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2004Annual Repor t

KWANTAS CORPORATION BERHADCompany No: 356602-W Incorporated In Malaysia

Perserverance Performance

reaching new heightsPursue our goals with force and determination

Notice of Annual General Meeting 03Statement Accompanying Notice of Annual General Meeting 06

Share Performance 085 Years Group Financial Highlights 09

Corporate Information 10Corporate Structure 11

Directors’ Profile 12Chairman’s Statement 16

Operations Review 20Recognition Received 2002-2004 24

Corporate Governance 25Statement on Internal Control 28

Compliance Statements and Additional Compliance Information 29Statement of Directors’ Responsibilities in Audited Financial Statements 30

Audit Committee 31Financial Statements 33

Properties of the Group 82Shareholdings Statistics 84

Form of Proxy 87

At Kwantas, we enhance the lives of our employees, shareholders and community by

establishing good business practises, making sound investments and undertaking social

responsibilities.

We will endeavour to accelerate efficiency and operate an effective management to achieve

satisfactory results for our customers and investors.

Kwantas strives towards Quality and Excellence without compromise.

CONTENTS

mission

efficiencySurpassing performance standards throughoptimal and innovative use of resources

kwantas corporat ion berhad 356602-W 2

3 a n n u a l r e p o r t 2 0 0 4

Notice of 9th Annual General Meeting

NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting of the Members of theCompany will be held at the 4th Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu,Sabah on Wednesday, 15 December 2004 at 10.00 a.m. for the following purposes:

AGENDA1. To receive and adopt the audited financial statements for the year ended 30 June 2004 together with the Directors’

and Auditors’ Reports thereon. Resolution 1

2. To declare a first and final tax exempt dividend of 10 sen per ordinary share. Resolution 2

3. To re-elect the following Directors pursuant to Article 73 of the Company’s Articles of Association as Directors ofthe Company:

(a) Dato’ Mohd Sarit Bin Haji Yusoh Resolution 3(b) Datuk Jaswant Singh Kler Resolution 4(c) Ooi Jit Huat Resolution 5

4. To re-elect Kwan Ngen Chung, the Managing Director of the Company pursuant to Article 106 of the Company’sArticles of Association. Resolution 6

5. To re-appoint Messrs Ernst & Young as Auditors of the Company and authorise the Directors to fix their remuneration.Resolution 7

6. To transact any other ordinary business of the Company for which due notice shall have been given.

7. As SPECIAL BUSINESS to consider and, if thought fit, pass the following resolutions:

ORDINARY RESOLUTION NO.1

AUTHORITY TO ALLOT AND ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965. Resolution 8

That pursuant to Section 132D of the Companies Act, 1965 and subject always to the approval of the relevantauthorities, the Directors be and are hereby empowered to issue shares in the capital of the Company from time totime upon such terms and conditions and for such purposes as the Directors may in their discretion deem fit providedthat the aggregate number of shares issued pursuant to this resolution does not exceed ten percent (10%) of the issuedshare capital of the Company for the time being and that the Directors be and are also empowered to obtain theapproval for listing and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad and thatsuch authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.

ORDINARY RESOLUTION NO.2

PROPOSED RENEWAL OF THE EXISTING SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OFA REVENUE OR TRADING NATURE INVOLVING SECTION 2.1.2 AND 2.1.3 Resolution 9

“That, subject always to the compliance with the Companies Act, 1965, the Memorandum and Articles of Associationof the Company, the Listing Requirements of Bursa Malaysia Securities Berhad and all other applicable laws,regulation and guidelines, approval be and is hereby given to the Company and its subsidiaries to enter intorecurrent related party transactions of a revenue and trading nature which are necessary for the day-to-day operationsof the Company and its subsidiaries from time to time, the nature and the contracting parties of which referred tounder Sections 2.1.2 and 2.1.3 of the Circular to Shareholders dated 23 November 2004 provided that

(i) the transaction is in the ordinary course of business on an arm’s length basis, on normal commercial termsand on terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company; and

(ii) disclosure is made in the annual report of the breakdown of the aggregate value of the transactions conducted pursuant to this shareholders’ mandate during the financial year of the Company based on the following information:

(a) the type of the recurrent transaction made; and

(b) the names of the related parties involved in each type of the recurrent transaction made and their relationshipwith the Company,

and that such authority shall commence upon the passing of this resolution and shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting of the Company following the general meeting at which such mandate was passed, at which time it will lapse, unless by a resolution passed at the meeting, the authorityis renewed;

(b) the expiration of the period within which the next Annual General Meeting after the date it is required to beheld pursuant to Section 143(1) of the Companies Act, 1965 but shall not extend to such extension as may beallowed pursuant to Section 143(2) of the Companies Act, 1965; or

(c) revoke or varied by resolution passed by the shareholders in general meeting,

whichever is earlier

and further that authority be and is hereby given to the Directors of the Company to complete and do all such actsand things (including executing such documents as may be required) to give effect to the transactions contemplatedand/or authorised by this Ordinary Resolution.”

By Order of the Board

KWAN CHIEW GIOK (LS007125)CHONG KAN HIUNG (MIA 8401)SecretariesLahad Datu

23 November 2004


Notice of 9th Annual General Meeting (cont’d)

Notes:A) NOTES ON APPOINTMENT OF PROXY

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy may but need not be a member of the Company. The instrument appointing a proxy must be deposited atthe Registered Office of the Company at 1st Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah,not less than 48 hours before the time appointed for holding the meeting. Where the Form of Proxy is executed bya corporation, it must be either under seal or under the hand of any officer or attorney duly authorized.

B) NOTES ON SPECIAL BUSINESS(i) Resolution 8

The proposed resolution is in relation to the authority to allot shares pursuant to Section 132D of the CompaniesAct, 1965 and if passed, will give the Directors of the Company, from the date of the above general meeting,authority to issue and allot shares from the unissued capital of the Company for such purpose as the Directorsmay deem fit and in the interest of the Company. This authority, unless revoked or varied by the Company ingeneral meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

(ii) Resolution 9The proposed resolution is in relation to the renewal of the existing shareholders’ mandate for recurrent related party transactions of a revenue or trading nature with related parties in the ordinary course of business whichare necessary for the Company’s day-to-day operations.

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Notice of 9th Annual General Meeting (cont’d)


Statement AccompanyingNotice of Annual General Meeting(Pursuant to paragraph 8.28(2) of The Listing Requirements of Bursa Malaysia Securities Berhad)

PARTICULARS OF DIRECTORS STANDING FOR RE-ELECTIONAT THE ANNUAL GENERAL MEETING.

1) Directors standing for re-election at the Ninth Annual General Meeting of Kwantas Corporation Berhad:

(i) Dato’ Mohd Sarit Bin Haji Yusoh(ii) Datuk Jaswant Singh Kler(iii) Ooi Jit Huat

The above Directors are retiring by rotation pursuant to Article 73 of the Articles of Association of the Company.

(iv) Kwan Ngen Chung

The above Director who is the Managing Director of the Company, is retiring pursuant to Article 106 of the Articles of Association of the Company.

2) Attendance of Directors at Board Meetings

Details of attendance at board meetings held in financial year ended 30 June 2004 (total of 4 meetings held):

Name of directors Attendance(i) Dato’ Mohd. Sarit Bin Haji Yusoh 2(ii) Kwan Ngen Chung 3(iii) Kwan Ngen Wah 3(iv) Kwan Jin Nget 3(v) Kwan Min Nyet 3(vi) Chong Kan Hiung 4(vii) Datuk Jaswant Singh Kler 4(viii) Ooi Jit Huat 4

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Statement Accompanying Notice of Annual General Meeting (cont’d)

3) Place, date and hour of Board of Directors’ Meetings held

The Board of Directors’ Meetings during the year were held at the following date, time and venue:

Date Time Venue

(i) 29 August 2003 11.30 a.m Suite 1-6-W9, 6th Floor, CPS Tower, Centre Point Sabah, 88000 Kota Kinabalu,Sabah, Malaysia

(ii) 21 November 2003 4.30 p.m Suite 1-6-W9, 6th Floor, CPS Tower, Centre Point Sabah, 88000 Kota Kinabalu, Sabah, Malaysia

(iii) 24 February 2004 4.00 p.m Suite 1-6-W9, 6th Floor, CPS Tower, Centre Point Sabah, 88000 Kota Kinabalu, Sabah, Malaysia

(iv) 21 May 2004 10.30 a.m Suite 1-6-W9, 6th Floor, CPS Tower, Centre Point Sabah, 88000 Kota Kinabalu, Sabah, Malaysia

4) Further details of directors who are standing for re-election.

Details of directors who are standing for re-election are set out in the Directors’ Profile appearing on pages 12 to 15of the Annual Report.

competitive advantageWe are in a race without a finish line.When we improve, so do our competitors.


Share Performance

9 a n n u a l r e p o r t 2 0 0 4

5 Years Group Financial Highlights

overcomingchallenges togetherHardwork and continuous innovation will propel us ahead everytime

BOARD OF DIRECTORSDato’ Mohd Sarit Bin Haji Yusoh DIMP, AMP

(Chairman – Independent Non-Executive Director)

Kwan Ngen Chung(Managing Director – Non-Independent Executive Director)

Kwan Ngen Wah(Executive Director – Non-Independent Executive Director)

Kwan Jin Nget(Non-Independent Executive Director)

Kwan Min Nyet(Non-Independent Executive Director)

Chong Kan Hiung(Non-Independent Executive Director)

Datuk Jaswant Singh Kler(Independent Non-Executive Director)

Ooi Jit Huat(Independent Non-Executive Director)

SECRETARIESChong Kan Hiung(MIA 8401) Kwan Chiew Giok(LS 007125)

REGISTERED OFFICEAND PRINCIPALPLACE OF BUSINESS1st Floor, Fordeco BuildingJalan Singamata91100 Lahad DatuTel no : 089-881188Fax no : 089-883333

AUDITORSErnst & Young

SOLICITORSCheu Adnan & RaziChin, Mirdin & CoYap & ChinLind, Willie, Wong & Chin

AUDIT COMMITTEEDatuk Jaswant Singh Kler (Chairman)Kwan Ngen Chung (Member)Ooi Jit Huat (Member)

BANKERSMalayan Banking BerhadHSBC Bank Malaysia BerhadStandard Chartered Bank Malaysia BerhadUnited Overseas Bank (M) BerhadBank Industri & Teknologi Malaysia BerhadMaybank International (L) LtdChina Construction Bank

REGISTRARSSymphony Share Registrars Sdn BhdLevel 26, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel no : 03-27212222Fax no : 03-27212530/1

STOCK EXCHANGE LISTINGMain Board of Bursa Malaysia Securities Berhad


Corporate Information

KWANTAS CORPORATION BERHAD (KCB)Company No: 356602-W Incorporated: 23 Aug 1995

Principal activity:• Investment holding company

HARANKY SDN BHD (HSB)Company No: 28971-K Incorporated: 18 Aug 1976

Principal activity:• Operation of oil palm plantations

(Haranky Estate)

KWANTAS PLANTATIONS SDN BHD (KPSB)Company No: 85636-X

Incorporated: 1 Jun 1982Principal activities:

• Operation of oil palm plantations(Mewah & Pintasan Estate)

• Stone quarry

PALM ENERGY SDN BHD (PESB)Company No: 539089-X

Incorporated: 13 Feb 2001Principal activity:

• Operation of a biomass power plant

KWANTAS OIL SDN BHD (KOSB)Company No: 57450-X

Incorporated: 21 Apr 1980Principal activities:

• Operation of palm oil mills, kernel crushing plant & palm oil refinery

• Wholesaling & supply ofdiesel and lubricants

DONG MA OILS & FATS(GUANGZHOU FREE TRADE ZONE)

CO LTD (DMGZFTZ)Principal activities:

• Operation of a bulking installationin a free trade area

• Trading of oils and fats products• Operation of specialty fats and

veg oil refining

AMAN BERSATU SDN BHD (ABSB)Company No: 145295-M

Incorporated: 25 Sept 1985Principal activity:

• Operation of oil palm plantations

BENAR BERSATU SDN BHD (BBSB)Company No: 143185-D

Incorporated: 5 Aug 1985Principal activity:

• Operation of oil palm plantations

KWANTAS INTERNATIONAL INC (KII)Company No: LL02811

Incorporated: 19 Apr 2001Principal activity:

• International trading

DONG MA OILS & FATS(ZHANGJIAGANG FREE TRADE ZONE)

CO LTD (DMZJGFTZ)Principal activities:

• Operation of a bulking installationin a free trade area

• Trading of oils and fats products

MAXIMLINK ENTERPRISE SDN BHD (MESB)Company No: 179828-V

Incorporated: 17 Mar 1989Principal activity:

• Rental of leasehold land

100%

100%

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100%100%

100%

100%

51%

100%

100%

Malaysia Companies

Foreign Companies

11 a n n u a l r e p o r t 2 0 0 4

Corporate Structure

Dato’ Mohd Sarit Bin Haji Yusoh, D.I.M.P., A.M.P.,a Malaysian, aged 53, is the Chairman of the Company.He was appointed to the Board on 23 August 1996.He graduated with a Bachelor of Arts (Economics) (Hon)Degree from University of Malaya in 1975 and Master ofArts (Economics) Degree from University of Philippinesin 1977.

Dato’ Sarit is a Director of several public listedcompanies, private companies and voluntaryorganizations. He has had a distinguished career withthe government sector primarily in the fields of financeand education. He had served as an Officer to theMinistry of Finance in 1975 before joining PETRONASas Marketing Executive from 1977 to 1981. He was theGeneral Manager of PERNAS from 1981 to 1984. He servedas Political Secretary to the Education Minister, Ministryof Education from 1986 to 1990. He was the ExecutiveChairman of Wembley Industries Holdings Berhadfrom 1991 to 1993, Kentucky Fried Chicken Holdings(M) Berhad from 1993 to 1999 and AyamasFood Corporation Berhad from 1994 to 1999. Currently,he is also the Chairman of Khee San Berhad and KurniaSetia Berhad. His other directorships are Goh Ban HuatBerhad and Liqua Health Corporation Berhad.

Dato’ was the Pahang State Assemblyman for theSemantan Constituency from 1990 to 1999 and iscurrently the member of Parliament for Temerloh,Pahang Darul Makmur and has been elected into officesince 1999.

Dato’ holds nil shares in Kwantas Corporation Berhadand does not have any family relationship with anyother Directors and/or other major shareholders ofthe Company and has no conflict of interest with theCompany. Dato’ has not been convicted for any offenceswithin the past 10 years other than traffic offences.

Dato’ is the Chairman of Nomination Committee of theCompany.

Dato’ attended 2 out of the 4 Board Meetings of theCompany held during the financial year ended 30 June2004.

DATO’ MOHD SARIT BIN HAJI YUSOHChairman(Independent Non-Executive Director)

KWAN NGEN CHUNGManaging Director and Chief Executive Officer(Non-Independent Executive Director)

Kwan Ngen Chung, a Malaysian, aged 44, is one ofthe co-founder directors of the Company and is currentlythe Company Managing Director. He holds a degree ofMaster of Business Administration from WisconsinInternational University, USA.

Prior to the founding of the Company, Kwan Ngen Chunghas been principally involved in the oil palm industry.He also has substantial experience in stone quarryoperation, road construction and property development.Using his vast knowledge and experience obtained inthe past 20 years, he and his brother, Kwan Ngen Wahestablished Kwantas Corporation Berhad in 1996.

Kwan Ngen Chung holds 40,750,000 shares in KwantasCorporation Berhad. He is the brother of Kwan Ngen Wah,Kwan Jin Nget and Kwan Min Nyet. Except for certainrecurrent related party transactions of revenue andexpenditure nature which are necessary for day-to-dayoperations of the Company and its subsidiaries and forwhich he is deemed to be interested as disclosed on page74 of the Annual Report, there are no other businessarrangements with the Company in which he has personalinterests. He has not been convicted for any offenceswithin the past 10 years other than traffic offences.

Kwan Ngen Chung is the member of Audit andRemuneration Committee of the Company.

Kwan Ngen Chung attended 3 out of the 4 BoardMeetings of the Company held during the financialyear ended 30 June 2004.


Directors’ Profile

Kwan Jin Nget, a Malaysian, aged 37, graduated with aBachelor Degree of Business Administration fromUniversity of Iowa, USA in 1989. She has been a Directorsince the Company was incorporated.

Kwan Jin Nget is currently the Director of Administration/Plantation of the Company. Her responsibilities includethe coordination for the efficient operations of theCompany and overseeing human resources management,General Administration and oil palm plantations.

