Sustainable Forest Management Transforming PWI to Deliver ...

Sustainable Forest Management TransformingPWI to Deliver Sustainable Result

Annual Report 2019

PRICEWORTH INTERNATIONAL BERHAD399292-V

Contents Corporate Information 2

Group Corporate Structure 3

5 Year Financial Highlights 4

Directors’ Profile 5

Key Senior Management Profile 7

Management Discussion & Analysis 8

Corporate Sustainability Statement 12

Corporate Governance Overview Statement 15

Statement of Director’s Responsibility for Preparation of Financial Statements 32

Audit Committee Report 33

Statement of Risk Management and Internal Control 36

Additional Compliance Information 38

Financial Statements 39

List of Properties 126

Analysis of Shareholdings 128

Notice of Twenty-Third Annual General Meeting 130

Proxy Form

Priceworth International Berhad (399292-V)2

BOARD OF DIRECTORS

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

Lim Nyuk Foh(Managing Director)

Koo Jenn Man(Executive Director)

Chiew Boon Chin (Independent Non-Executive Director)

Ooi Jit Huat(Independent Non-Executive Director)

BOARD COMMITTEES

Audit CommitteesChiew Boon Chin (Chairman)Ooi Jit HuatDatuk Dr. Roslan Bin A Ghaffar

Nomination CommitteesOoi Jit Huat (Chairman)Datuk Dr. Roslan Bin A GhaffarChiew Boon Chin

Remuneration CommitteeChiew Boon Chin (Chairman)Ooi Jit Huat Datuk Dr. Roslan Bin A Ghaffar

Risk Management CommitteeChiew Boon Chin (Chairman)Lim Nyuk Foh Koo Jenn Man

COMPANY SECRETARY

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

REGISTERED OFFICE

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

SHARE REGISTRAR

Boardroom Share Registrars Sdn. Bhd.11th Floor, Menara SymphonyNo. 5, Jalan Prof. Khoo Kay KimSeksyen 1346200 Petaling Jaya, SelangorTel No. : 03 -78904700Fax No. : 03 -78904670

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

Corporate Information

100%MAXLAND DOCKYARD

& ENGINEERINGSDN BHD

60%SEMARING MDE JV

SDN BHD

100%HARVEST ELEMENT

SDN BHD

100%MAJU SINARNETWORKSDN BHD

100%BETA BUMI SDN BHD

100%INNORASDN BHD


100%CERGAS KENARI

SDN BHD

100%MAXLAND GARBON

SARLU

100%MAXLAND (CONGO)

SARLU

100%SINORA

SDN BHD

100%KEKAL ERAMAJU

SDN BHDSINO GOLDENSTAR LIMITED

100%LIGREEN (SI)

LTD

60%PRICEWORTH

SAWMILL (SI) LTD

100%PWP (SI)

LTD

100%CABARAN CERDAS

SDN BHD

100%MAXLAND (SI)

LTD

100%MAXLANDSDN BHD

100%LIGREEN (PNG)

LTD

Manufacturing of plywood, sawn timber & moulded timberTimber logs harvesting contract works

Timber concession and reforestationOthers and dormant

100%GSR PTE LTD

100%PRICEWORTHINDUSTRIESSDN BHD

100%RIMBUNAN GAGAH

SDN BHD

Annual Report 2019 3

Group Corporate Structure

100%MAXLAND DOCKYARD

& ENGINEERINGSDN BHD

60%SEMARING MDE JV

SDN BHD

100%HARVEST ELEMENT

SDN BHD

100%MAJU SINARNETWORKSDN BHD

100%BETA BUMI SDN BHD

100%INNORASDN BHD


100%CERGAS KENARI

SDN BHD

100%MAXLAND GARBON

SARLU

100%MAXLAND (CONGO)

SARLU

100%SINORA

SDN BHD

100%KEKAL ERAMAJU

SDN BHDSINO GOLDENSTAR LIMITED

100%LIGREEN (SI)

LTD

60%PRICEWORTH

SAWMILL (SI) LTD

100%PWP (SI)

LTD

100%CABARAN CERDAS

SDN BHD

100%MAXLAND (SI)

LTD

100%MAXLANDSDN BHD

100%LIGREEN (PNG)

LTD

Manufacturing of plywood, sawn timber & moulded timberTimber logs harvesting contract works

Timber concession and reforestationOthers and dormant

100%GSR PTE LTD

100%PRICEWORTHINDUSTRIESSDN BHD

100%RIMBUNAN GAGAH

SDN BHD


5 Year Financial Highlights

2019 2018 2017 2016 2015

Turnover RM’000 31,144 169,755 168,488 166,938 203,711

Profit / (Loss) Before Tax RM’000 (156,503) 33,632 2,200 1,641 61

Tax RM’000 (930) (20,844) 2,060 (721) 1,781

Profit / (Loss) After Tax RM’000 (157,433) 12,788 4,260 920 1,842

Share Capital RM’000 366,052 263,910 243,505 65,460 46,670

Net Assets RM’000 285,223 340,551 304,472 274,551 254,063

Net Assets Per Share RM 0.07 0.33 0.33 0.42 0.54

Net Earnings / (Loss) Per Share

(Basic) (sen) (4.0) 1.3 0.6 0.2 0.6

Turnover (RM’000)

2015 2016 2017 2018 2019

203,711

166,938 168,488 169,755

31,144

0

250,000

200,000

150,000

100,000

50,000

Profit / (Loss) before Tax (RM’000)

2015 2016 2017 2018 2019

61 1,641 2,200

33,632

(156,503)

(200,000)

100,000

50,000

0

(50,000)

(100,000)

(150,000)

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

2015 2016 2017 2018 2019

0.6 0.6

0.2

1.3

(4.0)

(5.0)

5.0

2.5

0

(2.5)

Net Assets (RM’000)

2015 2016 2017 2018 2019

254,063

274,551304,472

340,551

285,223

0

100,000

400,000

300,000

200,000


Directors’ Profile

DATUK DR. ROSLAN BIN A GHAFFARIndependent Non-Executive Chairman67 years of age, Malaysian, MaleMember of Audit Committee, Nomination Committee and Remuneration Committee

Datuk 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, Datuk 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 on 1 September 2007.

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

He does not have any family relationship with any Director and/or major shareholder of the Company nor conflict of interest with the Company.

He has no convictions for offences within the past 5 years (other than traffic offences, if any), nor any public sanction or penalty imposed by regulatory bodies during the financial year.

LIM NYUK FOHManaging Director55 years of age, Malaysian, MaleMember of Risk Management Committee

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 is currently also the Managing Director of Bertam Alliance Berhad. He is a substantial shareholder of the Company. He does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest with the Company.

He has no convictions for any offences within the past 5 years (other than traffic offences, if any), nor any public sanction or penalty imposed by regulatory bodies during the financial year.


Directors’ Profile (continued)

KOO JENN MANExecutive Director 46 years of age, Malaysian, MaleMember of Risk Management Committee

Mr Koo was appointed 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 subsequently 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.

Currently, Mr Koo is the Non-Independent Non-Executive Director of Bertam Alliance Berhad. He does not have any family relationship with any Director and/or major shareholder of the Company, nor conflict of interest with the Company.


OOI JIT HUATIndependent Non-Executive Director68 years of age, Malaysian, MaleChairman of Nomination CommitteeMember of Audit Committee and Remuneration Committee

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 the Independent Non-Executive Director of Kwantas Corporation Berhad.

He does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest with the Company.


CHIEW BOON CHINIndependent Non-Executive Director52 years of age, Malaysian, Male Chairman of Audit Committee, Remuneration Committee and Risk Management CommitteeMember of Nomination Committee

Mr Chiew was appointed to the Board on 21 February 2019. He graduated from the University of Windsor, Ontario Canada with a Bachelor Degree major in Mathematics. He was attached to a men’s undergarment manufacturer from 1991 till 2003. During his tenure with company, he oversaw product marketing, production function, direct brand management, product launches, advertising and tradeshow marketing. Mr. Chiew is presently the Administrative and Product Manager of an apparel distribution company. He is a member of the management and assisted the company in developing a fully integrated consignment system and ISO 9001 implementation.

Mr Chiew is currently the Executive Director of Bertam Alliance Berhad.

He does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest with the Company.



LIM NYUK FOHManaging Director 55 years of age, Malaysian, Male

The management team is headed by our Managing Director, Mr Lim Nyuk Foh. His personal profile as set out in the Directors’ Profile on page 5 of this Annual Report.

KOO JENN MAN Executive Director 46 years of age, Malaysia, Male

Mr Koo was appointed as Executive Director on 25 May 2011. His personal profile as set out in the Directors’ Profile on page 6 of this Annual Report.

FONNY TSEN LIP FON Director of Sinora Sdn Bhd 55 years of age, Malaysian, Female

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 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 Director of Maxland Sdn Bhd 62 years of age, Malaysian, Male

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 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.

Key Senior Management Profile


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 more than 25 years of experience in the industry. on upstream operation, we have 116,920 hectares of forestland under our management for replanting and harvesting, while on downstream operation, 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 currently operate 116,920 hectares of Forest Management Units with ranging from 50 years to 80 years.

We have more than 500 units of machinery and vehicles for our operations including 7 units of log fishers which forms one of the main pre-requisites to comply with Reduced Impact Logging (RIL) under SFM. This full-fledged fleet has the capacity to handle more than 500,000 cubic meter of timber harvesting per year.

Our upgraded plywood and sawn 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 meter of sustainable plywood a year and 115,000 cubic meter of sawn timber a year. We employ more than 2,000 personnel and are equipped with state-of-the-art wood peeling machinery.

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.

During the financial year, the Group’s operations were affected by the temporary interruptions to facilitate the widely reported verifications conducted by authorities, which was led by the Special Task Force set up by the Sabah Chief Minister Department on the major timber companies in Sabah since July 2018.

Despite of the adverse effects from such temporary interruptions, the Group has complied with the authorities’ requests as the operations are in accordance to the laws and practices under the Sabah Forest Enactment, 1968 and the approved Forest Management Plan No 3 for FMU 5 which was approved by Sabah Forestry Department (“SFD”) with the input and participation of three (3) non-governmental organizations (“NGO”) which subsequently formed the NGO council. The Group is in the midst of liaising with the relevant authorities for the finalization of the verifications and requesting for resumption of operation.

Corporate Objectives and Strategies

As reported in previous financial year, the Board of Directors has embarked on a “Game-changing, transformative acquisition” of the 88,920 hectares Forest Management Unit no. 5 (FMU5). The Group has also completed the Proposed Right Issues of RM102 million during the financial year in which RM80 million had been utilised to reduce the bank borrowing. This has positioned PWI on a sound footing with bigger capitalisation and lower gearing. The acquisition of FMU 5 will ensure a stable, consistent supply of sustainable timber to feed the mills as well as increase to utilisation of the timber harvesting equipment

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 Agricultural standards (JAs). We have other products such as sawn timber, moulded timber, finger-joint which are mainly export to Thailand, Taiwan, Korea and other countries.

Management Discussion & Analysis


In terms of contribution to revenue, the two largest contributing products are plywood and sawn timber. Our plywood products are of the highest quality which is subject to JAS certification, a requirement for the Japanese market. Our plywood plant obtained certification for the ISO 9001-2008 standard for manufacturing processes, ensuring our products are of high quality, including process quality control measure and final quality inspection being complied with.

Customer Base

Our major buyers are established Japanese trading houses with whom we have maintained strong relationships for more than 20 years. Other buyers are trading houses from Thailand, Taiwan, Korea and Malaysia and others.

FINANCIAL RESULTS

The Group recorded a loss of RM157 million for the financial year ended 30 June 2019 (FY 2018: profit RM12.8 million) were mainly due to the temporary interruptions of logging operations to facilitate the widely reported verification by the relevant authorities. In addition, the increase in losses was also due to the impairment on goodwill, badly degraded round logs stock written off after prolonged restrictions imposed by authorities for their verification, provision for receivables and written back of deferred tax assets.

PWI has recapitalised the Company and reducing its gearing through various fund raising exercises including the Rights Issue which had been completed in August 2018. 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 acquisition of FMU5. Besides the purchase consideration of RM260 million for FMU 5, we do not envisage significant capital expenditure as PWI is well equipped with plant and machinery.

Other Operating IncomeThe other operating income mainly consist of RM11 million which was generated from the waiver of penalty interest from a financial company.

Other Operating ExpensesThe other operating expenses of 93 million mainly due to the impairment on goodwill, badly degraded round logs stock written off after prolonged restrictions imposed by authorities for their verification and provision for receivables.

Finance CostsOne of the Group’s current main objective is to reduce the gearing ratio and lowering its finance cost.

Following the completion of our rights issue in August 2018, PWI’s gearing ratio reduced to 0.12 times.

Income Tax Expenses The deferred tax expense represents the deferred tax movement of the subsidiary companies. The deferred tax liabilities were resulted by the temporary differences on the qualifying assets.

Management Discussion & Analysis(continued)


Malaysia Operations

In Malaysia, our focus is in Sabah which includes 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 sustainable Forest Management (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 116,920 hectares of FMU under the SFM regime which requires replanting. Limited areas are allowed for harvesting under the new regulations. Hence, most of our assets remain underutilised. This reduced timber supply has also impacted our plywood mill operations.

Quality Engineered Wood products

While our main focus in manufacturing currently is in plywood, our next step will be to explore and expand into container flooring in the near future.



POTENTIAL RISKS

As mentioned earlier, the Group’s operations were affected by the temporary interruptions to facilitate the widely reported verifications conducted by authorities, which was led by the Special Task Force set up by the Sabah Chief Minister Department on the major timber companies in Sabah since July 2018.

Despite of the adverse effects from such temporary interruptions, the Group has complied with the authorities’ requests as the operations are in accordance to the laws and practices under the Sabah Forest Enactment, 1968 and the approved Forest Management Plan No 3 for FMU 5 which was approved by Sabah Forestry Department (“SFD”) with the input and participation of three (3) non-governmental organizations (“NGO”) which subsequently formed the NGO council. The Group is in the midst of liaising with the relevant authorities for the finalization of the verifications and requesting for resumption of operation.

PWI see this as the right direction towards restructuring the timber industry in Sabah and developing downstream activities, which will in turn be positive for the economy of the state and for the Group.

Furthermore, the temporary disruptions have significantly reduced the supply of logs to the market and the silver lining is that it has elevated the selling prices of round logs, plywood and sawn timber products which PWI is prepared to take advantage of once operations resumed.

FORWARD LOOKING

Despite being affected by the temporary disruptions mentioned above, PWI see this as the right direction towards restructuring the timber industry in Sabah and developing downstream activities, which will in turn be positive for the economy of the state and for the Group.

Furthermore, the temporary disruptions have significantly reduced the supply of logs to the market and the silver lining is that it has elevated the selling prices of round logs, plywood and sawn timber products which PWI is prepared to take advantage of once operations resumed.

The Group is in the midst of liaising with the relevant authorities for the finalization of the verifications and requesting for resumption of logs harvesting operation.

The Group has signed a log supply agreement with Innoprise Corporation Sdn Bhd’s subsidiary Rakyat Berjaya Sdn Bhd on 7 October 2019, following the terms of the memorandum of understanding (MOU) signed on 3 September 2019. Under the agreement signed today, Priceworth will receive logs worth up to a 30 percent stake and to be paid for via an issue of new shares following the completion and acceptance of a due diligence exercise. With this, the PWI Group will resume logging activities in the Yayasan Concession areas which will ensure a constant Log Supply for the PWI Group’s Plywood and Sawn timber mills. PWI also looks forward to the resumption of logging operations in Forest Management Unit FMU 5. Innoprise Corporation Sdn Bhd and PWI will use their best efforts to obtain government approvals for PWI to resume log harvesting operations

Innoprise Corporation Sdn Bhd is the investment holding vehicle of Yayasan Sabah for its various investments which includes the various subsidiaries companies owned by Yayasan Sabah. Yayasan Sabah is a Sabah State sanctioned organization that exists to promote educational and economic opportunities for the benefit of the people of Sabah.



Priceworth International Berhad (“PWI” or “The Group”) has always focused on being a responsible corporate citizen by embedding sustainable practices into our business processes from upstream operations such as sustainable forest management, reforestation and comprehensive harvesting planning to downstream operations such as manufacturing of engineered wood products and globally certified wood products from bodies such as Forest Stewardship Council (“FSC”) and Global Forestry Services (“GFS”).Our Sustainability Statement forms part of our Annual Report and is reviewed by our Board of Directors.

SCOPE OF SUSTAINABILITY AND BASIS FOR THE SCOPE

Pursuant to Bursa Malaysia Securities Berhad’s Sustainability Reporting Guide, PWI’s sustainability framework is based upon evaluation on the economic, environment, and social risk and opportunity that consistent with PWI’s corporate governance framework and social responsibilities.

To demonstrate our commitment towards sustainability, the Group will formalize a governance structure to drive the Group’s sustainability agenda.

ENVIRONMENT

The Group has been in the timber industries since 1992. Currently, we implement sustainable forest management over timber concession of 28,000 hectares with 50 years tenure and a Forest Management Unit (FMU5) of 88,920 hectares with remaining tenures of 80 years under a sustainable Forest Management Licence Agreement (“SFMLA”). The Forest Management Plan of FMU5 (“FMP no.3) has been approved by the Forestry Department of Sabah in October 2017. The objectives and strategies of the FMP3 are design to produce, restore or sustain ecosystem integrity and desired conditions, uses, products and services in the SFMLA area over a long term. They were derived based on a wide-ranging consultation with other stakeholders especially with non-governmental organisations (NGO) and made reference to the High Conservation Value (“HCV”) assessment carried out by Wild Asia of WWF Malaysia in the SFMLA area.

By using the technique of Mosaic planting, we have to-date, successfully rehabilitated approximately 12,000 hectares of our timberconcessions with the following certifications:

Forest Certificate Awards:Maxland Sdn Bhd- Forest Rehabilitation

1) Certificate of Complianceserial no: SFD-CC/217/9Achievement: Mosaic planting and silviculture treatment under Annual Work Plan 2018, in FMU 17A (Area A) and FMU 17B (Area B & C), as stipulated in the sustainable Forest Management License Agreement (SFMLA: 01/2007)

2) Certificate of Compliance (Rakyat Berjaya Sdn Bhd (Maxland Sdn Bhd)serial no: SFD-CC/225/5Achievement: Mosaic planting and silviculture treatment under AnnualWork Plan 2017, in FMU16, as stipulated in the sustainableForest Management License Agreement (SFMLA: 09/97)

Beta Bumi Sdn Bhd

1) Certificate of Compliance (Rakyat Berjaya Sdn Bhd (Beta Bumi Sdn Bhd)serial no: SFD-CC/233/1Achievement: NFM Harvesting as specified in the Specification for Reduced-Impact Logging (RIL),Timber Harvesting Operations, Mosaic Planting and silviculture treatment under the Annual Work Plan 2017 in FMU 16, as stipulated in the sustainable Forest Management License Agreement (SFMLA : 09/97)

Corporate Sustainability Statement


Conservative Harvesting Plan (“CHP”) will be carried out to plan and map the trees. Reduced Impact Logging RIL reduces logging damage to future crop trees. The system is conducive for allowing the forest to regenerate naturally before the next harvesting cycle while maintaining forest cover for the protection of soil and water. Under this regime and with the use of our new model of equipment, Log Fishers, the impact on the environment is largely reduced during the harvesting of logs.

