MANAGEMENT DISCUSSION & ANALYSIS HUMAN CAPITAL … Sime Darby Oils, Research & Development), focusing first on enhancing leadership and technical capabilities. With that in mind, With

Our Strategic ContextSime Darby Plantation

47Annual Report // 6-Month Financial Period Ended 31 December 2018

MANAGEMENT DISCUSSION & ANALYSIS

HUMAN CAPITAL DEVELOPMENT

CULTURE AND HEALTH TRANSFORMATION

It has been more than a year since we first charted our own course as a pure-play entity. Our transformation journey, anchored on our commitment to strengthen and sustain performance excellence, continues to gain momentum.

RISE to APEX, our call to action that focuses on driving value creation and sustaining it through Organisational Health, progressed from measuring the current state of our health via the Organisational Health Index (OHI) to holding engagement sessions with employees from all business segments globally to influence optimal health. These sessions focused on identifying management practices that are crucial to the success of the department’s or Group’s strategy and developing action plans for areas that needed improvements.

The engagement sessions resulted in a better understanding of the concept of Organisational Health, its importance in sustaining performance and development of plans focused on actions and behaviours that influence optimal health. True to our culture of accountability, the senior management team affirmed their commitment to this initiative by championing the rollouts to identify action plans for their departments or operating units.

The chart below illustrates the three-stage approach that the organisation has undertaken and will focus on in its culture and health transformation - Measure, Focus and Act and Embed.

FocusAction planning with focus on actions and behaviours

to influence optimal organisational health

Act and EmbedMonitoring and

consistency in follow through to ensure efforts are

embedded throughout the organisation

MeasureOrganisational Health baseline

identification

ORGANISATIONAL HEALTH JOURNEY

JULY2018

OCT2018

2019ONWARDS

Employees attending the OHI roll-out at Higaturu Oil Palms in New Britain Palm Oil Limited A facilitated group discussion to develop result-based action plans

Our Strategic Context Sime Darby Plantation

48 Annual Report // 6-Month Financial Period Ended 31 December 2018

MANAGEMENT DISCUSSION & ANALYSISHUMAN CAPITAL DEVELOPMENT

More than 40 employee engagement sessions were carried out across five (5) countries with the intention of identifying and developing action plans to improve management practices that are crucial to the strategy of the department or operating unit.The responses gathered from these sessions are thematised into three (3) key areas as outlined in the chart below:

PRIORITISED ACTIONS TO ARRIVE AT DESIRED ORGANISATIONAL CULTURE AND HEALTH TO DRIVE BUSINESS RESULTS

Business Driven People Interventions

• Inspire employees through encouragement, guidance and recognition.• Empower through communication, consultation and delegation.• Build positive environment characterised by team harmony and care for

employees’ welfare.

• Articulate clear strategy and translate into specific goals.• Drive accountability through clear objectives and explicit performance targets.• Reward and recognise employees to motivate and encourage high

performance.

• Build employees’ knowledge and skills to effectively adapt to changes in external environment.

• Provide career and development opportunities that motivate employees. • Encourage and harness new ideas necessary to remain competitive advantage.

Innovation & Knowledge Management

Leadership & Culture

Development

Strong Performance Management

To ensure proper monitoring of action plans, our focus will be on applying a simple yet structured monitoring approach, via the WAVE system. This automated tracking system will be implemented to track the progress and achievement of the action plans, where business segments will input their status update on a monthly basis and driven by the respective business units. Periodic reporting of the completion and effectiveness of these action plans will be escalated to the Plantation Management Committee for any systemic variations that require intervention and approval at top management level.

The effectiveness of the action plans will be reviewed through a “Pulse Survey” that focuses on assessing the impact of the initiatives against the targeted management practice scores. This bi-annual survey, which will be rolled out in June 2019, will provide a snapshot of SDP’s health, whilst allowing for business segments to review and refine their action plans to achieve the desired results.

FY2019 and Forward Priorities




LEADERSHIP DEVELOPMENT

Leadership development is one of the top priorities within our organisation. We acknowledge that to deliver value in today’s competitive and volatile environment, it is important to develop leaders with the necessary capabilities and competencies to enable them to execute the strategies of the organisation. Such leaders will need to be adept at dealing with the mounting complexities of a disruptive world, while maintaining a bold and forward-thinking perspective for their organisation. SDP focuses on three fundamental capability pillars in growing our talents into such leadership profile:

Sound Technical CapabilitiesCross-Functional Enterprise

Management Capabilities Diversity Leadership Representation

Sound Technical Capabilities

Piloting with our Upstream operations, a capability building initiative was undertaken to equip our estate and mill managers with the fundamental operational capabilities and competencies that are core to their operational responsibilities. The pilot project’s objective was to ensure that the estate and mill managers’ knowledge, skills and proficiencies are thoroughly assessed against the baseline technical capabilities and competencies curriculum. Necessary areas of development are then identified and launched to grow these managers to the required level of capability.

In conducting this exercise, the areas of water management and replanting were identified as the first developmental priority for the Upstream operation-wide development initiative. 50 managers from various regions within the Malaysian operations benefited from this development intervention, which commenced in December 2018.

Cross-Functional Enterprise Management Capabilities

Aside from solid technical capabilities and skills mastery, dynamic leaders must possess the critical enterprise management capabilities that transition them from “operational leaders” to “business leaders”.

Similarly, the “assess, identify and develop” approach from the technical capabilities section revealed that Financial Management was a critical enterprise competency that Upstream operation managers will require in maintaining operational effectiveness in a cross-functional business leadership position. Specifically customised for industry and job level context, the Chartered Institute of Management Accountants (CIMA) & Incorporated Society of Planters (ISP), designed and delivered a Financial Management training session for the Regional Chief Executive Officers (RCEOs) and managers. The training session is primarily aimed at improving their knowledge and understanding on the financial aspects of their operations.

Field visit at Chersonese Estate

The Regional CEOs attending the Financial Management Training Session at Plantation Tower, Ara Damansara, Malaysia




Diversity Leadership Representation

SDP acknowledges the importance of strengthening our leadership pipeline in view of gender diversity. Starting with the Upstream leadership, a pilot development programme was mooted to improve the gender diversity within this particular leadership pool.

To this end, the first Female Manager Development Programme was introduced with the objective of enabling the women leaders’ growth, both in leadership and technical context, supporting them in their developmental journey and career. SDP’s own top female management accepted the challenge and championed this year-long programme, acting as mentors for the participants of the programme.

Our focus in FY2019 is to review and implement customised development programmes for the other business segments (i.e. Sime Darby Oils, Research & Development), focusing first on enhancing leadership and technical capabilities. With that in mind, the following initiatives, amongst others, will be introduced in FY2019.

Global Graduate Programme (GGP)

With the organisation’s focus on expanding the Sime Darby Oils operations, it is imperative that a pipeline of future leaders is created. We are developing a programme that aims to build future leaders, anchored in the areas of commercial and manufacturing. The Global Graduate Programme is designed to provide a structured and unique platform that will expose Sime Darby Oils core talent to various business segments with opportunities to be rotated globally.

This programme will cover both technical and personal effectiveness while providing real world experiences with mentorship opportunities. This would not only increase the agility and flexibility of talents in dealing with new world challenges but would also be a first step in preparing a succession pipeline.

Accelerated Skill Enhancement through Knowledge Sharing (ASK)

This programme is an initiative to accelerate operational capabilities through hands-on and experiential learning methodology to improve yield enhancement in Minamas, Indonesia. External senior planters will coach and share successful best practices and their nuanced experiences on the relevant technical areas to the selected participants. This programme is expected to be implemented in 2019.


Female managers and assistant managers in Upstream Malaysia operations are given recognition




STRONG PERFORMANCE MANAGEMENT

Conversation to Inspire Performance

Performance Management has been identified as a key component to organisational health and culture. Aside from a sound and relevant Performance Management philosophy and accompanying framework, the awareness and integration of the philosophy into the organisation are critical for effective Performance Management. As SDP continues to compete in a global market, it is critical that our people managers are equipped with the right skillsets and are able to manage a high-performing team with an open and constructive culture.

In driving this initiative, a Performance Feedback and Coaching Training Programme was launched to develop our managers in the area of people development, focusing on capabilities to provide effective feedback to their employees and to encourage frequent and meaningful performance dialogues. This initiative not only creates a positive work environment due to the frequent recognition and appreciation for outstanding performance, but also highlights the importance of enabling constructive discussion about areas of development and growth.

Two pilot sessions were rolled out to 40 estate and mill managers and senior managers across our Upstream operations in Malaysia and Indonesia. Anchored around the new Culture and Health Transformation, the focus of the pilot sessions (one for Upstream Malaysia and Upstream Indonesia respectively) revolved around improving conversation skills, building effective relationships within teams, best practices in giving developmental feedback and guide for managing common coaching challenges.

To further strengthen our Performance Management system, this programme will be extended to employees who are in managerial positions and above in Malaysia, Indonesia and Thailand to further inculcate an open culture of providing frequent and constructive feedback and recognition.


A Performance Feedback & Coaching Training programme to enable constructive discussion about areas of development and growth

Pilot training session for Upstream Managers centred around Culture & Health transformation



MANAGEMENT DISCUSSION & ANALYSIS

OUR TOTAL QUALITY MANAGEMENT

In October 2018, we launched the Innovation and Productivity Charter (IPC) to represent our commitment to maximising stakeholders’ experience by delivering sustainable prosperity across the value chain. Our IPC marks the third of our charters which will be delivered predominantly through quality management and operational excellence. The focus for our Upstream operations is to achieve a fresh fruit bunch (FFB) yield of 23 MT/ha and 23% oil extraction rate (OER) by 2023. The focus for our Sime Darby Oils Operations is to strive to ensure continuous Best-in-Class processes and cost management practices which will ensure higher productivity and price competitiveness. This section focuses on key initiatives that we have delivered through total quality management.

QUALITY MANAGEMENT

Our SCRA Q+ (Structured Crop Recovery Assessment with Quality and other relevant indicators) programme aims to further realise our commitment to achieving high FFB yield and OER by increasing the efficiency of harvesting and evacuation of crops, maximising crop quality, reducing oil losses and ensuring mill efficiency.

THE EVOLUTION OF SCRA Q+ IN SIME DARBY PLANTATION

SFA

SCRA

SCRA Q+

• Started Sept’10• Normal individual

assessment • Criteria: *UCLF, *UHB,

*HBL, *UCLF/CP• Manual

• Normal individual assessment

• Assessment Criteria: Infield UCLF, UHB, HBL,

Platform UCLF• *SFA System

- Dec’11 – Peninsular- Apr’12 – East Malaysia

• Group assessment• Assessment started:

- May’14 – Peninsular- Nov’14 – East Malaysia

• *SFA System• Assessment Criteria:

- Crop Recovery- Field Husbandry

(Observation)

• Group assessment (SOU basis) • Started Jul’17 for both

Peninsular and East Malaysia• Assessment Criteria:

- SCRA: Crop Recovery, Crop Quality & Freshness

- *SORA: 10 assessment areas including mill losses

- Rubber: Quality & Hygiene Assessment

Field Assessment

The competencies and skills of our people are the main contributors to the success of the SCRA Q+ programme. To date, the assessment team comprises six (6) lead assessors for SCRA and four (4) lead assessors for SORA, and is assisted by 53 FFB Graders (certified by the Malaysian Palm Oil Board).

In the period under review, we further deployed the SCRA Q+ programme at Ramu Agri Industries Limited (RAIL) in NBPOL, Papua New Guinea (PNG) and Sime Darby Plantation Liberia (SDPL), Liberia and will continue to expand the programme at all our operations in Indonesia and PNG.

*SFA System: Structured Field Assessment System*UCLF: Uncollected Loose Fruit

*UHB: Unharvested Bunch*HBL: Harvested Bunch Left

*UCLF/CP: Uncollected Loose Fruit per Collection Point *SORA: Structured Oil Recovery Assessment



MANAGEMENT DISCUSSION & ANALYSISOUR TOTAL QUALITY MANAGEMENT

OPERATIONAL EXCELLENCE

Our Operational Excellence and Innovation Business Management Strategy (OEIBMS) 2.0 through Lean Six Sigma focuses on continuous improvement processes and performance across our businesses by developing our people with Lean Six Sigma competency. In the financial period ended December 2018, we successfully completed 723 projects on revenue generation, cost savings, cost avoidance and other non-financial indicators such as safety, water, waste and carbon emissions.

TOTAL NUMBER OF PROJECTS COMPLETED IN F INANCIAL PERIOD ENDED DEC 2018

Our success to date is attributed to our pool of talented people. Our Champion workshops which targeted managers and senior leadership have trained 240 champions. Throughout 2018, we have produced five (5) certified master black belts, 13 ASQ certified black belts, 56 black belt internal consultants and 1,068 practitioners.

OPERATIONAL EXCELLENCE PRACTITIONERS ACROSS THE GROUP

Champions Trained

240Certified Master

Black Belts

5ASQ Certified Black Belts

13Black Belt

Internal Consultants Trained

56Practitioners

Trained

1,068

Upstream Malaysia

Upstream Indonesia

Downstream

Procurement

R&D

322

212

167

1111



MANAGEMENT DISCUSSION & ANALYSISOUR TOTAL QUALITY MANAGEMENT

WAR ON WASTE PARTICIPATION RATE BY OPERATING UNIT

TargetActual

WOW 1.0FY2016

20%16%

WOW 2.0FY2017

40%

55%

WOW 3.0FY2018

50%

66%

WOW 4.0FY2019

60%

WOW 5.0FY2020

80%

In January 2019, our internal “War on Waste” programme was awarded the “Most Innovative Approach to Driving Culture Change” at the OPEX Business Transformation World Summit 2019 in Orlando, USA. This culture change programme was established in late 2015 and is now in its third instalment, successfully generating over 5,000 projects from 223 operating units (66%) across our operations and support services in FP December 2018. The fourth edition of the War on Waste (WOW 4.0) programme will see the introduction of the “Clone Protocol” framework - a platform to capture successful projects and replicate them throughout the business.

In applying LSS methodology across our value chain, we deployed the 5S system in our working environment. In the FP December 2018, we have internally certified a total of two (2) operating units from our Upstream Indonesia’s Kalimantan Selatan & Sebamban (KSS) and Riau Utara & Aceh (RUA) regions, and re-certified a total of five (5) operating units from our Upstream Malaysia’s Northern and Sabah regions.

For more details of our Total Quality Management efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com

SDP won the “Most Innovative Approach to Driving Culture Change” award at the OPEX Business Transformation World Summit 2019 in Orlando, USA for the Group’s War on Waste (WoW) programme

Ensuring Sustainable ValuesSime Darby Plantation


OUR SOCIAL PERFORMANCE

The implementation of the Innovation and Productivity Charter (IPC) aims to improve productivity of not only our operations but also our workforce. We will therefore continue to focus on improving the way we manage the safety and health of our workforce and on how we deliver on our responsibility to respect human rights throughout our business operations.

OUR WORKFORCE STATISTICS AS AT 31 DECEMBER 2018

95,537

92,057 1,790 1,085 90515

Dec 2017 2.66%

SIME DARBY OILS

HEAD OFFICE AGRI BIO & RENEWABLES

UPSTREAM R&D

12,805

79,334

3,398Executive

81%

19%Female

Male

Non-Executive

Worker

GENDER

POSITION

42.2%

30.0%

23.0%

2.4% 1.4% 1.0%

RESPECTING HUMAN RIGHTS

For the period under review, we continued our efforts in operationalising our commitments to our Human Rights Charter (HRC) which is in line with the United Nations Guiding Principles (UNGP) on Business and Human Rights. Through due diligence processes, we identified a number of salient issues and are currently developing mitigation measures and improvement plans to address them. For the full HRC, please visit our website at www.simedarbyplantation.com. Some of these issues are highlighted in this report. Further details on initiatives impacting our people and our communities is encapsulated in our “Supplementary Progress Report on Sustainability 2018” which is available on our website at www.simedarbyplantation.com. Our progress report on human rights is also enclosed in our Modern Slavery and Human Trafficking Statement FY2018 (July – December).

Malaysia Indonesia Papua New Guinea

Liberia Solomon Islands

Ensuring Sustainable Values Sime Darby Plantation



ERADICATING EXPLOITATION

Currently, Sime Darby Plantation (SDP) has a total staff strength of 95,537, with over 80% of workers in fields, mills and refineries across the globe. Within the Upstream sector in Malaysia, over 24,000 workers are migrant labourers mostly from Indonesia, India, Bangladesh and Nepal.

Bangladeshi

Indian

Indonesian

Nepalese

Others

6%5% 2%

23%

64%

BREAKDOWN OF MIGRANT WORKERS IN MALAYSIA BY COUNTRY OF ORIGIN AS AT DECEMBER 2018

We continue to monitor and evaluate our migrant workers recruitment procedures in Malaysia. As far as possible, recruitment is conducted directly by our own teams in the countries of origin. In these countries, all briefing materials and contracts are translated into the relevant local languages to ensure potential workers understand and accept their positions voluntarily.

We work closely with our partners in the workers’ countries of origin to understand various administrative costs incurred by them. Throughout the recruitment process, we ensure all potential candidates understand that SDP does not impose a recruitment fee.

In our efforts to eradicate exploitation, we continued to monitor the handover of passports to our migrant workers in 124 estates and 34 mills in Malaysia. This initiative is aligned with our commitment of ‘not withholding passports’ to ensure that our workers are given freedom of movement. Newly hired workers are also reminded to ensure they are in possession of their identification documents prior to leaving their country of origin during our recruitment sessions.

