ANNUAL REPORT - malaysiastock.biz ANNUAL REPORT - JAVA BERHAD (2511 – M) TABLE OF CONTENTS . CORPORATE INFORMATION 2 . CORPORATE STRUCTURE 3 . PROFILE OF DIRECTORS 4 . ... Agronomy

2016 ANNUAL REPORT

ANNUAL REPORT - JAVA BERHAD (2511 – M)

TABLE OF CONTENTS

CORPORATE INFORMATION 2

CORPORATE STRUCTURE 3

PROFILE OF DIRECTORS 4

KEY SENIOR MANAGEMENT PROFILE 6

CHAIRMAN’S STATEMENT 8

STATEMENT OF CORPORATE GOVERNANCE 10

AUDIT COMMITTEE REPORT 18

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 22

DIRECTORS’ RESPONSIBILITY STATEMENT 24

CORPORATE SOCIAL RESPONSIBILITY STATEMENT 25

MANAGEMENT DISCUSSION AND ANALYSIS 26

FINANCIAL STATEMENTS 27

ADDITIONAL COMPLIANCE DISCLOSURES 120

LIST OF PROPERTIES HELD 121

ANALYSIS OF SHAREHOLDINGS 122

MESSAGE TO OUR SHAREHOLDERS 125

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CORPORATE INFORMATION BOARD OF DIRECTORS Dato’ Dr. Abu Talib Bin Bachik YBM Tunku Mahmood Bin Chairman/Independent Tunku Mohammed D.K. PSI Non-Executive Director Independent Non-Executive Director Sy Choon Yen Hedzir Bin Aminudin Executive Director Independent Non-Executive Director AUDIT COMMITTEE SHARE REGISTRAR Hedzir Bin Aminudin Boardroom Corporate Services (KL) Sdn Bhd Chairman Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama YBM Tunku Mahmood Bin 47800 Petaling Jaya Tunku Mohammed D.K. PSI Selangor Darul Ehsan Member Malaysia Tel : 03-7720 1188 Dato’ Dr. Abu Talib Bin Bachik Fax : 03-7720 1111 Member COMPANY SECRETARY SOLICITORS Ahmad Khamis Magribi bin Abdul Rahman Kumar Partnership (MIA 23694) Ng & Co Vin Partnership REGISTERED OFFICE PRINCIPAL BANKERS Suite 2.02, Level 2 Hong Leong Bank Berhad Wisma E & C Alliance Bank Malaysia Berhad No. 2 Lorong Dungun Kiri Damansara Heights 50490 Kuala Lumpur AUDITORS Malaysia Messrs. Baker Tilly Monteiro Heng Tel : 03-2092 3535 Fax : 03-20935571 BUSINESS OFFICE STOCK EXCHANGE LISTING Suite M.02, Mezzanine Floor Main Board of Bursa Malaysia Securities Berhad Wisma E & C (Listed since 29 December 1973) No. 2, Lorong Dungun Kiri Stock Name: JAVA Damansara Heights Stock Code: 2747 50490 Kuala Lumpur ISIN Code: MYL2747OO003 Malaysia Tel : 03-2092 3535 Fax : 03-2093 9690 WEBSITE www.javaberhad.com.my

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CORPORATE STRUCTURE AS AT 31 DECEMBER 2016 JAVA BERHAD (2511-M) • Key Heights Sdn Bhd (100%)

(592628-M) - Wincohasil Sdn Bhd (100%)

(542521-A) - Kumpulan Kinabatangan Timber Sdn Bhd (100%)

(74040-X) - Pinawantai Sdn Bhd (100%)

(68640-M) - Bizkaya Sdn Bhd (100%)

(541934-D)

• Java Timber Sdn Bhd (100%) (53469-A)

• Java Industries Sdn Bhd (100%) (269014-D)

• Java Plantations Sdn Bhd (100%)

(210695-H) - Ladang BungaTanjong Sdn Bhd (80%)

(389827-K) • Java Woods Sdn Bhd (100%)

(29775-T)

• Java Trading Sdn Bhd (100%) (136741-A)

• Java Resources Sdn Bhd (100%) (276278-W)

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PROFILE OF DIRECTORS DATO’ DR. ABU TALIB BIN BACHIK Dip. Agric. (Mal); BSc., MSc (LSU-USA); Dr. Agric. Sc. (Ghent Univ., Belgium) Chairman/ Independent Non-Executive Director Dato’ Dr. Abu Talib Bin Bachik, aged 69, a Malaysian citizen, was appointed an Independent Non-Executive Director of the Company in March 2009 and Chairman of the Board on 4 November 2010. He is a member of the Audit Committee. He holds a Diploma in Agriculture from the College of Agriculture Malaysia (now known as University Putra Malaysia), a BSc and MSc in Agronomy from the Louisiana State University, USA, and a Doctor in Agriculture Science from the University of Gent, Belgium. He was appointed as Director of Iris Corporation Berhad since November 2016. Dato’ Dr. Abu Talib Bin Bachik has wide experiences in Administration and Management, including Marketing, Business Development, Communications and Public Relations, when he was at the Multimedia Development Corporation (MDeC) promoting the development of the Multimedia Super Corridor (MSC) from 1999 to 2008. Prior to joining MDeC, he was a Research Scientist in the Rubber Research Institute of Malaysia (RRIM) (now part of the Malaysian Rubber Board (MRB)). He was an experienced researcher and scientist in Agronomy and Soil Chemistry who has authored about 50 technical, scientific and research papers. From 1971 in the RRIM, he held various administrative and management positions. In 1997, he was appointed the Deputy Director General (Development) of the Malaysian Rubber Board and held the position until he opted for early retirement in 1999 when he joined MDeC. He is also currently a Director of Urun Plantations Sdn Bhd and SHC Tubau Plantation Sdn Bhd, subsidiaries of Sin Heng Chan (Malaya) Berhad, a public company listed on the Main Market of Bursa Malaysia Securities Berhad, and a member of the Board of Directors of the Malaysian Rubber Board. SY CHOON YEN LLB(Hons), Barrister-at-Law, JP Executive Director Mr. Sy Choon Yen, aged 49, a Malaysian citizen, joined the Board as an Executive Director in March 2005. He is a member of the ESOS Committee of the Company. He graduated with a Bachelors Degree in Law (Hons) from Manchester University, England. He is a Barrister-at-Law of England and Wales and an Advocate & Solicitor of the High Court of Malaya. He was conferred as a Justice of Peace by the Governor of the State of Melaka in October 2005. Mr. Sy Choon Yen served as the Chief Executive Director of Kumpulan Kinabatangan Timber Sdn Bhd and Pinawantai Sdn Bhd from the year 2000 and was appointed as an Executive Director of Key Heights Sdn Bhd and its subsidiaries in November 2002. He also serves on the board of all the subsidiaries of the Company and several other private companies including Urun Plantations Sdn Bhd, SHC Tubau Plantation Sdn Bhd and SHC Technopalm Plantation Services Sdn Bhd, which are subsidiaries of Sin Heng Chan (Malaya) Berhad, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. YBM TUNKU MAHMOOD BIN TUNKU MOHAMMED D.K. PSI Independent Non-Executive Director YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI, aged 72, a Malaysian citizen, was appointed as Director of the Company in January 2005. He is a Member of the Audit Committee and ESOS Committee as well as the Chairman of Nomination Committee and Remuneration Committee of the Company. He is also the Senior Independent Non-Executive Director. YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI served the military for many years. He is a businessman and currently runs a holiday resort in Johor. He is currently a Director of Sin Heng Chan (Malaya) Berhad, a public company listed on the Main Market of Bursa Malaysia Securities Berhad, and also serves on the board of several other private companies. In 2012, YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI was appointed as “Jumaah Majlis Diraja Johor”. He was nominated as a Member of The Royal Court of Johor.

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PROFILE OF DIRECTORS HEDZIR BIN AMINUDIN MIA Independent Non-Executive Director Encik Hedzir Bin Aminudin, aged 63, a Malaysian citizen,was appointed an Independent Non-Executive Director of the Company in November 2015. He is the Chairman of the Audit Committee and a member of the Nomination Committee and Remuneration Committee. He is also the Chairman of the ESOS Committee. Encik Hedzir Bin Aminudin is presently a Director of SPR Energy (M) Sdn Bhd since 2011. He joined SPR Energy upon his retirement from KLCC Property Holdings Bhd (“KLCCP”). He has served for 17 years in various senior management positions within the KLCCP Group such as General Manager Finance of Putrajaya Holdings Sdn Bhd as well as KLCCP’s Head of Corporate Finance and Risk Management. Prior to joining KLCCP, he was a General Manager Operations of Kelanamas Industries Berhad, Head of Treasury of Malaysian Mining Corporation Bhd and Treasury Accountant of Malaysia Airlines Bhd. He does not hold any directorship in any other public companies. Encik Hedzir Bin Aminudin is a member of the Malaysian Institute of Accountants and qualified Accountant with Turpin Stead & Sopers, Accountancy Tutors, London. Notes to Directors’ Profile:- 1. NONE OF THE DIRECTORS HAS:

• Any family relationship with any Director and/ or major shareholders of the Company • Any conflict of interest with the Company • Any conviction for offences within the past ten (10) years

2. ATTENDANCES AT BOARD MEETINGS

The details of the Directors’ attendance at Board Meetings are set out on pages 12 of this Annual Report.

3. SHAREHOLDINGS

The details of the Directors’ interest in the securities of the Company are set out on pages 122 and 124 of this Annual Report.

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KEY SENIOR MANAGEMENT PROFILE SY CHOON YEN Male, Executive Director/Non-Independent Executive Aged 67, Malaysian Please refer to his Director’s Profile appearing in Page 4 of the Annual Report 2016. AHMAD KHAMIS MAGRIBI ABDUL RAHMAN Male, Group Accountant Aged 40, Malaysian Mr Ahmad Khamis Magribi graduated in 2000 with a Bachelor in Accountancy from University Teknologi MARA. He also a member of the Malaysia Institute of Accountants (MIA). He has extensive exposure in financial management with more than 17 year experience which covers various industries such as manufacturing, construction, road maintenance, logging, transportation, project management and others. Prior joining the Company, he was with Scomi Rail Bhd (subsidiary of Scomi Engineering Bhd). He does not have any family relationship with any Director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He has not been convicted for offences within the past five years. There were no sanction and or penalties imposed on him by any regulatory body during the financial year. RICARDO ANG TSIAW VUN Male, Group Human Resource Manager Aged 45, Malaysian Mr. Ricardo Ang Tsiaw Vun, age 45, a Malaysian citizen, joined in December 2013. He graduated from Middlesex University London with a Degree in Business Admin and is a Certified International Human Resource Manager (American Certification Institute). He has over a decade of H.R. and Administration experience covering various industries such as Oil Palm, Marine Engineering, O&G and Defense related. Prior to joining, he served as the Regional Manager, Human Capital Management with Boustead Penang Shipyard Sdn Bhd, a subsidiary of Boustead Heavy Industries Corporation Berhad, responsible for subsidiaries and Joint Venture company located in Sabah servicing the Royal Malaysian Navy’s submarine division. He does not have any family relationship with any Director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He has not been convicted for offences within the past five years. There were no sanctions and/or penalties imposed on him by any regulatory body during the financial year.

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KEY SENIOR MANAGEMENT PROFILE LIEW YEN SUN Male, Group Operation Manager Aged 49, Malaysian Mr. Liew Yen Sun, aged 49 a Malaysian citizen, began his career in timber based industry right after completing his STPM. He started as a Production Supervisor has risen to where he is right now with over 28 years of industry experience under his belt. He has undergone numerous industry specific/production processes training both locally and overseas i.e. in Japan and Sweden for Profile Setting, laminated products and maintenance of machineries and equipment. He joined the company back in 2007 as an Asst. Production Manager and a year later was promoted to Production Manager in 2008. He was later assigned to handle the procurement portfolio in 2013. He does not have any family relationship with any Director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He has not been convicted for offences within the past five years. There were no sanctions and/or penalties imposed on him by any regulatory body during the financial year.

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CHAIRMAN’S STATEMENT On behalf of the Board of Directors, I am pleased to present the Annual Report and the Audited Financial Statements of Java Berhad (“the Company”) and its group of companies (“JAVA” or “the Group”) for the financial year 31 December 2016. REVIEW OF OPERATIONS Cessation of the Timber Operations In view that the timber operations had sustained losses for the past few years with little signs of recovery, the Board had decided to cease the timber operations after considering that the continuation of the timber operations would result in further losses due to the adverse market conditions of the timber industry. The Board took cognisance of the fact that the timber operations would not be expected to turnaround in the near future as the said timber operations have been hampered by high manufacturing cost primarily due to the lack of economies of scale as a result of shortage in the supply of timber logs. The Company had announced the cessation of the timber operations of its subsidiaries, namely Java Industries Sdn Bhd, Java Timber Sdn Bhd, Java Woods Sdn Bhd and Java Resources Sdn Bhd, on 8 January 2016. With the cessation of the timber operations, the Company is able to curb on its losses and focus on restructuring its business and source for new profitable business ventures. Plantation During the financial period under review, the oil palm production of FFB for the 18 months financial period ended 31 December 2015 was 4,063mt whilst the production of FFB for the financial year ended 31 December 2016 was 2,514mt. The decrease in the overall FFB production was partly due to the effects of the El Nino where palm fruit growth would wane at the end of the year, but mainly due to lack of agronomic inputs as a result of cost cutting measures during this transition period of the Group Regularisation Plan as explained below. Nevertheless, the Group has intensified efforts during the financial year to improve the workers’ welfare at the estate in order to remain competitive in attracting workers to the estate whilst it undertake recruitment efforts to address the shortage of harvesters and field workers. The Group continues to carry out efforts to engage with local community to provide them with various jobs with the intervention of improving their livelihood and to also complement with our existing workforce. FINANCIAL PERFORMANCE The Group closed the financial year with total gross revenue of RM1.796 million, which is significantly lower as compared to RM18.895 million in FY2015. The Group had recorded a lower loss after tax of RM20.223 million as compared to RM54.618 million loss after tax recorded in the preceding year. The lower revenue and lower loss after tax was due to the additional six (6) months results with the change in our financial period ended 30 June to 31 December for the Financial Year 2015 and due to the cessation of the timber operations during the financial period ended 31 December 2015. The net assets value per ordinary share stood at RM0.07 with basic loss of 11.49 sen per share for the financial year.

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CHAIRMAN’S STATEMENT CORPORATE DEVELOPMENT The Company had been classified as an ‘affected listed issuer’ pursuant to the Practice Note 17 (“PN17”) and Paragraph 8.03A/8.04 of the Bursa Malaysia Securities Berhad Main Market Listing Requirement (‘MMLR”). The Board had announced on January 8, 2016 (“First Announcement”) and on January 12, 2016 that the Company had also triggered Paragraph 2.1(a) of PN17 of the MMLR as the shareholders’ equity of the Company on a consolidated basis is 25% or less than the issued and paid-up capital of the Company and such shareholders’ equity is less than RM40.0 million based on the Company’s proforma management accounts as at September 30, 2015 after incorporating the financial impact from the Cessation of Timber Business and that the financial performance of the Company is not expected to improve for the quarter ended December 31, 2015. On 27 June 2016, Java Timber Sdn Bhd (“JTSB”) and Java Industries Sdn Bhd (“JISB”), being wholly-owned subsidiaries of JAVA, has on 27 June 2016, received a Notice pursuant to Section 186 of the Companies Act, 1965 of the Appointment of Receivers and Managers ("R&M") ("Notice") by Hong Leong Bank Berhad ("HLBB"). Pursuant to the Notice dated 27 June 2016, HLBB has appointed Encik Mohamed Raslan Abdul Rahman and Ms Chan Siew Mei of KPMG Deal Advisory Sdn Bhd, jointly and/or severally as Receivers and Managers over the changed assets of JTSB and JISB under the powers contained in the Debentures dated 9 July 2007 created by JTSB and JISB in favour of HLBB for the facilities granted by HLBB ("Debenture"). Consequently, JTSB and JISB ceased to be subsidiaries of the Company. On 7 April 2017, the Company had submitted an appeal to Bursa Malaysia Securities Berhad (“Bursa Malaysia”) against the rejection of extension of time to submit Regularisation Plan and the decision to de list the Company. Currently the Company still waiting for the reply from Bursa Malaysia Securities Berhad before the Company can embark for any regularisation plan. PROSPECTS As an Affected Listed issuer under PN17 of MMLR, the future of the Group is largely dependent on the successful implementation of its proposed regularisation scheme which would ensure that the Group continues as a public listed Companies of Bursa Securities and put the Group on a strong footing to normalise its business operations. Therefore, the Board is committed and the Group is working towards a restructuring scheme which is envisaged to reposition the Group upon successful implementation of its Regularisation Plan pending the decision from Bursa Malaysia Securities Berhad. ACKNOWLEDGEMENT On behalf of the Board of Directors, I wish to express our sincere gratitude and appreciation to all our valued shareholders for their perseverance, customers, business partners, bankers, auditors and government authorities for their invaluable support and confidence towards the Group and to the Securities Commission and Bursa Securities and other relevant authorities for their advice and assistance. We look forward to having your continued support while we undertake the regularisation plan. We are indebted to the management and staff of the Group for their hard work, dedication, loyalty and contribution towards the Group despite the uncertainties and challenges. I am also grateful for the unwavering support and contributions made by my fellow Board of Directors during the year. Thank you. DATO’ DR. ABU TALIB BIN BACHIK Chairman

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STATEMENT OF CORPORATE GOVERNANCE The Corporate Governance Framework of the Java Berhad Group (“Group”) has been formulated to promote: • Integrity, transparency and professionalism with the objective of safeguarding the shareholders’

investment and ultimately enhancing the shareholders’ interest; • Providing an operating autonomy, in the various core business operations of the Group steered towards

achieving the business objectives while maintaining adequate check and balance; and • Ethical business conduct based on the Group’s core values and business principles.

BOARD OF DIRECTORS

Role of the Board of Directors The Board assumes responsibility for stewardship of the Company and its subsidiaries and is primarily responsible for the protection and enhancement of long-term value and returns for the shareholders, and supervising its affairs to ensure its success within a framework of acceptable risks and effective control and in compliance with the relevant laws, regulations, guidelines and directives which governs the Group. The Board regularly reviews the performance of the Group and individual businesses, key controls, corporate governance standards and adequacy of human resources to ensure that the necessary financial and resources are available to meet the Group’s objectives. In addition, the Board is directly responsible for decision making in respect of the following matters:- (a) appointment of directors and key managerial personnels; (b) announcements including approval and releases of financial results and annual reports; (c) formulating and reviewing strategic plans, including both medium-term and long-term, and key policies of

the Group; (d) approves the annual budget and carries out period review of the progress made against the respective

business targets; (e) identify and manage principal risks; (f) oversight of the Group’s business operations and financial performance; (g) ensuring that the operating infrastructure, systems of control, system of risk management, financial and

operational controls, are in place and properly implemented; (h) approves significant investments and capital expenditures; and (i) corporate policies in keeping with good corporate governance and business practices.

Board Composition and Balance The strength of the Board lies in the composition of its members, who has a wide range of expertise, extensive experience and diverse background in business, finance and technical knowledge. As at 31 December 2016, the Board consists of four (4) directors of whom three (3) are independent. The composition of Independent Non-Executive directors is higher than the minimum prescribed in the Code and Listing Requirements. The list of directors is as follows:- Executive Director Sy Choon Yen - Executive Director Independent Non-Executive Directors Dato’ Dr. Abu Talib Bin Bachik - Chairman YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI Hedzir Bin Aminudin

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STATEMENT OF CORPORATE GOVERNANCE The composition of the Board is reviewed by the Nomination Committee to ensure that the current Board size is appropriate and effective, taking into account the nature and scope of the Company’s operations. The Board comprises persons who as a group provide the relevant core competencies and mix of skills in the areas of financial, technical and business to meet the Company’s requirements. The directors’ objective judgment on corporate affairs, collective experience and knowledge are invaluable to the Group. Profiles of the members of the Board are set out on pages 4 and 5 of this Annual Report. The roles of the Non-Executive Chairman and the Executive Director have been distinguished, with a clear division of their responsibilities to ensure that there is a balance of power and authority. The Chairman is responsible for ensuring Board effectiveness and conduct. The Executive Director is responsible for providing leadership and advancing relationships with regulators and stakeholders, as well as having overall responsibility over the operating units, organisational effectiveness, formulation of strategies and implementation of Board policies and decisions. Independence of Directors The Independent Non-Executive Directors play a pivotal role in corporate accountability, which is reflected in their membership of the various Board committees and their attendance of meetings as set out in this report. The Independent Non-Executive Directors provide unbiased views and impartiality to the Board’s deliberations and decision-making process. In addition, the Independent Non-Executive Directors ensure that matters and issues brought to the Board are fully discussed and examined, taking into account the interest of all stakeholders in the Group. The Independent Non-Executive Directors engage with the Management and with both the external as well as the internal auditors to address matters concerning the management and oversight of the Company’s business and operations. All the Independent Non-Executive Directors do not engage in the day-to-day management of the Company and do not participate in any business dealings and are not involved in any other relationship with the Company. If such conflict were to arise, the Directors will abstain from all deliberation and decision-making process for good governance, this is to ensure that the Independent Non-Executive Directors remain free of conflict of interest situations and facilitate them to carry out their roles and responsibilities as Independent Directors effectively. The Board noted that YBM Tunku Mahmood has been appointed as Independent Non-Executive Director of the Company have served for a cumulative period of more than (9) years as at the date of the Sixty-First (61st) AGM. Pursuant to Recommendation 3.2 of MCCG and notwithstanding their long tenure in office, the Board based on the review, is unanimous in its opinion that YBM Tunku Mahmood’s independence have not been compromised or impaired in any way. Accordingly, the Board strongly recommends retaining YBM Tunku Mahmood as Independent Non-Executive Director will be tabling this recommendation as Ordinary Resolutions to shareholders for approval at the forthcoming AGM.

Directors’ Code of Ethics The Directors observe a code of ethics in accordance with the code of conduct expected of Directors as set out in the Company Directors’ Code of Ethics established by the Group. The Group recognises that all Directors are equally and collectively accountable for the proper stewardship of the Group’s affairs. The Group maintains a directors’ and officers’ liability insurance policy to cover against liabilities arising from holding office as directors. Board Meetings Board meetings for the ensuing financial year are scheduled in advance to facilitate the Directors to plan ahead and organise the next year’s Board meetings into their respective schedules.

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STATEMENT OF CORPORATE GOVERNANCE The Board meets at least every quarter and on other occasions, as and when necessary, to inter-alia approve quarterly financial results, business plans and budgets as well as to review the performance of the Company and its operating subsidiaries, governance matters and other business development activities. Special Board meetings are held when necessary, to deliberate on major transactions and ad-hoc matters that require the Board’s urgent attention and decisions. Senior management and external advisors are invited to attend the Board and Board Committee meetings to advice on relevant agenda items to enable the board and its committees to arrive at a considered decision. The Chairman of the Audit Committee would inform the Directors at Board meetings, of any salient matters noted by the Audit Committee and which require the Board’s notice or direction. The Board meetings are chaired by Dato’ Dr. Abu Talib Bin Bachik, the Chairman/Independent Non-Executive Director, who has the responsibility of ensuring that each of the agenda item is adequately reviewed and thoroughly deliberated within a reasonable timeframe. The Board has met six (6) times during the financial year. The meeting attendance of the individual Directors are as follows: DIRECTORS ATTENDANCE/NO.