Other activities which are undertaken by us in the SFMLA area are various forest protections such as monitoring on forest encroachment, illegal logging, forest fire and illegal hunting and socio-economic development programs for the local communities living within and adjacent to the SFMLA area.

COMMUNITY

On the way towards our timber concession, we have built and continously maintaining 2 main steel and concrete bridges of 80 metres long each, the Tamoi and Imbak steel bridge, and various wooden bridges within the 135KM of roads under our maintenance. these infrastructures are an important access for the thousands of villagers at the nearby village.

We have also provided employment opportunity and necessary training to the local villagers with an aim to eventually improve their livelihood and living standard. The local stewardship of human resources plays an important role in sustainable resource use. the participation of local communities in the management of biodiversity not only promotes conservation but can also help

Under the SFMLA area, 4,101 hectares has been designated as community forest zone for the livelihood farming of about 3,000 local native people in addition to another 1,500 local natives living adjacent to the SFMLA area. We will work closely with the Department of Agriculture and the Sabah Forestry Department to eliminate inefficient farming and introduce effective program that pave the way for modern and productive agriculture that enhanced the productivity of the community forest area set aside for them.

WORKPLACE

As at 30 June 2019, our Group employs approximately 300 employees and supports the living hoods of approximately 1,000 people including our employees and their families, workers of our various sub- contractors and their families. The management recognizes and values the contributions, skills, and knowledge of our employees. Every year, we carried out various trainings which cover the area such as workplace safety, techniques on Reduced Impact Logging and its code of practices and Comprehensive Harvesting Planning as part of the sustainable continuance programs.

Corporate Sustainability Statement(continued)


MARKETPLACE

In the production and marketing of our wood products, the Group is committed to legality, sustainablility and traceability, thecertificates listed below is evidence of the company’s commitment on our products:

Year Certification Scope

2002 ISO 9001:2000 1st Cert. Quality System for Manufacturing of Plywood and Veneer

2003 JAS (Japanese Agricultural Standard) For Manufacturing Concrete Plywood, Structural & General Plywood

2005 FAS (Forest Stewardship Council) For 100% FSC Certified Plywood

2006 ISO 9001:2000 Re-Cert. Quality System for Manufacturing of Plywood and Veneer

2008 BSMI (Taiwan) Control of Formaldehyde Emission

2008 CE Marking (Europe) For Manufacturing Structural Plywood

2009 CARB P2 (USA) Control of Formaldehyde Emission

2010 5S Workplace Organization Method Uses Seiri, Setton, Seiso, Seiketsu, Shitsuke

2011 MITB (Malaysia) For Manufacturing Structural Plywood

2017 TLAS Legality & Traceability

2018 EPA (USA) Control of Formaldehyde Emission

Table 1: List of certifications and year awarded

We are subjected to an annual audit by GFS and Sabah Forestry Department to check on compliance to TLAS (TIMBER LEGALITY ASSURANCE SYSTEM) under P5 and P6. We take pride that there is no major gaps from the audits in terms of legality and traceability of our raw materials and products.

One of our main market is Japan. Our plywood to Japan is JAS certified. JAS certification is not only a recognition on plywood quality and production standards but also on traceability.

We adopt the highest standard in formaldehyde emission through our certifications with JAS, CARB P2 & EPA. These certifications ensure full compliance as stipulated in its standards in controlling the level of formaldehyde emission as claimed on our plywood.

As a result of our continuance research for sustainability and environmental friendly raw materials, we have embarked on the container flooring project. Container flooring is extremely durable plywood for the container floor. Tests using renewable resources such as rubber wood and bamboo is underway.

Corporate Sustainability Statement(continued)


The Board of Directors (“the Board”) of Priceworth International Berhad acknowledges the importance of maintaining high standard of corporate governance practices throughout the Group to protect and enhance long-term shareholders’ value and all stakeholders’ interests. With the principles and recommendations as set out in the Malaysian Code on Corporate Governance (“MCCG”), the Board is committed to ensure that a sound framework of best corporate governance practices is in place by managing the affairs of the Group with transparency, integrity and accountability.

The Board is pleased to present the following Corporate Governance Overview Statement (“Statement”) that describe the extent of how the Group has applied and complied the three (3) principles set out in the MCCG throughout the financial year ended 30 June 2019:

(a) Principle A : Board leadership and effectiveness;(b) Principle B : Effective audit and risk management; and (c) Principle C : Integrity in corporate reporting and meaningful relationship with stakeholders.

This Statement also serves as a compliance with Paragraph 15.25 of Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and shall be read together with the Corporate Governance Report (“CG Report”) of the Company that provides detailed application for each practice as set out in MCCG. The CG report can be downloaded from the Company’s website at www.pwibhmalaysia.com.my or through the announcement published on the website of Bursa Securities.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

PRINCIPLE A: PART 1– BOARD RESPONSIBILITIES

Intended Outcome 1.0• Every company is headed by a Board, which assumes responsibility for the company’s leadership and is

collectively responsible for meeting the objectives and goals of the company.

1.1 Strategic aims, values and standards

The Board is responsible for the leadership, oversight and overall management of the Company. An effective Board is the one that made up of a combination of Executive Directors with intimate knowledge of the business and Non-Executive Directors from diversified industry/business background to bring broad business and commercial experience to the Group. The Board has the overall responsibilities for corporate governance, establishing goals, strategies and direction, reviewing the Group’s performance and critical business issues and ultimately the enhancement of long-term shareholders’ value. It monitors and delegates the implementation of the strategic direction to Management.

The Directors collectively, with their different background and specialization, bring with them a diverse wealth of experience and expertise in areas such as business, finance, legal, regulatory and operations which is relevant to the Group. A brief profile of each individual Director is set out in this Annual Report.

The Board reviews the strategic plan of the Company tabled by Management at its meeting. The review would cover the performance targets and long-term plans of the Company to be met by Management. On an annual basis, the Executive Directors and Management review with the Board the outlook of the relevant industries for the following financial year.

The Board is satisfied with the strategic plan of the Company as presented by the Management. The Board would continue to review the plan to ensure its implementation. The Board’s role is to oversee the performance of the Management to determine whether the business is properly managed. The Board gets updates from Management at the quarterly Board meetings when reviewing the unaudited quarterly results. During such meetings, the Board participated actively in the discussion on the performance of the Company and assessed the performance of the Management.

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.

Corporate Governance Overview Statement


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

PRINCIPLE A: PART 1– BOARD RESPONSIBILITIES (cont’d)



1.1 Strategic aims, values and standards (cont’d)

The Board has a formal schedule of matters reserved for its decision which include, amongst others, the following:

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.

A part of its effort to ensure the effective discharge of its duties, the Board has delegated certain functions and responsibilities to the following respective Board Committees:

• Nomination Committee;• Remuneration Committee;• Audit Committee; and• Risk Management Committee.

The Chairman of each Board Committee will report to the Board on the outcome of the Committee’s meetings which includes the key issues deliberated at the Committee’s meetings. The Board Committees discharge their duties in accordance to the Terms of Reference approved by the Board.

1.2 The Chairman of the Board

The Board has elected a Chairman from amongst the members of the Board who is a Non-Executive Director, Datuk Dr. Roslan Bin A Ghaffar as the Company’s Independent Non-Executive Chairman provides leadership and guidance to the Board and is responsible for ensuring effectiveness of the Board’s performance. Datuk Dr. Roslan A Ghaffar works closely with the rest of the Board members in forming policies and strategies to align the business activities driven by the management team.

The responsibilities of the Chairman are clearly defined in the Board Charter.

1.3 Separation of the positions of the Chairman and Managing Director (“MD”)

The Chairman, Datuk Dr. Roslan Bin A Ghaffar, and the MD, Mr Lim Nyuk Foh, both holds separate position. There is a clear division of responsibilities between the Chairman and the MD to ensure the balance of power and authority, such that no one individual has unfettered powers of decision-making.

The Chairman is responsible in leading the Board in its collective oversight of Management and ensure effectiveness of the Board matters whilst the MD is responsible to implement the policies and strategies approved by the Board for the purposes of running the business and the day-to-day management of the Company.

1.4 Qualified and Competent Company Secretaries

In compliance with Practice 1.4 of the MCCG, the Board is supported by two (2) External Company Secretaries. The Company Secretaries of the Company are qualified to act as Company Secretary under Section 235 of the Companies Act, 2016 (“the Act”). The Company Secretaries provides the required support to the Board in carrying out its duties and stewardship role, providing the necessary advisory role with regard to the Company’s constitution, Board’s policies and procedures as well as compliance with all regulatory requirements, MCCG, guidance and legislation.

Corporate Governance Overview Statement(continued)







1.4 Qualified and Competent Company Secretaries (cont’d)

The Board has ready and unrestricted access to the advice and services of the Company Secretaries, who are considered capable of carrying out the duties to which the post entails. The Directors may seek advice from the Management on issues under their respective purview. The Directors may also interact directly with the Management, or request further explanation, information or updates on any aspect of the Company’s operations or business concerns from them.

The Company Secretaries keep the Board abreast with the latest regulatory updates and also ensure that deliberations at Board and Board Committee meetings are well documented.

The Board is satisfied with the performance and support rendered by the two (2) qualified and experienced Company Secretaries to the Board in discharging of its functions.

The Company Secretaries are 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 Act, the MMLR and the Constitution of the Company;• facilitating orientation of new director; • disseminating suitable training courses and arranging for Directors to attend such courses when requested.

1.5 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.






1.5 Access of Information and Advice (cont’d)

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.

Senior Management staff may be invited to attend Board meetings to provide the Board detailed explanations and clarifications on certain matters that are tabled to the Board. 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.

The Board meets at least four (4) times a year at quarterly intervals, with additional meetings convened as necessary. There were five (5) meetings held during the financial year ended 30 June 2019 as set out the below table:-

Name of Directors No. of Meetings Attended %

Datuk Dr. Roslan Bin A Ghaffar 5/5 100%

Mr Lim Nyuk Foh 3/5 60%

Mr Koo Jenn Man 5/5 100%

Mr Ooi Jit Huat 5/5 100%

Mr Chiew Boon Chin(Appointed on 21 February 2019)

1/1 100%

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.

The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company





Intended Outcome 2.0• There is demarcation of responsibilities between the board, board committees and management.• There is clarity in the authority of the board, its committees and individual directors.

2.1 Board Charter

The Board understands the importance of the roles and responsibilities between the Board and Management. As part of the good corporate governance process, the Board has documented these roles and responsibilities in the Board Charter to ensure accountability of both parties and also to provide reference for directors in relation to the Board’s role, powers, duties and functions.

The Board reviews the Board Charter periodically, where necessary, to ensure it remains relevant and effective at the prevailing time and business environment.

The Board Charter clearly set outs the functions, responsibilities, and processes of the Board and ensures that all Board members are aware of their roles and duties. In order to ensure that the direction and control of the Group are in the hands of the Board, it had adopted a formal schedule of matters reserved for the Board’s deliberation and decision which is set out in the Board Charter. The Board Charter is available on the Company’s website at www.pwibhmalaysia.com.my.

Intended Outcome 3.0• The Board is committed to promoting good business conduct and maintaining a healthy corporate culture

that engenders integrity, transparency and fairness.• The Board, management, employees and other stakeholders are clear on what is considered acceptable

behavior and practice in the company.

3.1 Code of Ethics and Conduct

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.

3.2 Whistle Blowing Policy and Procedures

The Board always encourages employees and stakeholders to report any grievances and raise concerns about misconduct, wrongdoings, malpractices involving the Company. However, the Board together with management has yet to develop formal policies and procedures on whistle blowing due to lack of resources and suitable personnel to oversee the whistle blowing function. The Board is always mindful of the importance of having formal whistle blowing policies as a way to create the conditions necessary for the effective management of whistle blowing and shall adopt a policy on whistle blowing as soon as practicable.




PRINCIPLE A: PART 2 – BOARD COMPOSITION (cont’d)

Intended Outcome 4.0• Board decisions are made objectively in the best interests of the company taking into account diverse

perspectives and insights.

4.1 Board Composition

The Board currently comprises of three (3) Independent Non-Executive Directors out of total five (5) Directors in the Board. Therefore, the following prescribed requirements have fully complied by the Board:

• Paragraph 15.02(1) of the MMLR which stipulates that at least 2 directors or 1/3 of the board of directors, whichever is higher, are Independent Directors; and

• Practice 4.1 of the MCCG, where at least half of the board comprises Independent Director.

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 Directors are 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.

4.2 Tenure of Independent Director

The MCCG 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 MCCG further recommends that if the Board desires to retain such director as an Independent Director, it may justify and seek the shareholders’ approval. If the Board continues to retain the Independent Director after twelfth (12) years, the Board will seek annual shareholders’ approval through a two-tier voting process.

The Company does not impose a limit on the length of service for both Executive and Independent Non-Executive Directors.

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.

During the financial year under review, both the Nomination Committee and the Board have assessed the independence of Mr Ooi Jit Huat (“Mr Ooi”) and Mr Chiew Boon Chin (“Mr Chiew”) and are satisfied with their skills, contributions and independent judgements. Besides, Mr Ooi and Mr Chiew remained objective and independent in expressing their views and in participating in deliberation and decision making of the Board and Board Committees.

The Company will be seeking its shareholders’ approval at this forthcoming 23rd AGM to retain Mr Ooi as Independent Director of the Company.

4.3 Diversity of the Board and Senior Management

The Company does not practice any form of gender, ethnicity and age group biasness as all candidates either Board or Senior Management team shall be given fair and equal treatment.







4.3 Diversity of the Board and Senior Management (cont’d)

The Board believes that there is no detriment to the Company in not adopting a formal gender, ethnicity and age group diversity policy as the Company is committed to provide fair and equal opportunities and nurturing diversity within the Group.

Notwithstanding with the above, the Board affirms its commitment to boardroom diversity as a truly diversified board can enhance the board’s effectiveness, perspective, creativity and capacity to thrive in good times and to weather the tough times. In identifying suitable candidates for appointment to the Board, the Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board.

4.4 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.

4.5 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.

The Nomination Committee is also empowered to bring to the Board, recommendation as to the appointment of any new Director or to fill board vacancies as and when they arise. In making its recommendation, the Nomination Committee will consider the required mix of skills, knowledge, expertise, experience and other qualities, including core competencies which Directors of the Company should bring to the Board.

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; andviii) to recommend to the Board concerning the re-election by shareholders of any director under the “retirement by rotation”

provisions in the Company’s Constitution.

Mr Chiew Boon Chin has been appointed as an Independent Non-Executive Director during the financial year ended 30 June 2019.




PRINCIPLE A: PART 2 – BOARD COMPOSITION



4.6 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 the Constitution 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 he/she has sufficient time to effectively discharge his/her 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.

4.7 Nomination Committee

As recommended by the MCCG, 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 (Independent Non-Executive Director)Member : Datuk Dr. Roslan Bin A Ghaffar (Independent Non-Executive Director)Member : Chiew Boon Chin (Independent Non-Executive Director)







4.7 Nomination Committee (cont’d)

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 line with the amendment of MMLR, the term of reference of the Nomination Committee can be viewed at the Company’s website at www.pwibhmalaysia.com.my.

The Nomination Committee had undertaken the following activities for the financial year ended 30 June 2019:

i) reviewed and recommended to the Board the appointment of new Board member and Board Committees; (ii) reviewed the effectiveness of the Board, as a whole, Board Committees and individual Directors and make appropriate

recommendation to the Board; iii) reviewed the Independence of Independent Directors;iv) reviewed and recommended to the Board, the re-election of the Directors who will be retiring at the forthcoming Annual

General Meeting (“AGM”) of the Company; andv) reviewed the revised Terms of Reference of the Nomination Committee to align with the MMLR and MCCG.

4.8 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 Secretaries 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 MCCG, the Act 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 2019, the following training programmes and seminars were attended by the Directors: -







4.8 Directors’ Training (cont’d)

Name of Directors Date of Training Title of Training

Datuk Dr. Roslan Bin A Ghaffar 30/04/2019

22/07/2019

Engagement Session with Audit Committee Members on Integrated Reporting (IR)Corporate Liability and MRCB’s Internal Controls

Mr Lim Nyuk Foh 27/11/2018 2019 Budget & Tax Conference

Mr Koo Jenn Man 27/11/201804/12/201811/12/2018

02/04/2019

2019 Budget & Tax ConferenceSeminar Percukaian Kebangsaan 20182019 Budget Seminar –Restoring Public Finances, Sustaining Growth, Enhancing WellbeingIn-House Training on Understanding Financial Reporting & Implication of Inaccurate & Delay in Reporting

Mr Ooi Jit Huat 10/08/201821/11/2018

Internal Audit for Board & Audit Committee2019 Budget Seminar


16/03/2018

02/04/2019

21/11/2018

Malaysian Code on Corporate Governance & Corporate Governance Guide In-House Training on Understanding Financial Reporting and Implication of Inaccurate & Delay In Reporting 2019 Budget Seminar –Restoring Public Finances, Sustaining Growth, Enhancing Wellbeing

Intended Outcome 5.0• Stakeholders are able to form an opinion on the overall effectiveness of the board and individual directors.

5.1 Criteria for Board Assessment

The Nomination Committee conducts 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 considers and approves the recommendations on the re-election and re-appointment of Directors at the Company’s forthcoming Annual General Meeting, with a view to meet the current and future requirements of the Group.

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 he/she must not hold directorships at more than five (5) public listed companies as prescribed in Paragraph 15.06 of the MMLR of Bursa Securities.





Intended Outcome 5.0• Stakeholders are able to form an opinion on the overall effectiveness of the board and individual directors.

5.1 Criteria for Board Assessment (cont’d)

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.

During the financial year ended 30 June 2019, the Nomination Committee conducted an annual assessment of its Directors and the effectiveness of the Board of Directors as a whole in terms of board mix and composition, boardroom activities and board’s relationship with management. It also conducted an assessment of the Directors who are subject to retirement by rotation at the forthcoming 23rd AGM in accordance with the provisions of the Constitution of the Company and relevant provisions of the Act and the MCCG. Upon recommendation by the Nomination Committee of the proposed re-election of the relevant directors, the Board had recommended the re-election of the relevant Directors to be tabled at the forthcoming 23rd AGM for shareholders’ approval.