Kwan Jin Nget holds 90,000 shares in KwantasCorporation Berhad. She is the sister of Kwan Ngen Wah,Kwan Ngen Chung and Kwan Min Nyet. Except for certainrecurrent related party transactions of revenue andexpenditure natures which are necessary for day-to-dayoperations of the Company and its subsidiaries and forwhich she is deemed to be interested as disclosed onpage 74 of the Annual Report, there are no other businessarrangements with the Company in which she haspersonal interests. She has not been convicted for anyoffences within the past 10 years other than trafficoffences.

Kwan Jin Nget attended 3 out of the 4 Board Meetingsof the Company held during the financial year ended30 June 2004.

KWAN JIN NGETExecutive Director(Non-Independent Executive Director)

Kwan Ngen Wah, a Malaysian, aged 46, is one of theco-founder directors of the Company and is currently anExecutive Director. He received his tertiary education inthe UK.

Kwan Ngen Wah has been actively involved in the oilpalm industry, stone quarry operation, road constructionand property development projects for the past 20 yearsand gained substantial knowledge and experience inthese industries. The accumulated experience coupledwith the close relationship with customers and suppliersprovide adequate impetus for him to efficiently steer theCompany to greater success.

Kwan Ngen Wah holds 40,250,000 shares in KwantasCorporation Berhad. He is the elder brother of Kwan NgenChung, Kwan Jin Nget and Kwan Min Nyet. Except forcertain recurrent related party transactions of revenueand expenditure natures which are necessary for day-to-day operations of the Company and its subsidiaries and for which he is deemed to be interested as disclosedon page 74 of the Annual Report, there are no otherbusiness arrangements with the Company in which he haspersonal interests. He has not been convicted for anyoffences within the past 10 years other than trafficoffences.

Kwan Ngen Wah attended 3 out of the 4 Board Meetingsof the Company held during the financial year ended30 June 2004.

KWAN NGEN WAHExecutive Director(Non-Independent Executive Director)

13 a n n u a l r e p o r t 2 0 0 4

Directors’ Profile (cont’d)

Kwan Min Nyet, a Malaysian, aged 35, graduated with aBachelor Degree of Business Administration fromUniversity of Iowa, USA in 1989. She has been a Directorsince the Company was incorporated.

Kwan Min Nyet is responsible for the finance andthe marketing functions of the Company’s oil milloperations.

Kwan Min Nyet holds 119,000 shares in KwantasCorporation Berhad. She is the sister of Kwan Ngen Wah,Kwan Ngen Chung and Kwan Jin Nget. Except for certainrecurrent related party transactions of revenue andexpenditure natures which are necessary for day-to-dayoperations of the Company and its subsidiaries and forwhich she is deemed to be interested as disclosed onpage 74 of the Annual Report, there are no other businessarrangements with the Company in which she haspersonal interests. She has not been convicted for anyoffences within the past 10 years other than trafficoffences.

Kwan Min Nyet attended 3 out of the 4 Board Meetingsof the Company held during the financial year ended30 June 2004.

KWAN MIN NYETExecutive Director(Non-Independent Executive Director)

Chong Kan Hiung, a Malaysian, aged 40, is a CharteredAccountant of the Malaysian Institute of Accountantsand a fellow of the Chartered Association of CertifiedAccountant in the UK and also a member of the MalaysianInstitute of Taxation. He was appointed as a Non-Independent Executive Director on 12 November 2001.

Chong Kan Hiung is responsible for the financialfunctions of the Group, he has been with the Group forthe past 9 years and is also the joint Company Secretaryfor the Company. Prior to joining the Kwantas Group in1996, he was attached to an international PublicAccountant firm for 10 years. He has considerableexperience in corporate finance and generalmanagement. Chong Kan Hiung is also a certified memberof the Financial Planning Association of Malaysia.

Chong Kan Hiung holds 300,000 shares in KwantasCorporation Berhad. He does not have any familyrelationship with any other Directors and/or other majorshareholders of the Company and has no conflict ofinterest with the Company. He has not been convictedfor any offences within the past 10 years other thantraffic offences.

Chong Kan Hiung attended 4 out of the 4 Board Meetingsof the Company held during the financial year ended30 June 2004.

CHONG KAN HIUNGExecutive Director(Non-Independent Executive Director)



Datuk Jaswant Singh Kler, a Malaysian, aged 64, is aPlantation Consultant who was appointed as anIndependent Non-Executive Director on 17 February2000.

Datuk has been actively involved in the plantation sectorfor the past 40 years as well as other trade and non-tradeorganization. He was also the Chairman of the EastMalaysian Planters Association (EMPA) from 1985 to 2000and since then has been appointed as adviser to EMPA. He sits on the Board of Malaysian Cocoa Board.Other positions currently held by Datuk include CouncilMember of Sabah BIMP-EAGA, Committee Member ofMalaysia International Chamber of Commerce andIndustry (Sabah Branch) and Council Member for SabahBusiness Council. Datuk also sits on the Board of TSHResources Berhad and has been appointed as Directorof the Institute of Development Studies (Sabah).

Datuk holds nil shares in Kwantas Corporation Berhadand does not have any family relationship with anyother Directors and/or other major shareholders of theCompany and has no conflict of interest with theCompany. He has not been convicted for any offenceswithin the past 10 years other than traffic offences.

Datuk Jaswant Singh Kler is the Chairman of Audit andRemuneration Committee of the Company.

Datuk Jaswant Singh Kler attended 4 out of the 4 BoardMeetings of the Company held during the financial yearended 30 June 2004.

DATUK JASWANT SINGH KLERDirector(Independent Non-Executive Director)

Ooi Jit Huat, a Malaysian, aged 53, is a Certified PublicAccountants and the managing partner of publicaccounting firm, Russ Ooi & Associates since 1985. He isalso the member of Malaysian Institute of Accountantsand the Malaysian Institute of Taxation. He wasappointed as an Independent Non-Executive Director on9 March 2000.

Ooi Jit Huat was trained as an auditor with, the thenKPMG Peat Marwick, Mitchell, and he was instrumental insetting up the consultancy arm for the firm. He has over20 years of experience in the financial industry havingcarved areas of expertise in corporate consultancy,financial management, management information systemsand auditing and investigations. His professionalassignments covered floatation exercises, investigationsand due diligence reporting and the reverse take-overof several companies on the Bursa Malaysia SecuritiesBerhad. He sits on the Board of Priceworth WoodProducts Berhad.

Ooi Jit Huat holds nil shares in Kwantas CorporationBerhad. He does not have any family relationship withany other Directors and/or other major shareholders ofthe Company and has no conflict of interest with theCompany. He has not been convicted for any offenceswithin the past 10 years other than traffic offences.

Ooi Jit Huat is a member of Audit, Nomination andRemuneration Committee of the Company.

Ooi Jit Huat attended 4 out of the 4 Board Meetingsof the Company held during the financial year ended30 June 2004.

OOI JIT HUATDirector(Independent Non-Executive Director)

15 a n n u a l r e p o r t 2 0 0 4


To our dear shareholders


Chairman’s Statement

On behalf of the Board of Directors of KwantasCorporation Berhad, I am pleased to present the Annual Report and audited Financial Statements of the Group and of the Company for the financial yearended 30 June 2004.

17 a n n u a l r e p o r t 2 0 0 4

Chairman’s Statement (cont’d)

2004 marks another significant year for Kwantas Corporation Berhad asthe Group achieves record earnings. The plantation business continuedto perform well with the favourable price of crude palm oil whichremained strong in the financial year. The worldwide demand for edibleoils increased, coupled with the rising consumption in China which isexpected to continue to grow. With the storage and productionfacilities completed or nearing completion, Kwantas is strategicallyplaced to compete in this growing market.

Financial ResultsThe last fiscal year has resulted in many positive accomplishmentsincluding a 26.7% increase in profit after tax over the previous year. I am pleased with the operating results which reflects the continuedgrowth and profitability of the Group.

For the financial year ended 30 June 2004, the Group achieved revenue of RM1.19 billion (2003: RM1.28 billion) and profitafter tax of RM40.34 million (2003: RM32.18 million). The basic earnings per share rose to 28.54 sen compared to 22.84sen in the previous year.

Manufacturing activities including the processing, production and trading of palm oil products remain the main revenuegenerator for the Group contributing RM1.185 billion to the total revenue. The trading of industrial products earned totalrevenue of RM5.51 million (2003: RM13.28 million) whereas other activities produced income of RM118,357 for the Group(2003: RM138,296).

Corporate GovernanceThe Board continues to place great importance on ensuring that the highest standards of corporate governance arepracticed throughout the Group for greater accountability and transparency. This is clearly defined in the Code on CorporateGovernance which forms part of the Annual Report together with the Statement of Internal Control and ComplianceStatements.

DividendThe Board of Directors is pleased to recommend a first and final tax exempt dividend of 10 sen per ordinary share for thefinancial year ended 30 June 2004. This dividend payment of RM14,179,400 will be made in 2005 subject to theshareholders’ approval at the forthcoming Annual General Meeting.



Strategy for the Future and ProspectsThe outlook for the Malaysian economy continues to be positivewith the government’s forecast for continued GDP growth for2004/05. In line with this, the Group is confident that the marketfor palm oil products will remain strong and this will continue tobe the main source of revenue for Kwantas.

The Group’s growth is also expected to be strong in China wherethe new facilities will come online and tap the vast potential inthe consumer market there. As China’s economy continues tothrive, the demand for consumer products will grow exponentiallyand this will in turn drive the demand for palm oil products.

However, not one to rest on our laurels, we will endeavour to lookfor new investment opportunities to expand the business inMalaysia as well as in other countries in the region.

Significant Corporate DevelopmentsDuring the year, the Group continued its construction of the Chinafacilities which are nearing completion. With its investment in China,Kwantas is now positioned to reach a vast population in the two regionswhere the facilities are based. In Guangzhou, the Group has bulkinginstallations, refinery, soap noodle and shortening plants. The bulkinginstallations have been completed and in operation whereas the refinery and shortening plant are currently undergoing testing andcommissioning. These operations are expected to contributesignificantly to the Group’s earnings in the coming years.

On 28 May 2004, Kwantas acquired 100% equity interest in Dong Ma Oils& Fats (Zhangjiagang Free Trade Zone) Co Ltd, a company incorporatedin The People’s Republic of China, for a total consideration ofRM8,831,948. The main activities of this company are the operationof bulking facilities and the trading of oils and fats products in theJiangsu Province.

19 a n n u a l r e p o r t 2 0 0 4


AppreciationOn behalf of the Board of Directors, I would like to take this opportunity to thank themanagement and staff as well as our customers and suppliers for their staunch support andcommitment to the Kwantas Group of Companies. As we expand our horizons and place ourfoothold in China, it is imperative that the teamwork and dedication that we haveexperienced continues to carry us to an even brighter and profitable future.

I would also like to express my sincerest appreciation and gratitude to our shareholders,business partners, relevant authorities and Government agencies, financiers and advisorsfor their cooperation and invaluable guidance which have played important roles in thecontinued success of the Kwantas Group.

Last but by no means least, I would like to thank my fellow directors whose diligence,support and cooperation has been the cornerstone of Kwantas.

DATO’ MOHD SARIT BIN HAJI YUSOH DIMP, AMPChairman

9 November 2004


Operations Review

the four main business activitiesof the Group are palm products processing, the management and operations of plantations,production of biomass energy and trading of diesel. Although the Kwantas Group has grownover the past few years, management continues to diligently in control of overheads.Effective controls are in place to ensure that any increase in overheads and expenses isjustified and supported by increase in business activity.

Financial OverviewFor the second year running, the Kwantas Group has achieved over RM1 billion in revenue. The Group’s profitabilityis a testament to sound business practice that is the standard that Kwantas adheres to. The consistent performanceof the Group is a result of the solid foundation established by the management.

Net profit for the year increased by 25.3% from RM32.1 million in 2003 to RM40.3 million in 2004, in part due tohigh crude palm oil prices which remained strong in the last financial year, partly caused by increased demandfor edible oils which could not be met by lower production of soyabean oil.

The plantation division generated revenue of RM47.6 million in 2004 with operational profits of RM26.3 millionwhile the trading of diesel resulted in revenue of RM6.1 million. With the bio-mass plant in full operation,it produced revenue of RM9.6 million and corresponding operational profits of RM4.0 million.

The manufacturing and processing of palm products were the largest revenue generator with RM1.185 billionand profit from operations of RM28.9 million.

21 a n n u a l r e p o r t 2 0 0 4

Operations Review (cont’d)

China OperationsKwantas first invested in China in year 2000 and has succeeded in establishing operations in 2 major cities, Guangzhou andZhangjiagang. The revenue earned from business activities (bulkingfacilities and trading of palm oil products) in China was RM10.5million for the financial year ended 30 June 2004 from RM2.6million in the previous financial year. The revenue is expected toincrease as the facilities in China come fully on-stream.

GuangzhouThe completion of the bulking installation in Guangzhou hasresulted in revenue being generated from the rental of storagefacilities. The refinery and shortening plants in Guangzhou werecompleted in mid-2004 and are currently being tested andcommissioned. These facilities will contribute greatly to the futureearnings of Kwantas as the demand for palm oil products in Chinagrows. The refinery refines palm, soya bean and rapeseed oil tomeet the ever-increasing demand in China. The shortening plantwill process palm oil to produce margarine and shortening.

The soap noodle plant processes palm stearin and palm kernel oilto produce soap noodles which are then sold to local manufacturersto produce household soaps and detergents.

ZhangjiagangAs planned, Kwantas began setting up its facilities in ZhangjiagangFree Trade Zone which commenced operations in the second halfof 2004. The company will trade in oil and fat products as wellas offer bulking storage facilities within the Free Trade Zone.



IT UpdateKwantas has upgraded the Group’s website, www.kwantas.com.my, with the latest information about the Group.Shareholders are also able to download copies of the Group’s Annual Reports in PDF format. The website will be expandedto incorporate the Group’s other activities in the region.

With the constant changing IT landscape, Kwantas is not one to be left behind. The IT department keeps a close watch onimprovements in technology to ensure that new ideas and advancements that may improve efficiency of operations andoverall profitability are reviewed and evaluated, brought to the attention of management and properly implemented.

Kwantas uses monitoring software tools so that management is able to track vessels globally and the visual surveillancesystems that were installed at the site offices and refineries allows management to monitor activities remotely. Thesurveillance system extends to China so that head office is constantly in touch with the offices and is able to respond toany situation immediately.

Kwantas is also implementing the latest telecommunication applications to ensure timeliness of information reaches therelevant parties on their mobile phones whether it be by email, MMS or GPRS. Other telephony improvements include theimplementation of VOIP (Voice Over Internet Protocol) technology which uses the internet to make telephone connectionswith excellent clarity. By using this system as the supplementary telecommunication channel, all offices and branches areable to save costs and increase productivity through more effective communication channels.

Mobility and communication are priorities as the Group’s operations expand over a wider area. The ability to receive thelatest information allows management to react with immediacy and make decisions that avoids production delays andoverall downtime.

23 a n n u a l r e p o r t 2 0 0 4


Social Contribution and CommunityThe management continues to contribute to the community indifferent forms, whether by way of donation or sponsorship.Kwantas also provides training opportunities to students from thelocal colleges and universities for their industrial trainingprogrammes by placing them within the Head Office or on theproduction floor where they are able to experience first-hand theactual workings of the company. Some of the students are offeredpermanent employment upon completion of their training andstudies.

Staff Training and WelfareThe Kwantas Group believes that the staff forms the backbone ofthe organization and training plays an important part of theiremployment as it keeps them updated on current issues andadvancements in the industry.

Some of the training courses attended by staff include:• Familiarisation on ‘e-kilang’ system and FFB grading skills• Safety and Health• Effective Management of KWSP Contribution• Updates in Milling Technology and Environmental Issues• Managing Industrial Relations -Employment Act 1955• Occupational Safety and Health Act 1994 & Regulations• Effective Budget Planning, Control & Practices and Filing

System Management• Implementation of Code On Prevention and Management of

HIV/AIDS at the Workplace

EnvironmentKwantas continues its commitment to preserve the environmentwith our recycling efforts and bio-mass renewable energy. Thecombustion of empty fruit bunches and kernel shells to produceelectricity is one of the ways to reduce waste. Other ways ofmanaging waste are being researched together with watermanagement and other conservation matters.

With our committed and experienced management team and staff,Kwantas will continue to deliver Quality and Excellence withoutcompromise.


