kwantas 05' -fa 10/11 -...

annual report 2005 21

operations review

Financial Overview

As a transnational company with offices in Lahad Datu, Kota Kinabalu, Guangzhou,Shanghai, Zhangjiagang and Hong Kong, Kwantas Corporation Berhad (KCB)’s overallperformance and profitability is a result of the Group’s synergistic consolidation of itsbusinesses as an integrated palm oil producer. Its core business segments includeplantation, biomass energy, diesel and lubricants, rental of leasehold land, stone and gravelquarry, soap noodle and oleochemical plants, trading and bulking facilities and palmproducts processing. The latter comprises manufacturing activities such as milling, kernelcrushing and refining.

The stability of palm product prices has contributed to KCB’s continued sterling performancein 2005. The oil palm plantation and palm products processing activities continued to be themajor contributor to the company’s revenue and profit.

The revenue of the Group has increased by RM16,139,000 (1.40%) from RM 1,190,410,000in year 2004 to RM 1,206,549,000 for the current financial year ended 30 June 2005. This wasmainly attributable to the increase of palm products processing production as a result ofimproved yield from oil palm plantations as compared to the previous financial period.

The oil palm plantation and palm products processing divisions generated a total revenue ofRM1,262,009,000 and profit from operations of RM61,849,000 in 2005. Trading of industrialproducts such as diesel and lubricants resulted in revenues of RM7,046,000. The fullyoperational 9.8 MW biomass power plant produced revenues of RM6,895,000.

Palm Oil Plantation & Palm Products Processing

KCB is moving towards progressively building oil palm acreage. As a major player in theindustry, the Group is sourcing more lands suitable for the development of oil palm plantations,in line with its strategic expansion programme to increase the source of its oil supplies.

The acquisition of the entire equity interests in Kwantas Land Development Sdn. Bhd. (KLDSB)and Kwantas Oleo Sdn. Bhd. (KOLEO) has significantly increased the Group’s plantationholdings from 10,232.53 hectares to 17,721.82 hectares - a 7,489.29 hectare build up or73.3% increase in land bank. With these acquisitions, the Group expects higher yields fromthe land already planted with fruit-bearing trees which would expand its business operationsand enhance future earnings.

By steadily increasing its acreage to ensure that Fresh Bruit Bunches (FFB) are constantlyavailable for processing, the Group is able to achieve its production targets. These FFB aresent promptly to its palm oil mills, to optimise oil quality and extraction rate.

The acquisitions were also aimed at strategically streamlining operations that would bringabout cost savings from the synergised pooling of assets resulting to a more efficientallocation of resources.

22 kwantas corporation berhad 356602-W

operations review (cont’d)

Business Development in China

Aside from Malaysia, China is KCB’s one other main geographical area of business. From its initialpresence in that country which began with a sales and marketing office in Guangzhou in the year2000, KCB has expanded its operations there since 2002, in recognition of China’s growing demandfor palm oil products.

Guangzhou Operations

Bulking facilities in Guangzhou continue to be in operation, bringing in revenue from the rental ofstorage facilities and handling of palm oil products for customers who wish to store quantities of palmoil within a Free Trade Zone. The tanks are close to the port and palm oil can be piped directly fromtankers to the storage facility.

The refinery plant in Guangzhou began operation in 2005 with a total production capacity of 700MTper day. The refinery not only processes palm oil but also soya bean oil to meet the demands ofmainly the local buyers.

KCB also recently completed its shortening and margarine plant in Guangzhou in mid-2005. Theplant, with a capacity of 144MT per day, manufactures products used in the confectionery and bakeryindustries.

Meanwhile the oleochemical and soap noodle plants in Guangzhou are still under construction andare expected to undergo tests and commissioning by April 2006. These plants will be processingpalm stearin and palm kernel oil to produce soap noodles, a semi-finished product used as the baseingredient in the manufacture of household soaps.

