62 Kulim (Malaysia) Berhad (23370-V)

Transcription

1 SECTION 2 ABOUT KULIM CORPORATE MILESTONES SUSTAINABLE GROWTH Sindora became a 77%-owned subsidiary of Kulim in May, adding plantation land and bringing in a number of Intrapreneur Ventures ( IV ) companies into the Group. - In October, NBPOL acquired 100% stake in Ramu Agri-Industries Limited ( Ramu ), PNG, further expanding the Group s landbank to 124,833 hectares. - NBPOL became one of the first plantation companies to receive Roundtable on Sustainable Palm Oil ( RSPO ) certification in September. - Construction commenced for NBPOL s 200,000 TPA refinery plant in UK. - Expansion of QSR into Cambodia for KFC restaurants Official RSPO certification was accorded to Kulim-owned plantations in Malaysia in January. - In January, QSR increased its shareholdings in KFCH to 50.25% and KFCH became a subsidiary of QSR. - Estate swap with Sime Darby Plantations Sdn Bhd ( SDP ) in September, involving Sindora s Sungai Simpang Kiri Estate and SDP s Sungai Tawing Estate, to realise potential rationalisation benefits of their respective locations. - Sindora and its subsidiary, E.A. Technique (M) Sdn Bhd acquired 20% and 18% respectively, of Orkim Sdn Bhd ( Orkim ), increasing its tanker fleet, bringing along charter contracts with major oil companies. - KFCH received the franchise rights to operate KFC restaurants in Mumbai and Pune, India In April, NBPOL acquired 80% stake in CTP (PNG) Ltd (now known as Kula Palm Oil Limited), bringing in additional 26,000 hectares of plantation land to the Group s landbank. - Completion of equity swap in Nexsol (S) Pte Ltd and Nexsol (M) Sdn Bhd between Kulim and Peter Cremer (Singapore) GmBH in April. Following the exercise, Nexsol (M) Sdn Bhd became a 100% subsidiary of Kulim, while at the same time Nexsol (S) Pte Ltd ceased to be an associate of Kulim. - In May, NBPOL officially launched its refinery in Liverpool. - NBPOL s subsidiary, Ramu, was officially accorded with RSPO certification in August. - In September, Kulim concluded the disposal of NatOleo and its subsidiaries, marking the Group s exit from the oleochemicals business. 62 Kulim (Malaysia) Berhad (23370-V)

2 The disposal of business and undertakings by QSR and KFCH was concluded in January Both companies were delisted from the official list of Bursa Malaysia Securities Berhad effective 7 February entering new dimension Kulim completed its capital restructuring exercise, involving a share split, bonus shares and free warrants in March Kulim acquired six (6) parcels of oil palm estates measuring approximately 13,687 hectares and two (2) palm oil mills from JCorp. - Sindora became a wholly-owned subsidiary of Kulim and delisted from the official list of Bursa Malaysia Securities Berhad effective 30 November Kulim s shareholding in NBPOL diluted to 48.97% in May pursuant to the issuance of new shares to the minority shareholders of KPOL to streamline the shareholding structure of KPOL. However, NBPOL is still consolidated as a subsidiary pursuant to FRS 10: Consolidated Financial Statements. - Kulim via Sindora, completed the disposal of Metro Parking (Malaysia) Sdn Bhd Group to Damansara Realty Berhad. - In April, Kulim via Sindora, completed the disposal of Orkim Sdn Bhd to GMV-Orkim Sdn Bhd. - Kulim acquired 60% of Danamin (M) Sdn Bhd, a company involved in O&G servicing activities in June Kulim launched the Proposed Partial Offer of up to 20% of NBPOL in June The Proposed Partial Offer was subsequently announced as lapsed on 5 September On 3 October 2013, Kulim entered into the Conditional Sale and Purchase Agreement ( CSPA ) with PT Graha Sumber Berkah ( PT GSB ) for the acquisition of up to 75% stake in PT Wisesa Inspirasi Nusantara ( PT WIN ), which gave it control over approximately 40,000 hectares of oil palm estate in Central Kalimantan On 2 May, Kulim converted the Convertible Cumulative Loan Securities ( ICCULS ) in Asia Economic Development Fund Limited ( AEDFL ) and capitalised accumulated interest into ordinary shares of AEDFL, which entailed AEDFL to become a 54.21% owned subsidiary of Kulim. - Kulim via its wholly-owned subsidiary company Kulim Energy Nusantara Sdn Bhd ( KENSB ) had on 24 October 2014 entered into a Joint Operating Agreement ( JOA ) with PT Radiant Bukit Barisan E&P ( PT RBB ) and PT GSB to participate in the exploration and development of Oil & Gas field in South West Bukit Barisan Block ( SWBB Block ), Central Sumatera, Indonesia. - On 10 December 2014, KENSB entered into a Conditional Subscription and Shares Purchase Agreement ( CSSPA ) with PT Citra Sarana Energi ( PT CSE ) and its existing shareholders for acquisition of 60% equity interest in PT CSE. - E.A. Technique (M) Berhad, an indirect subsidiary of Kulim held through Sindora, was admitted to the Main Market of Bursa Malaysia on 11 December Integrated Annual Report A New Energy

3 SECTION 2 ABOUT KULIM GROUP S SIGNIFICANT SUBSIDIARIES AS AT 31 MARCH 2015 kulim (malaysia) berhad PLANTATION 100% 100% 100% 100% 95.26% 100% 100% 74% Sindora Berhad Mahamurni PLANTATIONS Sdn Bhd Kulim PLANTATIONS (MALAYSIA) Sdn Bhd ULU Tiram MANUFACTURING Company (MALAYSIA) Sdn Bhd Kumpulan BERTAM PLANTATIONS Berhad EPA MANAGEMENT Sdn Bhd Selai Sdn Bhd PT WISESA INSPIRASI NUSANTARA INTRAPRENEUR VENTURES 100% 90% 60% 75% 75% 75% 75% 75% 95% 100% EPASA Shipping Agency Sdn Bhd MIT Insurance Brokers Sdn Bhd MICROWELL Bio SOLUTIONS Sdn Bhd Kulim NURSERY Sdn Bhd Renown Value Sdn Bhd EDARAN BADANG Sdn Bhd Extreme Edge Sdn Bhd Kulim CIVILWORKS Sdn Bhd PINNACLE PLATFORM Sdn Bhd Kulim Safety Training and SERVICES Sdn Bhd 82% 75% 75% 100% 90% 100% oil AND gas Sindora Timber Sdn Bhd 50.8% 100% 60% Perfect Synergy Trading Sdn Bhd Optimum STATUS Sdn Bhd Sovereign MULTIMEDIA Resources Sdn Bhd Special appearance sdn bhd AKLI Resources Sdn Bhd E.A. Technique (M) Berhad KULIM ENERGY NUSANTARA SDN BHD DANAMIN (M) SDN BHD others 100% 54.2% 100% 60% 100% 100% 100% JTP Trading Sdn Bhd Asia ECONOMIC DEVELOPMENT Fund Limited Skellerup (M) INDUSTRIES Sdn Bhd Kulim TopPlant Sdn Bhd The Secret of Secret Garden Sdn Bhd GranuLab (M) Sdn Bhd Kulim LIVESTOCK Sdn Bhd 68% 90% Asia LogisticS Council SDN BHD SIM MANUFACTURING Sdn Bhd MALAYSIA IndoneSIA HONG KONG The full list of companies under Kulim Group is set out in Notes 16 to the Financial Statements on pages 254 to Kulim (Malaysia) Berhad (23370-V)

4 CORPORATE INFORMATION BOARD OF DIRECTORS Chairman/Non-Independent Non-Executive Director DATO KAMARUZZAMAN ABU KASSIM Managing Director AHAMAD MOHAMAD Executive Director JAMALUDIN MD ALI ABDUL RAHMAN SULAIMAN Non-Independent Non-Executive Director DATIN PADUKA SITI SA DIAH SH BAKIR ZULKIFLI IBRAHIM ROZAINI MOHD SANI Independent Non-Executive Director TAN SRI DATO SERI UTAMA ARSHAD AYUB DATUK HARON SIRAJ DR. RADZUAN A. RAHMAN LEUNG KOK KEONG AUDIT COMMITTEE TAN SRI DATO SERI UTAMA ARSHAD AYUB (Chairman) DR. RADZUAN A. RAHMAN LEUNG KOK KEONG NOMINATION COMMITTEE DATO KAMARUZZAMAN ABU KASSIM (Chairman) TAN SRI DATO SERI UTAMA ARSHAD AYUB DATUK HARON SIRAJ REMUNERATION COMMITTEE DATO KAMARUZZAMAN ABU KASSIM (Chairman) TAN SRI DATO SERI UTAMA ARSHAD AYUB DR. RADZUAN A. RAHMAN STOCK EXCHANGE LISTING BOARD OPTION COMMITTEE DATO KAMARUZZAMAN ABU KASSIM (Chairman) AHAMAD MOHAMAD DR. RADZUAN A. RAHMAN ZULKIFLI IBRAHIM SECRETARIES IDHAM JIHADI ABU BAKAR (MAICSA ) NURALIZA A. RAHMAN (MAICSA ) REGISTERED OFFICE Level 11, Menara Komtar, Johor Bahru City Centre, Johor Bahru, Johor Darul Takzim Tel. : / Fax. : REGISTRAR Level 11, Menara Komtar, Johor Bahru City Centre, Johor Bahru, Johor Darul Takzim Tel. : / Fax. : nursheila@jcorp.com.my PRINCIPAL BANKERS Asian Finance Bank Berhad CIMB Bank Berhad HSBC Bank Malaysia Berhad Malayan Banking Berhad OCBC Bank (M) Berhad RHB Bank Berhad Standard Chartered Bank Malaysia The Bank of Nova Scotia Berhad AUDITORS Ernst & Young WEBSITE GROUP S LISTED ENTITIES STOCK EXCHANGE LISTED SINCE STOCK CODE Kulim (Malaysia) Berhad Main Market - 14 November Bursa Malaysia Securities Berhad E.A Technique (M) Berhad Main Market - Bursa Malaysia Securities Berhad 11 December Integrated Annual Report A New Energy

5 SECTION 2 ABOUT KULIM BOARD OF DIRECTORS From left to right: DATO KAMARUZZAMAN ABU KASSIM Chairman/Non-Independent Non-Executive Director AHAMAD MOHAMAD Managing Director JAMALUDIN MD ALI Executive Director ZULKIFLI IBRAHIM Non-Independent Non-Executive Director 66 Kulim (Malaysia) Berhad (23370-V)

6 From left to right: ROZAINI MOHD SANI Non-Independent Non-Executive Director TAN SRI DATO SERI UTAMA ARSHAD AYUB Independent Non-Executive Director DATIN PADUKA SITI SA DIAH SH BAKIR Non-Independent Non-Executive Director ABDUL RAHMAN SULAIMAN Executive Director DATUK HARON SIRAJ Independent Non-Executive Director DR. RADZUAN A. RAHMAN Independent Non-Executive Director LEUNG KOK KEONG Independent Non-Executive Director Integrated Annual Report A New Energy

7 SECTION 2 ABOUT KULIM BOARD OF DIRECTORS DATO KAMARUZZAMAN Abu KASSIM Chairman/Non-Independent Non-Executive Director Aged 51, is a Non-Independent Non-Executive Director and the Chairman of Kulim (Malaysia) Berhad ( Kulim ). He was appointed to the Board of Kulim as Director on 1 January 2008 and appointed as Chairman on 12 January He is also the Chairman of the Board Option Committee. He graduated with a Bachelor of Commerce majoring in Accountancy from the University of Wollongong, New South Wales, Australia in Dato Kamaruzzaman embarked his career as an Audit Assistant at Messrs. K.E. Chan & Associates in May 1988 and later joined Messrs. Coopers & Lybrand (currently known as Messrs, PricewaterhouseCoopers) in In December 1992, he left the firm and joined Perbadanan Kemajuan Ekonomi Negeri Johor (currently known as Johor Corporation ( JCorp ) as a Deputy Manager in the Corporate Finance Department and was later promoted to General Manager in Dato Kamaruzzaman is currently the President and Chief Executive of JCorp with effect from 1 December Prior to that, he had served as the Chief Operating Officer of JCorp beginning 1 August 2006 and later appointed as Senior Vice President, Corporate Services & Finance of JCorp beginning 1 January Dato Kamaruzzaman also sits as the Chairman of KPJ Healthcare Berhad and Damansara REIT Managers Sdn Bhd, the manager of Al-Aqar KPJ REIT, companies under JCorp Group listed on the Main Market of Bursa Malaysia Securities Berhad. He is also the Chairman of Johor Land Berhad and Waqaf An-Nur Corporation Berhad, an Islamic endowment institution which spearheads JCorp Corporate Responsibility programmes. In addition, he also sits as Chairman and/or Director of several other companies within JCorp Group. Other than as disclosed, Dato Kamaruzzaman does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. Dato Kamaruzzaman attended all eight (8) Board of Directors Meetings of Kulim held during the financial year ended 31 December Ahamad Mohamad Managing Director Aged 62, is the Managing Director of Kulim (Malaysia) Berhad since He was appointed to the Board on 24 January He is also a member of the Board Option Committee. He graduated with a Bachelor of Economics (Honours) degree in 1976 from the University of Malaya. He joined JCorp in June 1979 as a Company Secretary for various companies within the JCorp Group. He was involved in many of JCorp s projects, among others are the Johor Specialist Hospital, prefabricated housing project and the Kotaraya Complex in Johor Bahru. He is presently a member of the Board of Directors of KPJ Healthcare Berhad and also the Chairman and Director of several other companies within the JCorp Group. He is the Chairman of E.A. Technique (M) Berhad, an indirect subsidiary of Kulim company via Sindora Berhad which was listed on the main market of Bursa Malaysia Securities Berhad on 11 December He is also a Director of Waqaf An-Nur Corporation Berhad, an Islamic endowment institution that spearheads JCorp Group s Corporate Responsibility programmes, including the unique Corporate Waqaf Concept initiated by JCorp. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors Meetings of the Company in the financial year ended 31 December Kulim (Malaysia) Berhad (23370-V)