ENSURING FAVOURABLE WORKING CONDITIONS

In September 2018, SDP rolled out an initiative three (3)months ahead of the Malaysian government’s minimum wage enforcement to ensure a fair wage rate for workers in our Malaysian operations. The national Malaysian minimum wage for the period under review was RM1,000 per month for workers in Peninsular Malaysia and RM920 per month in East Malaysia.

In addition, SDP ensures workers are provided with decent living and working conditions through productivity-based income incentives as well as various free and subsidised benefits. These include, among others, free accommodation, potable water, supply of rice, subsidised electricity, free medical treatment for employees and their immediate dependants, as well as various amenities such as school bus transport for employees’ children and recreational facilities.

IMPROVING GRIEVANCE MECHANISM

In November 2018, we collaborated with Nestlé and ELEVATE on a programme to provide an independent third party helpline for our workers in Malaysia. The goal of the helpline is to provide an effective avenue for workers to report on working conditions, recruitment, safety and other issues that may affect them directly or indirectly via a technology-enabled communication channel. More information can be found in SDP’s Modern Slavery and Human Trafficking Statement FY2018 (July – December).

Freedom of Association

Country

Number of Collective

Agreements

Number of employees

covered under Collective

AgreementsMalaysia 10 28,380Indonesia 37 29,878Papua New Guinea 1 21,609South Africa 1 68Netherlands 1 194Liberia 1 2,169Vietnam 1 232

Table: Breakdown of collective agreements and number of workers covered under the agreements as at December 2018

In localities where formal unions do not exist, comparable means of representation are created, such as joint consultative councils and other similar platforms for workers to raise their concerns and safeguard their rights. Our goal is to ensure our workers, including non-union members (approximately 30% of the workforce) have proper channels to air their grievances.




The foundation has been laid for a management response and accountability framework at the plantation level, which is survivor-friendly and progressive in terms of women and children’s human rights standards. This should be replicated with higher management as well as making this workshop a staple, alongside conducting a refresher session once every six (6) months.

Women’s Aid Organisation (WAO) Malaysia

ELIMINATING VIOLENCE AND SEXUAL HARASSMENT

For the period under review, SDP collaborated with Women’s Aid Organisation (WAO) and Yayasan Sime Darby (YSD) on gender-based issues through empowerment programmes on the ground, which helped respondents to better understand, identify, respond and manage social issues at the estate level, specifically sexual harassment and domestic violence.

Seven (7) sessions have been conducted across four (4) regions in Peninsular Malaysia. More than 200 participants made up of gender committee members, auxiliary police as well as hospital and medical assistants attended the two-day workshops. Key outcomes from the workshops include recommendations on action plans, for greater awareness on these issues within our operations.

We aim to complete the roll out of the programme in Sarawak and Sabah by 2019. The Gender Committees in our plantations have been empowered to monitor and evaluate outcomes of the programme. Upon completion, a more focused and targeted set of trainings will be developed to equip key functions, to prevent and eliminate gender-based violence in our plantations.

For more details on our Social Performance efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” and our Sime Darby Plantation Modern Slavery and Human Trafficking Statement FY2018 (July to December) which can be found on our website at www.simedarbyplantation.com

One of the seven gender-empowerment programmes conducted in FP December 2018



OCCUPATIONAL SAFETY AND HEALTH PERFORMANCE

The Group regrets to report four (4) fatalities or Class 1 accidents during the period under review and a Fatality Rate (FAR) of 3.3 (3.3 fatalities for every 100 million hours worked). This is a 10% increase from the previous year. The causes of these fatalities were work-related transport (2), machinery (1) and contact with hot substance (1). The accidents occurred in Papua New Guinea (2), Indonesia (1) and Malaysia (1).

OCCUPATIONAL FATALITIES

2

1

43

1

311

2

Upstream Malaysia

Upstream Indonesia

NBPOL

During this reporting period, four (4) accidents resulted in permanent disability injuries. These Class 2 accidents were also recorded in Papua New Guinea (1) and Malaysia (3) and were due to machinery (3) and electrocution while harvesting (1). With such an unfortunate number of cases, the Group is determined to continue with mitigation efforts such as safety programmes to keep our workers safe.

During the review period, the Group recorded a Loss Time Injury Frequency Rate (LTIFR) of 13.0, (13 injuries per million hours worked). This marks a 2% increase compared to the previous year.

The Group also recorded a total of 6,243 lost days within the financial period under review, with Total Recordable Severity Rate (TRSR) of 52.0 (52 lost days for every million hours worked). This marks a 36% reduction compared to the previous year.

LOST TIME INJURY & LOST TIME INJURY FREQUENCY RATE

FY16/17FY15/16 FY17/18 FP2018

SDP LTI Cases SDP LTIFR

19.7

23.7

0 0.0

2,000

5.0

10.0

15.0

25.0

20.0

4,000

6,000

12.8 13.0

1,562

2,943

4,685

5,903

Overall, there has been a 45% reduction in accident rates since FY2016. These statistics will serve as a reminder for us to continue ensuring the safety and health of our employees at work.

KEY INTERVENTION PROGRAMMES

In 2018, we launched our latest initiative dedicated to ensuring the safety and health of our employees, contractors and visitors under the banner of iCARE (Intervention, Communication, Accountability, Risk Mitigation and Excellence).

Training programmes are organised to inculcate the culture of responsibility and accountability in our operating units. The trainings include long-term programmes such as the Building Estate Sustainability and Transformation (BEST) programmes, Cadet Planters and Cadet Engineers, as well as short-term programmes such as Ergonomics & Manual Handling and Safe Chemical Handling. Basic Occupational First Aiders (BOFA) training is also conducted to equip employees with life-saving first aid knowledge. During the period under review, a total of 260 employees from our operating units within Malaysia were certified as occupational first aiders. In addition to programmes designed to tackle unsafe acts, we also continue to improve our approach to eradicate unsafe conditions.

45%reduction


FY16/17 FY17/18 FP2018



Various assessment programmes have been introduced to ensure significant risks are mitigated. These include HIRAC (Hazard Identification, Risk Assessment and Risk Control), HAZOP (Hazard and Operability Study) and CHRA (Chemical Health Risk Assessment). We strive to prevent major accidents by identifying unsafe conditions and unsafe acts and ensuring monitoring through the SIME card (Spot, Intervene, Modify, Execute) initiative and PIIRO (Preventing Incidents by Identifying Hazards, Reporting Near Misses and Observing & Recognising Positive Safety Behaviour) initiative. For the review period, the Group recorded a total of 60,318 SIME cards, equivalent to the number of potential accidents which were successfully prevented. This was a 65% increase compared to the corresponding period in the previous year.

During the period under review, 35 OUs received the OSH Award from the Malaysia Society of Occupational Safety & Health (MSOSH) in various categories such as Gold Merit (2), Gold (28) and Silver (5), as well as the Highest Participation Award for the third consecutive year. In Indonesia, 21 of our estates and mills received the National Zero Accident Award from the Indonesian authorities.

LEGAL COMPLIANCE

During the period under review, the Group maintained full compliance to OSH legal requirements when it recorded zero (0) case of non-compliance to OSH legal requirements.

For more details on our Occupational Safety & Health efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com


A Mini Tractor Grabber (MTG) complete with safety bar and cage



OUR ENVIRONMENTAL IMPACT

The commitments and initiatives laid out in our Innovation and Productivity Charter (IPC) is aligned with our long-term goal to reduce our physical footprint, use more renewable resources and recycled material, optimising our ability to produce more in meeting the increasing needs of a growing global population. In our efforts to minimise environmental harm, we are guided by our Responsible Agriculture Charter (RAC), which lays down our commitment in “No Deforestation and No Development on Peatland”. Beyond regulatory requirements, we also strive to minimise our carbon footprint, protect biodiversity in our landscapes, and ensure responsible waste and water management.

CARBON AND ENERGY

2018 Performance

This year, we continue to collect and calculate emissions for our palm oil and rubber operations throughout the calendar year 2018 using the RSPO PalmGHG calculator version 3 and the GHG Protocol accounting standard. We used the RSPO PalmGHG calculator to measure emissions from land use change (LUC) due to replanting and new planting activities. The operational emissions data was collected and calculated in accordance with the GHG Protocol accounting standard.

From 1 January to 31 December 2018, our absolute Greenhouse Gas (GHG) footprint was around 4.89 million tonnes of carbon dioxide equivalent (tCO2-e). Our analysis shows that methane emissions from palm oil mill effluent (POME) represent around 42% of our total GHG footprint, while emissions from LUC accounts for 33%. However, it should be noted that emissions from previous LUC continue to be included in our emissions calculations today. A detailed breakdown of our GHG emissions is illustrated in the graph on the right:

Land Use Change

Effluent Treatment

Fertilisers

Boilers

Purchased Electricity

Electricity Generation

Machineries (Heavy Machineries, Agricultural Machineries & Other Stationary Machineries

Transport (Controlled Vehicles)

Purchased Steam

BREAKDOWN OF GHG EMISSIONS IN 2018

40.5%

37.5%

6.2%

6.7%

3.1%2.1%

1.4%1.9%

0.7%

DEFORESTATION LINKED TO MAJOR AGRICULTURAL COMMODITIES

TOTAL FOREST LOSS, 1990 – 2008 (MILLION HECTARES)

= 1 million ha Production Export

AVERAGE ANNUAL FOREST LOSS, 2001 – 2011 (MILLION HECTARES)

Livestock

Beef and other ruminant products

Pig and poultry

Livestock

Beef

Crops

SoyMaize

Palm OilWood products

RiceSugarcane

Rubber

Crops

Soybean

Palm Oil

Wood production

The main commodities driving deforestation, from the analysis of Climate Focus based on two (2) different data sources. Climate Focus has concluded that the more important a commodity is, the less likely that a company will have pledged to eliminate the deforestation that it’s causing. The report is featured in the “Progress on the New York Declaration on Forests - Goal 2 Assessment Report & Update on Goals 1-10.”

Million hectares/year0 1 2 3

13%Exports

44% Exports

40% Exports

33% Exports

Source: Climate Focus calculations based on European Commission, 2013 Source: Henders et al., 2015

*Numbers may not add up to 100% due to rounding up of figures




ANNUAL GHG EMISSIONS INTENSITY TREND(Includes data from Liberia and NBPOL from 2015 onwards)

Emissions Intensity Target = 0.64 tCO2-e/ CPO produced

2009(baseline)

2015 2016 2017 2018

1.02 1.20 1.13 1.091.06

In 2018, we achieved an emissions intensity of 1.09 tCO2-e/t CPO (tonnes of carbon dioxide equivalent per volume of production (tCO2e/t CPO), which represented a 5% increase from the baseline figure. In consideration of the current challenging business environment, and with less than two (2) more years to meet our original target of 40% emissions reduction from the baseline level of 2009, we have concluded that a revision of the entire carbon reduction strategy for our upstream operations was necessary. As such, during the period under review, the Group has decided to extend the target date to achieve the desired emissions reduction level by another 10 years, setting a more realistic and achievable target year date of 2030, from the initial commitment of year 2020.

We consumed 30 million gigajoules (GJ) of energy in 2018, marking a decrease of 14% from the previous year. This was mainly due to lower energy demand from our NBPOL operations. Most of the energy used by boilers are still from renewable sources such as biomass (palm kernel shell and fibre), which contributed to 84% of SDP’s overall energy needs. This initiative has avoided approximately 1.8 million tCO2-e of emissions had diesel been used instead.

Renewables

ENERGY BREAKDOWN BY SOURCE

84% 16% 7%

5%

1%

3%

Non-Renewable Sources Diesel

Electricity

Mediumfuel oil

Natural gas

Carbon Reduction & Renewable Energy Initiatives

As of 2018, we operate nine (9) biogas facilities within Malaysia, Indonesia and PNG. These include five (5) facilities at our palm oil mills in Malaysia, two (2) plants at our kernel crushing plants in Indonesia and two (2) in NBPOL, PNG. These biogas facilities contributed to an 8% reduction in GHG emissions.




In 2018, the two (2) biogas facilities in Malaysia - Flemington biogas facility in Bagan Datuk, Perak, generated 7,986 MWh while the Hadapan biogas facility in Kulai, Johor, generated 6,984 MWh – which contributed to the renewable energy mix in the national grid. In addition, the Tennamaram, Merotai and West Oil Mills in Malaysia commenced methane flaring in 2017, while the two (2) kernel crushing plants in Indonesia - Pemantang and Rantau - commenced methane flaring in 2018.

In NBPOL, the Mosa biogas facility supplies 900 kW to the PNG power grid and has another 1.6 mW available for Group operations and housing compounds. The Kumbango biogas facility is mostly dedicated to powering the refinery where 900 kW directly replaces diesel generated power. Power is also directly supplied to their boilers, which is equivalent to 1.6 mW in gas. This equates to a saving of approximately 15,000 litres of diesel per day.

BIODIVERSITY

Tree planting has been one of our biggest conservation efforts, aiming at preserving endangered plant species and creating wildlife corridors that are critical to various animal species. In total, we have set aside 39,997 ha of High Conservation Value (HCV) areas for conservation across our global operations.

In Malaysia, we have successfully planted 1,367,901 trees over 10 years, which is part of a bigger programme with Yayasan Sime Darby (YSD) and the Forest Research Institute Malaysia (FRIM). This achievement comprises four (4) projects – the Sime Darby Plant-A-Tree (SDPAT) programme; the reforestation and rehabilitation of Orang Utan habitats in Northern Ulu Segama with the Sabah Forestry Department; the Kinabatangan RiLeaf Project with Nestlé Malaysia; and the peat swamp protection and rehabilitation project in the Raja Musa Forest Reserve with Global Environment Centre (GEC).

Since 2014, 69,911 trees have also been planted on 426.5 ha in PNG. In West New Britain, we are working with a local school and an environmental NGO to restore 86 ha of mangrove forest and planted 10,914 saplings of Rhizophora sp. and Bruguiera sp. sourced from a community-based nursery.

FIRE AND HAZE

Since the launch of the Sime Darby Hotspot Alert Dashboard in 2015, we have been actively monitoring and managing fire and haze issues within SDP’s operational areas. For the period under review, data from MODIS, VIIRS, and NOAA satellites detected a total of 604 fire hotspots.

LocationNo. of fire detected by

satellitesMalaysia 2Indonesia 596Liberia 1Papua New Guinea 7Overall 606

Table: Fires detected by satellite (Jul-Dec 2018)

Based on the data, Indonesia recorded the largest number of potential fires. Out of the 606 fires, on-the-ground verification confirmed that 94% were actual fires. From these, 559 fires occurred outside of our estate boundaries. Indonesia is located near the equator and has high humidity condition, which means naturally-occurring land fires are very rare. Upon investigations, majority of these fires were caused by the local community conducting land clearing for farming practices such as paddy-planting, especially in Kalimantan and Sumatra.

In Indonesia, we strive hard to develop prevention systems on the ground to control land fires. To date, we have 72 watchtowers that are 15 metres high to enhance our surveillance in strategic locations throughout our Indonesian estates. Simultaneously, we also implemented community-based fire prevention programmes in collaboration with local universities to ensure our prevention efforts begin at the field/village level. Since the programme’s inception in 2015, local communities in high risk areas have become more aware about ways to conduct land preparation without slash and burn activities and implement composting practices.

Jul 2018 Aug 2018 Sep 2018 Oct 2018 Nov 2018 Dec 2018

NO. OF F IRES DETECTED BY SATELLITE IN INDONESIA (JUL-DEC2018)

0

50

100

150

200

250

300

350

400

450

500

23

444

9232 1 4

For more details on our Environmental Performance efforts, which also include environmental management, water and waste, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com

How We Are GovernedSime Darby Plantation


HOW WE ARE GOVERNED

64 Our Board of Directors70 Our Leadership Team72 Profile of Leadership Team75 Corporate Governance Overview Statement84 Governance & Audit Committee Report90 Nomination & Remuneration Committee Report96 Risk Management Committee Report98 Sustainability Committee Report102 Board Tender Committee Report104 Statement on Risk Management and Internal Control110 Statement of Responsibility by the Board of Directors

How We Are Governed Sime Darby Plantation


Nationality Malaysian

Gender Male

Age 64

Date of Appointment 30 December 2010

(Appointed as the Executive Deputy Chairman & Managing Director of Sime Darby Plantation Berhad on 21 November 2017)

AREAS OF EXPERTISE:Economics, Finance and Management

RELEVANT EXPERIENCE:Former President & Group Chief Executive of Sime Darby Berhad, Group President & Chief Executive Officer (CEO) of Felda Global Ventures Holdings Berhad, Group Managing Director (MD) of Felda Holdings Berhad and Group MD and CEO of Lembaga Tabung Haji. Former Director, Property Division of Pengurusan Danaharta Nasional and MD of Federal Power Sdn Bhd, Syarikat Perumahan Pegawai Kerajaan Sdn Bhd and Electra House Sdn Bhd. Former Group General Manager of Island & Peninsular Group. Presently, the Chairman of the Malaysian Palm Oil Board, Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Malaysian Institute of Accountants.

DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES:Listed Issuers:Eastern & Oriental Berhad

Public Companies:Yayasan Sime Darby

TAN SRI DATO’ SERI MOHD BAKKE SALLEHExecutive Deputy Chairman & Managing Director

OUR BOARD OF DIRECTORS


Gender Male

Age 72

Date of Appointment 1 July 2013

AREAS OF EXPERTISE:Public Administration and Economics

RELEVANT EXPERIENCE:Began his career with the Faculty of Economics, University of Malaya and has held various positions in the Malaysian Government including Deputy Minister of Energy, Telecommunications and Post, Deputy Minister of Finance, Minister of Youth and Sports and Chief Minister of Johor. Former Chairman of Sime Darby Berhad, Sime Darby Property Berhad and Johor Corporation. Current member of the Board of Trustees of the World Islamic Economic Forum (WIEF) Foundation.

DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES:Listed Issuers:None

Public Companies:None

TAN SRI DATO’ A. GHANI OTHMANChairman, Non-Independent Non-Executive Director

Governance & Audit Committee

GAC Nomination & Remuneration Committee

NRC Risk Management Committee

RMC Sustainability Committee

SC Board Tender Committee

BTC

OUR COMMITMENTGovernance is not just about adherence to a set of recommendations. It is a way of doing business and is at the heart of everything we do.





Gender Male

Age 70


AREAS OF EXPERTISE:Plantation and Research & Development

RELEVANT EXPERIENCE:Former Chief Executive Officer of the Malaysian Palm Oil Council and Director-General of the Malaysian Palm Oil Board and Palm Oil Research Institute of Malaysia. Past President of the Academy of Sciences Malaysia. Former Director of Bank Negara Malaysia and Federal Land Development Authority (FELDA). Senior Fellow of the Academy of Sciences Malaysia and Fellow of the Malaysian Oil Scientists’ and Technologists’ Association and the Incorporated Society of Planters.

DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES:Listed Issuers:CB Industrial Product Holding Berhad


TAN SRI DATUK DR YUSOF BASIRANIndependent Non-Executive Director

NRC BTC

Chairman Chairman

Nationality Indonesian

Gender Male

Age 49

Date of Appointment 24 November 2015

AREAS OF EXPERTISE:Trading, Oil & Gas and Power Utilities

RELEVANT EXPERIENCE:Former President Director and Chief Executive Officer of Mahaka Group of Companies. Former National Chairman of the Indonesia Young Entrepreneurs Association (HIPMI) and Chairman of the Indonesia Coordinating Board of Investment. Former Ambassador Extraordinary and Plenipotentiary to Japan and the Federated States of Micronesia and Minister of Trade of the Republic of Indonesia. Current President Commissioner of PT Medco Energi International Tbk.



MUHAMMAD LUTFIIndependent Non-Executive Director

SC




Gender Male

Age 55


AREAS OF EXPERTISE:Finance and Investment Management

RELEVANT EXPERIENCE:Over 20 years of experience in the finance sector. Held various senior positions in Permodalan Nasional Berhad (PNB) including Senior Vice President of Finance and Investment Processing Division, Chief Financial Officer (CFO) and Group CFO. Presently, the Deputy President and Group CFO of PNB. Holds an Executive Masters in Business Administration. A Certified Financial Planner since 2002. Fellow of the Association of Chartered Certified Accountants and member of the Malaysian Institute of Accountants.


Public Companies:Pengurusan Pelaburan ASN Berhad

DATO’ MOHD NIZAM ZAINORDINNon-Independent Non-Executive Director

GAC NRC


Gender Female

Age 62

Date of Appointment 24 February 2016

(Appointed as Senior Independent Non-Executive Director of Sime Darby Plantation Berhad on 14 July 2017)

AREAS OF EXPERTISE:Banking and Finance

RELEVANT EXPERIENCE:Has working experience in PricewaterhouseCoopers, Bank Pembangunan (M) Bhd and Bapema Corporation Sdn Bhd. Has served 12 years with Maybank in various senior positions including that of General Manager, Group Strategic Planning. Former President/Executive Director of Malaysian Rating Corporation Berhad. Current Chairman of the Private Pension Administrator Malaysia and Chief Executive Officer of the Malaysia Professional Accountancy Centre. Fellow and Council Member of the Association of Chartered Certified Accountants and member of the Malaysian Institute of Accountants, Malaysian Institute of Certified Public Accountants, International Federation of Accountants (IFAC) Professional Accountants in Business (PAIB) Committee and Vice Chairman of FIDE Forum.


Public Companies:Bank Pembangunan Malaysia Berhad (Chairman)

DATUK ZAITON MOHD HASSANSenior Independent Non-Executive Director


GAC NRC RMC

Chairman




Gender Male

Age 60


AREAS OF EXPERTISE:Investment Management and Economics

RELEVANT EXPERIENCE:Held various senior positions in the Employees Provident Fund (EPF) including Senior Manager of Investment and Economics Research Department, Company and Intermediary Supervision Division and Equity Investment Department. Former General Manager of International Equity Department. Currently the Deputy Chief Executive Officer of the Investment Division of EPF.

DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES:Listed Issuers:Yinson Holdings BerhadMalaysian Resources Corporation Berhad

Public Companies:PLUS Malaysia Berhad

DATO’ MOHAMAD NASIR AB LATIFNon-Independent Non-Executive Director

SC SC


GAC NRC

Nationality British

Gender Male

Age 74

Date of Appointment 5 April 2019

AREAS OF EXPERTISE:Finance and Plantation

RELEVANT EXPERIENCE:Over 35 years of experience in the Plantation Industry including Finance Director of Barlow Boustead Estates Agency Sdn Berhad and Joint Managing Director of Highlands & Lowlands Berhad. Former Board member of Sime Darby Berhad and HSBC Bank Malaysia Berhad. Former Council Member of the Incorporated Society of Planters and Joint Chairman of the Roundtable on Sustainable Palm Oil (RSPO) Biodiversity Technical Committee. Currently Joint Chair of the Grievance Committee of the RSPO, Fellow of the Institute of Chartered Accountants in England and Wales and Honorary Treasurer of the Malaysian Branch of the Royal Asiatic Society.



DATO’ HENRY SACKVILLE BARLOWIndependent Non-Executive Director

Chairman




Gender Female

Age 50


AREAS OF EXPERTISE:Equity Research and Investment Analyst

RELEVANT EXPERIENCE:Has served over 23 years with Credit Suisse Malaysia. Head of Equity Research in Credit Suisse Malaysia from 2010 until her retirement in 2017. Led the team to top the Institutional Investor polls for seven (7) consecutive years, 2010 to 2017. Has also served as the Malaysian equity strategist and the regional plantations head for Credit Suisse.

DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES:Listed Issuers:IJM Corporation Berhad


TAN TING MINIndependent Non-Executive Director

GAC RMC BTC


Gender Male

Age 65


AREAS OF EXPERTISE:Legal, Business and Regulatory Affairs

RELEVANT EXPERIENCE:Enrolled as an Advocate and Solicitor of the Supreme Court of Singapore and the High Court of Malaya. Served as a First Class Magistrate in Brunei Darussalam and was Company Secretary of Harrisons Malaysian Plantations Berhad. Founder and Senior Partner of Zainal Abidin & Co. Presently the Chairman of Global Humanitarian Fund, a company limited by guarantee in the United Kingdom.


Public Companies:Maybank Islamic Berhad (Chairman)Padu Corporation (Limited by Guarantee) (Chairman)Lam Soon (M) Berhad

ZAINAL ABIDIN JAMALNon-Independent Non-Executive Director


RMC SC BTC

i. Dato’ Mohamad Nasir Ab Latif is a nominee Director of the Employees Provident Fund Board.

ii. The nominee Directors of Permodalan Nasional Berhad are as follows:

• Tan Sri Dato’ A. Ghani Othman;• Dato’ Mohd Nizam Zainordin; and• Zainal Abidin Jamal.

Additional Information1. Save as disclosed herein, none of the Directors has any family relationship

with and is not related to any director and/or major shareholder of Sime Darby Plantation Berhad, nor has any personal pecuniary interest in any business arrangement involving the Group:

Chairman



Nationality Singaporean

Gender Male

Age 64


AREAS OF EXPERTISE:Trading and Investment Management

RELEVANT EXPERIENCE:Has a wealth of industry experience in the edible oil sector spanning over 38 years managing investments and businesses of edible oil and grains trading, shipping, storage terminals, refineries and biofuel manufacturing, as well as investor & advisor to a leading physical palm brokerage. Presently, the Founding Chairman of Charleston Holdings Pte Ltd, a private investment group which controls subsidiaries and investments ranging from trading, brokerage, property development and logistics.



LOU LEONG KOKIndependent Non-Executive Director


RMC


Gender Female

Age 58


RELEVANT EXPERIENCE:Held various senior positions in Kumpulan Guthrie Berhad including Manager, Group Chief Executive’s Office, Controller, Corporate Business Development and Monitoring, Director, Corporate Business Development and Human Resource and Head, Group Legal & Compliance. Has working experience in many areas, among others, investment analysis, money market trading, corporate secretarial and legal as well as a Manager in the Group Chief Executive’s Office in Permodalan Nasional Berhad. Former Group Secretary of Sime Darby Berhad.

QUALIFICATIONS:• Degree in Law from the University of Malaya• Admitted to the Malaysian Bar• Licensed Company Secretary

Note:The full profile of the Group Secretary is available online in the Senior Management section at www.simedarbyplantation.com

NORZILAH MEGAWATI ABDUL RAHMANGroup Secretary

2. Other than traffic offences, none of the Directors has any conviction for offences within the past five (5) years nor public sanctions or penalties imposed by the relevant regulatory authorities during the financial period. None of the Directors has any conflict of interest with Sime Darby Plantation Berhad.

3. The details of Directors’ attendance at Board Meetings held in the financial period ended 31 December 2018 are set out in the Corporate Governance Overview Statement on page 75 of this Annual Report.

4. The full profiles of the Directors are available online in the Board of Directors section at www.simedarbyplantation.com



OUR LEADERSHIP TEAM

Chief Operating Officer, Downstream

MOHD HARIS MOHD ARSHADChief Financial Officer

RENAKA RAMACHANDRANChief Advisor & Value Officer

DATUK FRANKI ANTHONY DASS

Group Secretary Chief Communications Officer

NORZILAH MEGAWATI ABDUL RAHMAN ELIZA MOHAMEDChief Research & Development Officer

DR HARIKRISHNA KULAVEERASINGAM

TAN SRI DATO’ SERI MOHD BAKKE SALLEHExecutive Deputy Chairman & Managing Director

02

08

03

09

04

10



OUR LEADERSHIP TEAM

Chief Human Resources Officer

ZULKIFLI ZAINAL ABIDINChief Sustainability Officer Chief Strategy & Innovation Officer

DR SIMON LORD DR SHARIMAN ALWANI MOHAMED NORDIN

Group General Counsel

LEE AI LENGChief Integrity & Assurance Officer Chief Risk Officer

NIK MAZIAH NIK MUSTAPHA GAJANI NAYAGI SEEVENESERAJAH

MOHAMAD HELMY OTHMAN BASHADeputy to Managing Director & Chief Operating Officer, Upstream

01

05

11

06

12

07

13



52 19 September 2016

Age Country Date of Appointment

PROFILE OF LEADERSHIP TEAM

Skills and Experience:Began his career as a Trainee Accountant/Auditor with Wellers, Accountants, Oxford, United Kingdom. Joined Shell Refining Company (FOM) Bhd and has held various roles including Head of General Accounts, Project Accountant, Area Accountant for Shell Malaysia Trading Sdn Bhd (Southern Region) and Indirect Tax Advisor for Shell Malaysia Ltd.

He joined Guthrie Property Holding Sdn Bhd in 1997 as Finance and Administration Manager and subsequently held various leadership positions in Kumpulan Guthrie Berhad including Chief Executive Officer of Highlands & Lowlands Berhad and Guthrie Ropel Berhad, the two (2) listed companies within the Kumpulan Guthrie Berhad Group. He was instrumental in bringing about the completion of the acquisition and restructuring exercise of PT Minamas Gemilang Plantation in Indonesia.

He was appointed Head Plantation Upstream of Sime Darby Plantation Berhad (SDPB) before he left in 2013 to set up Xcellence Alliance Sdn Bhd and Chemara Palmea Holdings Bhd. He later joined SDPB as Head, Plantation Services and Special Project in 2016 and was subsequently appointed as the Chief Operating Officer, Upstream in 2017. He was appointed to his current role on 1 January 2019. Apart from assisting the Managing Director with the overall running of the SDPB Group, he also leads the Plantation Upstream business.

Presently, he is the President of the Malayan Agricultural Producers Association.

Qualification(s):• Fellow of the Association of Chartered Certified Accountants• Member of the Malaysian Institute of Accountants

MOHAMAD HELMY OTHMAN BASHADeputy to Managing Director & Chief Operating Officer, Upstream

01

Skills and Experience:Has over 35 years of plantation management and corporate experience in Sime Darby Plantation Berhad (SDPB). He began his career with Kumpulan Guthrie Berhad (KGB) and has held various senior leadership roles in KGB rising up through the ranks to become the Chief Executive Officer, PT Minamas Gemilang, Indonesia and subsequently, appointed Managing Director of SDPB on 1 December 2010. He assumed his current position on 21 November 2017.

He is also a Board member of a number of subsidiary companies in SDPB both local and abroad.

Presently, he is the Chairman of the Malaysian Palm Oil Association, a member of the Programme Advisory Council of Malaysian Palm Oil Board, The Board of Trustees of the Malaysian Palm Oil Council and a council member of the Malaysia Productivity Corporation. He is a Fellow of the Incorporated Society of Planters (ISP) and the Malaysian Oils Scientists and Technologists Association (MOSTA).

Qualification(s):• Bachelor of Science degree in Agriculture from Universiti Pertanian

Malaysia. He has also attended various management and business programmes with the Malaysian Institute of Management (MIM), the Asian Institute of Management (AIM) and the Harvard Senior Management Leadership programmes

DATUK FRANKI ANTHONY DASSChief Advisor & Value Officer

62 1 December 2010


02

Skills and Experience:More than 20 years of experience in finance, external audit and financial advisory services. Began her career with Raj and Associates and subsequently joined PricewaterhouseCoopers (PwC). Held various senior positions/leadership roles in PwC including Executive Director. As an Executive Director, she was involved in, among others, the audit of public listed companies, review of profit and cash flow forecast and projections for restructurings and initial public offerings, due diligence and financial analysis. She has been actively involved in the Malaysian Accounting Standards Board (MASB) for the changes to IAS 41 by working on papers with the MASB for its onward discussion with the International Accounting Standards Board. She is also a member of the Accounting and Taxation Committee of the Malaysian Palm Oil Association and a member of the ACCA Accountants for Business Global Forum.

Qualification(s):• Fellow of the Association of Chartered Certified Accountants

RENAKA RAMACHANDRANChief Financial Officer

51 1 April 2011


03




Skills and Experience:He was formerly the Senior Vice President, Strategy & Value Management in Sime Darby Berhad, an Economist at Bank Negara Malaysia and had a stint as Sector Economist in Fidelity Management and Research, Boston, USA. He was appointed as Head, Strategy & Business Development of Sime Darby Plantation Berhad (SDPB) in 2014 and was redesignated as Chief Strategy & Innovation Officer in January 2018. He is also the Chief Transformation Officer of SDPB.

Qualification(s):• PhD in International Economics & Finance from Brandeis University’s

International Business School, United States of America • Bachelor’s degree in Economics from Cambridge University, United

Kingdom

DR SHARIMAN ALWANI MOHAMED NORDINChief Strategy & Innovation Officer

49 1 February 2014


07

Skills and Experience:Began his career as a trader with Cargill in Malaysia and the Philippines. He joined Nestlé in Kuala Lumpur in 2001 and subsequently moved to London to join the company’s global cocoa procurement and price risk management desk. He held various senior positions in Nestlé including General Manager and Head of Global Oils and Fats, and helped establish Nestlé’s Commodity Procurement Centre for Asia, Oceania and Africa Regions in Singapore. He was a former Director of Commodity Risk Management, Unilever Plc (Singapore) before joining Sime Darby Plantation Berhad in 2014 as Head of Global Trading and Marketing/Sime Darby Oils Manufacturing.

Qualification(s):• Bachelor of Science degree in Business Administration from the University of

Arizona, United States of America

MOHD HARIS MOHD ARSHADChief Operating Officer, Downstream

46 1 April 2014


04

Skills and Experience:Began his career as a Management Trainee at Unilever PLC - Unilever Plantations Ltd, and rose through the ranks as Business Development Manager in 1996. Held various senior leadership positions in New Britain Palm Oil Limited Group including Group Director of Sustainability for New Britain Plantation Services Pte Ltd, Head of Research and Head of Technical Services. Former Vice President/Executive Board Member of the Roundtable on Sustainability Palm Oil Board and Group Chief Sustainability Officer of Sime Darby Berhad.

Qualification(s):• Bachelor of Science degree in Applied Biology from Lanchester (Coventry)

Polytechnic, United Kingdom• PhD in Environmental Effects of Pesticides from the University of Bath,

United Kingdom

DR SIMON LORDChief Sustainability Officer

61 21 November 2017


06

Skills and Experience:Has more than 20 years of experience across the full spectrum of the human resources discipline. Held various senior positions including General Manager, Group Human Resources, Golden Hope Plantations Berhad and Group Chief Human Resources Officer, Sime Darby Berhad.

Qualification(s):• Master in International Affairs degree and a Bachelor in Business

Administration degree from Ohio University, United States of America (USA)• Attended Senior Management Development Programmes at Harvard

Business School and Peter F. Drucker School of Management, Claremont, California, USA

ZULKIFLI ZAINAL ABIDINChief Human Resources Officer

57 21 November 2017


05

08DR HARIKRISHNA KULAVEERASINGAMChief Research & Development Officer

57 1 July 2016


Skills and Experience:Began his career as a Post-Doctoral Researcher with the University of California, Davis. Joined Golden Hope Plantations Berhad as a Biotechnologist. He was a Lecturer and an Associate Professor at Universiti Putra Malaysia. Joined Sime Darby Technology Centre Sdn Bhd as General Manager, Biotechnology, where he helped establish a new technology centre with biotechnology capability, and subsequently assumed the position as Director of Research. Held various senior positions in Sime Darby Plantation Berhad including Senior Vice President II, Biotechnology and Breeding and Head Research & Development.