Recognition Received 2002-2004

Year Publication Ranking

2004 The Edge Companies that gave the best returns (5 years)• Top 100 companies - Kwantas Corporation Berhad 86• Plantation Sector - Kwantas Corporation Berhad 3

2004 The Edge Top 100 Companies that gave the best returns (3 years)• Kwantas Corporation Berhad 54

2003 Malaysian Malaysia’s Top CompaniesBusiness Ranking of Top 100 Companies

• Kwantas Corporation Berhad 70Ranked by Highest Increase in Turnover

• Kwantas Corporation Berhad 9Ranked by Biggest Change in Profit

• Kwantas Corporation Berhad 4Ranked by Highest Return on Assets

• Kwantas Corporation Berhad 38

2002 Smart Investor Malaysia’s Top 100 ROE Companies (Return on Equity)Ranking of Top 100 ROE Companies

• Kwantas Corporation Berhad 35Ranked by Sales

• Kwantas Corporation Berhad 39Ranked by Growth Net Profit

• Kwantas Corporation Berhad 90

2002 Malaysia 1000 Top 1000 CompaniesRanked by Turnover / Sales

• Kwantas Corporation Berhad 197• Kwantas Oil Sdn Bhd 198

2002 Malaysia 1000 Top 500 CompaniesRanked by Profit Before Tax


Ranked by Total Tangible Assets• Kwantas Corporation Berhad 375• Kwantas Oil Sdn Bhd 405

Ranked by Shareholders’ Funds• Kwantas Corporation Berhad 335• Kwantas Oil Sdn Bhd 392

Ranked by Capital Employed• Kwantas Corporation Berhad 500

2002 Malaysia 1000 Top 300 most Improved CompaniesRanked by Absolute Increase in Turnover


2002 Malaysia 1000 Ranked by IndustryAgriculture / plantation

• Kwantas Corporation Berhad 8 of 22Manufacturing / Consumer Products / Food & Beverage

• Kwantas Oil Sdn Bhd 11 of 69

25 a n n u a l r e p o r t 2 0 0 4

Corporate Governance

The Board of Directors (“the Board”) of Kwantas Corporation Berhad (“KCB” or the Company) is committed to direct and managethe Company in ensuring that the Company practices good Corporate Governance.

A. DIRECTORS

Composition and Responsibilities

The Board of Directors currently consists of eight members, of whom three are Independent Non-Executive Directors.The profile of each director is presented in this Annual Report on pages 12 to 15. The Board brings a wide range ofbusiness, industrial and financial experience to lead the company.

There is a clear division of responsibility between the Chairman and the Managing Director to ensure there is balanceof power and authority. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the ManagingDirector has overall responsibility for the Group’s overall operating units, organisational effectiveness and implementationof Board decisions. There is also balance in the Board because of the presence of Independent Non-Executive Directors ofthe calibre necessary to carry sufficient weight in Board decisions. The role of Independent Non-Executive Directors is notonly deliberating on the Groups’ financial results but is also particularly important in ensuring that the strategies proposedby the Executive Directors are fully discussed and examined. The Board is of the view that the interests of shareholders ofthe Company are fairly represented through the current composition.

The Company has corporate objectives and position descriptions including the limits to management’s responsibilities, which the Executive Directors are aware and are responsible for meeting, even though these are not documented. The Board willlook into the process of formalising the documentation. The Board will also formalise the schedule of matters which specifically reverts to it for decision.

The Board has delegated its Remuneration Committee and Nomination Committee with specific powers and responsibilities which operate under approved terms of reference in cognisance to the recommendation of the Code.

Board Meetings

The Board met four times during the financial year ended 30 June 2004. The attendance record of each Director is as follows:

Directors Number of Board Meeting Attended1. Dato’ Mohd Sarit Bin Haji Yusoh 2/42. Kwan Ngen Chung 3/43. Kwan Ngen Wah 3/44. Kwan Jin Nget 3/45. Kwan Min Nyet 3/46. Chong Kan Hiung 4/47. Datuk Jaswant Singh Kler 4/48. Ooi Jit Huat 4/4


Corporate Governance (cont’d)

A. DIRECTORS (cont’d)

Re-election of Directors

In accordance with the provisions of the Company’s amended Articles of Association, all the Directors shall retire and be eligiblefor re-election by rotation at each Annual General Meeting at least once in three years.

Appointments to the Board

The Nomination Committee was established on 15 November 2001, comprising of the following Independent Non-Executive Directors:

1. Dato’ Mohd Sarit Bin Haji Yusoh Chairman2. Datuk Jaswant Singh Kler Member3. Ooi Jit Huat Member

The Nomination Committee is responsible for making recommendations for any appointments to the Board.The Committeeis empowered to assess the required mix of skills and experience which the Directors should bring to the Board. Anynew nomination is then put to the full Board for assessment and endorsement.

Directors’ Training

All Directors have attended and successfully completed the Mandatory Accreditation Programme (MAP) conducted by the Research Institute of Investment Analysis Malaysia (RIIAM), an affiliate company of Bursa Malaysia Securities Berhad.The Directors will continue to attend other relevent training programmes to equip themselves with the knowledge in the latest statutory and regulatory developments, in compliance with practice note No. 15/2003 on Continuous Education Programme (‘CEP”) to enable them to discharge their duties and responsibilities more effectively.

B. DIRECTORS’ REMUNERATION

Remuneration Committee

The Remuneration Committee was established on 15 November 2001, comprising of the following Directors:

1. Datuk Jaswant Singh Kler Chairman2. Kwan Ngen Chung Member3. Ooi Jit Huat Member

Procedure

The objective of the Committee is to recommend to the Board the remuneration of all Directors. The Committee shall ensure that the Company attracts and retains the Directors needed to run the Group successfully. The Committee will examine the existing remuneration scheme with the performance, experience and scope of responsibility of the Directors. Presentlythe remuneration of Directors, including Non-Executive Directors, is endorsed by the Board for approval by the shareholders of the company at the Annual General Meeting.

DisclosureThe details of the remunerations for the Directors of KCB during the year are as follows:

1. Aggregated remuneration of the Directors categorised by components

Directors’ Executive Non-ExecutiveRemuneration Directors Directors

RM RMFees - 66,000Salaries and other emoluments 1,205,728 -Bonuses 470,500 -Total 1,676,228 66,000

27 a n n u a l r e p o r t 2 0 0 4

Corporate Governance (cont’d)

B. DIRECTORS’ REMUNERATION (cont’d)

2. The number of Directors with total remuneration analysed by bands

Director Executive Non-ExecutiveRemuneration Directors Directors

RM’000 Number of directors Number of directorsBelow 50 - 3

50 to 100 - -100 to 150 1 -150 to 200 3 -200 to 250 - -250 to 300 - -300 to 350 - -350 to 400 1 -

C. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS

The Board believes in clear and regular communication with its shareholders and institutional investors. Besides the variousannouncements made during the financial year, the Annual Report and release of financial results on a quarterly basis providesshareholders with an overview of the Group’s performance and its business activities. All enquiries made are normally dealt withas promptly as practicable. In addition, the Board plans to conduct regular dialogues with institutional investors, fund managers and analysts with the aim of fostering mutual understanding of the Group’s objectives.

The Company has over the years used the Annual General Meeting as a forum of communication with its shareholders. The Boardencourages participation from shareholders by having a question and answer session during the Annual General Meeting whereby the Directors are available to discuss aspects of the Group’s performance and its business activities.

Each item of special business included in the notice of the meeting will be accompanied by a full explanation of the effectsof a proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting and the Chairman declares the number of proxy votes received both for and against each separate resolution when appropriate. For re-electionof directors, the Board ensures that full information is disclosed through the notice of meetings regarding directors whoare retiring and who are willing to serve if re-elected.

D. ACCOUNTABILITY AND AUDIT

Financial Reporting

In preparing the annual financial statements and quarterly announcements to shareholders, the Directors aim to present a balanced and understandable assessment of the Group’s position and prospects.

The Audit Committee assists the Board in ensuring accuracy and adequacy of information by reviewing and recommendingfor adoption information for disclosure.

Internal Control

The Board maintains a system of internal controls to safeguard shareholders’ investments and the Group’s assets.

The Statement on Internal Control furnished on page 28 of the Annual Report provides an overview of the state of internal controls within the Group.


Statement On Internal Control

The Board recognises that it is responsible for the Group’s system of internal controls and for reviewing its adequacy and integrity.As with any internal control system, the system can only provide reasonable but not absolute assurance against materialmisstatement or loss, as controls are designed to manage rather than eliminate the risk of failure to achieve business objectives.

The Board has reviewed and approved the Group’s budget for the year. The budgeting process incorporates the internal and externalrisk factors of each division of the Group. Detailed analysis is periodically undertaken to assess the Group’s historical performance,competitors, customers’ requirements and customers’ business trends, production capacity and other internal sources. At Boardmeetings, actual performance and results are monitored against budgets, with reasons for significant variances identified andhighlighted to the Board for appropriate corrective measures.

The Group’s organisation structure embeds strong control features throughout the Group. The structure identifies the heads of eachdepartment and their subordinates which facilitates a clear reporting line.

Currently, the monitoring and managing of the Group as a whole is delegated to the five Executive Directors who are activelyinvolved in the day-to-day operations of the Group. The Executive Directors attend scheduled meetings held at operational andmanagement levels to identify, discuss and resolve business and operational issues. The Executive Directors will in-turn informthe Board of any significant unresolved matters which require Board intervention or Board-level decision making.

During the current financial year, the Group outsourced its Internal Audit function to a professional services firm, whose remit is tothe Audit Committee. The Internal Audit function carried out a high-level risk assessment of the Group’s business processes thatare key to the achievement of its business objectives in order to determine the focus areas of internal audit which will be carriedout during the next financial year. As part of the exercise, the management assessed the current controls in place to managestrategic risks. Where deficiencies/weaknesses were noted, management has identified action plans to rectify those weaknesses.The Board has reviewed and endorsed the assessment.

During the financial year, the Group also engaged a professional services firm to conduct an assessment of the Group’s system ofinternal control based on the requirements outlined in the Statement on Internal Control: Guidance for Directors of Public ListedCompanies issued by Bursa Malaysia Securities Berhad’s Task Force. The Board has reviewed the key findings and recommendationsof this assessment and has begun to put in place certain measures to enhance the controls in some of the areas highlighted.

The Board is pleased to report that there were no significant material internal control weaknesses noted during the year underreview and to the date of approval of the annual report and accounts.

29 a n n u a l r e p o r t 2 0 0 4

Compliance Statements and AdditionalCompliance Information

As at the financial year ended of 30 June 2004, the Group has complied with all of the Best Practises in Corporate Governanceas set out in part 2 of the Malaysia Code on Corporate Governance.

Additional Compliance Information

1. Share BuybackDuring the financial year, there was no share buyback by the Company.

2. Options, Warrants or Convertible SecuritiesDuring the financial year, there were no options, warrants or convertible securities issued.

3. American Deposit Receipt (ADR) or Global Deposit Receipt (GDR) ProgrammeThe Company has not sponsored any ADR or GDR programme in the financial year.

4. Imposition of Sanctions and/or PenaltiesThere were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant authorities.

5. Non-audit FeesNo non-audit fee was paid by the Company during the financial year.

6. Profit Estimate, Forecast or ProjectionThe Company did not release any profit estimate, forecast or projection for the financial year. No significant variancearose between the results for the financial year and the unaudited results previously announced.

7. Profit GuaranteeNo profit guarantee was given by the Company in respect of the financial year.

8. Material ContractsThe Company and its subsidiaries do not have any material contracts involving the interests of its Directors and/ormajor shareholders.

9. Recurrent Related Party TransactionsThe details of related party transactions are set out in note 27 to the financial statements. An Annual General Meetingwill be held on 15 December 2004 to pass an ordinary resolution to seek shareholders’ mandate for the renewal of recurrent related party transactions of a revenue or trading nature.

10. Revaluation of Landed PropertiesThere were no revaluation of landed properties during the financial year.

11. Utilisation of ProceedsThis is not applicable during the financial year.

12. Analysis of ShareholdingsThe analysis of shareholdings can be found on page 84.

13. List of propertiesThe list of properties for the Group can be found on page 82 and 83.


Statement of Directors’ Responsibilities In AuditedFinancial Statements(Pursuant to paragraph 15.27(a) of The Listing Requirements of Bursa Malaysia Securities Berhad)

Pursuant to Section 169 (15) of the Companies Act, 1965 that Directors are required to prepare financial statements whichgive a true and fair view of the financial position of the Group and of the Company for each financial year, as set out on page 38of this Annual Report.

In addition, pursuant to paragraph 15.27(a) of Listing Requirements of Bursa Malaysia Securities Berhad, when preparing thosefinancial statements, the Board of Directors has:

• adopted appropriate accounting policies and applied them consistently;

• ensured that applicable approved accounting standards had been followed;

• made judgements and estimates that are prudent and reasonable; and

• disclosed and explained when necessary in the financial statements.

The Directors have a general responsibility for taking such reasonable steps:

i) to safeguard the assets of the Group and the Company; andii) to prevent and detect fraud and other irregularities.

31 a n n u a l r e p o r t 2 0 0 4

Audit Committee

The members of the Audit Committee are as follows:

CHAIRMAN Datuk Jaswant Singh Kler (Independent Non-Executive Director)

COMMITTEE MEMBERS Kwan Ngen Chung (Non-Independent Executive Director)Ooi Jit Huat (Independent Non-Executive Director)

TERMS OF REFERENCE

The Audit Committee (“AC”) shall be governed by the following terms of reference.

CONSTITUTION

A committee of the Board known as the AC is established in accordance with the Listing Requirements of Bursa Malaysia SecuritiesBerhad.

MEMBERSHIP

The Committee shall be appointed by the Board from among its members and shall consist of not less than three (3) members ofwhom a majority shall not:

(a) be Executive Directors of the Company or any related corporation.(b) comprise a spouse, parent, brother, sister, son or adopted son, daughter or adopted daughter of an Executive Director

of the Company or of any related corporation; or(c) comprise persons having a relationship which, in the opinion of the Board, would interfere with the exercise of

independent judgement in carrying out the functions of the committee.

The committee shall elect a chairperson from among its members who is not an Executive Director or employee of the Companyor any related corporation.

In the event that a member of the committee resigns, dies or for any other reason ceases to be a member with the result thatthe number of members is reduced below three, the Board of Directors shall, within three months of that event, appoint suchnumber of new members as may be required to make up the minimum number of three members.

TERM OF MEMBERSHIP

Members of Committee shall be appointed for an initial term of three (3) years after which they will be eligible for re-appointment.

MEETINGS

The Committee shall meet at least two (2) times a year.

In addition, the chairperson shall convene a meeting of the committee if requested to do so by any member, the managementor internal or external auditors to consider any matter within the scope and responsibilities of the Committee.

ATTENDANCE AT MEETINGS

The Executive Director, the Group Financial Controller, the head of internal audit, and representative of the external auditorsshall normally attend meetings. However, the Committee may invite any person to be in attendance to assist in its deliberations.The Company Secretary shall be the Secretary of the Committee.

QUORUM

The presence of two (2) committee members shall be a quorum.


Audit Committee (cont’d)

AUTHORITY

The Committee is authorised by the Board to investigate any activity within its terms of reference. It has free access to allinformation and documents it requires for the purpose of discharging its functions and responsibilities.

The Audit Committee is also authorised to obtain outside legal or other independent professional advice as it considers necessary.

FUNCTIONS

The functions of the Committee shall be:

• to review the Group’s and Company’s quarterly and annual financial statements before submission to the Board• to review with the external auditors their audit plan, scope and nature of audit for the Group and the Company• to assess the adequacy and effectiveness of the system of internal control and accounting control procedures of

the Group and Company by reviewing the external auditors’ management letters and management’s response• to discuss with the external auditors on problems and reservations arising from their interim and final audits• to review any related party transactions that may arise within the Group or the Company• to consider the appointment of the external auditors, the terms of reference of their appointment, and any question

of resignation or dismissal• to undertake such responsibilities as may be agreed to by the Committee and the Board• to report to the Board its activities, significant result and findings

REPORTING PROCEDURES

The Secretary shall circulate the minutes of meetings of the Committee to all members of the Board.

ACTIVITIES

The summary of the activities of the Audit Committee in the discharge of its duties and responsibilities for the financial year includesthe following:

(i) review of the external auditors’ scope of work and their audit plan.(ii) reviewing with the external auditors on the results of their audit, the audit report and internal control

recommendations in respect of control weaknesses noted in the course of their audit.(iii) reviewing the audited accounts before recommending for the Board of Directors’ approval.(iv) reviewing the Company’s compliance with the Revamped Listing Requirements of the Bursa Malaysia Securities

Berhad and the applicable approved accounting standards issued by the Malaysian Accounting Standards Board.(v) review of the quarterly unaudited financial results announcements and recommending for the Board of Directors’

approval.(vi) review of the Internal Audit Department’s staffing needs, programmes and plan for the financial year under review and

annual assessment of the Internal Audit Department’s performance.(vii) review of the audit reports presented by Internal Audit Department on findings and recommendations with regard

to system and controls weaknesses noted in the course of their audit and management’s responses thereto and ensuringmaterial findings are adequately addressed by management.

NUMBER OF MEETINGS & DETAILS OF ATTENDANCE

Four (4) Audit Committee meetings were held during the financial year ended 30 June 2004. The attendance record of eachmember is as follows:

Audit Committee Members Total number of meetings Number of meeting attendedDatuk Jaswant Singh Kler 4 4Kwan Ngen Chung 4 3Ooi Jit Huat 4 4

Financial Statements

Directors’ Report 34Statement by Directors 38

Statutory Declaration 38Report of the Auditors 39

Income Statements 40Balance Sheets 41

Consolidated Statement of Changes in Equity 43Company Statement of Changes in Equity 44

Cash Flow Statements 45Notes to the Financial Statements 47

aiming for accuracy & accountability


Directors’ Report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company forthe financial year ended 30 June 2004.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 12 to thefinancial statements.

There have been no significant changes in the nature of these activities during the financial year.

RESULTS

Group Company RM RM

Profit after taxation 40,658,727 14,463,605Minority interests (315,509) -

Net profit for the year 40,343,218 14,463,605

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statementsof changes in equity.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were notsubstantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

The amount of dividends paid by the Company since 30 June 2003 were as follows:RM

In respect of the financial year ended 30 June 2003 as reported in thedirectors’ report of that year:

Final tax exempt dividend of 5%, on 141,461,800 ordinary shares,declared on 10 December 2003 and paid on 2 March 2004 7,073,090

At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the financial year ended 30 June 2004, of 10%on 141,794,000 ordinary shares, amounting to a dividend payable of RM14,179,400 (10 sen per ordinary share) will be proposedfor shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend,if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending30 June 2005.

35 a n n u a l r e p o r t 2 0 0 4

Directors’ Report (cont’d)

DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of this report are:

Dato’ Mohd Sarit Bin Hj Yusoh, DIMP, AMPKwan Ngen Chung Kwan Ngen WahDatuk Jaswant Singh KlerOoi Jit Huat Kwan Jin Nget Kwan Min Nyet Chong Kan Hiung

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company wasa party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or anyother body corporate, other than those arising from the share options granted under the Employee Share Options Scheme.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefitsincluded in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 6 to the financialstatements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a relatedcorporation with any director or with a firm of which the director is a member, or with a company in which the director has asubstantial financial interest, except as disclosed in Note 27 to the financial statements.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares andoptions over shares in the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1 Each 1 July 30 June

The Company 2003 Acquired Sold 2004

Direct Interest:Kwan Ngen Chung 40,250,000 500,000 - 40,750,000Kwan Ngen Wah 40,250,000 - - 40,250,000Kwan Jin Nget 80,000 100,000 (90,000) 90,000Kwan Min Nyet 100,000 19,000 - 119,000Chong Kan Hiung 300,000 - - 300,000Ooi Jit Huat 51,400 - (51,400) -

Indirect Interest:Ooi Jit Huat 25,600 - - 25,600



DIRECTORS’ INTERESTS (cont’d)

Number of Options Over Ordinary Shares of RM1 Each1 July 30 June

The Company 2003 Granted Exercised Lapsed 2004

Kwan Ngen Chung 1,000,000 - (500,000) - 500,000Kwan Ngen Wah 1,000,000 - - - 1,000,000Kwan Jin Nget 890,000 - (100,000) - 790,000Kwan Min Nyet 845,000 - (16,000) - 829,000Chong Kan Hiung 1,000,000 - - - 1,000,000

Kwan Ngen Chung and Kwan Ngen Wah by virtue of their interests in shares in the Company are also deemed interested in shares of allthe Company’s subsidiaries to the extent the Company has an interest.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its relatedcorporations during the financial year.

ISSUE OF SHARES

During the financial year, the Company increased its issued and paid-up ordinary share capital from RM141,066,000 to RM141,794,000by way of the issuance of 728,000 ordinary shares of RM1 each for cash pursuant to the Company’s Employee Share Options Scheme atexercise prices of RM1.03 per ordinary share. The new ordinary shares issued during the financial year rank pari passu in all respectswith the existing ordinary shares of the Company.

EMPLOYEE SHARE OPTIONS SCHEME

The Kwantas Corporation Berhad Employee Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders atan Extraordinary General Meeting held on 18 December 2000. Subsequently, certain amendments to the by-laws of the ESOS wereapproved by the shareholders at an Extraordinary General Meeting held on 28 May 2002. The ESOS was implemented on 10 April 2001and is to be in force for a period of 5 years from the date of implementation.

The revised salient features and other terms of the ESOS are disclosed in Note 21 to the financial statements.

Details of options granted to directors are disclosed in the section on Directors’ Interests in this report.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provisionfor doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provisionhad been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in theordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of theGroup and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

37 a n n u a l r e p o r t 2 0 0 4


OTHER STATUTORY INFORMATION (cont’d)

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence tothe existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financialstatements of the Group and of the Company which would render any amount stated in the financial statements misleading.

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

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

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelvemonths after the end of the financial year which will or may affect the ability of the Group or of the Company to meettheir obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financialyear and the date of this report which is likely to affect substantially the results of the operations of the Group or ofthe Company for the financial year in which this report is made.

OTHER SIGNIFICANT EVENTS

(a) On 10 May 2004, the Company acquired 100 ordinary shares of USD1.00 (RM3.80) each, representing 100% equity interest inKwantas International Inc. (“KII”), a company incorporated in the Federal Territory of Labuan, Malaysia, for a total considerationof USD100 (RM380).

(b) On 28 May 2004, the Company acquired 100% equity interest in Dong Ma Oils & Fats (Zhangjiagang Free Trade Zone) Co. Ltd. (“DMZJGFTZ”), a company incorporated in The People’s Republic of China, for a total consideration of USD2.3 million (RM8,831,948).

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors.

KWAN NGEN CHUNG CHONG KAN HIUNG

Kota Kinabalu, SabahMalaysia

27 October 2004


Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965

We, KWAN NGEN CHUNG and CHONG KAN HIUNG, being two of the directors of KWANTAS CORPORATION BERHAD, do hereby state that,in the opinion of the directors, the accompanying financial statements set out on pages 40 to 81 are drawn up in accordance with applicableApproved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financialposition of the Group and of the Company as at 30 June 2004 and of the results and the cash flows of the Group and of the Company forthe year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors.

KWAN NGEN CHUNG CHONG KAN HIUNG

Kota Kinabalu, SabahMalaysia27 October 2004

Statutory DeclarationPursuant to Section 169(16) of the Companies Act, 1965

I, CHONG KAN HIUNG, being the Director primarily responsible for the financial management of KWANTAS CORPORATION BERHAD, dosolemnly and sincerely declare that the accompanying financial statements set out on pages 40 to 81 are in my opinion correct, and I makethis solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed CHONG KAN HIUNG at Kota Kinabalu in the State of Sabahon 27 October 2004 CHONG KAN HIUNG

Before me,

39 a n n u a l r e p o r t 2 0 0 4

Report of the Auditors to the Members ofKWANTAS CORPORATION BERHAD (Incorporated in Malaysia)

We have audited the financial statements set out on pages 40 to 81. These financial statements are the responsibility of the Company’sdirectors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating theoverall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 andapplicable Approved Accounting Standards in Malaysia so as to give a true and fair view of:

(i) the financial position of the Group and of the Company as at 30 June 2004 and of the results and the cash flows of the Group and of the Company for the year then ended; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of whichwe have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as auditors,as indicated in Note 12 to the financial statements, being financial statements that have been included in the consolidated financialstatements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Companyare in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and wehave received satisfactory information and explanations required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification material to theconsolidated financial statements and did not include any comment required to be made under Section 174 (3) of the Act.

ERNST & YOUNG PANG PAK LOKAF: 0039 1228/3/05 (J)Chartered Accountants Partner

Tawau, SabahMalaysia

27 October 2004


Income StatementsFor the Year Ended 30 June 2004

Group CompanyNote 2004 2003 2004 2003

RM RM RM RM

Revenue 3 1,190,410,128 1,286,540,873 16,693,523 7,267,372

Cost of sales (1,060,770,011) (1,159,457,306) - -

Gross profit 129,640,117 127,083,567 16,693,523 7,267,372

Other operating income 4,185,820 7,653,046 322,948 -

Selling expenses (54,523,200) (70,451,509) - -

Administrative expenses (19,644,524) (17,637,462) (204,013) (76,447)

Profit from operations 4 59,658,213 46,647,642 16,812,458 7,190,925

Finance costs, net 7 (11,933,791) (10,345,593) (163,613) (18,044)

Profit before taxation 47,724,422 36,302,049 16,648,845 7,172,881

Taxation 8 (7,065,695) (4,212,724) (2,185,240) -

Profit after taxation 40,658,727 32,089,325 14,463,605 7,172,881

Minority interests (315,509) 87,162 - -

Net profit for the year 40,343,218 32,176,487 14,463,605 7,172,881

Earnings per share (sen):Basic 9 28.54 22.84Diluted 9 27.71 22.39

Net dividends per ordinary sharein respect of the year (sen): 10 10.00 5.00 10.00 5.00

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

41 a n n u a l r e p o r t 2 0 0 4

Balance SheetsAs at 30 June 2004


RM RM RM RM

NON-CURRENT ASSETS

Property, plant and equipment 11 465,284,349 433,413,525 - -Investments in subsidiaries 12 - - 307,375,668 294,494,000Deferred tax assets 24 4,725,764 8,146,316 - -

470,010,113 441,559,841 307,375,668 294,494,000

CURRENT ASSETS

Inventories 13 107,629,704 63,314,694 - -Trade receivables 14 73,556,701 82,015,520 - -Other receivables 15 63,863,138 26,898,008 96,645,247 99,909,655Cash and bank balances 16 30,472,816 42,893,758 13,506,199 3,441,505

275,522,359 215,121,980 110,151,446 103,351,160

CURRENT LIABILITIES

Borrowings 17 159,391,593 124,201,323 10,000,000 -Trade payables 19 68,195,923 46,062,571 - -Other payables 20 16,689,228 13,447,325 161,120,113 149,578,514Provision for taxation 925,917 1,103,535 - -

245,202,661 184,814,754 171,120,113 149,578,514

NET CURRENT ASSETS/(LIABILITIES) 30,319,698 30,307,226 (60,968,667) (46,227,354)

500,329,811 471,867,067 246,407,001 248,266,646



Balance Sheets

As at 30 June 2004 (cont’d)


RM RM RM RMFINANCED BY:

Share capital 21 141,794,000 141,066,000 141,794,000 141,066,000Share premium 53,820 31,980 53,820 31,980Other reserves 22 80,894,849 80,923,368 - -Retained profits 23 133,150,258 99,880,130 14,559,181 7,168,666

Shareholders’ equity 355,892,927 321,901,478 156,407,001 148,266,646Minority interests 10,655,443 5,457,437 - -

366,548,370 327,358,915 156,407,001 148,266,646

Borrowings 17 103,711,926 112,015,641 90,000,000 100,000,000Deferred tax liabilities 24 30,069,515 32,492,511 - -

Non-current liabilities 133,781,441 144,508,152 90,000,000 100,000,000

500,329,811 471,867,067 246,407,001 248,266,646


43 a n n u a l r e p o r t 2 0 0 4

Consolidated Statement of Changes in EquityFor the Year Ended 30 June 2004

Non-Distributable DistributableAsset Reserve

Share Share revaluation on RetainedNote capital premium reserve consolidation profits Total

RM RM RM RM RM RM

At 1 July 2002 140,696,000 20,880 62,412,722 18,510,646 70,521,563 292,161,811

Issue of ordinary sharespursuant to ESOS 21 370,000 11,100 - - - 381,100

Net profit for the year - - - - 32,176,487 32,176,487

Dividends 10 - - - - (2,817,920) (2,817,920)

At 30 June 2003 141,066,000 31,980 62,412,722 18,510,646 99,880,130 321,901,478

At 1 July 2003 141,066,000 31,980 62,412,722 18,510,646 99,880,130 321,901,478


Acquisition of subsidiaries - - - (28,519) - (28,519)


Dividends 10 - - - - (7,073,090) (7,073,090)

At 30 June 2004 141,794,000 53,820 62,412,722 18,482,127 133,150,258 355,892,927


Company Statement of Changes in EquityFor the Year Ended 30 June 2004

Non-Distributable DistributableAsset Reserve

Share Share revaluation on RetainedNote capital premium reserve consolidation profits Total

RM RM RM RM RM RM

At 1 July 2002 140,696,000 20,880 - - 2,813,705 143,530,585



Dividends 10 - - - - (2,817,920) (2,817,920)

At 30 June 2003 141,066,000 31,980 - - 7,168,666 148,266,646

At 1 July 2003 141,066,000 31,980 - - 7,168,666 148,266,646



Dividends 10 - - - - (7,073,090) (7,073,090)

At 30 June 2004 141,794,000 53,820 - - 14,559,181 156,407,001


45 a n n u a l r e p o r t 2 0 0 4

Cash Flow Statements For the Year Ended 30 June 2004

Group Company2004 2003 2004 2003

RM RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 47,724,422 36,302,049 16,648,845 7,172,881

Adjustments for:Bad debts written off 77,837 - - -Depreciation of property, plant and equipment 20,323,120 17,849,837 - -Dividend income - - (16,693,523) (7,267,372)Gain on disposal of property, plant and equipment (609) (591,780) - -Interest expense 13,048,991 10,961,878 6,770,000 3,385,000Interest income (1,115,200) (616,285) (6,606,387) (3,366,956)Property, plant and equipment scrapped 4,526 - - -

Operating profit/(loss) before working capital changes 80,063,087 63,905,699 118,935 (76,447)Increase in inventories (44,315,010) (35,922,318) - -(Increase)/decrease in receivables (26,562,486) 14,281,303 3,265,300 (62,493,398)Increase/(decrease) in payables 25,346,736 13,248,479 11,541,599 (33,296,842)

Cash generated from/(used in) operations 34,532,327 55,513,163 14,925,834 (95,866,687)Interest paid (13,048,991) (10,961,878) (6,770,000) (3,385,000)Taxation paid (8,267,419) (3,981,446) - -

Net cash generated from/(used in) operating activities 13,215,917 40,569,839 8,155,834 (99,251,687)

CASH FLOWS FROM INVESTING ACTIVITIES

Additional investments in a subsidiary - - (4,049,340) (5,554,935)Acquisition of subsidiaries (Note 12) (8,831,948) - (8,832,328) -Purchase of property, plant and equipment

(Note 11 (b)) (39,691,106) (31,934,524) - -Proceeds from disposal of property, plant

and equipment 17,193 3,937,180 - -Interest received 1,115,200 616,285 6,606,387 3,366,956Net dividends received - - 14,507,391 7,267,372

Net cash (used in)/generated from investing activities (47,390,661) (27,381,059) 8,232,110 5,079,393


Cash Flow Statements

For the Year Ended 30 June 2004 (cont’d)

Group Company2004 2003 2004 2003

RM RM RM RM

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of ordinary shares 749,840 381,100 749,840 381,100Proceeds from issuance of Fixed Rate

Serial Bonds - 100,000,000 - 100,000,000Proceeds from issuance of shares to minority 4,882,497 4,345,141 - -Drawdown of term loans 6,929,054 7,206,378 - -Repayment of term loans (1,661,098) (21,785,405) - -Payments of hire purchase financing (1,199,415) (839,260) - -Drawdown of bankers’ acceptances 1,530,910,000 1,246,565,000 - -Repayment of bankers’ acceptances (1,511,783,986) (1,321,289,873) - -Dividends paid (7,073,090) (2,817,920) (7,073,090) (2,817,920)

NET CASH GENERATED FROM/(USED IN) FINANCINGACTIVITIES 21,753,802 11,765,161 (6,323,250) 97,563,180

NET (DECREASE)/INCREASE IN CASHAND CASH EQUIVALENTS (12,420,942) 24,953,941 10,064,694 3,390,886

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR 42,893,758 17,939,817 3,441,505 50,619

EFFECT OF EXCHANGE RATEDIFFERENCES - - - -

CASH AND CASH EQUIVALENTS ATEND OF YEAR (NOTE 16) 30,472,816 42,893,758 13,506,199 3,441,505


47 a n n u a l r e p o r t 2 0 0 4

Notes to the Financial Statements30 June 2004

1. Corporate Information

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 12 tothe financial statements. There have been no significant changes in the nature of these activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of theBursa Malaysia Securities Berhad. The registered office of the Company is located at 1st Floor, Fordeco Building, Jalan Singa Mata, 91100 Lahad Datu, Sabah.

The number of employees in the Group and in the Company at the end of the financial year were 1,722 (2003: 1,563) and 8 (2003:8) respectively.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on27 October 2004.

2. Significant Accounting Policies

(a) Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical cost convention exceptfor the revaluation of leasehold land, plantations and buildings include within property, plant and equipment.

The financial statements comply with the provisions of the Companies Act, 1965 and applicable Approved AccountingStandards in Malaysia.

During the financial year ended 30 June 2004, the Group and the Company adopted MASB 29 Employee Benefits for thefirst time. The adoption of MASB 29 has not given rise to any adjustments to the opening balances of retained profitsof the prior and current year or to changes in comparatives.

(b) Basis of Consolidation

Subsidiaries

The consolidated financial statements include the financial statements of the Company and all its subsidiaries. Subsidiariesare those entities in which the Group has power to exercise control over the financial and operating policies so as toobtain benefits from their activities.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting,the results of subsidiaries acquired or disposed of during the financial year are included in the consolidated incomestatement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets andliabilities of the subsidiaries are measured at their fair values at the date of acquisition. The difference between the cost ofan acquisition and the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisitionis included in the consolidated balance sheet as goodwill or negative goodwill arising on consolidation.

Intra-group transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidatedfinancial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannotbe recovered.

The gain or loss on disposal of a subsidiary company is the difference between net disposal proceeds and the Group’sshare of its net assets together with any unamortised balance of goodwill and exchange differences.

Minority interests in the consolidated balance sheet consist of the minorities’ share of the fair value of the identifiable assetsand liabilities of the acquiree as at acquisition date and the minorities’ share of movements in the acquiree’s equity since then.


Notes to the Financial Statements

30 June 2004 (cont’d)

2. Significant Accounting Policies (cont’d)

(c) Negative Goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities ofa subsidiary at the date of acquisition over the cost of acquisition.

Negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statementover the weighted average useful life of those assets. Negative goodwill in excess of the fair values of the non-monetary assetsacquired is recognised immediately in the income statement.

To the extent that negative goodwill relates to expectation of future losses and expenses that are identified in the planof acquisition and can be measured reliably, but which are not identifiable liabilities at the date of acquisition, that portionof negative goodwill is recognised in the income statement when the future losses and expenses are recognised.

(d) Investments in Subsidiaries

The Company’s investments in subsidiaries are stated at cost less impairment losses. The policy for the recognition andmeasurement of impairment losses is in accordance with Note 2(o).

On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised inthe income statement.

(e) Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost/valuation less accumulated depreciation and impairment losses. The policyfor the recognition and measurement of impairment losses is in accordance with Note 2(o).

Leasehold land, plantations and buildings are stated at valuation less accumulated depreciation and impairment losses.Revaluations are made at least once in every five years based on a valuation by an independent valuer on an open marketvalue basis. Any revaluation increase is credited to equity as a revaluation surplus, except to the extent that it reversesa revaluation decrease for the same asset previously recognised as an expense, in which case the increase is recognisedin the income statement to the extent of the decrease previously recognised. A revaluation decrease is first offset againstunutilised previously recognised revaluation surplus in respect of the same asset and the balance is thereafter recognisedas an expense. Upon the disposal of revalued assets, the attributable revaluation surplus remaining in the revaluationreserve is transferred to retained profits.

Construction work-in-progress is not depreciated until it is completed and ready for use. No depreciation is provided onplantations. Replanting cost is written off in the income statements. Leasehold lands are depreciated over the period ofthe respective leases which range from 57 years to 99 years. Depreciation of other property, plant and equipment isprovided for on a straight line basis to write off the cost or valuation of each asset to its residual value over theestimated useful life, at the following annual rates:

Buildings - 5% to 10%Plant, machinery and equipment - 5% to 20%Tractors and vehicles - 20%Furniture, fixtures and fittings - 10% to 20%Effluent ponds - 10%

Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and thenet carrying amount is recognised in the income statement and the unutilised portion of the revaluation surplus on thatitem is taken directly to retained profits.

49 a n n u a l r e p o r t 2 0 0 4




(f) Plantation Development Expenditure

All expenses incurred in land preparation, planting and development of crops up to maturity are capitalised as cost ofplantation; all expenses subsequent to maturity are written off in the income statement.

(g) Inventories

(i) Oil palm seedlings

Oil palm seedlings, which represent the cost of seedlings remaining in nurseries for eventual field planting, are valuedat cost.

(ii) Palm and soya bean oil products

These are stated at the lower of cost (determined using the first-in, first-out basis) and net realisable value. Costincludes direct material, direct labour, other direct costs and appropriate production overheads. Net realisable valuerepresents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing,selling and distribution.

(iii) Stores and supplies

Stores and supplies held for the Group’s own use which are stated at the lower of cost and net realisable value, arevalued at the average cost of acquisition less provision for obsolescence and deterioration.

(h) Cash and Cash Equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposits at calland short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bankoverdrafts.

(i) Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership.All other leases are classified as operating leases.

(i) Finance leases

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair valuesand the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation andimpairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the presentvalue of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it ispracticable to determine; otherwise, the Company’s incremental borrowings rate is used.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs,which represent the difference between the total leasing commitments and the fair value of the assets acquired, arerecognised as an expense in the income statement over the term of the relevant lease so as to produce a constantperiodic rate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment asdescribed in Note 2(e).





(i) Leases (cont’d)

(ii) Operating leases

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over theterm of the relevant lease.

(j) Provisions for Liabilities

Provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probablethat an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimateof the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the currentbest estimate. Where the effect of the time value of money is material, the amount of a provision is the present value ofthe expenditure expected to be required to settle the obligation.

(k) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount ofincome taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have beenenacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between thetax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred taxliabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductibletemporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit willbe available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initialrecognition of an asset or liability in a transaction which is not a business combination and at the time of thetransaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liabilityis settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferredtax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity,in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that isan acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.

(l) Employee Benefits

(i) Short term benefitsWages, salaries, bonuses and social security contributions are recognised as an expense in the year in which theassociated services are rendered by employees of the Company. Short term accumulating compensated absences suchas paid annual leave are recognised when services are rendered by employees that increase their entitlement tofuture compensated absences, and short term non-accumulating compensated absences such as sick leave arerecognised when the absences occur.

(ii) Defined contribution plansAs required by law, employers in Malaysia make contributions to the Employees Provident Fund (“EPF”). Suchcontributions are recognised as an expense in the income statement as incurred.

Prior to the adoption of MASB 29 - Employee Benefits on 1 July 2003, no liability was recognised for the obligationsin respect of short-term employee benefits in the form of accumulating compensated absences. The change inaccounting policy has been accounted for retrospectively but no comparatives have been restated as the effect onretained profits is deemed to be immaterial.

51 a n n u a l r e p o r t 2 0 0 4




(m) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterpriseand the amount of the revenue can be measured reliably.

(i) Sale of goodsRevenue relating to sale of goods is recognised net of sales taxes and discounts upon the transfer of risks and rewards.

(ii) Revenue from servicesRevenue from services rendered is recognised net of service taxes and discounts as and when the services are performed.

(iii) Rental incomeRental income is recognised on a time proportion and accrual basis.

(iv) Interest incomeInterest is recognised on a time proportion basis that reflects the effective yield on the asset.

(v) Dividend incomeDividend income is recognised when the right to receive payment is established.

(n) Foreign Currencies

(i) Foreign currency transactions

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date ofthe transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit Malaysia atexchange rates ruling at that date, unless hedged by forward foreign exchange contracts, in which case the ratesspecified in such forward contracts are used. Non-monetary items initially denominated in foreign currencies, which arecarried at historical cost are translated using the historical rate as of the date of acquisition and non-monetary itemswhich are carried at fair value are translated using the exchange rate that existed when the values were determined.

All exchange rate differences are taken to the income statement.

(ii) Foreign entities

Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to theassets and liabilities, and at exchange rates at the dates of the transactions with respect to the income statement. Allresulting translation differences are recognised in equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities ofthe Company and translated at the exchange rate ruling at the date of the transaction.

The principal exchange rates used for each respective unit of foreign currency ruling at the balance sheet date are as follows:

2004 2003RM RM

Chinese Renminbi 0.4591 0.4591United States Dollars 3.8000 3.8000





(o) Impairment of Assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indicationof impairment. If any such indication exists, impairment is measured by comparing the carrying values of the assets with theirrecoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by referenceto discounted future cash flows.

An impairment loss is recognised as an expense in the income statement immediately, unless the asset is carried atrevalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of any unutilisedpreviously recognised revaluation surplus for the same asset.

(p) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisionsof the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement.Interest, dividends and gains and losses relating to a financial instrument classified as a liability, are reported as expenseor income. Distributions to holders of financial instruments classified as equity are recognised directly in equity.Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on anet basis or to realise the asset and settle the liability simultaneously.

(i) Receivables

Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is madefor doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(ii) Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods andservices received.

(iii) Interest-Bearing Borrowings

Interest-bearing bank loans are recorded at the amount of proceeds received, net of transactions costs.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which areassets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised aspart of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.The amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate which is theweighted average of the borrowing costs applicable to the Group’s borrowings that are outstanding during thefinancial year.

All other borrowing costs are recognised as an expense in the income statement in the period in which they are incurred.

53 a n n u a l r e p o r t 2 0 0 4




(iv) Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in whichthey are declared.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equitytransaction costs comprise only those incremental external costs directly attributable to the equity transactionwhich would otherwise have been avoided

(v) Derivative Financial Instruments

Derivative financial instruments are not recognised in the financial statements on inception.

Forward foreign exchange contracts:The underlying foreign currency assets or liabilities are translated at their respective hedged exchange rate and allexchange gains or losses are recognised as income or expense in the income statement in the same period as theexchange differences on the underlying hedged items. Exchange gains and losses arising on contracts entered intoas hedges of anticipated future transactions are deferred until the date of such transaction, at which time theyare included in the measurement of such transactions.

3. RevenueGroup Company

2004 2003 2004 2003RM RM RM RM

Gross dividends from subsidiaries - - 16,693,523 7,267,372Rental income 8,887,141 2,613,895 - -Sales of diesel and lubricants 11,730,545 13,278,337 - -Sales of palm oil products 1,153,067,887 1,260,236,700 - -Sales of soft oil products 16,606,198 10,273,645 - -Sales of stones and gravel 118,357 138,296 - -

1,190,410,128 1,286,540,873 16,693,523 7,267,372




4. Profit from Operations Group Company

2004 2003 2004 2003RM RM RM RM

Profit from operations is stated after charging/(crediting):

Staff costs (Note 5) 15,703,008 13,853,248 - -Non-executive directors’ remuneration

(Note 6) 66,000 78,000 - -Auditors’ remuneration 66,100 66,100 10,000 10,000Bad debts written off 77,837 - - -Depreciation of property, plant

and equipment (Note 11) 20,323,120 17,849,837 - -Hire of equipment 108,333 - -Hire of oil tankers 186,312 79,775 - -Property, plant and equipment scrapped 4,526 - - -Rental of premises 262,964 328,111 - -Gain on disposal of property, plant

and equipment (609) (591,780) - -Income from hire of equipment (1,343) (2,593) - -Income from rental of jetty (2,448,143) (2,758,150) - -Road toll charges (25,100) (34,980) - -

5. Staff Costs

Wages and salaries 14,949,035 12,975,535 - -Employees Provident Fund 699,386 823,686 - -Social security costs 54,587 54,027 - -

15,703,008 13,853,248 - -

Included in staff costs of the Group are executive directors’ remuneration amounting to RM1,676,228 (2003: RM1,264,440) asfurther disclosed in Note 6.

55 a n n u a l r e p o r t 2 0 0 4



6. Directors’ RemunerationGroup Company

2004 2003 2004 2003RM RM RM RM

Directors of the Company

Executive:

Salaries and other emoluments 1,205,728 887,840 - -Bonus 470,500 376,600 - -

1,676,228 1,264,440 - -Non-Executive:

Fees 66,000 78,000 - -

1,742,228 1,342,440 - -

Analysis excluding benefits-in-kind:Total executive directors’

remuneration excludingbenefits-in-kind (Note 5) 1,676,228 1,264,440 - -

Total non-executive directors’remuneration (Note 4) 66,000 78,000 - -

Total directors’ remunerationexcluding benefits-in-kind 1,742,228 1,342,440 - -

The number of directors of the Company whose total remuneration during the financial year fell within the following bands isanalysed below:

Number of Directors2004 2003

Executive directors:RM100,001 - RM150,000 1 1RM150,001 - RM200,000 3 3RM200,001 - RM250,000 - -RM250,001 - RM300,000 - -RM300,001 - RM350,001 - -RM350,001 - RM400,000 1 1

Non-Executive directors:RM1 - RM50,000 3 3




6. Directors’ Remuneration (cont’d)

Executive directors of the Company have been granted the following number of options under the Employee Share Options Scheme(“ESOS”):

Group and Company2004 2003

At 1 July 4,735,000 2,235,000Granted - 2,500,000Exercised (616,000) -

At 30 June 4,119,000 4,735,000

The share options were granted on the same terms and conditions as those offered to other employees of the Group (Note 21).

7. Finance Costs, NetGroup Company

2004 2003 2004 2003RM RM RM RM

Interest expense on:Bank overdrafts 66,291 65,467 - -Bankers’ acceptances 5,169,111 6,246,711 - -Export credit refinancing - 46,316 - -Fixed Rate Serial Bonds 6,770,000 3,385,000 6,770,000 3,385,000Hire purchase 178,802 69,408 - -Short term revolving credits - 79,101 - -Term loans 864,787 1,166,413 - -

13,048,991 11,058,416 6,770,000 3,385,000Interest income from:

Foreign currency deposits (94,818) (85,615) - -Negotiable certificate of deposits (639,253) (475,858) - -Fixed deposits (134,933) (116,375) (65,551) (96,539)Overdue accounts (246,196) (34,975) (6,540,836) (3,270,417)

11,933,791 10,345,593 163,613 18,044

57 a n n u a l r e p o r t 2 0 0 4



8. TaxationGroup Company

2004 2003 2004 2003RM RM RM RM

Income tax:Malaysian income tax 6,099,157 5,242,352 2,185,240 -Labuan offshore tax 20,000 - - -

(Over)/underprovided in prior years:Malaysian income tax (51,018) 2,575 - -

6,068,139 5,244,927 2,185,240 -

Deferred taxation (Note 24):Relating to origination and reversal

of temporary differences 2,050,802 (1,032,203) - -Overprovided in prior years (1,053,246) - - -

997,556 (1,032,203) - -

7,065,695 4,212,724 2,185,240 -

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expenseat the effective income tax rate of the Group and of the Company is as follows:

2004 2003RM RM

Group

Profit before taxation 47,724,422 36,302,049

Taxation at statutory tax rate of 28% (2003: 28%) 13,362,838 10,164,574Effect of income subject to tax rate of 20%* (43,607) -Effect of income subject to Labuan offshore tax (587,756) -Effect of income not subject to tax (227,396) (44,927)Effect of expenses not deductible for tax purposes 195,779 710,868Effect of expenses eligible for double deduction (822,500) (1,146,697)Effect of utilisation of previously unutilised unabsorbed

reinvestment allowances brought forward fromprevious years (3,585,853) (1,206,396)

Deferred tax assets recognised during the year (121,546) (6,192,927)Deferred tax assets not recognised in respect of current

year’s tax losses and unabsorbed capital allowances - 1,925,654Overprovision of deferred tax in prior years (1,053,246) -(Over)/underprovision of tax expense in prior years (51,018) 2,575

Tax expense for the year 7,065,695 4,212,724




8. Taxation (cont’d)

2004 2003RM RM

Company

Profit before taxation 16,648,845 7,172,881

Taxation at statutory tax rate of 28% (2003: 28%) 4,661,677 2,008,407Effect of income not subject to tax (2,578,480) (2,034,864)Effect of expenses not deductible for tax purposes 102,043 26,457

Tax expense for the year 2,185,240 -

* Pursuant to Paragraph 2A, Schedule 1, Part 1 of the Income Tax Act, 1967, the income tax rate applicable to the first RM500,000of the chargeable income of certain subsidiaries is 20% as these subsidiaries are small and medium scale companies.

Tax losses are analysed as follows:Group Company

2004 2003 2004 2003RM RM RM RM

Tax savings recognised during the year arising from:Utilisation of current year tax loss - 284,582 - -Utilisation of tax losses brought

forward from previous years 133,090 - - -Unutilised tax losses carried forward 1,850,421 2,726,634 - -

Unabsorbed capital, investment tax andreinvestment allowances are analysed as follows:

Tax savings recognised during the year arising from:Utilisation of current year capital allowances 5,319,884 5,528,920 - -Utilisation of unabsorbed capital allowances

brought forward from previous years 380,597 356,060 - -Utilisation of unabsorbed reinvestment

allowances brought forward fromprevious years 3,585,853 1,206,396 - -

Unabsorbed capital allowances carriedforward 9,449,800 6,961,622 - -

Unabsorbed investment tax allowancescarried forward 23,227,400 22,793,308 - -

Unabsorbed reinvestment allowancescarried forward 9,412,176 22,218,797 - -

59 a n n u a l r e p o r t 2 0 0 4



9. Earnings Per Share

(a) Basic

Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of ordinary sharesin issue during the financial year.

2004 2003

Net profit for the year (RM) 40,343,218 32,176,487Weighted average number of ordinary shares in issue 141,361,984 140,871,137

Basic earnings per share (sen) 28.54 22.84

(b) Diluted

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares in issue during the financial year has been adjusted for the dilutive effects of dilutive all potential ordinary shares, i.e. share options grantedto employee.

2004 2003

Net profit for the year (RM) 40,343,218 32,176,487

Weighted average number of ordinary shares in issue 141,361,984 140,871,137Effect of dilution:

Share options 4,240,026 2,818,448

Adjusted weighted average number of ordinary shares inissue and issuable 145,602,010 143,689,585

Diluted earnings per share (sen) 27.71 22.39

10. DividendsNet Dividends

Amount per Ordinary Share2004 2003 2004 2003

RM RM Sen Sen

Final tax exempt dividend of 5%, on141,461,800 ordinary shares, paid on2 March 2004 - 7,073,090 - 5.00

Final tax exempt dividend of 10%, on141,794,000 ordinary shares 14,179,400 - 10.00 -

14,179,400 7,073,090 10.00 5.00

At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the financial year ended 30 June 2004, of 10%on 141,794,000 ordinary shares, amounting to a dividend payable of RM14,179,400 (10 sen per ordinary share) will be proposedfor shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend,if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending30 June 2005.




11. Property, Plant and Equipment

Land, Plant, Furniture,Plantations Machinery Tractors Fixtures Construction

and and and and Effluent Work-inBuildings* Equipment Vehicles Fittings Ponds Progress Total

RM RM RM RM RM RM RMGroup

Cost/ValuationAt 1 July 2003 320,281,730 139,168,348 12,463,027 1,608,863 467,580 15,196,860 489,186,408Additions 9,437,255 5,701,902 4,791,984 228,595 9,880 23,213,490 43,383,106Disposals - (10,204) - - - (6,989) (17,193)Write-offs (6,578) (16,767) - (6,640) - - (29,985)Reclassification 14,783,401 194,753 - 19,519 - (14,997,673) -Acquisition of subsidiary

(Note 12) - - - - - 8,831,948 8,831,948

At 30 June 2004 344,495,808 145,038,032 17,255,011 1,850,337 477,460 32,237,636 541,354,284

Representing:At cost 87,625,808 145,038,032 17,255,011 1,850,337 477,460 32,237,636 284,484,284At valuation 256,870,000 - - - - - 256,870,000

344,495,808 145,038,032 17,255,011 1,850,337 477,460 32,237,636 541,354,284

Accumulated DepreciationAt 1 July 2003 8,369,257 38,265,034 8,322,758 665,208 150,626 - 55,772,883Charge for the year 4,614,948 12,847,405 2,669,746 152,041 38,980 - 20,323,120Disposals - (609) - - - - (609)Write-offs (6,578) (15,024) - (3,857) - - (25,459)Reclassification 252,431 (254,326) - 1,895 - - -

At 30 June 2004 13,230,058 50,842,480 10,992,504 815,287 189,606 - 76,069,935

Net Book ValueAt 30 June 2004At cost 80,270,574 94,195,552 6,262,507 1,035,050 287,854 32,237,636 214,289,173At valuation 250,995,176 - - - - - 250,995,176

331,265,750 94,195,552 6,262,507 1,035,050 287,854 32,237,636 465,284,349

At 30 June 2003At cost 59,100,271 100,903,314 4,140,269 943,655 316,954 15,196,860 180,601,323At valuation 252,812,202 - - - - - 252,812,202

311,912,473 100,903,314 4,140,269 943,655 316,954 15,196,860 433,413,525

Depreciation chargefor 2003 3,779,018 11,775,853 2,111,318 144,912 38,736 - 17,849,837

61 a n n u a l r e p o r t 2 0 0 4



11. Property, Plant and Equipment (Cont’d)

* Land, Plantations and Buildings of the Group:Leasehold

Land Plantations Buildings TotalRM RM RM RM

Cost/ValuationAt 1 July 2003 128,230,630 133,326,851 58,724,249 320,281,730Additions 858,343 2,246,222 6,332,690 9,437,255Write-offs - - (6,578) (6,578)Reclassification - 7,605 14,775,796 14,783,401

At 30 June 2004 129,088,973 135,580,678 79,826,157 344,495,808

Representing:At cost 5,648,554 10,105,791 71,871,463 87,625,808At valuation 123,440,419 125,474,887 7,954,694 256,870,000

129,088,973 135,580,678 79,826,157 344,495,808

Accumulated DepreciationAt 1 July 2003 736,638 - 7,632,619 8,369,257Charge for the year 1,463,684 - 3,151,264 4,614,948Write-offs - - (6,578) (6,578)Reclassification - - 252,431 252,431

At 30 June 2004 2,200,322 - 11,029,736 13,230,058

Net Book ValueAt 30 June 2004:At cost 7,984,501 10,105,791 62,180,282 80,270,574At valuation 118,904,150 125,474,887 6,616,139 250,995,176

126,888,651 135,580,678 68,796,421 331,265,750

At 30 June 2003:At cost 7,209,358 7,851,963 44,038,950 59,100,271At valuation 120,284,634 125,474,888 7,052,680 252,812,202

127,493,992 133,326,851 51,091,630 311,912,473

Depreciation charge for 2003 1,414,545 - 2,364,473 3,779,018




11. Property, Plant and Equipment (Cont’d)

(a) Details of the latest independent professional valuations of leasehold land, plantations and buildings owned by thesubsidiaries at 30 June 2004 are as follows:

ValuationDate of valuation Description of Property Amount Basis of Valuation

RM

30 June 2003 Leasehold land 34,670,000 Open market value30 June 2001 Leasehold land, plantations 222,200,000 Open market value

and buildings

256,870,000

At 30 June 2004, had the revalued leasehold land, plantations and buildings of the Group been carried at historical cost,the net book value would have been RM58,270,722 (2003: RM58,565,223).

(b) During the financial year, the Group acquired property, plant and equipment at aggregate cost of RM43,383,106 (2003:RM32,422,524) of which RM3,692,000 (2003: RM488,000) was acquired by means of hire purchase arrangements. Netbook value of property, plant and equipment held under hire purchase arrangements is as follows:

Group2004 2003

RM RM

Tractors and vehicles 4,102,855 511,393

(c) Leasehold land and plantations with an aggregate amount of RM174,860,000 (2003: RM174,860,000) have been charged tofinancial institutions to secure the RM100 million Al-Bai Bithaman Ajil Fixed Rate Serial Bonds for the Company.

12. Investments in SubsidiariesCompany

2004 2003RM RM

Unquoted shares, at cost 307,375,668 294,494,000

Details of the subsidiaries are as follows:Country of Equity Interest

Name of subsidiaries Incorporation Held (%) Principal activities2004 2003

Subsidiaries of the Company

Kwantas Oil Sdn. Bhd. Malaysia 100 100 Operation of palm oil mills,palm kernel mill, palm oil refinery mill,the wholesaling and supplyof diesel and lubricants, andtrading of refined soya bean oil

Kwantas Plantations Malaysia 100 100 Operation of oil palm plantations and aSdn. Bhd. stone and gravel quarry

63 a n n u a l r e p o r t 2 0 0 4



12. Investments in Subsidiaries (cont’d)Country of Equity Interest

Name of subsidiaries Incorporation Held (%) Principal activities2004 2003

Subsidiaries of the Company

Haranky Sdn. Bhd. Malaysia 100 100 Operation of an oil palm plantation

Palm Energy Sdn. Bhd. Malaysia 100 100 Operation of a Biomass power plant

Kwantas International Inc. Malaysia 100 - International trading

Dong Ma Oils & Fats People’s 51 51 Operation of a bulking(Guangzhou Free Trade Republic installation and trading ofZone) Co. Ltd. * of China palm oil products

Dong Ma Oils & Fats People’s 100 - Operation of a bulking(Zhangjiagang Free Trade Republic installation and trading ofZone) Co. Ltd. * of China palm oil products (currently

at development stage)Subsidiary of Kwantas Oil Sdn. Bhd.

Maximlink Enterprise Malaysia 100 100 Rental of leasehold landSdn. Bhd.

Subsidiaries of Kwantas Plantations Sdn. Bhd.

Aman Bersatu Sdn. Bhd. Malaysia 100 100 Operation of an oil palm plantation

Benar Bersatu Sdn. Bhd. Malaysia 100 100 Operation of an oil palm plantation

* Audited by firms of auditors other than Ernst & Young

Acquisition of Subsidiaries

During the financial year, the Group acquired 100% equity interest in Dong Ma Oils & Fats (Zhangjiagang Free Trade Zone) Co. Ltd.,incorporated in The People’s Republic of China and 100% equity interest in Kwantas International Inc., incorporated in the FederalTerritory of Labuan, Malaysia, for a total consideration of RM8,831,948 and RM380 respectively for cash.

The acquisition had the following effect on the Group’s financial results for the year:2004

RM

Revenue 2,170,560Profit from operations 2,170,723Net profit for the year 2,150,723




12. Investments in Subsidiaries (cont’d)

The acquisition had the following effect on the financial position of the Group as at the end of the year:

2004RM

Property, plant and equipment 8,831,948Goodwill on consolidation 28,519Trade and other receivables 2,051,725Cash and bank balances 95,437Other payables (4,578)Tax payable (20,000)

Group’s share of net assets 10,983,051

The fair values of the assets acquired and liabilities assumed from the acquisition of the subsidiaries were as follows:

Property, plant and equipment (Note 11) 8,831,948Cash and bank balances 380Other payables (28,519)

Fair value of total assets 8,803,809Goodwill on acquisition (Note 22) 28,519

Total cost of acquisition 8,832,328

Purchase consideration satisfied by:Cash 8,832,328

Cash outflow arising on acquisition:Purchase consideration satisfied by cash 8,832,328Cash and cash equivalents of subsidiaries acquired (380)

Net cash outflow of the Group 8,831,948

There were no acquisitions in the financial year ended 30 June 2003.

65 a n n u a l r e p o r t 2 0 0 4



13. InventoriesGroup Company

2004 2003 2004 2003RM RM RM RM

Cost:Oil palm seedlings 881,527 792,832 - -Palm products 101,902,502 58,019,261 - -Soya bean oil products 20,349 134,581 - -Stores and supplies 4,825,326 4,368,020 - -

107,629,704 63,314,694 - -

14. Trade Receivables

Trade receivables 73,597,452 82,056,271 - -

Less: Provision for doubtful debts (40,751) (40,751) - -

73,556,701 82,015,520 - -

The Group’s normal trade credit term ranges from 14 days to 90 days. Other credit terms are assessed and approved on a case-by-case basis.

The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors.

15. Other ReceivablesGroup Company

2004 2003 2004 2003RM RM RM RM

Due from a subsidiary - - 96,615,000 99,885,450Tax recoverable 2,504,485 482,823 3,197 2,305Advances 29,132,979 19,376,118 - -Deposits 353,154 362,266 - -Deposits for acquisition of machinery 22,514,412 2,039,906 - -Sundry receivables 8,620,131 4,067,919 27,050 21,900Prepayments 798,334 629,333 - -

63,923,495 26,958,365 96,645,247 99,909,655Less: Provision for doubtful debts (60,357) (60,357) - -

63,863,138 26,898,008 96,645,247 99,909,655

The amount due from a subsidiary is unsecured, bears interest at 6.77% (2003: 6.77%) and has no fixed terms of repayment.

The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors.




16. Cash and Cash EquivalentsGroup Company

2004 2003 2004 2003RM RM RM RM

Cash on hand and at banks 7,826,659 10,058,098 55,099 55,845Deposits with licensed banks 22,646,157 32,835,660 13,451,100 3,385,660

Cash and cash equivalents 30,472,816 42,893,758 13,506,199 3,441,505

Cash deposited in the designated Finance Service Reserve account amounting to RM13,385,000 (2003: RM3,385,000) are notavailable for use by the Group as these amounts are reserved for the redemption of Al-Bai’ Bithaman Ajil Fixed Rate Serial Bonds asstated in Note 17.

The average effective interest rate of deposits of the Group and of the Company at the balance sheet date was 2.65% (2003: 2.33%)per annum.

The average maturity of deposits of the Group and of the Company as at the end of the financial year was 30 days (2003: 1 day).

17. BorrowingsGroup Company

2004 2003 2004 2003RM RM RM RM

Short Term Borrowings

Secured:Bankers’ acceptances 141,475,507 122,349,493 - -Term loans 2,175,932 1,625,185 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 10,000,000 - 10,000,000 -Hire purchase payables (Note 18) 1,940,460 226,645 - -

155,591,899 124,201,323 10,000,000 -Unsecured:Short term revolving credits 3,799,694 - - -

159,391,593 124,201,323 10,000,000 -

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17. Borrowings (cont’d)Group Company

2004 2003 2004 2003RM RM RM RM

Long Term Borrowings

Secured:Term loans 12,817,195 11,899,680 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 90,000,000 100,000,000 90,000,000 100,000,000Hire purchase payables (Note 18) 894,731 115,961 - -

103,711,926 112,015,641 90,000,000 100,000,000

Total Borrowings

Bankers’ acceptances 141,475,507 122,349,493 - -Short term revolving credits 3,799,694 - - -Term loans 14,993,127 13,524,865 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 100,000,000 100,000,000 100,000,000 100,000,000Hire purchase payables (Note 18) 2,835,191 342,606 - -

263,103,519 236,216,964 100,000,000 100,000,000Maturity of borrowings

(excluding hire purchase payable):Within one year 157,451,133 123,974,678 10,000,000 -More than 1 year and less than

2 years 12,309,786 11,727,093 10,000,000 10,000,000More than 2 years and less than

5 years 67,818,915 55,845,432 60,000,000 50,000,0005 years or more 22,688,494 44,327,155 20,000,000 40,000,000

260,268,328 235,874,358 100,000,000 100,000,000

The average effective interest rates at the balance sheet date for borrowings, excluding hire purchase payables, were as follows:

Group Company2004 2003 2004 2003

% % % %

Bankers’ acceptances 3.35 3.21 - -Short term revolving credits 2.50 - - -Term loans 6.00 6.00 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 6.77 6.77 6.77 6.77




17. Borrowings (cont’d)

The bankers’ acceptances for a subsidiary company of the Group are secured by corporate guarantees from the Company; and a letterof negative pledge from a subsidiary company.

The short term revolving credits for a subsidiary company of the Group are unsecured and denominated in Chinese Renminbi.

The bank loans for a subsidiary company of the Group are secured by corporate guarantees from the Company; a first fixed charge overplant and equipment of a subsidiary company; a debenture giving a fixed and floating charge on all present and future assets of asubsidiary company; and a first legal charge over landed property of a third party.

The Al-Bai’ Bithaman Ajil Fixed Rate Serial Bonds of the Company are secured against the following:

(a) A legal charge over certain landed properties of a subsidiary company;

(b) Credit balances accruing to each of the Designated Accounts namely the Finance Service Reserve Account and CommoditiesReserve Account; and

(c) Various classes of insurances which have been taken up by a subsidiary company for its properties covering equipment, plant,machinery, factory building, boilers and others against fire and other identified perils.

18. Hire Purchase PayablesGroup Company

2004 2003 2004 2003RM RM RM RM

Minimum lease payments:Not later than 1 year 2,104,898 248,121 - -Later than 1 year and not later than 2 years 877,727 119,654 - -Later than 2 years and not later than 5 years 45,892 - - -

3,028,517 367,775 - -Less: Future finance charges (193,326) (25,169) - -

Present value of finance lease liabilities 2,835,191 342,606 - -

Present value of finance lease liabilities:Not later than 1 year 1,940,460 226,645 - -Later than 1 year and not later than 2 years 849,845 115,961 - -Later than 2 years and not later than 5 years 44,886 - - -

2,835,191 342,606 - -

Analysed as:Due within 12 months (Note 17) 1,940,460 226,645 - -Due after 12 months (Note 17) 894,731 115,961 - -

2,835,191 342,606 - -

The hire purchase liabilities bore interest at the balance sheet date of between 3.30% to 4.85% (2003: 4.85% to 6%) per annum.

69 a n n u a l r e p o r t 2 0 0 4



19. Trade Payables

The normal trade credit terms granted to the Group range from 30 days to 90 days.

20. Other PayablesGroup Company

2004 2003 2004 2003RM RM RM RM

Due to subsidiaries - - 160,983,154 149,485,871Due to directors 171,344 312,460 380 -Accruals and provisions 3,704,186 2,696,583 10,000 10,000Amounts due to contractors and suppliers 1,870,417 2,466,832 - -Deposits received 4,644,527 5,339,960 - -Sundry payables 6,151,681 2,487,033 126,579 82,643Retention sum 147,073 144,457 - -

16,689,228 13,447,325 161,120,113 149,578,514

Amounts due to subsidiaries and directors are unsecured, interest free and have no fixed terms of repayment.

21. Share CapitalNumber of OrdinaryShares of RM1 Each Amount

2004 2003 2004 2003RM RM

Authorised:

At 30 June 500,000,000 500,000,000 500,000,000 500,000,000

Issued and fully paid:

At 1 July 141,066,000 140,696,000 141,066,000 140,696,000Issued during the year pursuant

to ESOS 728,000 370,000 728,000 370,000

At 30 June 141,794,000 141,066,000 141,794,000 141,066,000

(a) Ordinary Shares Issued for Cash

During the financial year, the Company increased its issued and paid-up share capital from RM141,066,000 to RM141,794,000by way of the issuance of 728,000 ordinary shares of RM1 each pursuant to the Employee Share Options Scheme at an issueprice of RM1.03. The share premium arising from this issue amounted to RM21,840 has been credited to the share premiumaccount. The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company.




21. Share Capital (cont’d)

(b) Employee Share Options Scheme (“ESOS”)

The Kwantas Corporation Berhad Employee Share Options Scheme (“ESOS”) is governed by the by-laws approved by theshareholders at an Extraordinary General Meeting held on 18 December 2000. Subsequently, certain amendments to theby-laws of the ESOS were approved by the shareholders at an Extraordinary General Meeting held on 28 May 2002. The ESOSwas implemented on 10 April 2001 and is to be in force for a period of 5 years from the date of implementation.

The revised salient features of the ESOS are as follows:

(i) The Options Committee appointed by the Board of Directors to administer the ESOS, may from time to time grantoptions to eligible employees of the Group to subscribe for new ordinary shares of RM1 each in the Company.

(ii) Subject to the discretion of the Options Committee, any employee whose employment has been confirmed andany executive directors holding office in a full-time executive capacity of the Group, shall be eligible to participatein the ESOS.

(iii) The total number of shares to be issued under the ESOS shall not exceed in aggregate 10% of the issued share capitalof the Company at any point of time during the tenure of the ESOS and out of which not more than 50% of the sharesshall be allocated, in aggregate, to directors and senior management. In addition, not more than 10% of the sharesavailable under the ESOS shall be allocated to any individual director or employee who, either singly or collectivelythrough his/her associates, holds 20% or more in the issued and paid-up capital of the Company.

(iv) The option price for each share shall be the weighted average of the market price as quoted in the Daily OfficialList issued by Bursa Malaysia Securities Berhad for the 5 market days immediately preceding the date on which theoption is granted less, if the Options Committee shall so determine at their discretion from time to time, a discountof not more than 10% or the par value of the shares of the Company of RM1.

(v) An option granted under the ESOS shall be capable of being exercised by the grantee by notice in writing tothe Company commencing from the date of the offer but before the expiry of five years from the date of the receiptof the last of the requisite approvals.

(vi) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passu in all respectswith the existing ordinary shares of the Company other than as may be specified in a resolution approvingthe distribution of dividends prior to their exercise dates.

(vii) The persons to whom the options have been granted have no right to participate by virtue of the options, in anyshare issue of any other company.

71 a n n u a l r e p o r t 2 0 0 4



21. Share Capital (cont’d)

(b) Employee Share Options Scheme (“ESOS”) (cont’d)

The terms of share options outstanding as at the end of the financial year are as follows:

Number of Share OptionsGrant Expiry Exercise At AtDate Date Price 1 July Granted Exercised Lapsed 30 June

RM

200418.12.2000 17.12.2005 1.03 3,237,000 - (728,000) - 2,509,00012.10.2002 11.10.2007 1.71 3,500,000 - - - 3,500,000

6,737,000 - (728,000) - 6,009,000

200318.12.2000 17.12.2005 1.03 3,681,000 - (370,000) (74,000) 3,237,00012.10.2002 11.10.2007 1.71 - 3,500,000 - - 3,500,000

3,681,000 3,500,000 (370,000) (74,000) 6,737,000

Details of share options exercised during the financial year and the fair value, at exercise date, of ordinary shares issued are as follows:

Exercise Fair Value of Number of ConsiderationsExercise Period Price Ordinary Shares Share Options Received

RM RM RM

2004July 2003 - June 2004 1.03 2.88 - 5.20 728,000 749,840

Less: Par value of ordinary shares (728,000)

Share premium 21,840

2003July 2002 - June 2003 1.03 1.85 - 2.87 370,000 381,100

Less: Par value of ordinary shares (370,000)

Share premium 11,100




22. Other Reserves (Non-Distributable)Group Company

2004 2003 2004 2003RM RM RM RM

Asset revaluation reserve 62,412,722 62,412,722 - -

Reserve on consolidationBalance at 1 July 18,510,646 18,510,646 - -Acquisition of subsidiaries (Note 12) (28,519) - - -

Balance at 30 June 18,482,127 18,510,646 - -

80,894,849 80,923,368 - -

The nature and purpose of each category of reserve are as follows:

(a) Asset Revaluation ReserveThis reserve includes the cumulative net change, net of deferred tax effects, arising from the revaluation of leasehold land,plantations and buildings.

(b) Reserve on ConsolidationThis reserve represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of thesubsidiaries at the date of acquisition over the cost of acquisition.

23. Retained Profits

As at 30 June 2004, the Company has tax exempt profits available for distribution of approximately RM19,680,000 (2003:RM17,863,00), subject to the agreement of the Inland Revenue Board.

The Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 and the balance in the tax-exemptincome account to frank the payment of dividends out of its entire retained profits as at 30 June 2004.

24. Deferred TaxGroup Company

2004 2003 2004 2003RM RM RM RM

At 1 July 24,346,195 25,378,398 - -Recognised in the income statement

(Note 8) 997,556 (1,032,203) - -

At 30 June 25,343,751 24,346,195 - -

Presented after appropriate offsetting as follows:

Deferred tax assets (4,725,764) (8,146,316) - -Deferred tax liabilities 30,069,515 32,492,511 - -

25,343,751 24,346,195 - -

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24. Deferred Tax (cont’d)

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

Deferred Tax Liabilities of the Group:Property,Plant and

EquipmentRM

At 1 July 2003 32,492,511Recognised in the income statement 2,149,161

At 30 June 2004 34,641,672

At 1 July 2002 28,830,319Recognised in the income statement 3,662,192

At 30 June 2003 32,492,511

Deferred Tax Assets of the Group:

Tax Lossesand Unabsorbed

Unabsorbed InvestmentCapital Tax

Allowances Allowances Others TotalRM RM RM RM

At 1 July 2003 (1,761,162) (6,382,126) (3,028) (8,146,316)Recognised in the income statement (1,030,059) (121,546) - (1,151,605)

At 30 June 2004 (2,791,221) (6,503,672) (3,028) (9,297,921)

At 1 July 2002 (3,448,893) - (3,028) (3,451,921)Recognised in the income statement 1,687,731 (6,382,126) - (4,694,395)

At 30 June 2003 (1,761,162) (6,382,126) (3,028) (8,146,316)

25. Commitments Group Company

2004 2003 2004 2003RM RM RM RM

Capital expenditure

Approved and contracted for 16,219,000 16,381,000 - -




26. Contingent Liabilities

Unsecured

The Company has provided corporate guarantees to secure banking facilities granted to a subsidiary company. The amount utilisedand outstanding as at 30 June 2004 amounted to approximately RM120 million (2003: RM102 million).

The Group is disputing a claim amounting to approximately RM5 million from RHB Bank Berhad on an alleged foreign currencyforward contract entered into by a subsidiary company. Legal proceedings are in progress and the outcome is yet to be determined.The Company’s lawyers are of the opinion that the Group has a good prospect of succeeding in this litigation.

27. Significant Related Party Transactions Group Company

2004 2003 2004 2003RM RM RM RM

Trade transactions

Transactions with Fordeco ConstructionSdn. Bhd., a company in which KwanNgen Chung and Kwan Ngen Wah,directors of the Company, have interest:

Sales of diesel 1,035,285 1,101,986 - -

Transactions with Fordeco Sdn. Bhd.,a company in which Kwan Ngen Chungand Kwan Ngen Wah, directorsof the Company, have interest:

Sales of diesel 590,197 424,837 - -

Transactions with Lahad Datu Tyres Sdn.Bhd., a company in which the brotherand a sister of Kwan Ngen Chung, KwanNgen Wah, Kwan Jin Nget and KwanMin Nyet, directors of the Company,have interest:

Purchase of tyres, batteries and lubricants 969,596 825,287 - -

Transactions with Universal ShippingGroup Inc., a company in which KwanNgen Chung and Kwan Ngen Wah,directors of the Company, have interest:

Freight charges paid 12,702,780 - - -

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27. Significant Related Party Transactions (cont’d)

The directors are of the opinion that all the transactions above have been entered into in the normal course of business andhave been established on terms and conditions that are not materially different from those obtainable in transactions withunrelated parties.

28. Other Significant Events

On 10 May 2004, the Company acquired 100 ordinary shares of USD1.00 (RM3.80) each, representing 100% equity interest inKwantas International Inc. (“KII”), a company incorporated in the Federal Territory of Labuan, Malaysia, for a total cash considerationof USD100 (RM380).

On 28 May 2004, the Company acquired 100% equity interest in Dong Ma Oils & Fats (Zhangjiagang Free Trade Zone) Co. Ltd.(“DMZJGFTZ”), a company incorporated in The People’s Republic of China, for a total cash consideration of USD2.3 million(RM8,831,948).

29. Financial Instruments

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for thedevelopment of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. TheGroup operates within clearly defined guidelines that are approved by the Board and the Group’s policy is not to engagein speculative transactions.

(b) Interest Rate Risk

The Group’s primary interest rate risk relates to interest-bearing debt; the Group had no substantial long term interest-bearingassets as at 30 June 2004. The investments in financial assets are mainly short term in nature and have been mostlyplaced in fixed deposits or occasionally, in short term commercial papers.

The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. The Group reviewsits debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it tocapitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes.

The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their respectivenotes.

(c) Foreign Exchange Risk

The Group operates internationally and is exposed to various currencies, mainly United States Dollars and Chinese Renminbi.Foreign currency denominated assets and liabilities together with expected cash flows from highly probable purchases andsales give rise to foreign exchange exposures.

Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are keptto an acceptable level. Material foreign currency transaction exposures are hedged, mainly with derivative financialinstruments such as forward foreign exchange contracts.




29. Financial Instruments (cont’d)

(c) Foreign Exchange Risk (cont’d)

The net unhedged financial assets and financial liabilities of the Group companies that are not denominated in their functionalcurrencies are as follows:

Net Financial Assets/(Liabilities)Held in Non-Functional Currency

UnitedFunctional Currency of StatesGroup Companies Dollars Total

RM RM

At 30 June 2004:Ringgit Malaysia 62,591,035 62,591,035

At 30 June 2003:Ringgit Malaysia 78,185,926 78,185,926

As at balance sheet date, the Group had entered into forward foreign exchange contracts with the following notional amountsand maturities:

TotalWithin Notional

Currency 1 year AmountRM RM

At 30 June 2004:Forwards used to hedge

anticipated sales United States Dollar 138,945,268 138,945,268

At 30 June 2003:Forwards used to hedge

anticipated sales United States Dollar 131,093,100 131,093,100

The net unrecognised gains as at 30 June 2004 on forward contracts used to hedge anticipated sales which are expected tooccur between August 2004 and October 2004 amounted to RM347,921 and are deferred until the related sales occur, at whichtime they will be included in the measurement of the sales.

(d) Liquidity Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure thatrefinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficientlevels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives tomaintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raisescommitted funding from both capital markets and financial institutions and balances its portfolio with some short term fundingso as to achieve overall cost effectiveness.

77 a n n u a l r e p o r t 2 0 0 4




(e) Credit Risk

Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. Credit risk is minimisedand monitored by limiting the Group’s associations to business partners with high creditworthiness. Trade receivables aremonitored on an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer nor does it have any major concentration ofcredit risk related to any financial instruments.

(f) Fair Values

There is no disclosure of fair value for investments in subsidiaries and bonds issued under the basis of Islamic principlesas these are excluded from MASB 24 - Financial Instruments: Disclosure and Presentation.

The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet dateapproximated their fair values except for the followings:

Group CompanyCarrying Fair Carrying Fair

Note Amount Value Amount ValueRM RM RM RM

Financial Assets

At 30 June 2004:Advances to a subsidiary 15 - - 96,615,000 *

At 30 June 2003:Advances to a subsidiary 15 - - 99,885,450 *

Financial Liabilities

At 30 June 2004:Advances from subsidiaries 20 - - 160,983,154 *

At 30 June 2003:Advances from subsidiaries 20 - - 149,485,871 *

* It is not practical to estimate the fair values of advances from/to subsidiaries due principally to a lack of fixed repaymentterm entered into by the parties involved and without incurring excessive costs.





(f) Fair Values (cont’d)

The nominal/notional amount and net fair value of financial instruments not recognised in the balance sheets of the Groupand of the Company as at the end of the financial year are:

Group CompanyNominal/ Net Nominal/ NetNotional Fair Notional Fair

Note Amount Value Amount ValueRM RM RM RM

At 30 June 2004:Contingent liabilities 26 5,000,000 ** 120,000,000 **Forward foreign

exchange contracts 138,945,268 347,921 - -

At 30 June 2003:Contingent liabilities 26 5,000,000 ** 102,000,000 **Forward foreign

exchange contracts 131,093,100 483,328 - -

** It is not practicable to estimate the fair value of contingent liabilities reliably due to the uncertainties of timing, costsand eventual outcome.

The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments:

(i) Cash and Cash Equivalents, Trade and Other Receivables/Payables and Short Term BorrowingsThe carrying amounts approximate fair values due to the relatively short term maturity of these financial instruments.

(ii) BorrowingsThe carrying value of the Company’s borrowings is deemed to equal the fair value, which the Company estimates basedon incremental rates of comparable borrowing arrangements.

30. Segment Information

(a) Business Segments

The Group is organised on a worldwide basis into four major business segments:

(i) Bio-mass energy - generate and supply of energy and steam;(ii) Palm products processing - manufacture and sale of palm products, and operations of bulking installations;(iii) Plantations - management and operations of plantations; and(iv) Trading of industrial products - purchase and sale of diesel.

Other business segments include letting of commercial properties and a stone and gravel quarry, none of which are of a sufficient size to be reported separately.

79 a n n u a l r e p o r t 2 0 0 4



30. Segment Information (cont’d)

(a) Business Segments (cont’d)

The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactionswith unrelated parties.

Bio- Palm Trading ofmass products industrial

energy processing Plantations products Others Elimination ConsolidatedRM RM RM RM RM RM RM

30 June 2004

RevenueExternal sales - 1,184,775,957 - 5,515,814 118,357 - 1,190,410,128Inter-segment sales 9,571,322 581,400 47,622,182 594,270 50,000 (58,419,174) -

Total revenue 9,571,322 1,185,357,357 47,622,182 6,110,084 168,357 (58,419,174) 1,190,410,128

ResultProfit from operations 4,048,054 28,862,695 26,318,569 570,024 (141,129) 59,658,213Finance costs, net (11,933,791)Taxation (7,065,695)

Profit after taxation 40,658,727Minority interests (315,509)

Net profit for the year 40,343,218

AssetsSegment assets 36,813,070 527,826,660 275,087,902 9,139,747 450,624,364 (553,959,271) 745,532,472

LiabilitiesSegment liabilities 15,773,233 268,929,386 47,312,575 2,062,154 270,518,805 (225,612,051) 378,984,102

Other InformationCapital expenditure 1,730,585 34,049,346 7,603,175 - - 43,383,106Depreciation 1,550,704 15,040,012 3,259,981 78,451 393,972 20,323,120





(a) Business Segments (cont’d)Bio- Palm Trading of

mass products industrialenergy processing Plantations products Others Elimination Consolidated

RM RM RM RM RM RM RM

30 June 2003

RevenueExternal sales - 1,273,124,240 - 13,278,337 138,296 - 1,286,540,873Inter-segment sales 5,999,852 - 38,023,000 738,935 50,000 (44,811,787) -

Total revenue 5,999,852 1,273,124,240 38,023,000 14,017,272 188,296 (44,811,787) 1,286,540,873

ResultProfit from operations 3,850,943 23,491,568 19,169,244 523,589 (387,702) 46,647,642Finance costs, net (10,345,593)Taxation (4,212,724)

Profit after taxation 32,089,325Minority interests 87,162

Net profit for the year 32,176,487

AssetsSegment assets 39,827,037 429,677,955 254,745,228 8,244,412 433,557,227 (509,370,038) 656,681,821

LiabilitiesSegment liabilities 21,245,390 200,530,386 39,220,756 1,572,866 260,657,994 (193,904,486) 329,322,906

Other InformationCapital expenditure 8,356,607 15,920,849 8,145,068 - - 32,422,524Depreciation 226,135 14,490,731 2,658,732 80,262 393,977 17,849,837

81 a n n u a l r e p o r t 2 0 0 4




(b) Geographical Segments

Although the Group’s four major business segments are managed on a worldwide basis, they operate in two principalgeographical areas of the world. In Malaysia, its home country, the Group’s areas of operation are principally manufacturingand sale of palm products. Other operations in Malaysia include oil palm plantations, bio-mass energy plant and trading ofindustrial products.

The Group also operates in another country in the Asia Pacific region, The People’s Republic of China, for the operation ofbulking installations and trading of palm oil products.

Total Revenue from Segment CapitalExternal Customers Assets Expenditure

2004 2003 2004 2003 2004 2003RM RM RM RM RM RM

Malaysia 1,179,904,651 1,283,926,978 694,647,545 638,981,552 18,546,350 21,460,946

The People’s Republicof China 10,505,477 2,613,895 50,884,927 17,700,269 24,836,756 10,961,578

Consolidated 1,190,410,128 1,286,540,873 745,532,472 656,681,821 43,383,106 32,422,524


Properties of The Group

TITLE REGISTERED LAND TENURE AGE EXISTING NET DATE OF(location) OWNER AREA OF USAGE BOOK ACQUISITION

(Built-Up) BUILDING VALUE(RM) OR REVALUATION

CL 095317196, KPSB 5,260 ha Leasehold 99 - Oil Palm 125,678,078 30 June 2001Lamag, District of years from PlantationKinabatangan, Sabah 1/1/1979 to

31/12/2077

PL 096290069, Koyah HSB 1,122.9 ha Leasehold 99 - Oil Palm 23,160,094 30 June 2001Locality, Off KM 39, years from PlantationJln Lahad Datu-Sandakan, 1/1/1979 toDistrict of Kinabatangan, 31/12/2077Sabah.

CL 095318504, KPSB 1,768.7 ha Leasehold 99 - Oil Palm 43,311,510 30 June 2001CL 095318513, years from PlantationCL 095318522, 1/1/1989 toCL 095318531, 31/12/2087CL 095318540 and exceptCL 095318559, CL 095318559Sg Pin Locality, KM 50, 99 years leaseJln Lahad Datu-Sandakan, from 1/1/1988District of Kinabatangan, to 31/12/2086Sabah.

CL 075376117, District KPSB 2.434 ha Leasehold 99 - Vacant Land 36,859 27 July 1991Of Sandakan, Sabah. years from

1/1/1964 to31/12/2062

Unit No. 5/R7/4, KOSB 1490 sq. ft Pending strata 8 yrs Apartment for 128,677 7 January 1994Api-Api Centre, title used byKota Kinabalu, Sabah. Management

CL 115379336 MESB 14.15 ha Leasehold 99 7 yrs Palm Oil Product 33,094,092 30 June 2003Jalan Kuching, Off years from Processing ComplexJalan Dermaga, District 1/1/1990 to (Refinery & Kernalof Lahad Datu, Sabah 31/12/2088 Crushing)

CL 095319065 ABSB 282.6 ha Leasehold 99 - Oil Palm 6,363,550 30 June 2001Kinabatangan, District years from Plantationof Kinabatangan, Sabah 1/1/1989 to

31/12/2087

CL 095317007 BBSB 202.7 ha Leasehold 99 - Oil Palm 4,656,832 30 June 2001Latangan, District of years from PlantationKinabatangan, Sabah 1/1/1988 to

31/12/2086

CL 095316395 KPSB 1,534 ha Leasehold 999 - Oil Palm 9,200,000 30 June 2001Sungai Kinabatangan, years from PlantationDistrict of Kinabatangan, 1/1/1889 toSabah 31/12/2887

TL 117509832 KOSB 5 ha Leasehold 99 - Vacant 91,440 14 March 1997New Wharf Road, years fromDistrict of Lahad Datu, 1/1/1996 toSabah 31/12/2094

83 a n n u a l r e p o r t 2 0 0 4

Properties of The Group (cont’d)

TITLE REGISTERED LAND TENURE AGE EXISTING NET DATE OF(location) OWNER AREA OF USAGE BOOK ACQUISITION

(Built-Up) BUILDING VALUE(RM) OR REVALUATION

Lot 49, Export KOSB 2.19 acres Pending - Vacant 825,869 2 October 1999Oriented Industrial submission ofZone, Kota Kinabalu master title

CL 015493697 KOSB 0.453 ha Leasehold 99 - Vacant 895,396 26 July 2000Kuala Mengatal, years fromSepangar Bay, 1/1/1983 toKota Kinabalu 31/12/2081

CL 075339954 KOSB 3.84 acres Leasehold 999 - Vacant 1,278,279 15 August 20008 Mile, Jln Labuk, years fromSandakan 10/7/1888 to

9/7/2887

CL 095332184 KPSB 9.42 ha Leasehold 99 - Oil Palm 72,483 29 June 2002Sungai Latangan, years from PlantationKinabatangan 1/1/2000 to

31/12/2098

CL 095330662 KPSB 10.01 ha Leasehold 99 - Oil Palm 75,225 8 January 2001Sungai Lokan, years from PlantationKinabatangan 1/1/1998 to

31/12/2096

Title: (2001) No.4 DMGZFTZ 9,990 m2 Leasehold 50 2 yrs Bulking 1,573,331 31 January 2002No.15, Jinqiao Road, years from installation,Guangzhou Free Trade Zone, 25/10/2001 to edible oil complexGuangzhou, China 24/10/2051 and office

building

Title: (2003) No.BSQ-F2 DMGZFTZ 3,840 m2 Leasehold 50 - Bulking 401,843 20 August 2003Guangzhou Free Trade Zone years from installation andGuangzhou, China 22/08/2003 to edible oil complex

21/08/2053

Title: (2002) No.23 DMZJGFTZ 20,006 m2 Leasehold 50 - Bulking 2,121,053 21 June 2002Zhangjiagang Free Trade Zone years from installation andZhangjiagang, China 14/08/2002 to edible oil complex

13/08/2052

CL 095332451 KPSB 12.12 ha Leasehold 99 - Oil Palm 43,652 20 October 2003Kg. Kinabatangan, years from PlantationDistrict of Kinabatangan, 1/1/2000 toSabah 31/12/2098

CL 115415631 KPSB 30.08 ha Leasehold 99 - Oil Palm 252,232 17 May 2004CL 115415640 years from PlantationCL 115415659 1/1/2000 toCL 115415668 31/12/2098CL 115415677Ulu Segama,District of Lahad Datu,Sabah

CL 115311138 PESB 6.94 acres Leasehold - Power Plant 2,054,000 31 July 2004Mile 2 1/2, 99 years fromJln Kastam Baru, 1/1/1960 toDistrict of Lahad Datu, 31/12/2058Sabah


Shareholdings Statisticsas at 26 October 2004

The Company has 1,750 shareholders as at 26 October 2004. There is only one class of shares, namely, ordinary shares of RM1.00 each.

ANALYSIS OF SHAREHOLDINGSSize of holdings Number of holders % Number of shares %

1 – 999 237 13.54 68,125 0.051,000 – 10,000 1,328 75.89 3,218,425 2.2710,001 – 100,000 141 8.06 3,932,100 2.77100,001 – 7,089,699 (*) 38 2.17 24,975,950 17.617,089,700 and above (**) 6 0.34 109,599,400 77.30

Total 1,750 100.00 141,794,000 100.00

Remark : * Less than 5% of issued holdings** 5% and above of issued holdings

SUBSTANTIAL SHAREHOLDERS (5% and above)

No Name Numbers of shares held %

1. Kwan Ngen Wah 40,250,000 28.39

2. Kwan Ngen Chung 32,750,000 23.10

3. DB (Malaysia) Nominee (Asing) Sdn Bhd 12,250,000 8.64BNP Paribas Nominees Singapore Pte Ltd for Greenback Company Inc

4. Bock Wan Chek 8,516,500 6.01

5. Semangat Fajar Sdn Bhd 8,410,400 5.93

6. Mayban Nominees (Tempatan) Sdn Bhd 8,000,000 5.64Pledged Securities Account for Kwan Ngen Chung

7. Employees Provident Fund Board 7,422,500 5.23

DIRECTORS’ SHAREHOLDINGS

Numbers of shares heldNo Name Direct % Indirect %

1. Kwan Ngen Chung 40,750,000 28.74 - -2. Kwan Ngen Wah 40,250,000 28.39 - -3. Chong Kan Hiung 300,000 0.21 - -4. Ooi Jit Huat - - - -5. Kwan Min Nyet 119,000 0.08 - -6. Kwan Jin Nget 90,000 0.06 - -

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Shareholdings Statistics

as at 26 October 2004 (cont’d)

LIST OF TOP 30 SHAREHOLDERS AS AT 26 October 2004

No. Name Shareholdings %

1. Kwan Ngen Wah 40,250,000 28.39

2. Kwan Ngen Chung 32,750,000 23.10

3. DB (Malaysia) Nominee (Asing) Sdn Bhd 12,250,000 8.64BNP Paribas Nominees Singapore Pte Ltd forGreenback Company Inc

4. Bock Wan Chek 8,516,500 6.01

5. Semangat Fajar Sdn Bhd 8,410,400 5.93

6. Mayban Nominees (Tempatan) Sdn Bhd 8,000,000 5.64Pledged Securities Account for Kwan Ngen Chung

7. Employees Provident Fund Board 7,422,500 5.23

8. Semangat Beringin Sdn Bhd 2,200,100 1.55

9. Mayban Nominees (Asing) Sdn Bhd 1,756,500 1.25Pledged Securities Account for Bock Wan Chek

10. HLG Nominee (Tempatan) Sdn Bhd 1,472,300 1.04Pledged Securities Account for Ngui Kon Nyuk

11. OSK Nominees (Tempatan) Sdn Bhd 1,350,400 0.95Pledged Securities Account for Ho Sui Khyun

12. CIMSEC Nominees (Tempatan) Sdn Bhd 881,000 0.62CIMB for Mohamed Nizam Bin Abdul Razak

13. Citicorp Nominees (Tempatan) Sdn Bhd 861,000 0.61Pledged Securities Account for Aminuddin Yusof Lana

14. HDM Nominees (Tempatan) Sdn Bhd 789,300 0.56Pledged Securities Account for Ang Theng Hian

15. Kuala Lumpur City Nominees (Tempatan) Sdn Bhd 698,700 0.49Pledged Securities Account for Chong Mei Pin

16. AMSEC Nominees (Tempatan) Sdn Bhd 669,400 0.47Pledged Securities Account for Chow Pei Lim

17. Semangat Ceria Sdn Bhd 630,000 0.44

18. AMSEC Nominees (Tempatan) Sdn Bhd 511,200 0.36Pledged Securities Account for Chong King Ling


LIST OF TOP 30 SHAREHOLDERS AS AT 26 October 2004 (cont’d)

No. Name Shareholdings %

19. AMSEC Nominees (Tempatan) Sdn Bhd 490,200 0.35Pledged Securities Account for Tan Lee Beng

20. OSK Nominees (Tempatan) Sdn Bhd 453,800 0.32Pledged Securities Account for Chong KL

21. Ho Sui Khyun 381,500 0.27

22. Kuala Lumpur City Nominees (Tempatan) Sdn Bhd 317,600 0.22Pledged Securities Account for Nasip Bin Kasnan

23. Chong Kan Hiung 300,000 0.21

24. HSBC Nominees (Asing) Sdn Bhd 294,000 0.21Stichting Pensioenfonds Abp

25. Kwan Chiew Giok 249,800 0.18

26. Ho Mah Lee @ Ho Chwee Keng 229,000 0.16

27. Chong Mei Pin 195,500 0.14

28. Citicorp Nominees (Tempatan) Sdn Bhd 194,500 0.14Pledged Securities Account for Saw Bee Tin

29. Englobal (M) Sdn Bhd 185,400 0.13

30. Mohd Azahari Bin Abu Kassim 172,900 0.12

Shareholdings Statistics

as at 26 October 2004 (cont’d)

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Form of Proxy

I/We,(FULL NAME IN BLOCK LETTERS)

of(ADDRESS)

being a member/members of Kwantas Corporation Berhad, hereby appoint(FULL NAME IN BLOCK LETTERS)

of(ADDRESS)

or failing whom(FULL NAME IN BLOCK LETTERS)

of(ADDRESS)

as my/our own proxy, to vote for me/us on my/our behalf at the Ninth Annual General Meeting of the Company to be held at the 4th Floor, FordecoBuilding, Jalan Singamata, 91100 Lahad Datu, Sabah on Wednesday, 15 December 2004 at 10.00a.m. or at any adjournment thereof.

No. Resolutions For Against1. To receive and adopt the audited financial statements for the

year ended 30 June 2004 together with the Directors' and Auditors Report thereon - Resolution 1

2. To declare a first and final tax exempt dividend of 10 sen per ordinary share - Resolution 2

3. To re-elect the following Directors pursuant to Article 73 of the Company's Articles of Association as Directors of the company:

(a) Dato’ Mohd Sarit Bin Haji Yusoh - Resolution 3(b) Datuk Jaswant Singh Kler - Resolution 4

(c) Ooi Jit Huat - Resolution 5

4. To re-elect Kwan Ngen Chung, the Managing Director of the Company pursuantto Article 106 of the Company’s Articles of Association - Resolution 6

5. To re-appoint Messrs Ernst & Young as Auditors of the Company and authorise the Directors to fix their remuneration - Resolution 7

6. As Special Business, to consider and, if thought fit, pass the following resolutions:

(i) Authority to allot and issue shares pursuant to section 132D of the Companies Act, 1965 - Resolution 8

(ii) To propose renewal of the existing shareholders’ mandate forrecurrent related party transactions of a revenue or trading nature. - Resolution 9

(Please indicate with ‘X’ how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion.)

Sign this_______________day of ______________2004

Signature of shareholder(s)

Notes:A) NOTES ON APPOINTMENT OF PROXY

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy may but need not be a member of the Company. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 1st Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah, not less than 48 hours before the time appointed for holding the meeting.Where the Form of Proxy is executed by a corporation, it must be either under seal or under the hand of any officer or attorney duly authorized.

B) NOTES ON SPECIAL BUSINESS(i) Resolution 8

The proposed resolution is in relation to authority to allot shares pursuant to Section 132D of the Companies Act, 1965 and if passed, will give the Directors of the Company, from the date of the above generalmeeting, authority to issue and allot shares from the unissued capital of the Company for such purpose as the Directors may deem fit and in the interest of the Company. This authority, unless revoked or variedby the Company in general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

(ii) Resolution 9The proposed resolution is in relation to the renewal of the existing shareholders’ mandate for recurrent related party transactions of a revenue or trading nature with related parties in the ordinary course of business which are necessary for the Company’s day-to-day operations.

No. of Ordinary Shares Held

Kwantas Corporation Berhad(Company No: 356602-W)

Heading

Stamp/Setem

The Secretary

Kwantas Corporation Berhad(Company No: 356602-W)

1st Floor, Fordeco BuildingJalan Singamata

91100 Lahad Datu, Sabah

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Perserverance Performance - ChartNexusir.chartnexus.com/kwantas/website_HTML/attachments/attachment... · Perserverance Performance. reaching new heights Pursue our goals with force