KLK OLEO · KUALA LUMPUR KEPONG BERHAD (“KLK”), a company incorporated in Malaysia, employs...

KUALA LUMPUR KEPONG BERHAD (“KLK”), a company incorporated in Malaysia, employs under its Group more than 38,000 employees worldwide. It is listed on the Main Market of Bursa Malaysia Securities Berhad and has a market capitalisation of approximately RM22.5 billion as at 30 September 2011.

Started as a plantation company more than 100 years ago, plantations (oil palm and rubber) still lead as KLK’s core business activity. The Group has a plantation land bank of more than 250,000 hectares in Malaysia (Peninsular and Sabah) and Indonesia (Belitung, Sumatra and Kalimantan). Since the 1990s, the Group has diversified into resource-based manufacturing (oleochemicals, derivatives and specialty chemicals), property development and retailing (personal care products, toiletries and fine foods) with a worldwide operational and retailing presence.

Corporate Profile

Kuala Lumpur Kepong Berhad Annual Report 2011

1


Contents2 Financial Calendar

3 Corporate Information

4 Board of Directors

6 Profile of Directors

12 Simplified Group Assets & Liabilities

13 Group Highlights

14 Financial Highlights

15 5-Year Plantation Statistics

16 5-Year Financial Statistics

18 Area Statement

20 Chairman’s Statement / Kenyataan Pengerusi

28 CEO’s Review of Operations & Integrated Business Value Chain

37 Corporate Responsibility

44 Corporate Calendar

46 Group Corporate Structure

49 Statement on Corporate Governance

55 Statement on Internal Control

57 Audit Committee Report

62 Additional Compliance Information

64 Report of the Directors

68 Income Statements

69 Statements of Comprehensive Income

70 Statements of Financial Position

71 Consolidated Statement of Changes in Equity

72 Statement of Changes in Equity of the Company

73 Consolidated Statement of Cash Flows

76 Statement of Cash Flows of the Company

78 Notes on the Financial Statements

136 Directors’ Statement

136 Statutory Declaration

137 Report of the Auditors

140 Location of the Group’s Plantation Operations

142 Properties Held by the Group

150 Share Price and Volume Traded & Changes in Share Capital

151 Shareholding Statistics

153 Notice of Meeting / Notis Mesyuarat

159 Directory

Proxy Form

39th Annual General MeetingVenue : Wisma Taiko, 1 Jalan S.P. Seenivasagam 30000 Ipoh, Perak, MalaysiaDate : 22 February 2012Time : 12.00 noon

2


Financial Calendar

Financial Year End 30 September 2011

Announcement Of Results

First Quarter 23 February 2011Second Quarter 25 May 2011Third Quarter 16 August 2011Fourth Quarter 23 November 2011

Published Annual Report And Financial Statements

Notice of Annual General Meeting 29 December 201139th Annual General Meeting 22 February 2012

Dividends

InterimAnnouncement 25 May 2011Entitlement Date 15 July 2011Payment Date 9 August 2011

FinalAnnouncement 23 November 2011Entitlement Date 23 February 2012Payment Date 16 March 2012

3


BOARD OF DIRECTORS

R. M. AliasChairman

Tan Sri Dato’ Seri Lee Oi HianChief Executive Officer

Dato’ Lee Hau Hian

Tan Sri Datuk Seri Thong Yaw Hong

Datuk Abdul Rahman bin Mohd. Ramli

Dato’ Yeoh Eng Khoon

Roy Lim Kiam ChyeExecutive Director

Kwok Kian Hai

COMPANY SECRETARIES

Yap Miow Kien

Fan Chee Kum

AUDITORS

KPMG

PLACE OF INCORPORATION AND DOMICILE

In Malaysia as a public limited

liability company

REGISTERED OFFICE / PRINCIPAL PLACE OF BUSINESS

Wisma Taiko

1 Jalan S.P. Seenivasagam

30000 Ipoh

Perak, Malaysia

Tel : +605-241 7844

Fax : +605-253 5018

Website : www.klk.com.my

SHARE REGISTRARS

Symphony Share Registrars Sdn Bhd

55 Medan Ipoh 1AMedan Ipoh Bistari31400 IpohPerak, MalaysiaTel : +605-547 4833Fax : +605-547 4363

PRINCIPAL BANKERS

Malayan Banking Berhad

HSBC Bank Malaysia Berhad

CIMB Bank Berhad

STOCK ExCHANGE LISTING

Bursa Malaysia Securities Berhad

Main Market

Listed since 1974

Corporate Information

4


2 3

45

1

8 7 6

5


1. TAN SRI DATUK SERI THONG YAW HONG Independent Non-Executive Director

2. R. M. ALIAS Chairman Independent Non-Executive Director

3. TAN SRI DATO’ SERI LEE OI HIAN Chief Executive Officer Executive Director

4. ROY LIM KIAM CHYE Executive Director

5. DATO’ LEE HAU HIAN Non-Independent Non-Executive Director

6. KWOK KIAN HAI Independent Non-Executive Director

7. DATO’ YEOH ENG KHOON Independent Non-Executive Director

8. DATUK ABDUL RAHMAN BIN MOHD. RAMLI Independent Non-Executive Director

Board of Directors

6


Profile of Directors

Joined the Board on 1 July 1978 and has been the Chairman of KLK since 2008. He is also the Chairman of the Remuneration Committee and a member of the Nomination Committee of the Board.

He holds a Bachelor of Arts (Honours) degree from the University of Malaya, Singapore, a Certificate in Public Administration from the Royal Institute of Public Administration, London and has attended the Advanced Management Programme at Harvard Business School, US.

His directorships in other listed companies include Batu Kawan Berhad and Cerebos Pacific Limited (Singapore). He is also a trustee of Tan Sri Lee Loy Seng Foundation and Yayasan KLK.

He has no family relationship with any director/major shareholder of KLK. He is deemed interested in various transactions between the KLK Group and certain companies carried out in the ordinary course of business by virtue of his common directorships in these companies.

R. M. ALIASChairmanIndependent Non-Executive DirectorAged 79, Malaysian

Joined the Board on 1 February 1985 and is the CEO of KLK. He is also Chairman of Batu Kawan Berhad. He also serves as a trustee of several charitable organisations. He was formerly the Chairman of the Malaysian Palm Oil Council.

He graduated with a Bachelor of Agricultural Science (Honours) degree from the University of Malaya and obtained his Masters in Business Administration from Harvard Business School, US.

He joined the Company in 1974 as an executive and was subsequently appointed to the Board in 1985. In 1993, he was appointed as the Group’s Chairman/CEO and held the position until 2008, when he relinquished his role as Chairman, but remains as Executive Director and CEO of the Group.

Dato’ Lee Hau Hian who is also a Director of KLK is his brother. Tan Sri Dato’ Seri Lee is deemed connected to Batu Kawan Berhad, one of the substantial shareholders of KLK. He is deemed interested in various related party transactions with the KLK Group.

TAN SRI DATO’ SERI LEE OI HIANChief Executive OfficerExecutive DirectorAged 60, Malaysian

7



Joined the Board on 20 December 1993. He is a member of the Nomination Committee and the Remuneration Committee of the Board.

Dato’ Lee is the Managing Director of Batu Kawan Berhad and a director of Yule Catto & Co. plc. He is the President of The Perak Chinese Maternity Association. Besides serving as a director of Yayasan De La Salle and See Sen Chemical Berhad, he is also a trustee of Tan Sri Lee Loy Seng Foundation and Yayasan KLK.

He graduated with a Bachelor of Science (Economics) degree from the London School of Economics and has a Masters in Business Administration degree from Stanford University, US.

He is the brother of Tan Sri Dato’ Seri Lee Oi Hian who is the CEO of KLK and is deemed a connected party to Batu Kawan Berhad, a substantial shareholder of KLK. He is deemed interested in various related party transactions with the KLK Group.

DATO’ LEE HAU HIANNon-Independent Non-Executive DirectorAged 58, Malaysian

Joined the Board on 11 September 1999. He serves as a member of the Audit Committee of the Board. He is a member of the Institute of Chartered Accountants in Australia, the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Accountants (MIA).

Datuk Abdul Rahman was General Manager of United Asian Bank Berhad, Group Managing Director of Pernas Sime Darby Berhad and Group Chief Executive of Golden Hope Plantations Berhad prior to joining the KLK Board. He is currently a Board member of DRB-HICOM Berhad, a public company listed on the Main Market of Bursa Malaysia. He also serves as an Independent Member of Investment Committee of Felda Global Ventures Holdings Sdn Bhd.

He has no family relationship with any director/major shareholder of KLK. He has no interest in any transactions involving the KLK Group carried out in the ordinary course of business.

DATUK ABDUL RAHMAN BIN MOHD. RAMLIIndependent Non-Executive DirectorAged 72, Malaysian

8



Joined the Board on 8 March 1995. He is the Chairman of the Nomination Committee and a member of the Remuneration Committee of the Board. He is a Fellow of the Institute of Bankers Malaysia.

Tan Sri Datuk Seri Thong is the Co-Chairman of Public Bank Berhad and Public Mutual Berhad, Chairman of Berjaya Sports Toto Bhd and Malaysia Property Incorporated. His directorships in other public companies are Batu Kawan Berhad, Glenealy Plantations (Malaya) Bhd, HHB Holdings Bhd, Malaysian South-South Corporation Bhd, Public Islamic Bank Berhad, Public Investment Bank Bhd and LPI Capital Berhad. Among his many other appointments, he had served in the Economic Planning Unit in the Prime Minister’s Department since 1957 and became its Director-General from 1971 to 1978 and served as Secretary-General, Ministry of Finance from 1979 until his retirement in 1986. He was formerly the Chairman of the Employees Provident Fund Board. He currently serves as a member on the Boards of Trustees of Program Pertukaran Fellowship Perdana Menteri Malaysia, Tun Razak Foundation, Malaysian Institute of Economic Research and Yayasan Wah Seong. He is also a member of the Working Group of the Executive Committee for the National Implementation Task Force, and a member of the Investment Committee for the Unit Trust Funds managed by Public Mutual Berhad.