PRINCIPLE A: PART 3 – REMUNERATION

Intended Outcome 6.0• The level and composition of remuneration of directors and senior management take into account the

company’s desire to attract and retain the right talent in the board and senior management to drive the company’s long-term objectives.

• Remuneration policies and decisions are made through a transparent and independent process.

6.1 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.

6.2 Remuneration Committee

In line with the best practices of the MCCG, the Board has set up a Remuneration Committee which comprises majority of Independent Non-Executive Directors to assist the Board for determining the Director’s remuneration. The present members of the Remuneration Committee are as follow:-

Chairman : Chiew Boon Chin (Independent Non-Executive Director) Member : Ooi Jit Huat (Independent Non-Executive Director) Member : Datuk Dr. Roslan Bin A Ghaffar (Independent Non-Executive Director)

The Remuneration Committee is primarily responsible for recommending the policy and framework of the remuneration of the Directors and Senior Management, including the terms and remuneration of the Executive Director(s), to the Board in order to align with the business strategy and long-term objectives of the Company.

The remuneration of Directors and Senior Management is determined at levels which enable the Company to attract and retain Directors and Senior Management with the relevant experience and expertise to govern the Group effectively.




PRINCIPLE A: PART 3 – REMUNERATION (cont’d)

Intended Outcome 7.0• Stakeholders are able to assess whether the remuneration of directors and senior management is

commensurate with their individual performance, taking into consideration the company’s performance

7.1 Details of the remuneration of Directors

The Board collectively determines the remuneration for the Non-Executive Directors to ensure the same is appropriately reflective of experience and the level of responsibilities and contributions including the number of the scheduled meetings for the Board, board of subsidiaries and Board committees; and competitive compared with the prevalent market practices. Each of the Non-Executive Directors abstains from deliberating and voting on his own remuneration.

A summary in named basis of each individual directors of the remuneration of the Directors (including benefit-in-kind) in the Company for services rendered to the Group for the financial year ended 30 June 2019 is analysed as follows:-

Name of Directors Fees (RM)

Salaries and * other emoluments

(RM)Total(RM)

Mr Lim Nyuk Foh 383,700 36,000 387,300

Mr Koo Jenn Man - 120,000 120,000

Datuk Dr. Roslan Bin A Ghaffar 60,000 - 60,000

Kwan Tack Chiong (Retired on 5 December 2018)

17,500 - 17,500

Mr Ooi Jit Huat 42,000 - 42,000


11,614 - 11,614

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

7.2 Remuneration of Top Five Senior Management

In determining the remuneration packages of the Senior Management personnel, factors that were taken in consideration included their individual responsibilities, skills, expertise and contributions to the Group’s performance and whether the remuneration packages are competitive and sufficient to ensure that the Group is able to attract and retain executive talents.

The Company believes it may not be in its best interest to disclose the information on the remuneration on the named basis of each member of the Senior Management personnel, having considered the highly competitive human resource environment for personnel with the requisite knowledge, expertise and experience in the Group’s business activities.

The remuneration of the Senior Management personnel which is a combination of annual salary, bonus and benefits-in kind are determined in a similar manner as other management employee of the Company. The basis of determination has been consistently applied and is based on individual performance, the overall performance of the Company and benchmarked against other companies operating in similar industry.



PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

PRINCIPLE B: PART 1 – AUDIT COMMITTEE

Intended Outcome 8.0• There is an effective and independent Audit Committee.• The board is able to objectively review the Audit Committee’s findings and recommendations.• The company’s financial statement is a reliable source of information.

8.1 The Chairman of the Audit Committee is not the Chairman of the Board

The Company complied with the Practice 8.1 of the MCCG which stipulates that the Chairman of the Audit Committee is not the Chairman of the Board.

The Audit Committee is chaired by Mr Chiew Boon Chin, Independent Non-Executive Director, who is not the Chairman of the Board.

8.2 Former audit key partner

Practice 8.2 of the MCCG requires the Audit Committee to have a policy that requires a former key audit partner to observe a cooling-off period of at least two (2) years before being appointed as member of the Audit Committee.

8.3 Suitability, objectivity and independent of the 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 assessing or determining 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.




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

PRINCIPLE B: PART 1 – AUDIT COMMITTEE (cont’d)

Intended Outcome 8.0• There is an effective and independent Audit Committee.• The board is able to objectively review the Audit Committee’s findings and recommendations.• The company’s financial statement is a reliable source of information.

8.3 Suitability, objectivity and independent of the external auditors (cont’d)

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 2019.

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 2020.

8.4 Qualification of the Audit Committee

All Audit Committee members are financially literate, and its composition and performance are reviewed by the Nomination Committee annually and recommended to the Board for its approval. One (1) of the Audit Committee member is the members of the Malaysian Institute of Accountants (“MIA”) thus fulfilling the requirement under Paragraph 15.09(1)(c)(i) of the MMLR which requires at least one (1) of the Audit Committee members to be a member of the MIA. Audit Committee members acknowledge the need for continuous education trainings, however, for the year under review, some members of the Audit Committee attended training on the developments in accounting and auditing standards, practices and rules. All Audit Committee members will attend at least one training in financial year 2020 which is relevant to accounting and auditing standards, practices and rules in enhancing their professional development.

8.5 Composition of the Audit Committee

The Audit Committee comprises three (3) Independent Non-Executive Directors, of whom all are Independent Directors. This is in compliance with Paragraph 15.09(1)(b) of the MMLR of Bura Securities, which stipulates that “all the audit committee members must be non-executive directors, with a majority of them being independent directors”. The Company fully complied with the Step-Up Practice 8.4 of the MCCG which recommends that the Audit Committee should comprise solely of Independent Directors.


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

PRINCIPLE B: PART 2 – RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

Intended Outcome 9.0• Companies make informed decisions about the level of risk they want to take and implement necessary

controls to pursue their objectives.• The board is provided with reasonable assurance that adverse impact arising from a foreseeable future event

or situation on the company’s objectives is mitigated and managed.

9.1 Establishment of risk management and internal control framework

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.

As an ongoing process, significant business risks faced by the Group are identified and evaluated and consideration is given on the potential impact of achieving the business objectives. This includes examining principal business risks in critical areas, assessing the likelihood of material exposures and identifying the measures taken to mitigate, avoid or eliminate these risks.

9.2 Features of its risk management and internal control framework

The details of the Company’s internal control system and framework are set out in the Statement on Risk Management and Internal Control on pages 36 of this Annual Report.

9.3 Risk Management Committee (“RMC”)

The composition of RMC comprises three (3) members, one (1) Independent Director and two (2) Executive Directors as follows:

Chairman : Chiew Boon Chin (Independent Non-Executive Director)Member : Lim Nyuk Foh (Managing Director)Member : Koo Jenn Man (Executive Director)

Intended Outcome 9.0• Companies have an effective governance, risk management and internal control framework and stakeholders

are able to assess the effectiveness of such a framework.

10.1 Internal Audit Function

The Group has out-sourced the Internal Audit Function to an independent consulting firm to provide an independent assessment of the adequacy, efficiency, effectiveness of the Group’s internal control system. The Internal Auditors reports directly to the Audit Committee on its activities based on approved annual Internal Audit plan.

The principal responsibility of the Internal Audit Function is to undertake regular and systematic review of the systems of internal control, risk management process and compliance with the Group’s established policies and procedures so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Group. Functionally, the Internal Auditors reviews and assesses the Group’s systems of internal control and report to the Audit Committee directly. Before the commencement of audit reviews for the financial year, an audit plan is produced and presented to the Committee for review and approval. This ensures that the audit direction is in line with the Committee’s expectations.

Further details of the activities of the internal audit function are set out in the Audit Committee Report on pages 33 of this Annual Report.



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

PRINCIPLE C: PART 1 – COMMUNICATION WITH STAKEHOLDER

Intended Outcome 11.0• There is continuous communication between the company and stakeholders to facilitate mutual understanding

of each other’s objectives and expectations.• Stakeholders are able to make informed decisions with respect to the business of the company, its policies on

governance, the environment and social responsibility.

11.1 Effective, transparent and regular communication with its stakeholders

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

11.2 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.

PRINCIPLE C: PART 2 – CONDUCT OF GENERAL MEETINGS

Intended Outcome 12.0• Shareholders are able to participates, engage the board and senior management effectively and make

informed voting decision at General Meetings.

12.1 Notice for an Annual General Meeting

The Annual General Meeting (“AGM”) provides an opportunity for the shareholders to seek and clarify any issues pertaining to the Group and to have a better understanding of the Group’s activities and performance. Both individuals and institutional shareholders are encouraged to meet and communicate with the Board at the AGM and to vote on all resolutions. The Board is always available to meet members of the press after the AGM.

The notice of AGM together with the Annual Report are dispatched to the shareholders at least twenty-eight (28) days prior to the meeting date. Sufficient notice period is given to the shareholders in order for them to schedule their time to attend the Company’s AGM. The Notice for the 23rd AGM of the Company which scheduled to be held on 29 November 2019 had issued on 31 October 2019.



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

PRINCIPLE C: PART 2 – CONDUCT OF GENERAL MEETINGS (cont’d)

Intended Outcome 12.0• Shareholders are able to participates, engage the board and senior management effectively and make

informed voting decision at General Meetings.

12.2 Attendance of Directors at General Meetings

The Company’s AGM is the principal forum for dialogue and interaction with its shareholders at which the shareholders will be informed and updated on current developments of the Group.

The Chairman ensures that shareholders are given the opportunity to comment or raise issues and questions whether pertaining to issues on the agenda, the annual report, Group’s strategy or developments in the Group. The Chairman plays a vital role in fostering constructive dialogue between the Board and the shareholders.

All the members of the Board and the respective chairmen of the Board Committees will be present at the meetings to address queries raised by the shareholders which are relevant to their areas of responsibility. The Company’s External Auditors will also attend the AGM and would be available to answer questions from the shareholders pertaining to audit matters and the auditor’s report.

12.3 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.

COMPLIANCE STATEMENT

The Board is satisfied that to the best of its knowledge, the Company is substantially in compliance with the principles and practices set out in the MCCG as well as the relevant MMLR for the financial year ended 30 June 2019. Any practices in the MCCG which have not been implemented during the financial year will be reviewed by the Board and implemented where possible and relevant to the Group’s business.

This Statement is made in accordance with the resolution of the Board dated 29 October 2019.



The Directors are responsible for ensuring that the annual audited financial statements of the Group and of the Company are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 and the Bursa Malaysia Securities Berhad Main Market Listing Requirements so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2019 and of their financial performance and cash flows for the year ended on that date.

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

• overseeing the overall conduct of the Company’s business and that of the Group;• identifying principal risks and ensuring that an appropriate system of internal control exists to manage these risks;• reviewing the adequacy and integrity of Internal Controls System and Management Information System in the Company and within

the Group;• adopting suitable accounting policies and apply them consistently;• making judgements and estimates that are reasonable and prudent; and • ensuring compliance with application Approved Accounting Standards in Malaysia. The Directors are also responsible for ensuring that proper accounting and other records are kept which enable the preparation of the financial statements with reasonable accuracy and taking reasonable steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 30 June 2019, the Group has used the appropriate accounting policies and applied them consistently and supported by reasonable and prudent judgements and estimates. The Directors also consider that all applicable approved accounting standards have been complied with and further that the financial statements have been prepared on a going concern basis.

This statement was made in accordance with a resolution of the Board dated 29 October 2019.

Statement of Director’s Responsibility for Preparation of Financial Statements


The Audit Committee (“AC”) of Priceworth International Berhad (“PWI” or “the Company”) is pleased to present the AC Report for the financial year ended 30 June 2019.

COMPOSITION

The AC presently comprises the following members:

Chairman : Mr Chiew Boon Chin (Independent Non-Executive Director)Members : Mr Ooi Jit Huat (Independent Non-Executive Director) : Datuk Dr. Roslan Bin A Ghaffar (Independent Non-Executive Director)

During the financial year, Mr Kwan Tack Chiong retired as a Director at the conclusion of PWI’s 22nd Annual General Meeting (“AGM”) held on 5 December 2018 and accordingly ceased to be the Chairman of the Audit Committee. Mr Chiew Boon Chin took over as the Chairman of the Audit Committee from 21 February 2019 following the retirement of Mr Kwan Tack Chiong.

Mr Ooi Jit Huat, is a Chartered Accountant of the Malaysian Institute of Accountants, which is in compliance with paragraph 15.09(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. All member of the AC are financially literate and are able to understand and interpret financial statements to effectively discharge their duties and responsibilities as members of the AC. The details of the members of the AC are contained in the Directors’ Profile are set out in this Annual Report.

The TOR has been reviewed and updated 25 October 2018 to reflect the requirements of the applicable practices and recommendation of the MCCG and which is available on the Company’s website.

ATTENDANCE

During the financial year, a total of five (5) meetings were held and the details of the attendance are as follows:-

Name of Members Designation No. of Meetings Attended %

Mr Chiew Boon Chin(appointed on 21/02/2019)

Chairman 1/1 100%

Mr Ooi Jit Huat Member 5/5 100%

Datuk Dr. Roslan Bin A Ghaffar Member 5/5 100%

The Senior Management, External Auditors and persons carrying out the internal audit function or activity, or both are invited to attend the meeting to facilitate direct communication and to provide clarification on any audit issue whenever necessary. The Company Secretaries are responsible for distributing the agenda of the meetings and relevant information to the AC members in advance, and to record the proceedings of the ARC meetings.

The minutes of the AC meetings were recorded and tabled for confirmation at the next AC meeting and subsequently presented to the Board for notation. During the financial year, the AC Chairman presented to the Board the AC’s recommendations to approve the annual and quarterly financial statements, Internal Audit Report, Audit Planning Memorandum, Audit Review Memorandum and Risk Management Report. The AC Chairman also conveyed to the Board matters of significant concern as and when raised by the External Auditors or Internal Auditors in the respective quarterly presentations.

All deliberations during the Audit Committee meetings where duly minuted. Minutes of the Audit Committee meetings were tabled for confirmation at every succeeding Audit Committee meeting and the Minutes were distributed to each Board member for their notation.

The Audit Committee reviewed with Messrs. PKF on matters relating to the audit of the statutory accounts, audit report and recommendations made by them in their management letter and the adequacy of management’s responses thereto. The Audit Committee also reviewed the non-audit services provided by Messrs. PKF and the aggregate amount of fees paid to them taking into consideration of the process and requirements including fee threshold established under the policy and was satisfied that they were not likely to create any conflicts of interest nor impair the independence and objectivity of the external auditors.

Audit Committee Report


SUMMARY OF ACTIVITIES OF THE AC

During the financial year, the AC has carried out the following works in accordance with its terms of reference to meet its responsibilities:-

a) Reviewed the quarterly unaudited financial results 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 2019;

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 2019 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 effectiveness of the Group’s system of internal control;

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

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

k) Reviewed the Company’s compliance with the Main Market Listing Requirements, applicable Approved Accounting Standards and other relevant legal and regulatory requirements;

l) 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

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

INTERNAL AUDIT FUNCTION

The Company recognised that an internal audit function is essential to ensure the effectiveness of the Group’s system of internal control and is an integral part of the risk management process. The internal audit function for the Group has been outsourced to a professional service firm, Messrs. NSH Corporate Consultants (“NSH”) who conducts an independent review of the Group’s key processes and control systems for the financial year ended 30 June 2019.

The internal audit was conducted using a risk-based approach and was guided by the International Professional Practice Framework (“IPPF”).

The internal audit activities have been carried out according to the internal audit plan that was approved by the AC and is independent and not related to the External Auditors. The Board had via the AC evaluated their effectiveness by reviewing the results of the work done in AC meetings.

Audit Committee Report (continued)


The internal audit activities carried out in accordance with the approved audit plan for financial year ended 30 June 2019 which was approved by the Audit Committee:

Audit Activities Audit Entity

Assess the adequacy and effectiveness of the system of internal control and compliance with the Group’s policies and procedures over Corporate Governance

Priceworth International Berhad

The Audit Committee reviewed the significant audit findings and recommendations in the Internal Auditors’ Report to improve any weakness or non-compliance, and the respective Management’s responses thereto during the meeting held on 21 February 2019.

The internal audit function shall be independent of the activities and operations it audits and reports directly to the AC on the audit of the Group’s operation unit, reviewing the compliance to internal control procedures, highlighting weaknesses and making appropriate recommendations for improvement.

Further details on the Internal Audit Function are set out in the “Statement on Risk Management and Internal Control” on pages 36 to 37 of this Annual Report.

This report is made in accordance with the resolution of the Board dated 29 October 2019.

Audit Committee Report (continued)


Statement on Risk Management and Internal Control

Introduction

This statement is made pursuant to paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and guided by the statement on Risk Management and Internal Control: Guidelines for Directors of listed Issuers. The Group’s system of risk management and internal control applies principally to Priceworth International Berhad and its subsidiaries.

Board’s Responsibility

The Board affirms its responsibility in maintaining the Group’s system of internal controls and risk management and in seeking regular assurance on the adequacy and integrity of the internal controls and risk management systems and processes to safeguard shareholders’ value and the Group’s assets. However, due to the inherent limitations in any system of risk management and internal control, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives. Therefore, the internal control system put in place can only provide reasonable assurance rather than absolute assurance against material misstatements or loss. The significant areas covered by the Group’s system of internal control are financial, operational and compliance.

Risk Management

The Board understands that all areas of the Group’s activities involve some degree of risk and recognises that business decisions involve the taking of appropriate risks and the ultimate objective is to balance the risks involved with the potential returns to the shareholders. The Board is assisted by the Audit Committee in the oversight of overall risk management and internal control system of the Group as well as supported the senior management. The management organization structure and approval authority are clearly defined by outlining the respective management areas of responsibility.

The Board conducts quarterly management meetings with the senior management to review operational matters and identify potential risks. Key matters covering the financial and operation performance, changes in business environments, market outlook and the status and progress of various projects are reviewed, considered and discussed. Actions will be designed in ensuring the achievement of the budgets and the projects in accordance with the Group’s business plan.

The Group consciously covers and transfer certain risks by securing adequate insurance coverage against product, heavy machinery and motor vehicles.

The Board regards the risk management and internal controls system as an integral part of the overall management processes. The Audit Committee is supported by an outsourced Internal Audit Department which provides an independent assessment and evaluation of the effectiveness of the Group’s risk management.

Key Elements of Internal Control

i. Formal organisation structureThe Group has in place a well-defined organisational structure with well-defined lines of reporting, responsibilities and level of authority to ensure quick response to changes in ever changing and challenging business environment and to ensure effective supervision of day to day operations.

ii. Regular Performance ReportingQuarterly management reports are generated to facilitate the Board and the Senior Management in performing financial and op-eration reviews on the various operating units of the companies within the Group. The reports comprise comparison of results of current period with prior and variances between budget and operating results.