Qualification(s):• Bachelor’s degree in Plant Sciences from London University• PhD in Plant Molecular and Developmental Biology from Leicester

University

09

Please refer to page 69 for the profile of the Group Secretary.

NORZILAH MEGAWATI ABDUL RAHMANGroup Secretary

58 1 December 2017




Skills and Experience:Began her career as audit associate with Arthur Andersen & Co and had since accumulated over 21 years’ experience in internal and external audit, credit management and financial accounting. Held various senior positions in the Group Corporate Assurance function of Sime Darby Berhad including Head of Group Corporate Assurance – Plantation and Head of Group Corporate Assurance – Property.

She was appointed as the Acting Head, Governance, Assurance & Compliance of Sime Darby Plantation Berhad (SDPB) on 1 March 2018. She was then designated as the Chief Internal Auditor on 1 July 2018. Effective 25 February 2019, she was designated as the Chief Integrity & Assurance Officer of SDPB.

Qualification(s):• Chartered Accountant of the Malaysian Institute of Accountants • Certified Internal Auditor conferred by the Global Institute of Internal

Auditors, United States of America• Certification in Control Self-Assessment conferred by the Global Institute

of Internal Auditors, United States of America• Professional member of The Institute of Internal Auditors Malaysia • Bachelor of Accounting (Hons) degree from the Universiti Utara Malaysia

NIK MAZIAH NIK MUSTAPHAChief Integrity & Assurance Officer

44 1 March 2018



Additional Information1. None of the Senior Management has any family relationship with and is not related to any director and/or major shareholder of Sime Darby Plantation Berhad.2. None of the Senior Management has any conflict of interest with Sime Darby Plantation Berhad.3. Other than traffic offences, none of the Senior Management has any conviction for offences within the past five (5) years nor public sanctions or penalties imposed by the

relevant regulatory authorities during the financial year period.4. Directorships held by the Senior Management in public companies and listed issuers, other than companies within the Sime Darby Plantation Berhad Group, if any, are

disclosed in the Senior Management section at www.simedarbyplantation.com.5. The full profiles of the Senior Management are available online in the Senior Management section at www.simedarbyplantation.com.

12

Skills and Experience:Began her career in Ernst & Young and rose through the ranks to become a Director in the Advisory practice where she provided assurance & advisory services to various multi-national and public listed companies across a myriad of industries. She joined the Group Risk Management Department of Sime Darby Berhad as a Vice President in July 2012 and subsequently moved on to be the Head of Performance & Innovation Management for Sime Darby Berhad Group. She was appointed as Head of Portfolio Management of Sime Darby Plantation Berhad in October 2017. She was appointed as the Chief Risk Officer in June 2018.

Qualification(s):• Fellow of the Institute of Chartered Accountants in England & Wales • Member of the Malaysian Institute of Accountants • Bachelor of Arts (Hons) degree in Accounting and Financial

Management from the University of Sheffield, United Kingdom

GAJANI NAYAGI SEEVENESERAJAHChief Risk Officer

13

Skills and Experience:Has more than 25 years of experience in the areas of corporate and commercial law focusing on domestic and cross-border mergers and acquisitions, capital markets, issuance of private debt securities, joint ventures, banking and finance matters as well as real and personal property transactions. Beginning her career in private practice in 1991, she subsequently joined IOI Corporation Berhad in 1994 as the Group Legal Advisor and later served as Company Secretary as well. She was appointed as Head of Legal at Sime Darby Plantation Berhad in 2014 and was redesignated as the Group General Counsel in April 2018.

Qualification(s):• LLB (Hons) degree in Law from the University of Malaya, Kuala Lumpur• Admitted to the Malaysian Bar• Licensed Company Secretary • Diploma in Accounting and Finance (Association of Chartered Certified

Accountants)

LEE AI LENGGroup General Counsel

11

10

Skills and Experience:Held various senior leadership positions including Group Head - Corporate Affairs at Nestlé Malaysia, Group Head - Corporate Affairs & Sustainability at Maybank and Group General Manager - Group Communications at Media Prima Berhad. Served public affairs roles at Phillip Morris Malaysia and has experience in the legal profession.

Qualification(s):• LLB (Hons) degree in law from the University of Leeds, United Kingdom • Admitted as Barrister-at-law Lincolns Inn, London

ELIZA MOHAMEDChief Communications Officer

51 1 July 2017


53 1 June 2014


42 1 June 2018




CORPORATE GOVERNANCE OVERVIEW STATEMENT

As a testament to our commitment to values and ethical conduct, the Board of Sime Darby Plantation Berhad embraces the enhanced corporate governance disclosure requirements set out in Paragraph 15.25 and Practice Note 9 of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Securities).

The Board is pleased to present the Corporate Governance (CG) Overview Statement, which highlights how our Company complies with the principles and practices of the Malaysia Code on Corporate Governance (MCCG) 2017 for the financial period ended 31 December 2018 (FP December 2018). This statement is complemented with the prescribed Corporate Governance (CG) Report, which is available on the Company’s website at www.simedarbyplantation.com and should be read in conjunction with the Statement on Risk Management and Internal Control (SORMIC) and the respective Board Committees reports in the ensuing pages.

Our Corporate Governance framework has been developed based on the following statutory requirements, best practices and guideline:

• Companies Act 2016;• MMLR of Bursa Securities;• MCCG 2017; and• Corporate Governance Guide - 3rd Edition issued by Bursa Malaysia Berhad.

A summary of the Company’s corporate governance practices with reference to the MCCG 2017 is described in the following manner:

As at the date of this CG Overview Statement, the Company has applied all of the recommended practices (including Step Up) in MCCG 2017, except for the following practices:

Board Leadership and Effectiveness Effective Audit and Risk Management Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders

PRINCIPLE PRINCIPLE PRINCIPLEA B C

(refer details of Principle A on pages 77 to 81) (refer details of Principle B on page 82) (refer details of Principle C on page 83)

Practice 4.5 “The Board must have at least 30% women directors.”

Practice 12.3 “Leverage technology to facilitate voting and remote shareholders’ participation at General Meetings.”

Practice 4.3“The Board has a policy which limits the tenure of its independent directors to nine (9) years.”

Practice 7.3“Full disclosure of detailed remuneration of each member of senior management on a named basis.”

Practice 8.4“The Audit Committee should comprise solely of Independent Directors.”

Recommended Practices Step Up Practices

Detailed explanations for the above departures and non-adoption as well as measures put in place to apply the above said Practices are outlined in the CG Report. This is our commitment in promoting strong and effective governance to support better decision-making and accountability and instil stakeholders’ confidence and trust in the Company.

This statement is made in accordance with a resolution of the Board of Directors dated 5 April 2019.




The Board Committees are established to assist the Board in discharging its statutory and fiduciary responsibilities. This includes ensuring independent oversight of risk management and internal control. Terms of Reference have been established to ensure that the Board Committees remain focused on its duties enabling the Board to take a broader perspective, looking at enterprise-level issues such as strategy and governance.

To promote greater transparency, accountability and responsiveness.

To balance the operating autonomy of the various Group Companies with appropriate checks and balances and performance benchmarks.

To cultivate ethical business conduct and instil desired behaviours based on the Group’s espoused Core Values and Business Principles as set out in the Code of Business Conduct.

Group Integrity, Governance &

AssuranceExternalAuditors

Group Risk Management

Plantation Leadership Committee

Management Committee


Risk Management Committee

EDCMD Nomination & Remuneration

Committee

Sustainability Committee

Board Tender Committee

SHAREHOLDERS

Board of Directors

CORPORATE GOVERNANCE FRAMEWORK

Our Corporate Governance framework has been designed based on the following principles:

Legislation

Company Constitution

Board Charter

Policies

Procedures




BOARD LEADERSHIP AND EFFECTIVENESSPRINCIPLE ABOARD RESPONSIBILITIES

Our Board Charter sets out the Board’s strategic intent and outlines the roles and powers that the Board specifically reserves for itself, and those which it delegates to Management and in so doing, also sets the tone of the various Board Committees. The specified roles are highlighted below:

• Managing and leading Board meetings to ensure robust decision-making;• Building a high-performance Board;• Managing Board-Management interface by acting as the conduit between Management

and the Board, developing a positive relationship with the Executive Deputy Chairman & Managing Director (EDCMD);

• Acting as a spokesperson for and representative of the Board and the Group; and• Ensuring appropriate steps are taken to provide effective communication with stakeholders

and that their views are communicated to the Board as a whole.

• Acting in good faith and in the best interests of the Company;• Demonstrating good stewardship and acting in a professional manner with sound mind;• Acting with reasonable care, skill and diligence subject to the business judgement rule;• Avoiding conflicts of interest with the Company in a personal or professional capacity,

including improper use of the property, information and opportunity of the Company;• Exercising greater vigilance and professional scepticism in understanding and shaping the

strategic direction of the Company and/or Group; and• Compliance with the Companies Act, securities legislation and the Main Market Listing

Requirements.

The Senior Independent Non-Executive Director serves as a sounding board for the Chairman, an intermediary for other Directors when necessary, and the point of contact for shareholders and other stakeholders with concerns that have failed to be resolved or would not be appropriate to be communicated through the normal channels of the Chairman/EDCMD.

The EDCMD assumes the overall responsibility for the execution of the Group’s strategies in line with the Board’s direction, oversees the operations of the subsidiary companies and drives the Group’s businesses and performance towards achieving the Group’s vision and goals.

The Group Secretary is responsible for advising the Board on regulatory compliance matters and providing good information flow and comprehensive practical support to Directors, both as individuals and collectively, with particular emphasis on supporting the Non-Executive Directors in maintaining the highest standards of probity and corporate governance. All Directors have unrestricted access to the advice and services of the Group Secretary to facilitate the discharge of their duties.

SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR (SINED)

EXECUTIVE DEPUTY CHAIRMAN & MANAGING DIRECTOR (EDCMD)

GROUP SECRETARY

BOARD CHAIRMAN

INDIVIDUAL DIRECTORS

For further details, refer to the Board Charter which is available on the Company’s website at www.simedarbyplantation.com under the Governance section.



BOARD MEETINGS & ATTENDANCE

The breakdown of the Board and Board Committees meetings held as well as the Directors’ attendances at Board meetings are set out below:

Board & Board Committee Meetings held in FP December 2018

Jul’ 18 Aug’ 18 Sep’ 18 Oct’ 18 Nov’ 18 Dec’ 18

Board Meetings: Board Committee Meetings:


Board GAC

GAC GAC

GAC

GAC

BOD

BOD BOD BOD

BOD

BOD

Nomination & Remuneration Committee

NRC

NRC NRCNRC


RMC

RMC RMC

Sustainability Committee

SC

SC SC

SC

Board Tender Committee

BTC

BTC

Details of the key activities of each Board Committee are set out within the relevant Committee reports from pages 84 to 103.

The table below shows each Director’s attendance at the Board meetings during the FP December 2018.

DIRECTORS’ ATTENDANCE AT BOARD MEETINGS

Directors Designation/IndependenceBoard Meetings#

Attendance %Tan Sri Dato’ A. Ghani Othman Chairman, Non-Independent 4/5 80

Tan Sri Dato’ Seri Mohd Bakke Salleh Executive Deputy Chairman & Managing Director 5/5 100

Tan Sri Datuk Dr Yusof Basiran Independent 4/5 80

Muhammad Lutfi Independent 4/5 80

Datuk Zaiton Mohd Hassan Senior Independent 5/5 100

Dato’ Mohd Nizam Zainordin Non-Independent 5/5 100

Dato’ Mohamad Nasir Ab Latif Non-Independent 5/5 100

Zainal Abidin Jamal Non-Independent 5/5 100

Tan Ting Min Independent 5/5 100

Lou Leong Kok Independent 5/5 100

Dato’ Henry Sackville Barlow Independent N/A(i) N/A(i)

Former Director Designation/IndependenceBoard Meetings#

Attendance %Dato’ Che Abdullah @ Rashidi Che Omar Independent 2/3(ii) 67

Details of the respective directors’ attendance at Board Committee meetings are provided in the relevant Committee reports from pages 84 to 103.

Total Board & Board Committees Meeting Hours =

42.7

Notes: # Reflects the number of meetings held during the time the Director held office.(i) Not Applicable as the effective date of appointment was 5 April 2019.(ii) An Independent Non-Executive Director; Dato’ Che Abdullah @ Rashidi Che Omar retired at the conclusion of the Fifteenth Annual General Meeting of the Company on 21 November 2018.




BOARD DYNAMICS

Beyond age, ethnic and gender diversity, our Board consists of members with diverse skills and educational background, international and industry experiences, as well as knowledge and philosophies in bringing competing views when deliberating matters at Board meetings, thus ensuring decision-making perspectives are enhanced (refer to further details on our Board Diversity on page 95 of this report). A majority of our Board members are independent to foster greater boardroom objectivity.

Board Evaluations are conducted annually to provide opportunities for increasing efficiency, maximising strengths and highlighting areas for improvement. Pursuant to the Board Evaluation exercise in August 2018, it was concluded that the Board had discharged its responsibilities well, with good Board structure and operations. Out of the 5-point Likert scale, with five (5) being the best possible rating, most assessment criteria under the Board assessment were rated either ‘4’ or ‘5’. The Board was satisfied with the evaluation outcome and identified key areas of enhancement.

CORPORATE CULTURE & VALUES

The Board sets the ‘tone at the top’ in directing our Company’s culture and values and we continue to embrace our core values of Integrity, Respect & Responsibility, Enterprise and Excellence. Adherence to these founding values is paramount which are embedded in the following policies on expected standards of behaviour:

• Our Code of Business Conduct (COBC) demonstrates our enforcement of the Company’s ethical tone for behaving fairly, honestly and ethically wherever we do business, and our collective commitment to uphold integrity throughout the Group;

• Our commitment to excellence extends beyond our organisation. We also work closely with our Vendors (such as Service Providers, Suppliers, Contractors and Consultants) to ensure that our values and principles are carried through in every aspect of our business operations. Our Vendor Code of Business Conduct (VCOBC) provides guidance to the Vendors on the required standards of behaviour when conducting work for the Group and have been derived from our Group’s Core Values; and

• Our Whistleblowing Policy provides an avenue for the reporting of genuine concerns in relation to wrongdoings without fear of reprisal. Any employee, stakeholder or the public can lodge their concerns via the Company’s corporate website at www.simedarbyplantation.com.

SETTING STRATEGY

The Board is responsible for deciding the Group’s strategy and overseeing its performance, while passing the responsibility of the day-to-day operations to the EDCMD. The Board is directly involved in approving major acquisitions, providing oversight and control, growing shareholder value and promoting corporate governance. The regular report by the EDCMD to the Board includes business updates and insights, which ensures that the Directors have a sound understanding of our operational matters, the competitive and regulatory environment, group and business unit performance, investor relations and sustainability.

As part of the Group’s succession planning strategy, Encik Mohamad Helmy Othman Basha was appointed as the Deputy to the Managing Director, in addition to his role as the Chief Operating Officer for Upstream in January 2019.

PROFESSIONAL DEVELOPMENT AND CONTINUOUS EDUCATION

Newly appointed Directors will undergo an on-boarding session to orientate them on the Group’s business, performance, issues, strategies and structure. Site visits, which include briefings from the Management of operational units are organised to provide each new Director with a visual perspective of the Group’s operations and further depth and appreciation of the key drivers behind the Group’s businesses.

We thereafter encourage all Directors to keep their skills and knowledge up to date, and to help them, we provide the Board and individual directors with the continuous education that they may require. Save for Dato’ Barlow who was appointed to the Board as an Independent Non-Executive Director on 5 April 2019, all our Directors have attended the Mandatory Accreditation Programme (MAP).

During the FP December 2018, the Group Secretary has undertaken a Directors’ Training Needs Assessment to identify individual Director’s training and development aspirations, which is then translated into a professional development plan, covering areas such as legal and regulatory compliance, sustainability and environment as well as innovation.

The Group Secretary thereafter recommends the list of programmes to the Board. The organising of the programmes is undertaken on a regular basis. All Directors attended training programmes, conferences, seminars, courses and/or workshops during the FP December 2018. For more detailed information on the Directors’ Training and Continuous Education Programme, please refer to the Company’s website at www.simedarbyplantation.com.




BOARD REMUNERATION

The Nomination & Remuneration Committee (NRC) is primarily responsible for conducting periodic reviews and recommending to the Board a formal and transparent remuneration policy and framework for Directors and Senior Management of our Company, drawing on external consultants’ advice as necessary, as well as the remuneration framework of employees of our Company.

The Directors’ remuneration policy is reviewed regularly to ensure that the compensation of the Chairman and Directors of the Board are aligned to at least around the 75th percentile and the 50th percentile of appropriate peer groups, respectively. The remuneration framework is aligned to the complexity and leadership position of the Company and benchmarked against regional companies which are comparable to us in terms of size and similar nature of business, to ensure that the Board and Board Committees members are competitively remunerated.

The salient elements of the Directors’ remuneration policy and a summary of the Executive Director’s remuneration package are described in Practice 7.1 of the CG Report.