Zhangjiagang Operations

Similar bulking installation facilities have been completed in the 3rd quarter of 2004 in ZhangjiagangFree Trade Zone and have commenced operation. The facility has a storage capacity of up to 42,000MT of oil and fat products.

Currently in the works are the oleochemical and soap noodle plants in Zhangjiagang which areexpected to be commissioned by mid-2006.

Greater integration and diversification is expected from the Group with the initiation of thesedownstream activities in China, thus, generating positive revenue for the company in the future.

Producing Environment-Friendly Biofuels

Biodiesel has become the new buzzword in the palm oil industry as countries seek vegetable oils toproduce environmentally friendly biofuels. Palm oil is one of the world’s cheapest vegetable oils andanalysts believe that palm oil producers stand to benefit the most being the cheapest and the easiestoil to work with when transforming into fuels.



Producing Environment-Friendly Biofuels (Cont’d)

Analysts believe that biodiesel usage has the potential to become the biggest component of growthin vegetable oils, particularly palm oil. European governments are promoting the use of biodieselderived from vegetable oils and ethanol to cut greenhouse gas emissions from fossil fuels. TheEuropean Union imports about 3.5 million tonnes of refined and crude palm oil every year, mainly fromMalaysia and Indonesia. Analysts further predict that rising biodiesel usage will mean demand foredible oils that will outstrip production by at least 6 million tonnes a year.

Recognising the greater potential of palm oil in the production of biodiesel, Kwantas Group is lookingto penetrate into that market in the future. The Group is poised for ventures that would supply biodieseldemand in countries not just in Europe, but including other crude oil importing countries as well.

IT Development

In today's world where timely information is crucial for any business organisation, Kwantas

recognises the need to keep up to date with the latest technologies and changes in the IT industry.

Whether it is training courses for computer software or workshops for setting up networking

infrastructure, the staff are regularly trained and updated to ensure the Kwantas Group achieves

maximum efficiency and information flow within the Group is current.

The physical geographical barriers no longer exist when the Head Office in Sabah is able tocommunicate directly with the factories in Guangzhou and Zhangjiagang via the Internet utilising thelatest software which allows voice as well as video communication at minimal cost. Documents aretransmitted between Group offices through an online SharePointPortal Server system to allow easyand secure access of files and information. This has resulted in substantial telecommunication costsavings as well as increasing productivity for the Group.

Human Resource Development

Kwantas has always recognised the need to provide the staff with the appropriate training in orderfor them to perform at their optimum level, whether they are in production, management, IT,administration or HR.

In the past year, the staff have been sent on a number of training courses including:

• NIOSH Safety Training Workshop for Mill Personnel• Recruitment Procedures & Policies on Foreign Workers in Sabah• Motivation & Professional Development• Law of Constructive Dismissal & Resignation• Taklimat Khas/Kounter Penerimaan Borang Tuntutan Gerakan Latihan• Certificate Programme for Safety & Health Officers• Seminar on Ganoderma Disease of Oil Palm and its Management• Computer Course - MS Word & MS Excel• MEF Workshop on Mediation Theory & Practice

Human Resource Development (Cont’d)

• Business Acceleration Course• 5th ISP National Seminar 2005• Plan & Maintain a MS Windows Server 2003 Network Infrastructure• Management Techniques & Practices• Effective Debt Collection Techniques (Chinese Version)• 2005 National Conference on Internal Auditing• PSMB 2005 Conference

- Directors Perspective on Efficient and Alternative Financing Sources- Value Creation & Corporate Gov Growth & Bottom Line Financial Strategies in Today's Markets

• Introduction to the Clean Development Mechanism (CDM) and the CDM Project Cycle• Another 50 Contractual Problems relevant to Malaysia & Their Solution• Dialogue on HRD Policies and Procedures

Sabah International Expo (SIE) 2004

Kwantas being the Silver Sponsor, also participated in the Sabah International Expo 2004 which washeld in Kota Kinabalu on 8th to 12th September 2004. Jointly organised by the MalaysianInternational Chamber of Commerce (MICCI) of Sabah and Federation of Sabah Manufacturers(FSM), the Expo is a multi-sector trade and investment exhibition which focuses on the developmentof business, trade and investment opportunities in Sabah as well as the rest of Malaysia. The Expo,which attracted 387 delegates and more than 36,000 visitors, showcased the latest technologies formanufacturing and resource-based industries to companies throughout the region. In participating inthis Expo, Kwantas was able not only to showcase the Kwantas Group to trade visitorsfrom other ASEAN countries but also made key business contacts and develop future tradeopportunities for the Group.