OF MEETINGS HELD

PERCENTAGE OF

ATTENDANCE Dato’ Dr. Abu Talib Bin Bachik

6/6

100%

Sy Choon Yen 5/6 83.3% YBM Tunku Mahmood Bin Tunku Mohammed 5/6 83.3% Hedzir Bin Aminudin 6/6 100% Supply of Information The proceedings of the Board meetings are conducted in accordance to a structured agenda to facilitate productive and meaningful deliberations. Confidential papers or urgent proposals are presented and tabled at the Board meetings under supplemental agenda. An e-meeting paperless system was introduced since 2015 to enable discussion of Board materials electronically, which provides Directors with secured access to meeting papers directly on their iPads. The system allows Directors to easy access to board materials, even while travelling, providing greater convenience, better security, cost and time savings and a positive impact on the environment. The Board, whether as a group or individually may seek any clarification or further details that they need from the Management or the Company Secretary on matters pertaining to the Company’s and the Group’s operating or business concerns. In addition to quantitative information, the Directors are also provided with updates on other areas such as market developments, customer and risk management. The Chief Operating Officer and Senior Management Officers are invited to attend the Board meetings to report to the Board on matters relating to their areas of responsibility, and also to brief and provide details to the Directors on recommendations submitted for the Board’s consideration. The Chief Accountant also attends Board meetings by invitation to brief the Board on financial guidelines, new accounting standards and matters relating to the financial portfolio. Pursuant to the Group’s Policy and Procedures for Directors to take Independent Advice, the Directors are at liberty to seek independent professional advice should the need arise in discharging their duties. The cost of securing such professional services will be borne by the Company. Conflict of Interest A Director, who has interest, either direct or indirect, in any proposal or transactions being considered, declares his interest and abstains from participating in discussions and any decision-making on that proposal. The minutes of meeting will reflect as such.

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STATEMENT OF CORPORATE GOVERNANCE Appointment and Re-election In compliance with the Code, the Nomination Committee has the responsibility of recommending new candidates for appointment as Directors to the Board based on the required mix of skills, expertise, experience and other qualities of individuals concerned to constitute an effective board as well as Board Committees. In accordance with the Company’s Articles of Association, one third of Directors shall retire from office and be eligible for re-election at each Annual General Meeting. Re-appointments are not automatic and all Directors shall retire from office at least once in every three (3) years but shall be eligible for re-election by shareholders in the Annual General Meeting. Pursuant to the Listing Requirements, each member of the Board holds not more than five (5) directorships in public listed companies. This ensures that the Board’s commitment, resources and time are focused on the affairs of the Group to enable them to discharge their duties effectively. The ability of a Director to serve effectively as an Independent Director is very much a function of his calibre, qualification, experience and personal qualities, and has no compelling relationship to his tenure as an Independent Director. Directors’ Training All the Directors have attended the Mandatory Accreditation Programme conducted by Bursa Malaysia Training Sdn Bhd, the training and education arm of Bursa Malaysia Securites Berhad. The Executive Director had been with the Company for several years and was familiar with his duties and responsibilities as Director. The newly appointed Directors will be given briefings and orientation by the Executive Director and top management of the Company on the business activities of the Group and its strategic directions, as well as their duties and responsibilities as Directors. The Directors keeps up-to-date with market developments and related issues through Board luncheon discussion meetings with the Chief Operating Officers and other Senior Management Officers. These interactions provide the platforms for dissemination of emergent strategic directions and ideas which enhance the knowledge and relevant of the Directors. The Directors are regularly updated on new statutory and regulatory requirements as well as the impact and implication to the Group and Directors in carrying out their duties and responsibilities. In addition, the Directors also receive briefings and updates on the Group’s businesses and operations, risk management activities and technology initiatives on a regular basis. An appropriate budget is in place for Directors’ training and all the Directors are kept informed of available training programmes on a regular basis. The Company provides internal programmes and other external programmes for its Directors during the financial year. The programmes attended by the Directors are:- • Mandatory Accreditation Programme • 3rd International Sustainable Energy Summit (ISES) 2016 Company Secretary The Directors have ready and unrestricted access to the advice and services of the Company Secretary to enable them to discharge their duties effectively. The Company Secretary informed the Board on the proposed contents and timing of the material announcements to be made to Bursa Malaysia and also serves notice to Directors on the closed period for trading in Java Berhad’s shares in accordance with the closed-periods stated in Chapter 14 of the Bursa Securities Main Market Listing Requirements. The Company Secretary attends and ensures that all Board meetings are properly convened, and that an accurate and proper record of the proceedings and resolutions passed are taken and maintained in the statutory register at the registered office of the Company.

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STATEMENT OF CORPORATE GOVERNANCE Board Committees To ensure the effective discharge of the Board’s fiduciary duties, the Board has delegated specific responsibilities to the following Board Committees. The Board Committees will deliberate in greater detail and examine the issues within their terms of reference as set out by the Board in compliance with the Code. The functions and terms of reference of Board Committees are reviewed from time to time to ensure that they are relevant and up-to-date. (i) Audit Committee

Composition of the Audit Committee, its terms of reference and a summary of its activities are set out on pages 18 to 21 of this Annual Report.

(ii) Nomination Committee

The Nomination Committee is comprised entirely of the Independent Non-Executive Directors. The members are: • YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI - Chairman • Hedzir Bin Aminudin - Member

Among the primary duties of the Nomination Committee includes assessing and reviewing the composition of the Board to ensure that it has an appropriate balance of skills and experience among the Board members, as well as recommending to the Board, candidates for all directorships and on Board Committees. The Nomination Committee reviews the criteria for evaluating the Board’s performance. The performance criteria for the Board evaluation includes an evaluation of the size and composition of the Board, the Board’s access to information, accountability, Board’s processes and Board’s performance in relation to discharging its principal responsibilities, communication with management and standards of conduct of the Directors. Each Director assesses the Board’s performance as a whole by providing feedback to the Nomination Committee. The Nomination Committee, when reviewing the Board’s performance, will take note of the feedback received from the Directors and act on their comments accordingly. For the year under review, the Nomination Committee held one (1) meeting, which was attended by all members of the Committee.

(iii) Remuneration Committee The Remuneration Committee is comprised entirely of Independent Non-Executive Directors. The members are: • YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI - Chairman • Hedzir Bin Aminudin - Member

The Remuneration Committee is entrusted with responsibilities to set the policy framework and to make recommendations to the Board on the components of remuneration packages, general employment terms and other benefits for the Executive Directors and key Senior Management Officers so as to attract, retain and motivate individuals of high caliber and quality to serve the Group. The Remuneration Committee held a meeting during the financial year, which was attended by all members.

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STATEMENT OF CORPORATE GOVERNANCE

(iv) Employee Share Option Scheme (“ESOS”) Committee

The Committee is primarily responsible for administering the Company’s ESOS Scheme in accordance with the approved bye-laws and regulations, including selection of eligible employees and options allocations. It also reviews the guidelines and bye-laws relating to the schemes and advised the Board accordingly. The members of the ESOS Committee are:- • Hedzir Bin Aminudin - Chairman • YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI - Member • Sy Choon Yen - Member

DIRECTORS’ REMUNERATION Level and Mix of Remuneration In setting remuneration packages, the Remuneration Committee takes this consideration the pay and employment conditions within the industry and in comparable companies. As part of the review, the Remuneration Committee ensures that the performance related elements and remuneration form a significant part of the total remuneration package of Executive Directors and is designed to align the Directors’ interest with those of shareholder and link rewards to corporate and individual performance. The Remuneration Committee also reviews all matters concerning the remuneration of Non-Executive Directors to ensure that the remuneration commensurate with the contributions and responsibilities of the Directors. The Company submits the quantum of Directors’ fees of each year to the shareholders for approval at each Annual General Meeting. Disclosure on Remuneration Remuneration of Non-Executive Directors is determined by the Board as a whole. Individual Directors do not participate in determining their own remuneration package. The Board, based on the sum to be authorized by the Company’s shareholders, determines fees payable to Non-Executive Directors. Non-Executive Directors are also entitled to meeting allowances and reimbursement of expenses incurred in the course of their duties as Directors. The aggregate remuneration of Directors for the financial year ended 31 December 2016 is categorised as follows:- Executive Director Non-Executive Directors

Salaries Other Emoluments Fees Total

RM’000 RM’000 RM’000 RM’000 372 - 25 397

- 162 75 237

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STATEMENT OF CORPORATE GOVERNANCE The analysis of remuneration of Directors for the financial period year 31 December 2016 is as follows:- Range of Remuneration No Of Director Executive Non-Executive Below RM50,000 - - RM50,001 to RM100,000 - 3 RM100,001 to RM150,000 - - RM150,001 to RM200,000 - - RM200,001 to RM250,000 - - RM250,001 to RM300,000 - - RM350,001 to RM400,000 1 - ACCOUNTABILITY AND AUDIT Financial Reporting The Board is responsible for presenting a clear, balanced and comprehensive assessment of the Group’s financial position, performance and prospects each time it releases its quarterly and annual financial statements to its shareholders. The Board is responsible for ensuring that financial statements prepared give a true and fair view of the state of affairs of the Company and of the Group. The Board considers the presentation of the financial statements and that the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. Timely release of announcements on quarterly financial statements reflects the Board’s commitment to provide transparent and up-to-date disclosures of the performance of the Company and of the Group. The statement of Directors’ responsibilities for the preparation of the audited financial statements of the Company and of the Group is set out in page 24 of this Annual Report.

Risk Management & Internal Control The Statement on Risk Management & Internal Control provides an overview of the state of internal controls within the Group and is set out on pages 22 to 24 of this Annual Report.

Relationship with External Auditors The Board ensures that there are formal and transparent arrangements for the achievement of objectives and maintenance of professional relationship with the External Auditors. The External Auditors have full access to the books and records of the Group at all time. They participate in the annual stock counts of the Group. The Audit Committee meets the External Auditors at least twice a year to discuss their audit plan, audit findings and the financial statements. These meetings are held without the presence of the Executive Director and any member of the Management whenever deemed necessary. In addition, the External Auditors are invited to attend the annual general meeting of the Company and are available to answer shareholders’ questions on the conduct of the statutory audit and the preparation and content of their audit report. The Audit Committee’s role with respect to Internal and External Auditors is described in the Audit Committee Report set out on pages 18 to 21 of this Annual Report.

SHAREHOLDERS AND INVESTORS The Board recognizes the importance of effective communication with the shareholders and investors through various appropriate channels. The Group regularly communicates with the investor community in conformity with disclosure requirements. The Group maintains strict confidentiality and employs best efforts to ensure that no disclosure of material information is made on a selective basis to any individuals unless such information has previously been fully disclosed and announced to the relevant authorities.

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STATEMENT OF CORPORATE GOVERNANCE

SHAREHOLDERS AND INVESTORS (CONTINUED) The annual report continues to be the Group’s main channel of communication with stakeholders. The Company disseminates its annual report to its shareholders either in hard copy or in CD-ROM media. The Annual General Meeting is the primary forum for the Directors to communicate with shareholders. The Board provides opportunities for shareholders to raise questions pertaining to issues in the Annual Report, corporate developments in the Group, the resolutions being proposed and the business of the Group at every general meeting. The Board encourages other channels of communication with shareholders. For this purpose, the Board has identified YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI as the Senior Independent Director to whom questions or concerns regarding the Group may be conveyed. YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI can be contacted via the following channels:- Post : YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI c/o Corporate Secretarial Department Suite 2.02, Level 2, Wisma E & C No. 2, Lorong Dungun Kiri Damansara Heights 50490 Kuala Lumpur Fax : (603) 2093 5571 Investors may also direct their queries to Investor Relations Officer at the above address and fax number or email : [email protected] . The Company’s website, www.javaberhad.com.my houses all other corporate information and financial information that is made public, such as the quarterly announcement of the financial results of the Group, announcements and disclosures made pursuant to the disclosure requirements of Bursa Securities Main Market Listing Requirements and other corporate information on Java. Whistle-Blowing Policy The Whistle-Blowing Policy of the Company was adopted in February 2011. The Policy is to ensure that sufficient coverage and protection to whistleblowers, which encompasses report of suspected misconduct, wrong doings, corruption and instance of fraud, and/or abuse involving the resources of the Group. The Whistle-Blowing Policy is circulated to all employees and associates of the Group. Compliance with the Code The Board has approved this statement and is of the opinion that the Company has, in all material respects, complied with the principles and best practices outlined in the Code for the financial year ended 31 December 2016. This Statement on Corporate Governance is made in accordance with the resolution of the Board of Directors dated 3 May 2017.

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mailto:[email protected]


AUDIT COMMITTEE REPORT The Audit Committee reviews and monitors the integrity of the Group’s financial reporting process, in addition to reviewing the Group’s system of internal controls. It also reviews the Group’s audit process, compliance with legal and regulatory requirements, code of business conduct and any other matters that are specially delegated by the Board. 1. Membership and Attendance

The Audit Committee of the Company was established on 6 June 1994. The Audit Committee members and details of attendance of each member of the Audit Committee meetings during the financial year 31 December 2016 are as follows:-

Audit Committee Attendance/Number of meetings held

Hedzir bin Aminudin (Chairman) Independent Non-Executive Director

4/4

YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI Independent Non-Executive Director

3/4

Dato’ Dr. Abu Talib Bin Bachik Independent Non-Executive Director

4/4

The Audit Committee met four (4) times during the financial year ended 31 December 2016.

2. Summary of Activities of the Audit Committee

During the financial period ended 31 December 2016, the Audit Committee carried out its duties as set out in the terms of reference which included the following:- (a) Review of the quarterly financial reports before recommending to the Board for their approval and

release of the Group’s results to Bursa Malaysia Securities Berhad; (b) Reviewed the audited financial statements of the Company and of the Group with the External

Auditors prior to submission to the Board of Directors for their approval; (c) Reviewed the internal audit plan to ensure adequate scope and comprehensive coverage over the

activities of Java and the Java Group; (d) Reviewed the internal audit reports which were tabled during the year, the audit recommendations

made and management’s response to these recommendations. Where appropriate, the Committee has directed management to rectify and improve control procedures and workflow processes based on the internal auditors’ recommendations and suggestions for improvement;

(e) Reviewed Internal Auditors’ risk and audit methodologies in assessing and rating risks of auditable areas and ensure that all high and critical risk areas are audited;

(f) Reviewed of the Audit Planning Memorandum with the External Auditors; (g) Reviewed of the results and issues arising from the audit and their resolutions with the External

Auditors; (h) Reviewed the appointment of the internal auditors and took cognizance of the resignation of the

internal auditor; and (i) Reviewed any related party transactions.

3. Internal Audit Function

The Audit Committee is aware that the internal audit function is essential to assist in determining the effectiveness of the system of internal control in the Company. For the financial years under review, no independent external consultant was engaged to undertake the functions of the Internal Auditor as the Company is now operating at minimum capacity in view of the predicaments encountered by the Group over the operating subsidiary of the Group, the internal audit function cannot be applied.

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AUDIT COMMITTEE REPORT

3. Internal Audit Function (continued)

Nevertheless, the Board undertakes regular and systematic reviews on the existing system of internal control so as to provide reasonable assurance that such system continue to operate satisfactorily and effectively.

4. Terms of Reference

Composition

The Committee shall be appointed by the Board from amongst its Directors excluding alternate Directors and shall comprise no fewer than three (3) members, all of whom must be Non-Executive Directors with a majority of whom shall be Independent Directors. Alternate Director shall not be appointed as member of the Committee. All members should be financially literate and at least one (1) member must be:- a) a member of the Malaysian Institute of Accountants (“MIA”); or b) if he is not a member of MIA, he must have at least 3 years’ working experience and must have

passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or c) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule

of the Accountants Act, 1967; or d) fulfils such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad.

In the event a Member of the Committee resigns, dies, or for any reason ceases to be a member with the result the number of members is reduced to below three (3), or if the majority of the members become Non-Independent Directors, the Board of Directors shall within three (3) months of such vacancy, appoint such number of new members as may be required to make up the minimum number of three (3) members or the majority being Independent Directors. Therefore a member of the Audit Committee who wishes to retire or resign should provide sufficient written notice to the Company so that a replacement may be appointed before he leaves.

The Board of Directors of the Company must review the term of office and performance of an audit committee and each of its members at least once every three (3) years to determine whether such audit committee and members have carried out their duties in accordance with their terms of reference.

Chairman The Chairman shall be elected from amongst their number, who shall be an Independent Director. In event of the Chairman’s absence, the meeting shall be chaired by an Independent Director. The Chairman should engage on a continuous basis with senior management, such as the chairman of the Board, the Chief Executive Officer, the finance director, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Company. Secretary The Company Secretary shall be the Secretary of the Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Committee and circulating them to the Committee Members. The Committee Members may inspect the minutes of the Audit Committee at the Registered Office or such other place as may be determined by the Audit Committee.

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AUDIT COMMITTEE REPORT Meetings The Committee shall meet at least four (4) times in each financial year and may regulate its own procedure in lieu of convening a formal meeting by means of video or teleconference. The quorum for a meeting shall be two (2) members, provided that the majority of the members present at the meeting shall be independent. In addition to its four meetings each financial year, the Committee may take action by unanimous written consent of its members. The Committee may call for a meeting as and when required with reasonable notice as the Committee Members deem fit. All decisions at such meeting shall be decided on a show of hands on a majority of votes. The external auditors and internal auditors have the right to appear at any meeting of the Audit Committee and shall appear before the Committee when required to do so by the Committee. The external auditors may also request a meeting if they consider it necessary. The other directors and employees of the Company may attend any particular Audit Committee meeting only at the Committee’s invitation, specific to the relevant meeting. Rights The Audit Committee shall:- (a) have explicit authority to investigate any matter within its terms of reference; (b) have the resources which are required to perform its duties; (c) have full and unrestricted access to any information pertaining to the Group; (d) have direct communication channels with the external auditors and person(s) carrying out the internal

audit function or activity; (e) have the right to obtain legal or independent professional or other advice at the Company’s expense; (f) have the right to convene meetings with the external auditors, the internal auditors or both excluding

the attendance of other directors and employees of the Company, whenever deemed necessary; (g) promptly report to the Bursa Malaysia Securities Berhad (“Bursa Securities”), or such other name(s)

as may be adopted by Bursa Securities, matters which have not been satisfactorily resolved by the Board of Directors resulting in a breach of the listing requirements;

(h) have the right to pass resolutions by a simple majority vote from the Committee and that the Chairman shall have the casting vote should a tie arise;

(i) meet as and when required on a reasonable notice; and (j) the Chairman shall convene a meeting to consider any matter external auditor believes should be

brought to the attention of the directors or shareholders, upon the request of the External Auditors. Duties (a) To review with the external auditors on:-

o the audit plan, its scope and nature; o the audit report; o the results of their evaluation of the accounting policies and systems of internal accounting

controls within the Group; and o the assistance given by the officers of the Company to external auditors, including any

difficulties or disputes with Management encountered during the audit. (b) To review the adequacy of the scope, functions, competency and resources of the internal audit

function, and that it has the necessary authority to carry out its work.

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AUDIT COMMITTEE REPORT Duties (Continued) (c) To recommend such measures as to be taken by the Board of Directors on the effectiveness of the

system of internal control, management information and risk management practices of the Group. (d) To review the internal audit programme, processes, the results of the internal audit programme,

processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function.

(e) To review any appraisal or assessment of the performance of members of the internal audit function. (f) To review any appointment or termination of the internal auditors and take cognizance of

resignations of internal auditors and provide the resigning internal auditors an opportunity to submit reasons for resigning.

(g) To review with management:-

o audit reports and management letter issued by the external auditors and the implementation of audit recommendations;

o interim financial information; and o the assistance given by the officers of the Company to external auditors.

(h) To review related party transactions entered into by the Company or the Group and to determine if

such transactions are undertaken on an arm’s length basis and normal commercial terms and on terms not more favourable to the related parties than those generally available to the public, and to ensure that the Directors report such transactions annually to shareholders via the annual report, and to review conflicts of interest that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity.

(i) To review the quarterly reports on consolidated results and year-end financial statements prior to

submission to the Board of Directors, focusing particularly on:-

o changes in or implementation of major accounting policy and practices; o significant and / or unusual matters arising from the audit; o the going concern assumption; and o compliance with accounting standards and other legal requirements.

(j) To discuss problems and reservations arising from the interim and final audits, and any matter the

auditor may wish to discuss (in the absence of management where necessary). (k) To meet with the external auditors without executive board members present at least twice a year,

where necessary. (l) To consider the appointment and / or re-appointment of auditors, the audit fee and any questions of

resignation or dismissal including recommending the nomination of person or persons as external auditors to the board.

(m) To verify the allocation of options pursuant to a share scheme for employees as being in compliance

with the criteria for allocation of options under the share scheme, at the end of each financial year.

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STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL Introduction The Board of Directors (“the Board”) of Java Berhad (“Java” or “the Group”) is pleased to present its Statement on Risk Management & Internal Control for the financial year ended 31 December 2016, which has been prepared pursuant to paragraph 15.26(b) of Bursa Malaysia Securities Berhad (“Bursa Securities”) Listing Requirements for the Main Market and as guided by the Statement on Risk Management & Internal Control: Guidance for Directors of Public Listed Companies (“the Guidance”). Board’s Responsibility The Board acknowledges that its ultimate responsibility for the Group’s system of internal control, which includes the establishment of an appropriate control environment and framework as well as for reviewing its adequacy and integrity. However, such a system is designed to manage the Group’s risks within an acceptable level, rather than to eliminate the risk of failure to achieve the business objectives of the Group. Therefore, it should be noted that such a system of internal control can only provide reasonable but not absolute assurance against material misstatement, financial losses or fraud. The Board has undertaken the appropriate initiatives to strengthen the transparency, accountability and efficiency of the operations. The Board recognizes the importance of ensuring that a sound system of internal controls and effective risk management practices to safeguard shareholders’ interests and Company’s assets. It has therefore given due attention towards improving the effectiveness of internal control, risk management and governance process of the organisation. Management assists the Board on the implementation of the Board’s policies and procedure on risk and control, design, operations and monitoring of suitable internal controls to mitigate and control risks. In addition, the Board has also received assurance from the Executive Director and Chief Financial Officer that the Group’s risk management and internal control system is operation adequately and effectively in all material aspects. Risk Management The Board recognise the importance of identifying and managing principal risks of the Group’s daily operations and that the identification and the management of such risk will affect the achievement of the Group’s corporate objectives. As part of the integral process of risk management, the Group shall formalise the Group’s risk management framework in which the existence of significant risks of the Group can be identified and quantified. A risk profile of the Group shall be compiled to help the Board and Senior Management to provide their focus on areas of high risks. Whilst the Board maintains ultimate control over risk and control issues, it has been delegated to the executive management the implementation of the system of risk management and internal control within an established framework. Functional management has been given a clear line of accountability and delegated authorities as part of the internal control efforts. These have been documented in the Group’s standard operating practices. Senior Management is responsible for identifying, managing and reporting on significant risks on an on-going basis and any significant risk matters will be brought to the attention of the Executive Director, and if necessary, are also raised for discussion at Board meetings. Internal Audit Function The Audit Committee is aware that the internal audit function is essential to assist in determining the effectiveness of the system of internal control in the Company.

For the financial years under review, no independent external consultant was engaged to undertake the functions of the Internal Auditor as the Company is now operating at minimum capacity in view of the predicaments encountered by the Group over the operating subsidiary of the Group, the internal audit function cannot be applied. Nevertheless, the Board undertakes regular and systematic reviews on the existing system of internal control so as to provide reasonable assurance that such system continue to operate satisfactorily and effectively.

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STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL Key Internal Control Processes 1. Board Committees

Clear roles of the Board and Board Committees are stated under the Statement of Corporate Governance section of this Annual Report. These Board Committees, which include Audit Committee, Nomination Committee, Remuneration Committee and ESOS Committee, operates within their respective defined terms of references approved and specific authority delegated by the Board.

2. Organisational Structure and Responsibility Levels The Group has established an organized structure with a clear line of accountability and has strict authorisation, approval and control procedures which provide a sound framework within the organization and facilitate proper corporate decision making at the appropriate level in the organisation’s hierarchy. Responsibility levels are communicated throughout the Group which set out, amongst other, authorisation levels, segregation of duties and other control procedures.