Remuneration for the Non-Executive Directors of the Board and as members of the Board Committees in the form of fees for the FP December 2018 is as follows:

Board/Board CommitteeChairman(RM/Year)

Member(RM/Year)

Board 600,000240,0001

400,0002

Governance & Audit Committee 80,000 50,000

Nomination & Remuneration Committee 60,000 35,000

Risk Management Committee 60,000 35,000

Sustainability Committee 60,000 35,000

Board Tender Committee 60,000 35,000

Notes: 1 Fee for Resident Director.2 Fee for Non-Resident Director.

REMUNERATION & MATERIAL BENEFITS OF OUR DIRECTORS

The remuneration of our Directors, which includes salaries and bonuses for the Executive Director and Director’s fees, meeting allowances and benefits for the Non-Executive Directors, is considered and recommended by our NRC and subsequently approved by our Board. The fees and benefits payable to the Non-Executive Directors are approved by our shareholders at a general meeting of the Company.




Director’s Fees5

TotalDirector’s

FeesBenefits-in-kind1 Sub-Total

Director’s Fees6

Grand TotalAs

Director

As Board Committee

MemberSubsidiaries

of SDP(RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000)

Dato’ Che Abdullah @ Rashidi Che Omar 95 71 166 1 167 79 246

Total 95 71 166 1 167 79 246

Notes: 1 Certain benefit such as Company Car and Petrol are only provided to the former Directors of Sime Darby Berhad until 1 December 2018. Other benefits-in-kind include Healthcare,

Insurance & Mobile Phone.2 Including Driver for Chairman.3 Non-Resident Director.4 N/A – Not Applicable.5 Paid by SD Plantation.6 Paid by Subsidiary Companies of SD Plantation.

Notes: 1 Benefits-in-kind include Healthcare, Insurance & Mobile Phone.

Additionally, details of remuneration (including benefits-in-kind) for a Director who had retired on 21 November 2018 are as follows:

Bands of the senior management’s remuneration for the FP December 2018 are disclosed in Practice 7.2 of the CG Report.

Details of Directors’ remuneration (including benefits-in-kind) and the aggregate remuneration of Directors at the Group level for the FP December 2018 are as follows:

Salary & Other

Remuneration

Directors’ Fees5

TotalDirectors’

FeesBenefits-in-kind1 Sub-Total

Directors’ Fees6

Grand TotalAs

Directors

As Board Committee Members

Subsidiaries of SDP

(RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000)Executive DirectorTan Sri Dato’ Seri Mohd Bakke Salleh 2,762 N/A4 N/A4 N/A4 29 2,791 N/A4 2,791

Non-Executive Director Tan Sri Dato’ A. Ghani Othman2

N/A4

302 - 302 36 338 - 338

Tan Sri Datuk Dr Yusof Basiran 121 60 181 18 199 111 310

Muhammad Lutfi3 202 18 220 14 234 25 259

Datuk Zaiton Mohd Hassan 121 76 197 15 212 - 212

Dato’ Mohd Nizam Zainordin 121 43 164 1 165 - 165

Dato’ Mohamad Nasir Ab. Latif 121 17 138 1 139 - 139

Zainal Abidin Jamal 121 48 169 16 185 - 185

Tan Ting Min 121 61 182 5 187 - 187

Lou Leong Kok3 202 17 219 1 220 - 220

Total for Non-Executive Directors 1,432 340 1,772 107 1,879 136 2,015

Grand Total 2,762 1,432 340 1,772 136 4,670 136 4,806




EFFECTIVE AUDIT AND RISK MANAGEMENTPRINCIPLE BGOVERNANCE & AUDIT COMMITTEE (GAC)

Following the retirement of Dato’ Che Abdullah @ Rashidi Che Omar at the conclusion of the previous Annual General Meeting (AGM) of the Company held on 21 November 2018 and the appointment of Dato’ Henry Sackville Barlow on 5 April 2019, the GAC is now composed of three (3) Independent Non-Executive Directors and one (1) Non-Independent Director. The GAC is chaired by the Senior Independent Non-Executive Director, Datuk Zaiton Mohd Hassan.

The mandate of the GAC is encapsulated in its Terms of Reference which, among others, defines its purpose, composition, appointment, authority, functions and duties. During the FP December 2018 under review, the GAC had convened three (3) meetings, during which key matters relating to financial reporting, internal and external audits, governance and related party transactions were discussed.

In effectively discharging its oversight roles on governance and internal controls, the GAC is assisted by the Chief Integrity & Assurance Officer (CIAO) who leads the Group’s in-house internal audit and compliance functions.

The activities of the GAC, its duties and responsibilities as well as details of meetings attended by each member can be found on pages 84 to 89 of this Annual Report and Section A of the CG Report.

RISK MANAGEMENT COMMITTEE (RMC)

The RMC was established as one of the committees of the Board and supports the Board by setting and overseeing the Risk Management Framework of the Group and regularly assessing the aforementioned Framework and policies to ascertain its adequacy and effectiveness. The RMC is comprised of four (4) Non-Executive Directors and is chaired by a Non-Independent Non-Executive Director, Encik Zainal Abidin Jamal.

The RMC is assisted by the Chief Risk Officer (CRO) in executing its main functions and duties as specified in the RMC’s Terms of Reference.

The activities of the RMC, its duties and responsibilities as well as details of meetings attended by each member can be found on pages 96 to 97 of this Annual Report and Section A of the CG Report.

RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

The RMC, along with the GAC, have been delegated with the responsibilities of overseeing the effectiveness of risk management and internal control systems on behalf of the Board, and also to advise the Board on the principal risks facing the business including those that would threaten its solvency or liquidity.

Details of the Risk Management and Internal Control Framework are disclosed in the ‘Statement of Risk Management and Internal Control’ and can be found on pages 104 to 109 of this Annual Report and Section A of the CG Report.




I. COMMUNICATION WITH STAKEHOLDERS

THE BOARD BELIEVES IN EFFECTIVE, TRANSPARENT AND REGULAR COMMUNICATION WITH ITS STAKEHOLDERS TO BUILD TRUST AND FACILITATE MUTUAL UNDERSTANDING OF EACH OTHER’S OBJECTIVES AND EXPECTATIONS.

Timely and Quality Disclosure

The Board is committed in ensuring all communications to the investing public regarding the business, operations and financial performance of the Company are accurate, timely, factual, informative, consistent, broadly disseminated and where necessary, filed with regulators in accordance with applicable legal and regulatory requirements.

We look forward to engaging with our shareholders at the forthcoming AGM. The AGM offers an opportunity to our shareholders to raise questions pertaining to our Company’s performance directly to our Board, EDCMD and Senior Leaders.

The Company’s website is a key communication channel for the Company to reach its shareholders, the investment community, and the general public. Information on the Company's values, Corporate Governance Framework, COBC, whistleblowing guidelines, and various other corporate governance initiatives is available on the Company’s website.

The Company’s financial results, announcements made to Bursa Securities and corporate presentations can also be retrieved from our Company’s website at www.simedarbyplantation.com.

INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERSPRINCIPLE C Integrated Reporting

Our Annual Report for the FP December 2018 is prepared in accordance with the International Integrated Reporting Framework (IR) issued by the International Integrated Reporting Council (IIRC) and Global Reporting Initiatives’ (GRI) Sustainability Reporting Standards to enhance reporting connectivity while providing stakeholders with a more holistic view of how the Company creates and sustains value.

II. CONDUCT OF GENERAL MEETINGS

Notification in writing to shareholders (via hard copy or electronic means) of the publication of the Notice of AGM and the Annual Report on the Company’s website, will be dispatched to shareholders at least 28 days prior to the AGM that is scheduled on 23 May 2019. The Notification will provide the designated website link and Quick Response (QR) code, where a copy of the Notice of AGM and the Annual Report may be downloaded.

Shareholders have the right to request a hard copy of our Annual Report through the designated channel. The venue of the AGM is at a central and easily accessible location.

The AGM provides an opportunity to the Chairman and other members of the Board to disclose the Company’s progress and performance. Directors shall attend the AGM to answer any question from shareholders.

More detailed information on the AGM is available online in the Investor Relations section at www.simedarbyplantation.com.

In the previous AGM and Extraordinary General Meeting (EGM) conducted on 21 November 2018, all but one (1)Director (Dato’ Che Abdullah @ Rashidi Che Omar) attended the meetings and responded to all queries and concerns by the shareholders.




GOVERNANCE & AUDIT COMMITTEE REPORT

GAC

INSIDE THIS REPORT

The Governance & Audit Committee (GAC) plays an important role in promoting a strong corporate governance culture throughout the Group, and as such, the purpose of this report is to provide an overview of the areas that the Committee had reviewed in the financial period in support of this mandate. The focus of the GAC’s activities, as guided by its Terms of Reference (TOR), encompasses the following key areas:

• Review of financial results and statements;• Review of conflict of interest situations and related party transactions in ensuring that transactions are carried out in the

best interest of the Group and not detrimental to the interest of our minority shareholders;• Foster solid governance, internal control, and risk environment; and• Oversight of the external and internal audit processes.

COMMITTEE COMPOSITION AND MEETINGS

The GAC comprises four (4) members, all of whom are Non-Executive Directors, and a majority of whom are Independent. The current GAC members are:

Members1 Membership Appointment AttendanceDatuk Zaiton Mohd Hassan Chairman

Senior Independent Non-Executive Director24 February 2016 4/4 100%

Dato’ Mohd Nizam Zainordin Member Non-Independent Non-Executive Director

14 July 2017 4/4 100%

Tan Ting Min Member Independent Non-Executive Director

9 August 2017 4/4 100%

Dato’ Henry Sackville Barlow2 Member Independent Non-Executive Director

5 April 2019 N/A4 N/A4

Former Member Membership Retirement AttendanceDato’ Che Abdullah @ Rashidi Che Omar

MemberIndependent Non-Executive Director

21 November 2018 1/3 33%3

Notes:1 For the Members’ profiles see pages 66 to 69.2 Dato’ Henry Sackville Barlow was appointed as Member of the GAC on 5 April 2019 after the financial period ended 31 December 2018.3 Reflects the number of meetings held during the time the Director held office.4 Not Applicable.

The GAC comprises Non-Executive Directors and is supported by the Group Integrity, Governance & Assurance Department in discharging its responsibilities. The GAC Chairman reports to the Board on key matters deliberated at the GAC meetings.

Meetings of the Committee are attended by the Executive Deputy Chairman & Managing Director (EDCMD), Deputy to the Managing Director & Chief Operating Officer, Upstream, Chief Advisor & Value Officer, Chief Financial Officer, Chief Operating Officer, Downstream, Chief Integrity & Assurance Officer, and Chief Risk Officer. In addition, other members of Senior Management are also invited to attend meetings as and when necessary to support detailed discussions.

The external auditors also attend and brief the Committee on matters relating to external audit for the current financial period and provided an update on past audit matters at the meetings.

DATUK ZAITON MOHD HASSAN - Chairman of the Governance & Audit Committee

The Committee assists the Board to embed a strong governance culture within the Group, which is fundamental in generating value for our stakeholders.




The Chairman of the GAC, Datuk Zaiton Mohd Hassan, is a Fellow of the Association of Chartered Certified Accountants (ACCA), United Kingdom, and a member of the Malaysian Institute of Accountants (MIA), Malaysian Institute of Certified Public Accountants (MICPA), and Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC).

Dato’ Mohd Nizam Zainordin is a Fellow of the ACCA, United Kingdom, a member of the MIA and a Certified Financial Planner. He has over 20 years of experience in the finance sector.

Tan Ting Min obtained her Bachelor and Master of Arts degrees from the University of Cambridge, United Kingdom in 1991 and 1994, respectively. She was the regional plantation sector team lead in Credit Suisse from 1998 to 2017 and has covered the plantation sector for close to 25 years. When she was the Head of Equity Research in Credit Suisse (2010-2017), she had written extensively on equity investment strategy in Malaysia, based on economics, political and macro fundamentals.

Dato’ Henry Sackville Barlow obtained his Bachelor and Master of Arts degrees from the University of Cambridge, United Kingdom. He is also a Fellow of the Institute of Chartered Accountants in England and Wales. Dato’ Barlow has over 35 years of experience in the Plantation Industry. Presently, he is Joint Chair of the Grievance Committee of the Roundtable on Sustainable Palm Oil (RSPO).

Collectively, the GAC members are qualified individuals and have a wide range of skills and expertise to discharge the Committee’s functions and duties. The GAC members’ financial literacy and understanding of the financial reporting process have contributed to the GAC’s discussion in upholding the integrity of the Company’s financial reporting process and financial statements.

Further details of the GAC members are available under the Board of Directors section on the Company’s website at www.simedarbyplantation.com.

ROLES OF THE COMMITTEE

The GAC is primarily responsible for:

• Assisting the Board in fulfilling its statutory and fiduciary responsibilities of monitoring the Group’s management of financial risk processes, and accounting and financial reporting practices;

• Reviewing the Group’s business process, the quality of the Group accounting function, financial reporting and the system of internal controls;

• Enhancing the independence of both the external and internal audit functions by providing direction to and oversight of these functions on behalf of the Board; and

• Assisting the Board in ensuring that an effective ethics programme is implemented across the Group, and monitors compliance with established policies and procedures.

The specific functions and duties of the GAC are provided in its TOR, which is available online in the Corporate Governance section at www.simedarbyplantation.com.

ANNUAL PERFORMANCE ASSESSMENT

The Board has conducted an annual review of the term of office and performance of the GAC and is satisfied that the Committee has effectively discharged its duties in accordance with its TOR.



OUR FOCUS AND ACTION PLAN

The GAC receives updates on key governance matters, audit initiatives and significant matters across the Group at each of its quarterly meetings. The summary of significant matters discussed by the GAC for the financial period ended 31 December 2018 (FP December 2018) is shown below:

Significant Initiatives/Issues Matters Considered OutcomeBudget 2019 Consequential impact on minimum wage that will be raised

to RM1,100 nationwide.The Management advised that the impact would not be immediate as the impact was more on general workers who were on daily-rated wage. The estimated cost impact is approximately RM8.03 million per annum.

It is advisable to ensure the salary adjustments complied with the minimum wage requirements as the RSPO and the Malaysian Sustainable Palm Oil (MSPO) will check the salary of workers for certifications renewal.

Ensured financial statements comply with applicable financial reporting standards

Malaysian Financial Reporting Standards (MFRS) 9 “Financial Instruments” and MFRS 16 “Leases”.

The external auditors, PricewaterhouseCoopers PLT (PwC) had reviewed and concurred with management’s computation and impact assessment arising from the adoption of MFRS 9 and MFRS 16 on the Group’s opening balance as at 1 July 2018.

The GAC agreed for PwC to audit the financial impact arising from the adoption of these standards for the current financial period during the final audit FP December 2018.

Significant Judgements and Issues

The GAC reviews and reports to the Board on significant matters including financial reporting issues, significant judgments made by Management, significant and unusual events or transactions, and how these matters are addressed. The two (2) significant matters considered by the GAC, which were also highlighted by PwC are as follows:

1. Recoverability of the Group’s investment in Sime Darby Plantation Liberia (SDP Liberia)

There were changes to the key assumptions in determining the fair value of the investment, resulting in additional impairment charge for the financial period.

The impairment charge of USD28.4 million (RM111.8 million) has been recognised by Management at SDP Group level for the financial year ended 30 June 2018. The GAC agreed that Management continues to closely monitor the progress of the Group’s investment in SDP Liberia as the recoverable amount remains highly sensitive and that appropriate disclosures should be made in the financial statements.

2. Impairment assessment of the carrying value of goodwill arising from the New Britain Palm Oil Limited (NBPOL) acquisition

NBPOL’s goodwill was partly allocated to PT Minamas Gemilang and its subsidiaries (Minamas Group) cash generating units (CGU) as Minamas Group operations are expected to benefit from the synergies of the acquisition of NBPOL.

Management performed impairment assessment of the CGU based on value-in-use (VIU) determined using the discounted cash flow models, which was approved by the Directors. A range of sensitivity analysis was also performed by Management.

PwC have reviewed Management impairment assessment and concurred with the reasonableness of key assumptions used.

Based on the sensitivity analysis, an individual change of the key assumptions provides sufficient headroom in the VIU to recover the carrying value of the net assets (including the allocated goodwill) in Minamas Group. However, should all the key assumptions used changed in a negative manner, the Group will record a deficit.

As such, GAC agreed that appropriate disclosures of key assumptions and sensitivities should be made in the financial statements of the Group.




SUMMARY OF ACTIVITIES

During the financial period, the GAC discharged its functions and carried out its duties as set out in its TOR. The summary of key activities undertaken by the GAC during the FP December 2018 is provided below:

Financial reporting

• Considered the unaudited quarterly financial results and the related press statements for recommendation to the Board. In doing so, there was focus on changes in major accounting policies and practices as well as significant impairments and adjustments/issues affecting the financial information to ensure compliance with the MFRS and other statutory requirements;

• Considered the audited draft financial statements of the Company and the accompanying Directors’ and Auditor’s reports and ensured that the financial statements complied with the MFRS, for recommendation to the Board for approval;

• Considered the proposed dividends for recommendation to the Board; and• Reviewed foreign currency exposures.