He graduated with a Bachelor of Arts (Honours) degree in Economics from University of Malaya and a Masters degree in Public Administration from Harvard University and has attended the Advanced Management Programme from Harvard Business School. Tan Sri Datuk Seri Thong was the Pro-Chancellor of Universiti Putra Malaysia till June 2006. On 17 September 2006, he was conferred the Honorary Doctorate of Economics by Universiti Putra Malaysia.

He has no family relationship with any director/major shareholder of KLK. He is deemed interested in transactions between the KLK Group and certain companies carried out in the ordinary course of business by virtue of his common directorships in these companies.

TAN SRI DATUK SERI THONG YAW HONGIndependent Non-Executive DirectorAged 81, Malaysian

9



Was appointed to the Board on 24 February 2005. He is the Chairman of the Audit Committee of the Board.

He is also a director of Batu Kawan Berhad and See Sen Chemical Berhad, as well as a trustee of Yayasan KLK. His past working experience included banking, manufacturing and the retail business.

He obtained his Bachelor of Arts (Honours) degree in Economics (Business Administration) from the University of Malaya in 1968 and was called to the Bar of England and Wales at Lincoln’s Inn in 1979.

He has no family relationship with any director/major shareholder of KLK. He is deemed interested in various transactions between the KLK Group and certain companies carried out in the ordinary course of business by virtue of his common directorships in these companies.

DATO’ YEOH ENG KHOONIndependent Non-Executive DirectorAged 64, Malaysian

Was appointed to the Board on 1 June 2007.

Mr. Lim holds a Bachelor of Economics (Honours) degree and a Diploma in Education (Distinction) from the University of Malaya. He has also attended the Senior Management Development Programme from Harvard Business School and Advanced Management Programme from INSEAD.

Mr. Lim is the KLK Group Plantations Director. He has been with the KLK Group since 1975. Prior to his current position, he was the Marketing Director overseeing commodities trading for the plantations division. He is also a council member of the Malaysian Agricultural Producers Association and Malaysian Palm Oil Association.


ROY LIM KIAM CHYEExecutive DirectorAged 61, Malaysian

10



Joined the Board on 27 May 2009. He is a member of the Audit Committee of the Board.

He graduated from the University of Singapore with a degree in Chemistry and Mathematics.

He was a Managing Director of a Sime Darby unit before joining Kuok Group as General Manager of Pasir Gudang Edible Oil. He served as Managing Director of Kuok Oils and Grains until 2008 and thereafter was appointed Joint Chief Operation Officer of Wilmar International Ltd before retiring in 2009. In addition, he was a Council member of Malaysian Palm Oil Council and a Board member of Palm Oil Refiners Association of Malaysia (“PORAM”) for 15 years. He also previously served as Chairman of PORAM.


KWOK KIAN HAIIndependent Non-Executive DirectorAged 67, Singaporean

Notes:1) Conviction for Offences None of the Directors of KLK has been convicted of any offence.

2) Attendance of Board Meetings Details of the Directors’ attendance at Board meetings are set out in the Statement on Corporate Governance on page 50.

11


12


At 30 September 2011

Simplified Group Assets & Liabilities

TOTAL ASSETS

TOTAL EQUITY & LIABILITIES

Shareholders’ Funds 6,005

Non-controlling Interests 320

Borrowings 1,687

Other Liabilities 1,151

RM Million13%

2010

Shareholders’ Funds 7,074

Non-controlling Interests 392

Borrowings 2,090

Other Liabilities 1,414

RM Million

2011

2010

Property, Plant and Equipment 2,765

Prepaid Lease Payments 159

Biological Assets 1,672

Other Non-Current Assets 1,172

Cash and Cash Equivalents 1,255

Other Current Assets 2,140

RM Million

2011

Property, Plant and Equipment 2,886

Prepaid Lease Payments 164

Biological Assets 1,837

Other Non-Current Assets 1,305

Cash and Cash Equivalents 1,670

Other Current Assets 3,108

RM Million

66%18%

3%

13%

64%19%

4%

30%

2%

18%13%

14%

23%

26%

2%

17%12%

15%

28%

13


Group Highlights

Financial 2011 2010 2009 2008 2007

Revenue (RM’000) 10,743,252 7,490,626 6,658,308 7,855,425 5,067,627

Profit: before taxation (RM’000) 2,066,205 1,382,832 887,362 1,445,481 886,458 attributable to equity holders of the Company (RM’000) 1,571,413 1,012,340 612,500 1,040,653 694,154

Earnings per share (sen) 147.56 95.06 57.51 97.72 65.18

Dividend per share: gross (sen) 85.00 60.0 40.0 70.0 50.0 net (sen) 85.00 60.0 40.0 54.9 36.9

Net tangible assets (RM’000) 6,735,910 5,683,265 5,305,482 5,243,498 4,609,566Net tangible assets per share (RM) 6.33 5.34 4.98 4.92 4.33

Key Corporate Ratios 2011 2010 2009 2008 2007

Dividend Yield(1) 4.0% 3.5% 2.9% 7.3% 3.8% Dividend Payout Ratio(2) 57.6% 63.1% 69.5% 56.1% 56.6% Return on Equity(3) 22.2% 16.9% 10.9% 18.8% 14.1%Return on Total Assets(4) 14.3% 11.0% 7.1% 12.2% 9.9%Net Debt to Equity(5) 5.9% 7.2% 8.1% 11.2% 11.5%

(1) Based on Gross Dividend expressed as a percentage of KLK Share Price as at 30 September

(2) Based on Net Dividend expressed as a percentage of Basic Earnings Per Share

(3) Based on Net Profit attributable to Equity Holders expressed as a percentage of Total Equity attributable to Equity Holders

(4) Based on Net Profit attributable to Equity Holders expressed as a percentage of Total Assets

(5) Based on Net Debt (being Total Borrowings less Cash and Cash Equivalents) expressed as a percentage of Total Equity attributable to Equity Holders

Production 2011 2010 2009 2008 2007

Fresh Fruit Bunches (mt) 3,288,974 3,176,106 2,859,929 2,803,792 2,360,061Rubber (’000 kgs) 20,847 23,005 22,381 21,958 22,942

Year Fourth Third Second FirstQuarterly Financial 2011 Quarter Quarter Quarter Quarter

Revenue (RM’000) 10,743,252 2,999,658 2,952,257 2,368,357 2,422,980Operating profit (RM’000) 2,112,670 616,372 588,147 507,220 400,931Profit before taxation (RM’000) 2,066,205 599,249 570,844 503,833 392,279Profit attributable to equity holders of the Company (RM’000) 1,571,413 460,614 432,759 373,854 304,186Earnings per share - basic (sen) 147.56 43.25 40.64 35.11 28.56Dividend per share - gross (sen) 85 70 - 15 -

14


Financial Highlights

Earnings Per Share (sen)

150

0

50

100

125

75

25

07 08 09 10 11

65.2

97.7

57.5

95.1

147.

6

Dividend Yield (percentage)

7

8

0

2

1

3

4

5

6

07 08 09 10 11

3.8

7.3

2.9

3.5

4.0

7

6

0

1

2

3

5

4

07 08 09 10 11

4.33

4.92

4.98

5.34

6.33

Shareholders’ Funds (RM’000)

8,000,000

7,000,000

1,000,000

2,000,000

3,000,000

4,000,000

6,000,000

5,000,000

07 08 09 10 11

4,91

9,05

3

5,53

7,09

4

5,63

4,00

9

6,00

5,20

4

7,07

3,64

9

Dividend Payout Ratio(percentage)

80

0

40302010

506070

07 08 09 10 11

56.6

56.1

69.5

63.1

57.6

Net Tangible Assets Per Share(RM)

Return on Equity (percentage)24

0

8

4

12

16

20

07 08 09 10 11

14.1

18.8

10.9

16.9

22.2

Return on Total Assets(percentage)16

0

42

6

10

1412

8

07 08 09 10 11

9.9

12.2

7.1

11.0

14.3

Net Debt to Equity(percentage)15

0

3

6

9

12

07 08 09 10 11

11.5

11.2

8.1

7.2

5.9

15


5-Year Plantation Statistics

2011 2010 2009 2008 2007OIL PALM

FFB Production – own estates (mt) 3,288,974 3,176,106 2,859,929 2,803,792 2,360,061 – sold (mt) 84,602 77,875 73,997 126,285 68,748 – purchased (mt) 653,200 734,864 893,143 861,076 851,981 – total processed (mt) 3,857,572 3,833,095 3,679,075 3,538,583 3,143,294Yield per mature hectare (mt FFB) 22.17 22.40 22.87 24.66 22.25Profit per mature hectare (before replanting expenditure) (RM) 9,783 7,061 7,326 10,684 5,790 Average selling prices: Refined palm products (RM/mt ex-refinery) 3,317 2,517 2,174 3,296 2,147 Crude palm oil (RM/mt ex-mill) 2,958 2,402 2,309 2,913 1,929 Palm kernel oil (RM/mt ex-mill) 4,611 2,810 2,167 3,597 2,175 Palm kernel cake (RM/mt ex-mill) 406 187 192 445 259 Palm kernels (RM/mt ex-mill) 2,141 1,291 1,181 1,714 1,131 FFB (RM/mt) 626 511 433 670 465

RUBBER

Production – own estates (’000 kgs) 20,847 23,005 22,381 21,958 22,942 – sold (’000 kgs) 165 - 49 - - – purchased (’000 kgs) 2,634 2,416 2,764 4,699 5,285 – total processed (’000 kgs) 23,316 25,421 25,096 26,657 28,227Yield per mature hectare (kgs) 1,214 1,233 1,367 1,394 1,450Profit per mature hectare (before replanting expenditure) (RM) 10,466 6,718 3,467 7,059 6,070Average selling price (net of cess) (sen/kg) 1,409 980 683 893 786