8 ABDUL RAHMAN SULAIMAN Executive Director Aged 57, was appointed as Executive Director of Kulim (Malaysia) Berhad on 1 September JAMALUDIN MD ALI Executive Director Aged 57, was appointed to the Board of Kulim (Malaysia) Berhad as a Non-Independent Non-Executive Director on 1 July 2012 and was re-designated as Executive Director on 4 December He graduated with a Bachelor of Economics (Honours) degree from University of Malaya in 1982 and Master of Business Administration from University of Strathclyde, Glasgow, Scotland in He started his career with Malayan Banking Berhad as Trainee Officer in 1982 and later served as International Fund Manager in Permodalan Nasional Berhad in He joined JCorp in 1992 and was appointed the Managing Director of Johor Capital Holdings Sdn Bhd in He was also the Group Chief Operating Officer of JCorp since 2001 before he was appointed the Managing Director of QSR Brands Bhd on 8 June 2006 as well as the Managing Director of KFCH Holdings (Malaysia) Bhd on 2 July He graduated with a Bachelor of Science (Honours) in Agribusiness in 1980 from Universiti Pertanian Malaysia (now known as Universiti Putra Malaysia) and Master in Business Administration from Henley Management College, United Kingdom in After serving Sime Darby Plantations Sdn Bhd since his graduation in 1980, he joined EPA Management Sdn Bhd in 1984 as a Manager. In 1995, he was appointed the Managing Director of Tepak Marketing Sdn Bhd until 2005 before joining Natural Oleochemicals Sdn Bhd as the Chief Operating Officer. He later joined JCorp in 2010 as the Executive Vice President (Land & Business Development) before joining Kulim in September He is also the Chairman and Director of several other companies within the JCorp Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors Meetings of the Company held during the financial year ended 31 December He is also the Chairman and Director of several other companies within the JCorp Group and was appointed as Alternate Director to Ahamad Mohamad in E.A. Technique (M) Berhad on 15 March Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended seven (7) Board of Directors Meetings of the Company held during the financial year ended 31 December Integrated Annual Report A New Energy

9 SECTION 2 ABOUT KULIM BOARD OF DIRECTORS ZULKIFLI IBRAHIM Non-Executive Non-Independent Director Aged 57, was the Chief Operating Officer of Kulim (Malaysia) Berhad since 3 November 2003 and was re-designated as the Executive Director when he was appointed to the Board on 1 July He was later re-designated as a Non- Independent Non-Executive Director on 1 September He is also a member of the Board Option Committe of Kulim. Currently he is the Chief Operating Officer/Senior Vice President of JCorp. He is a Fellow of the Association of Chartered Certified Accountants, United Kingdom and a member of the Malaysian Institute of Accountants since After serving various companies in the private sector since his graduation in 1983, he joined JCorp Group in 1990 as the Financial Controller of Sindora Berhad. In 1996, he was appointed the Managing Director of Antara Steel Mills Sdn Bhd until 2000 before joining PJB Pacific Capital Group in 2001 as the Chief Operating Officer. He joined Kulim as the Chief Operating Officer in He is also the Chairman and Director of several other companies within the JCorp Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors Meetings of the Company held during the financial year ended 31 December DATIN PADUKA SITI SA DIAH SH BAKIR Non-Independent Non-Executive Director Aged 63, is a Non-Independent Non-Executive Director of Kulim (Malaysia) Berhad. She was appointed to the Board on 1 January She graduated with a Bachelor of Economics from University of Malaya and MBA from Henley Business School, University of Reading, London, United Kingdom. Datin Paduka is a Non-Independent Non-Executive Director of KPJ Healthcare Berhad ( KPJ ) since 1 January Prior to that, she served as the Managing Director of KPJ from 1 March 1993 until her retirement on 31 December She had also served as KPJ s Corporate Advisor from 1 January 2013 until 31 December She is also the Chairman and Pro Chancellor of KPJ Healthcare University College since 1 August 2011 to date. Her career with JCorp commenced in 1974 and she has been directly involved in JCorp s Healthcare Division since She was appointed as the Chief Executive of Kumpulan Perubatan (Johor) Sdn Bhd, from 1989 until the listing of KPJ in November Throughout her career in KPJ, Datin Paduka is directly involved in developing and implementing the transformational strategies that made KPJ one of Malaysia s leading private healthcare service providers with 25 hospitals nationwide, four (4) hospitals abroad and more under development. 70 Kulim (Malaysia) Berhad (23370-V) Datin Paduka currently sits as a Director of Damansara REIT Managers Sdn Berhad, the Manager for AI- Aqar Healthcare REIT and Chemical Company of Malaysia Berhad. She was a Board member of KFC Holdings (Malaysia) Bhd and QSR Brands Bhd from 2010 until their privatisation in Datin Paduka was an Independent Non-Executive Director of Bursa Malaysia from 2004 to 2012 and a Board member of MATRADE from 1999 to 2010.

10 ROZAINI MOHD SANI Non-Independent Non-Executive Director Aged 42, was appointed to the Board as a Non-Independent Non-Executive Director on 15 January He obtained his Bachelor of Commerce (Accounting and Finance) with Merit degree from University of New South Wales, Australia in 1994 and is also a Fellow of Chartered Accountants Australia and New Zealand. Committed to promoting excellence in healthcare, Datin Paduka is the President of the Malaysian Society for Quality in Health ( MSQH ), the national accreditation body for healthcare services, elected since its inception in 1997 to date. Currently, she also sits on many other councils and committees at the national level. In 2010, Datin Paduka was named the CEO of the Year 2009 by the New Straits Times Press and the American Express. She has also received many more awards and accolades from 2011 to 2014, due to her contributions to the healthcare industry in Malaysia. She launched her biography entitled Siti Sa diah: Driven by Vision, Mission and Passion, penned by Professor Rokiah Talib, Penerbitan Universiti Kebangsaan Malaysia in Datin Paduka is a member of the Academic Committee of the Razak School of Government, and sits on several University Committees. She is a member of the University of Reading Malaysia Advisory Board, a member of the Centre for University-Industry Collaboration Advisory Council of Universiti Utara Malaysia ( UUM ) as well as the Adjunct Professor of UUM s Othman Yeop Abdullah Graduate School of Business, and as a Member of University Malaya s Research Advisory Committee. Other than as disclosed, she does not have any family relationship with any Director and/or major shareholder of Kulim. She has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. She attended seven (7) Board of Directors Meetings of the Company held during the financial year ended 31 December He is a qualified Chartered Accountant, with diverse leadership experience in financial management, accounting, corporate strategy, business development and commercial. He started his career in KPMG, Sydney, Australia, where he spent six (6) years in the Assurance & Advisory Division of the firm from 1995 to His last position in KPMG was Assistant Manager. He then continued his career in oil and gas, where he served more than 12 years in various business and financial leadership roles in PETRONAS, from March 2001 until November His last senior position in PETRONAS was Chief Financial Officer ( CFO ) of PETRONAS Dagangan Berhad, the public listed retail and marketing arm of PETRONAS from October 2010 until November He then served as CFO of Astro Malaysia Holdings Berhad, an integrated consumer media group listed on Bursa Malaysia from December 2013 until April 2014, before joining JCorp in May 2014 as Vice President, Finance & Corporate Services and Chief Financial Officer. He also sits on the Board of various subsidiaries within JCorp Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. Integrated Annual Report A New Energy

11 SECTION 2 ABOUT KULIM BOARD OF DIRECTORS Tan Sri DATO Seri UTAMA Arshad Ayub Independent Non-Executive Director Aged 87, is currently an Independent Non-Executive Director of Kulim (Malaysia) Berhad. He was appointed to the Board of Kulim on 31 January He is the Chairman of the Audit Committee. Tan Sri is also appointed as a member of the Remuneration and Nomination Committee of Kulim. Tan Sri is also the Chairman and Independent Non-Executive Director of the following listed companies:- - Malayan Flour Mills Berhad - Chairman - Tomypak Holdings Berhad - Chairman - Karex Berhad - Chairman - Top Glove Corporation Berhad - Director Tan Sri also sits on the Board of Directors of several private limited companies amongst others, PFM Capital Holdings Sdn Bhd, Bistari Johor Berhad and Zalaraz Sdn Bhd. Tan Sri graduated with a Diploma in Agriculture in 1954 from College of Agriculture, Serdang and pursued his Bachelor of Science degree in Economics with Statistics at the University College of Wales, Aberystwyth in the United Kingdom in 1958 and obtained Diploma in Business Administration from IMEDE Lausanne (now IMD), Switzerland in He has a distinguished career in the Malaysian Civil Service. Among the top posts he held were First Director, Mara Institute of Technology ( ), Deputy Governor of Bank Negara Malaysia ( ), Deputy Director- General in the Economic Planning Unit of the Prime Minister s Department ( ) and Secretary-General in the Ministry of Primary Industries (1978), Ministry of Agriculture ( ) and Ministry of Land and Regional Development ( ). He is the Pro Chancellor of UiTM, Chancellor of KPJ International University College and Chairman of University Malaya Board. Other than as disclosed, he has no family relationship with any Director and/or substantial shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted of any offences. He attended six (6) Board of Directors Meetings of the Company held during the financial year ended 31 December Kulim (Malaysia) Berhad (23370-V) DATUK HARON SIRAJ Independent Non-Executive Director Aged 71, was appointed to the Board of Kulim (Malaysia) Berhad on 9 January 2006 as an Independent Non-Executive Director. He is also a member of the Nomination Committee of Kulim. He graduated with a Bachelor of Arts (Honours) in Economics in 1968 from the University of Manchester, United Kingdom and Master of Art in Development Economics from Williams College, United States of America in He began his career in the Malaysian Administrative and Diplomatic Service after graduating in Among the senior positions he had held were Assistant Controller of Ministry of Commerce and Industry ( ), Principal Assistant Secretary, Ministry of Primary Industries ( ), Minister Counselor (Economic Affairs) at the Permanent Mission of Malaysia in Geneva, Switzerland ( ), Director of Industrial Development at Ministry of International Trade and Industry ( ), Director of International Trade at Ministry of International Trade and Industry ( ), Deputy Secretary-General (Trade) Ministry of International Trade and Industry ( ), Ambassador, Permanent Representative of Malaysia to United Nations and other International Organisations and Specialised Agencies in Geneva, Switzerland ( ), Secretary-General Ministry of Primary Industries ( ) and as the Chief Executive Officer of the Malaysian Palm Oil Promotion Council since 2001 until he retired in January He also holds directorship in HSBC Amanah Takaful Sdn Bhd and Apex Communications Group Sdn Bhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors Meetings of the Company held during the financial year ended 31 December 2014.

12 Leung Kok Keong Independent Non-Executive Director DR. RADZUAN A. RAHMAN Independent Non-Executive Director Aged 72, was appointed to the Board of Kulim (Malaysia) Berhad on 1 November 2006 as an Independent Non- Executive Director. He is also appointed as a member of the Audit, Remuneration and Board Option Committee of Kulim. He graduated with a Bachelor in Agricultural Science (Honours) degree from the University of Malaya in Subsequently, he obtained his Master and PhD in Resource Economics from Cornell University, New York in 1971 and 1974 respectively. Dr. Radzuan has an outstanding career, both as an academician and corporate practitioner. Amongst the notable distinguished positions held were as Associate Professor and the Dean of the Resource and Agribusiness Faculty, Universiti Pertanian Malaysia ( ) (now known as Universiti Putra Malaysia), Regional Director, Sime Darby Plantations for Melaka, Negeri Sembilan and Johor Regions ( ), Director, Development Division, Sime Darby Plantations ( ), Director, Corporate Planning, Golden Hope Plantations Berhad ( ) and Group Director Plantations, Golden Hope Plantations Berhad ( ). He had also served as the Managing Directors for Austral Enterprises Berhad, Island & Peninsular Berhad, Perumahan Kinrara Bhd ( ) as well as Tradewinds Plantation Berhad ( ). Currently he holds directorships in Idaman Unggul Berhad and Inch Kenneth Kajang Rubber Pte Ltd. Additionally, he sits on the Board of Kenangan Cergas Sdn Bhd, Maep Management Sdn Bhd and Green Capital Sdn Bhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended seven (7) Board of Directors Meetings of the Company held during the financial year ended 31 December Aged 48, was appointed to the Board of Kulim (Malaysia) Berhad as an Independent Non-Executive Director on 9 November He is also appointed as a member of the Audit Committee of Kulim. He obtained his Bachelor Degree in Accounting, Curtin University of Technology, Australia in December 1989 and is a Certified Practising Accountant and Chartered Accountant, CPA Australia and a member of Malaysian Institute of Accountants. Trained as an investment banker, he has significant experience in corporate finance and business development as well as management. He was the founding member and former Executive Director of Newfields Advisors Sdn Bhd, a boutique financial and corporate advisory firm from August 2001 to August He was the Chief Executive Officer, Platinum Energy Group from September 2006 to February From then on till 2012 he served as an Executive Director in Asia Bioenergy Technologies Berhad. Between September 2013 to February 2015, he briefly served as the Chief Financial Officer of Iskandar Waterfront Holdings Sdn Bhd. His wide and vast experience spanned from his earlier years as an Investment & Corporate Planning Manager, Hong Leong Credit Berhad from 1994 to 2001 and was with Coopers & Lybrand Kuala Lumpur since 1990 to Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors Meetings of the Company held during the financial year ended 31 December Integrated Annual Report A New Energy