3. Authority Levels The Board’s approving authority is delegated to the Management through the Executive Director with agreed policies and procedures set out within the Group. The policies of the Group are reviewed and updated when necessary to ensure its relevance to the Group’s operations.

4. Competency and Talent Management To enhance the competencies of the Group’s talent pool and establish a culture of continuous learning, there are policies and procedures for recruitment, performance appraisals and promotions to ensure that suitability qualified and competent personnel are hired and retained.

5. Financial Performance Management accounts and reports are prepared quarterly for review by Senior Management for effective monitoring and decision making. The Board monitors the Group’s performance by reviewing the quarterly results and examines the announcement to be made to Bursa Securities. These results are reviewed by the Audit Committee before they are tabled to the Board.

6. Monitoring and Review During the financial year 31 December 2016, no independent external consultant was engaged to undertake the functions of the Internal Auditor as the Company is now operating at minimum capacity in view of the predicaments encountered by the Group over the operating subsidiary of the Group, the internal audit function cannot be applied. In providing this assurance, the Board undertakes regular and systematic reviews on the existing system of internal control so as to provide reasonable assurance that such system continue to operate satisfactorily and effectively. These together with the external auditors’ findings arising from the audit of the statutory financial statements provide further assurance of the soundness and effectiveness of the internal control systems. Results of the audit are reported to the Audit Committee.

Conclusion The system of risk management and internal control described in this statement are considered appropriate to the business operations. It should be noted that such arrangements do not eliminate the possibility of collusion or deliberate circumvention of procedures by employees. Human error and/ or other unforeseen circumstances can result in poor judgment. However, the system of risk management and internal controls that exist throughout the Group and based on inquiry, information and assurance given, provides the Board the level of confidence on which it relies for assurance. There will be continual focus on measures to protect and enhance Shareholder value and business sustainability.

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STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL Review of the Statement by External Auditors The External Auditors have reviewed this Statement on Risk Management & Internal Control for the inclusion in the annual report of the Company for the financial year ended 31 December 2016 and reported to the Board that nothing has come to their attention that causes them to believe that this statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal control. This statement is made in accordance with the resolution of the Board dated 3 May 2017. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors are responsible for ensuring that the financial statements of the Group and of the Company are drawn up in accordance with the applicable approved accounting standards in Malaysia and provisions of the Companies Act, 1965 so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2016 and of the results and cashflows of the Group and the Company for the financial year ended on that date. In preparing the financial statements, the Directors have:- (a) adopted suitable accounting policies and applied them consistently; (b) made judgments and estimates that are reasonable and prudent; (c) ensured the adoption of applicable approved accounting standards; and (d) used the going concern basis for the preparation of the financial statements. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy of the financial position of the Group and of the Company and are kept in accordance with the Companies Act, 1965. The Directors are also responsible for safeguarding the assets of the Group and of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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CORPORATE SOCIAL RESPONSIBILITY STATEMENT Corporate Social Responsibility (“CSR”) relates to open and transparent business practices that are based on ethical values and respect for the employees, community, the environment, shareholders and other stakeholders. It is designed to deliver sustainable value and development to society at large. In view of the nature of the Company’s business and products, the Company is committed to operating in an economically, socially and environmentally sustainable manner whilst balancing the interest of the diverse stakeholders. At Java Berhad, we view CSR as a journey towards integrating the values of CSR initiatives and business practices to promote ethical values, respect for the employees, the community and the environment while ensuring the real long-term benefits for the relevant stakeholders. We care for our employees The Group strive to provide our employees a safe and healthy work environment. Our employees at the oil palm plantation in Kelantan resides in the housing estates which have been developed for our employees to strive. Our housing estates are equipped with facilities to provide our employees with constant supply of clean water and electricity as well as a canteen and surau to ensure that our employees have access to regular and healthy food and to carry out their religious obligations. We occasionally have social and recreational events to encourage networking and socialising between colleagues and peers in order to foster better working relationships and understanding. We care for our community Our nature of business affects many of the indigenous people living in the area of our operations. It has been the Group’s aim to assist the community in term of empowering them with knowledge, promoting healthy and balanced living and preserving their culture, beliefs and traditions. The Group’s development of the oil palm plantation has provided the local community in the vicinity with opportunities to supplement their income by engaging them to carry out field work, manuring and maintenance work. We also maintain effective, transparent and open communication with the local communities and would try our best during consultation and dialogues to accede to communities request for support that would help them lead more comfortable lives. In the Company’s bid to support the local communities in the State of Kelantan, we have conducted provided donations to schools, native community and religious bodies. We care for our environment We are working responsibly to reduce the environmental impact of our operations through improvement of our production processes and skills of our staff, which would in turn increase productivity and reduce wastage of resources and energy. We firmly believe in adopting waste management and recycling programme in our manufacturing process. The Management has adopted a paperless system to circulate its meeting papers to the Board and the Board committee in bid to reduce usage of paper as part of its waste management programme. The Group has implemented key initiatives such as separating used papers from its other waste and arranging for proper disposition on a periodic basis in support of recycling programmes. Our Board would continue to seek ways to grow our business while upholding our values and respect for the community, employees, the environment, shareholders and other stakeholders. With the commitment of our employees and with the support of our stakeholders, we will achieve our vision.

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MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL REVIEW Revenue Group revenue for the financial year (“FY”) ended 2016 was approximately 10% of the total revenue for FY 2015. The huge reduction was due to our cessation timber operation from 8 January 2016 onwards. Timber’s revenue for the FY 2016 is reported at RM0.27 million compare to RM16.89 million in FY 2015. Revenue for Fresh Fruit Bunch (“FFB”) reduces from RM2.01 million in FY 2015 to RM1.53 in 2016. The reduction was due to the additional 6 months results in 2015 with the change in our financial year ended 30 June to 31 December. Cost and Expenses and Other Income Our Group’s total cost and expenses before finance cost amounted to RM109.95 million, which was higher compared to RM71.16 million in 2015. This was due to impairment of other receivables, which came from two former subsidiary of the Group. Java Timber Sdn Bhd (“JTSB”) and Java Industries Sdn Bhd (“JISB) ceased to be subsidiaries of the Group upon Appointment of Receivers and Managers (“R&M”) by Hong Leong bank Berhad (“HLBB”). Other income of the Group reported a significance increase due to the derecognition two subsidiaries ie JTSB and JISB. Other income increase by RM88.40 million to RM90.30 million 2016 compared to 2015. Finance Cost The decrease in finance cost also due to derecognition of the JTSB and JISB which were two active companies in Java Group. Liquidity As an affected listed issuer and with cessation of our timber business, the Group have a minimal liquidity. Our Group’s short term deposit and cash and bank balance as at 31 December 2016 stood at RM0.31 million as compared to RM 0.67 million in the prior year. Future and Prospect As an Affected Listed issuer under PN17 of MMLR, the future of the Group is largely dependent on the successful implementation of its proposed regularisation scheme which would ensure that the Company the continues as a public listed Companies of Bursa Securities and put the Group on a strong footing to normalise its business operations. Therefore, the Board is committed and the Group is working towards a restructuring scheme which is envisaged to reposition the Group upon successful implementation of its Regularisation Plan pending the an appeal to Bursa Malaysia Securities Berhad (“Bursa Malaysia”) against the rejection of extension of time to submit Regularisation Plan and the decision to de list of the Company. 2012 2013 2014 2015 2016 Revenue 76,456 38,438 40,214 18,895 1,796 Gross Profit (21,292) (20,863) (15,871) (40,013) (1,503) Net profit/(loss) after tax (46,877) (50,542) (35,006) (54,618) (20,223) No. of shares in issue (000') 173,394 173,394 173,394 173,396 173,396 Gross profit/(loss) margin (%) -28% 54% -39% -212% -84% Net profit/(loss) margin (%) -61% -131% -87% -289% -1126% Net EPS/(LPS) (sen) (26.82) (28.88) (19.83) (31.13) (11.49) Shareholders' fund-net asset/(liability) 172,680 122,138 87,132 32,516 12,293 Net asset/(liability) per share (RM) 1.00 0.70 0.50 0.188 0.071 Total borowings 35,396 42,908 41,609 41,616 8,043 Gearing (times) 0.20 0.35 0.48 1.28 0.65 Net current assets/ (liabilities) 45,747 9,260 5,766 (56,986) (15,800) Current ratio (times) 1.87 1.16 1.13 0.05 0.05 Net cash generated from/(used) in operations (34,456) (4,775) 4,237 464 279 All figures in RM’000 unless stated otherwise

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ANNUAL REPORT - JAVA BERHAD (2511 – M) FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 CONTENTS Page DIRECTORS’ REPORT 28 FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION 34 STATEMENT OF FINANCIAL POSITION 36 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 37 STATEMENT OF COMPREHENSIVE INCOME 39

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 40 STATEMENT OF CHANGES IN EQUITY 42 CONSOLIDATED STATEMENT OF CASH FLOWS 43 STATEMENT OF CASH FLOWS 45 NOTES TO THE FINANCIAL STATEMENTS 47 SUPPLEMENTARY INFORMATION ON THE BREAKDOWN OF REALISED AND UNREALISED PROFITS OR LOSSES

112

STATEMENT BY DIRECTORS 113 STATUTORY DECLARATION 114 INDEPENDENT AUDITORS’ REPORT 115

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ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT The directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2016. PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and provision of management services. The principal activities of its subsidiaries are disclosed in Note 8 to the financial statements. Other than the cessation of timber operations which was completed during the financial year as disclosed in the Note 2 to the financial statements, there have been no other significant changes in the nature of these principal activities during the financial year. RESULTS Group Company RM’000 RM’000 Loss for the financial year, net of tax (20,223) (52,389)

════════ ═══════ Attributable to :- Owner of the Company (19,918) (52,389) Non-controlling interests (305) -

──────── ─────── (20,223) (52,389)

════════ ═══════ DIVIDEND No dividend was paid or declared by the Company since the end of the previous financial year. The directors do not recommend the payment of any dividend in respect of the financial year ended 31 December 2016. RESERVES AND PROVISIONS Other than as disclosed elsewhere in this report, there were no material transfers to or from reserves and provisions during the financial year other than as disclosed in the financial statements. BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and of the Company were prepared, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances that would render the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent.

28

ANNUAL REPORT - JAVA BERHAD (2511 – M) DIRECTORS’ REPORT CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company had been written down to an amount that they might be expected to be realised. At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist:- (i) any charge on the assets of the Group and of the Company which has arisen since the end of the

financial year which secures the liabilities of any other person; or (ii) any contingent liabilities in respect of the Group and of the Company which has arisen since the end of

the financial year. Other than as disclosed in the Note 16 to the financial statements, in the opinion of the directors, no contingent or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial period which, will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. ITEMS OF MATERIAL AND UNUSUAL NATURE Other than as disclosed in Note 21 to the financial statements, in the opinion of the directors, the results of the operations of the Group and of the Company for the financial year were not, substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event accrued in the interval between the end of the financial year and the date of this report. ISSUE OF SHARES AND DEBENTURES During the financial year, no new issue of shares or debentures were made by the Company.

29

ANNUAL REPORT - JAVA BERHAD (2511 – M) DIRECTORS’ REPORT EMPLOYEES’ SHARE OPTION SCHEME The Employees’ Share Option Scheme (“ESOS”) is governed by the ESOS By-Laws approved by the shareholders at the Extraordinary General Meeting held on 30 July 2004. The salient features of the ESOS are as follows:- (a) The maximum number of new ordinary shares in the Company which may be made available under the

share options (“Options”) granted pursuant to the ESOS shall not exceed ten percent (10%) (or such other higher percentage as may be permitted by the relevant regulatory authorities from time to time) of the issued and paid-up share capital of the Company at any point in time during the duration of the ESOS. The Company will, during the option period, keep available sufficient authorised and unissued ordinary shares to satisfy all outstanding Options which may be exercisable from time to time throughout the duration of the ESOS;

(b) An Eligible Employee is any executive director or employee of the Company or its subsidiaries (“the

Group”) who at the date of allocation:-

(i) has attained the age of eighteen (18) years; and (ii) is a confirmed employee of the Group. Provided that the ESOS Committee may, at its discretion, nominate any employee (including executive directors) of the Group to be an Eligible Person despite the eligibility criteria under the By-Laws 3.1 herein if not met, at any time and from time to time. No Options will be offered to an Eligible Director of the Company unless the specific allotment of Options to that Eligible Director to participate in the ESOS shall have previously been approved by the shareholders of the Company in a general meeting;

(c) The ESOS shall be in force for a period of five (5) years from the date of full compliance with the

statutory requirements (“Commencement Date”) and is subject to an extension for a maximum period of up to five (5) years commencing from the day the date of expiration of the original five (5) years period. The directors had on 14 October 2011 extended the ESOS which expired on 15 October 2011 for another five (5) years until 15 October 2016;

(d) The number of ESOS shares that may be offered and allotted to any one of the Eligible Person shall be

at the discretion of the ESOS Committee and the Board of Directors after taking into consideration the performance, length of service and seniority of the Eligible Person and such other factors that the ESOS Committee and the Board of Directors may deem relevant, subject to the following:-

(i) the number of ESOS shares allocated, in aggregate, to Eligible Directors and senior management

of the Group shall not exceed fifty percent (50%) of the total ESOS shares available under the ESOS; and

(ii) the number of ESOS shares allocated to any individual Eligible Person who, either singly or

collectively through person/(s) connected with them as defined in the Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), hold twenty percent (20%) or more in the total issued and paid-up share capital of the Company shall not exceed ten percent (10%) of the total ESOS shares available under the ESOS.

At the discretion of the ESOS Committee, an Eligible Person may be eligible for more than one (1) offer provided that the total aggregate number of shares to be offered to such Eligible Person shall not exceed the maximum allowable allotment as set out in the By-Laws;

30

ANNUAL REPORT - JAVA BERHAD (2511 – M) DIRECTORS’ REPORT EMPLOYEES’ SHARE OPTION SCHEME (CONTINUED) The salient features of the ESOS are as follows:- (Continued) (e) The subscription price shall be determined by the Board of Directors upon the recommendation of the

ESOS Committee in accordance with the Listing Requirements based on the 5-days weighted average market price of the Company’s ordinary shares immediately prior to the date of offer with a discount of not more than 10% (or such higher discount as may be allowed under the Listing Requirements from time to time) if deemed appropriate, subject to the par value of the Company’s ordinary shares and subject to adjustments in accordance with the By-Laws;

(f) The Options granted to an Eligible Person is exercisable only by the Eligible Person during his/her

tenure of services whilst he/she is employed/appointed/retained for services by the Group and subject to any extension pursuant to the By-Laws. No Options shall be exercised after the expiry of the option period; and

(g) The new ordinary shares to be allotted upon the exercise of an Options shall, upon issue and allotment,

rank pari passu in all respect with the existing issued and paid up shares of the Company for any dividends, rights, allotments and/or other distributions (including those arising on a liquidation of the Company or its subsidiary, as the case may be), if the date of allotment is on or before the entitlement date and subject to all the provisions of the Articles of Association of the Company.

The ESOS Committee comprising appointed members of the Board was set up on 29 August 2005 to administer the ESOS, who may from time to time offer Options to eligible employees and full-time Executive Directors of the Group and of the Company to subscribe for new ordinary shares in the Company. The movement in the Options exercisable by the Eligible Persons during the financial year to take up unissued ordinary shares of RM1/- each at the exercise price of RM1/- per ordinary share are as stated below:-

Exercise Balance Balance Grant Expiry Price At At Date Date RM/Share 1.1.2016 Granted Lapsed Expired 31.12.2016 16.10.2006 15.10.2016 1.0 431,800 - - (431,800) - The entire ESOS granted was expired on 15 October 2016. DIRECTORS The directors in office during the financial year and during the period from the end of the financial year to the date of the report are:- Dato’ Dr. Abu Talib Bin Bachik Sy Choon Yen YBM Tunku Mahmood Bin Tunku Mohammed D.K. Hedzir Bin Aminudin

31

ANNUAL REPORT - JAVA BERHAD (2511 – M) DIRECTORS’ REPORT DIRECTORS’ INTERESTS According to the Registar of Directors’ shareholdings required to be kept by the Company under Section 134 of the Companies Act 1965 in Malaysia, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:- Number of ordinary shares At At 1.1.2016 Bought Sold 31.12.2016 The Company Java Berhad Direct Interest Sy Choon Yen 1,400,000 - - 1,400,000 Indirect Interest Sy Choon Yen* 41,912,449 - - 41,912,449 * Deemed interested in the shares held by Amalan Menang Sdn. Bhd. by virtue of Section 6A of the

Companies Act 1965 in Malaysia and those shares held by his spouse, Looh Yen Loo by virtue of Section 134(12)(c) of the Companies Act 1965 in Malaysia.

Other than as disclosed above, none of the other directors in office at the end of the financial year had any other interests in shares, warrants and options in the Company during the financial year. DIRECTORS’ BENEFITS Since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit (other than the benefits included in the aggregate amount of emoluments received or due and receivable by the directors as disclosed in Note 21 to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any benefit which may be deemed to have arisen by virtue of the transactions as disclosed in Note 24 to the financial statements. Neither during nor at the end of the financial year was the Company a party to any arrangement whose object was to enable the directors to acquire benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate. SIGNIFICANT EVENTS DURING AND SUBSEQUENT TO THE FINANCIAL YEAR Details of significant events during and subsequent to the financial year are disclosed in Note 29 to the financial statements.

32

ANNUAL REPORT - JAVA BERHAD (2511 – M) DIRECTORS’ REPORT AUDITORS The auditors, Messrs. Baker Tilly Monteiro Heng, have indicated that they are not seeking for reappointment and shall retire at the forthcoming annual general meeting. This report was approved and signed on behalf of the Board of Directors in accordance with a resolution of the directors:- HEDZIR BIN AMINUDIN Director SY CHOON YEN Director Kuala Lumpur Date: 3 May 2017

33

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

2016 2015Note RM'000 RM'000

ASSETSNon-current assetsProperty, plant and equipment 6 15,937 82,343 Plantation development expenditure 7 12,156 12,815

Total non-current assets 28,093 95,158

Current assetsInventories 9 17 26 Trade and other receivables 10 558 2,090 Prepayments 14 - Tax recoverable 4 7 Short term deposits with licensed banks 11 241 561 Cash and bank balances 12 67 113

Total current assets 901 2,797

TOTAL ASSETS 28,994 97,955

EQUITY AND LIABILITIESEquity attributable to owners of the CompanyShare capital 13 173,396 173,396 Share premium 1,571 1,571 Revaluation reserve 14 6,337 40,253 Share options reserve 15 - 86 Accumulated losses (169,112) (183,183)

12,192 32,123 Non-controlling interests 101 393

TOTAL EQUITY 12,293 32,516

Group

34

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 (CONTINUED)

The accompanying notes form an integral part of these financial statements.

2016 2015Note RM'000 RM'000

Non-current liabilityLoans and borrowings 16 - 5,656

Total non-current liability - 5,656

Current liabilitiesTrade and other payables 17 8,591 23,728 Loans and borrowings 16 8,043 35,960 Tax payable 67 95

Total current liabilities 16,701 59,783

TOTAL LIABILITIES 16,701 65,439

TOTAL EQUITY AND LIABILITIES 28,994 97,955

Group

35

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016


2016 2015Note RM'000 RM'000

ASSETSNon-current assetsProperty, plant and equipment 6 - 236 Investment in subsidiaries 8 27,205 34,393

Total non-current assets 27,205 34,629

Current assetsTrade and other receivables 10 52,731 122,002 Prepayments 14 64 Short term deposits with licensed banks 11 241 250 Cash and bank balances 12 12 33

Total current assets 52,998 122,349

TOTAL ASSETS 80,203 156,978

EQUITY AND LIABILITIESEquity attributable to owners of the CompanyShare capital 13 173,396 173,396 Share premium 1,571 1,571 Share options reserve 15 - 86 Accumulated losses (107,064) (54,761)

TOTAL EQUITY 67,903 120,292

Current liabilitiesTrade and other payables 17 12,295 36,668 Loans and borrowings 16 - 13 Tax payable 5 5

Total current liabilities 12,300 36,686

TOTAL LIABILITIES 12,300 36,686

TOTAL EQUITY AND LIABILITIES 80,203 156,978

Company

36

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016

1.1.2016 1.7.2014to to

31.12.2016 31.12.2015Note RM'000 RM'000

Revenue 18 1,796 18,895 Cost of sales 19 (3,299) (58,908)

Gross loss (1,503) (40,013)

Other income 90,300 1,901 Distribution expenses - (209) Administrative expenses (4,956) (12,042) Other operating expenses (101,698) -

Results from operating activities (17,857) (50,363)

Finance costs 20 (2,366) (4,268)

Loss before taxation 21 (20,223) (54,631) Income tax expense 22 - 13

Loss for the financial year/period (20,223) (54,618)

Other comprehensive income, net of taxItem that will be reclassified subsequently to profit or lossRealisation of revaluation reserve 332 850

Total comprehensive loss for the financial year/period (19,891) (53,768)

Group

37

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 (CONTINUED)


1.1.2016 1.7.2014to to

31.12.2016 31.12.2015Note RM'000 RM'000

Loss for the financial year/period attributable to:-Owners of the Company (19,918) (53,970) Non-controlling interests (305) (648)

(20,223) (54,618)

Total comprehensive loss attributable to:-Owners of the Company (19,599) (53,141) Non-controlling interests (292) (627)

(19,891) (53,768)

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

Basic loss per share 23 (11.49) (31.13)

Diluted loss per share 23 (11.49) (31.13)

Group

38

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016

* Represented by amount less than RM1,000/-.