PLANTED AREA (weighted average hectares):

OIL PALM Mature 148,358 141,819 125,041 113,708 106,076 Immature 38,726 38,732 29,457 29,476 29,010

RUBBER Mature 17,175 18,662 16,369 15,753 15,819 Immature 4,057 5,405 4,140 3,798 3,799

TOTAL PLANTED AREA 208,316 204,618 175,007 162,735 154,704

16


5-Year Financial Statistics

2011 2010 2009 2008 2007

RM’000 RM’000 RM’000 RM’000 RM’000REVENUE

Palm products 4,551,491 3,280,031 3,212,982 3,564,120 1,956,142 Rubber 328,920 256,143 163,893 236,150 208,725Manufacturing 5,135,476 3,246,973 2,585,788 3,222,971 2,014,487 Retailing 651,054 614,325 605,180 703,504 775,118 Property development 4,588 30,123 30,804 42,164 63,868Investment income 51,326 40,584 37,958 65,691 43,185Other income 20,397 22,447 21,703 20,825 6,102

10,743,252 7,490,626 6,658,308 7,855,425 5,067,627

GROUP PROFIT

Palm products 1,416,049 996,240 906,830 1,223,256 582,862 Rubber 169,794 116,055 48,280 105,367 94,749 Manufacturing 226,345 137,699 35,597 117,142 61,623Retailing 22,860 31,161 (77,514) (4,259) 14,354Property development 1,351 3,788 10,340 11,750 12,095Investment holding 45,552 19,252 10,636 30,402 30,246Interest income 21,088 24,178 25,159 32,370 12,558Finance costs (74,244) (58,271) (68,769) (64,200) (36,139)Others 1,334 2,315 697 1,265 1,551Share of profits of equity accounted investees, net of tax 27,779 37,401 34,555 42,232 31,899Corporate 208,297 73,014 (38,449) (49,844) 80,660

Profit before taxation 2,066,205 1,382,832 887,362 1,445,481 886,458Tax expense (420,674) (315,562) (244,751) (355,976) (172,009)

Profit for the year 1,645,531 1,067,270 642,611 1,089,505 714,449

Attributable to: Equity holders of the Company 1,571,413 1,012,340 612,500 1,040,653 694,154 Non-controlling interests 74,118 54,930 30,111 48,852 20,295

1,645,531 1,067,270 642,611 1,089,505 714,449

ASSETS

Property, plant and equipment 2,886,437 2,765,016 2,687,197 2,573,603 2,232,083Investment properties - 4,463 5,086 5,137 5,188 Prepaid lease payments 164,139 158,747 158,044 146,140 103,934Biological assets 1,836,811 1,672,395 1,575,878 1,426,545 1,189,512Land held for property development 223,693 229,419 195,790 195,378 194,735Goodwill on consolidation 304,266 289,529 296,950 255,940 264,698Intangible assets 33,473 32,410 31,577 37,656 44,789 Investment in associates 92,521 199,361 210,379 258,495 172,455Available-for-sale investments 559,704 349,300 244,452 288,770 438,705Other receivable 61,940 46,808 37,057 23,567 20,099Deferred tax assets 29,399 21,022 9,833 6,888 11,634Current assets 4,777,475 3,395,061 3,152,088 3,292,125 2,325,460

Total assets 10,969,858 9,163,531 8,604,331 8,510,244 7,003,292

17


2011 2010 2009 2008 2007

RM’000 RM’000 RM’000 RM’000 RM’000EQUITY

Share capital 1,067,505 1,067,505 1,067,505 1,067,505 1,067,505Reserves 6,019,591 4,951,146 4,579,951 4,483,036 3,864,995Cost of treasury shares (13,447) (13,447) (13,447) (13,447) (13,447)

Total equity attributable to equity holders of the Company 7,073,649 6,005,204 5,634,009 5,537,094 4,919,053Non-controlling interests 392,422 320,145 308,760 202,913 176,159

Total equity 7,466,071 6,325,349 5,942,769 5,740,007 5,095,212

LIABILITIES

Deferred tax liabilities 245,732 241,989 251,072 220,278 195,218Provision for retirement benefits 224,747 219,378 44,165 27,136 32,951Borrowings 525,766 1,107,089 1,122,726 920,844 566,893Current liabilities 2,507,542 1,269,726 1,243,599 1,601,979 1,113,018

Total liabilities 3,503,787 2,838,182 2,661,562 2,770,237 1,908,080

Total equity and liabilities 10,969,858 9,163,531 8,604,331 8,510,244 7,003,292

SHAREHOLDERS’ EARNINGS AND DIVIDENDS

Earnings per share – sen 147.56 95.06 57.51 97.72 65.18Share price at 30 September – RM 21.10 17.00 13.80 9.60 13.20Gross dividend rate – sen 85.0 60.0 40.0 70.0 50.0Dividend yield at 30 September 4.0% 3.5% 2.9% 7.3% 3.8%P/E ratio at 30 September 14.3 17.9 24.0 9.8 20.3

5-Year Financial Statistics

18


Area Statement

2011 2010 % of % of % Total % Total Under Planted Under Planted Age in Years Hectares Crop Area Hectares Crop Area

OIL PALM

4 to 9 49,675 26 50,706 28

10 to 18 78,040 42 75,006 42

19 and above 20,091 11 19,265 11

Mature 147,806 79 71 144,977 81 72

Immature 39,211 21 19 33,962 19 17

Total 187,017 100 90 178,939 100 89

RUBBER

6 to 10 2,064 10 2,195 10

11 to 15 3,844 18 3,541 16

16 to 20 4,331 21 8,468 37

21 and above 6,970 33 3,717 16

Mature 17,209 82 8 17,921 79 9

Immature 3,721 18 2 4,866 21 2

Total 20,930 100 10 22,787 100 11

TOTAL PLANTED 207,947 100 201,726 100

Plantable Reserves 22,466 29,377

Conservation Areas 9,267 8,884

Dispute Areas 4,554 4,643

Building Sites, etc. 6,495 6,566

GRAND TOTAL 250,729 251,196

19


, 000

kg

s

Hec

tare

s

2007 2008 2009 2010 2011

25,000

20,000

15,000

10,000

5,000

25,000

20,000

15,000

10,000

5,000

0 0

23,00520,847

22,942 21,958 22,381

Planted Area -immature (hectares)

Rubber Production (’000 kgs)

Planted Area -mature (hectares)

Rubber Planted Area/Rubber Production

Oil Palm Planted Area/FFB Production15

,897

3,68

7

15,9

64

21,0

17

17,9

21

4,86

6

17,2

09

3,72

1

2007 2008 2009 2010 2011

140,000

160,000

120,000 3,000

100,000 2,500

80,000 2,000

60,000 1,500

40,000 1,000

20,000 500

0 0

3,1763,289

2,360

2,804 2,860

Hec

tare

s

, 000

mt

Planted Area -immature (hectares)

FFB Production (’000 mt)

Planted Area -mature (hectares)

3,500

4,00010

7,18

2

118,

357

137,

327

144,

977

147,

806

27,7

99

32,7

44

31,9

05

39,2

11

33,9

62

5,34

3

3,38

1

20


Economic Outlook

The memories of the 2008 financial crisis, necessitating the bailout by governments of financial institutions in the developed economies, are still fresh in our minds. Just as most economists are increasingly confident that a slower-paced but sustainable growth recovery is underway, aided by the China-led buoyant Asian economies, we are now faced with the sovereign debt crisis of certain European Union nations. These nations which have debts at dangerously high levels in relation to GDP, have issued bonds with unsustainable yields. Coupled with investors’ lack of confidence, there is a real danger of possible defaults. The domino effect resulting therefrom could cause unimaginable collateral damage to all economies and commodities worldwide.

Such is the environment we are now in. Fortunately, prices relating to our commodities are still reasonably buoyant. Amidst these uncertainties, the Group has sold 35% of financial year 2012’s palm oil production at an average price of close to RM3,000/mt.

Plantations

The Group’s Plantations Division remains its backbone and continued to be the key performer of the year under review, registering 77.2% of our pre-tax profit. The average price achieved for crude palm oil (“CPO”) was RM2,958/mt ex-mill and RM2,141/mt ex-mill for palm kernels. These prices are approximately 23.1% and 65.8% higher respectively than those of last year and were achieved despite the heavy discounts due to high export duty in Indonesia. The division’s profits were also aided by the excellent rubber prices achieved which averaged RM14.09/kg.

KLK Group achieved record-breaking results for financial year 2011 with both its core plantations and oleochemicals businesses returning historic highs in terms of revenue and pre-tax profit. This was primarily due to strong commodity prices, in particular that of palm oil and rubber, which have been resilient in the face of an uninspiring global economy. The commodities market was also helped by the strong demand from China, India and other Asian countries.

For financial year 2011, the Group registered a net profit of RM1.57 billion, which is 55.2% up from the previous year. These results are within market expectations, given that commodity prices have held up well despite the slowdown in the world’s major economies in the second half of 2011. Our profits have also been boosted by a non-recurring gain of RM244 million resulting from the disposal of our equity stakes in two associate companies.

Taking cognisance of the need to balance between a reasonable return to our shareholders and the funding for capital expenditure to ensure the growth of our Company, the Board is recommending a final single tier dividend of 70 sen per share. Together with the interim single tier dividend of 15 sen per share paid earlier, the total payout will amount to RM905.2 million or 57.6% of the net profit for the year. This payout ratio is generally in line with that of the previous years.

The net gearing ratio of our Company is reasonably low at 5.9% and there is sufficient funding in place for acquisitions, when the opportunity arises.