Recognition Received 2002-2005

Year Publication Ranking

2005 The Edge Companies that gave the best returns (5 years)• Top 100 companies - Kwantas Corporation Berhad 9• Plantation Sector - Kwantas Corporation Berhad 2

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 Taxation


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

corporate governanceThe Board of Directors (“the Board”) of Kwantas Corporation Berhad (“KCB” or “theCompany”) is committed to direct and manage the Company in ensuring that the Companypractices good Corporate Governance.

A. DIRECTORS

Composition and Responsibilities

The Board of Directors currently consists of eight members, of whom three areIndependent Non-Executive Directors. The profile of each director is presented inthis Annual Report on pages 14 to 16. The Board brings a wide range of business,industrial and financial experience to lead the company.

There is a clear division of responsibility between the Chairman and the ManagingDirector to ensure there is balance of power and authority. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the Managing Director has overallresponsibility for the Group’s overall operating units, organisational effectiveness andimplementation of Board decisions. There is also balance in the Board because of the presence of Independent Non-Executive Directors of the calibre necessary to carry sufficient weight in Board decisions. The role of Independent Non-Executive Directors is not onlydeliberating on the Groups’ financial results but is also particularly important in ensuringthat the strategies proposed by the Executive Directors are fully discussed and examined.The Board is of the view that the interests of shareholders of the Company are fairlyrepresented through the current composition.

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

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

Board Meetings

The Board met four times during the financial year ended 30 June 2005. Theattendance record of each Director is as follows:

Directors Number of Board Meeting Attended

1. Dato’ Mohd Sarit Bin Haji Yusoh 2/4 2. Kwan Ngen Chung 4/4 3. Kwan Ngen Wah 3/4 4. Kwan Jin Nget 3/4 5. Kwan Min Nyet 3/4 6. Chong Kan Hiung 4/4 7. Datuk Jaswant Singh Kler 4/4 8. Ooi Jit Huat 3/4



corporate governance (cont’d)

A. DIRECTORS (Cont’d)

Re-election of Directors

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

Appointments to the Board

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

1. Dato’ Mohd Sarit Bin Haji Yusoh Chairman 2. Datuk Jaswant Singh Kler Member 3. Ooi Jit Huat Member

The Nomination Committee is responsible for making recommendations for anyappointments to the Board. The Committee empowered to assess the required mixof skills and experience which the Directors should bring to the Board. Any new nomination is then put to the full Board for assessment and endorsement.

Directors’ Training

All the Directors have attended the Mandatory Accreditation Programme (MAP)prescribed by Bursa Malaysia Securities Berhad. The Directors will continue to attendother relevent training programmes to further enhance their skills and knowledge and to keep abreast with new regulatory and corporate governance developments. Todate,majority of the Directors have complied with the requirements of the Continuous EducationProgramme (“CEP”)

B. DIRECTORS’ REMUNERATION

Remuneration Committee

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

1. Datuk Jaswant Singh Kler Chairman 2. Kwan Ngen Chung Member 3. Ooi Jit Huat Member

Procedure

The objective of the Committee is to recommend to the Board the remuneration ofall Directors. The Committee shall ensure that the Company attracts and retains theDirectors needed to run the Group successfully. The Committee will examine theexisting remuneration scheme with the performance, experience and scope ofresponsibility of the Directors. Presently the remuneration of Directors, includingNon-Executive Directors, is endorsed by the Board for approval by the shareholdersof the company at the Annual General Meeting.



B. DIRECTORS’ REMUNERATION (Cont’d)

Disclosure

The details of the remunerations for the Directors of KCB during the year are asfollows:

1. Aggregated remuneration of the Directors categorised by components

Directors’ Executive Non-Executive Remuneration Directors Directors

RM RM

Fees - 82,000 Salaries and other emoluments 1,194,000 - Bonuses 590,000 - Total 1,784,000 82,000

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

Directors’ Executive Non-Executive Remuneration Directors Directors RM’000 Number of Directors Number of Directors

Below 50 - 3 50 to 100 - - 100 to 150 - - 150 to 200 1 - 200 to 250 3 - 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 andinstitutional investors. Besides the various announcements made during the financialyear, the Annual Report and release of financial results on a quarterly basis provideshareholders with an overview of the Group’s performance and its businessactivities. All enquiries made are normally dealt with as promptly as practicable. Inaddition, the Board plans to conduct regular dialogues with institutional investors,fund managers and analysts with the aim of fostering mutual understanding of theGroup’s objectives.

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



C. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS (Cont’d)

Each item of special business included in the notice of the meeting will beaccompanied by a full explanation of the effects of a proposed resolution. Separateresolutions are proposed for substantially separate issues at the meeting and theChairman declares the number of proxy votes received both for and against eachseparate resolution when appropriate. For re-election of Directors, the Board ensures that full information is disclosed through the notice of meetings regarding Directorswho are 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 toshareholders, 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 ofinformation by reviewing and recommending for 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 30 of the Annual Reportprovides an overview of the state of internal controls within the Group.


statement on internal controlThe Board recognises that it is responsible for the Group’s system of internal controls andfor reviewing its adequacy and integrity. As with any internal control system, the system canonly provide reasonable but not absolute assurance against material misstatement or loss, ascontrols are designed to manage rather than eliminate the risk of failure to achievebusiness objectives.

The Board has reviewed and approved the Group’s budget for the year. The budgetingprocess incorporates the internal and external risk 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 capacityand other internal sources. At Board meetings, actual performance and results are monitoredagainst budgets, with reasons for significant variances identified and highlighted to the Boardfor appropriate corrective measures.

The Group’s organisation structure embeds strong control features throughout the Group. Thestructure identifies the heads of each department and their subordinates which facilitates aclear reporting line.

Currently, the monitoring and managing of the Group as a whole is delegated to the fiveExecutive Directors who are actively involved in the day-to-day operations of the Group. TheExecutive Directors attend scheduled meetings held at operational and management levels toidentify, discuss and resolve business and operational issues. The Executive Directors willin-turn inform the Board of any significant unresolved matters which require Board interventionor Board-level decision making.

During the current financial year, the Group outsourced its Internal Audit function to aprofessional services firm, whose remit is to the Audit Committee. The Internal Audit functioncarried out a high-level risk assessment of the Group’s business processes that are key tothe achievement of its business objectives in order to determine the focus areas of internalaudit which will be carried out during the next financial year. As part of the exercise,the management assessed the current controls in place to manage strategic risks. Wheredeficiencies/weaknesses were noted, management has identified action plans to rectify thoseweaknesses. The Board has reviewed and endorsed the assessment.

During the financial year, the Group also engaged a professional services firm to conductan assessment of the Group’s system of internal control based on the requirements outlinedin the Statement on Internal Control: Guidance for Directors of Public Listed Companiesissued by Bursa Malaysia Securities Berhad’s Task Force. The Board has reviewed the keyfindings and recommendations of this assessment and has begun to put in place certainmeasures to enhance the controls in some of the areas highlighted.

The Board is pleased to report that there were no significant material internal controlweaknesses noted during the year under review and to the date of approval of the annualreport and accounts.


compliance statements and additional compliance information

As at the financial year ended of 30 June 2005, the Group has complied with all of the BestPractises in Corporate Governance as set out in part 2 of the Malaysia Code on CorporateGovernance.

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 FeesThe amount of non-audit fees paid to external auditors of the Group for the financial year for taxation, consultancy and other fees was approximately RM181,638.00.

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

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

8. Material ContractsSave as disclosed below, there are no material contracts (not being contracts entered into in the ordinary course of business) entered into by the Company or its subsidiary companiesduring the two (2) years immediately preceding the date of this Circular:

(i) Conditional share sale agreement dated 29 November 2004 entered into between theCompany and Kwan Ngen Chung and Kwan Ngen Wah for the acquisition of 250,000ordinary shares of RM1.00 each representing the entire equity interest in Kwantas Land Development Sdn Bhd (“KLDSB”) for a total purchase consideration of RM86,936,588 to be fully satisfied by the issue of 16,718,574 new Kwantas Shares at an issue price of RM5.20per share;

(ii) Conditional share sale agreement dated 29 November 2004 entered into between the Company and Kwan Ngen Chung and Kwan Ngen Wah for the acquisition of 2 ordinaryshares of RM1.00 each representing the entire equity interest in Kwantas Oleo Sdn Bhd (“KOLEO”) for a total purchase consideration of RM3,713,368 to be fully satisfied by theissue of 714,108 new Kwantas Shares at an issue price of RM5.20 per share;


compliance statements and additionalcompliance information (cont’d)

8. Material Contracts (cont’d)(iii) Supplemental conditional share sale agreement dated 5 January 2005 entered into

between the Company and Kwan Ngen Chung and Kwan Ngen Wah for the acquisition of250,000 ordinary shares of RM1.00 each representing the entire equity interest in KLDSBfor a revised total purchase consideration of RM63,352,702 to be fully satisfied by the issueof 12,183,210 new Kwantas Shares at an issue price of RM5.20 per share; and

(iv) Supplement conditional share sale agreement dated 5 January 2005 entered into between the Company and Kwan Ngen Chung and Kwan Ngen Wah for the acquisition of 2 ordinary shares of RM1.00 each representing the entire equity interest in KOLEO for a revised total purchase consideration of RM2,628,196 to be fully satisfied by the issue of 505,422 new Kwantas Shares at an issue price of RM5.20 per share.

9. Recurrent Related Party TransactionsThe details of related party transactions are set out in note 29 to the financial statements. An Annual General Meeting will be held on 14 December 2005 to pass ordinary resolution toseek shareholders’ mandate for the renewal of recurrent related party transactions of a revenueor 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 pages 102 to 104.

13. List of propertiesThe list of properties for the Group can be found on pages 98 to 101.


statement of directors’ responsibilitiesin audited financial statement

Pursuant to Section 169 (15) of the Companies Act, 1965 that Directors are required toprepare financial statements which give a true and fair view of the financial position ofthe Group and of the Company for each financial year, as set out on page 45 of thisAnnual Report.

In addition, pursuant to paragraph 15.27(a) of The Listing Requirements of Bursa MalaysiaSecurities Berhad, when preparing those financial 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; and

ii) to prevent and detect fraud and other irregularities.

(Pursuant to paragraph 15.27(a) of The Listing Requirements of Bursa Malaysia Securities Berhad)


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 ListingRequirements of Bursa Malaysia Securities Berhad.

MEMBERSHIP

The Committee shall be appointed by the Board from among its members and shall consistof not less than three (3) members of whom 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 adopteddaughter 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, wouldinterfere with the exercise of independent judgement in carrying out the functions ofthe committee.

The Committee shall elect a chairperson from among its members who is not an ExecutiveDirector or employee of the Company or any related corporation.

In the event that a member of the Committee resigns, dies or for any other reason ceasesto be a member with the result that the number of members is reduced below three (3), theBoard of Directors shall, within three (3) months of that event, appoint such number of newmembers as may be required to make up the minimum number of three (3) members.


audit committee (cont’d)

TERM OF MEMBERSHIP

Members of Committee shall be appointed for an initial term of three (3) years after whichthey 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 doso by any member, the management or internal or external auditors to consider any matterwithin the scope and responsibilities of the Committee.