1.1.2016 1.7.2014to to

31.12.2016 31.12.2015Note RM'000 RM'000

Revenue 18 9 54 Cost of sales - -

Gross profit 9 54

Other income 23 90 Administrative expenses (1,626) (4,687) Other operating expenses (50,795) -

Result from operating activities (52,389) (4,543) Finance costs 20 *- (7)

Loss before taxation 21 (52,389) (4,550)

Income tax expense 22 - -

Loss for the financial year/period (52,389) (4,550)

Other comprehensive income, net of tax - -

Total comprehensive loss for the financial year/period (52,389) (4,550)

Company

39

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016

Share Non-Share Share Revaluation Options Accumulated Controlling Total

Capital Premium Reserve Reserve Losses Total Interests Equity Group Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 January 2016 173,396 1,571 40,253 86 (183,183) 32,123 393 32,516

Total comprehensive loss for the financial yearLoss for the financial year - - - - (19,918) (19,918) (305) (20,223)Other comprehensive income for the financial year - - (332) - 319 (13) 13 - Disposal of subsidiaries - - (33,584) - 33,584 - - -

Transaction with owners:ESOS expired 13 - - - (86) 86 - - -

At 31 December 2016 173,396 1,571 6,337 - (169,112) 12,192 101 12,293

Attributable to owners of the Company

40

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 (CONTINUED)


Share Non-Share Share Revaluation Options Accumulated Controlling Total

Capital Premium Reserve Reserve Losses Total Interests Equity Group Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 July 2014 173,394 1,571 41,103 114 (130,070) 86,112 1,020 87,132

Total comprehensive loss for the financial periodLoss for the financial period - - - - (53,970) (53,970) (648) (54,618)Other comprehensive income for the financial period - - (850) - 829 (21) 21 -

Transaction with ownersIssuance of ordinary shares 13 2 - - - - 2 - 2 ESOS lapsed 15 - - - (28) 28 - - -

At 31 December 2015 173,396 1,571 40,253 86 (183,183) 32,123 393 32,516

Attributable to owners of the Company

41

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016


ShareShare Share Options Accumulated Total

Capital Premium Reserve Losses Equity Company RM'000 RM'000 RM'000 RM'000 RM'000

At 1 July 2014 173,394 1,571 114 (50,239) 124,840

Total comprehensive loss for the financial period - - - (4,550) (4,550)

Transaction with owners:Issuance of ordinary shares 2 - - - 2 ESOS lapsed - - (28) 28 -

At 31 December 2015 173,396 1,571 86 (54,761) 120,292

Total comprehensive loss for the financial year - - - (52,389) (52,389)

Transaction with owners:ESOS expired - - (86) 86 -

At 31 December 2016 173,396 1,571 - (107,064) 67,903

42

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016

1.1.2016 1.7.2014to to

31.12.2016 31.12.2015RM'000 RM'000

CASH FLOWS FROM OPERATING ACTIVITIES:-

Loss before taxation (20,223) (54,631)

Adjustments for:-Amortisation of plantation development expenditure 659 985 Depreciation of property, plant and equipment 2,653 7,621 Deposit written off - 151 Impairment loss on:-- trade receivables - 273 - other receivables 71,632 60 - property, plant and equipment 7,985 - Prepayments expensed off - 3,064 Interest expenses 2,366 4,268 Inventories write down - 27,910 Property, plant and equipment written off - 140 Interest income (2) (87) Gain on disposal of subsidiaries (79,756) - Gain on disposal of property, plant and equipment (359) (1,421)

Operating Loss before Working Capital Changes (15,045) (11,667)

Changes In Working Capital:-Inventories 9 3,182 Receivables (182,350) 11,692 Payables 197,931 (1,831)

Cash (Used In)/Generated From Operations 545 1,376

Interest paid (823) (1,343) Tax refunded 3 431 Tax paid (4) -

Net Operating Cash Flows (279) 464

Group

43

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 (CONTINUED)


1.1.2016 1.7.2014to to

31.12.2016 31.12.2015Note RM'000 RM'000

CASH FLOWS FROM INVESTING ACTIVITIES:-

Purchase of property, plant and equipment (2) (699) Proceeds from disposal of property, plant and equipment 990 2,802 Proceeds from disposal of subsidiary, net of cash disposed 8 2,588 - Interest received 2 8 Deposits pledged to licensed banks 70 -

Net Investing Cash Flows 3,648 2,111

CASH FLOWS FROM FINANCING ACTIVITIES:-

Interest paid - (2,925) Repayment of finance lease liabilities (210) (525) Repayment of term loan (2,577) - Net repayment of bank borrowings - (485) Proceeds from issuance of ordinary shares - 2 Interest payable 1,543 -

Net Financing Cash Flows (1,244) (3,933)

NET CHANGE IN CASH AND CASH EQUIVALENTS 2,125 (1,358)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR/ PERIOD (4,068) (2,710)

CASH AND CASH EQUIVALENTS AT THEEND OF THE FINANCIAL YEAR/ PERIOD (1,943) (4,068)

ANALYSIS OF CASH AND CASH EQUIVALENTS:-Cash and bank balances 67 113 Deposits placed with licensed banks 241 561 Bank overdrafts (2,010) (4,431)

(1,702) (3,757) Less: deposits pledged as security to licensed banks (241) (311)

(1,943) (4,068)

Group

44

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016

1.1.2016 1.7.2014to to

31.12.2016 31.12.2015RM'000 RM'000

CASH FLOWS FROM OPERATING ACTIVITIES:-

Loss before taxation (52,389) (4,550)

Adjustments for:-Depreciation of property, plant and equipment 73 318 Impairment loss on:-- other receivables 43,443 14 - investment in subsidiaries 7,188 - - property, plant and equipment 164 - Impairment loss on amount owing by subsidiaries no longer required - (37) Interest expenses * - 7 Loss on disposal of property, plant and equipment - 24 Short term deposits interest income * - (7)

Operating Loss before Working Capital Changes (1,521) (4,231)

Changes in Working Capital:-Receivables (43,366) 132 Payables 3,700 2,227

Cash Used In Operations (41,187) (1,872) Tax refunded - 151

Net Operating Cash Flows (41,187) (1,721)

CASH FLOWS FROM INVESTING ACTIVITIES:-

Interest received from short term deposit * - 7 Net change in amount owing to/by subsidiaries 41,171 1,789 Proceeds from disposal of property, plant and equipment - 201 Purchase of property, plant and equipment (1) (12)

Net Investing Cash Flows 41,170 1,985

Company

45

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 (CONTINUED)



1.1.2016 1.7.2014to to

31.12.2016 31.12.2015RM'000 RM'000

CASH FLOWS FROM FINANCING ACTIVITIES:-

Interest paid * - (7) Proceeds from issuance of ordinary shares - 2 Repayment of finance lease liabilities (13) (166)

Net Financing Cash Flows (13) (171)

NET CHANGE IN CASH AND CASH EQUIVALENTS (30) 93

CASH AND CASH EQUIVALENTS AT THEBEGINNING OF THE FINANCIAL YEAR/ PERIOD 283 190

CASH AND CASH EQUIVALENTS AT THEEND OF THE FINANCIAL YEAR/ PERIOD 253 283

ANALYSIS OF CASH AND CASH EQUIVALENTS:-

Cash and bank balances 12 33 Short term deposits placed with licensed banks 241 250

253 283

Company

46

ANNUAL REPORT - JAVA BERHAD (2511 – M) JAVA BERHAD (Incorporated in Malaysia) NOTES TO THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATION

Java Berhad (“The Company”) is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Suite 2.02, Level 2, Wisma E & C, No. 2, Lorong Dungun Kiri, Damansara Heights, 50490 Kuala Lumpur. The principal place of business of the Company is located at Suite M.02, Mezzanine Floor, Wisma E & C, No. 2, Lorong Dungun Kiri, Damansara Heights, 50490 Kuala Lumpur.

The principal activities of the Company are investment holding and provision of management services. The principal activities of its subsidiaries are disclosed in Note 8 to the financial statements. Other than the cessation of timber operations which was completed during the financial year as disclosed in the Note 2 to the financial statements, there have been no other significant changes in the nature of these principal activities during the financial year. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 3 May 2017.

2. FUNDAMENTAL ACCOUNTING CONCEPT

The financial statements of the Group and of the Company have been prepared on the assumption that the Group and the Company will continue as going concerns. The application of the going concern basis is based on the assumption that the Group and the Company will be able to realise their assets and liquidate their liabilities in the normal course of business. During the financial year, the Group and the Company incurred net losses of RM20,223,000/- and RM52,389,000/- respectively. As at 31 December 2016, the Group’s current liabilities exceeded its current assets by RM15,800,000/-. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s and the Company’s abilities to continue as going concerns. On 14 December 2015, the Company announced that its wholly-owned subsidiaries, namely Java Industries Sdn. Bhd. (“JISB”) and Java Timber Sdn. Bhd. (“JTSB”) have defaulted in its repayment of financing facilities to Hong Leong Bank Berhad (“HLBB”). The Company had been served a Writ of Summons and Statement of Claim from HLBB on the abovementioned financing facilities. On 8 January 2016, the Company announced that it has completed the cessation of its timber operations of the subsidiaries of the Company, namely JISB, Java Woods Sdn. Bhd., JTSB and Java Resources Sdn. Bhd. Pursuant to the said completion of cessation of timber operations, the Company had triggered Paragraph 8.03A(2) of the Main Market Listing Requirements (“MMLR”) of Bursa Securities whereby a listed issuer has suspended or ceased all of its business or its major business. In addition, the Company became an Affected Listed Issuer pursuant to Paragraph 2.1(a) of Practice Note No.17/2011 of the MMLR of Bursa Securities. As a result, the Company is required to submit a Regularisation Plan to the relevant authorities and to implement the Regularisation Plan within the stipulated timeframe.

47

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS

2. FUNDAMENTAL ACCOUNTING CONCEPT (CONTINUED)

On 27 June 2016, JTSB and JISB had received a Notice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers and Managers ("R&M") ("Notice") by HLBB. Pursuant to the Notice dated 27 June 2016, HLBB has appointed KPMG Deal Advisory Sdn Bhd, as Receivers and Managers for the facilities granted by HLBB. Consequently, JTSB and JISB ceased to be subsidiaries of the Company. During the financial year, Ladang Bunga Tanjong Sdn Bhd (“LBTSB”) had defaulted the principal payment on the term loan. Subsequent to the financial year, on 6 January 2017, the Company had submitted an application to Bursa Malaysia Securities Berhad (“BMSB”) for an extension of time of six months for the submission of the Regularisation Plan. On 31 March 2017, the application for the extension of time was rejected by BMSB. Hence, the Company has failed to comply with its obligation to regularise its condition within the stipulated timeframe. In the circumstances and pursuant to paragraph 8.04(5) of the MMLR: (a) the trading of the Company’s securities is suspended with effect from 10 April 2017. (b) the security of the Company will be de-listed on 12 April 2017 unless an appeal against the

de-listing is submitted to Bursa Securities on or before 7 April 2017 (the Appeal Timeframe). Any appeal submitted after the Appeal Timeframe will not be considered by BMSB.

In the event the Company submitted an appeal to BSMB within the Appeal Timeframe, the removal of the securities of the Company from the Official List of Bursa Securities on 12 April 2017 shall be deferred pending the decision on the Company’s appeal. The Company has on 7 April 2017 submitted an appeal to BMSB against the de-listing of the Company’s securities. The ability of the Group and of the Company to continue as going concerns is dependent upon:-

(i) the timely and successful formulation and implementation of a Regularisation Plan; (ii) the continuing support from its lenders and the formulation and timely implementation of the

plan to meet the revised payment obligations; (iii) the Group and the Company achieving sustainable and viable operations; and (iv) the Group and the Company generating adequate cash flows from its operating activities.

In the event that these are not forthcoming, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business. Accordingly, the financial statements may require adjustments relating to the recoverability and classification of recorded assets and liabilities that may be necessary should the Group and the Company be unable to continue as going concerns.

3. BASIS OF PREPARATION

3.1 Statement of Compliance

The financial statements of the Group and of the Company have been prepared in accordance with the Financial Reporting Standards (“FRSs”) and the requirements of the Companies Act 1965 in Malaysia.

3.2 Basis of measurement

The financial statements of the Group and of the Company have been prepared under the historical cost basis, other than as disclosed in the significant accounting policies in Note 4 to the financial statements.

48

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 3. BASIS OF PREPARATION (CONTINUED)

3.3 Use of estimates and judgement

The preparation of financial statements in conformity with FRSs requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reported period. It also requires directors to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgement are based on the directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates that are significant to the financial statements are disclosed in Note 5 to the financial statements.

3.4 Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency at the primary economic environment in which they operate (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency, and has been round up to the nearest thousand, unless otherwise stated.

3.5 Adoption of amendments/improvements to FRSs

The Group and the Company have adopted the following amendments/improvements to FRSs that are mandatory for the current financial year:-

Amendments/Improvements to FRSs FRS 5 Non-current Assets Held for Sale and Discontinued Operations FRS 7 Financial Instruments: Disclosures FRS 10 Consolidated Financial Statements FRS 11 Joint Arrangements FRS 12 Disclosure of Interest in Other Entities FRS 101 Presentation of Financial Statements FRS 116 Property, Plant and Equipment FRS 119 Employee Benefits FRS 127 Separate Financial Statements FRS 128 Investments in Associates and Joint Ventures FRS 138 Intangible Assets

The adoption of the above amendments/improvements to FRSs did not have any significant effect on the financial statements of the Group and of the Company, and did not result in significant changes to the Group’s and the Company’s existing accounting policies.

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3.6 New FRS, amendments/improvements to FRSs and new IC Interpretation (“IC

Int”) that have been issued, but yet to be effective The Group and the Company have not adopted the following new FRS,

amendments/improvements to FRSs and new IC Int that have been issued, but yet to be effective:-

Effective for

financial periods beginning on or after

New FRS FRS 9 Financial Instruments 1 January 2018 Amendments/Improvements to FRSs FRS 1 First-time Adoption of MFRSs 1 January 2018 FRS 2 Share-based Payment 1 January 2018 FRS 4 Insurance Contracts 1 January 2018 FRS 10 Consolidated Financial Statements Deferred FRS 12 Disclosure of Interests in Other Entities 1 January 2017 FRS 107 Statement of Cash Flows 1 January 2017 FRS 112 Income Taxes 1 January 2017 FRS 128 Investments in Associates and Joint Ventures 1 January 2018/ Deferred FRS 140 Invetsment Property 1 January 2018 New IC Int IC Int 22 Foreign Currency Transactions and Advance Consideration 1 January 2018

A brief discussion on the above significant new FRS, amendments/improvements to FRSs and new IC Int are summarised below. Due to the complexity of these new FRS, amendments/improvements to FRSs and new IC Int, the financial effects of their adoption are currently still being assessed by the Group and the Company.

FRS 9 Financial Instruments

Key requirements of FRS 9:-

• FRS 9 introduces an approach for classification of financial assets which is driven by

cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments.

In essence, if a financial asset is a simple debt instrument and the objective of the entity’s business model within which it is held is to collect its contractual cash flows, the financial asset is measured at amortised cost. In contrast, if that asset is held in a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets, then the financial asset is measured at fair value in the statements of financial position, and amortised cost information is provided through profit or loss. If the business model is neither of these, then fair value information is increasingly important, so it is provided both in the profit or loss and in the statements of financial position.

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3.6 New FRS, amendments/improvements to FRSs and new IC Interpretation (“IC Int”) that have been issued, but yet to be effective (Continued) FRS 9 Financial Instruments (Continued)

Key requirements of FRS 9:- (continued)

• FRS 9 introduces a new, expected-loss impairment model that will require more timely

recognition of expected credit losses. Specifically, this Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. The model requires an entity to recognise expected credit losses at all times and to update the amount of expected credit losses recognised at each reporting date to reflect changes in the credit risk of financial instruments. This model eliminates the threshold for the recognition of expected credit losses, so that it is no longer necessary for a trigger event to have occurred before credit losses are recognised.

• FRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced

disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.

Amendments to FRS 1 First-time Adoption of MFRSs Amendments to FRS 1 deleted the short-term exemptions that relate to FRS 7 Financial Instruments: Disclosure, FRS 119 Employee Benefits and FRS 10 Consolidated Financial Statements because they are no longer applicable.

Amendments to FRS 107 Statement of Cash Flows Amendments to FRS 107 require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including changes from cash flows and non-cash changes. The disclosure requirement could be satisfied in various ways, and one method is by providing reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities. Amendments to FRS 112 Income Taxes Amendments to FRS 112 clarify that decreases in value of debt instrument measured at fair value for which the tax base remains at its original cost give rise to a deductible temporary difference. The estimate of probable future taxable profits may include recovery of some of an entity’s assets for more than their carrying amounts if sufficient evidence exists that it is probable the entity will achieve this.

The amendments also clarify that deductible temporary differences should be compared with the entity’s future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences when an entity evaluates whether it has sufficient future taxable profits. In addition, when an entity assesses whether taxable profits will be available, it should consider tax law restrictions with regards to the utilisation of the deduction.

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3.6 New FRS, amendments/improvements to FRSs and new IC Interpretation (“IC Int”) that have been issued, but yet to be effective (Continued)

Amendments to FRS 10 Consolidated Financial Statements and FRS 128 Investments in Associates and Joint Ventures These amendments address an acknowledged inconsistency between the requirements in FRS 10 and those in FRS 128, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business, as defined in FRS 3. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business.

3.7 MASB Approved Accounting Standards, MFRSs

In conjunction with the planned convergence of FRSs with International Financial Reporting Standards as issued by the International Accounting Standards Board on 1 January 2012, the MASB had on 19 November 2011 issued a new MASB approved accounting standards, MFRSs (“MFRSs Framework”) for application in the annual periods beginning on or after 1 January 2012. The MFRSs Framework is mandatory for adoption by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities subject to the application of MFRS 141 Agriculture and/or IC Int 15 Agreements for the Construction of Real Estate (“Transitioning Entities”). The Transitioning Entities are given an option to defer the adoption of MFRSs Framework and shall apply the MFRSs framework for annual periods beginning on or after 1 January 2018. Transitioning Entities also include those entities that consolidate or equity account or proportionately consolidate another entity that has chosen to continue to apply the FRSs framework for annual periods beginning on or after 1 January 2012. Accordingly, the Group and the Company which are Transitioning Entities have chosen to defer the adoption of the MFRSs framework. As such, the Group and the Company will prepare their first MFRSs financial statements using the MFRSs framework for financial year ended 31 December 2018. The main effects arising from the transition to the MFRSs Framework are discussed below. The effect is based on the Group’s and the Company’s best estimates at the reporting date. The financial effects may change or additional effects may be identified, prior to the completion of the Group’s and the Company’s first MFRSs based financial statements. Application of MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards (“MFRS 1”) MFRS 1 requires comparative information to be restated as if the requirements of MFRSs have always been applied, except when MFRS 1 allows certain elective exemptions from such full retrospective application or prohibits retrospective application of some aspects of MFRSs. The Group and the Company are currently assessing the impact of adoption of MFRS 1, including identification of the differences in existing accounting policies as compared to the new MFRSs and the use of optional exemptions as provided for in MFRS 1. As at the date of authorisation of issue of the financial statements, accounting policy decisions or elections have not been finalised. Thus, the impact of adoption of MFRS 1 cannot be determined and estimated reliably until the process is completed.

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3.7 MASB Approved Accounting Standards, MFRSs (Continued)

MFRS 15 Revenue from Contracts with Customers The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the core principle by applying the following steps:- (i) identify the contracts with a customer; (ii) identify the performance obligation in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; (v) recognise revenue when (or as) the entity satisfies a performance obligation. MFRS 15 also includes new disclosures that would result in an entity providing users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. The Group is currently assessing the impact of the adoption of this standard.

MFRS 16 Leases Currently under MFRS 117 Leases, leases are classified either as finance leases or operating leases. A lessee recognises on its statement of financial position assets and liabilities arising from the finance leases. MFRS 16 eliminates the distinction between finance and operating leases for lessees. All leases will be brought onto its statement of financial position except for short-term and low value asset leases. MFRS 141 Agriculture MFRS 141 requires a biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell, except where the fair value cannot be measured reliably. MFRS 141 also requires agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less costs to sell at the point of harvest. Gains or losses arising on initial recognition of a biological asset and the agricultural produce at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset shall be included in the profit or loss for the period in which it arises. The Group is currently assessing the impact of the adoption of this standard. Amendments to MFRS 116 Property, Plant and Equipment and Amendments to MFRS 141 Agriculture With the amendments, bearer plants would come under the scope of MFRS 116 and would be accounted for in the same way as property, plant and equipment. A bearer plant is defined as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

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3.7 MASB Approved Accounting Standards, MFRSs (Continued) Amendments to MFRS 116 Property, Plant and Equipment and Amendments to MFRS 141 Agriculture (Continued) Nevertheless, the produce growing on the bearer plant would remain within the scope of MFRS 141. This is because the growth of the produce directly increases the expected revenue from the sale of the produce. Moreover, fair value measurement of the growing produce provides useful information to users of financial statements about future cash flows that an entity will actually realise as the produce will ultimately be detached from the bearer plants and sold separately.

4. SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements of the Group and the Company.

4.1 Basis of consolidation

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

(a) Subsidiaries and business combination

Subsidiaries are entities over which the Group is exposed, or has rights, to variable returns from its involvement with the acquirees and has the ability to affect those returns through its power over the acquirees. The financial statements of subsidiaries are included in the consolidated financial statements from the date the Group obtains control of the acquirees until the date the Group loses control of the acquirees. The Group applies the acquisition method to account for business combinations from the acquisition date. For a new acquisition, goodwill is initially measured at cost, being the excess of the following:-

• the fair value of the consideration transferred, calculated as the sum of the

acquisition-date fair value of assets transferred (including contingent consideration), the liabilities incurred to former owners of the acquiree and the equity instruments issued by the Group. Any amounts that relate to pre-existing relationships or other arrangements before or during the negotiations for the business combination, that are not part of the exchange for the acquiree, will be excluded from the business combination accounting and be accounted for separately; plus

• the recognised amount of any non-controlling interests in the acquiree either at

fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date (the choice of measurement basis is made on an acquisition-by-acquisition basis); plus

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NOTES TO THE FINANCIAL STATEMENTS 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.1 Basis of consolidation (Continued)

(a) Subsidiaries and business combination (Continued)

For a new acquisition, goodwill is initially measured at cost, being the excess of the following:- (Continued)

• if the business combination is achieved in stages, the acquisition-date fair value

of the previously held equity interest in the acquiree; less

• the net fair value of the identifiable assets acquired and the liabilities assumed at the acquisition date.

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

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

If the business combination is achieved in stages, the Group remeasures the previously held equity interest in the acquiree to its acquisition-date fair value, and recognises the resulting gain or loss, if any, in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have been previously recognised in other comprehensive income are reclassified to profit or loss or transferred directly to retained earnings on the same basis as would be required if the acquirer had disposed directly of the previously held equity interest. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, the Group uses provisional fair value amounts for the items for which the accounting is incomplete. The provisional amounts are adjusted to reflect new information obtained about facts and circumstances that existed as of the acquisition date, including additional assets or liabilities identified in the measurement period. The measurement period for completion of the initial accounting ends as soon as the Group receives the information it was seeking about facts and circumstances or learns that more information is not obtainable, subject to the measurement period not exceeding one year from the acquisition date.

Upon the loss of control of subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any gain or loss arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an associate, joint venture, an available-for-sale financial asset or a held for trading financial asset. Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The difference between the Group’s share of net assets before and after the change, and the fair value of the consideration received or paid, is recognised directly in equity.

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ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.1 Basis of consolidation (Continued)

(b) Non-controlling interests

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company and are presented separately in the consolidated statement of financial position within equity. Losses attributable to the non-controlling interests are allocated to the non-controlling interests even if the losses exceed the non-controlling interests.

(c) Transactions eliminated on consolidation

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

4.2 Separate financial statements

In the Company’s statement of financial position, investments in subsidiaries are measured at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs. The policy for the recognition and measurement of impairment losses shall be applied on the same basis as would be required for impairment of non-financial assets as disclosed in Note 4.15(b).

4.3 Financial instruments

Financial instruments are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contract provisions of the financial instrument. Financial instruments are recognised initially at fair value, except for financial instruments not measured at fair value through profit or loss, they are measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial instruments.

(a) Subsequent measurement The Group and the Company categorise the financial instruments as follows:

(i) Financial assets

Financial assets at fair value through profit or loss Financial assets are classified as fair value through profit or loss when the financial assets are either held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or are designated into this category upon initial recognition. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value with the gain or loss recognised in profit or loss. The Group has not designated any financial assets at fair value through profit or loss.

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4.3 Financial instruments (Continued)

(a) Subsequent measurement (Continued)

(i) Financial assets (Continued)

Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method less accumulated impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 4.15(a) to the financial statements. Gains and losses are recognised in profit or loss through the amortisation process.

Held-to-maturity investments Financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less accumulated impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 4.15(a) to the financial statements. Gains and losses are recognised in profit or loss through the amortisation process.

Available-for-sale financial assets Available-for-sale financial assets comprise investment in equity and debt securities that are designated as available for sale or are not classified in any of the three preceding categories. Subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair values hedges which are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

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(a) Subsequent measurement (Continued)

(i) Financial assets (Continued)

Unquoted equity instruments carried at cost Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less accumulated impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 4.15(a) to the financial statements.

(ii) Financial liabilities

Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities designated into this category upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value with the gain or loss recognised in profit or loss. Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair values otherwise cannot be reliably measured are measured at cost. The Group has not designated any financial liabilities at fair value through profit or loss. Other financial liabilities Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss through the amortisation process.

(b) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

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(c) Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting (i.e. the date the Group and the Company themselves purchase or sell an asset). Trade date accounting refers to:-

(i) the recognition of an asset to be received and the liability to pay for it on the

trade date; and

(ii) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

(d) Derecognition

A financial asset or a part of it is derecognised when, and only when, the contractual rights to receive the cash flows from the financial asset expire or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(e) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the statements of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

4.4 Property, plant and equipment

(a) Recognition and measurement

Property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. The policy for the recognition of measurement of impairment losses is in accordance with Note 4.15(b) to the financial statements.