Weekly management meetings are chaired by the Chief Executive Officer to discuss the Group’s operations and performance, including the drag of production issue. Other matters being discussed are feedback on progress of production, shortcomings or problems in conjunction with the proposed of solutions and potential risks that may affect the achievements of the Group’s business objectives together with proposed mitigating plans.

iii. Knowledgeable senior ManagementThe Group’s has experienced and competent staffs being allocate to different areas to support and continuously monitor the effectiveness of the Group’s system of internal control.

iv. Internal AuditThe Internal Audit Department that reports to the Audit Committee, conducts reviews on the adequacy and effectiveness of the internal control system of the Group. Where areas of improvement in the system are recommend, the Board reviews and considers the recommendations made by the Audit Committee and senior management.


Statement on Risk Management and Internal Control (continued)

Internal Audit Function

The Group has appointed an established external professional Internal Audit firm, which reports to the Audit Committee and assists the Audit Committee in reviewing the effectiveness of the internal control systems whilst ensuring that there is an appropriate balance of controls and risks throughout the Group in achieving its business objectives.

During the financial year, there are 2 individual internal auditors with relevant qualifications within the external internal audit firm. The head of the internal audit firm is led by Mr Ng Soon Hong who has 25 years’ experience of audit experience and reports directly to the Audit Committee to ensure impartiality and independence. He is a Chartered Accountant registered with the Malaysian Institute of Accountants, member of The Malaysian Association of Certified Public Accountant and also Chartered Tax Institute of Malaysia. Recently, he is being certified as Asean Chartered Professional Accountant. The internal audit firm carried out its functions according to the standards set by recognised professional bodies.

The internal audit firm carries out Conflict of Interest Declaration yearly to ensure that all the internal auditors are free from any relationships or conflict of interest which could impair their objectivity and independence in their audit assignments.

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 annual fee of internal audit for the year is RM 21,000.

The internal auditors have evaluated, reviewed and reported the Group’s quarterly financial risk, compliance risk and reporting risk over the Group’s quarterly report, management report, cash flow budgeted and accounting entries. The internal auditors also have given appropriate recommendation thereof to improve the present practise and to minimise the respective risks in these areas.

In July 2018, internal auditors have introduced and explained the risk management framework to the management of the Group’s and its subsidiaries in order to provide guideline on identified, assess and analyse of the risk for each department and also the way of perform risk treatment and action plan to handle their risk in the department respectively.

The risk management framework has been introduced and implemented to the Group in middle of the year. The management acknowledges that timeframe is required to be given to their middle management to familiarise the risk management framework even a dialog has been conducted by the internal auditors in July 2018. The internal auditors will conduct and revisit the risk management framework from time to time to ensure controllable risks are under their management control in order to minimising the overall risks of the Group.

Review of the Statement by External Auditors

As required by paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the external auditors have reviewed this statement on Risk Management and Internal Control. Their review was performed in accordance with the Malaysian Approved standard on Assurance engagement, ISAE 3000 (Revised):Assurance engagements other than Audits or Reviews of Historical Financial Information and Audit and Assurance Practice Guide 3: Guidance for Auditors on engagements to Report on the statement on Risk Management and Internal Control included in the Annual Report, issued by the Malaysian Institute of Accountants. Based on their review, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement on Risk Management and Internal Control is inconsistent with their understanding of the process the Board has adopted in its 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 are systematically assessed and continuously improve to cater for the changing of business environment and economy.

The Board has received assurance from the Managing Director and executive Director that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group. Hence, the Board is of the view that the current risk management practice and system of internal control instituted throughout the Group are sufficient to safeguard the Group’s assets. Nevertheless, the Board and management maintain a continuing commitment to strengthen the Group’s risk management and internal control environment and processes.

This statement on Risk and Internal Control Management is made in accordance with the resolution of the Board of Directors dated 29 October 2019.


Additional Compliance Information

Other Information required by Bursa Malaysia Securities Berhad Main Market Listing Requirements

(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 2019 were as follows:

Company (RM) Group (RM)

Audit Services Rendered 115,000.00 252,000.00

Non-Audit Services Rendered

(a) Review of Statement on Risk Management and Internal Control 9,000.00 9,000.00

(b) MATERIAL CONTRACTS

There were no material contracts entered into by the Group involving Directors’ and major shareholders’ interests either still subsisting at the end of the financial year, if not then subsisting entered into since the end of the previous financial year.

(c) UTILIZATION OF PROCEEDS FROM RIGHTS ISSUE

On 20 August 2018, the Company had completed its Right Issue exercise following 2,047,461,262 Rights Shares together with 1,023,730,631 Bonus Shares were listed and quoted on the Main Market of Bursa Securities

The Rights Issue has raised proceeds of RM102,373,065 and the fund utilization are stated:

Purpose

Proposed Utilisation

(RM)

Actual Utilisation

(RM)

Intended Timeframe for

Utilisation

Repayment of bank borrowings 80,000,000 80,000,000 Within 1 month

Working capital for the FMU5(1) 16,873,065 16,873,065 Within 6 months

Expenses in relation to the Proposals(2) 5,500,000 5,500,000 Within 6 months

Total 102,373,065 102,373,065

Notes:

(1) Relates to the funding of the installation and redeployment of our machinery from Sandakan at FMU5 and building new infrastructure further into FMU5 sites.

(2) The expenses relating to the Proposals include professional fees, fees payable to relevant authorities, expenses to convene the EGM, printing, advertisement and other ancillary expenses.

Directors’ report 40 Statement by directors 45 Statutory declaration 45 Report of the independent auditors 46 Statements of profit or loss and other comprehensive income 52 Statements of financial position 53 Statements of changes in equity 54 Statements of cash flows 57 Notes to the financial statements 60

Financial Statements


Directors’ report

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

Principal activities

The principal activity of the Company is investment holding.

The principal activities of the subsidiaries are set out in Note 18 to the financial statements.

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

Results Group Company RM RM

Loss for the financial year attributable to: Owners of the Company (157,435,422) (450,892,747) Non-controlling interests 2,835 -

(157,432,587) (450,892,747)

Reserves and provisions

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

Dividends

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


Directors’ report (continued)

Directors

The Directors in office during the financial year and during the period from the end of the financial year to the date of the report are:

Lim Nyuk Foh Koo Jenn Man Ooi Jit Huat Datuk Dr. Roslan Bin A Ghaffar Chiew Boon Chin (appointed on 21 February 2019) Kwan Tack Chiong (retired on 5 December 2018)

Pursuant to Section 253 of the Companies Act, 2016 in Malaysia, the Directors of subsidiaries during the financial year and during the period from the end of the financial year to date of this report, who are not also Directors of the Company, are as follows:

Al Hanna Surya Binti Juhar Dawat Gukang Fonny Tsen Lip Fon Lee San U Mize Ching Sektjen Wong Shu Kiew

Directors’ interests in shares

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

Number of ordinary shares

Direct interest: At

1.7.2018 Bought/

Allotment Sold At

30.6.2019

Lim Nyuk Foh 79,880,911 258,402,802 11,842,000 326,441,713 Koo Jenn Man 510 - - 510

By virtue of Directors’ interests in the ordinary shares of the Company, they are also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

The other Directors holding office at the end of the financial year had no any interest in the ordinary shares 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 and fees

The remuneration and fees paid to or receivable by the Directors of the Group and Company during the financial year is amounted to RM1,147,573 and RM361,438 respectively.

Indemnity and Insurance for directors, officers and auditors

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 2019 was RM10,246.

There was no indemnity given to or insurance effected for the auditors of the Group and of the Company.

Issues of shares and debentures

During the financial year, the Company exercised a rights issue of 2,047,461,262 new ordinary shares in the Company at the issue price of RM0.05 per share together with 1,023,730,631 free bonus issue on the basis of one bonus shares for every two rights shares subscribed in the Company.

As part of the exercise, the number of ordinary shares in the Company increased from 1,023,730,631 ordinary shares to 4,094,922,524 ordinary shares and the value of the share capital increased from RM263,910,667 to RM366,052,332. The shares were issued for repayment of borrowings and working capital purposes.

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.



4

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.

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

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

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

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

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



Auditors

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

During the financial year, the total amount of fees paid to or receivable by the auditors as remuneration for their services as auditors of the Group and the Company amounted to RM261,000 and RM124,000 respectively.

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

______________________________ LIM NYUK FOH Director

______________________________ KOO JENN MAN Director

Sandakan

Dated 29 October 2019


Statement by DirectorsPURSUANT TO SECTION 251(2) OF THE COMPANIES ACT, 2016

Statutory DeclarationPURSUANT TO SECTION 251(1)(B) OF THE COMPANIES ACT, 2016

In the opinion of the Directors, the accompanying financial statements set out on pages 52 to 125 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia so as to give a true and fair view of the financial positions of the Group and of the Company as at 30 June 2019 and of their financial performances and cash flows for the financial year ended on that date.




Sandakan


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 52 to 125 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960 in Malaysia.

Subscribed and solemnly declared by

)

the abovenamed KOO JENN MAN

)

at Sandakan in the state of Sabah

)

on 29 October 2019

)

__________________________KOO JENN MANMIA No. 16032

Before me,

_________________________ COMMISSIONER FOR OATHS

In the opinion of the Directors, the accompanying financial statements set out on pages 52 to 125 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia so as to give a true and fair view of the financial positions of the Group and of the Company as at 30 June 2019 and of their financial performances and cash flows for the financial year ended on that date.




Sandakan


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 52 to 125 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960 in Malaysia.

Subscribed and solemnly declared by

)

the abovenamed KOO JENN MAN

)

at Sandakan in the state of Sabah

)

on 29 October 2019

)

__________________________KOO JENN MANMIA No. 16032

Before me,

_________________________ COMMISSIONER FOR OATHS


Independent auditors’ report to the members of PRICEWORTH INTERNATIONAL BERHAD (Incorporated in Malaysia)

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 2019 of the Group and of the Company, and the Statements of Profit or Loss and Other Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 52 to 125.

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

Basis for Opinion

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

Material Uncertainty Related to Going Concern

We draw attention to Note 2 in the financial statements, which indicates that the Group incurred a net loss of RM157,432,587 during the financial year ended 30 June 2019 and, as of that date, the Group’s current liabilities exceeded its current assets by RM35,905,526, and has not complied with the repayment terms of its bank borrowings. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.


Independent auditors’ report to the members of PRICEWORTH INTERNATIONAL BERHAD (Incorporated in Malaysia)(continued)

(continued)

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.

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.

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. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.


Independent auditors’ report to the members of PRICEWORTH INTERNATIONAL BERHAD (Incorporated in Malaysia)(continued)(continued)

Key Audit Matters (continued)

Area of focus How our audit addressed the key audit matter

Reliance on management’s experts

The Group engaged independent valuers to value its biological assets which is carried at fair value less costs to sell, and to determine the recoverable amount of certain significant property, plant and equipment, land use rights and timber rights that are exhibiting impairment indicators due to the significant loss of RM157,432,587 suffered by the Group.

These independent valuers use industry/market accepted valuation methodology and approaches to determine the fair value of the underlying asset. Due to the measurement of fair value being inherently judgemental and the carrying value of these assets being material to the Group, we have considered this to be a key audit matter.

We have obtained the valuation reports prepared by the independent valuers engaged by the Group.

We have reviewed these reports for appropriateness of the methodology used and the reasonableness of the assumptions used.

We also assessed the competency, capabilities and objectivity of these independent valuer engaged by the Group.



Responsibilities of the Directors for the Financial Statements

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

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

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

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



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

(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, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 18 to the financial statements.

Other Matter

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

PKF SHARINAH BINTI MOHAMED IQBAL AF 0911 03285/10/2020 J CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANT

Kuala Lumpur



STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIvE INCOMEFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019

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

Group Company 2019 2018 2019 2018

Note RM RM RM RM

Revenue 5 31,143,872 169,754,810 - 20,000,000

Cost of sales (88,054,813) (137,745,515) - -

Gross (loss)/profit (56,910,941) 32,009,295 - 20,000,000

Interest income 6 126,006 5,478 125,881 - Other operating income 7 17,103,394 35,115,639 - - Other operating expenses 8 (93,707,489) (1,345,411) (438,591,504) - Selling expenses (1,865,342) (11,182,463) - - Administrative expenses (16,568,532) (12,252,321) (9,239,365) (2,599,352)

(Loss)/Profit from operations 9 (151,822,904) 42,350,217 (447,704,988) 17,400,648

Finance costs 12 (4,679,640) (8,717,939) (3,181,548) (7,207,079)

(Loss)/Profit before taxation (156,502,544) 33,632,278 (450,886,536) 10,193,569

Income tax expense 13 (930,043) (20,843,609) (6,211) (6,397)

(Loss)/Profit for the financial year (157,432,587) 12,788,669 (450,892,747) 10,187,172

Other comprehensive loss, net of tax

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations (37,162) (129,953) - -

Other comprehensive loss the financial year, net of tax (37,162) (129,953) - -

Total comprehensive (loss)/ income for the financial year (157,469,749) 12,658,716 (450,892,747) 10,187,172

(Loss)/Profit attributable to:

Owners of the Company (157,435,422) 12,794,388 (450,892,747) 10,187,172 Non-controlling interests 2,835 (5,719) - -

(157,432,587) 12,788,669 (450,892,747) 10,187,172

Total comprehensive (loss)/income attributable to:

Owners of the Company (157,472,584) 12,664,435 (450,892,747) 10,187,172 Non-controlling interests 2,835 (5,719) - -

(157,469,749) 12,658,716 (450,892,747) 10,187,172

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

Basic 14 (4.0) 1.3


STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2019


Group Company 30.6.2019 30.6.2018

Restated 1.7.2017 Restated

30.6.2019 30.6.2018

ASSETS Note RM RM RM RM RM

Non-current assets Property, plant and equipment 15 195,513,239 223,329,823 225,414,522 - - Land use rights 16 12,958,044 13,226,103 13,494,162 - - Intangible assets 17 9,959,289 25,126,956 26,315,119 - - Investments in subsidiaries 18 - - - 490,741 303,427,941 Biological assets 19 142,400,000 142,400,000 99,969,394 - - Deferred tax assets 20 - 4,400,000 14,159,000 - -

360,830,572 408,482,882 379,352,197 490,741 303,427,941

Current assets

Inventories 21 12,770,151 43,633,004 40,769,578 - - Trade and non-trade receivables 22 43,117,300 116,939,060 87,722,139 421,358 123,780,525 Tax recoverable - 20,976 9,868 - - Cash and bank balances 23 798,143 2,137,059 974,666 52,790 51,474

56,685,594 162,730,099 129,476,251 474,148 123,831,999

TOTAL ASSETS 417,516,166 571,212,981 508,828,448 964,889 427,259,940

EQUITY AND LIABILITIES

Equity attributable to owners of the

Company

Share capital 24 366,052,332 263,910,667 243,505,430 366,052,332 263,910,667 Other reserves 25 1,406,835 1,443,997 1,573,950 - - Treasury shares - - (10,324,612) (Accumulated losses)/

Retained profits 26 (81,855,122) 75,580,300 70,095,516 (387,325,233) 63,567,514 285,604,045 340,934,964 304,850,284 (21,272,901) 327,478,181

Non-controlling interests (380,786) (383,621) (377,902) - -

Total equity 285,223,259 340,551,343 304,472,382 (21,272,901) 327,478,181

Non-current liabilities Loans and borrowings 27 10,428,840 44,228,929 83,423,455 - 32,405,138 Deferred tax liabilities 20 29,272,947 32,744,033 21,625,155 - -

39,701,787 76,972,962 105,048,610 - 32,405,138

Current liabilities

Trade and non-trade payables 28 68,624,464 84,262,868 53,340,746 637,494 1,091,247 Loans and borrowings 27 23,953,134 69,412,673 45,842,522 21,594,085 66,285,374 Taxation 13,522 13,135 124,188 6,211 -

92,591,120 153,688,676 99,307,456 22,237,790 67,376,621 Total liabilities 132,292,907 230,661,638 204,356,066 22,237,790 99,781,759

TOTAL EQUITY AND LIABILITIES 417,516,166 571,212,981 508,828,448 964,889 427,259,940


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

The

acco

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g ac

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polic

ies

and

expl

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al

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R

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RM

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1 Ju

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73

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(Not

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) 74

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- A

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stat

ed

243,

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(10,

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(377

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) 30

4,47

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2

Prof

it/(L

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for

the

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r -

- -

12,7

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12,7

88,6

69

Oth

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loss

- Fo

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n op

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(129

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)

Tot

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(lo

ss)/

inco

me

- -

(129

,953

) 12

,794

,388

(5

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,658

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Con

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of t

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8

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(1

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)

- Is

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22

,371

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-

- -

- 22

,371

,800

Tot

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wne

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f the

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2

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5,23

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- 23

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018

263,

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- 1,

443,

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75,5

80,3

00

(383

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) 34

0,55

1,34

3

(forw

ard)


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

The

acco

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nyin

g ac

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ting

polic

ies

and

expl

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- -

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835

(157

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- (3

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- -

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Tot

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(157

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019

366,

052,

332

- 1,

406,

835

( 81,

855,

122)

(3

80,7

86)

285,

223,

259


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

The

acco

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ting

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ies

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RM

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R

M

At

1 Ju

ly 2

017

- A

s pr

evio

usly

rep

orte

d 16

8,99

4,18

2 (1

0,32

4,61

2)

74,5

11,2

48

60,6

89,9

46

293,

870,

764

- Pr

ior

year

adj

ustm

ent

(Not

e 35

) 74

,511

,248

-

(74,

511,

248)

-

-

- A

s re

stat

ed

243,

505,

430

(10,

324,

612)

-

60,6

89,9

46

293,

870,

764

Tot

al c

ompr

ehen

sive

inco

me

- -

- 10

,187

,172

10

,187

,172

C

ontr

ibut

ions

by

owne

rs o

f the

Com

pany

- D

ispo

sal o

f tre

asur

y sh

ares

-

10,3

24,6

12

- (7

,309

,604

) 3,

015,

008

- Sh

are

issu

ance

exp

ense

(1

,966

,563

) -

- -

(1,9

66,5

63)

- Is

suan

ce o

f sha

res

22,3

71,8

00

- -

- 22

,371

,800

Tot

al t

rans

actio

ns w

ith o

wne

rs o

f the

Com

pany

20

,405

,237

10

,324

,612

-

(7,3

09,6

04)

23,4

20,2

45

At

30 Ju

ne 2

018

263,

910,

667

- -

63,5

67,5

14

327,

478,

181

Tot

al c

ompr

ehen

sive

loss

-

- -

(450

,892

,747

) (4

50,8

92,7

47)