13 SECTION 2 ABOUT KULIM MANAGEMENT TEAM From left to right: JAMALUDIN MD ALI Executive Director/ Vice President Business Development Aged 57, is currently an Executive Director of Kulim (Malaysia) Berhad since 4 December He graduated with a Bachelor of Economics (Honours) from the University of Malaya in 1982 and Master of Business Administration from University of Strathclyde, Glasgow, Scotland in He joined JCorp in 1992 and has held senior positions within JCorp. He has served as the Group Managing Director of QSR Brands Bhd and KFC Holdings (Malaysia) Bhd from June and July 2006 respectively until 4 December He is currently an Alternate Director to Ahamad Mohamad in E.A. Technique (M) Berhad. He also sits on the Board of several other companies within JCorp and Kulim Group. AHAMAD MOHAMAD Managing Director Aged 62, has been the Managing Director since He holds a Bachelor of Economics (Honours) from University of Malaya. He joined JCorp in June 1976 as a Company Secretary for various companies within JCorp Group. He was involved in many of JCorp s landmark projects including the Johor Specialist Hospital, prefabricated housing project and the Kotaraya Complex now known as Kotaraya in Johor Bahru. He is presently the Chairman of E.A. Technique (M) Berhad of several other companies within JCorp and Kulim Group. ABDUL RAHMAN SULAIMAN Executive Director/ Vice President Oil & Gas/Plantation Operation Aged 57, was appointed to the Board as Executive Director on 1 September Prior to his appointment as the Executive Vice President (Land & Business Development) of Johor Corporation in 2010, he was the Chief Operating Officer of Natural Oleochemicals Sdn Bhd since He graduated with a Bachelor Science of Agribusiness degree from Universiti Pertanian Malaysia (now known as Universiti Putra Malaysia) in 1980 and Master of Business Administration from Henley Management College, United Kingdom in He is presently a Director of Sindora Berhad and also the member of the Board of Directors of several other companies within Kulim Group. 74 Kulim (Malaysia) Berhad (23370-V)

14 SATIRA OMAR Vice President Risk and System Management Aged 48, was appointed as Vice President, Risk and System Management of Kulim in She graduated with a Bachelor of Science majoring in Communication from the University of Southern Illinois, United States of America in 1992 and holds a Master of Business Administration from Henley Business School, University of Reading, United Kingdom. She joined JCorp Group in 1993 as an Executive before assuming her position as General Manager in Pro Corporate Management Services Sdn Bhd in She also sits on the Board of several other companies within Kulim Group. RAZALI HAMZAH Deputy General Manager Mill Development Age 40, was appointed as Deputy General Manager of Mill Development Department on 1 January He holds the Bachelor of Mechanical Engineering (Hons) from Queensland University of Technology, Queensland, Australia and Diploma in Business Administration from Henley Management College London, United Kingdom. He joined the Company on 29 April 1999 as a Cadet Engineer. He also sits on the Board of several companies within Kulim Group. From left to right: METHAL AHMAD General Manager Foods and Intrapreneur Ventures Aged 53, was appointed as the General Manager of Foods and Intrepreneur Ventures on 1 January He holds the Bachelor of Science (Resource Economic) and Diploma of Science (Forestry) from Universiti Pertanian Malaysia (now known as Universiti Putra Malaysia). He joined Sindora Berhad as a Planning Executive in 1989 and was seconded to Makmuran Sdn Bhd, a subsidiary company of Sindora Berhad from 1996 to Since then, he has been involved in the management of intrapreneurship scheme within Sindora Berhad and Kulim Group. He also sits on the Board of Directors of several other companies within the Kulim Group. ZULKIFLY ZAKARIAH Vice President, Estate Operation Aged 55, was appointed as the Vice President of Estate Operation in January He joined the Company in May 1980 as a Cadet Planter after completion of Higher School Certificate. He has served Kulim s Indonesian operations from 1999 to He was the Regional Head for Kulim s Northern operations in Johor, Malaysia before assuming his current position. He also sits on the Board of several companies within Kulim Group. AZLI MOHAMED Vice President, Finance Aged 47, appointed as Chief Financial Officer of Kulim (Malaysia) Berhad on 1 June He is a member of the Malaysian Institute of Accountants. He was with Messrs. PricewaterhouseCoopers from 1992 prior to joining KPJ Healthcare Berhad in 2001 until He then served JCorp as the General Manager of Finance Division until he assumed the current position. He is currently a Director of E.A. Technique (M) Berhad. He also sits on the Board of other companies within JCorp and Kulim Group. WONG SENG LEE Chairman Audit & Budget Review Committee Aged 65, has been the Executive Director of Kulim (Malaysia) Berhad since 8 January 1996 before redesignated as Non-Independent Non- Executive Director on 1 February He resigned from the Board of Kulim on 15 January He qualified as a Certified Accountant in 1974 and is a Fellow of the Association of Chartered Certified Accountants, United Kingdom. He is also a member of Malaysian Institute of Accountants and Institute of Certified Public Accountant of Singapore. He joined EPA Management Sdn Bhd as an Accountant in 1979 and was the Financial Controller for Kulim until He also sits on the Board of several other companies within Kulim Group. Integrated Annual Report A New Energy

15 SECTION 2 ABOUT KULIM ORGANISATION CHART BOARD OF DIRECTORS INTERNAL AUDIT Managing director Ahamad Mohamad CHAIRMAN AUDIT & BUDGET REVIEW COMMITTEE INSPECTORATE OFFICE WONG SENG LEE EXECUTIVE DIRECTOR BUSINESS DEVELOPMENT JAMALUDIN MD ALI VICE PRESIDENT RISK & SYSTEM MANAGEMENT SATIRA OMAR GENERAL MANAGER FOODS & IV METHAL AHMAD VICE PRESIDENT FINANCE AZLI MOHAMED EXECUTIVE DIRECTOR OIL & GAS/PLANTATION OPERATION ABDUL RAHMAN SULAIMAN VICE PRESIDENT ESTATE OPERATION ZULKIFLY ZAKARIAH DEPUTY GENERAL MANAGER MILL DEVELOPMENT RAZALI HAMZAH 76 Kulim (Malaysia) Berhad (23370-V) ADVISORY ROLE

16 Site visit by Board of Directors and top management to Kulim s first biogas plant at Sedenak Palm Oil Mill, Kulaijaya. Integrated Annual Report A New Energy

17 SECTION 3 PERFORMANCE HIGHLIGHTS & STATISTICS 80 Group 5-Year Financial Statistics 83 Group Quarterly Performance Group Statement of Value Added 85 5-Year Plantation Statistics: Group Malaysia Papua New Guinea Solomon Islands Indonesia 90 Human Capital Statistics 91 Shareholding Statistics 93 Warrantholding Statistics 95 Price Performance and Volume Traded Shares and Warrants 78 Kulim (Malaysia) Berhad (23370-V)

18 MT Nautica Maharani, a tanker locally built in 2011 with capacity of 10,000 deadweight tonnes; currently operating in the Straits of Malacca. 79 Integrated Annual Report 2014 A New Energy

19 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS GROUP 5-YEAR FINANCIAL STATISTICS Statement of Comprehensive Income Highlights (RM 000) Revenue 1,093,665 1,013, , , ,911 Segment %: Plantation 70% 77% 79% 74% 80% Intrapreneur Ventures 24% 20% 18% 22% 16% Others 6% 3% 3% 4% 4% Profit from Operations 138, , , , ,185 Segment %: Plantation 134% 112% 114% 95% 147% Intrapreneur Ventures 16% 32% 18% 9% (1%) Others (50%) (44%) (32%) (4%) (46%) Interest income 11,820 11,067 11,050 9,519 5,594 Finance costs (55,197) (51,423) (59,689) (33,052) (34,871) Share of results of associates ,992 2,174 Profit before taxation 95, ,918 89, , ,082 Taxation (34,005) (66,817) (25,852) (72,618) (35,415) Profit after taxation from - Continuing operations 61,528 40,101 63, ,164 81,667 - Discontinued operations 246, , , , ,159 Net profit for the year 308, , ,743 1,007, ,826 Attributable to: Owners of the Company 164, , , , ,592 Non-controlling interests 144,138 34, , , ,234 Net profit for the year 308, , ,743 1,007, ,826 * Comparative figures have been restated to reflect the Discontinued Operations retrospectively. GROUP 5-YEAR PROFIT vs AVERAGE CPO PRICE RM/tonne 3,500 3,000 2,701 3,219 3,193 2,923 RM Million 1,400 1,200 2,500 2,000 2,604 1,008 2,764 2,472 2,384 2,371 2,370 1, , , PAT (RM Million) Kulim Group Average CPO Price (RM/tonne) 80 Kulim (Malaysia) Berhad (23370-V) MPOB Average CPO Price (RM/tonne)

20 Statement of Financial Position Highlights (RM 000) ASSETS EMPLOYED Other non-current assets 3,773,743 6,624,596 6,795,342 7,852,213 6,254,289 Intangible assets 33, , ,667 1,097,799 1,046,895 Total Non-Current Assets 3,807,182 6,814,358 7,000,009 8,950,012 7,301,184 Other current assets 324,987 1,238,362 1,412,037 1,912,492 1,492,362 Cash and bank balances 342, , , , ,146 Assets of disposal group classified as held for sale 4,783,791-3,408,193 13,032 - Total Current Assets 5,451,375 1,615,542 5,101,119 2,570,226 1,944,508 Other current liabilities 173, ,899 1,487, ,471 1,084,744 Loans and borrowings 750,924 1,030, , , ,410 Liabilities of disposal group classified as held for sale 2,084,517-1,295, Total Current Liabilities 3,008,893 1,364,615 3,753,416 1,507,314 2,080,154 FINANCED BY: 6,249,664 7,065,285 8,347,712 10,012,924 7,165,538 Share capital 335, , , , ,336 Reserves 1,794,906 1,551,740 1,622,712 1,540,087 1,433,182 Reserves of disposal group classified as held for sale (51,622) Retained profits 1,943,596 1,905,404 1,474,336 2,436,500 1,972,850 Shareholders equity 4,022,506 3,780,657 3,417,685 4,292,096 3,565,368 Non-controlling interests 1,590,197 1,346,491 2,781,972 2,628,603 1,977,374 Long-term borrowings 451,261 1,032,921 1,171,679 2,049, ,020 Other long-term liabilities 185, , ,376 1,043, ,776 6,249,664 7,065,285 8,347,712 10,012,924 7,165,538 Average capital employed 6,657,475 7,706,499 9,180,318 8,589,231 6,922,198 Average shareholders equity 3,901,582 3,599,171 3,854,891 3,928,732 3,468,367 RM 000 GROUP 5-YEAR revenue vs AVERAGE CAPITAL EMPLOYED 10,000 8,000 6,000 6,922 8,589 9,180 7,706 6,657 4,000 Revenue (RM 000) 2, ,013 1,094 Average Capital Employed (RM 000) Integrated Annual Report A New Energy

21 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS GROUP 5-YEAR FINANCIAL STATISTICS Statement of Cash Flows Highlights (RM 000) Net cash flow from operating activities 683, , ,707 1,441, ,778 Net cash flow from investing activities (565,141) 405,623 (1,039,503) (1,474,025) (1,077,473) Net cash flow from financing activities 102,688 (1,345,144) 168, , ,116 Net change in cash and cash equivalents 220,741 (234,152) 100, ,196 43,421 Key Financial Indicators Profitability and Returns Operating profit margin 12.65% 14.51% 15.15% 29.44% 20.03% PBT margin 8.74% 10.55% 9.84% 27.47% 16.26% PATMI margin 15.02% 42.55% 23.30% 67.54% 53.56% Return on average shareholders equity 4.21% 11.98% 5.48% 14.38% 14.79% Return on average capital employed 2.47% 5.59% 2.30% 6.58% 6.55% Net assets per share (RM) Solvency and Liquidity Gearing ratio (times) - Gross Net Interest cover (times) Current ratio (times) Financial Market EPS (sen) - basic diluted Gross dividend per share (sen) Gross dividend rate (%) 38% - 394% 20% 100% Gross dividend yield (%) 2.82% % 1.45% 5.83% Net dividend payout rate (%) 76.76% % 10.93% 30.38% Average price-to-earnings ratio (times) Average price-to-book ratio (times) Kulim (Malaysia) Berhad (23370-V)

22 Group Quarterly Performance 2014 Financial Performance (RM 000) 2014 Q1 Q2 Q3 Q4 Revenue 276, , , ,495 Plantation 77% 75% 67% 61% Intrapreneur Ventures 20% 23% 29% 26% Others 3% 2% 4% 13% Operating results 31,230 44,671 25,635 36,788 Plantation 145% 103% 202% 115% Intrapreneur Ventures 45% 18% 4% (2%) Others (90%) (21%) (106%) (13%) Share of results of associates Profit before interest 31,337 44,746 25,660 37,167 Add/(Less): Interest income 1,105 2,700 3,928 4,087 Finance cost (12,243) (12,320) (12,641) (17,993) Profit before taxation 20,199 35,126 16,947 23,261 Basic earnings per share (sen) Operational Results FFB production (tonnes) - Malaysia 177, , , ,160 - PNG and SI (discontinued operations) 455, , , ,436 Group 633, , , ,596 CPO production (tonnes) - Malaysia 59,960 62,758 69,944 65,219 - PNG and SI (discontinued operations) 137, , , ,532 Group 196, , , ,751 Integrated Annual Report A New Energy

23 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS GROUP STATEMENT OF VALUE ADDED RM 000 RM 000 Revenue 1,093,665 1,013,157 Purchase of goods and services (114,102) (98,921) Value added by the Group 979, ,236 Other income 71,955 39,439 Finance costs (55,197) (51,423) Share of results of associates Discontinued operation 246, ,721 Value added available for distribution 1,243,820 1,328,273 Distribution To employees Staff costs 549, ,999 To the Government Taxation 34,005 66,817 To providers of capital Dividends to shareholders 126,111 - Non-controlling interests 144,138 34,754 To re-invest in the Group Depreciation and amortisation 351, ,635 Retained profits 38, ,068 1,243,820 1,328,273 No. of employees at year end (including discontinued operations) 23,820 23,575 Value added per employee (RM) 41,124 38,780 Wealth created per employee (RM) 52,217 56,342 No. of shares at year end ( 000 units) 1,327,481 1,278,731 Value added per share (RM) Wealth created per share (RM) VALUE ADDED DISTRIBUTION 31% 37% Government Employees Re-investment 44% % 2013 Providers of Capital 3% 5% 3% 22% 84 Kulim (Malaysia) Berhad (23370-V)