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4.4 Property, plant and equipment (Continued)

(a) Recognition and measurement (Continued)

Cost of assets includes expenditures that are directly attributable to the acquisition of the asset and any other costs that are directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes cost of materials, direct labour, and any other direct attributable costs but excludes internal profits. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs in Note 4.8 to the financial statements. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

(b) Subsequent cost

The cost of replacing a part of an item of property, plant and equipment is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the part will flow to the Group or the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss as incurred.

(c) Depreciation

Property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset to its residual value over the estimated useful lives of the assets concerned. The annual rates used for this purpose are as follows:-

Leasehold land and building 2% Renovation 10% Plant and machinery 5% - 10% Office equipment, furniture and fittings and motor vehicles 10% - 20%

Capital work-in-progress will be depreciated when the property, plant and equipment are ready for their intended use. The residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each reporting date. The effects of any revisions of the residual values and useful lives are included in the profit or loss for the financial year in which the changes arise. Fully depreciated assets are retained in the financial statements until the assets are no longer in use.

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4.4 Property, plant and equipment (Continued)

(d) Derecognition

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

4.5 Leases The determination of whether an arrangement is, or contains, a lease is based on the

substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets.

A lease is classified as a finance lease if it transfers substantially all the risks and rewards

incidental to ownership. All other leases that do not meet this criterion are classified as operating leases.

(a) Lessee Accounting

If an entity in the Group is a lessee in a finance lease, it capitalises the leased asset and recognises the related liability. The amount recognised at the inception date is the fair value of the underlying leased asset or, if lower, the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that assets.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are charged as expenses in the periods in which they are incurred.

The capitalised leased asset is classified by nature as property, plant and equipment or investment property. For operating leases, the Group does not capitalise the leased asset or recognise the related liability. Instead lease payments under an operating lease are recognised as an expense on the straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit.

(b) Lessor Accounting

If an entity in the Group is a lessor in operating lease, the underlying asset is not derecognised but is presented in the statement of financial position according to the nature of the asset. Lease income from operating leases is recognised in profit or loss on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished.

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4.6 Inventories

Inventories are measured at the lower of cost and net realisable value. Cost is determined on the weighted average basis. Cost of manufactured goods and work-in-progress include cost of raw materials, direct labour and an appropriate proportion of fixed and variable production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

4.7 Plantation development expenditure

Plantation development expenditure, include mature and immature oil palm plantations. Immature plantations are stated at acquisition cost which includes costs incurred for field preparation, planting, fertilising and maintenance, capitalisation of borrowing costs incurred on loans used to finance the developments of immature plantations and an allocation of other indirect costs based on planted hectares. In general, oil palms are considered mature 30 to 36 months after field planting. Point-of-sale costs include all costs that would be necessary to sell the assets. Upon maturity, all subsequent maintenance expenditure is charged to profit or loss and the capitalised pre-cropping cost is amortised on a straight line basis over 25 years, the expected useful life at the oil palm trees.

4.8 Borrowing costs

Borrowing costs are interests and other costs that the Group and the Company incur in connection with borrowing of funds. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

The Group and the Company begin capitalising borrowing costs when the Group and the Company have incurred the expenditures for the asset, incurred related borrowing costs and undertaken activities that are necessary to prepare the asset for its intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

4.9 Income tax

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

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4.9 Income tax (Continued)

(a) Current tax

Current tax is the expected taxes payable or receivable on the taxable income or loss for the financial year, using the tax rates that have been enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

(b) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the statements of financial position. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the Group is able to control the reversal timing of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different tax entities, but they intends to settle their income tax recoverable and income tax payable on a net basis or their tax assets and liabilities will be realised simultaneously.

.

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4.9 Income tax (Continued)

(c) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”) except:- • where the GST incurred in a purchase of assets or services is not recoverable

from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables that are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of financial position.

4.10 Discontinued operation

A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:-

• represents a separate major line of business or geographical area of operations; • is part of a single co-ordinated plan to dispose of a separate major line of business or

geographical area of operations; or • is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation, the comparative statements of profit or loss and other comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period.

4.11 Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the executive director of operations who is responsible for allocating resources and assessing performance of the operating segments and recommends strategic decisions to the Board.

4.12 Fair value measurements

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

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

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4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.12 Fair value measurements (Continued)

When measuring the fair value of an asset or a liability, the Group and the Company uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

that the Group and the Company can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability.

The Group and the Company recognise transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

4.13 Employee benefits

(a) Short-term employee benefits

Short-term employee benefit obligations in respect of wages, salaries, social security contributions, annual bonuses, paid annual leave, sick leave and non-monetary benefits are recognised as an expense in the financial year where the employees have rendered their services to the Group and the Company.

(b) Post-employment benefits

As required by law, the Group and the Company contribute to the Employees Provident Fund (“EPF”), the national defined contribution plan. Certain foreign subsidiaries make contributions to their respective countries’ statutory pension scheme. Such contributions are recognised as an expense in the profit or loss in the period in which the employees render their services.

4.14 Cash and cash equivalents

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand, bank balances and deposits and other short-term, highly liquid investments with a maturity of three months or less, that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents are presented net of bank overdrafts.

4.15 Impairment of assets

(a) Impairment and uncollectibility of financial assets

At each reporting date, all financial assets (except for financial assets categorised as fair value through profit or loss and investment in subsidiaries, associates and joint ventures) are assessed whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised.

65


4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.15 Impairment of assets (Continued)

(a) Impairment and uncollectibility of financial assets (Continued)

Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Loans and receivables and held-to-maturity investments The Group and the Company first assess whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If there is no objective evidence for impairment exists for an individually assessed financial asset, whether significant or not, the Group and the Company may include the financial asset in a group of financial assets with similar credit risk characteristics and collectively assess them for impairment. Financial assets that are individually assessed for impairment for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The amount of impairment loss is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced through the use of an allowance account and the loss is recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is then reversed by adjusting an allowance account to the extent that the carrying amount of the financial asset does not exceed what the amortised cost would have been had the impairment not been recognised. Loan together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group and the Company. If a write-off is later recovered, the recovery is credited to the profit or loss.

Available-for-sale financial assets In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value below its cost is considered to be objective evidence of impairment. The Group and the Company use their judgement to determine what is considered as significant or prolonged decline, evaluating past volatility experiences and current market conditions. When a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognised. The amount of cumulative loss that is reclassified from equity to profit or loss shall be the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss.

66



(a) Impairment and uncollectibility of financial assets (Continued)

Available-for-sale financial assets (continued)

Impairment losses on available-for-sale equity investments are not reversed through profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss, is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to loss event occurring after the recognition of the impairment loss in profit or loss.

Unquoted equity instruments carried at cost In the case of unquoted equity instruments carried at cost, the amount of the impairment loss is measured as the difference between the carrying amount of financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment shall not be reversed.

(b) Impairment of non-financial assets

The carrying amounts of non-financial assets (except for inventories) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the Group and the Company make an estimate of the asset’s recoverable amount. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of non-financial assets or cash-generating units (“CGUs”). The recoverable amount of an asset of CGU is the higher of its fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining the fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. Where the carrying amount of an asset exceed its recoverable amount, the carrying amount of asset is reduced to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

Impairment losses are recognised in profit or loss.

67



(b) Impairment of non-financial assets (Continued)

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. An impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised previously. Such reversal is recognised in profit or loss.

4.16 Revenue and other income

The Group and the Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(a) Timber products

Revenue derived from harvesting and trading of raw timber products is recognised upon goods delivered and customer’s acceptance. Revenue from manufacturing and trading of downstream timber products is measured at the fair value of the consideration receivable and is recognised in the profit or loss when the significant risks and rewards of ownership have been transferred to the buyers.

(b) Plantation products

Revenue derived from harvesting and trading of plantation products is recognised upon goods delivered and customer’s acceptance.

(c) Management fee

Management fee is recognised upon completion of services rendered in accordance with the terms of the agreement entered into.

(d) Interest income

Interest income is recognised on accrual basis.

Service charges and other related fees on financing facilities extended to customers are recognised on inception of such transactions.

(e) Rental income

Rental income is recognised on an accrual basis.

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4.17 Share capital

Ordinary shares Ordinary shares are equity instruments. An equity instrument is a contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

4.18 Share based payments

The Group operates its Employees’ Share Option Scheme (“ESOS”), an equity-settled, share-based compensation plan for employees of the Group which allows the Group’s employees to acquire ordinary shares of the Company. The fair value of the employee services received in exchange for the grant of the share options is recognised as an expense in the profit or loss over the vesting periods of the grant with a corresponding increase in the share options reserve within equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options granted at the granting date, taking into account, if any, the market vesting conditions upon which the options were granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in the assumptions about the number of share options that are expected to vest. At each reporting date, the Group revises its estimates of the number of share options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the profit or loss, with a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share options reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained earnings. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

69

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND

ASSUMPTIONS The preparation of the Group’s financial statements requires management to make judgement,

estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require material adjustments to the carrying amount of the assets or liabilities affected in the future. The estimates and judgements are continually evaluated by the directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Useful lives of property, plant and equipment

The Group estimate the useful lives of property, plant and equipment based on period over which the assets are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed periodically and are updated if expectation differs from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of useful lives of property, plant and equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets.

(b) Impairment of investment in subsidiaries and recoverability of amount owing by

subsidiaries

The Company tests investment in subsidiaries for impairment annually in accordance with its accounting policy. Reviews are performed regularly if events indicate that this is necessary. The assessment of the net tangible assets of the subsidiaries affects the result of the impairment test. Costs of investments in subsidiaries which have ceased operations were impaired up to the net assets of the subsidiaries. The impairment made on investment in subsidiaries entails an impairment to be made to the amount owing by these subsidiaries.

As disclosed in Note 8 to the financial statements, the recoverable amount of the investment in subsidiaries has not been reliably determined at this stage pending the formulation and implementation of a Regularisation Plan.

(c) Going concern

As disclosed in Note 2 to the financial statements, judgement is made by the directors whether the Group and the Company will be able to continue as a going concern. The financial statements of the Group and of the Company have been prepared on a going concern basis.

(d) Impairment of property, plant and equipment

The Group reviews the carrying amount of its property, plant and equipment, to determine whether there is an indication that those assets have suffered an impairment loss in accordance with relevant accounting policies. Independent professional valuations to determine the carrying amount of these assets will be procured when the need arise.

As disclosed in Note 6 to the financial statements, the recoverable amount of the property, plant and equipment has not been reliably determined by the Group and the Company at this stage pending the formulation and implementation of a Regularisation Plan.

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ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND

ASSUMPTIONS (CONTINUED)

(e) Impairment of plantation development expenditure

The Group assess the carrying amount of its plantation development expenditure at each reporting date whether there is an indication that an asset may be impaired. If such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the plantation development expenditure’s recoverable amount based on the fair value less cost to sell. In determining the fair value of the plantation development expenditure, the management takes into consideration of valuation carried out by professional valuer.

(f) Impairment of receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s and the Company’s receivables at the reporting date is disclosed in Note 10 to the financial statements.

(g) Taxation

Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

71

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 6. PROPERTY, PLANT AND EQUIPMENT Furniture fittings Capital Leasehold Plant and Motor and office Work in Group land Buildings machinery vehicles equipment Renovation Progress Total 2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost/Valuation At 1 January 2016 30,799 59,156 29,494 4,523 6,574 2,794 2,160 135,500 Additions - - - - 1 - 1 2 Derecognition of subsidiaries (9,052) (56,191) (25,634) (1,661) (5,683) - (1,559) (99,780) Disposals/write offs - - (2,062) (1,014) - - (444) (3,520) ───── ───── ───── ────── ───── ────── ────── ────── At 31 December 2016 21,747 2,965 1,798 1,848 892 2,794 158 32,202 ═════ ═════ ═════ ══════ ═════ ══════ ══════ ══════ Representing:- Cost 5,256 988 1,798 1,848 892 2,794 158 13,734 Valuation 16,491 1,977 - - - - - 18,468 ───── ───── ───── ────── ───── ────── ────── ────── 21,747 2,965 1,798 1,848 892 2,794 158 32,202 ═════ ═════ ═════ ══════ ═════ ══════ ══════ ══════ Accumulated Depreciation and Impairment Losses At 1 January 2016 3,292 14,634 25,615 4,106 4,742 768 - 53,157 Depreciation charge for the financial year 325 936 620 178 354 240 - 2,653 Impairment loss 3,301 2,402 58 74 206 1,786 158 7,985 Derecognition of subsidiaries (1,108) (15,007) (22,564) (1,550) (4,410) - - (44,639) Disposals/write offs - - (1,931) (960) - - - (2,891) ───── ───── ───── ────── ───── ────── ────── ────── At 31 December 2016 5,810 2,965 1,798 1,848 892 2,794 158 16,265 ═════ ═════ ═════ ══════ ═════ ══════ ══════ ══════ Net Book Value at 31 December 2016 15,937 - - - - - - 15,937 ═════ ═════ ═════ ══════ ═════ ══════ ══════ ══════ Representing:- Cost 5,112 - - - - - - 5,112 Valuation 10,825 - - - - - - 10,825 ───── ───── ───── ────── ───── ────── ────── ────── 15,937 - - - - - - 15,937 ═════ ═════ ═════ ══════ ═════ ══════ ══════ ══════

72

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 6. PROPERTY, PLANT AND EQUIPMENT Furniture fittings Capital Leasehold Plant and Motor and office Camp Work in Group land Buildings machinery vehicles equipment Road Renovation Progress Total 2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost/Valuation At 1 July 2014 30,959 59,579 33,675 6,868 7,660 5,800 2,788 2,220 149,550 Additions - 145 45 - 30 - 6 473 699 Disposals/write offs (160) (568) (4,226) (2,346) (1,116) (5,800) - (533) (14,749) ───── ───── ───── ────── ───── ───── ────── ────── ────── At 31 December 2015 30,799 59,156 29,494 4,523 6,574 - 2,794 2,160 135,500 ═════ ═════ ═════ ══════ ═════ ═════ ══════ ══════ ══════ Representing:- Cost 5,095 10,918 29,494 4,523 6,574 - 2,794 2,160 61,558 Valuation 25,704 48,238 - - - - - - 73,942 ───── ───── ───── ────── ───── ───── ────── ────── ────── 30,799 59,156 29,494 4,523 6,574 - 2,794 2,160 135,500 ═════ ═════ ═════ ══════ ═════ ═════ ══════ ══════ ══════ Accumulated Depreciation and At 1 July 2014 2,636 11,879 26,673 5,202 5,828 5,800 746 - 58,764 Depreciation charge for the financial period 671 3,047 3,117 743 21 - 22 - 7,621 Disposals/write offs (15) (292) (4,175) (1,839) (1,107) (5,800) - - (13,228) ───── ───── ───── ────── ───── ───── ────── ────── ────── At 31 December 2015 3,292 14,634 25,615 4,106 4,742 - 768 - 53,157 ═════ ═════ ═════ ══════ ═════ ═════ ══════ ══════ ══════ Net Book Value at 31 December 2015 27,507 44,522 3,879 417 1,832 - 2,026 2,160 82,343 ═════ ═════ ═════ ══════ ═════ ═════ ══════ ══════ ══════ Representing:- Cost 4,950 5,893 3,879 417 1,832 - 2,026 2,160 21,157 Valuation 22,557 38,629 - - - - - - 61,186 ───── ────── ───── ────── ───── ───── ────── ────── ────── 27,507 44,522 3,879 417 1,832 - 2,026 2,160 82,343 ══════ ══════ ═════ ══════ ═════ ═════ ══════ ══════ ══════

73

ANNUAL REPORT - JAVA BERHAD (2511 – M) 6. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Furniture, Motor Fittings and Office Vehicles Equipment Renovation Total RM’000 RM’000 RM’000 RM’000

Company 2016 Cost At 1 January 2016 8 685 90 783 Additions - 1 - 1 ────── ────── ────── ────── At 31 December 2016 8 686 90 784 ══════ ══════ ══════ ══════ Accumulated Depreciation and Impairment Losses At 1 January 2016 6 507 34 547 Depreciation charge for the financial year *- 64 9 73 Impairment loss 2 115 47 164 ────── ────── ────── ────── At 31 December 2016 8 686 90 784 ══════ ══════ ══════ ══════ Net Book Value at 31 December 2016 - - - - ══════ ══════ ══════ ══════ 2015 Cost At 1 July 2014 1,043 679 84 1,806 Additions - 6 6 12 Disposals (1,035) - - (1,035) ────── ────── ────── ────── At 31 December 2015 8 685 90 783 ══════ ══════ ══════ ══════ Accumulated Depreciation and Impairment Losses At 1 July 2014 613 405 21 1,039 Depreciation charge for the financial period 203 102 13 318 Disposals (810) - - (810) ────── ────── ────── ────── At 31 December 2015 6 507 34 547 ══════ ══════ ══════ ══════ Net Book Value at 31 December 2015 2 178 56 236 ══════ ══════ ══════ ══════

The leasehold land and buildings are stated at valuation based on the valuation conducted by firms of

professional valuers during the financial year ended 30 June 2012 using the open market value basis.

The following analyses the non-financial assets carried at fair value, by valuation method. The different levels have been defined as follows:- • Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset

or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). • Level 3 – inputs for the asset or liability that are not based on observable market data (that is,

unobservable inputs).

The fair value of the leasehold land and buildings of the Group are categorised as Level 2. 74

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 6. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Had these assets been carried at historical cost less accumulated depreciation, the net book values of

these assets that would have been included in the financial statements of the Group are as follows:- Group

2016 2015 RM’000 RM’000

Leasehold land 10,825 22,557 Buildings - 38,629 ────── ────── 10,825 61,186 ══════ ══════ Included in property, plant and equipment of the Group are assets pledged to the licensed banks to secure credit facilities granted to its subsidiaries with net book values as follows:- Group

2016 2015 RM’000 RM’000

Leasehold land 13,305 21,265 Buildings - 42,060 ────── ────── 13,305 63,325 ══════ ══════ Included in property, plant and equipment of the Group are assets acquired under finance lease instalment plans with net book values as follows:- Group

2016 2015 RM’000 RM’000

Motor vehicles - 157 ══════ ══════

In view of the cessation of the timber operation by the subsidiaries and the performance of the assets was worse than expected, there are indications of impairment on the carrying amount of property, plant and equipment. However, the recoverable amount of the property, plant and equipment has not been reliably determined by the Group and the Company at this stage pending the formulation and implementation of a Regularisation Plan.

75

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 7. PLANTATION DEVELOPMENT EXPENDITURE

Group

2016 2015 RM’000 RM’000

At cost At 1 January/ 31 December 16,343 16,343 ─────── ─────── Less: Accumulated amortisation At 1 January 3,528 2,543 Amortisation 659 985 ─────── ─────── At 31 December 4,187 3,528 ─────── ─────── Carrying amount as at 31 December 12,156 12,815 ═══════ ═══════ The oil palm plantation of the Group is developed on a parcel of land measuring approximately 1,331 hectares situated in Mukim of Lubok Bungor, Jajahan of Jeli, State of Kelantan Darul Naim, Malaysia.

8. INVESTMENT IN SUBSIDIARIES

Company 2016 2015 RM’000 RM’000

Unquoted shares, at cost 114,725 124,240 Less: Accumulated impairment losses (87,520) (89,847) ─────── ─────── 27,205 34,393 ═══════ ═══════ The following information relates to the subsidiaries which are all incorporated in Malaysia:- Name of the Companies Effective equity interest Principal activities

2016 2015

Direct subsidiaries Java Timber Sdn. Bhd. *- 100% Manufacturing and marketing

of sawn timber, moulded timber and other timber related products, providing wood treatment and kiln drying services, trading in timber logs and also as a timber contractor.

Java Industries Sdn. Bhd. *- 100% Manufacturing and marketing

of veneer, plywood and related products, trading in timber logs and as a timber contractor.

Java Woods Sdn. Bhd. (1) 100% 100% Manufacturing and marketing

of veneer related products.

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8. INVESTMENT IN SUBSIDIARIES (CONTINUED)

The following information relates to the subsidiaries which are all incorporated in Malaysia:- Name of the Companies Effective equity interest Principal activities

2016 2015

Direct subsidiaries Java Resources Sdn. Bhd. (2) 100% 100% Provision of transportation and

engineering services. Java Trading Sdn. Bhd. (3) 100% 100% Investment holdings and

general trading. Key Heights Sdn. Bhd. (4) 100% 100% Investment holding and

property development. Java Plantations Sdn. Bhd. (5) 100% 100% Investment holding. Indirect subsidiaries held through Key Heights Sdn Bhd Pinawantai Sdn. Bhd. (1) 100% 100% Trading in timber logs. Kumpulan Kinabatangan Timber Sdn. Bhd. (3) 100% 100% Timber contractor. Bizkaya Sdn. Bhd. (5) 100% 100% Trading in timber logs. Wincohasil Sdn. Bhd. (5) 100% 100% Timber contractor. Indirect subsidiaries held through Java Plantations Sdn Bhd Ladang Bunga Tanjong Sdn. Bhd. (6) 80% 80% Oil palm plantation.

* During the financial year, the Company announced that its wholly-owned subsidiaries, namely

Java Industries Sdn. Bhd. (“JISB”) and Java Timber Sdn. Bhd. (“JTSB”) have defaulted in its repayment of financing facilities to Hong Leong Bank Berhad (“HLBB”). The Company had been served a Writ of Summons and Statement of Claim from HLBB on the financing facilities.

Subsequently, the Company announced that JISB and JTSB received Notice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers and Managers by HLBB. Hence, both JTSB and JISB ceased to be subsidiaries of the Company.

The Group’s subsidiary which has non-controlling interest is not material individually or in aggregate to the financial position, financial performance and cash flows of the Group. On 8 January 2016, JISB, Java Woods Sdn. Bhd., JTSB and Java Resources Sdn. Bhd. have ceased their timber operations.

77

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 8. INVESTMENT IN SUBSIDIARIES (CONTINUED)

Audit Modifications (1) The auditors’ reports of these subsidiaries for the financial year ended 31 December 2016 contain

disclaimer of opinion on those financial statements in view of the following:-

- Going concern consideration; - Impairment review on property, plant and equipment; - Impairment review on amount owing by fellow subsidiaries; and - Other matters.

(2) The auditors’ reports of these subsidiaries for the financial year ended 31 December 2016 contain


- Going concern consideration; - Impairment review on property, plant and equipment; - Impairment review on amount owing by fellow subsidiaries; and - Other matters.



- Going concern consideration; and - Other matters.



- Going concern consideration; - Impairment review on property, plant and equipment; and - Other matters.



- Going concern consideration; - Impairment review on amount owing by fellow subsidiaries; and - Other matters.



- Going concern consideration; - Impairment review on property, plant and equipment; - Completeness of bank borrowings and other liabilities including contingent liabilities; and - Other matters.

78

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 8. INVESTMENT IN SUBSIDIARIES (CONTINUED)

Audit Modifications (Continued) In view of the cessation of the timber operations by the subsidiaries as disclosed in Note 2 to the financial statements and the adverse financial performance of the remaining subsidiaries, there are indications of impairment on the carrying amount of investment in subsidiaries. However, the recoverable amount of the investment in subsidiaries has not been reliably determined at this stage pending the formulation and implementation of a Regularisation Plan.

(i) Derecognition of subsidiaries

On 27 June 2016, the Company announced that JTSB and JISB received Notice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers and Managers by HLBB. Consequently, JTSB and JISB ceased to be subsidiaries of the Company.