Internal and external audit

• Held separate quarterly private sessions with the Chief Internal Auditor and the external auditors, without the presence of Management, except for the Group Secretary;

• Reviewed the Group Audit Plan of the external auditors which outlined their audit strategy and approach for the FP December 2018;

• Assessed the performance, suitability, objectivity and independence of the external auditor, PwC, using the adopted assessment questionnaire from Bursa Malaysia Corporate Governance (CG) Guide (3rd Edition) entitled “External Auditor Evaluation Guide”;

• Considered the global external audit fees for recommendation to the Board for approval;• Approved the Group Corporate Assurance (GCA) Plan to ascertain the extent of its scope and coverage of the Group’s activities,

including the adequacy of GCA’s staffing strategies in supporting the Plan’s completion; and• Deliberated on both the external and internal audit reports and the corresponding key findings, recommendations and corrective

actions taken by Management.

Governance

• Updated the Board on key matters deliberated at GAC meetings and the activities undertaken by the GAC. Minutes of the GAC meetings are circulated to the Board for noting. The report to the Board is a standing agenda item at the quarterly meetings of the Board;

• Provided oversight and reviewed the internal control framework and governance policies, processes and documents including the Group Policies & Authorities, Code of Business Conduct, TOR of the GAC and TOR of the Whistleblowing Committee;

• Approved the Group Compliance (GCO) Plan which outlined the key initiatives for GCO and the corresponding resources required to support the achievement of the plan;

• Considered the GCO report which summarises the key activities of GCO for the period encompassing regulatory and legislation compliance as well as policy and governance matters; and

• Reviewed the results of investigations conducted on whistleblowing allegations to ensure that independent investigations of such allegations had been conducted and appropriate follow-up action taken.

Related party transactions

• Reviewed related party disclosures in compliance with the MFRS 124, Main Market Listing Requirement (MMLR) of Bursa Malaysia Securities Berhad (Bursa Securities), Companies Act 2016, and the internal guidelines on a quarterly basis.

Other matters

• Reviewed the proposed Dividend Reinvestment Plan;• Reviewed the appointment of financial advisors for non-audit services;• Reviewed reports on hedges, open positions, investment tracking, and the weighted average cost of capital and investment hurdle

rate;• Reviewed the minutes of meetings of the GAC of Minamas Plantation; and• Performed an annual assessment of the Chief Internal Auditor against key result areas and competencies.




CONTINUOUS PROFESSIONAL DEVELOPMENT

The GAC members attended continuous professional development programme to keep themselves abreast of relevant developments in governance and accounting as well as auditing standards, practices, and rules. Further details on the programmes attended by the GAC members during this financial period are disclosed under Practice 8.5 of the Corporate Governance Report available under the Corporate Governance section on the Company’s website at www.simedarbyplantation.com.

GROUP INTEGRITY, GOVERNANCE AND ASSURANCE

The Group has a combined assurance (GCA) and compliance (GCO) function housed under the Group Integrity, Governance and Assurance (GIGA) Department. Previously known as the Group Governance, Assurance & Compliance (GGAC) Department, GIGA was renamed as a manifestation of the Group’s support towards the Honourable Malaysian Prime Minister’s call for the establishment of an Integrity and Governance Unit in all government-linked companies which oversees whistleblowing, investigations, integrity enhancement and governance – the functions, all of which, have always resided within GGAC. Accordingly, the Chief Internal Auditor, Nik Maziah Nik Mustapha, was re-designated as the Chief Integrity & Assurance Officer (CIAO) effective 25 February 2019.

The CIAO is a Certified Internal Auditor by the Global Institute of Internal Auditors, USA and holds a Certification in Control Self-Assessment conferred by the same Institute. She is also a Chartered Accountant of the Malaysian Institute of Accountants and a professional member of The Institute of Internal Auditors Malaysia. She holds a Bachelor of Accounting (Hons) degree from the Universiti Utara Malaysia and has accumulated over 21 years’ working experience in internal and external audit, credit management, and financial accounting in a wide range of industries including banking, airline, property, and plantation.

Group Corporate Assurance (GCA)

The GCA reports functionally to the GAC and administratively to the EDCMD to allow the required degree of independence from the operations of the Group. GCA’s principal responsibility is to undertake regular and systematic reviews so as to evaluate and improve the effectiveness of risk management, control, and governance processes. The ambit of GCA is defined in the GCA Charter, which is annually reviewed and tabled to the GAC for approval.

GCA activities are governed by The Institute of Internal Auditors’ mandatory guidance including the Definition of Internal Auditing, the Code of Ethics, and the International Professional Practices Framework (IPPF). This ensures that GCA remains effective and responds to the expanding demand for high-quality audit services. An internal Quality Assurance and Improvement Program (QAIP) has also been established, where through the internal QAIP, structured projects were identified/undertaken to achieve operational excellence, elevate competence, improve communication and administration, and sharing of best practices, in preparation for the first external assessment to be undertaken by the year 2021.

All independent internal audit services conducted in the Group during the financial period were conducted by GCA, through its 69 personnel comprising 66 internal auditors and three (3) secretarial/administrative staff. Apart from the Malaysia-based auditors, the CIAO is supported by Regional Heads in GCA offices located in Indonesia and Papua New Guinea. The operational costs incurred by GCA for the financial period amounted to RM5.45 million, comprising mainly staff costs and travelling expenses.

GCA assists the Group to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. This was attained via the conduct of the following key activities:

• Control and compliance reviews to establish compliance to laws, regulations, policies, and procedures which impact the Group;• Thematic reviews of Upstream operations which concentrate on the optimisation and performance of each Upstream region from

the perspective of cost management and efficiency. These reviews assist GCA in making a comparison on the performance of controls across regions and set a benchmark to be leveraged by Management in evaluating performance;

• Validation of Control Self-Assessment (CSA) results to ensure the reliability and effectiveness of the CSA exercise as well as on-going Continuous Control Monitoring (CCM) for immediate detection of non-compliances and anomalies/red flags;

• Deploying data analytics throughout the audit lifecycle, to broaden audit coverage in providing more comprehensive opinion on the effectiveness of governance, risk management and controls to the business;

• Business advisory/consulting reviews aimed at adding value towards key business activities;• Investigative audits pursuant to whistleblowing complaints lodged and Board/Management requests; and• Follow-up reviews on the implementation status of recommendations made to ensure that timely action has been taken to

address control limitations noted during audit reviews.




Group Compliance (GCO)

As in GCA, GCO also reports functionally to the GAC and administratively to the EDCMD, and provides oversight, coordination, consultation, and validation of the Group’s state of compliance. The main role of GCO is to assist the Board, the GAC, and Management in coordinating compliance risk management activities and provide reasonable assurance to the Management and the Board, that the Group’s operations and activities are conducted in line with all regulatory requirements, internal policies and procedures, Code of Business Conduct, and standards of good business practice.

In doing so, GCO plans and executes the corporate compliance programmes based on its approved compliance framework, addressing compliance issues and concerns within the Group, as follows:

• Initiating an Anti-Corruption Compliance programme in preparation of meeting the “adequate procedures” requirement as stipulated under the Malaysian Anti-Corruption Commission (Amendment) Act 2018;

• Administering of the whistleblowing channel which entails receipt of whistleblowing complaints, channelling complaints for investigation, monitoring of cases for closure as well as reporting to relevant parties on whistleblowing complaints received;

• Introducing various roll-out campaigns to generate interest and awareness in the revised Code of Business Conduct as well as resonate the Group’s commitment towards upholding a culture of high ethics and integrity;

• Monitoring of the status of compliance with regulations & legislation and the implementation of corrective action; and• Reviewing the Group Policies and Authorities (GPA) to ensure that they remain relevant in the current operating environment,

reflect best practices as well as identify areas that warrant new GPA provisions. Key outcomes of the GPA review are as follows:- A policy to address notification, reporting, and disclosure when dealing with regulators and government agencies was

developed;- The Policy Instrument Framework (PIF) which provided the operational structure for the management and governance of

all policy instruments within the Group was revised. The PIF among others established a structured hierarchy for all core policy instruments and documents and outlined the ground rules for the development, establishment, amendment, and review of all core policy instruments; and

- Policies and guidance to manage exposures related to the sanctions laws.

EXTERNAL AUDITORS

The Malaysian Institute of Accountants (MIA) has revised the ‘Audit Partner Rotation’ Period in Malaysia where effective 15 December 2018, Key Audit Partners of Public Interest Entities (PIE) are allowed to serve in the same role for a maximum of seven (7) years. The Engagement Partner rotating after such a period should not resume the audit engagement partner role for the PIEs until three (3) years have elapsed.

The external auditors, PwC, have confirmed their independence in accordance with the Firm’s requirement and with the provisions of the By-Laws of Professional Independence of the MIA (inclusive of the above stated requirement) in its Report to the GAC at its meeting on 20 February 2019.

In recommending PwC for re-appointment at the forthcoming Annual General Meeting (AGM) of the Company, the GAC considered their performance, suitability, objectivity, and independence by assessing, among others:

• The competence, audit quality and resource capacity of the external auditor in relation to the audit;• The nature and extent of the non-audit services rendered and appropriateness of the level of fees; and• Obtaining written assurance from the external auditors confirming that they are, and have been, independent throughout the

conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

This Report is made in accordance with the resolution of the Board of Directors dated 5 April 2019.




NOMINATION & REMUNERATION COMMITTEE REPORT

NRC

INSIDE THIS REPORT

This report highlights the activities of the Nomination & Remuneration Committee during the financial period ended 31 December 2018 (FP December 2018). We report to shareholders on our responsibility in supporting the development of a balanced Board in terms of expertise, skills, experience and diversity and ensuring remuneration principles for Directors will adequately compensate the Directors for their time and effort for the continuous success of the Company.

WHO IS THE COMMITTEE:

Members1 Membership Appointment AttendanceTan Sri Datuk Dr Yusof Basiran Chairman

Independent Non-Executive Director14 July 2017 3/3 100%

Datuk Zaiton Mohd Hassan Member Senior Independent Non-Executive Director

14 July 2017 3/3 100%

Dato’ Mohd Nizam Zainordin Member Non-Independent Non-Executive Director

14 July 2017 3/3 100%

Dato’ Henry Sackville Barlow2 MemberIndependent Non-Executive Director

5 April 2019 N/A N/A

Former Member Membership Retirement Attendance3

Dato’ Che Abdullah @ Rashidi Che Omar


21 November 2018 2/2 100%

Notes:1 For the Members’ profiles, see pages 64 to 69.2 Appointment with effect from 5 April 2019.3 Reflects the number of meetings held during the time the Director held office.N/A Not Applicable.

The Nomination & Remuneration Committee (NRC) comprises Non-Executive Directors (NED) with a majority being Independent Directors and includes a Senior Independent NED. The composition of the NRC complies with the requirements of both the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Listing Requirements) and the Malaysian Code on Corporate Governance (MCCG) 2017.

Meetings of the NRC are attended by the Executive Deputy Chairman & Managing Director (EDCMD). Other members of Senior Management are invited to meetings of the NRC when necessary to support detailed discussion on matters relevant to the agenda of the meeting.

The Committee reviews the Board composition and ensures that any appointment brings the right balance of skills, knowledge, breadth of experience and diversity to the Board. The Committee also oversees the appointment and promotion of Senior Management and succession plans to support the development of talent within the Group.

The Committee reviews and endorses the Senior Management Remuneration Policy and the Employees Remuneration Framework, which aim to attract, motivate and retain the best talent, to support the Group’s strategy and value creation for the Group and the shareholders. The Committee also ensures that at all times there is a balance between the need to compete for the very best talent and the need to pay fairly and responsibly.

TAN SRI DATUK DR YUSOF BASIRAN - Chairman of the Nomination & Remuneration Committee




• Recommending and reviewing the Policy on Board Composition of the Company

• Recommending the re-election of Directors retiring at the 2018 Annual General Meeting (AGM)

• Recommending revisions to the TOR of the NRC• Recommending the disclosure of the Report on the NRC for the

2018 Annual Report• Overseeing succession planning for the EDCMD• Evaluating and recommending the promotion of Senior

Management of SDP• Monitoring the conduct of the Board Effectiveness Assessment

(BEA) 2018 • Recommending suitable training programmes to continuously

train and equip Directors.• Reviewing the Bumiputera Empowerment Agenda Key

Performance Indicators (KPI) 2018 targets and achievement from January 2018 to June 2018

• Recommending the Bumiputera Empowerment Agenda KPI Plan for 2019.

• Recommending the remuneration for the NEDs of the SDP Group of Companies for the financial year ended 30 June 2018

• Reviewing and recommending the remuneration and benefits for the EDCMD and Direct Reports to the EDCMD

• Recommending the bonus and value creation incentive payouts for FY2017/2018

• Reviewing the performance of the EDCMD and recommending the bonus proposal for the EDCMD for FY2017/2018

• Recommending the salary increment and bonus proposals for Direct Reports to the EDCMD for FY2017/2018

• Recommending the implementation of SDP’s Mutual Separation Scheme

• Recommending Senior Management Remuneration Policy• Recommending the total remuneration review for Malaysia and

short term incentive framework for the Group.

Nomination Function Remuneration Function


The primary objectives of the Committee are as follows:

• To assist the Board in reviewing the appropriate size and balance of the Board, and reviewing the required mix of skills, experience and knowledge of the Directors. The NRC also ensures that there is sufficient succession planning and human capital development focus in the Sime Darby Plantation Berhad (SDP) Group; and

• To recommend to the Board the remuneration framework for the Non-Executive Chairman, the EDCMD, NEDs, Executive Directors, key Management positions and employees of the SDP Group.

The Terms of Reference (TOR) of the NRC are available online in the Governance section at www.simedarbyplantation.com.


The Board has reviewed the Committee’s effectiveness in carrying out its duties as set out in the Committee’s Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.

The Committee’s Terms of Reference was revised on 29 August 2018 to allow the Committee to delegate its authority and responsibilities as the Committee deems appropriate. Such delegation will be periodically reviewed by the NRC. The TOR was revised on 5 April 2019 to include the administering and implementing of the Long Term Incentive Plan.

OUR FOCUS

During the FP December 2018, the NRC undertook the following key activities:




NOMINATION AND RECRUITMENT PROCESS

One of the NRC’s key roles is to drive the recruitment process for new Directors. In considering candidates as potential Directors, the NRC takes into account the following criteria:

• Skills, knowledge, expertise and experience;• Time commitment, character, professionalism and integrity;• Perceived ability to work cohesively with other members of the Board;• Specialist knowledge or technical skills in line with the Group’s strategy;• Diversity in age, gender and experience/background; and• Number of directorships in companies outside the Group. On the appointment of Directors on the Board of SDP, where applicable, the NRC will seek third party feedback on candidates that the NRC is considering for recommendation to the Board of SDP. The NRC had, on 1 April 2019, recommended for consideration of the Board the appointment of Dato’ Henry Sackville Barlow as an Independent NED on the Board and Board Committees of SDP.

Prior to appointment, potential Directors are made aware of the time commitment expected from each of them in carrying out their roles as Director and/or Member of Board Committee(s) including attendance at the Board, Board Committees and other meetings. Directors are required to confirm that they are able to devote sufficient time to their roles at the Company and at the Group taking into consideration the number of their listed company board(s) and other commitments. In accordance with the provisions of the Listing Requirements, none of the Directors hold more than five (5) directorships in listed issuers during the FP December 2018.

On 5 April 2019, the Board approved the appointment of Dato’ Barlow as an Independent NED on the Board of SDP and as the Chairman and/or Member of the following Board Committees of SDP:

Board Committee DesignationSustainability Committee Chairman

Nomination & Remuneration Committee Member

Governance & Audit Committee Member

The appointment of Dato’ Barlow will facilitate the Company in addressing the requirement for Independent Directors on its Board and Board Committees.

The Group Secretary ensures that all appointments are properly made and that all necessary information is obtained from the Directors, both for the Company’s own records and for the purposes of meeting statutory obligations as well as obligations arising from the Listing Requirements.

RE-ELECTION OF DIRECTORS

The NRC ensures that the Directors retire and are re-elected in accordance with the relevant laws and regulations and the Company’s Constitution.

Pursuant to Rule 81.2 of the Company’s Constitution, any Director appointed during the year shall hold office only until the conclusion of the next AGM and shall be eligible for re-election at such meeting, but shall not be taken into account in determining the number of Directors who are to retire by rotation at such meeting.

Pursuant to Rule 103 of the Company’s Constitution, at least one-third (1/3) of the Directors (excluding the Director seeking re-election pursuant to Rule 81.2 of the Company’s Constitution) are required to retire by rotation at each AGM. Rule 104 of the Company’s Constitution states that all Directors shall retire from office once at least in each three (3) years. A retiring Director shall be eligible for re-election.




The Board recommends the re-election of the following Directors who will be retiring pursuant to Rules 81.2 and 103 of the Company’s Constitution at the forthcoming AGM:

RULE 81.2 OF THE CONSTITUTION

RULE 103 OF THE CONSTITUTION

Dato’ Henry Sackville Barlow

Dato’ Barlow has more than 35 years of experience in the plantation sector and is highly respected in the sustainability sphere. He is currently the Joint Chair of the Grievance Committee of the Roundtable on Sustainable Palm Oil (RSPO), a globally recognised body that develops and implements global standards for sustainable palm oil.

Tan Sri Datuk Dr Yusof Basiran

Tan Sri Datuk Dr Yusof was the Chief Executive Officer of the Malaysian Palm Oil Council (MPOC) since 2006 until his retirement in 2017 and the Director-General of the Palm Oil Research Institute of Malaysia (which later became the Malaysian Palm Oil Board) for 14 years from 1992 to 2006. Tan Sri Datuk Dr Yusof is an influential public figure in the Malaysian palm oil industry widely known to be one of the vocal defenders of the industry.

At a time when the palm oil industry is under increasing pressure from the European Union (EU), the Company will benefit from Tan Sri Datuk Dr Yusof’s standing in its effort to address the challenges and discrimination against the industry.