24 5-YEAR PLANTATION STATISTICS GROUP (INCLUDING DISCONTINUED OPERATIONS) OIL PALM Production (tonnes) Fresh Fruit Bunches (FFB) 2,531,275 2,312,042 2,304,012 2,375,388 1,985,619 Crude Palm Oil 779, , , , ,653 Palm Kernel 198, , , , ,413 FFB processed 3,584,580 3,345,529 3,294,771 3,340,307 2,790,553 Yield and Extraction Rates FFB yield (tonnes per mature hectare) * OER (%) KER (%) AREA STATEMENT (HECTARES) Oil palm - mature 110, , , , ,185 - immature 18,463 21,015 22,018 17,352 12, , , , , ,224 Sugar 7,515 7,718 7,721 7,720 8,231 Other crops (excluding inter-row planted fruits) ,309 8,578 8,676 8,630 9,131 Planted area 136, , , , ,355 Pastures 9,145 9,282 9,282 9,282 9,518 Reserve land, building sites etc 40,235 40,919 42,204 36,453 34,459 Titled area 186, , , , ,332 * Yield per hectare inclusive of annual production of FFB at Palong, Mungka and Kemedak Estate. Integrated Annual Report A New Energy

25 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS 5-YEAR PLANTATION STATISTICS MALAYSIA OIL PALM Production (tonnes) FFB produced - Processed by own mills 827, , , , ,016 FFB produced - Sold to others 13,738 14, ,228 82,605 90,210 Total FFB produced 841, , , , ,226 Purchased FFB 425, , , , ,281 Total FFB processed 1,252,825 1,259,858 1,021, , ,297 Crude Palm Oil 257, , , , ,233 Palm Kernel 69,681 70,891 58,773 53,678 47,758 Yield and Extraction Rates FFB yield (tonnes per mature hectare) * OER (%) KER (%) Average Selling Price (RM per tonne) Crude Palm Oil (locally delivered) 2,370 2,472 2,923 3,193 2,604 Palm Kernel (ex-mill) 1,708 1,287 1,599 2,300 1,666 RUBBER Production (kgs) ,398 Yield per mature hectare (kgs) Average selling prices (sen per kg) ,032 AREA STATEMENT (HECTARES) Oil palm - mature 37,654 36,909 35,170 32,865 28,997 - immature 9,469 10,198 10,422 7,458 5,416 47,123 47,107 45,592 40,323 34,413 Other crops: Rubber Sentang Pineapple Fruits (inter-row planting with oil palm) Planted area 47,658 47,708 46,288 40,974 35,054 Reserve land, building sites etc 3,502 3,452 3,263 2,916 2,396 Titled area 51,160 51,160 49,551 43,890 37,450 * Yield per hectare inclusive of annual production of FFB at Palong, Mungka and Kemedak Estate. ** Rubber area was leased out w.e.f. 1 April Kulim (Malaysia) Berhad (23370-V)

26 5-YEAR PLANTATION STATISTICS PAPUA NEW GUINEA (DISCONTINUED OPERATIONS) OIL PALM Production (tonnes) FFB produced 1,551,944 1,364,046 1,457,830 1,608,330 1,313,876 Purchased FFB 630, , , , ,041 FFB processed 2,182,164 1,942,595 2,126,516 2,276,485 1,851,917 Crude Palm Oil 487, , , , ,801 Palm Kernel 120, , , ,999 93,123 Refined Palm Oil 70,289 57,810 67,826 59,741 66,434 Palm Olein 56,682 43,640 48,695 27,120 34,418 Palm Stearin 15,259 12,961 12,496 16,398 15,448 Crude Palm Kernel Oil 49,573 42,623 33,878 36,283 31,039 Oil palm seeds (million sold) Yield and Extraction Rates FFB yield (tonnes per mature hectare) OER (%) KER (%) Average Selling Prices (USD per tonne CIF) Crude Palm Oil ,062 1, Refined Palm Oil - - 1, Palm Olein 1,071 1,124-1, Palm Stearin ,092 1, Crude Palm Kernel Oil 1, ,119 1,675 1,141 Seeds (USD per seed) AREA STATEMENT (HECTARES) Oil palm - mature 67,110 63,538 61,668 63,091 65,306 - immature 8,158 10,072 10,560 8,924 6,191 75,268 73,610 72,228 72,015 71,497 Sugar 7,515 7,718 7,721 7,720 8,231 Other crops Planted area 83,042 81,587 80,208 79,994 79,987 Pastures 9,145 9,282 9,282 9,282 9,518 Reserve land, building sites etc 35,124 36,002 37,478 32,277 30,800 Titled area 127, , , , ,305* * Inclusive of Kula w.e.f. 1 May Integrated Annual Report A New Energy

27 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS 5-YEAR PLANTATION STATISTICS SOLOMON ISLANDS (DISCONTINUED OPERATIONS) OIL PALM Production (tonnes) FFB produced 138, , , , ,517 Purchased FFB 11,339 10,976 15,908 14,218 11,822 Processed FFB 149, , , , ,339 Crude Palm Oil 33,752 32,154 31,846 31,592 28,619 Palm Kernel 7,989 7,542 8,037 8,332 7,532 Crude Palm Kernel Oil 3,347 3,173 3,387 3,537 3,206 Yield and Extraction Rates FFB yield (tonnes per mature hectare) OER (%) KER (%) Average Selling Prices (USD per tonne CIF) Crude Palm Oil ,067 1, Palm Kernel Oil 1,482 1,151 1,450 1,675 1,141 AREA STATEMENT (HECTARES) Oil palm - mature 5,447 5,530 5,078 5,347 5,882 - immature , Planted area 6,283 6,275 6,114 6,317 6,314 Reserve land, building sites etc 1,609 1,465 1,463 1,260 1,263 Titled area 7,892 7,740 7,577 7,577 7,577 PLANTATION STATISTICS INDONESIA AREA STATEMENT (HECTARES) 2014 Oil palm - Immature 71 Planted area 71 Undeveloped land 40,574 Total area with IUP* 40,645 * IUP - Izin Usaha Perkebunan 88 Kulim (Malaysia) Berhad (23370-V)

28 PLANTATION PERFORMANCE 2014 A SNAPSHOT FFB PRODUCED 2,531,275 Tonnes FFB PROCESSED 3,584,580 Tonnes 6% 4% 33% 35% 61% 61% CPO PRODUCED 779,085 Tonnes 4% PK PRODUCED 198,433 Tonnes 4% 33% 35% 63% 61% Malaysia Papua New Guinea Solomon Islands Integrated Annual Report A New Energy

29 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS HUMAN CAPITAL STATISTICS AS AT 31 DECEMBER 2014 CONTINUING OPERATIONS DISCONTINUED OPERATIONS DIVISION Plantation and Support Intrapreneur and Other Services Malaysia Indonesia Sub Papua New Solomon Sub Grand Total Guinea Islands Total Total 6, ,757 14,257 1,376 15,633 22,390 1,430-1, ,430 8, ,187 14,257 1,376 15,633 23,820 BY DIVISION No. of employees 15,000 10,000 5,000 Plantation and Support Intrapreneur and Other Services 1, Malaysia Indonesia Papua New Guinea Solomon Islands CONTINUING OPERATIONS DISCONTINUED OPERATIONS DIVISION Managerial and Professional Executives and Assistant Managers Office and Field Staff/Guard General Workers - Field Work Malaysia Indonesia Sub Papua New Solomon Sub Grand Total Guinea Islands Total Total ,422-1,422 1, ,038 3,460 6, ,099 12,050 1,237 13,287 19,386 8, ,187 14,257 1,376 15,633 23,820 BY CATEGORY 14,000 12,000 10,000 5,000 1, Managerial and Professional Executive and Assistant Managers Office and Field Staff/Guard General Workers - Field Work Malaysia Indonesia Papua New Guinea Solomon Islands 90 Kulim (Malaysia) Berhad (23370-V)

30 SHAREHOLDING STATISTICS AS AT 14 april 2015 Authorised Share Capital Issued and Fully Paid-Up Capital Class of Shares : RM500,000, : RM335,907,414 less RM6,969,150 Treasury Shares = RM328,938,264 : Ordinary Share of RM0.25 each Voting Right of Shareholders Every member of the Company present in person or by proxy shall have one vote on a show of hand and in the case of a poll shall have one vote for every share of which he/she is the holder. Break DOWN of Shareholdings SIZE OF SHAREHOLDINGS NO. OF NO. OF SHAREHOLDERS % SHARES % Less than , , ,460, ,001 10,000 6, ,336, , ,000 2, ,858, ,001 to less than 5% of Issued Capital ,202, % and above of Issued Capital ,888, TOTAL 10, ,315,753, Top Thirty Securities ACCOUNT Holders (Without aggregating the securities from different securities accounts belonging to the same depositor) NAME NO. OF SHARES % 1 Johor Corporation 622,560, Kumpulan Wang Persaraan (Diperbadankan) 83,286, Waqaf An-Nur Corporation Berhad 69,041, HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 50,827, RHB Capital Noms (T) Sdn Bhd - A/C Johor Corporation (Jedcon ESSB) 49,753, Citigroup Noms (T) Sdn Bhd - A/C Exempt AN for AIA Bhd. 37,784, Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board 36,374, RHB Noms (T) Sdn Bhd - A/C JCorp Capital Solutions Sdn. Bhd. 25,650, RHB Noms (T) Sdn Bhd - A/C Johor Corporation 23,400, Johor Corporation 22,478, Citigroup Noms (A) Sdn Bhd - A/C CBNY for Dimensional Emerging Markets Value Fund 8,659, Johor Corporation 7,336, AmanahRaya Trustees Berhad - A/C Public Islamic Select Treasures Fund 6,599, Tabung Amanah Warisan Negeri Johor 6,423, Zalaraz Sdn Bhd 5,000, AmanahRaya Trustees Berhad - A/C Amanah Saham Wawasan ,772, Citigroup Noms (A) Sdn Bhd - A/C Exempt An For Citibank New York (Norges Bank 1) 4,631, HSBC Noms (A) Sdn Bhd - A/C Exempt An for JPMorgan Chase Bank, National Association (U.S.A.) 4,525, Integrated Annual Report A New Energy

31 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS SHAREHOLDING STATISTICS Top Thirty Securities ACCOUNT Holders (CONTINUED) (Without aggregating the securities from different securities accounts belonging to the same depositor) (continued) NAME NO. OF SHARES % 19 RHB Capital Noms (T) Sdn Bhd - A/C Chai Kin Loong (MTK) 4,472, Citigroup Noms (T) Sdn Bhd - A/C Kumpulan Wang Persaraan (Diperbadankan) (CIMB Equities) 4,147, AmanahRaya Trustees Berhad - A/C Public Islamic Sector Select Fund 3,963, Citigroup Noms (A) Sdn Bhd - A/C CBNY for Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc 3,059, Lembaga Tabung Angkatan Tentera 3,034, Citigroup Noms (A) Sdn Bhd - A/C CBNY for DFA Emerging Markets Small Cap Series 2,930, Maybank Noms (T) Sdn Bhd - A/C Etiqa Insurance Berhad (Life Par Fund) 2,870, CIMSEC Noms (T) Sdn Bhd - A/C CIMB Bank for Arshad bin Ayub (MY1393) 2,772, CIMB Commerce Trustee Berhad - A/C Public Focus Select Fund 2,764, Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LPF) 2,675, Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LGF) 2,297, Gan Teng Siew Realty Sdn.Berhad 2,256, SUBSTANTIAL SHAREHOLDERS DIRECT INDIRECT NAME NO. OF NO. OF SHARES % SHARES % 1 Johor Corporation - 3 a/cs 652,375, ,892, Kumpulan Wang Persaraan (Diperbadankan) 83,286,200 Citigroup Noms (T) Sdn Bhd - A/C Kumpulan Wang Persaraan (Diperbadankan) - 3 a/cs 5,895,300 Kenanga Investment Bank Berhad - CLR (B4) For Kumpulan Wang Persaraan (Diperbadankan) 100,000 89,281, Waqaf An-Nur Corporation Berhad 69,041, ANALYSIS OF SHAREHOLDERS NO. OF NO. OF SHAREHOLDERS % SHARES % Malaysian Bumiputera 1, ,263, Others 8, ,018, Foreigners ,470, TOTAL 10, ,315,753, Kulim (Malaysia) Berhad (23370-V)

32 WARRANTHOLDING STATISTICS AS AT 14 april 2015 BREAK DOWN OF WARRANTHOLDINGS Size of Warrantholdings NO. OF NO. OF Warrantholders % WarrantS % Less than , , , ,001 10,000 1, ,173, , , ,339, ,001 to less than 5% of Issued Capital ,210, % and above of Issued Capital ,723, TOTAL 3, ,351, Top Thirty Securities ACCOUNT Holders (Without aggregating the securities from different securities accounts belonging to the same depositor) NAME NO. OF WARRANTS % 1 Johor Corporation 21,285, HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 8,437, Su Ming Keat 2,899, Waqaf An-Nur Corporation Berhad 2,434, Affin Hwang Noms (T) Sdn Bhd - A/C Mohd Fauzy bin Abdullah (M09) 1,920, Toh Cheok 1,038, Britz Networks Sdn. Bhd. 815, Yayasan Teratai 700, CimSec Noms (T) Sdn Bhd - A/C CIMB for Ahmad Fuad bin Md Ali (PB) 640, HSBC Noms (A) Sdn Bhd - A/C AA Noms SG for CM Ltd 600, Nik Mohamed Din bin Nik Yusoff 600, Saw Huat Seong 573, Nadzley binti Noordin 550, Syed Jalaludin bin Syed Salim 540, Lim Feng Chieh 530, Toh Cheok 520, Low Swee Chong 520, Koh Ping Quek Ping Ming 500, Public Noms (T) Sdn Bhd - A/C Tam Tam Seng Sen (E-PPG) 425, Kenanga Noms (T) Sdn Bhd - A/C Lee Youn Sue (10MG00003) 414, Lau Jit Weng 413, Teoh Ah Guan 401, Koh Tse Quek Tse Ming 400, RHB Noms (T) Sdn Bhd - A/C Maybank Kim Eng Securities Pte. Ltd. for Md Yusoff Bin Md Ali (A/C 2) 398, CimSec Noms (A) Sdn Bhd - A/C Exempt AN for CIMB Securities (Singapore) Pte Ltd (Retail Clients) 362, Integrated Annual Report A New Energy