Con

trib

utio

ns b

y ow

ners

of t

he C

ompa

ny

- Sh

are

issu

ance

exp

ense

(2

31,4

00)

- -

- (2

31,4

00)

- Is

suan

ce o

f sha

res

102,

373,

065

- -

- 10

2,37

3,06

5

Tot

al t

rans

actio

ns w

ith o

wne

rs o

f the

Com

pany

10

2,14

1,66

5 -

- -

102,

141,

665

At

30 Ju

ne 2

019

366,

052,

332

- -

(387

,325

,233

) (2

1,27

2,90

1)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019


Group Company

2019 2018 2019 2018

Cash flows from operating Note RM RM RM RM

activities


Adjustments for:

Allowance for impairment on

receivables 74,746,148 321,708 135,654,304 -

Amortisation of intangible asset - 1,188,163 - -

Amortisation of land use rights 268,059 268,059 - -

Bad debts written off 394,350 1,823 - 1,823

Depreciation of property, plant and

equipment 26,090,690 27,196,689 - 37

Fair value adjustment for forest

planting expenditure - 405,926 - -

Fair value gain on biological assets - (26,535,970) - -

Gain on disposal of property, plant

and equipment (1,268,834) (3,075,629) - -

Impairment loss on intangible assets 15,167,667 - - -

Impairment loss on investment in

subsidiaries - - 302,937,200 -

Impairment loss on property, plant

and equipment 2,468,847 1,023,703 - -

Interest expenses 4,679,640 8,717,939 3,181,548 7,207,079

Interest income (126,006) (5,478) (125,881) -

Impairment loss on inventories 1,324,827 - - -

Liabilities no longer in existence

written back (45,267) (366,423) - -

Unrealised loss on foreign exchange 197 - - -

Waiver on overdue interest (11,847,041) - - -

Operating (loss)/profit before working

capital changes (44,649,267) 42,772,788 (9,239,365) 17,402,508

Change in inventories 29,538,026 (2,863,426) - -

Change in receivables (1,318,738) (29,540,452) 726,786 (63,209)

Change in payables (4,364,929) 30,628,124 (453,753) 239,391

Cash (used in)/ from operations (20,794,908) 40,997,034 (8,966,332) 17,578,690

Income tax paid - (87,892) - (18,245)

Income tax refund 20,234 - - -

Net cash (used in)/from

operating activities (20,774,674) 40,909,142 (8,966,332) 17,560,445

(forward)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 (continued)


(continued)

Group Company

2019 2018 2019 2018

Note RM RM RM RM

Cash flows from investing

activities

Acquisition of property, plant and

equipment 15 (770,129) (33,904,650) - -

Interest received 126,006 5,478 125,881 -

Payment of forest planting

expenditure - (15,911,624) - -

Proceeds from disposal of property,

plant and equipment 1,296,010 10,844,586 - -

Net cash from/(used in)

investing activities 651,887 (38,966,210) 125,881 -

Cash flows from financing

activities

Increase in amounts due from

subsidiary companies - - (13,021,923) (32,534,317)

Interest paid (4,061,004) (8,446,456) (3,181,548) (7,207,079)

Loans and borrowings drawdown - 462,886 - -

Proceeds from disposal of treasury

shares - 3,015,008 - 3,015,008

Proceeds from issuance of shares 102,373,065 22,371,800 102,373,065 22,371,800

Repayment of loans and

borrowings (79,259,628) (16,087,261) (77,096,427) (1,215,631)

Share issuance expenses (231,400) (1,966,563) (231,400) (1,966,563)

Net cash from/(used in)

financing activities 18,821,033 (650,586) 8,841,767 (17,536,782)

Net (decrease)/increase in cash

and cash equivalents (1,301,754) 1,292,346 1,316 23,663

Effect of exchange rate fluctuations

on cash held (37,162) (129,953) - -

Cash and cash equivalents at

beginning of financial year 2,137,059 974,666 51,474 27,811

Cash and cash equivalents at end

of financial year 23 798,143 2,137,059 52,790 51,474


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 (continued)


Reconciliation of liabilities arising from financing activities

1 July 30 June 2018 Repayments Drawdown 2019

Group RM RM RM RM

Obligations under finance lease 5,139,110 (2,780,061) - 2,359,049 Term loan 108,502,492 (76,479,567) - 32,022,925

113,641,602 (79,259,628) - 34,381,974

1 July 30 June 2017 Repayments Drawdown 2018

Group RM RM RM RM

Bank overdrafts 10,000,000 (10,000,000) - - Obligations under finance lease 9,993,751 (4,854,641) - 5,139,110 Term loan 109,272,226 (1,232,620) 462,886 108,502,492

129,265,977 (16,087,261) 462,886 113,641,602

Company 1 July 30 June 2018 Repayments 2019 RM RM RM

Term loan 98,690,512 (77,096,427) 21,594,085

Company 1 July 30 June 2017 Repayments 2018 RM RM RM

Term loan 99,906,143 (1,215,631) 98,690,512


NOTES TO THE FINANCIAL STATEMENTS AT 30 JUNE 2019

1. General information

The Company, incorporated in Malaysia, is a public limited liability company that isincorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa MalaysiaSecurities Berhad. The principal activity of the Company is investment holding. The principalactivities of the subsidiaries are set out in Note 18 to the financial statements.

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.

These financial statements were authorised for issue by the Directors in accordance with aresolution of the Board of Directors dated 29 October 2019.

2. Basis of preparation

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

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

The financial statements are also prepared on the going concern basis. However, during thefinancial year ended 30 June 2019, the Group incurred a net loss of RM157,432,587, and asat that date, the Group’s current liabilities exceeded its current assets by RM35,905,526 andhas not complied with the repayment terms of its bank borrowings as disclosed in Note 27.

The ability of the Group to continue as a going concern and meet its obligations is thereforedependent on the continued support and indulgence from its lenders, the recommencementof logging operations currently affected by the state wide freeze imposed by the authoritiesand the achievement of future profitable operations, which indicates the existence of amaterial uncertainty which may cast significant doubt about the Group’s ability to continue asa going concern and in such an event, the Group may be unable to realise its assets anddischarge its liabilities in the normal course of business

The financial statements are prepared in Ringgit Malaysia (“RM”) which is the Company’sfunctional currency. Each entity in the Group determines its own functional currency anditems included in the financial statements of each entity are measured using that functionalcurrency.


NOTES TO THE FINANCIAL STATEMENTS AT 30 JUNE 2019 (continued)

2. Basis of preparation (continued)

(a) Adoption of new and revised MFRS

The following amended Standards have been adopted in the current year. Unless otherwise disclosed, their adoption has had no material impact on the amounts reported in these financial statements.

MFRS 9 Financial Instruments

The standard introduces new requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. MFRS 9 Financial Instruments replaces MFRS 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group and the Company applied MFRS 9 using the modified retrospective method, with an initial application date of 1 July 2018. The Group and the Company have not restated the comparative information, which continues to be reported under MFRS 139.

Classification and measurement

MFRS 9 has two 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. Debt instruments that are held within a business model whose objective is both to collect the contractual cash flows and to sell the debt instruments, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured subsequently at fair value through other comprehensive income (FVTOCI). For financial liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the statement of profit or loss, unless this creates an accounting mismatch.




(a) Adoption of new and revised MFRS (continued)

The following table and the accompanying notes below explain the original measurement categories under MFRS 139 and the new measurement categories under MFRS 9 for each class of the Group’s and the Company’s financial assets and financial liabilities as at 1 July 2018. The effect of adopting MFRS 9 on the carrying amounts of financial assets at 1 July 2018 relates solely to the new impairment requirements but has not been adjusted against opening retained earnings as the impact was not material to the Group and to the Company.

Note

Original classification under MFRS

139

New classification

under MFRS 9

Original carrying

amount under MFRS 139

New carrying amount

under MFRS 9

Financial assets RM RM

Group Trade and other Loan and Amortised receivables (a) receivables cost 116,939,060 116,939,060 Cash and bank Loan and Amortised balances receivables cost 2,137,059 2,137,059

Company Trade and other Loan and Amortised 123,780,525 123,780,525 receivables (a) receivables cost Cash and bank Loan and Amortised 51,474 51,474 balances receivables cost

(a) Trade and other receivables and cash and bank balances that were classified as loans and receivables under MFRS 139 are now classified at amortised cost. Trade and other receivables financial assets classified as loan and receivables as at 30 June 2019 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest.

There are no changes in classification and measurement for the Group’s and the Company’s financial liabilities.

The classification and measurement requirements of MFRS 9 did not have a significant impact to the Group and to the Company other than as disclosed above.





Impairment

MFRS 9 replaces the ‘incurred loss’ model in MFRS 139 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under MFRS 9, credit losses are recognised earlier than under MFRS 139. For assets in the scope of the MFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile.

The impairment requirements apply to financial assets measured at amortised cost and fair value through other comprehensive income, lease receivables, contract assets 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 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. MFRS 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances.

Hedge accounting

There is no impact on the changes in hedge accounting as the Group does not apply hedge accounting.





MFRS 15 Revenue from Contracts with Customers

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

Identify the contract(s) with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

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

MFRS 15 supersedes MFRS 111 Construction Contracts, MFRS 118 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. MFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

MFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The Group adopted MFRS 15 using the full retrospective method of adoption. However, there is no financial impact on the adoption of MFRS 15 to the Group as there is no past record on the variable consideration, such as right of return and volume rebates to its customers. The Group has recognised its revenue based on the performance obligation satisfied at a point in time in prior years, and this continues to be the case under MFRS 15.




(b) Standards issued but not yet effective

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

Effective for annual periods commencing on or after 1 January 2019

MFRS 16 Leases

IC Interpretation 23 Uncertainty over Income Tax Treatments

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


Effective for annual periods commencing on or after 1 January 2020

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

A brief description on the above standards is set out below:

MFRS 16 Leases

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

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

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

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




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

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

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

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

IC Interpretation 23 Uncertainty over Income Tax Treatments

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


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

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




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


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

The Group and the Company plan to assess the potential effect of the adoption of the above new standards and amendments on their financial statements in 2020.

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

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

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

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

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




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

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

3. Significant accounting judgements and estimates

The preparation of the Group’s and the Company’s financial statements requires managementto 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 thatcould require a material adjustment to the carrying amount of the asset or liability affected inthe future periods.

(a) Judgements made in applying accounting policies

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

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 reporting made to 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:

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.



3. Significant accounting judgements and estimates (continued)

(b) Key sources of estimation uncertainty (continued)

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.

Carrying value of investments in subsidiary companies

Investments in subsidiary companies are reviewed for impairment annually in accordance with its accounting policy as disclosed in Note 4(o) 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.

Impairment of trade and non-trade receivables

The Group makes provision for impairment loss for nancial assets at amortised cost based on assumptions about risk of default and expected loss rates. The Group use judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Where the expectation is different from the original estimate, such difference will impact the carrying value of the receivables and impairment loss in the period in which such estimate has been changed.

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.

Fair value of biological assets

Estimates are involved in determining the fair value of biological assets relating to market prices of logs, species, size of logs. There is no effective market for biological assets, so market price is derived from observable market prices (when available), contracted prices or estimated future prices. In measuring the fair value of biological assets, various management estimates and judgements are required.



4. 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.

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.



4. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

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.

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.




(a) Basis of consolidation (continued)

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.

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.

Transactions eliminated on consolidation

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

(b) Foreign currencies

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.

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.




(b) Foreign currencies (continued)

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

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

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

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.




(c) Revenue recognition

Revenue is recognised when or as a performance obligation in the contract with customer is satisfied, i.e. when the “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation is a promise to transfer a distinct goods or service (or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer) to the customer that is explicitly stated in the contract and implied in the Group’s customary business practices.

Revenue is measured at the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services to the customers, excluding amounts collected on behalf of third parties such as sales taxes or goods and services taxes. If the amount of consideration varies due to discounts, rebates, refunds, credits, incentives, penalties or other similar items, the Group estimates the amount of consideration to which it will be entitled based on the expected value or the most likely outcome. If the contract with customer contains more than one performance obligation, the amount of consideration is allocated to each performance obligation based on the relative stand-alone selling prices of the goods or services promised in the contract.

The revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolve

Revenue from sales of goods is recognised upon delivery of goods where the control of the goods has been passed to the customers, or performance of services, net of sales and goods and service taxes and discounts based on recognition at a point of time.

Other revenue earned by the Group and the Company are recognized on the following bases:

Dividend income

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

Revenue from services

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

Rental income

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




(d) Employee benefits

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.

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 atransaction that is not a business combination and that affects neither accountingnor taxable profit or loss;

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

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




(e) Income taxes (continued)

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 accumulated 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.

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. 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.




(g) Property, plant and equipment (continued)

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.

Capital 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 of seventy-one (71) years.

(i) Intangible assets

Goodwill

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

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-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.




(i) Intangible assets (continued)

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.

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 4(o) to the financial statements.

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.

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

Biological assets are measured at fair value less costs to sell, based on market prices of logs, species, size of logs. Market prices are obtained from observable market prices (where available), contracted prices or estimated future prices. The costs to sell include the incremental selling costs, including royalty payable to authority and estimated costs of transport to market. Changes in fair value of biological assets are recognised in profit or loss.

In measuring the fair value of biological assets, various management estimates and judgements are required. Estimates and judgements in determining the fair value of biological assets relate to the market prices, size, species and quality of the logs.

(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 instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Policy applicable from 1 July 2018

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s and the Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient, the Group and the Company initially measure a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient are measured at the transaction price determined under MFRS 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group’s and the Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group and the Company commit to purchase or sell the asset.

For purposes of subsequent measurement, financial assets are classified in four categories:

(i) Financial assets at amortised cost (debt instruments)

(ii) Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

(iii) Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

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

The Group and the Company only has financial assets at amortised cost.




(l) Financial instruments (continued)

Financial assets at amortised cost (debt instruments)

The Group and the Company measure financial assets at amortised cost if both of the following conditions are met:

• The financial asset is held within a business model with the objective to holdfinancial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cashflows that are solely payments of principal and interest on the principal amountoutstanding

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group’s and the Company’s financial assets at amortised cost includes trade and other receivables and cash and bank balances.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised when:

• The rights to receive cash flows from the asset have expired; or

• The Group and the Company have transferred its rights to receive cash flowsfrom the asset or has assumed an obligation to pay the received cash flows infull without material delay to a third party under a ‘pass-through’ arrangement;and either (a) the Group and the Company have transferred substantially all therisks and rewards of the asset, or (b) the Group and the Company have neithertransferred nor retained substantially all the risks and rewards of the asset, buthas transferred control of the asset

When the Group and the Company have transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group and the Company continue to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained.





Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group and the Company could be required to repay.

Impairment of financial assets

The Group and the Company recognise an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group and the Company expect to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables and contract assets, the Group and the Company apply a simplified approach in calculating ECLs. Therefore, the Group and the Company do not track changes in credit risk, but instead recognised a loss allowance based on lifetime ECLs at each reporting date. The Group and the Company have established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

ECLs for all other debts instruments are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

The Group and the Company may apply the low credit risk simplification for debt instruments considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group and the Company reassess the internal credit rating of the debt instrument at end of each reporting date.

The Group and the Company consider a financial asset in default when contractual payments are one year past due. However, in certain cases, the Group and the Company may also consider a financial asset to be in default when internal or external information indicates that the Group and the Company are unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group and the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.





Policy applicable before 1 July 2018

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.

For purposes of subsequent measurement, financial assets are classified into four categories:

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

(ii) Held-to-maturity investments

(iii) Loans and receivables

(iv) Available-for-sale financial assets

The Group and the Company only has financial assets classified as loans and receivables.

Loans and receivables

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

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

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.

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.

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 the Company that can be reliably estimated.

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

Financial liabilities

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

Financial liabilities, within the scope of MFRS 9, are recognised in the 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:

Financial liabilities at fair value through profit or loss

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

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





Financial liabilities measured at amortised cost

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

Trade and other 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.

(m) 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.




(n) 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 cost 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 cost of materials, direct labour, other direct costs and appropriate proportion 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.

(o) 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.




(o) Impairment of non-financial assets (continued)

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.

(p) 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.

(q) 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.

(r) Leases

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.




(r) Leases (continued)

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.

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 4(g) to the financial statements.

(s) Government grants

Unconditional government grant related to biological assets measured at fair value less costs to sell is recognised in profit or loss when the government grant becomes receivable.

If a government grant related to biological assets measured at fair value less costs to sell is conditional, including when a government grant requires the Group not to engage in specified agricultural activity, the Group recognises the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met.




(t) 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.

(u) 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.

(v) 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.




(w) 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.

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.



5. Revenue

Group Company 2019 2018 2019 2018 RM RM RM RM

Contract fee 1,218,185 4,573,926 - - Dividend income from a

subsidiary company - - - 20,000,000 Road tolls 1,244,661 2,185,851 - - Sale of processed wood

products 22,497,353 126,836,134 - - Sale of logs 4,365,783 24,428,879 - - Services income 1,817,890 11,730,020 - -

31,143,872 169,754,810 - 20,000,000

6. Interest income

Group Company 2019 2018 2019 2018

Interest income from: RM RM RM RM

Deposits with licensed banks 126,006 5,478 125,881 -

7. Other operating income


Discount received 575 17,618 - - Fair value gain on

biological assets (Note 19) - 26,535,970 - -

Gain on disposal of property, plant and equipment 1,268,834 3,075,629 - -

Gate pass income 480,454 747,484 - - Insurance claim 36,286 271,687 - - Liabilities no longer in

existence written back 45,267 366,423 - - Miscellaneous income 445,799 1,427,953 - - Gain on foreign exchange - Realised 33,547 12,546 - - Rebate of royalty - 140,617 - - Rental income 1,675,345 1,104,873 - - Reversal of impairment on

receivables - 6,315 - - Bad debts recovery 4,526 - - Sale of bare core 23,950 - - - Sale of log core - 64,484 - - Sale of saw dust 153,777 467,132 - - Sale of barge 250,000 - - - Sale of scrap iron 19,789 8,555 - - Transportation income 818,204 868,353 - - Waiver on overdue Interest (Note 28) 11,847,041 - - -

17,103,394 35,115,639 - -



8. Other operating expenses


Impairment loss on: Intangible assets

15,167,667 - - - (Note17) Property, plant and equipment (Note 15) 2,468,847 1,023,703 - -

Trade and non-trade receivables (Note 22) 74,746,148 321,708 135,654,304 -

Investment in subsidiaries (Note 18) - - 302,937,200 -

Allowance for slow moving and obsolete inventories (Note 21) 1,324,827 - - -

93,707,489 1,345,411 438,591,504 -

9. (Loss)/Profit from operations

Group Company 2019 2018 2019 2018

Other than those RM RM RM RM disclosed in Note 6, 7, 8, 10 and 11, (loss)/profit from operations have been arrived at after charging:

Amortisation of intangible asset (Note 17) - 1,188,163 - -

Amortisation of land use rights (Note 16) 268,059 268,059 - -

Auditors’ remuneration - Statutory audit

- Current year 252,000 306,000 115,000 115,000 - Under provision in prior

year 6,000 20,000 - 20,000 - Other services 9,000 46,100 9,000 46,100 Bad debts written off 394,350 1,823 - 1,823 Depreciation of property,

plant and equipment (Note 15) 26,090,690 27,196,689 - 37

Hiring of vehicles 47,843 157,735 - - Rental expenses 1,328,951 287,846 44,742 49,540

10. Employee benefits expense


Salaries and wages 12,765,801 31,336,093 404,061 651,639 Contributions to defined

contribution plan 623,018 1,220,144 18,597 20,642 Contributions to

employment insurance scheme 5,505 7,311 143 85

Social security contributions 79,246 163,344 1,502 1,683 13,473,570 32,726,892 424,303 674,049

Capitalised in camp infrastructure - (6,947,581) - -

Capitalised in biological assets - (3,265,455) - -

13,473,570 22,513,856 424,303 674,049



10. Employee benefits expense (continued)

Included in employee benefits expense of the Group and of the Company are executivedirectors’ remuneration amounting to RM921,459 (2018: RM1,012,435) and RM135,324(2018: RM146,776) respectively as further disclosed in Note 11 to the financial statements.