As an Independent NED of the Company, Tan Sri Datuk Dr Yusof’s contribution has been invaluable to the NRC and the Board Tender Committee, which he has served as Chairman since July 2017 and February 2018, respectively.

Datuk Zaiton Mohd Hassan

Datuk Zaiton has held the position of Senior Independent NED of the Company since July 2017 and is currently the Chairman of the Governance & Audit Committee (GAC).

Datuk Zaiton is also the Chairman of the Audit Committee of Lembaga Tabung Haji. Datuk Zaiton has an impressive career in the banking and accounting profession with a strong track record in the areas of governance, risk and audit, across the private sector and public institutions. Datuk Zaiton was the President/Executive Director of Malaysian Rating Corporation Bhd (MARC), a Malaysian based credit rating institution which she helped set up in 1996.

With a career spanning over 40 years, Datuk Zaiton has invaluable industry experience in varied banking and financial sectors, and strong business acumen. With her market-based view of the business and an understanding of the competitive business landscape, Datuk Zaiton provides valuable input and insight to the discussions at the Board and Board Committees. Datuk Zaiton is also a member of the NRC and Risk Management Committee of the Company.



RULE 103 OF THE CONSTITUTION (CONTINUED)

The Directors have met the Board’s expectations of high performance based on the performance and contribution of each Director as assessed through the Board Effectiveness Assessment (BEA) 2018.

The Board is of the view that the Independent Directors have brought independent and objective judgment in Board deliberations and decisions.

TENURE OF THE INDEPENDENT DIRECTORS

None of the six (6) Independent Directors have served on the Board for more than nine (9) years.

Two (2) Independent Directors namely Tan Sri Datuk Dr Yusof and Datuk Zaiton are seeking re-election at this AGM.


Dato’ Mohd Nizam Zainordin

Dato’ Mohd Nizam is a Non-Independent NED of the Company. Dato’ Mohd Nizam is a nominee Director of Permodalan Nasional Berhad (PNB), the Investment Manager of AmanahRaya Trustee Berhad – Amanah Saham Bumiputera, the major shareholder of the Company.

Dato’ Mohd Nizam has an extensive career in Finance spanning over 20 years and is the current Chief Financial Officer of PNB. As a nominee Director and representative of PNB, Dato’ Mohd Nizam sits as a member of the NRC and GAC, giving meaningful insights towards enhanced corporate governance practices and functioning of the Company. Dato’ Mohd Nizam’s specialised knowledge in the field of Finance has been instrumental in guiding the Company in taking critical policy and business decisions, benefitting the Company as a whole.

Dato’ Mohamad Nasir Ab Latif

Dato’ Mohamad Nasir is a Non-Independent NED. Dato’ Mohamad Nasir is currently the Deputy Chief Executive Officer of the Investment Division of the Employees Provident Fund Board (EPF).

Representing EPF as its nominee Director on the Board of the Company, Dato’ Mohamad Nasir monitors that the affairs of the Company are conducted in a manner dictated by the laws governing companies and ensures good corporate governance. Dato’ Mohamad Nasir’s experience in equity investment through his positions at and service on the boards of public and private companies has led to effective discussions at Board and Board Committee meetings on the regulatory and market conditions that the Company faces.



BOARD EFFECTIVENESS ASSESSMENT (BEA)

The BEA 2018 was conducted in June 2018 through questionnaires. The questionnaires were based on the Corporate Governance Guide (3rd Edition) on the Guidance on Board Leadership and Effectiveness issued by Bursa Malaysia Securities Berhad.

In view that the BEA 2018 was recently undertaken, the effectiveness of the Board and Board Committees for the period from 1 July 2018 to 31 December 2018 and for the financial year ending 31 December 2019 (FY2019) will be undertaken in the fourth quarter of FY2019 (BEA 2019). The Company will consider engaging an external independent third party to conduct the BEA 2019.

Detailed information on the BEA and the assessment criteria is provided in the Corporate Governance Report from pages 39 to 40 available in our website www.simedarbyplantation.com.

BOARD REMUNERATION FRAMEWORK

The Remuneration Framework for members of the Board and Board Committees of SDP was last reviewed and adopted in August 2017. There has been no change to the Remuneration Framework since 2017.

Detailed disclosure on the remuneration of individual Directors of SDP on named basis is provided in the Corporate Governance Overview Statement from pages 80 to 81.


The NRC is responsible for the implementation of the Policy and for monitoring progress towards the achievement of the Board’s objectives.

The salient features of the Policy are available online in the Corporate Governance section at www.simedarbyplantation.com.

The Board will maintain at least two (2) women

Directors on the Board and will actively work towards having a minimum of 30% women as members of the

Board by 2020.

The Board will work towards having a generationally-

diverse Board so as to have a balance between maturity and

experience.

The age diversity of the Board can be found on page 29 of the Corporate Governance Report at www.simedarbyplantation.com.

The Board will work towards diversifying the ethnic

composition of the Board as and when vacancies arise

and suitable candidates are identified.

Following the appointment of Dato’ Barlow, the number of Independent Non-Executive Directors on the Board of

SDP has increased to six (6) out of 11 Directors. A Board

comprising a majority of Independent Directors allows for more effective oversight

of Management.

Gender Diversity Age Diversity Ethnic Diversity Independence of Directors

BOARD COMPOSITION AND DIVERSITY

The Board Composition Policy was adopted by the Board in February 2018 and reviewed in September 2018 to align with the Securities Commission Malaysia’s stated target of increasing women participation on the Boards of the top 100 companies on Bursa Malaysia Securities Berhad. The Board’s progress towards achieving targets set out in the Policy is as shown below.



ZAINAL ABIDIN JAMAL - Chairman of the Risk Management Committee

The Committee is focused on ensuring a robust risk management framework is in place. Key risk exposures encountered in the pursuit of the Group’s strategies and objectives are adequately identified, mitigated and reported.

RISK MANAGEMENT COMMITTEE REPORT

RMC

INSIDE THIS REPORT

The purpose of this report is to highlight areas that the Committee has reviewed during the financial period ended 31 December 2018 (FP December 2018) and the priorities going forward.

We report to shareholders on our responsibility to ensure the implementation of appropriate systems to manage the overall risk exposures of the Sime Darby Plantation Berhad Group.


Members1 Membership Appointment AttendanceZainal Abidin Jamal2 Chairman

Non-Independent Non-Executive Director14 July 2017 2/2 100%

Datuk Zaiton Mohd Hassan Member Senior Independent Non-Executive Director

14 July 2017 2/2 100%

Tan Ting Min Member Independent Non-Executive Director

14 July 2017 2/2 100%

Lou Leong Kok Member Independent Non-Executive Director

1 December 2017 2/2 100%

Notes:1 For the Members’ profiles see pages 64 to 69. 2 Encik Zainal Abidin Jamal was appointed as the Risk Management Committee (RMC) Chairman on 9 August 2017.

The RMC comprises a majority of Independent Non-Executive Directors and is supported by the Group Risk Management (GRM) Department in discharging its responsibilities. The RMC Chairman reports to the Board on key matters deliberated at the RMC meetings.

Meetings of the Committee are attended by the Executive Deputy Chairman & Managing Director, Deputy to Managing Director & Chief Operating Officer – Upstream, Chief Advisor & Value Officer, Chief Financial Officer, Chief Operating Officer, Downstream, Chief Risk Officer and Chief Integrity & Assurance Officer. In addition, other members of senior management are also invited to attend meetings as and when necessary to support detailed discussions.


The primary objective of the Committee is to assist the Board of Directors in the discharge of its statutory and fiduciary responsibilities by identifying significant risks and ensuring that the Group Risk Management Framework (RMF) includes the necessary policies and mechanisms to manage the overall risk exposures of the Group. The RMC is also tasked with reviewing the effectiveness of the RMF to ensure that it continues to support the vision, mission, and strategic objectives of the Group whilst safeguarding stakeholders’ interests.



RISK MANAGEMENT COMMITTEE REPORT

Specific duties of the Committee are as follows:

• Review the adequacy of the scope, functions, authority, competency and resources of the GRM Department.

• Provide oversight, direction and counsel to the risk management process, specifically to:

(i) Establish the Group’s risk management framework based on internationally recognised risk management standards. (ii) Conduct an annual review and periodic testing of the Group RMF. (iii) Establish and periodically review the Group risk management guidelines and policies and ensure implementation of the

objectives outlined in the policies and compliance with them.(iv) Review and recommend the Group’s level of risk tolerance and actively identify, assess and monitor key business risks to

safeguard shareholders’ investments and the Group’s assets.(v) Monitor the Group level risk exposures and management of the significant financial and non-financial risks identified

including considering whether response strategies (and contingency plans) to manage or mitigate material risks are appropriate and effective given the nature of the identifiable risks.

• Review investment proposals that are significant from a risk perspective and monitor the execution of risk mitigation strategies for such proposals. Follow up on post-investment risk mitigation strategies to ensure that the strategies are implemented subsequent to the Board’s approval.

Detailed Terms of Reference of the Committee are available online in the Corporate Governance section at www.simedarbyplantation.com.


The Board performs an annual assessment of the Committee’s effectiveness in undertaking its duties as set out in the Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.

The Committee’s Terms of Reference on administrative matters were revised on 29 August 2018.

OUR FOCUS AND ACTION PLANS

During the FP December 2018, the RMC has undertaken the following key activities:

• Monitoring of principal risks affecting the achievement of the Group’s strategies & objectives. This includes reviewing strategic risk reports on external and emerging risk outlooks as well as country risk assessments;

• Approving the establishment of the Group Business Continuity Standard which provides overarching guidelines for the development and/or update of business continuity procedures, to ensure that the Group is able to continue its operations with minimal impact to stakeholders in the event of crisis or disruption;

• Reviewing of risk appetite principles and related exposures; • Reviewing and tracking previous approved investment initiatives; and • Reviewing and tracking the financial exposure position of the Group.

Where appropriate, the RMC also leveraged on the work of other Board committees such as the Sustainability Committee and Nomination & Remuneration Committee to assist with ensuring robust oversight of these particular risk exposures.

In the coming year, the RMC will continue to focus on providing oversight over the implementation of the RMF throughout the Group as well as monitoring the key risk exposures and the resultant mitigating actions affecting SDP.



DATO’ HENRY SACKVILLE BARLOW - Chairman of the Sustainability Committee

With the intense scrutiny faced by our industry from all our stakeholders, Sime Darby Plantation can differentiate itself by developing and implementing leading responsible agriculture practices within our operations, and throughout our global supply chain.

SUSTAINABILITY COMMITTEE REPORT

SC

INSIDE THIS REPORT

The purpose of this report is to highlight areas that the Committee has reviewed during the financial period ended 31 December 2018 (FP December 2018). We report to shareholders on our oversight responsibilities in relation to the Sime Darby Plantation Berhad (SDP) Group objectives, policies and practices pertaining to sustainability, more particularly contributing to a better society, minimising environmental harm and delivering sustainable development.


Members1 Membership Appointment AttendanceDato' Henry Sackville Barlow2 Chairman

Independent Non-Executive Director5 April 2019 N/A3 N/A3

Muhammad Lutfi MemberIndependent Non-Executive Director

13 December 2017 1/3 33%

Dato’ Mohammad Nasir Ab Latif Member Non-Independent Non-Executive Director

13 December 2017 3/3 100%

Zainal Abidin Jamal MemberNon-Independent Non-Executive Director

13 December 2017 3/3 100%


ChairmanIndependent Non-Executive Director

21 November 2018 2/3 67%

Ex Officio Member Membership Appointment AttendanceSir Jonathon Espie Porritt Sustainability Advisor 22 March 2018 3/3 100%

Notes:1 For the Members’ profiles see pages 64 to 69.2 Dato’ Henry Sackville Barlow was appointed after the FP December 2018.3 Not Applicable.

The Sustainability Committee (SC) comprises all Non-Executive Directors. The Committee is supported by Sir Jonathon Espie Porritt, Board Sustainability Advisor. Sir Jonathon assists the Committee by identifying emerging sustainability trends and their implications to SDP, and reviewing and advising on SDP’s progress towards meeting its sustainability commitments, whilst meeting stakeholders' expectations.

Meetings of the Committee are attended by the Executive Deputy Chairman & Managing Director and the Chief Sustainability Officer, together with other members of senior management.





The SC is committed to ensuring that the Group operates in line with its sustainability purpose, which is to contribute to a better society, minimise environmental harm and deliver sustainable development.

The primary objectives of the Committee are as follows:

• Reviewing the sustainability strategy and performance of the SDP Group at the Board level;• Overseeing the monitoring, reporting and verification of the Sustainability Key Performance Indicators of the SDP Group and

their implementation through the Group Blueprint and Roadmaps;• Emphasising and facilitating the adoption of a positive mind-set in favour of sustainability throughout the Group; and• Working to a set of Corporate Sustainability Principles (the Charter).

Detailed Terms of Reference for the Committee are available online at the Corporate Governance section of www.simedarbyplantation.com.


The Board performs an annual assessment of the Sustainability Committee’s effectiveness in carrying out its duties as set out in the Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.

The Committee’s Terms of Reference were revised on 29 August 2018 to incorporate further administrative enhancements.

OUR FOCUS AND ACTION PLANS

Our Focus During the FP December 2018

SDP strives to enhance our production capabilities without compromising our commitment around contributing to a better society, minimising environmental harm, and delivering sustainable development.

Throughout the reporting period, the Committee’s focus has been on key sustainability initiatives that deliver impact.

Significant Initiatives/Issues Matters Considered Outcome

Improving Occupational Safety and Health (OSH) Performance

Due to the nature of the industry the Group operates in, OSH performance continues to be an area of key concern due to the number of fatalities and major accidents across the Group.

The OSH performance, which includes the review of lag indicators such as Lost Time Incidents and lead indicators such as Concerned Reporting, and key initiatives implemented by Management to improve the safety and health performance are discussed during each meeting.

OSH Performance continues to be an area of focus for the entire Group.

Sadly, SDP reported four (4) fatalities within this reporting period with a Loss Time Injury Frequency Rate (LTIFR) of 13.0 (13 injuries per million hours worked). There is still tremendous room for improvement and the Committee is committed to work with management in achieving SDP’s goal of Zero Harm.

Intensifying Deployment of Operational Excellence Efforts

The 5-year Operational Excellence and Innovation Business Management Strategy (OEIBMS) 2.0 was launched last year, with a target of harvesting RM550 million of cumulative benefits over a period of five (5) years.

Key initiatives to further expand the roll-out and scope of these efforts, such as the War on Waste (now in its 3rd iteration) are reviewed in detail during each meeting.

The Operational Excellence programme has maintained momentum with completion of 723 projects within the Financial Period Ended December 2018.

The Operational Excellence initiatives this year have continued to receive national and international acclaim, and SDP has emerged as the Permodalan Nasional Berhad Group Innovation Challenge Champion for the 8th year in a row.




Enhancing Respect for Human Rights within the Organisation

Human Rights has emerged as an area of increased stakeholder interest with legislations being passed in countries where the Group operates, such as the UK Modern Slavery Act (2015), US Trade Enforcement and Trade Facilitation Act (2015) and the Australia Modern Slavery Bill (2018).

The Committee has deliberated in detail on the initiatives underway to mitigate risks around Human Rights abuses and the Group’s commitment around Business and Human Rights.

The Group has implemented several initiatives to mitigate risks around Human Rights abuses within its operations and continues to conduct impact assessments to understand salient human rights issues and risk for each country that the Group operates in.

The Group also continues to engage and collaborate with partners to work together to address the more complex human rights challenges the industry as a whole faces.

Effective Engagement of Stakeholders

Operating in an industry under intense scrutiny by a wide range of stakeholders, effective engagement with these stakeholders is imperative in ensuring the reputation of the Group is not only protected, but also projected in a positive manner.

The Committee deliberated in detail the approach and initiatives the Group is taking to effectively engage with stakeholders, which includes direct engagements, participation in pre-competitive collaborations, and participation in thought leadership platforms.

Through the appointment of the external Sustainability Advisor, an independent third party view point is also brought as input to discussions within the SC.

The Group has been actively participating in various strategic thought leadership platforms to ensure active engagement with stakeholders.

The Group has also initiated various platforms and collaborations to proactively engage with stakeholders around material sustainability issues such as human wildlife conflicts (PONGO Alliance), human rights (Decent Rural Living Initiative) and grievance mechanisms (Collaboration with ELEVATE).

Enhancing Supply Chain Sustainability

Stakeholder expectations around managing sustainability risks of the supply chain has intensified recently, with a focus on the issue of deforestation within the supply chain.

The Committee scrutinised in detail the efforts made by management in ensuring increased transparency of the Group’s global supply chain via traceability and also the efforts being made to manage sustainability risks within the supply chain. This has resulted in improved visibility of SDP’s global supply chain, and also mechanisms being put in place to effectively respond to supplier grievances.

The Group has achieved a 98% traceability to mill, and the global mill list has been made publicly available. The grievances against suppliers within the Group’s supply chain and actions taken have also been made available publicly in line with stakeholders’ expectations.

SDP has also engaged with several non-government organisations to support the Group in proactively identifying sustainability risks within its supply chain.





Climate Change Impacts

The impact of the Group’s operations through emissions has also been an area of focus during the SC meetings.

The SC conducted an extensive review of the carbon reduction strategy and targets during this period, with input from the Sustainability Advisor. Key initiatives which contribute to the carbon reduction targets, such as a revised biogas strategy was also deliberated in detail to ensure targets were feasible whilst maintaining ambitions. The SC will play a vital role in monitoring and verifying this strategy.