33 SECTION 3 PERFORMANCE HIGHLIGHTS AND STATISTICS WARRANTHOLDING STATISTICS Top Thirty Securities ACCOUNT Holders (continued) (Without aggregating the securities from different securities accounts belonging to the same depositor) (continued) NAME NO. OF WARRANTS % 26 CimSec Noms (T) Sdn Bhd - A/C Exempt AN for CIMB Securities (Singapore) Pte Ltd (Retail Clients) 345, Roslin Teoh Mei Lin 345, Lee Youn Sue 320, Low Moy Kia 320, Mohd Hassan Bin Marican 318, SUBSTANTIAL WARRANTHOLDERS NO. OF NAME WARRANTS % 1 Johor Corporation 21,285, HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 8,437, ANALYSIS OF WARRANTHOLDERS NO. OF NO. OF Warrantholders % WARRANTS % Malaysian Bumiputera ,377, Others 3, ,828, Foreigners ,145, TOTAL 3, ,351, Kulim (Malaysia) Berhad (23370-V)

34 PRICE PERFORMANCE AND VOLUME TRADED 2014 SHARES AND WARRANTS Closing Share Price (RM) Volume Closing Warrant Price (RM) Volume Traded Traded Month Highest Average Lowest ( 000) Highest Average Lowest ( 000) JANUARY , ,873 FEBRUARY , ,035 MARCH , ,782 APRIL , ,362 MAY , ,014 JUNE , ,480 JULY , ,982 AUGUST , ,872 SEPTEMBER , ,773 OCTOBER , ,450 NOVEMBER , ,541 DECEMBER , ,677 SHARES WARRANTS Volume Traded ( 000) Price (RM) Volume Traded ( 000) Price (RM) 250, , , , ,000 90, ,000 60, ,000 30, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0.4 Highest Average Lowest Volume Traded Integrated Annual Report A New Energy

35 SECTION 4 SEGMENT REVIEW 98 Plantation 110 Intrapreneur Ventures 118 Oil and Gas 96 Kulim (Malaysia) Berhad (23370-V)

36 Unloading of FFB at the loading ramp; Sindora Palm Oil Mill, Kluang. 97 Integrated Annual Report 2014 A New Energy

37 SECTION 4 SEGMENT REVIEW PLANTATION zulkifly zakariah Vice President, Estate Operation RAZALI HAMZAH Deputy General Manager, Mill Development 98 Kulim (Malaysia) Berhad (23370-V)

38 Amidst a dynamic and volatile economic environment, 2014 was a challenging year for the Malaysian palm oil industry. While Crude Palm Oil ( CPO ) production, closing stocks and export revenue increased, the industry saw a decline in export volume and imports. Nevertheless, Malaysia continued to press ahead to consolidate its position as a leading player in the global palm oil industry. With new areas in Sarawak planted with oil palms, the total oil palm planted area in the country has increased 3.1% to 5.39 million hectares. The year in review also saw a 2.3% increase in CPO production to million tonnes, due mainly to higher OER and an increase in new areas coming into production. However, the monsoonal floods in Kelantan, Terengganu and Pahang towards the end of the year, took its toll on Malaysian FFB yield which was lower but better quality harvests received by the mills contributed towards an improvement in OER, which registered an increase of 1.8% to 20.62%. For the year, the nation s total exports of palm oil declined by 4.8% to million tonnes. This was the result of reduced demand from China, Pakistan, United States of America ( USA ), Ukraine and Iran. During the year, India has supplanted China as Malaysia s largest export market with an intake of 3.23 million tonnes or 18.7% of the total exports volume. The overall CPO price showed a slight upward trend in 2014, increasing by 0.5% to average RM2, per tonne. It reached its peak in March, when CPO was traded at RM2,855 per tonne while the lowest price was in September at RM2, per tonne. CPO STATISTICS - Malaysia (Million tonnes) OIL PALM PLANTED AREA - Malaysia Pen. Malaysia Sabah 5 0 CPO Production 28% Sarawak 23% Export of CPO 5.23 Million hectares 2014 Palm Oil Stocks 49% Integrated Annual Report A New Energy

39 SECTION 4 SEGMENT REVIEW PLANTATION Production cost per tonne CPO after kernel credit in Malaysia decreased slightly from RM1,520 per tonne in 2013 to RM1,327 per tonne in 2014 mainly due to both higher ffb throughput and cpo production plus greater estate efficiencies and a number of cost control initiatives implemented during the year was a generally weak year for the global trade in vegetable oils. The price of soybean oil, which is the closest competitor to palm oil, was down by 14% to USD909 per tonne. The sharp decline in the price of soybean was attributed mainly to an abundant supply in the USA and South America. Ample global inventories in competing vegetable oils compounded the oversupply situation, which further depressed CPO prices. In the oil and gas business, the price of crude oil had been around USD100 per barrel, buoyed by growing consumption in developing countries like China and geo-political unrest in the Middle East. Oil production from conventional fields could not keep up with demand, resulting in soaring prices. Over the year, demand for oil from Europe, Asia and the USA began tapering off, due to weakening economies and new efficiency measures. Meanwhile, high oil prices also spurred oil companies in the USA and Canada to begin drilling for non-conventional reserves. All these factors combined to bring down the price of the benchmark Brent Crude by 44% by year-end 2014 and this had significant ramifications on global economies and investor sentiments % EBIT, Malaysia Plantation Scenic view from the loading ramp, Tereh Palm Oil Mill, Kluang. 100 Kulim (Malaysia) Berhad (23370-V)

40 Panoramic view of oil palm plantation and nursery at Sedenak Estate, Kulaijaya. REVENUE FOR FINANCIAL YEAR 2014 RM0.77 bil Despite higher production of FFB and CPO, Malaysia Plantation turned in a slightly lower turnover in FY 2014, mainly attributed to the lower average CPO price secured. In FY 2014, Malaysia Plantation sold its CPO at RM2,370 per tonne on average basis, lower than the average of RM2,472 per tonne CPO in FY However, Kulim managed to record higher average price for PK at RM1,708 per tonne in FY 2014 versus RM1,287 per tonne in FY Malaysia RM2.87 billion REVENUE RM2.10 bil Papua New Guinea & Solomon Islands Thanks to the concerted effort by the operation team, our Cost Management and Productivity initiatives have started to show positive result in FY At the EBIT level, Malaysia Plantation recorded 12.6% improvement as compared to the previous year, although revenue was 1.7% down in FY Significant areas of improvement include manuring, harvesting and mill processing. Production cost after kernel credit was RM1,327 per tonne CPO as compared to RM1,520 per tonne CPO in the previous year. The Group s operation in Indonesia turned in a small loss of RM1 million in its first year operation. FINANCIAL HIGHLIGHTS In FY 2014, Kulim s Plantation Division - comprising operations in Malaysia, Papua New Guinea ( PNG ) and the Solomon Islands ( SI ), collectively recorded revenue of RM2.87 billion and EBIT of RM million. In comparison, the Division revenue and EBIT in FY 2013 was RM2.57 billion and RM million respectively. The Group s operations in PNG and SI under NBPOL group turned in notable improvement with 17% and 386% increase in revenue and EBIT respectively. Apart from a much better palm product prices fetched in FY 2014, particularly for PKO, the increased profit was also due to a non-cash gain of USD8.4 million as a result of the acquisition of 95% of the issued share capital of PT Timbang Deli Indonesia. Following the completion of NBPOL disposal on 26 February 2015, this would be the final year for Kulim to report on operations of NBPOL. Integrated Annual Report A New Energy

41 SECTION 4 SEGMENT REVIEW PLANTATION Variance Revenue (RM Million) - Malaysia (13.07) - PNG and SI (Discontinued Operations) 2, , , , EBIT (RM Million) - Malaysia PNG and SI (Discontinued Operations) FFB Production ( 000 tonnes) - Malaysia PNG and SI (Discontinued Operations) 1, , , , CPO Production (tonnes) - Malaysia PNG and SI (Discontinued Operations) Palm Product Prices - Malaysia - CPO (RM per tonne) 2,370 2,472 (102) - PK (RM per tonne) 1,708 1, PNG and SI (Discontinued Operations) - CPO (USD per tonne) PKO (USD per tonne) 1, Kulim (Malaysia) Berhad (23370-V)

42 % Group s FFB Production % Group s CPO Production OPERATIONAL REVIEW As at 31 December 2014, the divestment of NBPOL by Kulim was still in progress, and was subsequently completed on 26 February Therefore, for operational reporting purposes, we have included the operational review for plantations in PNG and SI. During the year under review, Kulim had operations in Peninsular Malaysia, Papua New Guinea ( PNG ), the Solomon Islands ( SI ) with Indonesia being the latest addition. Of the Group s total plantation landbank of 226,253 hectares, 22.6% or 51,160 hectares are located in the southern part of Peninsular Malaysia. Another 56.1% or 126,871 hectares are in PNG, the SI making up another 3.3% or 7,577 hectares and the balance located in Indonesia. With the acquisition of 60% equity in PT Wisesa Inspirasi Nusantara ( PT WIN ) concluded on 14 February 2015, it entails Kulim to have the right to develop 40,645 hectares of landbank in the Central Kalimantan, Indonesia. Oil Palm Planted Area as at Titled area (ha) Mature (ha) Immature (ha) Total (ha) Total (%) Malaysia 51,160 37,654 9,469 47,123 37% Indonesia 40, PNG (discontinued operations) 126,871 67,110 8,158 75,268 58% SI (discontinued operations) 7,577 5, ,283 5% Total 226, ,211 18, , % In terms of the maturity profile, 37,654 hectares or 73.6% of our planted area in Malaysia consist of mature palms more than three (3) years. Whereas in Indonesia, we have young palms cultivated in 2014 of 71 hectares. In PNG and the SI, mature palms constitute 52.9% and 71.9% respectively. Kulim Group is considered one (1) of the industry leaders in the oil palm industry in terms of yield performance. In FY 2014, the Group including NBPOL operations produced 2.53 million tonnes of FFB, an improvement of 9.5% from 2.31 million tonnes achieved in the previous year. The PNG operations were the biggest contributor to FFB production, accounting for 1.55 million tonnes or 61.3%, followed by Malaysia (33.2%) and the SI (5.5%). PLANTATION IN MALAYSIA Estate Operations During the year, our Malaysian operations produced a total of 841,079 tonnes of FFB, a 3.09% increase from 815,896 tonnes produced in Correspondingly, we also achieved a 1.04% increase in yield per hectare to tonnes from tonnes recorded the previous year. Our FFB performance was superior compared to the average yield achieved by the industry in Johor as well as Peninsular Malaysia, which was tonnes and tonnes respectively. The Group is committed to improving the age profile of its palms. In FY 2014, some 1,611 hectares were replanted with new high yielding clones. Replanting is undertaken on a staggered basis to maximise the crop potential before felling is carried out. As a result of our replanting initiative, the average age profile of our palms has improved to years. Integrated Annual Report A New Energy

43 SECTION 4 SEGMENT REVIEW PLANTATION % Malaysia Oil Yields To 4.60 tonnes CPO per hectare Kulim Crane Free System at Sedenak Estate, Kulaijaya. Mill Operations In FY 2014, our four (4) mills in Malaysia Sedenak, Sindora, Tereh and Palong Cocoa produced 257,881 tonnes of Crude Palm Oil ( CPO ), an increase of 1.24% from the previous year. This was despite a 0.56% decrease in FFB processed from both the Group s estates and external suppliers. Palm Kernel ( PK ) production amounted to 69,681 tonnes, a slight decrease of 1.71% from FY In terms of oil yields, our Malaysian plantations recorded a marginal increase from 4.47 tonnes of CPO per hectare recorded in FY 2013 to 4.60 tonnes for the year in review. This excludes CPO from FFB purchased from third party suppliers. We achieved OER of 20.58%, which is an improvement from 20.22% recorded in 2013 as a result of mainly favourable drier weather and increased matured crops from Group s estates. However, the Kernel Extraction Rate ( KER ) declined marginally from 5.63% to 5.56% over the same period. It is noteworthy that our OER is higher than the industry average of 20.19% for Peninsular Malaysia while our KER is at par with the industry average. 104 Kulim (Malaysia) Berhad (23370-V) Cost Management and Productivity Initiatives In the palm oil industry, producers are price takvers as opposed to price movers and there is little leeway for us to exert control over commodity prices. The onus therefore is on producers to control costs whilst increasing productivity in order to remain profitable. For FY 2014, our cost of production from field was contained at RM268 per tonne, which is 4.29% below our budget estimates. Good Agricultural Practices and Manufacturing Practices have been adopted at all stages of our plantation operations to enhance efficiency and productivity. They cover an entire spectrum of activities, ranging from nursery preparation, field planting and up-keeping, right up to FFB harvesting, transportation and processing at the mills. Over the years, proactive measures have been taken to step up the Group s mechanisation and automation programmes to reduce dependency on labour, especially for FFB harvesting and evacuation. We have expanded the utilisation of the Kulim Crane Free System that was developed in-house for loading and evacuation activities. Other field up-keeping activities such as manuring and pathway maintenance have also been mechanised.

44 % Malaysia OER 20.58% Higher than industry average of 20.19%. The latest addition to our mechanisation programme involve the use of Bin System for faster and more efficient FFB loading and evacuation. After field trials conducted last year, the use of motorised harvesting poles known as Cantas and C-Kat has also proven effective for palms that are below five (5) metres and over six (6) metres in height respectively. Mechanisation has helped to reduce rising labour costs and to some extent mitigated the problem of labour shortages. The collective wage agreements between the Malaysian Agricultural Producers Association ( MAPA ) and the National Union of Plantation Workers ( NUPW ) are up for review and this might impact on labour and production costs. The way forward therefore is for plantation players like Kulim to increase the level of mechanisation in the upstream sector of the industry. Biogas Plant Projects The biogas plant project is being implemented in phases at our five (5) mills - including the new Pasir Panjang Palm Oil Mill which was commissioned in March 2015, to reduce the Group s overall carbon foot-print to 80.5% of the 2012 baseline emission by Our first biogas plant, which is located at the Sedenak Palm Oil Mill was commissioned on 8 April 2014 and currently running with average daily production of methane gas of approximately 5,000 m 3. Another plant is under construction at the Pasir Panjang Palm Oil Mill and is targeted for completion by mid This will be followed by the Sindora Palm Oil Mill, with commissioning planned for early By 2017, the Palong Cocoa and Tereh Palm Oil Mill will also have their own biogas plants. Biogas is being used as an additional fuel for the boiler systems, apart from mesocarp fibres and palm shells. A reduction in the use of palm shells can help ensure lower particulate emissions and smoke opacity. Commercially, there is a market for palm shells while excess biogas produced by our mills can be bottled and sold for industrial use. The Group is looking into the viability of these options as another possible revenue stream. Bin System Faster and more efficient FFB loading and evacuation In-field FFB collection before being transported to the mill. Integrated Annual Report A New Energy

45 SECTION 4 SEGMENT REVIEW PLANTATION RESEARCH AND DEVELOPMENT Kulim s investment in research and development ( R&D ) is an integral part of the Group s strategy to be a key player in the palm oil industry. We have a team of highly trained and experienced research personnel with expertise in agronomics, seed production, plant breeding and biotechnology, among others. R&D for our Malaysian operations is carried out at the Kulim Agro-Tech Centre based in Kota Tinggi, Johor. Precision Agriculture and Analytical Services The Kulim Agrotech Information System ( KATIS ) is based on the concept of precision agriculture. It combines the Global Positioning System ( GPS ), Geography Information System ( GIS ) and the Oil Palm Monitoring Programme to capture agronomic and management data. The data provides a quick overview of an estate s performance so that under-performing areas can be identified and mitigation actions taken. We are moving ahead with plans to incorporate highresolution aerial photography into the available GPS digital maps. A pilot project covering some 10,000 hectares was completed early last year, facilitating the production of more accurate and verifiable computer-generated image-based palm census. These photographs give a better perspective of the overall plantation landscape showing the physical infrastructure in place, terrain, land use, field conditions and even the health of palms. It is also useful in the design of road and drainage networks to address the problem of flooding in low-lying areas. The project will be extended to cover another 10,000 hectares in the Palong Estate in Analytical Services The Group s Ulu Tiram Central Laboratory ( UTCL ) offers expertise in chemical and physical testing of samples, agronomic and fertiliser recommendations to improve productivity, as well as effluent testing for the palm oil mills. The Group has invested in the latest testing equipment such as the Inductive Coupled Plasma-Optical Emission Spectrophotometer ( ICP-OES ), Atomic Absorption Spectrophotometer ( AAS ), Flame Photometer, UVspectrophotometer and Nitrogen Auto Analyser to ensure reliable analytical results. With the fully automatic nitrogen analyser, UTCL is able to produce faster results. Using the Dumas method, it only takes five (5) minutes per sample or three (3) hours for a set of 40 samples, compared to 17 minutes and 11 hours it used to take using older machines. Likewise, the ICP-OES has facilitated the efficient and more expedient testing of samples. In FY 2014, UTCL handled over 13,000 samples from Malaysia and also from NBPOL in Papua New Guinea. UTCL is accredited to MS ISO/IEC SAMM (Skim Akreditasi Makmal-Makmal Malaysia), the main ISO standard used by testing and calibration laboratories. UTCL s competency is also recognised globally and supported by the Mutual Recognition Agreement ( MRA ) endorsed by the International Laboratory Accreditation Cooperation ( ILAC ). The ILAC is an international cooperation initiative with over 40 laboratory bodies having signed the MRA to promote the acceptance of accredited test and calibration data. 106 Kulim (Malaysia) Berhad (23370-V)

46 Integrated Pest Management ( IPM ) A balanced IPM approach as a means of pest and disease control has reduced overdependence on pesticides, making the control process more sustainable. Barn owls and snakes help keep a check on rodent populations while predatory insects, parasitoids and entomopathogenic fungi keep defoliating insects at bay. It is only in an outbreak situation where natural predation controls are inadequate that we resort to using insecticides. Research Collaboration Kulim has long collaborated with other research institutions such as the MPOB. Among recent collaborations has been in the area of Ganoderma, a prominent oil palm disease in Malaysia. In-house research is focused on possible mitigation factors such as the use of microbes. Agronomy To promote the science of soil management and crop production, the Group is supported by a data base built up over 20 years. The data base is used to determine the performance of different planting areas, provide analysis and recommendations on best practices, determine sites for new agronomy trials and optimise planting schedules. Over the years, the responsibilities of the Agronomy Unit have escalated from providing technical advices and services to undertaking full-fledged R&D activities. The findings are made available to estates across the Group to enhance the monitoring of field performance and facilitate benchmarking against the high performers. Maximising Yields Agronomic services based on Best Management Practices are tapped to maximise yields and outputs in a sustainable manner: Nutrient management as well as soil characterisation and conservation strategies are all aimed at improving soil management. Long-term fertiliser studies are aimed at improving the efficiency of specific nutrient applications and to evaluate the use of pesticides that are less toxic, cost effective and more environmentally friendly. Zero-Burning Replanting The Group has long advocated zero-burning replanting as a practical and environmentally sound practice. As opposed to burning, old and uneconomical stands of oil palms are shredded and left to decompose in situ, helping to recycle nutrients into the soil. Besides complying with environmental legislation, zero-burning is also our contribution in the global effort to minimise global warming. Plant Breeding Conventional breeding The selection of elite planting materials to achieve high oil yields remains the primary objective of Kulim s palm breeding programme. During the year, progeny testing involving various elite duras were field planted in various locations. Seedlings of some new crosses were also nurtured for the 2015 planting. Experiments were undertaken to find new sources of improved dura and pisifera parent palms for future planting materials and ortets for clonal propagation. We have also embarked on a Single Seed Descend ( SSD ) programme to create an in-bred line within a 5-year instead of a 10-year cycle. Emphasis is given to an optimal balance of inorganic and organic fertilisers to promote efficient energy usage and achieve higher palm oil yields sustainably. In the face of increasing prices of inorganic fertilisers, biocompost produced from the Group s milling operations enables the efficient use of byproducts covering larger planting areas. Starting from FY 2014, the technique of biocompost application on terraces has been improvised from surface to subsoil application. Integrated Annual Report A New Energy

47 SECTION 4 SEGMENT REVIEW PLANTATION STALK LENGTH 28.8cm 10cm - 15cm 20cm Current Ideal Angolan Genetic The Plant Breeding Unit is also focused on developing genetic materials with economically important traits such as ganoderma tolerance, high vitamin E, long-bunch stalk, high bunch number, early bearing, good OER and big fruitlets. Current planting materials have a stalk length of cm, but for harvesting efficiency with a mechanical cutter, the ideal stalk length should be 20 cm. Seedlings derived from Angolan genetic materials with stalk length of 28.8 cm have been nurtured at our nurseries in readiness for the 2015 planting. We have also developed progenies with dwarf characteristics, improved oil yields and high vitamin E content. Our fast track programme aims to shorten the time taken to develop elite parental palms that produce uniformly high yielding planting materials. During the year, a number of tenera palms with oil/bunch ( O/B ) over 35% and oil yield above 10 tonnes per hectare per year in nine (9) clones of different genetic backgrounds were selected for recloning. Efforts to conserve nine (9) potential BM119 pisifera palms aged 23 years in Basir Ismail Estate was carried out using the slanting technique. Based on earlier progeny testing, seven (7) pisifera palms were certified by SIRIM and can be used as male parents for pollen sources in the commercial production of DxP seeds. Seed Production In Malaysia, a total of 1.1 million DxP seeds were produced and 0.87 germinated seeds were sold in 2014 by the Group s Plant Breeding Unit. Biotechnology The Group is constructing a new dedicated R&D facility focusing on genomic research to complement its conventional plant breeding and tissue culture facilities. Genomic research facilitates more accurate results when the legitimacy of a plant breeding material can be confirmed through DNA finger printing. This is particularly useful for quality assessment and control in plant breeding materials and tissue culture ramets. It will also assist in selecting palms that carry the desirable genes. Fruit segregation can be made as early as during the nursery stage rather than the fruit bearing stage in the conventional breeding method. Collaborative efforts with MPOB have confirmed the reliability of the fruit segregation method for dura, tenera and pisifera varieties in a blind testing programme that involved over 100 leaf samples. 108 Kulim (Malaysia) Berhad (23370-V)

48 PT Sumber Sawit Rejo; Kulim s oil palm estate in Central Kalimantan, Indonesia. 40,645 Ha New Oil Palm Plantations Central Kalimantan, Indonesia PLANTATION IN INDONESIA In 2013, Kulim was presented with an opportunity to reenter Indonesia having left it in The completion of 74% acquisition in PT Win paved the way for Kulim and PT GSB to develop 40,645 hectares of new oil palm plantations in Central Kalimantan, Indonesia. Being a socially and environmentally responsible corporate citizen, Kulim is committed to the expansion of its plantation operations, especially in Indonesia, guided by the RSPO s New Planting Procedures ( NPP ) apart from the relevant Indonesian regulations through a fomal process to secure the necessary documentation to obtain a release permit prior to land development. Accordingly, we initiated the necessary stakeholders engagement programme as early as June 2013, including surveys to determine the High Conservation Value ( HCV ) area and engagement with the local Dayak community to explain our development plans and obtain their consent to proceed with our development plans. PLANTATION IN PNG AND SI During the year, a total of 2,331,756 tonnes of FFB were processed, a 11.8% increase from previous year s 2,085,670 tonnes. Correspondingly, NBPOL group s CPO extraction rate for the year was 22.35% versus 22.15% recorded in Total oil production was 574,124 tonnes (2013: 507,856 tonnes), with 521,204 tonnes of CPO and 52,920 tonnes of PKO produced respectively (2013:462,060 tonnes and 45,796 tonnes respectively). In 2014, NBPOL group completed 1,183 hectares of new plantings (with a further 1,479 hectares under preparation) and 2,743 hectares of replanting. CPO prices traded during the year between USD675 and USD935 per tonne, starting the year at USD785 per tonne, increased to USD935 per tonne during the year and ended at around USD700 per tonne with current prices trading at approximately USD700 per tonne. In July 2014, the relevant documents were submitted to TUV Rheinland Indonesia, a leading service provider for RSPO certification. The report by auditors from TUV Rheinland was completed in September and was subsequently published on the RSPO website for public notification purposes. We are also in the final stages to obtain the necessary permits to convert 7,133 hectares of forest (Hutan Produksi Konversi - HPK ) to grow oil palms (Areal Penggunaan Lain APL ). The final approval from the Forestry Ministry is expected by June Integrated Annual Report A New Energy

49 SECTION 4 SEGMENT REVIEW INTRAPRENEUR VENTURES JAMALUDIN MD ALI Executive Director Business Development METHAL AHMAD General Manager Foods and IV 110 Kulim (Malaysia) Berhad (23370-V)

50 Kulim s Intrapreneur Ventures ( IV ) began to take form in 2005 as a key strategy to develop new growth engines for the Group. By tapping the considerable entrepreneurial talent amongst the Group s employees and nurturing promising businesses with growth potential, the goal is to diversify the Group s revenue streams and provide long-term growth for shareholders. Today, IV brings together some 17 companies under its corporate umbrella involved in a diverse range of business activities. Kulim s IV is the test-bed for the Group s entrepreneurial talent. We are constantly on the look-out for new and promising businesses that we can nurture to maturity. Our efforts have paid off with some success stories, notably that of E.A. Technique (M) Berhad ( EATech ) and its subsequent listing on the Main Market of Bursa Securities on 11 December As to be expected, we have also had our share of businesses that have not performed in line with expectations. These have been downsized or restructured. Some operations have been outsourced while those underperforming or are no longer in line with the Group s business objectives have been divested. In FY 2014, we acquired one (1) new company Sovereign Multimedia Resources Sdn Bhd ( Sovereign ), disposed of two (2) companies Superior Harbour Sdn Bhd and General Access Sdn Bhd, while the operations of two (2) companies have been outsourced Epasa Shipping Agency Sdn Bhd and Akli Resources Sdn Bhd. With the growing prominence of the O&G business, we will be reclassifying two (2) IV companies EATech and Danamin (M) Sdn Bhd ( Danamin ) under the new division effective 1 January corporate highlights O Listing of E.A. Technique (M) Berhad on Bursa Malaysia O Acquisition of Sovereign Multimedia Resources Sdn Bhd by Extreme Edge Sdn Bhd O Disposal of Superior Harbour Sdn Bhd and General Access Sdn Bhd O Outsourced operation of Epasa Shipping Agency Sdn Bhd and Akli Resources Sdn Bhd Integrated Annual Report A New Energy

51 SECTION 4 SEGMENT REVIEW INTRAPRENEUR VENTURES Merger & Acquisitions Disposal Business Expansion Downsizing & Restructuring STRATEGIES FOR IVS Pricing/ Marketing Price Differentiation Focus on Core Competency New Business Strategy 112 Kulim (Malaysia) Berhad (23370-V)