ATTENDANCE AT MEETINGS

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

QUORUM

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

AUTHORITY

The Committee is authorised by the Board to investigate any activity within its terms ofreference. It has free access to all information and documents it requires for the purpose ofdischarging its functions and responsibilities.

The Audit Committee is also authorised to obtain outside legal or other independentprofessional 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 beforesubmission to the Board



FUNCTIONS (cont’d)

• to review with the external auditors their audit plan, scope and nature of audit for theGroup and the Company.

• to assess the adequacy and effectiveness of the system of internal control and accountingcontrol procedures of the Group and Company by reviewing the external auditors’ management’s response.

• to discuss with the external auditors on problems and reservations arising from theirinterim 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 theirappointment, 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 results and findings.

REPORTING PROCEDURES

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

ACTIVITIES

The summary of the activities of the Audit Committee in the discharge of its duties andresponsibilities for the financial year includes the 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 reportand internal control recommendations in respect of control weaknesses noted in thecourse of their audit.

(iii) reviewing the audited financial statements before recommending for the Board ofDirectors’ approval.



ACTIVITIES (con’td)

(iv) reviewing the Company’s compliance with the Revamped Listing Requirements ofthe Bursa Malaysia Securities Berhad and the applicable approved accountingstandards issued by the Malaysian Accounting Standards Board.

(v) review of the quarterly unaudited financial results announcements and recommendingfor the Board of Directors’ approval.

(vi) review of the Internal Audit Department’s staffing needs, programmes and plans forthe financial year under review and annual assessment of the Internal Audit Department’sperformance.

(vii) review of the audit reports presented by Internal Audit Department on findings andrecommendations with regard to system and controls weaknesses noted in the course oftheir audit and management’s responses thereto and ensuring material findings areadequately addressed by management.

NUMBER OF MEETINGS & DETAILS OF ATTENDANCE

Four (4) Audit Committee meetings were held during the financial year ended 30 June2005. The attendance record of each member is as follows:

Audit Committee Members Total number of meetings Number of meetings attended

Datuk Jaswant Singh Kler 4 4 Kwan Ngen Chung 4 4Ooi Jit Huat 4 3


financial statements

40 Directors’ Report 45 Statement By Directors45 Statutory Declaration46 Report of the Auditors47 Income Statements48 Balance Sheets

50 Consolidated Statement of Changes in Equity 51 Company Statement of Changes in Equity52 Cash Flow Statements 54 Notes to the Financial Statements

The directors have pleasure in presenting their report together with the audited financial statements ofthe Group and of the Company for the financial year ended 30 June 2005.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The principal activities of the subsidiariesare disclosed in Note 13 to the financial statements.

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

RESULTS

Group CompanyRM’000 RM’000

Profit after taxation 35,312 34,513Minority interests 2,307 -

Net profit for the year 37,619 34,513

There were no material transfers to or from reserves or provisions during the financial year other thanas disclosed in the statements of changes in equity.

In the opinion of the directors, the results of the operations of the Group and of the Company duringthe financial year were not substantially affected by any item, transaction or event of a material andunusual nature.

DIVIDENDS

The amount of dividends paid by the Company since 30 June 2004 were as follows:

RM’000

In respect of the financial year ended 30 June 2004 as reported in thedirectors’ report of that year:

Final tax exempt dividend of 10%, on 141,860,000 ordinary shares,declared on 15 December 2004 and paid on 15 March 2005 14,186

At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the financial yearended 30 June 2005, of 10% on 154,548,632 ordinary shares, amounting to a dividend payable ofRM15,454,863 (10 sen per ordinary share) will be proposed for shareholders’ approval. The financialstatements for the current financial year do not reflect this proposed dividend. Such dividend, ifapproved by the shareholders, will be accounted for in equity as an appropriation of retained profits inthe financial year ending 30 June 2006.

directors’ report



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 dateof this report are:

Dato’ Mohd Sarit Bin Hj YusohKwan 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 anyarrangement to which the Company was a party, whereby the directors might acquire benefits bymeans of the acquisition of shares in or debentures of the Company or any other body corporate, otherthan 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 abenefit (other than benefits included in the aggregate amount of emoluments received or due andreceivable by the directors as shown in Note 6 to the financial statements 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 inwhich the director has a substantial financial interest, except as disclosed in Note 29 to the financialstatements.

DIRECTORS’ INTERESTS

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

Number of Ordinary Shares of RM1 Each1 July 30 June

The Company 2004 Acquired Sold 2005

Direct Interest:Kwan Ngen Chung 40,750,000 6,344,316 - 47,094,316Kwan Ngen Wah 40,250,000 6,344,316 - 46,594,316Kwan Jin Nget 90,000 - - 90,000Kwan Min Nyet 119,000 - - 119,000Chong Kan Hiung 300,000 - - 300,000

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 2004 Granted Exercised Lapsed 2005

Kwan Ngen Chung 500,000 - - - 500,000Kwan Ngen Wah 1,000,000 - - - 1,000,000Kwan Jin Nget 790,000 - - - 790,000Kwan Min Nyet 829,000 - - - 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 alsodeemed interested in shares of all the Company’s subsidiaries to the extent the Company has aninterest.

None of the other directors in office at the end of the financial year had any interest in shares in theCompany or its related corporations during the financial year.

ISSUE OF SHARES

During the financial year, the Company increased its issued and paid-up ordinary share capital fromRM141,794,000 to RM154,548,632 by way of:

(a) the issuance of 12,183,210 ordinary shares of RM1 each at an issue price of RM5.20 per ordinary shares as full discharge of purchase consideration for the acquisition of Kwantas Land Development Sdn. Bhd.;

(b) the issuance of 505,422 ordinary shares of RM1 each at an issue price of RM5.20 per ordinary shares as full discharge of purchase consideration for the acquisition of Kwantas Oleo Sdn. Bhd.; and

(c) the issuance of 66,000 ordinary shares of RM1 each for cash pursuant to the Company’s Employee Share Options Scheme at an exercise price of RM1.03 per ordinary share.

The new ordinary shares issued during the financial year rank pari passu in all respects with theexisting 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 at an Extraordinary General Meeting held on 18 December 2000.Subsequently, certain amendments to the by-laws of the ESOS were approved by the shareholders atan Extraordinary General Meeting held on 28 May 2002. The ESOS was implemented on 10 April2001 and 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 22 to the financialstatements.

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 provision for doubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had 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 the ordinary 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) it necessary to write off any bad debts or the amount of the provision for doubtful debts 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.

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

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements 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 which secures 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 twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their 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 financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

OTHER SIGNIFICANT EVENTS

(a) On 22 June 2005, the Company acquired 100% equity interest in Dong Ma Palm Industries (Zhangjiagang) Co. Ltd., a company incorporated in The People’s Republic of China, for a total consideration of USD2,559,166 (RM9,724,986).

(b) On 22 June 2005, the Company acquired 51% equity interest in Dong Ma (Guangzhou Free Trade Zone) Oleochemicals Co. Ltd., a company incorporated in The People’s Republic of China, for a total consideration of USD1,800,000 (RM6,840,000).

(c) On 30 June 2005, the Company acquired 250,000 ordinary shares of RM1 each, representing 100% equity interest in Kwantas Land Development Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM63,352,702.

(d) On 30 June 2005, the Company acquired 2 ordinary shares of RM1 each, representing 100% equity interest in Kwantas Oleo Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM2,628,196.