The overall carbon reduction strategy and implementation plans of key initiatives were reviewed and management has continued with its implementation.

Key commitments made in the Responsible Agriculture Charter were also updated to reflect the latest developments around implementation of no-deforestation within operations and supply chains.

During the reporting period, SDP has launched the Innovation and Productivity Charter which articulates our aspirations in delivering sustainable development through enabling high levels productivity.

SDP is still the leading producer of certified sustainable palm oil globally, but has also received further recognition of its efforts around sustainability as it emerged as overall winners in the inaugural Sustainability Business Awards Malaysia. SDP also received awards during the event for Best Sustainability in the Community and Best Land Use and Biodiversity and special recognition for the Strategy & Sustainability Management and Supply Chain Management categories.

Priorities for 2019

Moving forward, the SC will continue to work with management in ensuring that the Group continues on its journey to become the leader in responsible agricultural practices within the palm oil sector. The SC has authorised the implementation of five (5) key management strategies which seek to deliver value to shareholders whilst balancing the needs of its diverse stakeholders. These strategies are:

• Flawless implementation of sustainability standards;• Lead in the development of new standards and approaches;• Inclusion of stakeholders in delivering sustainable development;• Manage sustainability risks within the Group’s global supply chain; and• Differentiate the Group via sustainability and leverage on sustainability to create value.




TAN SRI DATUK DR YUSOF BASIRAN - Chairman of the Board Tender Committee

The Board Tender Committee is established to assume the responsibility for reviewing and deliberating on key tenders, ensuring that tender exercises are conducted in a transparent and fair manner, adopting the principle of good governance, and delivering the best value to the Group. The Committee will continue to ensure that the procurement of key contracts also comply with the process and procedures of the Group Procurement Policies & Authorities.

BOARD TENDER COMMITTEE REPORT

BTC

INSIDE THIS REPORT

The purpose of this report is to highlight areas that the Committee has reviewed during the financial period ended 31 December 2018 (FP December 2018) and the priorities going forward.


Members1 Membership Appointment AttendanceTan Sri Datuk Dr Yusof Basiran Chairman

Independent Non-Executive Director21 February 2018 1/1 100%

Zainal Abidin Jamal2 Member Non-Independent Non-Executive Director

27 February 2019 N/A3 N/A3

Tan Ting Min MemberIndependent Non-Executive Director

21 February 2018 1/1 100%



21 November 2018 0/1 0%

Notes:1 For the Members’ profiles see pages 64 to 69.2 Encik Zainal Abidin Jamal was appointed after the FP December 2018.3 Not Applicable.

The Board Tender Committee (BTC) comprised a majority of Independent Non-Executive Directors. The BTC is supported by Group Procurement who assists in arranging various sub-tender committee meetings to review and support the tender papers prior to tabling to the BTC. The BTC Chairman reports to the Board on key matters deliberated at the BTC meetings.

Meetings of the BTC are attended by the Deputy to Managing Director & Chief Operating Officer, Upstream, Chief Advisor & Value Officer, Chief Financial Officer and other members of senior management.


The BTC was established on 21 February 2018 to assist the Board in overseeing the process of awarding significant contracts/tenders by Sime Darby Plantation Berhad (SDP) and its subsidiaries (SDP Group). The BTC has the mandate to review and approve tenders with value above RM100 million up to RM500 million. For tenders above RM500 million, the BTC has the mandate to review and support the tenders before the same are deliberated and approved by the Board. Meetings of the BTC are held as and when required.



The Committee is responsible for:

• Overseeing that the tender process is carried out in accordance with the Group Procurement Policies & Authorities and standard operating procedures including the fulfillment of the Bumiputera Empowerment Agenda of the Government;

• Reviewing and ensuring that the tender evaluation criteria are comprehensive and allow for maximum competition among vendors;• Awarding tenders based on merit, always allowing for qualitative considerations and competitive pricing where practical and feasible;• Reviewing the adequacy of the Tender Evaluation Report which incorporates both the technical and commercial evaluation;• Deliberating on the Tender Evaluation Report and recommending actions as appropriate to:

- award to the vendor as recommended; or- recommend price renegotiation benchmarking against the lowest bidder or market rate; or- award to a vendor(s) other than the one recommended and support with reason(s); or- propose specification change and to proceed with a new tender or to request the resubmission of quotation on changes

only or to renegotiate; or- to keep-in-view or to cancel the tender with supporting reason(s)/justification(s).

• Participating in the negotiations and/or site visits if such actions will assist in the decision making; and• Reviewing, supporting and approving the Tender Report, highlighting any concern or irregularity in the tender.

Detailed Terms of Reference for the Committee are available online at the Corporate Governance section of www.simedarbyplantation.com.


The Board performs an annual assessment of the BTC’s effectiveness in undertaking its duties as set out in the Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.

The BTC’s Terms of Reference were revised and standardised on 29 August 2018 on administrative matters.

OUR FOCUS & ACTION PLANS

The BTC is committed to ensuring that the Group continues to procure goods and services for key contracts/tender in a transparent, objective and fair manner adopting the principles of good governance and at the same time delivering best value to the Group. The BTC is also committed to ensuring that the procurement of key contracts are conducted in accordance with the process and procedures of the Group Procurement Policies & Authorities. Besides getting the best value for the Company through procurement, cost reduction and cost avoidance have become a top priority for the Company.

During the FP December 2018, the Company has undertaken the following key activities:

• To revise the Group Policies & Authorities on procurement; and • To standardise specifications, consolidate volume, source for alternative materials and adopt the most competitive method of

negotiation to secure the best value to the Group.

Moving forward, the BTC is committed to ensuring that SDP continues to pursue sustainable value creation for the SDP Group to benefit all stakeholders.

BOARD TENDER COMMITTEE REPORT



STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION

The Board is pleased to provide the Statement of Risk Management and Internal Control which outlines the state of risk management and internal control within SDP for the financial period under review.

RESPONSIBILITIES AND ACCOUNTABILITIES

The Board has an overall responsibility for the Group’s risk management and internal control systems and is focused on setting the tone and culture towards their effectiveness. Successful integration of good governance structures and processes with performance-focused risk management and internal control at every level of the Group and across our operations has been key towards the effective pursuit of our objectives. This is as encapsulated in our governance framework on risk management and internal controls which assigns responsibility to relevant levels at Board and Management as detailed below:

Refer to the Governance & Audit Committee (GAC) Report on pages 84 to 89 for an overview of the activities conducted by the Group Integrity, Governance & Assurance function. Further details on risk management governance are provided in the next section.

RISK MANAGEMENT

Risk Management Governance

The Board acknowledges its overall responsibility for the establishment, oversight and monitoring of the Group’s risk management framework and related processes as well as reviewing its effectiveness to ensure that these activities continue to support the mission, vision and strategic objectives of the Group whilst safeguarding stakeholders’ interests.

Our integrated approach is two (2) pronged, i.e. a top down strategic view which is complemented by bottom up operational risk assessments, whilst taking cognisance of the external environment in which we operate.

Group Corporate Assurance

Group Compliance

BOARD OF DIRECTORS


Group Integrity, Governance & Assurance



Executive Deputy Chairman & Managing Director

Management Committee




The Risk Management Committee (RMC) assists the Board in providing the framework and guidance in which the business units can operate, identify, and report on Group-wide risks. The RMC has a broad mandate to ensure the effective implementation of the objectives outlined in the Risk Management Framework and compliance with them throughout the Group. Furthermore, the RMC is also responsible for periodically reporting higher risk exposures as well as on the progress and assessment of risk management in the Group to the Board. The RMC is assisted by the Group Risk Management function which is responsible for supporting the RMC with oversight of the Risk Management Framework.

The Board delegates to the Executive Deputy Chairman & Managing Director (EDCMD) the responsibility for ensuring effective implementation and maintenance of the Risk Management Framework and that all personnel adhere to its mandates. The Management Committee supports the EDCMD in ensuring risk management is adequately carried out, as part of their responsibility in evaluating and making key strategic and operational decisions. Jointly, the EDCMD and Management Committee are responsible for providing leadership and sponsorship for the implementation of the Risk Management Framework. The EDCMD and Management Committee ensure that risk assessment is explicitly performed during strategic planning exercises, on top of managing risk exposures in the pursuit of the Group’s strategies.

The Risk Management Governance Structure shown below captures the arrangements and accountability of relevant levels of management and operations.

These three (3) lines of defence in the exercise of their functions are designed to reinforce each other in the implementation and strengthening of the Group’s Risk Management Framework.

To read more about how we practised risk management during the period under review, see pages 96 to 97.



RISK CHAMPIONSRespective Business Units/Support Function have nominated Risk Champions who will support the Risk Owners on risk management matters

EXECUTIVE DEPUTY CHAIRMAN & MANAGING DIRECTOR

BOARD OF DIRECTORS

BUSINESS UNITS/SUPPORT FUNCTIONS

1st Line of Defence

2nd & 3rd Line of Defence

• Group Advisory & Value Creation • Upstream • Sime Darby Oils • Finance • Group Human Resources • Group Sustainability & Quality Management

• Group Strategy & Innovation • Group Legal • Group Research & Development • Group Corporate Secretarial • Group Communications

MANAGEMENT COMMITTEE (RISK OWNERS) Accountable and responsible for effective risk

identification & management

Group Integrity, Governance & Assurance




Group Risk Management Framework

Our Risk Management Framework is aligned with ISO31000:2018 standard on risk management which promotes three (3) facets of risk management as depicted in the diagram below:

The primary goal of the Risk Management Framework is to identify, evaluate and manage risks that would impede the achievement of the Group’s long-term and short-term strategies and objectives. Creating and protecting value is the key driver of risk management. The role of leaders and their responsibilities are emphasised in the framework to ensure that risk management is an essential part of business. The Risk Management Framework is also aligned with COSO 2017 Enterprise Risk Management— Integrating with Strategy and Performance which clearly underscores our commitment towards enterprise risk management in strategic planning and our will to embed risk management throughout the organisation.


Principles (clause 4)

Framework (clause 5) Process (clause 6)

Integration

Design

ImplementationEvaluation

Improvement

Leadership and Commitment

Value Creation and Protection

Integrated

InclusiveDynamic

Continual Improvement

Structured and Comprehensive

Human and Cultural Factors

Best Available Information Customised

COM

MUN

ICAT

ION

& C

ONSU

LTAT

ION

MON

ITOR

ING

& R

EVIE

W

RECORDING & REPORTING

Scope, Context, Criteria

Risk Assessment

Risk Treatment

Risk Evaluation

Risk Analysis

Risk Identification



Group Business Continuity Framework

Our Business Continuity Framework was established during the period under review and is aligned with ISO22301:2012 standard on business continuity management systems. It covers end to end guidance to assist with managing a crisis event, as depicted in the diagram below:-

The Group is committed to safeguard the interests of all stakeholders in times of disaster and/or emergency. Therefore, Business Continuity processes are put in place to ensure that the Group is able to continue operations with minimal impact to stakeholders in the event of disruption.

Risk Reporting

The Risk Management Framework provides for consistent review and reporting. On a quarterly basis, formal risk reports are developed and presented to the Management Committee and RMC. Any potential risks identified are escalated as appropriate, with mitigation actions put in place to manage such risks. Significant risks affecting the business as well as periodic external and emerging risk outlooks are presented to the RMC.


BUSINESS CONTINUITY

Process Emergency and Crisis Management Recovery and Restoration Management

Document Emergency Preparedness and Response (EPR)

Procedures

Crisis Communications Plan (CCP)

Disaster Recovery Plan (DRP)

Business Continuity Plan (BCP)

Nature of Document

Documents procedures to manage potential

and actual emergency situations with ESH

implications

Documents procedures to manage communications when a crisis is imminent or

has happened

Documents procedures to recover and

protect business IT infrastructure to support business

operations

Documents procedures to recover and restore business operations to

normality

Objective of Document

Safety and health of people are maintained

Communications occurs effectively

IT applications/data protected

People relocate and resume operation

effectively



INTERNAL CONTROL FRAMEWORK

Group Policies and Authorities (GPAs)

Our GPAs represent a formal delegation of the Board’s powers and functions to Management and enables the Board to facilitate a robust control environment entailing clear lines of responsibility, accountability and authority limits. The GPAs are broadly categorised as follows:

• Functional policies that describe the approach taken to achieve corporate objectives;• Standards of ethical behaviour and business conduct that are necessary to establish sustainable business practices and enhance

the image of the Group;• Policies that safeguard the integrity of the Group’s physical and intangible assets;• Policies to ensure the effective functioning of key processes; and• Authorisation limits to enter into financial commitments on behalf of the Group.

The GPAs are reviewed and revised, as appropriate, on an annual basis to ensure that they are relevant to the current operating environment and reflect better intended practices. In addition to the core GPAs, various policies, procedures and guidelines are developed by relevant departments and business units to support the achievement of the principles stipulated in the GPAs, all of which, are mandatory to be complied with by Directors and Employees of the Group.

Code of Business Conduct

Our Code of Business Conduct (COBC) demonstrates SDP’s commitment towards conducting business in an ethical manner and is instrumental in guiding us to uphold our Group’s fundamental Core Values: Integrity, Respect & Responsibility, Enterprise and Excellence. All Directors and Employees of the Group must read and declare compliance with the COBC upon appointment to or joining the Group and relevant training and attestation programmes are developed to ensure that staff will be able to understand the COBC and apply it in their daily lives. Where cases of breaches of the COBC, including fraud, had been suspected, investigations will be conducted and where fault has been established, will be addressed in line with existing human resource policies. As our counterparties are also encouraged to adopt similar principles and standards of behaviour, the Vendor COBC outlines the standards of behaviour required from the Vendors in relation to labour & human rights, environment, safety & health and ethics & management practices.

Performance Reward

Our Performance Management Framework is designed to support the Group’s vision of becoming a sustainable high performance organisation to drive business results, by aligning organisational objectives to individual performance. Our annual performance management process includes the cascading of Key Performance Indicators (KPIs) to our employees which are aligned to our business strategy and includes measurements on business growth and productivity, customer and stakeholder management, operational efficiencies as well as well human capital development.

Internal Audit

Internal audits performed evaluate whether risk management, control and governance processes are designed and operate sustainably and effectively and provide an objective and independent assessment to the Management and Board on the state of internal controls. Where limitations have been noted, recommendations on corrective action to be implemented are followed up to ensure these are appropriately addressed.

Business Reporting

Our business performance is monitored on a periodic basis by the Board and Management via the preparation and review of operational reports, periodic budgets and financial performance (actual against budget) and forecast reports.




Whistleblowing

Our whistleblowing channels (website, e-mail, telephone) provide an avenue for genuine wrongdoing concerns to be raised in good faith without fear of reprisals or retaliation. We take all reports of possible wrongdoings seriously and shall investigate the reports, regardless of the length of service, position/title, relationship or connection of the alleged parties to the Group.

MATERIAL JOINT VENTURES AND ASSOCIATES

The disclosures in this statement exclude the risk management and internal control practices of the Group’s Joint Ventures and Associates. The Group’s interests in these entities are safeguarded through the appointments of members of the Group’s Senior Management team to the Board of Directors and, in certain cases, the management or operational committees of these entities.

REVIEW OF THE STATEMENT BY THE EXTERNAL AUDITORS

As per the requirement of Paragraph 15.23 of the MMLR of Bursa Securities, the external auditors have reviewed this Statement of Risk Management and Internal Control (SORMIC). Their limited assurance review was performed in accordance with the Audit and Assurance Practice Guide (AAPG) 3 (Revised: February 2018) issued by the Malaysian Institute of Accountants. The AAPG 3 (Revised) does not require the external auditors to consider whether the SORMIC covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control systems including the assessment and opinion by the Board of Directors and the Management thereon.

CONCLUSION

For the financial period under review and up to the date of approval of this statement, the Board is satisfied with the adequacy and effectiveness of the Group’s system of risk management and internal control to safeguard the shareholders’ investments and the Group’s assets.

The Board has received reasonable assurance from the EDCMD and the Group Chief Financial Officer that the Group’s risk management and internal control systems, in all material aspects, are operating adequately and effectively. This statement is made in accordance with the Statement of Risk Management and Internal Controls – Guidance for Directors of Listed Issuers (Guidelines) issued on 31 December 2012, which is in line with the requirements of Paragraph 15.26(b) of the MMLR of Bursa Securities and Principle B of the Malaysian Code on Corporate Governance 2017 issued by Securities Commission Malaysia.

This statement is made in accordance with a resolution of the Board dated 5 April 2019.




The Directors are responsible for the preparation, integrity and fair presentation of the annual financial statements of the Sime Darby Plantation Berhad Group. As required by the Companies Act, 2016 (Act) and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the financial statements for the financial period ended 31 December 2018, as presented on pages 112 to 326, have been prepared in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Act.

The Directors consider that in preparing the financial statements, the Group and the Company have used the appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Directors are satisfied that the information contained in the financial statements give a true and fair view of the financial position of the Group and of the Company at the end of the financial period and of the financial performance and cash flows for the financial period.

The Directors have responsibility for ensuring that proper accounting records are kept. The accounting records should disclose with reasonable accuracy the financial position of the Group and the Company to enable the Directors to ensure that the financial statements comply with the Act. The Directors have the general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board of Directors dated 5 April 2019.

BOARD APPROVAL OF FINANCIAL STATEMENTS

The annual financial statements for the financial period ended 31 December 2018 are set out on pages 112 to 326. The preparation thereof was supervised by the Group Chief Financial Officer and approved by the Board of Directors on 5 April 2019.

STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS