FGV Annual Report 2012

70 Felda Global Ventures Holdings Berhad 21 INVESTMENT IN SUBSIDIARIES (continued) (c) Acquisition of plantation estates (i) Land Lease Agreement (“LLA”) The Company entered into an agreement with Lembaga Kemajuan Tanah Persekutuan (“FELDA”) on 1 November 2011 to lease for a period of 99 years (i) lands with individual land titles issued to FELDA as the registered owner (ii) existing lands granted to FELDA for development but where individual land titles have not been issued to FELDA and (iii) other lands to be alienated or to be acquired by FELDA in the future. (ii) LLA Addendum On 2 January 2012, the Company entered into an addendum to LLA (“LLA Addendum”) to acquire certain assets and liabilities other than biological assets of the plantation estates owned by FELDA for a purchase consideration equivalent to the carrying values of the assets and liabilities acquired as at 31 December 2011 amounting to RM54,690,000, removing the requirement for consents from State Authority prior to commencement of LLA and amending the definition of categories of assets requiring to be maintained by the Company. As a result, the LLA commenced on 1 January 2012. (iii) Novation Agreement On 6 January 2012, as part of its restructuring process, FELDA, the Company and Felda Global Ventures Plantations (Malaysia) Sdn. Bhd. (“FGVPM”), a subsidiary of the Company had entered into a novation agreement whereby all benefits, rights, title, interest, obligations, undertakings, covenants and liabilities of the Company under the LLA and LLA Addendum shall be transferred by the Company to FGVPM from 1 January 2012 and FELDA has consented to the transfer of all of the Company’s benefits, rights, title, interest, obligations, undertakings, covenants and liabilities to FGVPM subject to the terms and conditions of the novation agreement. (iv) Tenancy Agreements • On 6 January 2012, FELDA and FGVPM entered into a tenancy agreement in respect of the LLA of which this tenancy shall be for an initial period of three years and upon expiry of the three year period, FGVPM shall have the option to renew the tenancy for further terms of three years each up to a total duration of 99 years unless terminated in accordance with the provisions of the LLA term. The option to renew shall be exercisable by written notice, or by conduct of the parties allowing continued enjoyment of rights of the Lands by FGVPM under the agreement. In the event that the Approvals for any part of the Lands are obtained from time to time or individual land titles are issued by the state authorities for any part of the Additional Existing Lands and the Approvals are obtained, the parties will proceed to register the lease in accordance with the LLA, and thereafter the Approved Lands shall be excluded from this agreement and the tenancy therein and shall fall under the lease in the LLA . • On 21 January 2012, FELDA and FGVPM entered into a tenancy agreement in respect of certain plantation lands which are vested in FELDA. This tenancy shall commence on 1 January 2012 and shall be for an initial period of three years. Upon expiry of the intial tenancy agreement’s three years term, FGVPM shall have the option to renew the tenancy for further terms of three years each up to a total duration of 99 years unless terminated in accordance with the provisions of the LLA and at an agreed consideration which reflects the Lease Consideration in accordance with the LLA . In the event that FELDA loses rights to these lands, no compensation is payable to FGVPM. (v) Management Agreement On 21 May 2012, the Tenancy Agreement dated 6 January 2012 was supplemented by an addendum, whereby both FELDA and FGVPM acknowledged that as at 1 January 2012, FGVPM has yet to be deemed or recognised as native in respect of the lands in Sarawak to the Land Code of Sarawak. Both FELDA and FGVPM agree to exclude all the Sarawak Lands from the Tenancy Agreement and the LLA. Both FELDA and FGVPM agree that no lease consideration shall be deemed payable in respect of these Sarawak Lands for the tenancy for the period commencing from 1 January 2012 until FGVPM has duly obtained the status of native, all Approvals have been obtained and upon registration of the lease in accordance with the Land Code of Sarawak. Upon fulfilment of the aforementioned conditions, the Sarawak Lands will be included as part of the Remaining Existing Lands and the terms of the LLA shall be applicable in respect thereof and the accounting application shall remain the same as per LLA . In the event the lands or any part thereof at any time become affected by any notice by acquisition under Land Acquisition Act 1960, the lessor may not be compensated for the termination costs. Notes to the Financial Statements for the financial year ended 31 December 2012