11. Directors’ remuneration

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

Group Company 2019 2018 2019 2018

Executive directors’ RM RM RM RM remuneration (Note 10)

- Salaries and other emoluments 832,385 904,545 120,924 122,376

- Bonus - 10,000 - 10,000 - Contributions to defined

contribution plan 89,074 97,890 14,400 14,400 921,459 1,012,435 135,324 146,776

Non-executive directors’ remuneration:

- Fees 226,114 156,000 226,114 156,000 - Other emoluments - 3,000 - 3,000

226,114 159,000 226,114 159,000

Total directors’ remuneration 1,147,573 1,171,435 361,438 305,776

The names of directors of subsidiaries and their remuneration details are set out in the respective subsidiaries’ statutory financial statements and the said information is deemed incorporated herein by such reference and made a part hereof.

The total remuneration of the directors of the Company (which includes the remuneration earned from subsidiary companies) is analysed below:

Number of Directors 2019 2018

Executive directors:

RM100,001 – RM150,000 1 1 RM150,001 – RM300,000 - - RM300,001 – RM450,000 - - RM450,001 – RM600,000 1 1

Non-executive directors:

Below RM50,000 2 2 RM50,001 – RM100,000 1 1



12. Finance costs

Group Company 2019 2018 2019 2018

Interest expenses: RM RM RM RM

- Bank overdraft - 237,408 - - - Obligations under finance

leases 262,596 613,031 - - - Term loans 3,798,408 7,596,017 3,181,548 7,207,079 - Others 618,636 660,421 - -

4,679,640 9,106,877 3,181,548 7,207,079 Less: Capitalised in

biological asset - 388,938 - -

4,679,640 8,717,939 3,181,548 7,207,079

13. Income tax expense


Current taxation 6,211 8,167 6,211 - Deferred tax expense

(Note 20) 928,914 20,877,878 - - 935,125 20,886,045 6,211 -

(Over)/Under provision in prior year (5,082) (42,436) - 6,397

930,043 20,843,609 6,211 6,397

A reconciliation of income tax expense applicable to (loss)/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:



Taxation at Malaysian statutory tax rate

of 24% (2018: 24%) (37,560,611) 8,071,747 (108,212,769) 2,446,457 Non-tax deductible

expenses 20,257,276 2,993,260 108,242,980 2,353,543 Non-taxable income (31,535) (296,454) (24,000) (4,800,000) Effect of deductible

temporary differences but not recognised as deferred tax assets 18,269,995 10,117,492 - -

935,125 20,886,045 6,211 - (Over)/Under provision in

prior year (5,082) (42,436) - 6,397 930,043 20,843,609 6,211 6,397



14. (Loss)/Earnings per share

(a) Basic

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

Group 2019 2018 RM RM

(Loss)/Profit net of tax attributable to owners of the Company (157,435,422) 12,794,388

Weighted average number of ordinary shares in issue 3,935,052,261 977,102,934

2019 2018 Sen Sen

Basic (loss)/earnings per share (4.0) 1.3

(b) Diluted

There is no dilution in the (loss)/earnings per share of the current and previous year end as there are no dilutive potential ordinary shares outstanding at the end of the reporting period.



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15. Property, plant and equipment (continued)

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


Recognised in profit or loss (Note 9)

- Cost of sales 25,228,328 25,344,732 - Administrative expenses 862,362 786,804

26,090,690 26,131,536 Capitalised in biological assets - 1,065,153

26,090,690 27,196,689

The property, plant and equipment of the Group acquired under finance leases are as follows:

Group Accumulated Net book At cost depreciation value

2019 RM RM RM

Heavy equipment, motor vehicles and trucks 8,883,038 (4,733,890) 4,149,148

Plant and machinery 14,129,886 (13,494,041) 635,845 23,012,924 (18,227,931) 4,784,993

2018

Heavy equipment, motor vehicles and trucks 8,883,038 (3,577,181) 5,305,857

Plant and machinery 14,129,886 (12,504,949) 1,624,937 23,012,924 (16,082,130) 6,930,794

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 17,144,829 17,516,587 Buildings 77,455,395 80,291,712 Heavy equipment, motor vehicles and

motor launches 18,497,839 21,488,587 Plant and machinery 43,405,841 51,068,801 Furniture, fittings and equipment 187,819 821,330 Aircraft - 1 Tug boat and scow 307,590 451,599 Camp infrastructure and slipway 17,233,520 30,307,838 Construction work-in-progress 7,811,637 8,587,536

182,044,470 210,533,991




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

Accumulated amortisation At 1 July 1,564,531 1,296,472 Charge for the financial year (Note 9) 268,059 268,059 At 30 June 1,832,590 1,564,531

Net book value At 30 June 12,958,044 13,226,103

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.

17. Intangible assets

Group Goodwill Timber rights License Total RM RM RM RM

CostAt 1 July 2017/

30 June 2018/ 30 June 2019 20,323,572 53,271,223 303,830 73,898,625

Accumulated amortisation and impairment losses

At 1 July 2017 5,155,905 42,123,771 303,830 47,583,506 Amortisation charge (Note 9) - 1,188,163 - 1,188,163

At 30 June 2018 5,155,905 43,311,934 303,830 48,771,669 Impairment charge (Note 8) 15,167,667 - - 15,167,667

At 30 June 2019 20,323,572 43,311,934 303,830 63,939,336

Net book value

30 June 2019 - 9,959,289 - 9,959,289

30 June 2018 15,167,667 9,959,289 - 25,126,956

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. Land use rights



18. Investments in subsidiaries

Company 2019 2018 RM RM

Unquoted shares, at cost 183,427,941 183,427,941 Amounts due from subsidiaries 120,000,000 120,000,000

303,427,941 303,427,941 Less: impairment for investments in

subsidiaries (Note 8) (302,937,200) -

490,741 303,427,941

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 accumulated impairment loss, if any.

Details of the subsidiaries are as follows:

Proportion of ownership

interest Name of subsidiary Country of 2019 2018 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 Sdn. Bhd. maintenance services for

marine vessels

Cergas Kenari Sdn. Bhd. Malaysia 100 100 Dormant 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 Dormant Beta Bumi Sdn. Bhd. Malaysia 100 100 Timber concession and

reforestation Harvest Element Sdn. Bhd. Malaysia 100 100 Investment holding GSR Pte Ltd* Singapore 100 100 Dormant



18. Investments in subsidiaries (continued)

Details of the subsidiaries are as follows: (continued)

Proportion of ownership

interest Name of subsidiary Country of 2019 2018 Principal

incorporation % % activities

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 100 100 Dormant

Held through Maxland Dockyard & Engineering Sdn. Bhd.

Semaring MDE JV Sdn. Bhd. Malaysia 60 60 Dormant

Held through Sinora Sdn. Bhd. Sino Golden Star Limited* Hong Kong 100 100 Dormant

SAR Kekal Eramaju Sdn. Bhd. Malaysia 100 100 Dormant

Held through Maju Sinar Network Sdn. Bhd.

Maxland Congo S.A.R.L.U* Congo 100 100 Dormant

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 Dormant Islands

PWP (SI) Limited* Solomon 100 100 Dormant Islands

Ligreen (SI) Limited* Solomon 100 100 Dormant Islands

Priceworth Sawmill (SI) Limited* Solomon 100 100 Dormant Islands

Held through Maxland Sdn. Bhd.

Ligreen (PNG) Limited* Papua New 100 100 Dormant Guinea

* Not audited by PKF, Malaysia

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



19. Biological assets


At 1 July 142,400,000 99,969,394 Increase due to purchases - 16,300,562 Changes in fair value less costs to sell

(Note 7) - 26,535,970 Fair value adjustment on government

grant - (405,926) At 30 June 142,400,000 142,400,000

The biological asset is in respect of the Group’s Sustainable Forest Management Project of 7,988 hectares and 20,151 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 fair value hierarchy of the biological asset is level 3, which is techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The valuation of biological assets is based on income approach which considers the net present value of all directly attributable net cashflows. Significant unobservable inputs are used by the independent valuer in determining the fair value of the asset, which include the discount rate use in the discounted cash flow model and adjustment factors to account for the discounted cash flow methods. The resulting fair value based on the independent valuer’s professional opinion is therefore sensitive to these unobservable inputs, and changes to these inputs may result in a significantly higher or lower fair value measurement.

Fair value measurements using significant unobservable inputs

The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair value measurements:

Description of unobservable inputs 2019 2018

Selling price per meter3 RM350 to RM500 RM350 to RM500 Net harvesting volume 70% to 90% 70% to 90% Discount rate 22% 22%

Relationship of unobservable inputs to fair value

(i) Increase in price would increase fair value

(ii) Increase in net harvesting volume would increase fair value



19. Biological assets (continued)

Sensitivity analysis

As at 30 June 2019, with all other variables held constant, the Group’s profit before taxationfor the year would have been impacted as follows:

Variable 2019 2018 RM RM

Selling price increase/decrease by RM1 916,694 916,694 Net harvesting volume increase/ decrease by 1% 3,615,752 3,615,752 Discount rate increase/decrease by 1% 4,146,021 4,146,021

20. Deferred tax (assets)/liabilities


At 1 July 28,344,033 7,466,155 Recognised in profit or loss (Note 13) 928,914 20,877,878 At 30 June 29,272,947 28,344,033

Presented after appropriate offsetting as follows:

Deferred tax liabilities 29,272,947 32,744,033 Deferred tax assets - (4,400,000)

29,272,947 28,344,033



20. Deferred tax (assets)/liabilities (continued)

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


Property, plant and equipment 35,888,916 194,740,065 Land use rights 16,097,100 15,249,026 Timber rights 22,840,670 20,689,370 Biological assets 142,400,000 26,535,970 Unutilised tax losses (63,029,867) (105,624,360) Unabsorbed capital allowances (32,226,206) (33,489,933)

121,970,613 118,100,138 Tax rate 24% 24% Deferred tax (asset)/liabilities recognised 29,272,947 28,344,033

The amount of temporary differences for which no deferred tax asset has been recognised in the statements of financial position is as follows:


Property, plant and equipment 52,600,937 1,542,619 Unutilised tax losses (138,034,561) (9,993,032) Unabsorbed capital allowances (8,643,525) (9,501,757)

(94,077,149) (17,952,170)

Under the Malaysia Finance Act, 2018, which was gazetted on 27 December 2018, the Group’s tax losses with no expiry period amounting to RM138,034,561 as at 30 June 2019 will be imposed with a time limit of utilisation. Any accumulated unutilised tax losses brought forward from year of assessment 2018 can be carried forward for seven (7) consecutive years of assessment (i.e. from year of assessment 2019 to 2025). Any amount which is not deducted at the end of the period shall be disregarded. The unabsorbed capital allowances can be carried forward indefinitely to be utilised against income from the same business source, subject to no substantial change in shareholders of the subsidiaries.

These deferred tax assets are not recognised due to uncertainty of its recoverability.



21. Inventories

Group 2019 2018

Cost RM RM

Consumable and spares 6,665,019 8,842,299 Finished goods 1,041,399 3,835,018 Logging contract work-in-progress - 19,648,132 Nursery 28,759 924,487 Raw materials 1,194,270 4,817,810 Timber logs 376,271 277,149 Work-in-progress 3,032,043 4,510,171

12,337,761 42,855,066 Less: Allowance for slow moving and obsolete inventories (Note 8) 1,324,827 -

11,012,934 42,855,066

Net realisable value

Finished goods 1,757,217 777,938 12,770,151 43,633,004

Included in work-in-progress are the following expenses incurred and capitalised during the financial year:

2019 2018 RM RM

Depreciation of property, plant and equipment - 302,043 Employee benefits expense - 215,658



22. Trade and non-trade receivables


Trade receivables

Related parties 547,560 1,668,170 - - Third parties 5,580,673 31,063,168 - -

6,128,233 32,731,338 - - Less: Allowance for impairment 2,780,646 2,936,685 - - Trade receivables, net 3,347,587 29,794,653 - -

Non-trade receivables

Deposits and advances for log supplies 68,530,893 43,454,198 - -

Other deposits 27,466,038 25,838,859 12,260 12,260 Prepayments 2,289,598 4,084,419 238,128 886,178 Other receivables

Related parties 2,211,003 4,822,300 - - Third parties 13,569,660 9,429,123 170,970 249,706

114,067,192 87,628,899 421,358 1,148,144 Less: Allowance for impairment 74,297,479 484,492 - - Non-trade receivables, net 39,769,713 87,144,407 421,358 1,148,144 Amounts due from subsidiaries - - 135,654,304 122,632,381 Less: Allowance for impairment - - 135,654,304 -

- - - 122,632,381 Total trade and non-trade

receivables 43,117,300 116,939,060 421,358 123,780,525

Trade receivables are non-interest bearing and the normal credit terms granted by the Group are 60 to 90 days (2018: 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 5 (2018: 8) customers representing 50% (2018: 82%) of total net receivables.



22. Trade and non-trade receivables (continued)

The ageing analysis of the Group’s trade receivables as at the reporting date is as follows:

Group Gross Expected credit Carrying amount loss value

2019 RM RM RM

Not past due 1,320,079 (16,017) 1,304,062 Past due:

- less than 30 days 241,847 (1,850) 239,997 - between 31 to 60 days 31,040 - 31,040 - between 61 to 90 days 61,021 (1,051) 59,970 - more than 90 days 4,474,246 (2,761,728) 1,712,518

4,808,154 (2,764,629) 2,043,525

6,128,233 (2,780,646) 3,347,587

Gross Individual Carrying amount impairment value

2018 RM RM RM

Not past due 7,836,748 - 7,836,748 Past due:

- less than 30 days 1,063,539 - 1,063,539 - between 31 to 60 days 156,087 - 156,087 - between 61 to 90 days 850,166 - 850,166 - more than 90 days 22,824,798 (2,936,685) 19,888,113

24,894,590 (2,936,685) 21,957,905

32,731,338 (2,936,685) 29,794,653

Impairment for trade receivables is measured at an amount equal to lifetime excepted credit loss. The expected credit losses on trade receivables includes both individual impairment for those that show objective evidence of impairment (stage 3 loss) and collective impairment (stage 2 loss). Collective impairment has been provided using the provisional matrix based on historical loss experience of the Group with reference to past due status of the debtor, as follows:

Expected credit loss rates

Not past due

Past due: - less than 30 days - between 31 to 60 dates - between 61 to 90 days - more than 90 dates

1% to 5%

5% to 15% 8% to 35% 10% to 50% 15% to 55%



22. Trade and non-trade receivables (continued)

For other receivables including amounts due from subsidiary companies, a lifetime expectedcredit loss is assessed for those counterparties that show significant increase in credit risk asat the end of the reporting period, and impairment made based on objective evidence ofimpairment.

The allowance for impairment on non-trade receivables include RM68,530,893 (2018: Nil)made on advances for log supplies due to uncertainty over its recovery following the statewide logging freeze imposed by the authorities.

Trade receivables that are neither past due nor impaired are creditworthy receivables withgood payment records with the Group. None of the Group’s trade receivables that areneither past due nor impaired have been renegotiated during the financial year.

The Group has trade receivables amounting to RM2,043,525 (2018: RM21,957,905) that arepast due but not impaired at the reporting date. These balances are unsecured in nature.

Amounts due from related parties and subsidiaries companies are unsecured, interest freeand repayable on demand.

Group Movement in allowance account for trade 2019 2018 receivables: RM RM

At 1 July 2,936,685 2,636,222 Written off (1,064,627) - Charge for the financial year (Note 8) 908,588 300,463 At 30 June 2,780,646 2,936,685

Movement in allowance account for non-trade receivables:

At 1 July 484,492 463,247 Written off (24,573) - Charge for the financial year (Note 8) 73,837,560 21,245 At 30 June 74,297,479 484,492

The allowance account in respect of receivables is used to record impairment losses. Unless the Company is satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the receivable directly.

23. Cash and cash equivalents


Cash in hand and at banks 798,143 2,137,059 52,790 51,474 Cash and bank balances/

Cash and cash equivalents 798,143 2,137,059 52,790 51,474



24. Share capital

Issued and fully paid: Group/Company Ordinary shares Share capital

unit RM

At 1 July 2017 930,670,631 243,505,430 Issuance of shares 93,060,000 22,371,800 Share issuance expense - (1,966,563) At 30 June 2018 1,023,730,631 263,910,667 Issuance of shares 3,071,191,893 102,373,065 Share issuance expense - (231,400) At 30 June 2019 4,094,922,524 366,052,332

During the financial year, the Company exercised a rights issue of 2,047,461,262 new ordinary shares in the Company at the issue price of RM0.05 per share together with 1,023,730,631 free bonus issue on the basis of one bonus shares for every two rights shares subscribed in the Company.

As part of the exercise, the number of ordinary shares in the Company increased from 1,023,730,631 ordinary shares to 4,094,922,524 ordinary shares and the value of the share capital increased from RM263,910,667 to RM366,052,332. The shares were issued for repayment of borrowings and working capital purposes.

The holders of ordinary 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.

25. Other reserves

Foreign currency

translation reserve

Group RM

At 1 July 2017 1,573,950 Foreign currency translation (129,953)

At 1 July 2018 1,443,997 Foreign currency translation (37,162)

At 30 June 2019 1,406,835

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.



26. (Accumulated losses)/Retained profits

The Company’s policy is to treat all gains and losses that pass through the statement ofcomprehensive income (i.e. non-owner transactions or events) as revenue reserves. Otherthan retained profits, all other revenue reserves are regarded as non-distributable in the formof cash dividends to shareholders. Accumulated losses is the opposite of retained profits andwhen an entity is in an accumulated loss position, it is prohibited from distributing cashdividends to shareholders.

27. Loans and borrowings

Group Company 2019 2018 2019 2018

Non-current RM RM RM RM

Secured:

Obligations under finance leases - 2,011,811 - -

Term loans 10,428,840 42,217,118 - 32,405,138 10,428,840 44,228,929 - 32,405,138

Current

Secured:

Obligations under finance leases 2,359,049 3,127,299 - -

Term loans 21,594,085 66,285,374 21,594,085 66,285,374

23,953,134 69,412,673 21,594,085 66,285,374

Total loans and borrowings

Secured:

Obligations under finance leases 2,359,049 5,139,110 - -

Term loans 32,022,925 108,502,492 21,594,085 98,690,512

34,381,974 113,641,602 21,594,085 98,690,512

Group Company 2019 2018 2019 2018

Maturity structure of RM RM RM RM loans and borrowings

Within one year 23,953,134 69,412,674 21,594,085 66,285,374 Between one to two years - 34,117,023 - 32,405,138 Between two to five years - 299,925 - - More than five years 10,428,840 9,811,980 - -

34,381,974 113,641,602 21,594,085 98,690,512

The interest rate structures are as follows:

Nominal interest rate Effective interest rate 2019 2018 2019 2018

Obligations under finance leases 4.66% 4.66% 5.78% 5.78%

Term loan 1 BFR+3.5% BFR+3.5% 10.35% 10.35% Term loan 2 3.00% 3.00% 3.00% 3.00%



27. Loans and borrowings (continued)

(a) Obligations under finance leases

These obligations are secured by a charge over the leased assets as disclosed in Note 15 to the financial statements.

As at 30 June 2019, of the total lease liability outstanding of RM2,359,049, RM433,494 relates to overdue instalments that the Group has not complied with and for which legal action to recover these balances have been initiated by the bank. As a result, the full lease liability has been classified as current, and as at the date of these financial statements, the Group has not yet regularised these repayments.

(b) Term loan 1

This loan with a total outstanding balance of RM21,594,085 (2018: RM98,690,512) is secured by: (i) a first legal charge over leasehold land and timber rights of certain subsidiary

companies as disclosed in Notes 15 and 17 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.

Pursuant to the revised repayment terms agreed with the bank, the balance of this loan is repayable over ten monthly repayment of RM2,228,170 (inclusive of interest) commencing July 2019 and a final monthly payment for the remaining balance of the loan in May 2020. As at the date of these financial statements, the Group has not been complying with this repayment terms.

(c) Term loan 2

This loan with a total outstanding balance of RM10,428,840 (2018: RM9,811,980) 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.

This loan is repayable over five years to commence at the earlier of the expiry of the grace period of 15 years from the first drawdown in year 2012 or the commencement of harvesting of the planted trees related to biological assets as disclosed in Note 16.

This loan was granted 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 and as the government grant relates to the biological asset measured at its fair value less cost to sell, it is recognised in profit or loss pursuant to MFRS 141, Agriculture.



Trade payables

Related parties 19,828 39,370 - - Third parties 18,761,922 19,187,182 - -

18,781,750 19,226,552 - -

Non-trade payables

Accruals 10,018,067 22,033,129 207,359 137,261 Deposits received 20,584,101 22,859,646 - - Other payables

Related parties 1,888,954 1,852,211 83,563 66,150 Third parties 17,351,592 18,291,330 346,572 887,836

49,842,714 65,036,316 637,494 1,091,247

Total trade and non- trade payables 68,624,464 84,262,868 637,494 1,091,247

Trade and non-trade payables are non-interest bearing and the normal credit terms granted to the Group are 30 to 90 days (2018: 30 to 90 days).

Included within non-trade payables are outstanding contributions to EPF and Socso totalling RM4,069,058, and RM42,130 (2018: RM3,707,595 and RM54,173) for which the Group is unable to make the payments due to its tight cash flow position and is therefore in breach of the regulation to make these payments. As at the date of these financial statements, these outstanding contributions have still not been settled in full.

Also included within non-trade payables are late payment penalty interest on its hire purchase liabilities totalling RM3,000,000 (2018: RM14,542,291). The Group has reached a settlement agreement on this outstanding amount, resulting in a waiver of overdue interest of RM11,847,041 which has been recognised in other operating income. The remaining RM3,000,000 is to be repaid over twelve monthly instalments of RM250,000 commencing from September 2019.

Amounts due to related parties are unsecured, interest free and repayable on demand.

28. Trade and non-trade payables




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, and entities under the common control.

(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 Type of 2019 2018 2019 2018

Name of related party transaction RM RM RM RM

Entities under common control

Bertam Alliance Berhad Rental fee 42,052 42,052 (64,878) (64,878)

Integral Acres Sdn. Bhd. Rental income 3,210 35,310 159,643 153,947 Sales of wood

products - 37,189 Sikap Hajat Sdn. Bhd. Transportation

income - - 1,046,599 746,950 Repair and

maintenance 1,404 1,404 Purchase of

spare parts - 659,418 Sale of

consumable goods - 136,989

Maxland Enterprise Sdn. Bhd. Professional fee 278 278 18,796 21,037

Rental of office 2,988 84,888 Green Edible Oil Sdn. Bhd. Rental income 90,000 97,000 15,000 - Barigos Sdn. Bhd. Purchase of

spare parts - 448,206 (69,911) (71) Purchase of

tyres - 1,344 Repair and

maintenance 60 60 Suria Century Resources Sdn. Bhd. Disposal of fixed

assets 120,000 - (1,342,951) (1,067,030) Purchase of

diesel 2,466 - Rental of

equipment (232,900) 150,679 Sale of tyres 120,939 103,039 Sale of diesel - 383,366 Transportation charges - 13,674

Himpunan Palma Sdn. Bhd. - - - (166,981) (56,016) Grand Propel Sdn. Bhd. Contract fee - 49,788 6,667 6,667

Purchase of log - 144,414

Spur Scope Sdn. Bhd. Contract fee - 34,200 (55,380) 26,472 Repair and

maintenance - 938,807 Purchase of

spare parts - 19,792

Nadi Hasil (M) Sdn. Bhd. Contract fee - 21,483 292,285 230,300



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 2019 2018 2019 2018 Name of related party transaction RM RM RM RM


Remagaya Sdn. Bhd. Sales of wood products - 761 23,220 4,601,511

Contract fee - 325,857

With a Director of the Group:

Lim Nyuk Foh Rental of land 30,000 30,000 - -

Company Transaction value

Balance outstanding as at 30 June

Type of 2019 2018 2019 2018 Name of related party transaction RM RM RM RM

With subsidiary companies:

Sinora Sdn. Bhd. Dividend income - 20,000,000 374,765 101,591,615

Priceworth Indutries Sdn. Bhd. - - - 1,103,850 20,957,113

GSR Pte Ltd - - - - 83,653


Bertam Alliance Berhad Rental fee 42,052 42,052 (64,878) (64,878) Maxland Enterprise Sdn. Bhd. Documentation

charges 278 - 18,796 (1,272) Rental fee 2,988 7,488

(c) The remuneration of directors and other members of key management during the financial year was as follows:


Short-term employee benefits 832,385 914,545 120,924 132,376

Contributions to defined contribution plan 89,074 97,890 14,400 14,400

921,459 1,012,435 135,324 146,776

Included in the key management personnel are:

Directors’ remuneration (Note 11) 921,459 1,012,435 135,324 146,776

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.

The terms and conditions and prices of the above transactions are mutually agreed between the parties.



30. Commitments and contingencies

(a) Capital commitments

Group 2019 2018

Capital expenditure commitments RM RM

Approved and contracted for:

- Acquisition of property, plant and equipment 12,971,083 11,254,395

- Acquisition of timber rights 237,000,000 237,000,000 249,971,083 248,254,395

The capital commitment relates to:

i) the balance purchase consideration of RM237,000,000 for the acquisition oftimber rights arising from the acquisition of the entire issued and paid-up sharecapital of Rumpun Capaian Sdn. Bhd. (Rumpun) by GSR Pte. Ltd. (GSR), awholly own subsidiary of the Company. The Sale and Purchase Agreement(SPA) was signed on 19 October 2016. Pursuant to supplementary letter dated23 August 2019, the repayment of this balance purchase consideration hasbeen extended to 30 November 2019.

ii) Machinery and equipment totalling RM12,971,083 relating to the constructionof a second production line at the Group’s plywood mill in Sandakan.

(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 16 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 15 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.



31. Financial instruments

(a) Categories of financial instruments

Group Company Carrying amount

Financial assets at amortised

cost

Carrying amount

Financial assets at

amortised cost

2019 Financial assets RM RM RM RM

Trade and non-trade receivables 40,827,702 40,827,702 183,230 183,230 Cash and bank balances 798,143 798,143 52,790 52,790

41,625,845 41,625,845 236,020 236,020


Trade and non-trade payables 68,624,464 68,624,464 637,494 637,494 Loans and borrowings 34,381,974 34,381,974 21,594,085 21,594,085

103,006,438 103,006,438 22,231,579 22,231,579

2018 Financial assets

Trade and non-trade receivables 67,400,443 67,400,443 122,894,347 122,894,347 Cash and bank balances 2,137,059 2,137,059 51,474 51,474

69,537,502 69,537,502 122,945,821 122,945,821


Trade and non-trade payables 84,262,868 84,262,868 1,091,247 1,091,247 Loans and borrowings 113,641,602 113,641,602 98,690,512 98,690,512

197,904,470 197,904,470 99,781,759 99,781,759

A reconciliation of trade and other receivables in financial assets to the amounts reflected in the statements of financial position is as follows:


Trade and other receivables

As reflected in the statements of financial position (Note 22) 43,117,300 116,939,060 421,358 123,780,525 Less: Deposits and advances for log

supplies - 45,454,198 - - Prepayments 2,289,598 4,084,419 238,128 886,178

Loans and receivables 40,827,702 67,400,443 183,230 122,894,347



31. Financial instruments (continued)

(b) 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.

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.




(b) Financial risk management (continued)

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 RM3,755,375 (2018: RM5,198,179) relating to corporate guarantees provided by the Company to the banks to secure obligations under finance leases granted to certain subsidiaries.

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 RM3,755,375 (2018: RM5,198,179) 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.

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):

Contractual Carrying undiscounted Within 1 – 5 Over amount cash flows 1 year years 5 years

RM RM RM RM RM Group 2019 Trade and non-trade

payables 68,624,464 68,624,464 68,624,464 - - Loans and borrowings 34,381,974 46,009,565 24,034,565 - 21,975,000

103,006,438 114,634,029 92,659,029 - 21,975,000

2018 Trade and non-trade

payables 84,262,868 84,262,868 84,262,868 - -

Loans and borrowings 113,641,602 141,585,126 83,332,869 36,277,257 21,975,000

197,904,470 225,847,994 167,595,737 36,277,257 21,975,000

Company 2019 Trade and non-trade

payables 637,494 637,494 637,494 - -

Loans and borrowings 21,594,085 21,594,085 21,594,085 - -

22,231,579 22,231,579 22,231,579 - -

2018 Trade and non-trade

payables 1,091,247 1,091,247 1,091,247 - -

Loans and borrowings 98,690,512 114,487,884 80,000,000 34,487,884 -

99,781,759 115,579,131 81,091,247 34,487,884 -





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) 2019 2018

Effects on profit after taxation RM RM

Increase of 30bp (15,548) (228,257) Decrease of 30bp 15,548 228,257

Foreign currency risk

The Group is not materially exposed to foreign currency risk as the Group’s foreign operations are currently dormant.

(c) 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




(c) Fair value information (continued)

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.

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 astrong credit rating and healthy capital ratios in order to support its business and maximiseshareholder value. To achieve this objective, the Group may make adjustments to the capitalstructure in view of changes in economic conditions, such as adjusting the amount of dividendpayment, returning of capital to shareholders or issuing new shares. The Group’s strategieswere unchanged from the previous financial year.

The gearing ratio of the Group and of the Company as at the end of the reporting period wasas follows:


Loans and borrowings 34,381,974 113,641,602 21,594,085 98,690,512 Less: Cash and cash

equivalents 798,143 2,137,059 52,790 51,474

Net debt 33,583,831 111,504,543 21,541,295 98,639,038

Total equity 285,223,259 340,551,343 (21,272,901) 327,478,181

Gearing ratio 0.12 0.33 (1.01) 0.30

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% (or 50% if the auditors have highlighted a material uncertainty related to going concern which is the case for the Group) 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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26,0

90,6

90

Fina

nce

cost

s

805,

577

691,

829

686

3,18

1,54

8 -

4,67

9,64

0 Se

gmen

t (lo

ss)/

prof

it

(66,

740,

066)

(2

49,5

88,0

10)

(1,3

57,4

20)

(12,

400,

066)

17

3,58

3,01

8 (1

56,5

02,5

44)

Ass

ets

and

liabi

litie

s

Add

ition

to

non-

curr

ent

asse

ts

437,

208

277,

805

- 55

,116

-

770,

129

Segm

ent

asse

ts

191,

043,

948

186,

614,

035

6,07

5,19

9 56

,662

,704

(2

2,87

9,72

0)

417,

516,

166

Segm

ent

liabi

litie

s 22

9,30

1,81

4 33

6,88

5,98

3 17

,709

,127

10

5,60

3,96

7 (5

57,2

07,9

84)

132,

292,

907



33.

Seg

men

t in

form

atio

n (c

ontin

ued)

(i)

Ope

rati

ng s

egm

ent

(con

tinue

d)

Per

20

18

Adj

ustm

ents

co

nso

lidat

ed

and

finan

cial

L

ogg

ing

Man

ufac

turi

ng

Shi

pyar

d O

ther

s el

imin

atio

ns

stat

emen

ts

Rev

enue

R

M

RM

R

M

RM

R

M

RM

Exte

rnal

cus

tom

ers

31,1

88,6

56

135,

028,

034

3,53

8,12

0 -

- 16

9,75

4,81

0 In

ter-

segm

ent

79,7

76,6

17

112,

283

- 20

,000

,000

(9

9,88

8,90

0)

- T

otal

rev

enue

11

0,96

5,27

3 13

5,14

0,31

7 3,

538,

120

20,0

00,0

00

(99,

888,

900)

16

9,75

4,81

0

Res

ults

Inte

rest

inco

me

- 5,

478

- -

- 5,

478

Am

ortis

atio

n of

tim

ber

righ

ts

- -

- -

1,18

8,16

3 1,

188,

163

Am

ortis

atio

n of

land

use

rig

hts

-

72,0

37

- -

196,

022

268,

059

Dep

reci

atio

n of

pro

pert

y, p

lant

and

equi

pmen

t 9,

008,

525

17,0

36,7

86

1,13

5,19

5 16

,183

-

27,1

96,6

89

Fina

nce

cost

s

296,

701

1,21

2,50

6 1,

653

7,20

7,07

9 -

8,71

7,93

9 Se

gmen

t pr

ofit/

(loss

) 34

,487

,936

7,

608,

499

(1,4

54,5

65)

10,3

84,0

04

(17,

393,

596)

33

,632

,278

Ass

ets

and

liabi

litie

s

Add

ition

to

non-

curr

ent

asse

ts

41,6

26,7

08

8,51

0,10

4 68

,400

-

- 50

,205

,212

Segm

ent

asse

ts

296,

484,

368

442,

017,

266

8,14

4,60

5 50

5,89

9,54

1 (6

81,3

32,7

99)

571,

212,

981

Segm

ent

liabi

litie

s 22

7,02

1,23

4 33

9,43

6,10

5 17

,114

,711

18

3,02

2,58

8 (5

35,9

33,0

00)

230,

661,

638



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 2019 2018 2019 2018 RM RM RM RM

Malaysia 16,199,290 41,263,208 394,210,334 547,486,578 Hong Kong - 26,492,030 - 421,131 Korea 720,161 3,176,638 - - Thailand 823,623 4,201,555 - - Japan 11,517,690 89,913,696 - - Taiwan 1,261,929 3,655,617 - - Singapore - - 23,075,842 23,077,624 Others 621,179 1,052,066 229,990 227,648

31,143,872 169,754,810 417,516,166 571,212,981

Total assets information presented above consist of the following items as presented in the consolidated statement of financial position:

2019 2018 RM RM

Property, plant and equipment 195,513,239 223,329,823 Land use rights 12,958,044 13,226,103 Intangible assets 9,959,289 25,126,956 Biological assets 142,400,000 142,400,000 Deferred tax assets - 4,400,000 Inventories 12,770,151 43,633,004 Tax recoverable - 20,976 Trade and non-trade receivables 43,117,300 116,939,060 Cash and bank balances 798,143 2,137,059

417,516,166 571,212,981

(iii) Major customers

Revenue from 7 (2018: 6) major customers amounted to RM16,043,656 (2018: RM94,962,397) representing 52% (2018: 56%) arising from sale of wood products.



34. Events after the reporting period

In October 2019, the Company signed a log supply agreement with a unit of Innoprise CorpSdn Bhd (“Innoprise"), the investment holding vehicle of Yayasan Sabah, under which theCompany will issue new shares to Innoprise, amounting to a 30% stake in the company, forlogs supplied. The Company entered the log supply agreement with Rakyat Berjaya Sdn Bhd(RBSB), a subsidiary of Innoprise.

Pursuant to this agreement, Innoprise will be entitled to appoint two directors to the boardof the Company and also has the right to appoint the chief executive officer upon the issueof the new shares following the completion and acceptance of a due diligence exercise withintwo months from the date of the agreement.

In October 2019, one of the Group’s log supplier received approval from RBSB for the resumption of logging operations. This is however subject to the approval by the Sabah Forestry Department and the Environmental Impact Assessment from the Environmental Protection Department. Hence, the commencement of the logging operations is subject to approvals obtained from the relevant authorities.