Chairman’s Statement

21



R. M. ALIASChairman

On the sustainability front, the RSPO Certification body, Control Union Certifications, carried out its final assessment of our Kekayaan Complex in Johor from 29 November to 3 December 2010 and we are pleased to inform that a Certificate of Sustainability has been awarded in respect of the Kekayaan Complex on 31 October 2011. Our target remains the achievement of RSPO and ISPO certification for all our plantation operating centres by 2014.

Group fresh fruit bunches (“FFB”) production had continued to increase from 3.18 million mt to 3.29 million mt, a growth of approximately 3.6%. This increase was due mostly to new fields coming into maturity mainly in Indonesia. We are confident that growth in FFB for this current year will be much improved with the good age-profile and significantly improved planting materials planted.

We are encouraged that FFB yield per hectare held up at 22.17 mt with only a slight decrease, despite the industry’s tight labour situation and the dilutive effect of our Medan joint venture. Our oil extraction rate (“OER”) increased marginally to 21.44%, and this is an area which we will continue to work on improving.

During this financial year, we anticipate to complete 3 new palm oil mills and 3 CPO refineries in Indonesia, in response to the new duty structure. In addition, value added projects such as methane capture for energy, enhancing oil recovery using hexane, etc., are also being implemented.

KLK Oleo, recorded a pre-tax profit of RM239.7 million for financial year 2011, a 30.9% increase....

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Retail

The restructuring of Crabtree & Evelyn Group’s US operations which was completed in early 2010, has set a firmer foundation for the Retail Division’s future growth. The division remains profitable despite weak demand, particularly in the US and Europe which account for more than half of retail sales. Nevertheless, the revamp of the creative side of the business has been successful and a pipeline of new products has been launched. Asia continues to show strong growth with business opportunities in new markets such as China and India.

Corporate Responsibility

KLK supports the improvement of community well-being as part of its efforts to develop human capital and maintain the sustainability of its business operations.

Humana Child Aid Society of Sabah, is a non-governmental organisation which operates learning centres with the aim to provide basic primary education to the children of plantation workers and other underprivileged children in remote areas in Sabah who have little or no access to schools due to poverty, distance or legal status. KLK has been working with Humana to set up learning centres at our estates in Sabah and an initial allocation of RM1 million was provided to kick start the programme. The first learning centre, located at KLK Mill Complex, Tawau, commenced operations in March 2011.

Over at our Indonesian plantations, KLK collaborates with the Indonesia Heritage Foundation (“IHF”) to provide community-based crèches and kindergartens for the children of our estate workers and those living in the vicinity of these estates. The IHF curriculum is dedicated to inculcating good character in young children in the belief that this will provide the bedrock to support a culture of peace and prosperity. This is a vision which is shared by KLK Group and we have to-date sent 24 teachers for training at the IHF Training Centre, who have since been allocated to our operating centres in Riau, Belitung and Kalimantan Timur.


Manufacturing

Our Oleochemicals Group, KLK Oleo, recorded a pre-tax profit of RM239.7 million for financial year 2011, a 30.9% increase over that of last year. Notwithstanding lingering concerns over the weak global macro-economic environment which continued to weigh down on buying sentiment, KLK Oleo managed to extract benefit from additional capacities coming on-stream and improved sales in the fatty acids, fatty alcohol and esters businesses. This was also despite the new Indonesian palm oil duty structure which gives Indonesian oleochemical products a significant competitive advantage.

The focus of KLK Oleo for the immediate future is to consolidate and improve on its existing business segments by working on a number of expansion projects, both in Malaysia and abroad, which will eventually increase the Group’s oleochemical capacities. KLK Oleo will also continue its strategy of optimising the integrated value chain and driving cost efficiency despite facing uncertainties in the global economy.

As for the other manufacturing operations, these continue to suffer losses due to lack of economies of scale. We have commenced action to exit the Standard Soap business in the UK. We have also re-located our tocotrienol plant from Singapore to Malaysia, and taken steps to revamp the management of our parquet business, BKB Hevea Products. Such efforts should reduce the losses in these non-profitable businesses of the Group.

Property

The Desa Coalfields development was completed last year.Moving forward, the Group’s property development activities will be centred on “Bandar Seri Coalfields”, a 1,000 acre township development in Sg. Buloh, Selangor. In line with the government’s call for developers to embark on affordable housing projects to meet the demand, particularly from 1st time home-buyers, Bandar Seri Coalfields has been launched with prices of houses starting from RM308,000 onwards. All phases of this development have to-date, met with a very good reception with almost all units sold within weeks of each launch.

23


Earlier in the year, KLK had also donated 23 acres of land in Ulu Bernam, Selangor, to the Malaysian Government for the re-settlement of squatters currently residing in Kg. Hassan, a multi-racial village in the vicinity of KLK’s Tg. Malim Estate. The gift of land is part of KLK Group’s social contribution to the Government’s economic transformation programme which encourages property ownership and aims to elevate workers’ income.

In line with the Government’s drive to make our nation a high income society, KLK, has adopted a minimum wage system for our plantation workers. Plantation workers are now guaranteed a minimum basic wage of RM650 per month. In addition to the above, KLK has also responded to the Government’s call to increase wages by RM200 per month, to all plantation workers below executive level.

Our dedicated efforts to provide our employees with a safe and healthy workplace have been recognised by the National Council for Occupational Safety and Health and I am happy to announce that we have been awarded the first place under the Plantations category, for the prestigious National Occupational Safety and Health Award 2010.

Strategic Outlook

It is difficult to estimate the Group’s profit for financial year 2012 due to the current uncertainties in the commodities market and the effects of the Eurozone debt crisis. However, we remain fundamentally bullish based on our projected improvements in OER and double-digit growth in FFB production on the expectation of rising FFB yields and increases in oil palm mature areas.

We are also committed to our programme for new plantings in Indonesia, as well as numerous major capital expenditure projects, totalling in excess of RM1 billion, all of which we believe are critical to the long-term growth and health of the Group.

We have taken steps to control costs escalation in the face of inflationary pressures and these will continue in the midst of the current uncertainties in the global economy. Cost increases, such as the increase in workers’ wages, are unavoidable but can be balanced by productivity gains. Hence, we will continue to focus on our extraction rates and labour productivity.

At the same time, we believe there will be pockets of opportunities for which KLK is well-placed to seize, in order to create and build on shareholder value.

Acknowledgement

KLK’s success to-date has been made possible by the efforts and sacrifices of our dedicated team of employees. On behalf of the Board, I wish to convey my gratitude to these hardworking individuals and ask that they continue to uphold their commitment to excellence. I also take this opportunity to thank our shareholders as well as our customers, business partners, bankers and all stakeholders for their unwavering support of the Group.


24


Tan Sri DATO’ SERI LEE OI HIANChief Executive Officer

Kenyataan Pengerusi

Tinjauan Ekonomi

Keadaan krisis kewangan tahun 2008 yang telah mengakibatkan institusi kewangan di negara-negara ekonomi membangun terpaksa diselamatkan oleh kerajaan masing-masing masih jelas di ingatan kita. Sebagaimana yang diyakini oleh kebanyakan pakar ekonomi bahawa ekonomi kini sedang melalui pemulihan pertumbuhan secara beransur-ansur tetapi mampan, dibantu oleh keteguhan ekonomi Asia yang diterajui oleh China, kita kini berhadapan pula dengan krisis hutang sovereign di beberapa negara Kesatuan Eropah. Negara-negara yang mempunyai jumlah hutang amat tinggi berbanding KDNK ini telah menerbitkan bon-bon dengan hasil yang tidak mampan. Ditambah dengan kurangnya keyakinan di kalangan pelabur, keadaan dilihat begitu berbahaya sehingga dijangka boleh membawa kepada kemungkinan kegagalan pembayaran. Kesan rentetan daripada keadaan tersebut boleh mengakibatkan kerugian cagaran yang amat besar kepada semua ekonomi dan komoditi seluruh dunia.

Begitulah keadaan ekonomi yang sedang kita hadapi pada masa kini. Namun begitu, harga berkaitan dengan komoditi kita masih berada di paras yang agak kukuh. Di tengah-tengah segala ketidaktentuan tersebut, Kumpulan telah menjual 35% daripada pengeluaran minyak sawit pada tahun kewangan 2012 dengan harga purata hampir RM3,000/tm.

Kumpulan KLK telah mencapai rekod keputusan tertinggi bagi tahun kewangan 2011 di mana kedua-dua perniagaan terasnya iaitu perladangan dan oleokimia telah mencatat hasil dan keuntungan sebelum cukai paling tinggi dalam sejarah. Ini dihasilkan terutamanya oleh kekukuhan harga komoditi, khususnya bagi minyak sawit dan getah yang kekal teguh walaupun berhadapan dengan keadaan ekonomi global yang tidak begitu menggalakkan. Pasaran komoditi turut disokong oleh permintaan kukuh dari China, India dan negara-negara Asia lain.

Bagi tahun kewangan 2011, Kumpulan telah mencatat keuntungan bersih berjumlah RM1.57 bilion, meningkat 55.2% berbanding tahun sebelumnya. Keputusan tersebut berada dalam lingkungan pencapaian pasaran yang telah dijangkakan, memandangkan harga komoditi masih mampu bertahan walaupun negara-negara ekonomi besar dunia menuju ke arah kelembapan pada separuh tahun kedua 2011. Keuntungan kita juga telah dilonjakkan oleh keuntungan tidak berulang berjumlah RM244 juta daripada pelupusan kepentingan ekuiti dalam dua syarikat bersekutu.

Dengan mengambil kira keperluan untuk menyeimbangkan pulangan yang berpatutan kepada para pemegang saham kita dan dana bagi perbelanjaan modal bagi memastikan pertumbuhan Syarikat, Lembaga mengesyorkan satu dividen akhir satu peringkat sebanyak 70 sen sesaham. Berserta dengan dividen interim satu peringkat sebanyak 15 sen sesaham yang telah dibayar terlebih dahulu, jumlah pembayaran akan berjumlah sebanyak RM905.2 juta atau 57.6% daripada keuntungan bersih bagi tahun ini. Nisbah pembayaran ini secara amnya adalah sejajar dengan yang dikeluarkan pada tahun-tahun lepas.

Nisbah penggearan bersih bagi Syarikat kita berada di tahap yang agak rendah iaitu 5.9% dan masih terdapat dana yang mencukupi untuk kegunaan pelaksanaan pengambilalihan, apabila peluang untuk melaksanakannya tiba.

R. M. ALIASPengerusi

25


Perladangan

Bahagian Perladangan Kumpulan kekal sebagai tunjang utama dan terus menjadi bahagian yang mencatat prestasi terunggul pada tahun yang ditinjau, dengan merekodkan sebanyak 77.2% daripada keuntungan sebelum cukai kita. Harga purata yang dicapai bagi minyak sawit mentah (“MSM”) adalah sebanyak RM2,958/tm selepas dikilang dan RM2,141/tm selepas dikilang bagi isirung sawit. Harga-harga tersebut masing-masing adalah sebanyak kira-kira 23.1% dan 65.8% lebih tinggi berbanding tahun sebelumnya dan ia berjaya dicapai walaupun terpaksa menanggung diskaun eksport yang tinggi disebabkan oleh duti eksport yang melambung di Indonesia. Keuntungan bahagian tersebut turut disokong oleh harga getah yang sangat baik yang berjaya dicapai iaitu pada kadar purata RM14.09/kg.

Pengeluaran buah tandan segar (“BTS”) Kumpulan terus meningkat daripada 3.18 juta tm kepada 3.29 juta tm iaitu mewakili pertumbuhan sebanyak kira-kira 3.6%. Peningkatan ini sebahagian besarnya dihasilkan oleh kematangan ladang-ladang baru di Indonesia. Kita yakin bahawa pertumbuhan BTS bagi tahun semasa akan dipertingkatkan lagi dengan profil usia yang baik dan penanaman anak-anak pokok yang jauh lebih baik.

Kita berasa sungguh sukacita kerana hasil BTS setiap hektar telah mengukuh pada 22.17 tm dengan hanya mengalami penurunan yang kecil, walaupun industri mengalami keadaan bekalan tenaga buruh yang meruncing dan kesan pencairan daripada usaha sama kita di Medan. Kadar perahan minyak (“KPM”) kita mencatat peningkatan kecil kepada 21.44%, justeru, merupakan bidang yang akan terus kita tumpukan usaha bagi menghasilkan peningkatan.

Pada tahun kewangan ini, sebagai tindak balas terhadap struktur duti baru, kita menjangka akan menyiapkan 3 buah kilang minyak sawit baru dan 3 kilang penapis MSM di Indonesia. Di samping itu, projek-projek tambah nilai seperti memerangkap metana untuk menghasilkan tenaga, mempertingkatkan pemulihan minyak menggunakan heksana, dan lain-lain, juga sedang giat dilaksanakan.

Dari sudut kemampanan, badan Pensijilan RSPO iaitu Pensijilan Kesatuan Kawalan telah menjalankan penilaian akhirnya terhadap Kompleks Kekayaan kita di Johor mulai 29 November hingga 3 Disember 2010 dan kita dengan sukacita memaklumkan bahawa Sijil Kemampanan telah

pun dianugerahkan kepada Kompleks Kekayaan pada 31 Oktober 2011. Kita terus mensasarkan untuk mencapai pensijilan RSPO dan ISPO bagi semua pusat operasi ladang kita menjelang tahun 2014.

Kenyataan Pengerusi

sebelum cukai sebanyak RM239.7 juta bagi tahun kewangan 2011, meningkat 30.9%....

KLK Oleo, mencatat keuntungan

Perkilangan

Kumpulan Oleokimia kita iaitu KLK Oleo, mencatat keuntungan sebelum cukai sebanyak RM239.7 juta bagi tahun kewangan 2011, meningkat 30.9% berbanding tahun lepas. Walaupun berhadapan dengan kebimbangan yang berterusan terhadap kelembapan persekitaran ekonomi makro global yang terus melemahkan sentimen pembelian, KLK Oleo masih mampu meraih manfaat daripada aliran masuk kapasiti tambahan dan jualan yang bertambah baik bagi perniagaan asid lemak, alkohol lemak dan ester. Ini berjaya dicapai walaupun terpaksa menanggung struktur duti minyak sawit baru Indonesia yang memberikan kelebihan daya saing ketara kepada produk-produk oleokimia Indonesia.

Tumpuan KLK Oleo bagi jangka masa terdekat adalah untuk mengukuhkan dan mempertingkatkan segmen-segmen perniagaan sedia ada dengan melaksanakan beberapa projek perluasan, baik di Malaysia mahupun di luar negara, yang lama-kelamaan akan dapat meninggikan kapasiti oleokimia Kumpulan. KLK Oleo juga akan meneruskan strateginya untuk mengoptimumkan rantaian nilai bersepadu dan mendorong kecekapan kos bagi menghadapi sebarang kemungkinan ekonomi global.

Operasi perkilangan yang lain terus menanggung kerugian disebabkan oleh kurangnya pencapaian ekonomi mengikut skala. Kita telah memulakan tindakan untuk tidak lagi terlibat dalam perniagaan Standard Soap di UK. Kita juga telah memindahkan loji tokotrienol kita dari Singapura ke Malaysia dan telah mengambil langkah untuk merombak semula pengurusan bagi perniagaan parquet, BKB Hevea Products.

26


Usaha tersebut dijangka akan mengurangkan kerugian yang dihadapi oleh perniagaan-perniagaan Kumpulan yang tidak menguntungkan ini.

Hartanah

Pembangunan Desa Coalfields telah berjaya disiapkan pada tahun lepas. Seterusnya, aktiviti pembangunan hartanah Kumpulan akan ditumpukan di “Bandar Seri Coalfields” yang merupakan sebuah pembangunan perbandaran di Sg. Buloh, Selangor seluas 1,000 ekar. Sejajar dengan seruan kerajaan kepada para pemaju untuk membangunkan projek-projek perumahan mampu milik bagi memenuhi permintaan, khususnya daripada para pembeli rumah kali pertama, Bandar Seri Coalfields telah melancarkan rumah-rumah dengan harga bermula daripada RM308,000 ke atas. Hingga kini, semua fasa dalam pembangunan ini telah mendapat sambutan yang cukup menggalakkan dengan hampir kesemua unit telah habis dijual dalam tempoh hanya beberapa minggu selepas dilancarkan.

Peruncitan

Penstrukturan semula operasi Kumpulan Crabtree & Evelyn di Amerika Syarikat (AS) yang berjaya disiapkan pada awal tahun 2010, telah meletakkan asas yang kukuh bagi pertumbuhan masa depan Bahagian Peruncitan. Bahagian tersebut berjaya mengekalkan keuntungan sungguhpun permintaan adalah lemah, khususnya di AS dan Eropah yang meliputi lebih separuh daripada jualan peruncitan. Walau bagaimanapun, rombakan semula telah berjaya dilaksanakan di bahagian kreatif perniagaan dan produk-produk baru telah pun berjaya dilancarkan. Asia terus mempamerkan pertumbuhan yang kukuh dengan peluang perniagaan di pasaran-pasaran baru seperti di China dan India.

Tanggungjawab Korporat

KLK menyokong pelaksanaan peningkatan kesejahteraan masyarakat sebagai sebahagian daripada usahanya untuk membangunkan modal insan dan mengekalkan kemampanan operasi perniagaannya.

Persatuan Bantuan Kanak-Kanak Humana Sabah adalah sebuah organisasi bukan kerajaan yang mengendalikan pusat-pusat pembelajaran dengan tujuan untuk menyediakan asas pendidikan peringkat rendah kepada anak-anak pekerja ladang dan kanak-kanak daripada keluarga kurang berkemampuan lain di kawasan terpencil di Sabah yang tidak mempunyai akses kepada kemudahan sekolah disebabkan oleh kemiskinan, jarak yang jauh atau status dari sudut perundangan. KLK telah bekerjasama dengan Humana untuk membina pusat-pusat pembelajaran di ladang-ladang kita di Sabah dan peruntukan awal sebanyak RM1 juta telah pun disediakan untuk memulakan program berkenaan.Hasilnya, pusat pembelajaran pertama yang terletak di Kompleks Kilang KLK, Tawau telah mula beroperasi pada bulan Mac 2011.

Di ladang-ladang kita di Indonesia pula, KLK telah menjalin permuafakatan dengan Indonesia Heritage Foundation (“IHF”) untuk menyediakan kemudahan taman permainan dan tadika komuniti bagi anak-anak para pekerja ladang kita dan mereka yang tinggal di sekitar ladang-ladang tersebut. Kurikulum IHF diwujudkan untuk menerapkan akhlak yang baik di kalangan anak-anak kecil atas kepercayaan bahawa ini akan menyediakan asas untuk menyokong budaya keamanan dan kesejahteraan. Ini merupakan suatu wawasan yang turut dikongsi oleh Kumpulan KLK dan hingga kini, kita telah menghantar seramai 24 orang guru untuk menjalani latihan di Pusat Latihan IHF dan mereka telah pun ditempatkan di pusat-pusat operasi kita di Riau, Belitung dan Kalimantan Timur.

Pada awal tahun ini, KLK juga telah menyumbangkan tanah seluas 23 ekar di Ulu Bernam, Selangor kepada Kerajaan Malaysia untuk digunakan sebagai penempatan semula setinggan yang kini tinggal di Kg. Hassan, sebuah perkampungan pelbagai bangsa di sekitar Ladang Tg. Malim milik KLK. Pemberian tanah tersebut adalah sebahagian daripada sumbangan sosial Kumpulan KLK kepada program transformasi Kerajaan yang menggalakkan pemilikan hartanah dan bertujuan untuk meningkatkan pendapatan pekerja.

Kenyataan Pengerusi

27


Sejajar dengan usaha Kerajaan untuk menjadikan negara kita sebagai sebuah negara dengan masyarakat berpendapatan tinggi, KLK telah menerima pakai satu sistem gaji minimum bagi para pekerja ladang kita. Pekerja ladang kini diberi jaminan gaji pokok minimum sebanyak RM650 sebulan.Selain itu, KLK juga telah menyahut seruan Kerajaan untuk meningkatkan gaji sebanyak RM200 sebulan kepada semua pekerja ladang di bawah peringkat eksekutif.

Usaha berdedikasi kita untuk menyediakan tempat kerja yang selamat dan sihat kepada kakitangan telah diiktiraf oleh Majlis Keselamatan dan Kesihatan Pekerjaan Nasional dan saya dengan sukacita mengumumkan bahawa kita telah mendapat tempat pertama di bawah kategori Perladangan bagi Anugerah Keselamatan dan Kesihatan Pekerjaan Nasional 2010 yang berprestij.

Tinjauan Strategik Masa Depan

Adalah sukar untuk menganggar keuntungan Kumpulan bagi tahun kewangan 2012 disebabkan oleh ketidaktentuan semasa dalam pasaran komoditi dan kesan daripada krisis hutang di negara-negara Eropah. Walau bagaimanapun, prestasi kita dilihat kekal menggalakkan berdasarkan kepada peningkatan yang diunjurkan dalam KPM dan pertumbuhan dua angka dalam pengeluaran BTS yang dijangka terhasil oleh peningkatan hasil BTS dan pertambahan kawasan-kawasan kelapa sawit matang.

Kita juga komited terhadap program penanaman semula di Indonesia, serta pelbagai projek perbelanjaan modal utama yang berjumlah melebihi RM1 bilion, di mana kesemuanya kita percaya adalah penting untuk pertumbuhan dan kestabilan jangka panjang Kumpulan.

Kita telah mengambil langkah-langkah yang perlu untuk mengawal kenaikan kos natijah daripada tekanan inflasi dan ini akan diteruskan memandangkan keadaan persekitaran ekonomi global semasa yang tidak menentu. Kenaikan kos, seperti kenaikan gaji pekerja, adalah sesuatu yang tidak dapat dielakkan tetapi masih boleh diimbangi menerusi peningkatan produktiviti. Justeru, kita akan terus memfokus kepada kadar perahan dan produktiviti tenaga kerja kita.

Pada masa yang sama, kita percaya akan wujud peluang-peluang yang boleh diraih oleh KLK untuk mencipta dan terus membina nilai pemegang saham.

Penghargaan

Kejayaan KLK hingga kini telah dimungkinkan oleh usaha dan pengorbanan pasukan kakitangan kita yang berdedikasi. Bagi pihak Lembaga, saya ingin menyampaikan setinggi-tinggi penghargaan kepada individu-individu yang tekun berusaha ini dan menyeru agar mereka meneruskan komitmen mereka ke arah kecemerlangan. Saya juga ingin mengambil kesempatan ini untuk menyampaikan ucapan ribuan terima kasih kepada para pemegang saham kita serta kepada para pelanggan, rakan kongsi perniagaan, jurubank dan semua pemegang kepentingan atas sokongan mereka yang tidak berbelah bagi kepada Kumpulan.

Kenyataan Pengerusi

28


Plantations

It was indeed an outstanding year for our plantations sector as the prices of our three main commodities were substantially higher than those of last year. Crude Palm Oil (“CPO”) prices started the financial year around RM2,850/mt, but rose to a high of above RM3,900/mt in February 2011. A sharp and quick correction followed, after which the market gradually wound its way down to about RM3,050/mt by the end of the financial year. Tight supplies of grains and oilseeds due to inclement weather in the midst of strong demand had ensured that CPO traded above RM3,000/mt for most of the year.

Our average price for CPO of RM2,958/mt ex-mill was satisfactory, considering that our Indonesian production which comprised about 40% of the Group’s output was subjected to heavy discounts due to the high export duty in Indonesia. Palm kernel prices too had a phenomenal year, reaching an unprecedented high of RM3,370/mt before settling down to about RM1,840/mt by the end of the year. The very wide range is testimony to the high volatility of the market.

Our average price achieved for palm kernels was RM2,141/mt ex-mill which again was trimmed by the low prices of our Indonesian kernels. Rubber prices also climbed to a record high of above RM17.00/kg supported by strong demand, low production and generally high petroleum prices. The Group managed an average price of RM14.09/kg. Riding on these favourable prices, we report with great pleasure that the Plantations Division delivered an all-time record profit before tax of RM1.60 billion which was 42% higher than the year before on the back of a turnover of RM4.88 billion.

CEO’s Review of Operations

KLK Group posted a set of sterling results for financial year 2011 with a net profit of RM1.57 billion on the back of a record turnover of RM10.7 billion. This was due to a combination of factors, namely buoyant commodity prices and increased global demand, added to strong management and fiscal control. During the financial year under review, the Group remained focused on its core businesses, namely plantations and oleochemicals. As part of this focus, we also took the opportunity to dispose of several non-core associates, and to strategise the expansion of the Group’s property development arm.

Management will continue to scour for opportunities which maximise shareholder value. In this respect, the Group’s healthy cash reserves will stand us in good stead and also enable us to fund major capital expansion projects to fuel the next phase of growth.

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TAN SRI DATO’ SERILEE OI HIANChief Executive Officer

Oil Palm

The oil palm sector contributed RM1.44 billion accounting for 89% of the total profit from estate operations. The average profit per hectare for oil palm of RM9,783 was partly restrained by the higher costs in our younger areas in Indonesia as well as our joint venture in North Sumatra where rehabilitation work is still ongoing. However, we are pleased to report that our

Immature

4-9 Yrs

10-18 Yrs

19 Yrs & Above


PALM AGE (YRS) SIZE (HA) PERCENTAGE

Immature 39,211 21%

4-9 49,675 26%

10-18 78,040 42%

19 & Above 20,091 11%

TOTAL 187,017 100%

OIL PALM AGE PROFILE AT 30 SEPTEMBER 2011

Plantations Division delivered an all-time record profit before tax of RM1.60 billion which was 42% higher than the year before on the back of a turnover of RM4.88 billion....

21%11%

42%

26%

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East Kalimantan properties have turned profitable with strong rising yields which more than doubled last year’s output. Our expectation of it being an important contributor to profits going forward is being realised.

The age profile of our palms is slightly skewed to the younger palms in view of our steady replanting rate as well as new plantings in Indonesia. The immature and young sector together comprise 47% of the planted area which augurs well for the future growth of FFB production. At the same time a reasonably sizeable area accounting for 42% of planted hectarage continues to drive profits. The older palms make up only 11% of the planted area and would not be too demanding in terms of funding for replanting especially when resources are required for new plantings in Indonesia.

The Group’s fresh fruit bunches (“FFB”) production was only 3.6% higher at 3.29 million mt, with all of the increase being accounted for by our Indonesian properties. Peninsular and Sabah have taken a longer time than expected to recover from tree stress and suffered negative growth and stagnation respectively. Consequently, the overall FFB yield per hectare declined marginally to 22.17 mt per hectare, being also impacted by the dilution of young fields in Kalimantan and low yields in North Sumatra.

Our oil extraction rate (“OER”) improved to 21.44%, with the intense implementation of ripeness standard and clean and thorough loose fruit collection. Grading of FFB are conducted in the fields to ensure that estates take ownership of the OER. These processes were given a further boost by reorganising the

labour into husband and wife teams for harvesting and loose fruit collection, and our Riau region which initiated this system has made significant and sustainable OER gains to about 23%. We are optimistic that spreading the use of this system to all our operating centres will further enhance the Group’s OER. It is noteworthy that our Berau palm oil mill in East Kalimantan has improved their OER to above 25% during the last few months of the financial year. The FFB yield per hectare and OER supported CPO per hectare of 4.75 mt which was a touch higher than last year, but with these positive developments show promise of a higher figure going forward.

The Group’s ex-estate costs of production of FFB and CPO was RM182/mt ex-estate, and RM1,066/mt ex-mill respectively. These were higher than last year’s cost by about 16% and 11% respectively due to increases in operating costs and wages and generally higher cost in young fields in Indonesia where productivity is still low. With effect from 1 September 2011, the Group supported the government’s initiative to increase the wages of staff and field workers in operating centres by RM200/month, which will add to costs going forward, and will have to be mitigated by increase in productivity.

The profit returned by the processing sector which included refining and kernel crushing operations declined sharply from RM29 million to RM5 million due to the recognition of unrealised losses in derivatives with the adoption of FRS 139, the bulk of which was on account of hedging of foreign exchange. The operational profit would have been RM39.43 million without the provision of unrealised losses.


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Rubber

The Group had a very good year for rubber, which profit rose by 44% to RM174 million despite lower production and higher costs. The high average price achieved was able to cushion the negative factors and generated a profit per hectare of RM10,466/ha. Rubber production has been on the decline due to replanting and aging trees. However, the yield of 1,214 kg/ha is below the expectation and consequently cost has risen to 396 sen/kg and in part also due to rise in wages. Notwithstanding, management is making all efforts to improve by reviewing stimulation policy, identifying clones for replanting and experimenting with separating the tasks of tapping and collection. Initial results for the latter have been encouraging and if successful would generate positive results in future.

Projects

The rehabilitation of two older palm oil mills in Johor and Perak to change to using vertical sterilisers and expansion in capacity in the latter was successfully commissioned this year. Three new palm oil mills in Riau, Medan and Central Kalimantan are currently under construction, whilst on the drawing board is a new palm oil mill in Jabontara, East Kalimantan which comes with a nearby bulking installation and jetty. The expansion in processing facilities in Indonesia is to cater for increasing FFB from maturing new fields.