The effects of the derecognition of the investment in subsidiaries on the financial position of the Group are as follows:-

2016 JISB JTSB TOTAL RM’000 RM’000 RM’000

Assets Property, plant and equipmet 22,349 32,790 55,139 Trade and other receivables 32,435 79,689 112,124 Prepayments 62 50 112 Cash and bank balances 7 12 19

────── ────── ────── 54,853 112,541 167,394 Liabilities Trade and other payables 110,858 102,210 213,068 Tax payables - 24 24 Borrowings: - - Term loan 15,710 15,683 31,393 - Bank overdraft 1,304 1,303 2,607 - Finance lease obligations 58 - 58 ───────────────── ────────── 127,930 119,220 247,150 ────── ────── ────── Net liabilities (73,077) (6,679) (79,756) ────── ────── ────── Gain on derecognition of subsidiaries (73,077) (6,679) (79,756) ══════ ══════ ══════ Cash and cash equivalents of subsidiaries represent net cash inflows on disposal 1,297 1,291 2,588 ══════ ══════ ══════

79

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 9. INVENTORIES

Group 2016 2015 RM’000 RM’000

At lower of cost and net realisable value:- Raw material and consumables 17 16 Manufactured goods - 10

────── ────── 17 26 ══════ `══════

In the previous financial year, the cost of inventories of the Group recognised as expenses in cost of sales was RM12,172,000/- and the timber inventories amounting to RM27,910,000/- had been written down in view of the cessation at the timber operations by subsidiaries as disclosed in Note 2 to the financial statements.

10. TRADE AND OTHER RECEIVABLES

Group Company

2016 2015 2016 2015 Note RM’000 RM’000 RM’000 RM’000

Trade receivables Trade receivables 291 1,010 - - Less: Accumulated impairment losses (224) (533) - -

────── ────── ────── ────── Trade receivables, net (a) 67 477 - -

══════ ══════ ══════ ══════

Other receivables Other receivables (b) 71,382 1,244 43,519 105 Amount owing by subsidiaries (c) - - 53,883 123,149 Deposits (d) 306 429 156 156 72,138 1,673 97,558 123,410 Less: Accumulated impairment losses - Other receivables (b) (71,647) (60) (43,457) (14) - Amount owing by subsidiaries - - (1,370) (1,394) (71,647) (60) (44,827) (1,408)

────── ────── ────── ────── Other receivables, net 491 1,613 52,731 122,002

══════ ══════ ══════ ══════ Total trade and other receivables 558 2,090 52,731 122,002

══════ ══════ ══════ ══════ The trade and other receivables of the Group and of the Company are not exposed to foreign currency risk.

80

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 10. TRADE AND OTHER RECEIVABLES (CONTINUED)

(a) Trade Receivables

The Group’s and the Company’s normal trade credit terms are ranges from 7 to 90 days (2015: 7 to 90 days). Other credit terms are assessed and approved on a case-to-case basis. Ageing analysis on trade receivables The ageing analysis of the Group’s trade receivables is as follows:-

Group 2016 2015 RM’000 RM’000

Neither past due nor impaired 67 321 Past due but not impaired Past due 1 – 30 days - 1 Past due 31 – 120 days - - Past due more than 120 days - 155

- 156

Impaired 224 533 ────── ──────

291 1,010 ══════ ══════

Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. Significant number of receivables of the Group’s trade receivables arises from regular and existing customers of the Group and losses have incurred infrequently. Receivables that are past due The management has a credit policy in place to monitor and minimise the exposure of default. The Group trades only with recognised and creditworthy third parties. Trade receivables are monitored on an ongoing basis. As at the reporting date, there were no significant concentrations of credit risk in the Group and receivables that are past due but not impaired and are unsecured in nature. Receivables that are impaired The Group’s trade and other receivables that are impaired at the reporting date and the movement of the impairment used to record the impairment are as follows:-

Individually impaired 2016 2015 RM’000 RM’000

Group Trade receivables

- nominal amount 224 533 Less: Accumulated impairment losses (224) (533) ───── ──────

- - ══════ ══════

81


10. TRADE AND OTHER RECEIVABLES (CONTINUED)

(a) Trade Receivables (Continued)

Movements in impairment:-

Group 2016 2015 RM’000 RM’000

At 1 January 533 322 Charge for the financial year - 273

Written off (309) (62) ────── ────── At 31 December 224 533

══════ ══════ Receivables that are individually determined to be impaired at the reporting date relates to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

(b) Other receivables Movements in impairment:-

Group 2016 2015 RM’000 RM’000

At 1 January 60 60 Charge for the financial year 71,632 -

Written off (45) - ────── ────── At 31 December 71,647 60

══════ ══════ During the financial year, the Company announced that its wholly-owned subsidiaries, namely Java Timber Sdn Bhd (“JTSB”) and Java Industries Sdn Bhd (“JISB”) received Notice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers and Managers by Hong Leong Bank Berhad (“HLBB”). Hence, both JTSB and JISB ceased to be subsidiaries of the Company. As a result, the balances of amount owing by JTSB and JISB amounted to RM71,632,000/- had been reclassed to other receivables. The Group and the Company have made an allowance for impairment losses in respect of the amount owing by JTSB and JISB.

(c) Amount owing by subsidiaries Amount owing by subsidiaries are unsecured, non-interest bearing and repayable on demand. In view of the cessation of the timber operation by the subsidiaries as disclosed in Note 2 to the financial statements and the adverse financial performance of the remaining subsidiaries, there is objective evidence of impairment on the amount owing by subsidiaries. However, the recoverable amount of the amount owing by subsidiaries has not been reliably determined at this stage pending the formulation and implementation of a Regularisation Plan.

(d) Deposits

Included in deposits are rental and parking deposits of RM129,300/- (2015: RM143,000/-) paid to a Company in which a substantial shareholder has interest.

82

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 11. SHORT TERM DEPOSITS WITH LICENSED BANKS

Included in fixed deposits placed with licensed banks of the Group are amounts of RM241,000/-

(2015: RM311,000/-) pledged to licensed banks to secure credit facilities granted to certain subsidiaries.

The effective interest rate of fixed deposits at the reporting date was 3.05% (2015: 3.05%) per annum. 12. CASH AND BANK BALANCES

The currency exposure profile of cash and bank balances are as follows:-

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Ringgit Malaysia 67 106 12 33 US Dollar - 7 - -

────── ────── ────── ────── 67 113 12 33

══════ ══════ ══════ ══════

13. SHARE CAPITAL

Group and Company Number of shares

of RM1/- each Amount 2016 2015 2016 2015 ’000 units ’000 units RM’000 RM’000

Authorised:- Ordinary shares At the beginning/end of the financial year/ period 500,000 500,000 500,000 500,000 Preference shares At the beginning/end of the financial year/ period 100,000 100,000 100,000 100,000

────── ────── ────── ────── 600,000 600,000 600,000 600,000

══════ ══════ ══════ ══════

Issued and fully paid:- Ordinary shares At the beginning of the financial year/ period 173,396 173,394 173,396 173,394 Issuance of ordinary shares during the financial year/ period - 2 - 2

────── ────── ────── ────── At the end of the financial year/ period 173,396 173,396 173,396 173,396 ══════ ══════ ══════ ══════ The Company did not issue any shares or debentures during the financial year.

83

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 13. SHARE CAPITAL (CONTINUED)

(a) Employees’ Share Option Scheme (“ESOS”) The ESOS is governed by the ESOS By-Laws approved by the shareholders at the Extraordinary General Meeting held on 30 July 2004.

The salient features of the ESOS are as follows:- (i) The maximum number of new ordinary shares in the Company which may be made

available under the share options (“Options”) granted pursuant to the ESOS shall not exceed ten percent (10%) (or such other higher percentage as may be permitted by the relevant regulatory authorities from time to time) of the issued and paid-up share capital of the Company at any point in time during the duration of the ESOS. The Company will, during the option period, keep available sufficient authorised and unissued ordinary shares to satisfy all outstanding Options which may be exercisable from time to time throughout the duration of the ESOS;

(ii) An Eligible Employee is any executive director or employee of the Company or its

subsidiaries (“the Group”) who at the date of allocation:-

(a) has attained the age of eighteen (18) years; and (b) is a confirmed employee of the Group. Provided that the ESOS Committee may, at its discretion, nominate any employee (including executive directors) of the Group to be an Eligible Person despite the eligibility criteria under the By-Laws 3.1 herein if not met, at any time and from time to time.

No Options will be offered to an Eligible Director of the Company unless the specific allotment of Options to that Eligible Director to participate in the ESOS shall have previously been approved by the shareholders of the Company in a general meeting;

(iii) The ESOS shall be in force for a period of five (5) years from the date of full compliance

with the statutory requirements (“Commencement Date”) and is subject to an extension for a maximum period of up to five (5) years commencing from the day the date of expiration of the original five (5) years period. The directors had on 14 October 2011 extended the ESOS which expired on 15 October 2011 for another five (5) year until 15 October 2016;

(iv) The number of ESOS shares that may be offered and allotted to any one of the Eligible

Person shall be at the discretion of the ESOS Committee and the Board of Directors after taking into consideration the performance, length of service and seniority of the Eligible Person and such other factors that the ESOS Committee and the Board of Directors may deem relevant, subject to the following:- (a) the number of ESOS shares allocated, in aggregate, to Eligible Directors and

senior management of the Group shall not exceed fifty percent (50%) of the total ESOS shares available under the ESOS; and

(b) the number of ESOS shares allocated to any individual Eligible Person who, either

singly or collectively through person/(s) connected with them as defined in the Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), hold twenty percent (20%) or more in the total issued and paid-up share capital of the Company shall not exceed ten percent (10%) of the total ESOS shares available under the ESOS.

84

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 13. SHARE CAPITAL (CONTINUED)

(a) Employees’ Share Option Scheme (“ESOS”) (Continued)

At the discretion of the ESOS Committee, an Eligible Person may be eligible for more than one (1) offer provided that the total aggregate number of shares to be offered to such Eligible Person shall not exceed the maximum allowable allotment as set out in the By-Laws;

(v) The subscription price shall be determined by the Board of Directors upon the recommendation of the ESOS Committee in accordance with the Listing Requirements based on the 5-day weighted average market price of the Company’s ordinary shares immediately prior to the date of offer with a discount of not more than 10% (or such higher discount as may be allowed under the Listing Requirements from time to time) if deemed appropriate, subject to the par value of the Company’s ordinary shares and subject to adjustments in accordance with the By-Laws;

(vi) The Options granted to an Eligible Person is exercisable only by the Eligible Person

during his/her tenure of services whilst he/she is employed/appointed/retained for services by the Group and subject to any extension pursuant to the By-Laws. No Options shall be exercised after the expiry of the option period; and

(vii) The new ordinary shares to be allotted upon the exercise of an option shall, upon issue

and allotment, rank pari passu in all respect with the existing issued and paid up shares of the Company for any dividends, rights, allotments and/or other distributions (including those arising on a liquidation of the Company or its subsidiary, as the case may be), if the date of allotment is on or before the entitlement date and subject to all the provisions of the Articles of Association of the Company.

The ESOS Committee comprising appointed members of the Board was set up on 29 August 2005 to administer the ESOS, who may from time to time offer Options to eligible employees and full-time Executive Directors of the Group and of the Company to subscribe for new ordinary shares in the Company. The directors had on 14 October 2011 extended the ESOS which expired on 15 October 2011 for another five (5) years until 15 October 2016. The movement in the options exercisable by the Eligible Persons during the financial year to take up unissued ordinary shares of RM1/- each at the exercise price of RM1/- per ordinary share are as stated below:-

The entire ESOS granted was expired on 15 October 2016.

85


14. REVALUATION RESERVE Group 2016 2015 RM’000 RM’000

At 1 January 40,253 41,103 Realisation of revaluation reserves (332) (850) Derecognition of subsidiaries (33,584) -

────── ────── At 31 December 6,337 40,253

══════ ══════ This represents surplus arising from revaluation of leasehold land and buildings.

15. SHARE OPTIONS RESERVE Group and Company 2016 2015 RM’000 RM’000

At 1 January 86 114 ESOS lapsed - (28) Transfer to accumulated losses (86) -

────── ────── At 31 December - 86

══════ ══════ When the share option is expired, the amount from the share option reserve is transferred to retained

earnings. 16. LOANS AND BORROWINGS Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Current (secured) Finance lease obligation - 179 - 13 Floating rate bank loans 6,033 31,350 - - Bank overdrafts 2,010 4,431 - -

────── ────── ────── ────── 8,043 35,960 - 13

══════ ══════ ══════ ══════ Non–current (secured) Finance lease obligation - 31 - - Floating rate bank loans - 5,625 - -

────── ────── ────── ────── - 5,656 - 13

══════ ══════ ══════ ══════

Total loans and borrowings 8,043 41,616 - 13 ══════ ══════ ══════ ══════

86

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 16. LOANS AND BORROWINGS (CONTINUED)

(a) Finance lease obligation Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Minimum lease payments - not later than one year - 185 - 13 - later than one year and not later than five years - 31 - -

────── ────── ────── ────── - 216 - 13

Less: Amount representing finance charges - (6) - -

────── ────── ────── ────── Present value of minimum lease payment - 210 - 13

══════ ══════ ══════ ══════

Represented by:- Current - not later than one year - 179 - 13 Non-current - later than one year and not later than five years - 31 - -

- 31 - -

────── ────── ────── ────── - 210 - 13

══════ ══════ ══════ ══════ Obligations under finance lease In the previous financial year, the effective interest rate was at 4.64% to 7.16% per annum. Interest rates were fixed at the inception of the finance lease arrangements.

(b) Loans and borrowings

Floating rate bank loans The remaining maturities of the term loans are as follows:-

Group 2016 2015 RM’000 RM’000

On demand and within one year 6,033 31,350 Later than one year and not later than five years - 5,625 Later than five years - -

────── ────── 6,033 36,975

══════ ══════

87


NOTES TO THE FINANCIAL STATEMENTS

16. LOANS AND BORROWINGS (CONTINUED)

The term loans bear interest rate ranges of 7.85% (2015: ranges from 7.35% to 7.85%) per annum and are repayable by fixed monthly instalments.

The secured long term loans due to a licensed bank are secured over the followings:-

(i) a debenture in the form and substance prescribed by the lender;

(ii) creation of a first fixed and floating charge over all the assets of the subsidiaries;

(iii) third party first legal charge on the oil palm plantation;

(iv) legal charge of 800,000 of RM1/each ordinary shares of a subsidiary; and

(v) corporate guarantee by the Company.

The term loans and bank overdrafts of the Group are secured over the followings:-

(i) a fixed deposits of subsidiaries of RM241,000/- (2015: RM311,000/-);

(ii) legal charge of lands with an integrated timber complex;

(iii) first party second legal charge by the Company in favour of the Bank over the registered sublease interest by third party;

(iv) first and second debenture by way of fixed and floating charge over certain subsidiaries’ present and future assets; and

(v) corporate guarantee by the Company.

During the financial year, Ladang Bunga Tanjong Sdn. Bhd. (“LBTSB”) had defaulted the principal payment on term loan. Therefore, the term loan has been classified as short term loan as a whole, as it is deemed to be pay immediately.

As disclosed in Note 29(a) to the financial statements, on 14 December 2015, the Company announced that its wholly-owned subsidiaries, namely Java Industries Sdn. Bhd. (“JISB”) and Java Timber Sdn. Bhd. (“JTSB”) have defaulted in its repayment of financing facilities to Hong Leong Bank Berhad (“HLBB”). The Company had been served a Writ of Summons and Statement of Claim from HLBB on the abovementioned financing facilities.

On 27 June 2016, JTSB and JISB had received a Notice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers and Managers ("R&M") ("Notice") by HLBB. Pursuant to the Notice dated 27 June 2016, HLBB has appointed KPMG Deal Advisory Sdn. Bhd., as Receivers and Managers for the facilites granted by HLBB.

88



17. TRADE AND OTHER PAYABLES

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Current Trade payables Trade payables 301 1,139 - -

────── ────── ────── ────── Other payables Accrued operating expenses 1,037 1,730 - - Other payables 7,199 20,798 7,781 4,081 Refundable deposits 54 61 - - Amount owing to subsidiaries - - 4,514 32,587

8,290 22,589 12,295 36,668 ────── ────── ────── ──────

Total trade and other payables 8,591 23,728 12,295 36,668

Add: Loan and borrowings (Note 16) 8,043 41,616 - 13 ────── ────── ────── ──────

Total financial liabilities 16,634 65,344 12,295 36,681 ══════ ══════ ══════ ══════

(a) Trade payables

The normal trade credit term granted to the Group is 15 to 90 days (2015: 15 to 90 days).

(b) Other payables

In the previous financial period, included in other payables is an amount of RM446,000/- payable to a Company in which a director had interest which is non-trade in nature, unsecured, interest free and repayable on demand.

In the previous financial period, included in other payable is an amount of RM14,914,000/- and RM446,800/- payable to a substantial shareholder and a company in which a director had interest respectively, which is non-trade in nature, unsecured, interest free and repayable on demand.

(c) Amount owing to subsidiaries

The amount owing to subsidiaries is non-trade in nature, unsecured, interest free and is repayable on demand.

89



18. REVENUE

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Timber products 270 16,886 - - Plantation products 1,526 2,009 - - Management fee - - 9 54

────── ────── ────── ────── 1,796 18,895 9 54

══════ ══════ ══════ ══════

19. COST OF SALES

Cost of sales represents the costs of inventories sold, production costs, direct material, labour costs andrelated overheads.

20. FINANCE COSTS

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Interest expenses - term loan (secured) 2,034 2,894 - - - bank overdrafts and bankers’ acceptances 263 1,343 - - - finance lease and others 69 31 *- 7

────── ────── ────── ────── 2,366 4,268 - 7

══════ ══════ ══════ ══════


21. LOSS BEFORE TAXATION

Loss before taxation has been arrived at:- Group Company

1.1.2016 1.7.2014 1.1.2016 1.7.2014 to to to to

31.12.2016 31.12.2015 31.12.2016 31.12.2015 RM’000 RM’000 RM’000 RM’000

After charging:- Audit fee:- - current year 121 223 19 45 - prior years (17) (25) - 14 Impairment loss on:- - trade receivables - 273 - -

90

ANNUAL REPORT - JAVA BERHAD (2511 – M) NOTES TO THE FINANCIAL STATEMENTS 21. LOSS BEFORE TAXATION (CONTINUED) Loss before taxation has been arrived at:- (Continued) Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014 to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015 RM’000 RM’000 RM’000 RM’000

After charging:- (continued) Impairment loss on:- - other receivables 71,632 60 43,443 14 - property, plant and equipment 7,985 - 164 - - investment in subsidiaries companies - - 7,188 - Amortisation of plantation development expenditure 659 985 - - Depreciation of property , plant and equipment 2,653 7,621 73 318 Deposit written off - 151 - - Directors’ remuneration:- - Executive - fee 25 26 25 25 - salaries 403 771 403 558 - other emoluments 41 147 38 106 - Non-executive - fee 75 79 75 75 - salaries 162 243 162 243 Inventories written down - 27,910 - - Prepayments expensed off - 3,064 - - Property, plant and equipment written-off - 140 - - Loss on foreign exchange - realised - 3 - - Loss on property, plant and equipment - - - 24 Loss on disposal of investment in subsidiaries - - 7,188 - Staff costs:- - salaries, allowances and bonuses 1,532 6,135 621 1,694 - Employees’ Provident Fund 186 596 76 245 - SOCSO 19 33 6 11 - other staff related expenses 78 73 15 19 Rental of premises:- - land 34 92 - - - office (485) 550 (485) 550 Rental:- - office equipment 6 9 6 9 - stumping - 1 - - ────── ────── ────── ────── After crediting:- Gain on disposal of property, plant and equipment (359) (1,421) - - Gain on disposal of subsidiaries (79,756) - - - Short term deposits interest income (2) (87) *- (7) Impairment loss on amount owing by subsidiaries no longer required - - - (37) Realised gain on foreign exchange - (8) - - Rental income (24) (68) - - ────── ────── ────── ────── * Represented by amount less than RM1,000/-.

91



22. INCOME TAX EXPENSE

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000 Income tax - prior years - 13 - -

────── ────── ────── ────── - 13 - -

══════ ══════ ══════ ══════

Income tax is calculated at the Malaysian statutory tax rate of 24% of the estimated assessable profit for the financial year. In the Budget Speech 2014, the Government announced that the statutory tax rate would be reduced to 24% from 25% effective year of assessment 2016.

A reconciliation of income tax expense applicable to loss before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company are as follows:-

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Loss before taxation (20,223) (54,631) (52,389) (4,550) ────── ────── ────── ──────

Taxation at applicable tax rate of 24% (2015: 25%) 4,854 13,658 12,573 1,138 Tax effects arising from - non-taxable income 21,440 101 - - - non-deductible expenses (25,657) (680) (12,211) (205) - origination of deferred tax assets not recognised (637) (12,556) (323) (896) - overprovision in prior years - 13 - - - deferred tax recognised at different tax rate - (523) - (37)

────── ────── ────── ────── - 13 39 -

══════ ══════ ══════ ══════

Deferred tax assets have not been recognised in respect of the following items:-

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Taxable temporary differences (14,973) (14,218) 70 113 Unused tax losses (48,564) (44,017) (20,161) (18,868) Unabsorbed capital allowances (2,586) (5,235) (461) (451)

────── ────── ────── ────── (66,123) (63,470) (20,552) (19,206)

══════ ══════ ══════ ══════ Potential deferred tax assets not recognised at 24% (15,870) (15,233) (4,932) (4,609)

══════ ══════ ══════ ══════ 92



23. LOSS PER SHARE

(a) Basic loss per ordinary share

Basic loss per share is calculated by dividing the net loss for the financial year/ period attributable to owners of the Company by the weighted average number of ordinary shares in issue during the financial year/ period:-

Group 1.1.2016 1.7.2014

to to 31.12.2016 31.12.2015

RM’000 RM’000 Net loss for the financial year/period attributable to

owners of the Company (RM’000) (19,918) (53,970) ══════ ══════

Weighted average number of shares (‘000 unit) 173,396 173,396 ────── ──────

Basic loss per ordinary share (sen) (11.49) (31.13) ══════ ══════

(b) Diluted loss per ordinary share

The Group has no potential dilutive of ordinary shares. As such, there is no dilution effect on the loss per share of the Group.

24. SIGNIFICANT RELATED PARTY TRANSACTIONS

(a) Transactions with related parties

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Management fees received/ receivable from subsidiaries - Ladang Bunga Tanjong Sdn. Bhd. - - 9 54

Purchases of raw material from a Company which a director,

Sy Choon Yen and a substantial shareholder, Dato’ Choo Keng Weng have interests - Anika Desiran Sdn. Bhd. - 11,425 - -

Management fees paid/payable to a Company in which a

substantial shareholder, Dato’ Choo Keng Weng has interests - SHC Technopalm Plantation Services Sdn. Bhd. - 104 - -

93



24. SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)

(a) Transactions with related parties (Continued)

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Rental expenses paid to a Company in which a substantial shareholder, Dato’ Choo Keng Weng has interests - Desa Samudra Sdn. Bhd. 81 598 81 598

6 years motor vehicles sold to a Company in which a substantial shareholder, Dato’ Choo Keng Weng has interests - Desa Samudra Sdn. Bhd. - 130 - 130

5 years motor vehicles and 20 years safety vehicle sold to a Company in which a substantial shareholder, Sy Choon Yen has interests - SPR Energy (M) Sdn Bhd - 437 - -

5 years motor vehicles sold to a substantial shareholder - Sy Choon Yen - 155 - -

5 years motor vehicles sold to a Non-Executive Director - Dato’ Dr. Abu Talib Bin Bachik - 49 - 49

────── ────── ────── ──────

(b) Key management compensation

The remuneration of key management personnel, which includes the director’s remuneration, is disclosed as follows:-

Group Company 1.1.2016 1.7.2014 1.1.2016 1.7.2014

to to to to 31.12.2016 31.12.2015 31.12.2016 31.12.2015

RM’000 RM’000 RM’000 RM’000

Short term employees benefits 1,166 2,693 878 1,918 Defined contribution plans 222 614 164 431

────── ────── ────── ────── 1,388 3,307 1,042 2,349

══════ ══════ ══════ ══════

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25. SEGMENTS INFORMATION

The Group prepared the following segment information in accordance with MFRS 8 OperatingSegments based on the internal reports of the Group's strategic business units which are regularlyreviewed by the Group's Chief Executive Officer (“CEO”) for the purpose of making decisions aboutresource allocation and performance assessment.

Segments:- Products and services:- Timber products Harvesting and trading of raw timber products and

manufacturing and trading of downstream timber products. Plantation Oil palm plantation. Investment Investment holding.

The inter-segment transactions have been entered into in the normal course of business and have beenestablished on terms and conditions that are not materially different from those obtainable intransactions with unrelated parties.

Segment profitSegment performance is used to measure performance as Group’s Chief Executive Officer believesthat such information is the most relevant in evaluating the results of certain segments relative to otherentities that operate within these industries. Performance is evaluated based on operating profit or losswhich is measured differently from operating profit or loss in the consolidated financial statements.

Segment assets and liabilitiesThe total of segment assets and liabilities is measured based on all assets and liabilities of a segment,as included in the internal reports that are reviewed by the Group’s Chief Executive Officer.

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25. SEGMENTS INFORMATION (CONTINUED)

Adjustments Timber and

Products Plantation Investment Elimination Consolidation RM’000 RM’000 RM’000 RM’000 RM’000

2016 Revenue Revenue from external customers 270 1,526 - - 1,796 Inter-segment revenue - - 9 (9) A -

────── ────── ────── ────── ────── Total 270 1,526 9 (9) 1,796

══════ ══════ ══════ ══════ ══════

Results Included in the measure of segment profit & (loss) are : Interest expense 1,637 729 - - 2,366 Depreciation of property, plant and equipment 2,003 577 73 - 2,653 Amortisation of plantation development expenditure - 659 - - 659 Rental of premises:- - land 34 - - - 34 - office - - (485) - (485) Rental:- - office equipment - - 6 - 6 Impairment loss on:- - other receivables 28,189 - 43,443 - 71,632 - investment in subsidiaries companies - - 7,188 (7,188) - - investment in property, plant and equipment 7,821 - 164 - 7,985 Rental income (24) - - - (24) Gain on disposal of subsidiaries - - - (79,756) (79,756) Gain on disposal of property, plant and equipment (359) - - - (359)

══════ ══════ ══════ ══════ ══════ Segment (loss)/profit (40,421) (1,527) (52,390) 74,115 (20,223)

══════ ══════ ══════ ══════ ══════ Income tax expense - - - - -

────── ────── ────── ────── ────── Loss for the financial year (40,421) (1,527) (52,390) 74,115 (20,223)

══════ ══════ ══════ ══════ ══════

Other information Segment assets 37,137 27,393 101,336 (136,872) B 28,994 Segment liabilities 62,063 29,035 32,353 (106,750) C 16,701

══════ ══════ ══════ ══════ ══════

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Adjustments Timber and

Products Plantation Investment Elimination Consolidation RM’000 RM’000 RM’000 RM’000 RM’000

2015 Revenue Revenue from external customers 16,886 2,009 - - 18,895 Inter-segment revenue 5,931 - 45 (5,976) A -

────── ────── ────── ────── ────── Total 22,817 2,009 45 (5,976) 18,895

══════ ══════ ══════ ══════ ══════

Results Included in the measure of segment profit & (loss) are : Interest expense 3,220 1,041 7 - 4,268 Depreciation of property, plant and equipment 7,303 - 318 - 7,621 Amortisation of plantation development expenditure - 985 - - 985 Rental of premises:- - land 92 - - - 92 - office - - 550 - 550 Rental:- - office equipment - - 9 - 9 - stumping 1 - - - 1 Impairment loss on:- - trade receivables 273 - - - 273 - other receivables 60 - - - 60 Property, plant and equipment written off 117 - 23 - 140 Deposit written off 151 - - - 151 Inventories written down 27,910 - - - 27,910 Prepayments expensed off 3,064 - - - 3,064 Rental income (68) - - - (68) Gain on disposal of property, plant and equipment (1,421) - - - (1,421) Interest income - (80) (7) - (87)

══════ ══════ ══════ ══════ ══════ Segment (loss)/profit (43,583) (2,198) (4,544) (37) (50,362)

══════ ══════ ══════ ══════ ══════ Income tax expense 13 - - - 13

────── ────── ────── ────── ────── Loss for the financial year (46,791) (3,239) (4,551) (37) (54,618)

══════ ══════ ══════ ══════ ══════

Other information Segment assets 504,445 28,898 195,528 (630,916) B 97,955 Segment liabilities 567,514 29,011 74,160 (605,246) C 65,439

══════ ══════ ══════ ══════ ══════

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Reconciliation of reportable segment revenue, profit or loss, assets, liabilities and other material itemsare as follows:

A Inter-segment revenues are eliminated on consolidation.

B Reconciliation of assets

2016 2015 RM’000 RM’000

Investment in subsidiaries (31,764) (38,952) Inter-segment assets (105,112) (591,971) Tax recoverables 4 7

────── ──────(136,872) (630,916) ══════ ══════

C Reconciliation of liabilities

2016 2015 RM’000 RM’000

Inter-segment liabilities (106,817) (605,341) Tax payables 67 95

────── ──────(106,750) (605,246) ══════ ══════

Geographical information

The Group’s operations, assets and liabilities are in Malaysia, hence no geographical segment is presented.

Information about major customers

For plantation segment, revenue from one customer represented approximately RM1,526,000/- (2015: RM1,810,000/-) for the Group’s total revenue.

26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s and the Company’s activities are exposed to a variety of financial risks arising from theiroperations and the use of financial instruments. The key financial risks include credit risk, liquidityrisk, foreign currency risk and interest rate risk. The Group’s and the Company's overall financial riskmanagement objective is to optimise value for their shareholders. The Group and the Company do nottrade in financial instruments.

The Board of Directors reviews and agrees to policies and procedures for the management of theserisks, which are executed by the Group’s senior management. The audit committee providesindependent oversight to the effectiveness of the risk management process.

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26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

The Group’s financial risk management policies are as follows:-

(i) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rate.

The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings.

The Group and the Company manage the net exposure to interest rate risks by maintaining sufficient lines of credit to obtain acceptable lending costs and by monitoring the exposure to such risks on an ongoing basis. Management does not enter into interest rate hedging transactions since it considers that the cost of such instruments outweigh the potential risk of interest rate fluctuation.

The information on maturity dates and effective interest rate of financial assets and liabilities are disclosed in their respective notes.

Sensitivity analysis for interest rate risk

Fair value sensitivity analysis for fixed rate instruments The Group and the Company do not account for any fixed rate financial assets at fair value through profit or loss and equity. Therefore a change in interest rates at the reporting date would not affect profit or loss and equity.

Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Profit or loss/Equity 2016 2015

100bp 100bp 100bp 100bp Increase Decrease Increase Decrease RM’000 RM’000 RM’000 RM’000

Group Variable rate instruments (80) 80 (414) 414

─────── ─────── ─────── ───────

(ii) Credit Risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

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(ii) Credit Risk (Continued)

The management has a credit policy in place to monitor and minimise the exposure of default. The Group and the Company trade only with recognised and creditworthy third parties. Trade receivables are monitored on an ongoing basis.

Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 10 to the financial statements. Deposits with banks that are neither past due nor impaired are placed with reputable financial institutions with no history of default.

Financial assets that are either past due or impaired Information regarding financial assets that are past due or impaired is disclosed in Note 10 to the financial statements.

Financial guarantee contracts The Company is exposed to credit risk in relation to financial guarantees given to banks in respect of loans granted to former subsidiaries. As at the reporting date, there was default on the repayment on borrowings granted to former subsidiaries disclosed in Note 2 to the financial statements.

(iii) Liquidity Risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations when they fall due. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities between financial assets and liabilities, principally from trade and other payables, loan and borrowings.

The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met on timely basis.

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(iii) Liquidity Risk (Continued)

The following summarises the maturity profile of the Group’s and of the Company’s liabilities at the reporting date on contractual undiscounted repayment obligations:-

Maturity analysis

Contractual Contractual On demand Carrying Interest Cash or within One to Over five Amount Rate flow one year five year years

RM’000 % RM’000 RM’000 RM’000 RM’000 2016

Group Financial liabilities Trade and other payables 8,591 - 8,591 8,591 - - Loans and borrowings - Floating rate bank loans 6,033 7.85 6,470 6,470 - - - Bank overdrafts 2,010 7.85 2,010 2,010 - -

────── ────── ────── ────── ──────16,634 17,071 17,071 - -

══════ ══════ ══════ ══════ ══════

Company Financial liabilities Trade and other payables 12,295 - 12,295 12,295 - -

══════ ══════ ══════ ══════ ══════

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(iii) Liquidity Risk (Continued)

Maturity analysis (Continued)

Contractual Contractual On demand Carrying Interest Cash or within One to Over five Amount Rate flow one year five year years

RM’000 % RM’000 RM’000 RM’000 RM’000 2015

Group Financial liabilities Trade and other payables 23,728 - 23,728 23,728 - - Loans and borrowings - Finance leases obligation 210 4.64 - 7.16 216 185 31 - - Floating rate bank loans 36,975 7.35 - 7.85 37,019 31,361 5,658 - - Bank overdrafts 4,431 7.60 - 7.85 4,431 4,431 - -

────── ────── ────── ────── ──────65,344 65,394 59,705 5,689 -

══════ ══════ ══════ ══════ ══════

Company Financial liabilities Trade and other payables 36,638 - 36,638 36,638 - - Loans and borrowings - Finance leases obligation 13 4.64 – 5.57 13 13 - -

────── ────── ────── ────── ──────36,681 36,681 36,681 - -

══════ ══════ ══════ ══════ ══════

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27. FINANCIAL INSTRUMENTS

(a) Fair value measurement

The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value:-

Note Trade and other receivables (current) 10 Loans and borrowings 16 Trade and other payables (current) 17

The carrying amounts of the current portion of loans and borrowings and other payables are reasonable approximation of fair values due to the insignificant impact of discounting.

The carrying amounts of trade and other receivables and trade and other payables are reasonable approximation of fair values due to the relatively short term nature of these financial instruments.

The fair value of loans and borrowings are estimated by discounting expected future cash flows at market incremental lending rate for similar types of loans and borrowings at the reporting date.

The following table provides the fair value measurement hierarchy of the Group’s and the Company’s financial instruments:-

2016 2015 Carrying Carrying Amount Fair Value Amount Fair Value RM’000 RM’000 RM’000 RM’000

Group Finance lease liabilities - - 210 218

────── ────── ────── ────── Company Finance lease liabilities - - 13 15

────── ────── ────── ──────

(b) Fair value hierarchy

The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:-

• Level 1 – quoted prices (unadjusted) in active markets for identical assets orliabilities.

• Level 2 – inputs other than quoted prices included within Level 1 that are observablefor the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 – inputs for the asset or liability that are not based on observable marketdata (unobservable inputs).

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.

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27. FINANCIAL INSTRUMENTS (CONTINUED)

(c) Classification of financial instruments

The table below provides an analysis of financial instruments categories as follows:-

(a) Loans and receivables (“L&R”) (b) Financial liabilities at amortised cost (“FLAC”)

Carrying Amount L&R FLAC RM’000 RM’000 RM’000

Group - 31 December 2016 Financial assets Trade and other receivables 558 558 - Short term deposits with licensed banks 241 241 - Cash and bank balances 67 67 -

────── ────── ──────866 866 -

══════ ══════ ══════Financial liabilities Trade and other payables (8,591) - (8,591) Loans and borrowings (8,043) - (8,043)

────── ────── ──────(16,634) - (16,634) ══════ ══════ ══════

Group - 31 December 2015 Financial assets Trade and other receivables 2,090 2,090 - Short term deposits with licensed banks 561 561 - Cash and bank balances 113 113 -

────── ────── ──────2,764 2,764 -

══════ ══════ ══════

Financial liabilities Trade and other payables (23,728) - (23,728) Loans and borrowings (35,960) - (35,960)

────── ────── ──────(59,688) - (59,688) ══════ ══════ ══════

Company - 31 December 2016 Financial assets Trade and other receivables 52,731 52,731 - Short term deposits with licensed banks 241 241 - Cash and bank balances 12 12 -

────── ────── ──────52,984 52,984 -

══════ ══════ ══════

Financial liabilities Trade and other payables (12,295) - (12,295)

══════ ══════ ══════

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27. FINANCIAL INSTRUMENTS (CONTINUED)

(c) Classification of financial instruments (Continued)

Carrying Amount L&R FLAC RM’000 RM’000 RM’000

Company 31 December 2015 Financial assets Trade and other receivables 122,002 122,002 - Short term deposits with licensed banks 250 250 - Cash and bank balances 33 33 -

────── ────── ──────122,285 122,285 - ══════ ══════ ══════

Financial liabilities Trade and other payables (36,668) - (36,668) Loans and borrowings (13) - (13)

────── ────── ──────(36,681) - (36,681) ══════ ══════ ══════

28. CAPITAL MANAGEMENT

The primary objective of the Group’s capital management practice is to ensure that it maintains ahealthy capital ratio in order to support its business and maximise shareholder value as well as toenable the Group to continue as going concern. To achieve this, the Group ensures that an optimalcapital structure is maintained. The Group periodically reviews and manages its capital structure andmakes adjustments to it, in light of changes in economic conditions.

The directors monitor and determine the optimal debt to equity ratio that complies with the debtscovenants. No changes were made in the objectives, policies or processes during the financial yearended 31 December 2016 and financial period ended 31 December 2015.

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Total loans and borrowings 8,043 41,616 - 13 ────── ────── ────── ──────

Equity attributable to owners of the Company 12,192 32,123 67,903 120,292

────── ────── ────── ──────Debt-to-equity ratio 0.66 1.30 - -

══════ ══════ ══════ ══════

The Group is also required to comply with the disclosure and necessary capital requirements as prescribed in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

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29. SIGNIFICANT EVENTS DURING AND SUBSEQUENT TO THE FINANCIALYEAR

(a) On 8 January 2016, the Company announced the cessation of timber operations of thesubsidiaries of the Company, namely Java Industries Sdn. Bhd. (“JISB”), Java Woods Sdn. Bhd., Java Timber Sdn. Bhd. (“JTSB”) and Java Resources Sdn. Bhd. Pursuant to the said completion of cessation of timber operations, the Company has triggered Paragraph 8.03A(2) of the Main Market Listing Requirements (“MMLR”) of Bursa Securities whereby a listed issuer has suspended or ceased all of its business or its major business. In addition, the Company had on 8 January 2016 announced that the Company is deemed to be a PN17 company as the shareholders’ equity of the Company is 25% or less of the issued and paid-up capital of the Company and such shareholders’ equity is less than RM40 million based on the Company’s unaudited management accounts.

As a PN17 company, the Company is required to comply with the following conditions:-

(a) within 12 months from the date of First Announcement;

(i) submit a regularisation plan to the Securities Commission (“SC”) if the plan will result in a significant change in the business direction or policy of the Company; or

(ii) submit a regularisation plan to Bursa if the plan will not result in a significant change in the business direction or policy of the Company, and obtain Bursa’s approval to implement the plan;

(b) implement the regularisation plan within the timeframe stipulated by the SC or Bursa, as the case may be;

(c) provide such information as may be prescribed by Bursa from time to time for public release; and

(d) so such acts or things as may be required by Bursa.

Further, the Company is also required to:-

(i) announce within 3 months from the First Announcement, on whether the regularisation plan will result in a significant change in the business direction or policy of the Company;

(ii) announce the status of its regularisation plan and the number of months to the end of the relevant time frames referred to in the Paragraphs 5.1 and 5.2 of PN17, as may be applicable, on a monthly basis until further notice from Bursa;

(iii) announce its compliance or non-compliance with a particular obligation imposed pursuant to PN17, on an immediate basis; and

(iv) announce the details of the regularisation plan (“Requisite Announcement”) which must contain the following:-

(a) contain details of the regularisation plan and sufficient information to demonstrate that the Company is able to comply with all the requirements set out under Paragraph 5.4 of PN17 after the implementation of the regularisation plan;

(b) include a timeline for the complete implementation of the regularisation plan; and

(c) be announced by the Company’s Principal Adviser.

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29. SIGNIFICANT EVENTS DURING AND SUBSEQUENT TO THE FINANCIALYEAR (CONTINUED)

(a) (Continued)

In the event that the Company fails to comply with the obligation to regularise its condition, all of its listed securities shall be suspended and delisted, immediately upon notification of suspension and de-listing by Bursa.

The Company is currently in the process of formulating the Regularisation Plan to regularise its financial condition and the Requisite Announcement will be made once the Regularisation Plan has been finalised.

(b) On 27 June 2016, JTSB and JISB, being wholly-owned subsidiaries of the Company, had received a Notice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers and Managers ("R&M") ("Notice") by Hong Leong Bank Berhad ("HLBB"). Pursuant to the Notice dated 27 June 2016, HLBB has KPMG Deal Advisory Sdn. Bhd., as Receivers and Managers over the charged assets of JTSB and JISB under the powers contained in the Debentures dated 9 July 2007 created by JTSB and JISB in favour of HLBB for the facilities granted by HLBB ("Debenture"). Consequently, JTSB and JISB ceased to be subsidiaries of the Company.

(c) During the financial year, Ladang Bunga Tanjong Sdn. Bhd. (“LBTSB”) had defaulted the principal payment on term loan. Last payment that was due on November 2016 has yet to be paid by LBTSB as at 31 December 2016. Therefore, the term loan has been classified as short term loan as a whole, as it is deemed to be pay immediately.

(d) The Minister of Domestic Trade, Co-operatives and Consumerism appointed 31 January 2017 as the date on which Companies Act 2016 comes into operation except for Section 241 and Division 8 of Part III.

Accordingly, the Group and the Company shall prepare the financial statements for the financial year ending 31 December 2017 in accordance with the requirements of Companies Act 2016 which will be applied prospectively.

Amongst the key changes introduced in the Companies Act 2016 which will affect the financial statements of the Group and of the Company are, where applicable:- • the removal of the authorised share capital;• shares issued will have no par or nominal value; and• share premium and capital redemption reserve will become part of share capital.

In addition, the financial statements disclosure requirements under the Companies Act 2016 are different from those requirements set out in the Companies Act 1965. Consequently, items to be disclosed in the Group’s and the Company’s financial statements for the financial year ending 31 December 2017 may be different from those disclosed in the financial statements for the current financial year.

(e) Subsequent to the financial year, on 6 January 2017, the Company had submitted an application to Bursa Malaysia Securities Berhad (“BMSB”) for an extension of time of six months for the submission of the Regularisation Plan. On 31 March 2017, the application for the extension of time was rejected by BMSB. Hence, the Company has failed to comply with its obligation to regularise its condition within the stipulated timeframe.

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29. SIGNIFICANT EVENTS DURING AND SUBSEQUENT TO THE FINANCIALYEAR (CONTINUED)

In the circumstances and pursuant to paragraph 8.04(5) of the MMLR:

(a) the trading of the Company’s securities is suspended with effect from 10 April 2017.(b) the security of the Company will be de-listed on 12 April 2017 unless an appeal against the de-

listing is submitted to Bursa Securities on or before 7 April 2017 (the Appeal Timeframe). Any appeal submitted after the Appeal Timeframe will not be considered by Bursa Securities.

In the event the Company submitted an appeal to BSMB within the Appeal Timeframe, the removal of the securities of the Company from the Official List of Bursa Securities on 12 April 2017 shall be deferred pending the decision on the Company’s appeal. The Company has on 7 April 2017 submitted an appeal to BMSB against the de-listing of the Company’s securities.

30. BASIS FOR DISCLAIMER OF OPINION ON THE STATUTORY FINANCIALSTATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2015

The statutory financial statements for the financial period ended 31 December 2015 was expressed adisclaimer of opinion. The extract of the basis for disclaimer of opinion is as follows:

1. As disclosed in Note 2 to the financial statements, the financial statements of the Group andthe Company have been prepared on the assumption that the Group and the Company willcontinue as going concerns. The application of the going concern basis is based on theassumption that the Group and the Company will be able to realise their assets and liquidatetheir liabilities in the normal course of business.

During the financial period, the Group and the Company incurred net losses ofRM54,618,000/- and RM4,550,000/- and the Company recorded negative operating cashflows of RM1,721,000/-. As at 31 December 2015, the Group’s current liabilities exceeded itscurrent assets by RM56,986,000/-. In addition, during the financial period, the Group hasdefaulted on the borrowings as disclosed in Note 33(A) to the financial statements. Theseconditions indicate the existence of material uncertainties which may cast significant doubtabout the Group’s and the Company’s abilities to continue as going concerns.

As disclosed in Note 33(A) to the financial statements, on 14 December 2015, the Companyannounced the default in repayment of the financial facilities to a bank. Subsequent to thefinancial period end, the Company received the letter from the Bank dated 15 February 2016that the management of the Bank has agreed to grant an indulgence of time up to 1 July 2017to settle the financial facilities. The Group is currently in the process of formulating the planto meet the revised payment obligations and announcement will be made once the plan hasbeen finalised.

Subsequent to the financial period on 8 January 2016, the Company announced that it hascompleted the cessation of its timber operations of the subsidiaries of the Company, namelyJava Industries Sdn. Bhd., Java Woods Sdn. Bhd., Java Timber Sdn. Bhd. and Java ResourcesSdn. Bhd. Pursuant to the said completion of cessation of timber operations, the Companyhad triggered Paragraph 8.03A(2) of the Main Market Listing Requirements (“MMLR”) ofBursa Securities whereby a listed issuer has suspended or ceased all of its business or itsmajor business.

On 8 January 2016, the Company announced that it became an Affected Listed Issuerpursuant to Paragraph 2.1(a) of Practice Note No.17/2011 of the MMLR of Bursa Securities.As a result, the Company is required to submit a Regularisation Plan to the relevantauthorities and to implement the Regularisation Plan within the stipulated timeframe.

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30. BASIS FOR DISCLAIMER OF OPINION ON THE STATUTORY FINANCIALSTATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2015(CONTINUED)

1. (Continued)

The ability of the Group and of the Company to continue as going concerns is dependentupon:

(i) the timely and successful formulation and implementation of a Regularisation Plan;

(ii) the continuing support from its lenders and the formulation and timely implementation of the plan to meet the revised payment obligations;

(iii) the Group and the Company achieving sustainable and viable operations; and

(iv) the Group and the Company generating adequate cash flows from its operating activities.


We were unable to obtain sufficient and appropriate audit evidence regarding the plans for the Group and the Company to achieve sustainable and viable operations and generating adequate cash flows from its operating activities. The timely and successful formulation and implementation of a Regularisation Plan, including obtaining continuous support from the lenders and the formulation and timely implementation of the plan to meet the revised payment obligations, remain uncertain at the date of this report.

2. As disclosed in Note 6 to the financial statements, the carrying amount of the property, plantand equipment of the Group and the Company amounted to RM82,343,000/- andRM236,000/- respectively. In view of the cessation of the timber operation by thesubsidiaries as disclosed in Note 2 to the financial statements, there are indications ofimpairment on the carrying amount of property, plant and equipment. However, therecoverable amount of the property, plant and equipment has not been reliably determinedby the Group and the Company at this stage pending the formulation and implementation ofa Regularisation Plan.

We were unable to obtain sufficient and appropriate audit evidence on the carrying amountof the property, plant and equipment as at 31 December 2015 as the recoverable amount hasnot been reliably assessed by the Group and the Company in accordance with FRS 136:Impairment of Assets. Therefore, we could not determine the effect of adjustments, if any, onthe financial position of the Group and the Company as at 31 December 2015 or on itsfinancial performance for the period then ended.

3. As disclosed in Note 10 to the financial statements, the inventories of the Group amounted toRM26,000/- as at 31 December 2015. The timber inventories amounting to RM27,910,000/-have been written down in view of the cessation of the timber operation by the subsidiariesas disclosed in Note 2 to the financial statements.

We were unable to obtain sufficient and appropriate audit evidence on the write down ofinventories as there was no assessment performed by the Group on the net realisable valuesof the inventories in accordance with FRS 102: Inventories. Therefore, we could notdetermine the effect of adjustments, if any, on the financial position of the Group and theCompany as at 31 December 2015 or on its financial performance for the period then ended.

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4. As disclosed in Note 18 to the financial statements, the borrowings of the Group amountedto RM41,616,000/- as at 31 December 2015. As disclosed in Note 33 (A) to the financialstatements, the Group defaulted on the repayment of certain borrowings during the financialperiod and subsequent to the financial period end, the Company received a letter from thebank that the management of the Bank has agreed to grant an indulgence of time to settlecertain borrowings but subject to terms and conditions as mentioned in Note 33 (A) to thefinancial statements. The Group is currently in the process of formulating the plan to meetthe revised payment obligations and announcement will be made once the plan has beenfinalised.

As at the date of this report, the replies relating to the request for certain bank confirmations to confirm the bank borrowings of the Group as at 31 December 2015 were outstanding. We were unable to obtain sufficient and appropriate audit evidence on the completeness of the borrowings in respect of any other possible costs, the completeness of other liabilities, any contingent liabilities and financial guarantee liabilities recorded and unrecorded in the Group’s and the Company’s financial statements for the financial period ended 31 December 2015. Therefore, we could not determine the effect of adjustments, if any, on the financial position of the Group and the Company as at 31 December 2015 or on their financial performance for the period then ended.

5. As disclosed in Note 9 to the financial statements, the investment in subsidiaries of theCompany as at 31 December 2015 amounted to RM34,393,000/-. In view of the cessation ofthe timber operations by the subsidiaries as disclosed in Note 2 to the financial statementsand the adverse financial performance of the remaining subsidiaries, there are indications ofimpairment on the carrying amount of investment in subsidiaries. However, the recoverableamount of the investment in subsidiaries has not been reliably determined at this stagepending the formulation and implementation of a Regularisation Plan.

We were unable to obtain sufficient and appropriate audit evidence on the carrying amount of the investment in subsidiaries of the Company as at 31 December 2015 as the recoverable amounts have not been reliably assessed by the Company in accordance with FRS 136: Impairment of Assets. Therefore, we could not determine the effect of adjustments, if any, on the financial position of the Company as at 31 December 2015 or on its financial performance for the period then ended.

6. As disclosed in Note 11 to the financial statements, the amount owing by subsidiaries of theCompany as at 31 December 2015 amounted to RM121,755,000/-. In view of the cessation ofthe timber operation by the subsidiaries as disclosed in Note 2 to the financial statementsand the adverse financial performance of the remaining subsidiaries, there is objectiveevidence of impairment on the amount owing by subsidiaries. However, the recoverableamount of the amount owing by subsidiaries has not been reliably determined at this stagepending the formulation and implementation of a Regularisation Plan.

We were unable to obtain sufficient and appropriate audit evidence on the carrying amount of the amount owing by subsidiaries as at 31 December 2015 and the recoverability has not been reliably assessed by the Company to ensure the carrying amount are recorded in accordance with FRS 139: Financial Instruments: Recognition and Measurement. Therefore, we could not determine the effect of adjustments, if any, on the financial position of the Company as at 31 December 2015 or on its financial performance for the period then ended.

110




7. As disclosed in Note 2 to the financial statements, the Group ceased its timber operations ofits subsidiaries and the formulation and implementation of a Regularisation Plan is pendingat this stage.

We were unable to carry out certain procedures or to obtain information we considerednecessary during our audit of the financial statements of the Group and the Company.Therefore, we could not determine the effect of adjustments, if any, on the financial positionof the Group and the Company as at 31 December 2015 or on its financial performance andcash flows for the period then ended.

111


JAVA BERHAD (Incorporated in Malaysia)

SUPPLEMENTARY INFORMATION ON THE BREAKDOWN OF REALISED AND UNREALISED PROFITS OR LOSSES

On 25 March 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the retained profits or accumulated losses as at the end of the reporting period, into realised and unrealised profits and losses.

On 20 December 2010, Bursa Malaysia further issued guidance on the disclosure and the format required.

Pursuant to the directive, the amounts of realised and unrealised profits or losses included in the accumulated losses of the Group and the Company as at 31 December 2016 and 31 December 2015 are as follows:-

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

The accumulated losses of the Group and of the Company - Realised (169,112) (183,183) (107,064) (54,761) - Unrealised - - - -

─────── ─────── ─────── ─────── (169,112) (183,183) (107,064) (54,761)

═══════ ═══════ ═══════ ═══════

The determination of realised and unrealised profits or losses is based on Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

The disclosure of realised and unrealised profits or losses above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and should not be applied for any other purposes.

112



STATEMENT BY DIRECTORS Pursuant to Section 169(15) of the Companies Act 1965

We, HEDZIR BIN AMINUDIN, and SY CHOON YEN being two of the directors of Java Berhad, do hereby state that in the opinion of the directors, the financial statements set out on pages 34 to 111 are drawn up in accordance with the Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2016 and of their financial performance and cash flows for the financial year then ended.

The supplementary information set out on page 112 has been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and presented based on the format as prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the directors:-

HEDZIR BIN AMINUDIN Director

SY CHOON YEN Director

Kuala Lumpur

Date: 3 May 2017

113



STATUTORY DECLARATION Pursuant to Section 169(16) of the Companies Act 1965

I, AHMAD KHAMIS MAGRIBI ABDUL RAHMAN, being the officer primarily responsible for the financial management of Java Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statements set out on pages 34 to 111, and the supplementary information set out on page 112 are correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act 1960.

.................................................................................... AHMAD KHAMIS MAGRIBI ABDUL RAHMAN

Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 3 May 2017

Before me,

MOHD FITRY ABDUL GHANI Commissioner for Oath W703

114


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF JAVA BERHAD (Incorporated in Malaysia)

Report on the Audit of the Financial Statements

Disclaimer of Opinion

We were engaged to audit the financial statements of Java Berhad, which comprise the statements of financial position as at 31 December 2016 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 34 to 111.

We do not express an opinion on the accompanying financial statements of the Group and of the Company. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

Basis for Disclaimer of Opinion

1. As disclosed in Note 2 to the financial statements, the financial statements of the Group and of theCompany have been prepared on the assumption that the Group and the Company will continue asgoing concerns. The application of the going concern basis is based on the assumption that theGroup and the Company will be able to realise their assets and liquidate their liabilities in thenormal course of business.

During the financial year, the Group and the Company incurred net losses of RM20,223,000/- andRM52,389,000/- respectively. As at 31 December 2016, the Group’s current liabilities exceeded itscurrent assets by RM15,800,000/-. In addition, the Group has defaulted on the borrowings asdisclosed in Note 29(b) and (c) to the financial statements. These conditions indicate the existenceof material uncertainties which may cast significant doubt about the Group’s and the Company’sabilities to continue as going concerns.

On 8 January 2016, the Company announced that it has completed the cessation of its timberoperations of the subsidiaries of the Company, namely Java Industries Sdn. Bhd. (“JISB”), JavaWoods Sdn. Bhd., Java Timber Sdn. Bhd. (“JTSB”) and Java Resources Sdn. Bhd.. Pursuant to thesaid completion of cessation of timber operations, the Company had triggered Paragraph 8.03A(2)of the Main Market Listing Requirements (“MMLR”) of Bursa Securities whereby a listed issuerhas suspended or ceased all of its business or its major business. In addition, the Companyannounced that it became an Affected Listed Issuer pursuant to Paragraph 2.1(a) of Practice NoteNo.17/2011 of the MMLR of Bursa Securities. As a result, the Company is required to submit aRegularisation Plan to the relevant authorities and to implement the Regularisation Plan within thestipulated timeframe.

On 27 June 2016, JTSB and JISB, being wholly-owned subsidiaries of the Company, had received aNotice pursuant to Section 186 of the Companies Act 1965 of the Appointment of Receivers andManagers ("R&M") ("Notice") by Hong Leong Bank Berhad ("HLBB"). Pursuant to the Noticedated 27 June 2016, HLBB has appointed Receivers and Managers over the charged assets of JTSBand JISB under the powers contained in the Debentures dated 9 July 2007 created by JTSB andJISB in favour of HLBB for the facilities granted by HLBB.

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The abilities of the Group and of the Company to continue as going concerns are dependent upon:-

(i) the timely and successful formulation and implementation of a Regularisation Plan; (ii) the formulation and timely implementation of the plan to meet the revised payment

obligations; (iii) the support from its lenders; (iv) the Group and the Company achieving sustainable and viable operations; and (v) the Group and the Company generating adequate cash flows from their operating activities.


We were unable to obtain sufficient and appropriate audit evidence regarding the plans for the Group and the Company to achieve sustainable and viable operations and generating adequate cash flows from its operating activities. The timely and successful formulation and implementation of a Regularisation Plan, including obtaining support from the lenders and the formulation and timely implementation of the plan to meet the revised payment obligations, remain uncertain at the date of this report.

2. As disclosed in Note 6 to the financial statements, the carrying amount of the property, plant andequipment of the Group amounted to RM15,937,000/-. In view of the cessation of the timberoperation by the subsidiaries and the performance of the assets was worse than expected, there areindications of impairment on the carrying amount of property, plant and equipment. However, therecoverable amount of the property, plant and equipment has not been reliably determined by theGroup and the Company at this stage pending the formulation and implementation of aRegularisation Plan.

We were unable to obtain sufficient and appropriate audit evidence on the carrying amount of theproperty, plant and equipment as at 31 December 2016 as the recoverable amount has not beenreliably assessed by the Group and the Company. Therefore, we could not determine the effect ofadjustments, if any, on the financial position of the Group and of the Company as at 31 December2016 or on its financial performance for the period then ended.

3. As disclosed in Note 16 to the financial statements, the borrowings of the Group amounted toRM8,043,000/- as at 31 December 2016. As disclosed in Note 29(c), Ladang Bunga Tanjong Sdn.Bhd., a subsidiary of the Company defaulted the repayment of borrowings during the financial year.

In the previous financial period, Java Industries Sdn. Bhd. (“JISB”) and Java Timber Sdn. Bhd.(“JTSB”), being wholly owned subsidiary of the Company defaulted on certain borrowings. Asdisclosed in Note 2 to the financial statements, JISB and JTSB had received a Notice pursuant toSection 186 of the Companies Act 1965, of R&M by Hong Leong Bank Berhad. Consequently,JTSB and JISB ceased to be subsidiaries of the Company during the financial year.

As at the date of this report, the replies relating to the request for certain bank confirmations toconfirm the bank borrowings of the Group as at 31 December 2016 were outstanding. We wereunable to obtain sufficient and appropriate audit evidence on the completeness of the borrowings inrespect of any other possible costs, the completeness of other liabilities, any contingent liabilitiesand financial guarantee liabilities recorded and unrecorded in the Group’s and the Company’sfinancial statements for the financial year ended 31 December 2016. Therefore, we could notdetermine the effect of adjustments, if any, on the financial position of the Group and of theCompany as at 31 December 2016 or on their financial performance for the year then ended.

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4. As disclosed in Note 8 to the financial statements, the investment in subsidiaries of the Company asat 31 December 2016 amounted to RM27,205,000/-. In view of the cessation of the timberoperations by the subsidiaries and the adverse financial performance of the subsidiaries, there areindications of impairment on the carrying amount of investment in subsidiaries. The recoverableamounts of the investment in subsidiaries have not been reliably determined at this stage pendingthe formulation and implementation of a Regularisation Plan.

We were unable to obtain sufficient and appropriate audit evidence on the carrying amount of theinvestment in subsidiaries of the Company as at 31 December 2016 as the recoverable amountshave not been reliably assessed by the Company in accordance with FRS 136: Impairment ofAssets. Therefore, we could not determine the effect of adjustments, if any, on the financial positionof the Company as at 31 December 2016 or on its financial performance for the year then ended.

5. As disclosed in Note 10 to the financial statements, the amount owing by subsidiaries of theCompany as at 31 December 2016 , net of impairment amounted to RM52,513,000/-. In view of thecessation of the timber operation by the subsidiaries and the adverse financial performance of thesubsidiaries, there is objective evidence of impairment on the amount owing by subsidiaries. Therecoverable amount of the amount owing by subsidiaries has not been reliably determined at thisstage pending the formulation and implementation of a Regularisation Plan.

We were unable to obtain sufficient and appropriate audit evidence on the carrying amount of theamount owing by subsidiaries as at 31 December 2016 and the recoverability has not been reliablyassessed by the Company to ensure the carrying amount are recorded in accordance with FRS 139:Financial Instruments: Recognition and Measurement. Therefore, we could not determine the effectof adjustments, if any, on the financial position of the Company as at 31 December 2016 or on itsfinancial performance for the year then ended.

6. As disclosed in Note 2 to the financial statements, the Group ceased its timber operations of itssubsidiaries and the formulation and implementation of a Regularisation Plan is pending at thisstage.

We were unable to carry out certain procedures or to obtain information that we considerednecessary during our audit of the financial statements of the Group and the Company. Therefore, wecould not determine the effect of adjustments, if any, on the financial position of the Group and theCompany as at 31 December 2016 or on its financial performance and cash flows for the year thenended.

7. As disclosed in Note 8 to the financial statements, Java Timber Sdn. Bhd. (“JTSB”) and JavaIndustries Sdn. Bhd. (“JISB”) ceased to be the subsidiaries of the Company. The gain onderecognition of these subsidiaries are amounted to RM79,756,000/- was based on the unauditedaccounts of JISB and JTSB. The latest audited financial statements of these former subsidiaries forthe financial period 31 December 2015 contain a disclaimer of opinion.

Therefore, we were unable to determine the effect of adjustment, if any on the financialperformance and cash flows of the Group for the year then ended.

8. As disclosed in Note 30 to the financial statements, the matters stated were unresolved since thepreceding financial year and formed the basis for disclaimer of opinion on the financial statementsof the Group and the Company for the financial period ended 31 December 2015. We were unableto determine whether adjustments to results of operations, and opening accumulated losses might benecessary. Our opinion on the current year’s financial statements is also modified because of thepossible effects of these matters on the comparability of the current financial year’s figures andcorresponding figures.

117



Responsibilities of the Directors for the Financial Statements

The directors of the Group and the Company are responsible for the preparation of financial statements of the Group and the Company that give a true and fair view in accordance with the Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and the Company that are free from material misstatement, whether due to fraud or error.

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

The directors of the Company are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our responsibility is to conduct an audit of the Group and the Company’s financial statements in accordance with approved standards on auditing in Malaysia and International Standards of Auditing, and to issue an auditor’s report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements. We are independent of the Group and the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:-

(a) Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we are unable to report whether the accounting records required by the Companies Act 1965 in Malaysia to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Companies Act 1965 in Malaysia. However, in our opinion, the registers required by the Companies Act 1965 in Malaysia to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Companies Act 1965 in Malaysia.

(b) Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we are unable to report whether we are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in a form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and whether we have received satisfactory information and explanations required by us for those purposes.

(c) As disclosed in Note 9 to the financial statements, the auditors’ reports on the financial statements of the subsidiaries contain modified opinions.

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Other Reporting Responsibilities

The supplementary information set out on page 112 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad.

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we are unable to report as to whether the supplementary information is prepared, in all material aspects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the contents of this report.

Baker Tilly Monteiro Heng Ong Teng Yan No. AF 0117 No. 3076/07/17(J) Chartered Accountants Chartered Accountant

Kuala Lumpur

Date: 3 May 2017

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ADDITIONAL COMPLIANCE DISCLOSURES Utilisation of Proceeds

There were no corporate proposals conducted in the financial year under review.

Share Buy-Backs

The Company did not enter into any share buy-back transactions during the financial year.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”)

The Company did not sponsor any ADR or GDR during the financial year.

Sanctions and/or Penalties

There were no material sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant authorities during the financial year.

Non-Audit Fees

During the financial period ended 31 December 2016, the total non-audit fees payable to companies affiliated to the external auditors’ firm for services rendered to the Company’s subsidiaries were RM18,300/-.

Variation in Results

There were no variances of 10% or more between the results for the financial year and the unaudited results. The Company did not make any release on the profit estimate, forecast or projection for the financial year.

Profit Guarantee

The Company did not grant any profit guarantee during the financial year.

Material Contracts Involving Directors and Major Shareholders

There were no material contracts outside the ordinary course of business entered into by the Company and its subsidiaries involving directors’ or major shareholders’ interest which are still subsisting as at 31 December 2016 or which have been entered into subsequent to the end of the previous financial year.

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LIST OF PROPERTIES HELD as at 31 December 2016

Location Description Area

(Acres)

Tenure (Year

Expiring) Age of

Building

Net Book Value as at 31.12.2016 (RM’000)

1 Kampung Murut, Kalabakan, Tawau, Sabah

CL 105479178 Land with office building

18.83 Leasehold (2089)

12 years 677

2 Mukim of Lubok Bongor, Daerah Jajahan Jeli, Negeri Kelantan

HS (D) 2/93 PT 3023 Oil Palm Plantation and Building

3,299.49 Leasehold (2069)

Between 3 – 4 years

15,071

3 Miles 4, Apas Road Tawau, Sabah

CL1052449291 Land

1.925 Leasehold (2916) -

5,256

TOTAL 21,004

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ANALYSIS OF SHAREHOLDINGS AS AT 19 APRIL 2017

Authorised Share Capital :RM600,000,000 divided into 500,000,000 Ordinary Shares of RM1.00 each and 100,000,000 Irredeemable Cumulative Convertible Preference Shares of RM1.00 each

Issued and paid-up Share Capital :RM173,396,089 ordinary shares of RM1.00 each Voting Rights :1 Vote per ordinary share

Size of Shareholdings No. of Holders % No. of Shares % 1 – 99 32,111 92.57 227,328 0.13 100 – 1,000 1,486 4.28 459,814 0.27 1,001 – 10,000 602 1.74 2,868,795 1.65 10,001 – 100,000 381 1.10 13,690,618 7.90 100,001 – 8,669,803 104 0.30 65,656,559 37.87 8,669,804 and above 3 0.01 90,492,975 52.18

34,687 100.00 173,396,089 100.00

Substantial Shareholders (based on the Register of Substantial Shareholders)

Direct Indirect Name of Substantial Shareholder No. of Shares % No. of Shares % Amalan Menang Sdn Bhd 40,912,449 23.60 - - Dato’ Choo Keng Weng 28,925,277 16.68 - - Samudera Sentosa Sdn Bhd 22,055,249 12.72 - - Sy Choon Yen 1,400,000 0.81 41,912,449 (1) 24.17 Note:(1) Deemed interest in shares held by Amalan Menang Sdn Bhd by virtue of Section 6A of Companies

Act, 1965 and shares held by his spouse, Looh Yen Loo by virtue of Section 134 (12)(c) of Companies Act, 1965.

Thirty Largest Shareholders

Name No. of Shares Held % 1 Sabah Development Nominees (Tempatan) Sdn Bhd

Pledged Securities Account for Amalan Menang Sdn Bhd 40,912,449 23.59

2 Choo Keng Weng 27,525,277 15.87

3 Sabah Development Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Samudera Sentosa Sdn Bhd

22,055,249 12.72

4 Tee Tiam Lee 6,365,900 3.67

5 Affin Hwang Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Rashidi Aly Bin Abdul Rais (M09)

5,305,200 3.06

6 RHB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for J.V. Avenue Sdn Bhd

4,514,391 2.60

7 Ong Sok Hean 3,680,000 2.12

8 Looh Keo @ Looh Lim Teng 2,255,200 1.30

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ANALYSIS OF SHAREHOLDINGS (cont’d) AS AT 19 APRIL 2017

Thirty Largest Shareholders (cont’d)

Name No. of Shares Held % 9 Affin Hwang Nominees (Tempatan) Sdn Bhd

Pledged Securities Account for Esa Bin Mohamed 2,144,100 1.24

10 Tee Chee Boon 2,026,000 1.17

11 HSBC Nominees (Asing) Sdn Bhd Exempt An For Credit Suisse (SG BR-TST-Asing)

1,683,067 0.97

12 Niaga Serimas Sdn Bhd 1,585,021 0.91

13 Havys Development Sdn Bhd 1,453,600 0.84

14 Maybank Nominees (Tempatan) Sdn Bhd Maybank Private Wealth Management for Sy Choon Yen (PW-M00099) (749560)

1,400,000 0.81

15 TA Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Choo Keng Weng

1,400,000 0.81

16 TASec Nominees (Tempatan) Sdn Bhd TA First Credit Sdn Bhd for Looh Chai Boon

1,400,000 0.81

17 Sy Ban Lee 1,151,000 0.66

18 Langkaran Asia Sdn Bhd 1,000,000 0.58

19 Looh Yen Loo 1,000,000 0.58

20 Ling Chu Nyo @ Ding Chuo Ngo 977,700 0.56

21 Malaysian Trustees Berhad Exempted-Trust Account for Aokam Perdana Berhad Scheme

964,735 0.56

22 How Lin Chew @ How Lim Chew 938,000 0.54

23 Lim Seng Chee 873,000 0.50

24 Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Mohd Salleh Bin Yeop Abd Rahman

872,500 0.50

25 Chu Siew Fei 825,600 0.48

26 Yeo Tai In @ Yong Tye Eng 800,000 0.46

27 Tan Boon Hoo 650,600 0.38

28 Lim Chin Lee 625,200 0.36

29 Kumarasan A/L Muthian 620,000 0.36

30 Tan Kok Peng 617,000 0.36

Total 137,620,789 79.37

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ANALYSIS OF SHAREHOLDINGS (cont’d) AS AT 19 APRIL 2017

Directors’ Interest in Shares (based on the Register of Directors’ Shareholdings)

Note:(1) Deemed interest in shares held by Amalan Menang Sdn Bhd by virtue of Section 6A of Companies Act, 1965 and shares held by his spouse, Looh Yen Loo by virtue of Section 134 (12)(c) of Companies Act, 1965.

By virtue of his interest in shares in the Company, Sy Choon Yen is deemed to have interests in the subsidiaries to the extent of the Company has an interest.

Dato’ Dr. Abu Talib Bin Bachik, YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI and Hedzir Bin Aminudin did not have any interest in shares of the Company or its related corporations during the financial year.

None of the Directors held or have been granted any options in the Company during the financial year.

Directors Direct Indirect No. of

Shares % No. of Shares %

Dato’ Dr. Abu Talib Bin Bachik - - - - Sy Choon Yen 1,400,000 0.81 41,912,449 (1) 24.17 YBM Tunku Mahmood Bin Tunku Mohammed D.K. PSI

- - - -

Hedzir Bin Aminudin - - - -

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MESSAGE TO OUR SHAREHOLDERS

Dear shareholders,

The Notice of Annual General Meeting and Proxy Form will be sent separately to you in due course. Kindly contact any of the following should you require further clarifications:-

BUSINESS OFFICE Suite M.02, Mezzanine Floor Wisma E & C No. 2, Lorong Dungun Kiri Damansara Heights 50490 Kuala Lumpur Malaysia Tel : 03-2092 3535 Fax : 03-2093 9690

SHARE REGISTRAR Boardroom Corporate Services (KL) Sdn Bhd Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan Malaysia Tel : 03-7720 1188 Fax : 03-7720 1111

We apologise for any inconvenience caused. Thank you.

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ANNUAL REPORT - malaysiastock.biz ANNUAL REPORT - JAVA BERHAD (2511 – M) TABLE OF CONTENTS . CORPORATE INFORMATION 2 . CORPORATE STRUCTURE 3 . PROFILE OF DIRECTORS 4 . ... Agronomy

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