35. Prior year errors and changes in comparative information

As previously reported

Prior year adjustment As restated

RM RM RM Group Statement of financial position At 1 July 2017 Share capital 168,994,182 74,511,248 243,505,430 Other reserves 76,085,198 (74,511,248) 1,573,950

Intangible assets 33,681,780 (7,366,661) 26,315,119 Loan and borrowings - Non-current (87,701,051) 4,277,596 (83,423,455) Retained profits (73,184,581) 3,089,065 (70,095,516)

At 30 June 2018 Biological assets - non-current 113,200,000 29,200,000 142,400,000 Biological assets - current 29,200,000 (29,200,000) -

Intangible assets 32,493,617 (7,366,661) 25,126,956 Loan and borrowings - Non-current (48,506,525) 4,277,596 (44,228,929) Retained profits (78,669,365) 3,089,065 (75,580,300)

Statement of profit or loss and other comprehensive income 2018 Administrative expenses 12,574,029 (321,708) 12,252,321 Other operating expense 1,023,703 321,708 1,345,411

Company Statement of financial position At 1 July 2017 Share capital 168,994,182 74,511,248 243,505,430 Other reserves 74,511,248 (74,511,248) -



35. Prior year errors and changes in comparative information (continued)

Following the transition to the no par value regime, the amounts standing to the credit ofthe share premium account and capital redemption reserve account shall become part of theshare capital. While the share premium amount was transferred to share capital during thefinancial year ended 30 June 2017, the capital redemption reserve amount included withinother reserves totalling RM74,511,248 was mistakenly not transferred to share capital, as istherefore now corrected via a prior year adjustment.

The timber rights included within intangible assets was overstated in prior years due topreviously undetected errors in the amortisation of the timber rights which as at 1 July 2017,the error amounted to RM7,366,661. There was no material error made in the amortisationof timber rights for the financial year ended 30 June 2018.

The government grant benefit included within loans and borrowings was understated in prioryears due to previously undetected errors in the calculation of the government grant whichas at 1 July 2017, the error amounted to RM4,277,596. There was no material error made inthe unwinding of government grant for the financial year ended 30 June 2019.

Pursuant to MFRS 141, Agriculture, biological assets are measured at fair value less cost tosell, and there is no requirement to separate the biological asset between current and non-current classification. Therefore, the amount previously classified as current of RM29,200,000has been reclassified to non-current.

Impairment loss on trade and non-trade receivables of RM321,708 for the financial year ended30 June 2018 was previously presented within administrative expenses but is now presentedwithin other operating expense to conform with current year presentation where allimpairment losses and allowances is classified within other operating expenses.

The Government grant loan included within loan and borrowings was understated in prioryears due to previously undetected error in the deferred interest which as at 1 July 2017, theerror amounted to RM 4,277,596. There was no material error made in the unwinding ofdeferred interest earned for the financial year ended 30 June 2018.


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 085318485Kolapis,District of Labuk &SugutBeluran, Sabah.


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

Net Book value

(RM’000)

6,982

3,480

5.704

1,332

175

180

1,343

14

Approximate Age of Building

(Years)

222222

22

22

19

2121

22

N/A

21

2424242424

N/A

Description and Existing

Use

- Generating Sets Room- Kiln Dry- Sawmill & Sawroom- Warehouse

Moulding PlantMain Factory

- Impregnation Plant- Warehouse- Workshop- Dockyard / Frabication - Brick Warehouse

Labour Quarters

Agriculture Land

Labour Quarters

- Sawmill Factory- Labour Quarters- OfficeBuilding- Workshop- Genset Room- Store & Saw- Doctor Room

- Lake


List of Properties(continued)

No.

9.

10.

11.

12.

13.

Location

Priceworth Industries Sdn Bhd

CL 075170062Mile 3.4 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- Lake

Agriculture Land

- Plywood Main Factory- 2nd Plywood Factory- Warehouse- Boiler House- Workshop-Mainsawmill+Office-MainOffice- Canteen- Moulding Factory- Moulding Warehouse- Kiln Drying Building

Log Pond

- Sawmill/ Timber Storage Factory- 2 storey dwelling house-OfficeBuilding- 2 storeyLabour Quarters with Kitchen, Dining & Canteen- 4 Blocks Labour Quarters- Sawdoctoring House- Generator House & Store

Land Area(acres)

9.89

14.24

38.28

80.46

38.45

Built-upArea

(sq. ft.)

-

-

103,95037,4463,228507

1,22625,50010,7346,6424,82884,87217,743

-

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

Net Book value

(RM’000)

12

95

9,441

1,722

673

Approximate Age of Building

(Years)

22

N/A

3623283636363636363636

N/A

25

25

2525

25

2525


Analysis of ShareholdingsAs at 1 October 2019

Total No. Issued : 4,094,922,524 No. of holders : 9,556Class of shares : Ordinary shares Voting rights : One vote per ordinary share

DISTRIBUTION SCHEDULE (AS PER THE RECORD OF DEPOSITORS)

Size of Holdings No. of Holders % No. of Shares Held %

1-99 502 5.25 19,043 0.00

100 to 1,000 435 4.60 174,584 0.00

1,001 to 10,000 2,111 22.10 10,346,336 0.26

10,001 to 100,000 3,728 39.01 177,198,132 4.33

100,001 to 204,746,125 2,779 29.08 3,674,886,762 89.74204,746,126 and above 1 0.01 232,297,667 5.67

Total 9,556 100.00 4,094,922,524 100.00

SUBSTANTIAL SHAREHOLDERS AS PER THE REGISTER OF SUBSTANTIAL SHAREHOLDERS

No. of Ordinary Shares heldName of Substantial Shareholders Direct Interest % Indirect Interest %

Maha Gayabina Sdn Bhd 272,589,412 6.66 - -

Lim Nyuk Foh 317,302,713 7.75 - -

DIRECTORS’ SHAREHOLDINGS AS PER THE REGISTER OF DIRECTORS

No. of Ordinary Shares heldName of Director Direct Interest % Indirect Interest %

Lim Nyuk Foh 317,302,713 7.75 - -Koo Jenn Man 510 0.00 - -Kwan Tack Chiong - - - -Ooi Jit Huat - - - -Chiew Boon Chin


LIST OF 30 LARGEST SHAREHOLDERS

No. Name No. of Shares %^

1. Kenanga Nominees (Tempatan) Sdn Bhd [Pledged securities account for Lim Nyuk Foh]

232,297,667 5.67

2. Maybank Nominees (Tempatan) Sdn Bhd[Pledged securities account for Maha Gayabina Sdn Bhd]

154,600,000 3.78

3. Tan Sri Abdul Rashid Hussain 149,207,712 3.64

4. Kenanga Nominees (Tempatan) Sdn Bhd[Pledged securities account for Maha Gayabina Sdn Bhd]

117,989,412 2.88

5. RHB Nominees (Asing) Sdn Bhd [Exempt AN (BP) for RHB securities Hong Kong Limited A/C Clients (retail)]

98,887,600 2.41

6. Kenanga Nominees (Tempatan) Sdn Bhd[Pledged securities account for Victoria Capital Sdn Bhd]

89,500,000 2.19

7. Alliancegroup Nominees (Tempatan) Sdn Bhd [Pledged securities account for Lim Nyuk Sang @ Freddy Lim (8071811)]

69,870,050 1.71

8. AmBank (M) Berhad[Pledged securities account for Lim Nyuk Sang @ Freddy Lim (Smart)]

67,452,800 1.65

9. Akas Permai Sdn Bhd 59,716,600 1.46

10. Alliancegroup Nominees (Tempatan) Sdn Bhd [Pledged securities account for Lim Fei Nee (7000197)]

51,288,000 1.25

11. H’ng Cheow Sen 51,120,000 1.25

12. Sabah Development Nominees (Tempatan) Sdn Bhd[Pledged securities account for Lim Nyuk Foh]

45,168,000 1.10

13. AffinHwangNominees(Asing)SdnBhd[Exempt AN for Philip Securities (Hong Kong) Ltd (Clients’ Account)]

42,000,000 1.03

14. City Solaris Sdn Bhd 41,945,200 1.02

15. Tam Cheng Yau 41,828,000 1.02

16. Lim Fei Nee 41,100,000 1.00

17. Alliancegroup Nominees (Tempatan) Sdn Bhd[Pledged securities account for Lim Nyuk Foh (8121417)]

40,951,000 1.00

18. Kenanga Nominees (Tempatan) Sdn Bhd [Pledged securities account for Merry Noel Robert]

40,000,000 0.98

19. Public Nominees (Tempatan) Sdn Bhd [Pledged securities account for Chow Choon Futt (E-TCS)]

39,737,100 0.97

20. Lim Hock Yet 39,500,000 0.96

21. Kenanga Nominees (Tempatan) Sdn Bhd [Pledged securities account for Gonawin Sdn Bhd]

38,462,000 0.94

22. Fung Kek Nan 32,000,000 0.78

23. Kenanga Nominees (Tempatan) Sdn Bhd [Pledged securities account for Ho Phea Keat (007)]

30,700,066 0.75

24. Kenanga Nominees (Tempatan) Sdn Bhd [Pledged securities account for Anis Bin Affandi]

26,404,000 0.64

25. Puan Sri Emilahani Yang Binti Mohd Yatim 25,165,796 0.61

26. HSBC Nominess (Asing) Sdn Bhd[Exempt AN for Credit Suisse (SG BR-TST-Asing)]

25,000,000 0.61

27. RHB Capital Nominees (Tempatan) Sdn Bhd [Pledged securities account for Wong Yung Soon (471299)]

24,000,000 0.59

28. Sukdarshen Singh A/L Sarjit Singh 23,034,400 0.56

29. Kenanga Nominees (Tempatan) Sdn Bhd [Pledged securities account for Chong Mee Fah @ Frederick Chong]

22,808,700 0.56

30. Public Nominees (Tempatan) Sdn Bhd [Pledged securities account for Chow Choon Futt (E-TCS)]

20,650,000 0.50

Analysis of ShareholdingsAs at 1 October 2019 (continued)


Notice of Twenty-Third Annual General Meeting

NOTICE IS HEREBY GIvEN THAT the Twenty-Third (23rd) Annual General Meeting of Priceworth International Berhad (“PWI” or “the Company”) will be convened and held at Grandis Hotels and Resorts, 3rd Floor, Advena Room, Suria Sabah Shopping Mall, 1A Jalan Tun Fuad Stephens, 88000 Kota Kinabalu, Sabah on Friday, 29 November 2019 at 9.00 a.m. to transact the following business:

AGENDA

1. ToreceivetheAuditedFinancialStatementsforthefinancialyearended30June2019togetherwiththe Reports of the Directors and Auditors thereon.

Please refer to Explanatory Note 1

2. To approve the payment of Directors’ fees and other benefits for an amount of not exceedingRM250,000.00 payable to the Directors of the Company for the period commencing from 30 November 2019 until the conclusion of the next Annual General Meeting of the Company to be held in 2020.

Ordinary Resolution 1

3. To re-elect Mr Koo Jenn Man who retires pursuant to Clause 105(1) of the Company’s Constitution. Ordinary Resolution 2

4. To re-elect Datuk Dr. Roslan Bin A Ghaffar who retires pursuant to Clause 105(1) of the Company’s Constitution.


5. To re-elect Mr Chiew Boon Chin who retires pursuant to Clause 114 of the Company’s Constitution. Ordinary Resolution 4

6. To re-appoint Messrs. PKF as Auditors of the Company until the conclusion of the next Annual GeneralMeetingandtoauthorisetheDirectorstofixtheirremuneration.


7. AS SPECIAL BUSINESSToconsiderandifthoughtfit,topassthefollowingOrdinaryResolutions:

(a) Authority to Issue and Allot Shares Pursuant to Sections 75 and 76 of the Companies Act 2016

“THAT subject to the Companies Act 2016 (“the Act”), the Constitution of the Company and approvals from Bursa Malaysia Securities Berhad (“Bursa Securities”) and other governmental and/or regulatory authorities, where such approval is required, 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 mayintheirabsolutediscretiondeemfitprovidedalwaysthattheaggregatenumberofsharesissued 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) Proposed Renewal of Share Buy-Back Authority for the Company to Purchase of its Own Ordinary Shares

“THAT, subject to the Act, the Bursa Securities Main Market Listing Requirements (“Listing Requirements”), the Company’s Constitution and the approvals of other relevant authorities, the Company be and is hereby authorised to purchase and hold such number of ordinary shares in the Company as may be determined by the Directors of the Company from time to time through the Bursa Securities provided that the aggregate number of shares purchased and/or held does not exceed ten percent (10%) of the total number of issued shares of the Company AND THAT the maximum amount of funds to be allocated by the Company for the purpose ofpurchasingitsownsharesshallnotexceedthetotalretainedprofitsoftheCompanyatthetime of the purchase.

THAT such authority shall commence immediately upon passing of this ordinary resolution until:

(i) the conclusion of the next AGM of PWI at which time it will lapse, unless the authority is renewed by an ordinary resolution passed at a general meeting, either unconditionally or subject to conditions; or

(ii) earlier revoked or varied by ordinary resolution passed by the shareholders of PWI in a general meeting; or

(iii) upon the expiration of the period within which the next AGM is required by law to be held,

whicheveroccursfirst.




Notice of Twenty-Third Annual General Meeting (continued)

7. AS SPECIAL BUSINESS (continued)Toconsiderandifthoughtfit,topassthefollowingOrdinaryResolutions:(continued)

(b) Proposed Renewal of Share Buy-Back Authority for the Company to Purchase of its Own Ordinary Shares (continued)

THAT authority be and is hereby given to the Directors to deal with the shares so purchased in their absolute discretion in any of the following manner:-

(i) cancel the shares so purchased; or

(ii) retain the shares so purchased as treasury shares and held by the Company; or

(iii) retain part of the shares so purchased as treasury shares and cancel the remainder; or

(iv) distribute the treasury shares as dividends to shareholders and/or resell on Bursa Securities and/or cancel all or part of them; or

(v) transfer all or part of the treasury shares for purposes of an employees’ share scheme, and/or as purchase consideration; or

AND THAT the Directors be and are hereby authorised to take all steps necessary to implement,finaliseandtogivefulleffecttotheProposedShareBuy-Back”

(c) Retention of Mr Ooi Jit Huat as an Independent Non-Executive Director

“THAT Mr Ooi Jit Huat, who has served as an Independent Non-Executive Director for a cumulative term of more than nine (9) years, be and is hereby retained as an Independent Non-Executive Director of the Company in accordance with the Malaysian Code on Corporate Governance.”


8. 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 SecretariesSandakan31 October 2019

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 22 November 2019 shall be regarded as member of the Company entitled to attend, speak and vote at the Annual General Meeting or appoint proxy/proxies to attend and vote on his/her behalf.

9. Pursuant to Clause 82 of the Company’s Constitution, all resolutions set out in this Notice will be put to vote by way of poll.

Explanatory Notes:

1. AuditedFinancialStatementsforthefinancialyearended30June2019

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. OrdinaryResolution6–AuthoritytoIssueandAllotSharesPursuanttoSections75and76OftheCompaniesAct,2016

The proposed adoption of the Ordinary Resolution No. 6, 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 total number of any such shares issued during the preceding twelve (12) months, does not exceed 10% of the total number of issued shares 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, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Twenty-Second Annual General Meeting of the Company held on 5 December 2018 and which will lapse at the conclusion of the Twenty-Third Annual General Meeting of the Company.

3. OrdinaryResolution7 - ProposedRenewal of ShareBuy-BackAuthority for theCompany toPurchaseof itsOwn

OrdinaryShares Ordinary Resolution 7, if passed, will provide the mandate for the Company to buy back its own shares up to a limit of 10% of the total

number of issued shares 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 31 October 2019 which is despatched together with the Company’s Annual Report 2019.

4. OrdinaryResolution8-RetentionasIndependentNon-ExecutiveDirectoroftheCompanypursuanttotheMalaysianCodeonCorporateGovernance(“MCCG”)

Ordinary Resolutions 8 is proposed pursuant to the MCCG and if passed, will allow 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 his retention are set out in the Corporate Governance Overview Statement in the Company’s Annual Report 2019.

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

TheprofilesoftheDirectorswhoarestandingforre-electionandre-appointmentatthe23rdAGMaresetoutintheDirectors’Profileonpage6oftheAnnualReport2019.

No individual seeking for election as a Director other than the Directors are seeking for re-election and retention as a Director at the 23rd AGM.

Notice of Twenty-Third Annual General Meeting (continued)


Proxy Form!

No. of shares held

I/We,……………………………………………………………………………………………………………………………………………..

of…………………………………………………………………………………………………………………………………………………

being a Member of Priceworth International Berhad hereby appoint …………………………………………………………………

…………………………………………………………………………………………………………………………………………………

of …………………………………………………………………………………………………………………………………………………

…………………………………………………………………………………………………………………………………………………..

or failing him/her ……………………………………………………………………………………………………………………………….

of…………………………………………………………………………………………………………………………………………………as my/our proxy to vote for me/us on my/our behalf at the Twenty-Third (23rd) Annual General Meeting of the Company to be held at Grandis Hotels and Resorts, 3rd Floor, Advena Room, Suria Sabah Shopping Mall, 1A Jalan Tun Fuad Stephens, 88000 Kota Kinabalu, Sabah on Friday, 29 November 2019 at 9.00 a.m. and at any adjournment thereof.

My/Our proxy to vote as indicated below:

No. Resolutions For AgainstResolution 1 ToapprovethepaymentofDirectors’ feesandotherbenefits foranamountofnot

exceeding RM250,000.00 payable to the Directors of the Company for the period commencing 30 November 2019 until the conclusion of the next Annual General Meeting of the Company to be held in 2020.

Resolution 2 To re-elect Mr Koo Jenn Man as DirectorResolution 3 To re-elect Datuk Dr. Roslan Bin A Ghaffar as DirectorResolution 4 To re-elect Mr Chiew Boon Chin as DirectorResolution 5 To re-appoint Messrs. PKF as Auditors of the Company until the conclusion of the next

AnnualGeneralMeetingandtoauthorisetheDirectorstofixtheirremuneration.As Special Business:

Resolution 6 Authority to allot shares pursuant to Sections 75 and 76 of the Companies Act, 2016Resolution 7 Proposed Renewal of Share Buy-Back Authority for the Company to Purchase of its

Own Ordinary SharesResolution 8 Retention of Mr Ooi Jit Huat as an Independent Non-Executive Director

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 specificdirections,yourproxywillvoteorabstainashe/shethinksfit.

Dated this ………… day of ……………………………………… 2019

………………………………………………….Signature:Shareholder or Common Seal

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 22 November 2019 shall be regarded as member of the Company entitled to attend, speak and vote at the Annual General Meeting or appoint proxy/proxies to attend and vote on his/her behalf.

9. Pursuant to Clause 82 of the Company’s Constitution, all resolutions set out in this Notice will be put to vote by way of poll.


The Company SecretaryPRICEWORTH INTERNATIONAL BERHAD1st Floor, Lot 5, Block No. 4Bandar Indah, Mile 4, Jalan Utara P. O. Box 284890732 SandakanSabah

Then fold here

First fold here

Affixstamp

PRICEWORTH INTERNATIONAL BERHAD(Company No. 399292-V)

(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 / 229370 / 221211Fax : 089-221213 / 223957E-mail : [email protected]

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