52 2014 Revenue 32.4% RM million 2014 EBIT 52.2% RM22.01 million Financial Highlights In FY 2014, Kulim s IV Division recorded higher revenue at RM million versus RM million in FY 2013 (excluding Discontinued Operations). The revenue improvement was largely attributable to EATech as a result of interim contract of six (6) harbour tugboats with Northport. Other IV companies which contributed to the revenue increase include Extreme Edge Sdn Bhd ( EESB ) as a result of the acquisition of Sovereign which was completed in June Division s Earnings Before Interest and Tax ( EBIT ) net of Discontinued Operations, however, dipped to RM22.01 million as compared to RM46.05 million in the previous year. EATech recorded a RM6.71 million lower EBIT mainly as a result of IPO expenses and relocation of its Floating Storage Unit ( FSU ) MT Nautica Muar, from Anjung Kecil field to Kayu Manis field during the year. Other companies that registered lower EBIT in FY 2014 include Kulim Nursery Sdn Bhd and Kulim Civilworks Sdn Bhd. Whereas, IV companies that outperformed its previous year s EBIT were EESB, Sindora Timber Sdn Bhd, The Secret of Secret Garden and Granulab (M) Sdn Bhd. E.A. Technique (M) Berhad EATech is principally a provider of marine transportation, port marine services and is also involved in ship building, repair and minor fabrication at several ports in Malaysia. Despite intense market competition, EATech recorded revenue of RM million and PBT of RM18.11 million for FY 2014, extending its track record of eight (8) consecutive years of profitability. Since Kulim s investment in EATech (via Sindora Berhad) back in 2006, the company has consolidated its position as a significant player in Malaysia s O&G industry and related services segment. As at the end of FY 2014 EATech operated a fleet of 31 marine vessels, of which 22 are self-owned, with the rest charted out to external parties consisting of oil majors and trading houses such as PETCO, and PETRONAS Dagangan. The company also has a FSU used to support offshore production platforms, two (2) Liquefied Petroleum Gas ( LPG ) tankers as well as 16 tugboats and five (5) mooring boats. Integrated Annual Report A New Energy

53 SECTION 4 SEGMENT REVIEW INTRAPRENEUR VENTURES Initial Public Offering A highlight of the year was the listing of EATech on the Main Market of Bursa Securities on 11 December The objective of the listing exercise was to allow the investing community to participate in EATech s equity and continuing growth as well as enable the company to gain recognition and corporate stature through its listing. The IPO entailed an offer for sale of 15 million existing shares and a public offering of 114 million new shares, of which 25.2 million new shares were made available to the Malaysian public at an issue price of 65 sen per share. The public response to the IPO was overwhelming, with the public portion oversubscribed by 5.12 times. On its maiden trading day, the share price of EATech suffered a 25.4% or 16.5 sen decline in line with the overall market that fell by points or 1.19%. Investor sentiments were weighed down as the benchmark Brent crude fell below USD65 per barrel. As a result, EATech ended its first trading day lower at 48.5 sen compared to its IPO price of 65 sen. The proceeds raised from the IPO will be utilised to repay bank borrowings, business expansion, working capital and to defray IPO expenses. EATech intends to use approximately RM19.2 million of the IPO proceeds to part finance the purchase of an oil tanker and to convert it into a FSU. Another RM10.0 million will be utilised to expand EATech s existing shipbuilding facilities in Perak. EATech s IPO Listing 5.12times Oversubscribed by public 114 Kulim (Malaysia) Berhad (23370-V)

54 Living up to its tagline of World Class, Home Grown, MIT is a homegrown enterprise that has grown to become significant player in the insurance and brokerage business Earnings Visibility EATech s earnings are expected to improve going forward with the delivery of eight (8) new vessels, including the Floating Storage Offloading ( FSO ) which is currently being refurbished and is expected to be completed in April The company has already secured a firm contract for the FSO. As we start a new year, the company has an order book of RM2.0 billion that will keep it busy until PETRONAS accounts for 55% of its order book with the rest from local O&G companies and its joint-venture with US O&G company and a local port operator. It is also bidding for another RM1.0 billion worth of domestic jobs and is expected to secure one (1) or two (2) projects in the near future. The plunging oil prices has yet to affect EATech s business. In fact, the current market conditions provide an opportunity for increased shipping contracts as bunker rates have dropped accordingly as well. An increasing demand for FSOs for marginal fields in the country also provides opportunity for EATech to expand further. MIT Brokers Insurance Sdn Bhd ( MIT ) In FY 2014, total premiums transacted by MIT decreased to RM67.33 million, compared to RM75.51 million achieved in FY In tandem with the decrease in premiums placement, MIT s PBT decline 3.96% to RM1.94 million, from RM2.02 million in FY The average margin was 19.26% (2014: 28.8%) when compared to the combined premiums transacted. Living up to its tagline of World Class, Home Grown, MIT is a home-grown enterprise that has grown to become significant player in the insurance and brokerage business. Its client base includes some of the biggest names in Corporate Malaysia, representing power and utilities, infrastructure projects, financial institutions, marine and energy industries, to cite a few examples. The company is backed by a team of experienced professionals to provide its growing client base with innovative solutions to cover a wide variety of business-related risks. To successfully compete in an increasingly globalised world, MIT has established linkages with some of the world s leading underwriters and brokers, notably from Singapore, Hong Kong and the United Kingdom. The company also has a network of associates, engineers and consultants who are trained to handle a portfolio of regional projects. Integrated Annual Report A New Energy

55 SECTION 4 SEGMENT REVIEW INTRAPRENEUR VENTURES MIT also provides services in the areas of Financial Solutions ( FINSOL ), Specialty, Commercial and Employee Benefits. Owing to the highly complex and extensive nature of the liability risks in FINSOL, it has a pool of lawyers and economists with the expert knowledge to assess a company s exposure. Industry best practices are shared, applied and refined to determine the best business solutions for a dynamic business environment. Under Specialty, the focus is exclusively on providing solutions for the Infrastructure, Power and Utilities, Marine and Energy sectors as well as Trade Credit and Political Risk exposures. The company acts on behalf of owners, principals, major contractors, financial lenders and sector professionals. In keeping up with developments, MIT has been reassessing the range and applicability of specialist insurance coverage to mitigate the effects of any consequential financial loss. Through its network, MIT has hired experts in the related risks and has sourced markets in the UK, Europe, Middle East and Asia Pacific for the placement of these risks. Among the range of specialist services provided by MIT, Commercial is rapidly gaining prominence. MIT designs, manages and administers insurance programmes for growing organisations. By tapping the knowledge of the marketplace, it can tailor benefits programmes, property and casualty coverage to meet the specific requirements of an organisation. In providing Employee Benefits programmes, MIT caters to corporate clients by designing for them a tailor-made and cost effective health care programme. This is followed through with the implementation of the programme as well as consultations to advise client on the newest trends and the changing landscape related to employee health care and benefits. Extreme Edge Sdn Bhd ( EESB ) During FY 2014, EESB group recorded revenue of RM11.21 million, an improvement of over 100% from RM5.49 million posted the previous year. The increase in revenue was mainly due to acquisition of 100% equity interest in Sovereign Multimedia Resources Sdn Bhd ( Sovereign ), an MSC-status company, which was completed in June 2014, apart from an increased project management services contracts secured by the company; not only from Kulim, but also from other external bodies. Correspondingly, PBT rose by % to RM2.71 million from RM739,000 previously recorded in FY The company was founded as a start-up in 2010, and since then it has evolved to become a successful technology and networking services provider in its own right. EESB is a onestop centre providing various solution-related networking services ranging from networking and communications, website design, development, hosting and management solutions to E-procurement. It also services and maintains servers, UPS devices and personal computers. Its portfolio includes project management and consultation services. EESB delivers high-value, tailored solutions with measurable results by working collaboratively with clients via a usercentred, technology-based and business-driven solutions methodology. This approach appeals to customers by significantly reducing the time and risks associated with designing and rolling-out complete integrated solutions. FY 2014 saw the growing importance of cloud infrastructure, be it public, internal or hybrid. To stay ahead, EESB has been seeking collaboration with software partners and cloud players to deliver the best practices and solutions to endusers. Going forward, EESB has set its sights on greater specialisation of products and services. EESB is a one-stop centre providing various solution-related networking services ranging from networking and communications, website design, development, hosting and management solutions to E-procurement. 116 Kulim (Malaysia) Berhad (23370-V)

56 EBSB is the inventor and manufacturer of a threewheeler multi-purpose machine Mechanical Buffalo named BADANG. It is mainly used for FFB evacuation and other field works such as manuring. Edaran Badang Sdn Bhd ( EBSB ) For FY 2014, EBSB registered a revenue of RM26.57 million, compared with RM28.50 million achieved previously. PBT decreased by 10.98% from RM1.73 million posted in FY 2013 to RM1.54 million in FY 2014 due to higher operating costs. EBSB is the inventor and manufacturer of a three-wheeler multi-purpose machine Mechanical Buffalo named BADANG. It is mainly used for FFB evacuation and other field works such as manuring. As part of its diversification and market penetration strategies, EBSB has established a new product distribution centre at Lahad Datu, Sabah. The centre is the sole distributor in Sabah for the Beluga, Tiger and Lion X 1000 range of machinery imported from Korea. Beluga machinery can be used for a range of agricultural activities, even in peat areas. Attesting to its popularity, EBSB also received sizeable new orders for BADANG from various plantation companies and government ministries. Kulim Safety, Training and Services Sdn Bhd Kulim Safety Training and Services Sdn Bhd ( KSTS ) KSTS revenue improved from RM2.42 million to RM2.46 million in FY 2014, due mainly to increased customer services activities that registered growth of 56.9%. Pre-tax profit, however, declined to RM325,000 compared to RM565,000 achieved the previous year. Guided by its motto to provide Safety for People, Planet and Profits, KSTS offers Occupational Safety and Health ( OSH ) related services. While the priority is on OSH training, KSTS also conducts training related to human resource development, motivation and quality-related field work. The company also provides advisory services on Health and Safety Management Systems (OHSAS 1800), RSPO, ISO Quality Management Systems. It undertakes auditing, inspection and look into cases related to deaths, accidents and dangerous occurrences at the workplace and make recommendations for improvements. Apart from providing health screening (medical surveillance), noise monitoring and administering urine and drugs tests, the company is also an authorised gas tester, visiting medical officer and a foreign workers medical screening expert on behalf of the Foreign Workers Medical Examination Monitoring Agency ( FOMEMA ). Guided by its motto to provide Safety for People, Planet and Profits, KSTS offers Occupational Safety and Health ( OSH ) related services. Integrated Annual Report A New Energy

57 SECTION 4 SEGMENT REVIEW oil and gas ABDUL RAHMAN SULAIMAN Executive Director, Oil and Gas/ Plantation Operation 118 Kulim (Malaysia) Berhad (23370-V)

58 KULIM S INVOLVEMENT IN O&G BUSINESS CHAIN Kulim s long-term strategy has always been to diversify its business activities in order to cushion any fluctuation in earnings arising from volatile palm oil prices. We established a foot-hold in the mid-stream of Oil and Gas ( O&G ) industry through E.A. Technique (M) Berhad ( EATech ), which has since grown organically to become one of the major players in the business of tugboat operations and transportation of clean petroleum products in Malaysia. The other foot-hold is through Danamin (M) Sdn Bhd ( Danamin ), which is involved in the fabrication of O&G pipelines, Non-Destructive Testing ( NDT ) and the provision of engineering services. O Upstream Exploration and Production SWBB PSC O Downstream / Support Services EATech Danamin Integrated Annual Report A New Energy

59 SECTION 4 SEGMENT REVIEW OIL & GAS On 24 October 2014, Kulim Energy Nusantara Sdn Bhd ( KENSB ), a wholly-owned subsidiary of Kulim, entered into a Joint Operating Agreement ( JOA ) with PT RBB and PT GSB to participate in the E&P in SWBB PSC. Consistent with the Group s long-term business plan to diversify its business activities, Kulim had on 3 October 2013 has entered into a MoU with PT Graha Sumber Berkah ( PT GSB ) to establish a framework to explore the possibility of a mutual co-operation to venture into the O&G sector in Indonesia via its participation in the Exploration and Production ( E&P ) of O&G. 120 Kulim (Malaysia) Berhad (23370-V) Involvement in South West Bukit Barisan Block Kulim proposed investment in South West Bukit Barisan ( SWBB ) venture is not something new, expanding its involvement in the O&G sector particularly into the niche upstream activities in Indonesia. It allows the Group to move up the O&G value chain and participate in the upstream business of E&P activities. The Government of Indonesia ( GOI ) awarded the SWBB PSC to subsidiaries of PT Citra Sarana Energi ( PT CSE ) - PT Radiant Bukit Barisan E&P ( PT RBB ) and PC SKR International Ltd ( PC SKR ) on 13 November 2008 for a period of 30 years. The exploration activities cover an initial exploration period of six (6) years before commencement of O&G development and production. On 31 October 2014, Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak & Gas Bumi ( SKK Migas ) has approved for the extension of SWBB PSC s exploration period for up to four (4) years. Measuring some 779 square kilometers, SWBB block is located onshore in the West Sumatera province. Under the SWBB PSC, PT RBB and PC SKR have participating interests of 51% and 49%, respectively in the SWBB block whereby PT RBB has been appointed as the Operator. On 24 October 2014, Kulim Energy Nusantara Sdn Bhd ( KENSB ), a wholly-owned subsidiary of Kulim, entered into a JOA with PT RBB and PT GSB to participate in the E&P in SWBB PSC. The JOA is to establish a co-operation between PT RBB, PT GSB and KENSB whereby PT RBB shall remain as the Main Operator while PT GSB and KENSB shall participate as the Co-operators of SWBB Block. On 23 December 2014, Kulim announced that all conditions precedent of the JOA have been fulfilled.

