the Company to be held at The Pacific Sutera Hotel, Level 3, Function Room 8, 1 Sutera Harbour Boulevard, Sutera Harbour, 88100 Kota Kinabalu, Sabah on Friday, 3 November 2017 at 9.00 a.m. and at any adjournment thereof.

To approve the payment of Directors’ fees and other benefits for an amount of not exceeding RM206,000 payable to the Directors of the Company for the financial year ending 30 June 2018

1. A member of the Company who is entitled to attend and vote at this meeting is entitled to appoint proxy/proxies to attend, speak and vote in his/her stead. A proxy may but need not be a member of the Company.

2. A member shall not be entitled to appoint not more than two (2) proxies to attend the same meeting and such appointment shall be invalid unless he/she specifies the proportions of his/her shareholdings to be represented by each proxy

3. In the case of corporate member, the instrument appointing a proxy shall either under its Common Seal or under the hand of an officer or attorney duly authorised.4. Where a member of the Company is an authorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1)

proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities

account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

6. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.

7. To be valid, this form duly completed must be deposited at the Company’s Registered Office at 1st Floor, Lot 5, Block No.4, Bandar Indah, Mile 4, Jalan Utara, P.O. Box 2848, 90732, Sandakan, Sabah, Malaysia, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

8. Only a depositor whose name appears on the Record of Depositors as at 23 October 2017 shall be regarded as member of the Company entitled to attend, speak and vote at the Extraordinary General Meeting or appoint proxy/proxies to attend and vote on his/her behalf.

9. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the Resolutions set out in this Notice will be put to vote by poll.

Priceworth International Berhad (399292-V)

Then fold here

First fold here

stamp

The Company SecretaryPRICEWORTH INTERNATIONAL BERHAD1st Floor, Lot 5, Block No. 4Bandar Indah, Mile 4, Jalan Utara P. O. Box 284890732 SandakanSabah

(Head Office)1st Floor, Lot 5, Block No. 4, Bandar Indah, Mile 4, Jalan Utara, P.O. Box 2848, 90732 Sandakan, Sabah, Malaysia.

Tel: 089-224771 / 221211 / 229370 Fax: 089-223969 / 221213 / 223957E-mail: [email protected]

PRICEWORTH INTERNATIONAL BERHAD(Company No. 399292-V)

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