Parallel to these, value added projects such as extracting oil from fibre using hexane has been commissioned at our Kekayaan Mill in Johor. Two projects to further extract oil from palm kernel expellers using hexane have commenced in Sabah and Indonesia.

In response to the new export duty structure in Indonesia which favours the export of downstream products over that of crude, three refineries will be rapidly set up in Indonesia. Should there be no significant changes to the duty structure, these plants will enhance our competitiveness and have quick payback periods. The clean development mechanism project to capture methane and other gasses from the effluent ponds of two palm oil mills in Sabah is operating well and would be complemented with gas engines to generate power. In planning are two similar projects in Riau and Belitung Island both of which will ultimately come with gas engines to generate power for the value added projects mentioned above. Our production and engineering division will have their hands full to deliver these projects on time.

Research & Development

Applied Agricultural Resources Sdn. Bhd. (“AAR”), the KLK Group’s research associate, has expanded its production of the high yielding AA Hybrida, which have added advantages of uniformity, small stature and slow height increment. AAR has also increased the saleable AA Vitroa to about 0.6 million ramets this year, up 20% from last year.

Its plant breeding section is actively pursuing the exploitation and introgression of other planting materials such as oleiferas and non-Deli lines into our breeding population. The purposes are primarily for continuous improvement of the production and quality of its esteemed planting materials, developing disease resistant materials to current and potential diseases such as Ganoderma and bud-rot respectively, and enhancing the oil quality.

AAR biotechnologists in collaboration with the pest and disease team have optimised the methodology to identify a wide range of microbes in agricultural fields. This success has led to the new commercial service of microbe identification and enumeration, which is extended to the public. It has also identified suitable SSR markers to fingerprint and protect its planting materials at clonal scale. Apart from this, its biotechnologists and plant breeders have commenced genomewide selection for more precise and effective prediction of superior parents for seed production.

AAR agronomy and advisory section has continued its essential role to support its Principals in providing sound technical advices, assessing the feasibility of land for plantation tree crops and developing ecologically friendly and scientifically better technology for plantation management. AAR pest and disease team is investigating the pathway and processes of Ganoderma infection using aseptic technique. This technique should allow it to study the inter-relationship between microbes and Ganoderma fungus in order to bring it under good control. AAR is also exploring the roles of both general and specific microbes such as mycorrhiza on soil fertility and nutrient uptake by the oil palm.

AAR chemistry laboratory has again been rated among the best agricultural chemistry laboratories in Malaysia based on the latest international and national cross-checks. This has attracted many non-principal clients from Malaysia, Indonesia and Papua New Guinea. The number of samples sent by these clients constituted over 80% of the analyses carried out by AAR chemistry laboratory.

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AAR’s research work has again been recognised locally and internationally as evidenced by the awards received this year:

a) Best poster award from the Malaysian Society of Soil Science;

b) Bronze medal from United Nations Educational, Scientific and Cultural Organisation (UNESCO) IHP for Best Thesis award.

These awards were given for research on the successful separation of the close interaction effects of aluminium and hydrogen ions on palm growth, and quantification of the leaching losses of N and groundwater contamination from applied fertilisers, respectively.

Manufacturing

Oleochemicals

The KLK Oleo Group closed financial year 2011 with a profit before tax of RM239.7 million, a 30.9% improvement against RM183 million achieved last year.

During the year under review, lingering concerns over the weak global macro-economic environment continued to weigh down on buying sentiment with many buyers hesitant on placing new deals, thus disrupting the supply and demand pattern. In addition, the business was impacted by aggressive export duty and tariff structures imposed by foreign jurisdictions, which gave overseas oleochemical

players significant price advantage in the market. The year also saw prices of lauric, a major feedstock for oleochemical products, at historic highs, breaching US$2,200 per ton in February 2011 before retreating to US$1,300 by the year-end, which augmented customers wait-and-see attitude in placing new orders.

Despite these challenges, the Group managed to extract benefit from additional capacities coming on stream, and to take opportunities of tightness in the market to chalk up solid progress in the first three quarters of the financial year. However raised uncertainties in the macro-economic environment, in particular the weak US economy and the Eurozone debt crisis by Q4, had further eroded customers’ buying confidence. Results were also impacted by the volatile year-end foreign exchange rates. The adoption of FRS 139 requires the marking of forward contracts to fair value, and this had given rise to unrealised exchange losses. Stripping out the effects of FRS 139, the profit before tax would have grown 36% compared to the previous year.

Our fatty acids business continue to benefit from our integrated value chain strategy, with captive sales holding steady to support operations at our downstream fatty alcohol, soap and esters units. Sales to external market had also grown well particularly into emerging markets. The glycerin business had a tough year as margins continued to soften as lower oil prices and new government mandates have rekindled biodiesel production and pushed glycerin output up globally. However, we see opportunities for this segment in the near future with the new epichlorohdyrin plants coming up in Asia and Europe.


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Our fatty alcohol business had performed strongly with better economies of scale from the expanded capacity. However this had been weighed down by plunging alcohol prices late in the year. On a positive note, our sales in Europe remain strong amid intense market competition from competing substitutes and cheap-base Indonesian competitors’ products.

Methyl ester volumes sold during the year had also improved, with better export volumes into Europe, due in part to healthy offtake and also with penetration into new markets, e.g. the firelighter industry. The Malaysian government’s B5 biodiesel mandate had also provided a boost to the segment.

The market development for methyl ester sulfonates is progressing at a slower than anticipated pace with long qualification processes required. Our product has attracted keen interest from major multi-nationals, as an oleo-based environmentally friendly surfactant offering from the Group.

Our esters business had also made encouraging progress especially in the cosmetics & toiletries and food & lubricants industries.

Despite being affected by weak demand following the Japan earthquake, our ethylene-bis-stearamide (“EBS”) segment had picked up and recorded healthy performance since then. EBS is used in ABS plastics, which is used mostly in the automobile and home appliances industries.

The soap business was challenging. Changes in customers’ buying pattern amid softening oil prices had impacted the business performance, this was further exacerbated by stiff

competition particularly from Indonesian producers offering at a cheaper-base. However, our sales initiative into emerging markets continues to bear fruit.

On our overseas investments front, our China operations continue to be challenged by strong competition and lack of economies of scale. We continue to streamline our business operations in Europe and are investing in new capacities in Germany, to be able to serve our customers better.

We are also building a fatty acid distillation plant in Dumai, Indonesia, to be held by our newly incorporated subsidiary, PT KLK Dumai. This is expected to further add to the Group’s overall fatty acids and glycerin capacity in the coming years.

Over the next few years, the KLK Oleo Group will also work on a number of expansion projects, both in Malaysia and abroad which will eventually increase the Group’s oleochemical capacities.

Others

The year under review has been a challenging one for the non-oleochemical businesses. Nevertheless, we are optimistic for our rubber gloves company as it appears to be turning the corner and for a 3rd year running has made a small profit before tax. Our parquet business continues to underperform and suffered a loss of RM15.9 million. The challenge is to ramp up capacity and increase market penetration, as our strong currency has impacted our margins.


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Our tocotrienol business was restructured and its plant relocated from Singapore to Port Klang in order to reduce operating costs. As market demand is still low, we foresee continued losses for the near future.

Property and Retailing

Property

Bandar Seri Coalfields, Sungai Buloh, Selangor

In line with the government’s call to developers to embark on affordable housing to meet the demand from a vast segment of home buyers who are unable to afford houses in the Klang Valley as prices have escalated beyond their means, we proceeded to execute our plan to commence the inaugural launch of our latest township development, “Bandar Seri Coalfields”, with prices of houses from RM308,000 onwards.

The first two phases of Bandar Seri Coalfields comprising 2-Storey terrace houses, The Bromelia 22ft x 75ft 2-Storey Link Homes and The Duranta 24ft x 75ft 2-Storey Link Homes, were launched late April 2011. Both phases received an overwhelming response. With large built-up areas of 1,960 sq ft and 2,180 sq ft respectively, both designs featured four bedrooms and four bathrooms, wet and dry kitchens and a sizeable family hall on the first floor.

The Bromelia Homes, totalling 138 units are fully sold whilst only limited corner units of the 204 units of The Duranta Homes are left for sale.

The Banyan 2-Storey Semi-Detached Homes were launched mid-July 2011 and within two weeks, all 128 units were fully sold. With a standard lot size of 40ft x 80ft and built-up area of 3,066 sq ft, these four bedrooms plus one utility room units were affordably priced from RM688,000 onwards.

The limited edition of the 24ft x 75ft 2-Storey terrace houses, The Oleander 2-Storey Link Homes were launched in early October 2011. Only 85 units are available for sale. With a built-up area of the intermediate unit at 2,423 sq ft and the built-up area of the corner unit at 3,079 sq ft, The Oleander Homes are designed with 5 rooms and 4 bathrooms and are sold from RM468,000 onwards.

Also included in Phase 1 are 80 units of the 22ft x 75ft 2-Storey Shop Offices and 128 units of the 22ft x 75ft 2-Storey Link Homes which are targeted to be open for sale at the last quarter of 2011 and 142 units of the 2-Storey Semi-Detached Houses which are targeted to be launched in the first quarter of 2012. Kumpulan Sierramas (M) Sdn Bhd / Sierramas Resort Homes, Sungai Buloh The construction works for the Garden Manor, which has been fully sold, is in progress with almost 50% completion and targeted to complete in 2012. The proposed Park Manor consisting of 41 units of strata bungalows is in the design stage and is expected to be launched in 2012.