60 Following the JOA, KENSB had on 10 December 2014 entered into a Conditional Subscription and Shares Purchase Agreement ( CSSPA ) with PT CSE and its existing shareholders namely, PT Wisesa Inspirasi Sumatera ( PT WIS ), a whollyowned subsidiary of GSB and PT Inti Energi Sejahtera ( PT IES ) to acquire a 60% equity interest in PT CSE for a total cash consideration of USD million (approximately RM million). Barring any unforeseen circumstances, the CSSPA is expected to be completed in the first half of Outlook and Prospects The growth of Kulim s O&G Division currently hinges on two (2) main factors - completion of acquisition, and the completion of major projects as planned. As disclosed in its Circular for Proposed Disposal of NBPOL, Kulim had earmarked some RM680 million out of the total proceeds for the O&G business in Indonesia, stretched forward over the next two (2) years, and is not a small sum by any means. For the 2015 work programme, Kulim remains focused on exploration drilling in SWBB. Production testing on a SWBB well is currently progressing with very encouraging indications of total Prospective and Contingent Resources of 404 million barrels of oil equivalent ( MMBOE ). PT RBB has obtained approval from GOI to drill an additional three (3) wells in Depending on its commercial viability, production can begin in the early 2016 and is expected to ramp up the Group s revenue. The results of E&P activities are uncertain and it may involve unprofitable efforts, not only from dry wells but also wells that are productive but do not have enough reserves to generate positive cash flows after taking into account, amongst others, drilling, development, operating and associated costs. Hence, the completion of a well does not guarantee that there will be returns on the investments or that the costs incurred will be recovered. Upstream O&G operations also involve a variety of risks that may expose Kulim to substantial liability arising from these hazards, thereby diminishing the returns Kulim can obtain in relation to any discovery. The industry, however, practises high standards of safety precautions thereby mitigating many of these risk factors and the Group take into account all precautionary steps to mitigate the possible risks associated with O&G business. On that note, the Group is taking into account all precautionary steps to mitigate the possible risks associated with the potential new ventures as well as the existing business it is already in. Our risk management team is monitoring various data, formulate a sound risk management strategy to enable quick reaction to any potential shocks. Integrated Annual Report A New Energy

61 122 Kulim (Malaysia) Berhad (23370-V) SECTION 5 sustainability

62 The wetland of Selai Estate; one of the largest man-made wetlands within Kulim s estates measuring approximately 7 acres. Integrated Annual Report A New Energy

63 SECTION 5 SUSTAINABILITY In today s nuanced, more discerning and better informed world, society s expectations of corporations are changing. In addition to the responsibility for making profits, consumers and investors alike are more conscious about the operational impact corporations have on society and the environment. Almost without exception, for all major businesses and industries worldwide, sustainability is a key word in safeguarding a stable future. CORPORATE VISION & MISSION SUSTAINABILITY POLICY PEOPLE People Policy Core Labour Standards OSH Policy Workplace Drug Policy Sexual Harassment Policy Grievance Procedure PLANET Environmental Policy Malaysian Palm Oil Association Environmental Charter PROFIT Business Policy Ethics Policy Social Contributions Profits with Responsibility Fraud Policy Quality Policies for Estates and Mills Production Charter (30:30) At Kulim, we have long upheld the notion that profitability and growth must go hand-in-hand with the building of a fair, ethical and responsible Company. That is why we have long embedded sustainability and corporate responsibility as an integral part of our core values, policy statements and work practices. Executed well, we believe that sustainability can be a powerful driver of business growth and a core competency to measure our success as a corporation. OUR SUSTAINABILITY POLICY Kulim s strives for performance with a purpose. It is not just about meeting the expectations of our stakeholders. Sustainability is at the core of how we do business. Our business model has been designed to deliver sustainable growth based on the 3Ps bottom line of People, Planet and Profit. Based on these three (3) Pillars of Sustainability, our approach is to ensure that today s requirements are satisfied without impairing the livelihood basis of future generations. 124 Kulim (Malaysia) Berhad (23370-V)

64 As part of our strategy towards sustainability, we have developed a Sustainable Management System ( SMS ) that is based on the Principles and Criteria set out by the RSPO. Our Principles for a Sustainable Development Performance are as follows: Invest in the training and development of employees to improve their knowledge, skills and competency to enhance performance and advance their career. Conduct all operations consistent with the SMS Framework to maintain a safe, healthy and viable work environment, Kulim will operate in compliance with all applicable national and international legislations and ensure that the achievement of long-term economic viability does not compromise its ethics and business policies. Ensure that land management practices are consistent with the long-term productivity of the resource so that the land remains suited for agricultural use. Kulim will not undertake new developments in areas of primary forest or on land containing one (1) or more High Conservation Value ( HCV ) attributes. Any land development undertaken by Kulim will take into account the conservation of biodiversity, protection of cultural and customary land use and the capacity of the land to sustain any development activities. Principles Continue to be a responsible corporate citizen, making a positive contribution to the communities in which it operates. Uphold the principles of Free, Prior and Informed Consent ( FPIC ) in all negotiations and interactions with stakeholders. In 2010, we established the Sustainability and Quality Council ( SQC ), now known as Sustainability and Initiative Council ( SIC ) to oversee the Group s overall Corporate Responsibility ( CR ) strategies and activities on behalf of the Board. CR and sustainability targets established and their performance are closely monitored by the SIC against agreed metrics. The SIC has identified the reduction of herbicide, water usage, carbon emission and reduction in accidents as key priority areas. However, at the same time it is very important for Kulim to maintain and improve employee and stakeholder engagement. Integrated Annual Report A New Energy

65 SECTION 5 SUSTAINABILITY PEOPLE People are the reason why any business is successful. When a company is conscientious about its employees and the communities in which it operates, it generates goodwill, additional loyalty, commitment and a sense of shared responsibility. From creating jobs and doing right by our workers, supporting meaningful causes, giving back to the community in cash and kind, and by volunteering our services, we are contributing towards a better world. Safety first; Mill operator checking on machineries wearing proper Personal Protective Equipment. 126 Kulim (Malaysia) Berhad (23370-V)

66 EMPLOYMENT standards Beginning in our own backyard, we treat all our employees without exception, with fairness and dignity. Our human resource policies are grounded in Malaysia s labour legislation as well as the International Labour Organisation s ( ILO ) Declaration on Fundamental Principles and Rights at Work. The Group is also committed to managing its workforce in a responsible manner guided by the Code of Conduct for Industrial Harmony. The Ethics Declaration Form serves as an important tool to promote a culture of integrity. Under the Whistle-Blower Policy, employees are encouraged to alert management about any infringement of ethics that might have slipped the compliance radar. In the interest of our employees, the Group does not tolerate the use of illegal drugs, banned substances and alcohol in the workplace. workers by nationality 12.9% 0.1% Malaysian 22.0% Bangladeshi Indonesian 65.0% Indian FOREIGN nationality 0.2% 16.5% Bangladeshi Indonesian Indian 83.3% Integrated Annual Report A New Energy

67 SECTION 5 SUSTAINABILITY As at 31 December 2014, we had 6,684 full-time employees in Malaysia, of which 5,517 or 82.5% were categorised as workers. About 78% or 4,305 are foreign workers, predominantly from Indonesia, India and Bangladesh. In 2014, our turnover rate was 27.2%, compared to 17.46% recorded in the previous year. The spike coincided with the repatriation of 845 foreign workers, on completing their three-year contracts. Policy of Non-Discrimination We recognise the value of diversity and we do not discriminate against women, ethnic or religious minorities and foreign workers. All field, office and management workers are paid the same salaries according to their predefined grades. We treat all our workers equally regardless of their race, gender and religion. Workers with HIV/AIDS are guaranteed confidentiality and are retained in employment for as long as they are healthy and able to perform. Fair Wages The wages we pay our workers and the conditions of employment meet the legal or industry minimum standards. In January 2014, the Minimum Wage Order 2012 stipulating a minimum wage of RM900 a month in Peninsular and RM800 in Sabah, Sarawak and Labuan was fully enforced. We also provide housing and utilities to our workers. Child and Bonded Labour We do not employ young people under the age of 16. Many of our workers reside with their families and their children have access to government schools and amenities that we provide but they do not work for the Company. Nor do we subject any of our workers to bonded labour. Local workers have the freedom to cease employment without penalty while foreign workers need to fulfil a three-year (3) contract. Freedom of Association We respect the rights of our workers to form and join unions. A total of 1,277 employees or 19.1% of our workforce are members of the National Union of Plantation Workers ( NUPW ). Our Collective Bargaining Agreements with the union are current, with no ongoing disputes. Recruitment of Foreign Workers The contracts between workers and the Company are signed upon the workers arrival to ensure there is no contract substitution occurs. Managing Overtime Mill workers tend to work longer hours during the peak harvesting season to ensure the fruits are processed before its quality deteriorates. However, with close monitoring of the overtime limit offered to the workers, we will ensure that this is within the Department of Labour s regulatory guidelines. Living Conditions Workers are typically accommodated in a two or threebedroom house that meet the minimum standard of Housing and Amenities Act Kulim (Malaysia) Berhad (23370-V)

68 EMPLOYEES RETENTION Employing outstanding people and providing opportunities for them to apply their talents is critical to our sustainability. We depend on a skilled managerial workforce as a vital success factor in shaping Kulim s present and future. Throughout 2014, our emphasis was on strengthening our talent-management programmes and instilling a performance-driven culture. We have set up a Performance Management System to ensure our people are being continually developed to keep pace with the Group s Vision and business expansion plans. As at 31 December 2014, we had 6,684 full-time employees in Malaysia, of which 17.5% comprise of staff and management. Remuneration Package An employee Climate Survey conducted in 2010 highlighted the competitiveness of the remuneration package as one (1) of the main concerns of employees. Since then, we have conducted a salary benchmarking survey to review the competitiveness of the salary scheme. Subsequently, the salary scale for executives, non-executives as well as security guards has been revised effective January Employee Development Our employees are also among our key stakeholders. During an engagement session, one of the issues brought up was the lack of young people in the plantation business and the problem of retaining talent. Succession planning is one (1) of the areas we are urgently addressing. To retain the so-called millennial generation within the Company, we are giving them space to develop their professional skills and providing opportunities for feedback. We have training and development programmes for all levels of staff. These programmes are structured around formal courses, seminars and workshops and are conducted internally or by external consultants. In FY 2014, we continued to tap the Strategic Enhanced Executive Development System ( SEEDS ) Programme to ensure we have a ready talent pool and pipeline of future leaders. Since its launched in 2008, more than 62 executives have benefited from this programme and are currently applying their knowledge at different operating units. During the year, we began collaborating with PUSPATRI (Johor Skills Development Centre) to run courses to enhance the technical skills of our employees. For FY 2014, we spent 2.32% of total payroll cost on training and achieved 3.21 training man-days per employee. This was slightly lower than what was spent in FY 2013 due to revised direction in learning and development strategic planning where focus were on the job training and in-house tailor-made programme. Whereas in FY 2015, focus will be on operational hands-on training as well as upskilling programme. Integrated Annual Report A New Energy

69 SECTION 5 SUSTAINABILITY Management by gender 81% 83% 82% 76% 73% 19% 17% 18% 24% 27% Female Male ENGENDERING GENDER EQUALITY Kulim s commitment to promote gender equality is seeing positive results. Various initiatives rolled out to empower women have been gaining traction. As at 31 December 2014, women made up 11.1% of our workforce and 10.9% of them are at the management level. Notwithstanding the challenges that are involved, we not discourage nor discriminate against women working on our estates. Women OnWards Women OnWards ( WOW ), originally called Panel Aduan Wanita or Women s Grievance Panel, came into being as part of a larger employee outreach programme. It has been endorsed by management and its activities are fully funded by the Company. Over the past two (2) years, WOW has been actively providing entrepreneurship opportunities for the women folk of Kulim through a programme known as Jejari Bistari. There is now a WOW Unit at each estate, with each one developing a unique product or service, such as tailoring, baking, arts and handicraft. These products or services are sold to staff and public during the festive season and company events. In 2014, WOW raised approximately RM19,000, the proceeds of which were ploughed back into their fledgling businesses. For the past four (4) years, we also joined the global movement to celebrate International Women s Day ( IWD ). Each year a different theme is chosen to celebrate the economic, political and social achievements of women in the past, present and future. In FY 2014, IWD was celebrated together with WOW Carnival with the theme Jom Sihat!. 130 Kulim (Malaysia) Berhad (23370-V)

70 Female office staff at Sindora Palm Oil Mill. Sexual Harassment We continued to make headway in reducing the number of reported cases of sexual harassment. In 2014, no cases were reported. This is a result of ongoing efforts to create awareness among employees of what constitutes inappropriate behavior and this is reinforced from time to time. Through a concerted campaign, women are also more aware of their rights and are more receptive to reporting cases of sexual harassment. Maternity Leave All our female employees are entitled to 60 consecutive days of paid maternity leave, in accordance the Malaysian Government regulations. In 2014, 23 employees took maternity leave and on returning to work, continued to remain employed with the Company. We are proud of the 100% retention rate as employment patterns suggest that women with a new baby are most likely to leave their jobs after one (1) year. No work with pesticide shall be undertaken by pregnant or breastfeeding female workers. OCCUPATIONAL SAFETY and HEaltH ( OSH ) In our journey towards sustainability, we have always considered good OSH practices to be an integral part of our business objectives. Kulim aspires to have an occupational safety and health record it can be proud of. Each mill and estate has a designated Occupational Safety and Health ( OSH ) coordinator who is responsible to ensure that the implementation of an OSH system is carried out effectively. These include organising safety training, tool-box safety briefing, OSH quarterly meetings, investigations and reporting all accidents to the OSH Manager. Each worker undergoes an average of 40 hours or five (5) man-days of safety training annually. The training focuses on safety practices including correct use of personal protection and sharp equipment, as well as the handling, application and safe disposal of chemicals. Workers operating machinery and vehicles undergo 16 hours or two (2) man-days of supervised training and must pass a practical exam before they are allowed to operate independently. We genuinely believe that there is no more important asset than our people and there is no higher priority than their safety. Despite our best efforts, there were two (2) workrelated deaths in The deaths were a blow to all of Kulim and our thoughts are with the bereaved, the families and friends. To avoid a recurrence, we took on the challenge of reinvesting in and reinvigorating our safety efforts. We began a series of training programmes to reinforce health and safety procedures among senior managements. The lessons learnt will be cascaded down the line to lift our safety performance. We can and we must do better. Integrated Annual Report A New Energy