Crabtree & Evelyn

This has been another year of continued growth in sales for Crabtree & Evelyn despite very challenging trading conditions. Total sales grew by US$27.2 million or 14.6% to US$213.2 million. A profit of US$6.0 million was recorded for financial year 2011, although this was 28.2% lower than last year’s profit. The drop in profit was due to lower margins and increase in operating cost.

The main driver behind our growth in financial year 2011 was the organic growth from our retail stores globally. We were particularly pleased with our performance in Asia where the total sales and operating results grew by 38.8% and 24.0% respectively.

During the year under review, Crabtree & Evelyn had successfully launched its new Floral Fragrance Collection which brings together a contemporary expression of four enticing fragrance experiences featuring ingredients from around Europe: Rosewater, Lavender, Lily and Iris. This launch was the culmination of our collaboration with master perfumers to seek out new ways to interpret the timeless elegance, beauty, and romance of the Crabtree & Evelyn Brand.

We also continued to roll-out our new store design concept in the Western countries. This new store design had been conceived and implemented in Asia, and feedback from the consumers indicate that the new look has been well received.


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Integrated Business Value Chain

Process

Product

Crude Palm Oil

Refining & Fractionation

Crushing

PLANTATIONS

Fresh Fruit Bunches

Effluent Ponds/Empty Fruit Bunches/Kernel Shell

Methyl Esters

Methyl Esters Sulfonate

Splitting

Neutralisation

Transesterification

Sulphonation

Palm Kernel CakesPalm Kernel Oil RBD OleinPalm FattyAcids RBD StearinRBD

Palm Oil

Soap

Kernels

Mill Process

Esterification

Glycerin Fatty acids

Alkoxylation

CDE/CME/EBS Fatty Amines

Amidation Hydrogenation

Fatty Esters Methyl Esters

Fatty AlcoholsFatty Acid Alkoxylates

Fatty Alcohol Alkoxylates

Fatty Ester Alkoxylates

Fatty Amine Alkoxylates

Ecomat Production

Mulching in Fields

Biomass Plants/Effluent Treatment

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KLK is committed to implementing measures that improve community well-being and the environment in which we operate. Our commitment stems from the belief that social and environmental performance can help create long-term value for shareholders and other stakeholders. At KLK, corporate responsibility is a continuous effort that has the whole-hearted support of the Board and our employees. Our initiatives range from donations to philanthropic causes, to long-term practices and programmes.

Commitment to Sustainable Business Operations

Responsible Business Practices

The objectives of conducting sustainable business operations are many and varied, but in KLK it is due to our recognition that sustainability activities that integrate broader environmental and societal concerns into business strategies and performance, can drive superior operating performance and be the hallmarks of good management and corporate governance.

In line with this objective, the agricultural and agronomic practices adopted by KLK to conserve the environment include ensuring that within its plantations, areas of high conservation values such as forest reserves, riparian reserves, waterfalls, hot springs and eco-systems that support migratory birds, continue to be preserved in its plantation operations. Steep and dry areas are devoted to rubber planting and degraded steep slopes are rehabilitated by planting them with fast growing forest trees or kept for natural forest regeneration. Degraded land (ex-tin mining land) is transformed into productive oil palm plantations with the extensive use of empty fruit bunches, mulching and appropriate fertilising.

KLK has developed innovative and environmentally friendly techniques for clearing old oil palms for replanting. These techniques include pulverising felled palms into small pieces and spreading the biomass widely over the whole field. No burning of the palm residues is necessary. Besides zero-burning, this innovative approach also destroys potential breeding sites for rhinoceros beetles and rats, hence reducing the use of pesticides and at the same time adding organic matter back to the soil.

KLK implements a fertiliser management system which minimises soil nutrient losses by mulching with ecomats. Soil and water management through appropriate land preparation techniques e.g. terracing and platforms, integrated pest management


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through planting of beneficial plants, use of appropriate fertilisers, recycling of palm oil mill by-products are part and parcel of the KLK’s Group agricultural policies.

Further, KLK has developed methods to successfully use mucuna bracteata more effectively as ground cover to reduce soil and nutrient losses in its plantations immediately after land clearing. Suitable frond placement technique and maintenance of soft vegetation in the interrows are other methods to conserve soil and moisture in its mature fields. Planting of beneficial plants and use of barn owls are proven biological control methods that KLK has employed in the management of pests in its plantations. Applied Agricultural Resources, our research & development arm, continues to be a mainstay in advising and guiding the Group towards sustainable agricultural practices.

Over at KLK Oleo, we take pride in the fact that our raw materials are derived from natural resources and are renewable. Our manufacturing processes and business operations are also crafted to reduce KLK Oleo’s carbon footprint. We will continuously strive to ensure that responsible care is implemented whenever possible.

KLK continues to improve its manufacturing facilities and operations to assure customers who use our products in food and animal feed applications. In this regard, the Palm-Oleo Rawang site has recently been certified as complying to the requirements of British Retail Consortium on Food Safety. Palm-Oleo is also preparing to be certified to GMP+, a requirement for the animal feed sector to address consumers’ concern about the source and traceability of the ingredients throughout the food chain from raw material to finished product.

In Germany, feed-in electricity tariffs have been introduced with the objective of supporting energy conservation and climate protection measures through encouraging the use of renewable energy sources and reducing CO2 emissions. At KLK Emmerich, a combined heat and power (CHP) system feeds waste heat into the main boiler for high pressured steam generation to maximise the energy efficiency and lower greenhouse gas emissions. The power generation provides for all the electricity requirements of the plant with the excess being fed into the local grid for third party use.

The Group will continue to invest in energy conservation projects which contribute to its bottom-line and create value for stakeholders.

In recognition of the Group’s commitment to environmentally sustainable practices, KLK was the recipient of the Merit Award in the “Malaysian Business-CIMA Enterprise Governance Awards 2010 (Green Initiatives) Category”.

Roundtable on Sustainable Palm Oil

The most visible example of the Group’s commitment to sustainable business operations is our whole-hearted participation in the Roundtable on Sustainable Palm Oil or “RSPO”. RSPO is an initiative created by organisations carrying out their activities in and around the entire supply chain for palm oil to promote the growth and use of sustainable palm oil through co-operation within the supply chain and open dialogue with its stakeholders. As a founding member of the RSPO, KLK is committed to the growth and production of sustainable palm oil based on the 8 principles and 39 criteria formulated by the RSPO (“P&C”) to regulate the production of sustainable palm oil. The P&C are a global standard that covers amongst others, Legal Compliance, Transparency, Best Agricultural Practices, Occupational Safety and Health elements, Environmental Protection, Biodiversity Enhancement and Social Commitment.

Certification of oil palm growers who meet the strict RSPO P&C will enhance the global acceptance of palm oil as food, fuel and feedstock. As a company which prides itself on being a responsible food producer and is committed to upholding the 3Ps (i.e. People, Planet and Profits) as part of our operations, we take cognisance of the growing awareness of and demand for responsibly produced goods. As such, KLK has been working actively towards achieving RSPO certification of its oil palm operations and to this end, our employees are given appropriate training and preparation for the certification process.

KLK’s Lahad Datu complex in Sabah, which covers 20,400 hectares and 3 palm oil mills, was awarded the RSPO Certificate of Sustainability in July 2010. With this and the earlier RSPO certification of our Tawau complex comprising 20,800 hectares and 3 palm oil mills earlier in 2009, KLK’s


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entire Sabah operations have been certified making available close to 180,000 mt of certified sustainable palm oil in the market. Supply chain traceability via our refinery in Sabah may now be implemented.

For the year under review, the RSPO carried out its final assessment of KLK’s Kekayaan Complex, Johor and Jeram Padang Complex, Negeri Sembilan and these centres are now pending certification. KLK is committed to full certification of all its operating centres in Malaysia by 2013, and in Indonesia by 2014. KLK is confident that the integration of the P&C in its operations will enhance the economic sustainability of KLK’s assets.

Human Capital Development

One of our key corporate responsibility initiatives is the development of human capital as our employees are our greatest asset. This development is achieved through the implementation of various initiatives such as increasing wages, establishing schools for foreign guest workers’ children, building university relationships, encouraging workplace diversity, training and promoting employee welfare. The ultimate aim of these initiatives is the unity of all employees in striving for a common objective, i.e. the success of the Company in terms of economic, social and environmental development.

Employee Compensation and Welfare

During the year under review, KLK supported the Government’s drive towards making Malaysia a high-income society by providing better wages and amenities to our plantation workers. Towards this end, KLK, being a member of the Malayan Agricultural Producers Association (MAPA) has adopted a minimum wage system for our plantation workers. Plantation workers are now guaranteed a minimum basic wage of RM650 per month, on the proviso that they turn up on all days offered within the month. Harvesters and tappers in our Peninsular estates are also guaranteed this minimum basic wage although these employees are capable of earning 3-4 times above this minimum basic wage in high cropping periods.

In addition to the above, KLK has also responded to the Government’s call to increase wages by RM200 per month to all plantation workers (below executive level) provided

they meet certain simple criteria. These criteria are set to encourage workers towards better productivity and outturn.

Various activities were also carried out this financial year to foster better ties with our employees and to improve their quality of life. Examples include but are not limited to medical health screening and awareness programmes, rewarding employees’ children who perform well in their examinations and recognition of long-service. We promote healthy lifestyles and team cohesiveness by sponsoring free courts, nets and consumables for our employees to participate in sporting activities. We also nurture a cordial relationship with various employee unions in order to protect employees’ wellbeing and guarantee us their support, which will in turn lead towards the attainment of our business goals.

In order to assist employees with their income tax returns, an open day with the Inland Revenue Board (“IRB”) was organised, during which staff were given the opportunity to seek clarification and settlement on their income tax matters and also register for e-filing. The open day was well attended and received as it provided convenience to both the IRB and KLK employees in their income tax dealings. Future open days are being planned with EPF and SOCSO.

In terms of housing and amenities, continuous efforts are made to beautify

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