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

21 October 2005




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 KWANTASCORPORATION BERHAD, do hereby state that, in the opinion of the directors, the accompanyingfinancial statements set out on pages 47 to 97 are drawn up in accordance with applicable MASBApproved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as togive a true and fair view of the financial position of the Group and of the Company as at 30 June 2005and of the results and the cash flows of the Group and of the Company for the 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, SabahMalaysia21 October 2005

I, CHONG KAN HIUNG, being the Director primarily responsible for the financial management ofKWANTAS CORPORATION BERHAD, do solemnly and sincerely declare that the accompanyingfinancial statements set out on pages 47 to 97 are in my opinion correct, and I make this solemndeclaration conscientiously believing the same to be true and by virtue of the provisions of theStatutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed CHONG KAN HIUNG at Kota Kinabalu in the State of Sabahon 21 October 2005 CHONG KAN HIUNG

Before me,

statutory declarationPursuant to Section 169(16) of the Companies Act, 1965

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


We have audited the financial statements set out on pages 47 to 97. These financial statements are theresponsibility of the Company’s directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and toreport our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no otherpurpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the directors, as well as evaluating the overall presentation ofthe 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 and applicable MASB 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 2005 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 financialstatements; and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and byits subsidiaries of which we 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 wehave not acted as auditors, as indicated in Note 13 to the financial statements, being financial statements thathave been included in the consolidated financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financialstatements of the Company are in form and content appropriate and proper for the purposes of the preparationof the consolidated financial statements and we have received satisfactory information and explanations requiredby us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification materialto the consolidated financial statements and did not include any comment required to be made under Section174 (3) of the Act.

Ernst & Young Pang Pak LokAF: 0039 1228/03/07 (J)Chartered Accountants Partner

Tawau, SabahMalaysia

21 October 2005


income statementsFor the year ended 30 June 2005

Group CompanyNote 2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Revenue 3 1,206,549 1,190,410 44,310 16,694

Cost of sales (1,094,935) (1,060,770) - -

Gross profit 111,614 129,640 44,310 16,694

Other operating income 16,404 4,186 7 323

Selling expenses (42,889) (54,523) - -

Administrative expenses (22,449) (19,645) (751) (204)

Profit from operations 4 62,680 59,658 43,566 16,813

Interest income 7 3,055 1,115 6,504 6,606

Finance costs 8 (16,773) (13,049) (6,502) (6,770)

Profit before taxation 48,962 47,724 43,568 16,649

Taxation 9 (13,650) (7,065) (9,055) (2,185)

Profit after taxation 35,312 40,659 34,513 14,464

Minority interests 2,307 (316) - -

Net profit for the year 37,619 40,343 34,513 14,464

Earnings per share (sen):Basic 10 26.52 28.54Diluted 10 25.74 27.71

Net dividends per ordinary sharein respect of the year (sen): 11 10.00 5.00 10.00 5.00

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


RM’000 RM’000 RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 12 640,893 465,284 - -Investments in subsidiaries 13 - - 389,922 307,376Deferred tax assets 25 5,580 4,726 - -

646,473 470,010 389,922 307,376

CURRENT ASSETS

Inventories 14 117,472 107,630 - -Trade receivables 15 74,674 73,556 - -Other receivables 16 48,035 63,863 95,003 96,645Cash and bank balances 17 66,528 30,473 13,225 13,506

306,709 275,522 108,228 110,151

CURRENT LIABILITIES

Borrowings 18 219,804 159,391 10,000 10,000Trade payables 20 93,495 68,196 - -Other payables 21 24,868 16,689 165,367 161,120Provision for taxation 1,174 926 - -

339,341 245,202 175,367 171,120

NET CURRENT (LIABILITIES)/ASSETS (32,632) 30,320 (67,139) (60,969)

613,841 500,330 322,783 246,407

balance sheetsAs at 30 June 2005



balance sheetsAs at 30 June 2005 (Cont’d)


RM’000 RM’000 RM’000 RM’000

FINANCED BY:

Share capital 22 154,549 141,794 154,549 141,794Share premium 53,348 54 53,348 54Other reserves 23 62,354 62,413 - -Retained profits 24 175,065 151,632 34,886 14,559

Shareholders’ equity 445,316 355,893 242,783 156,407Minority interests 8,348 10,655 - -

453,664 366,548 242,783 156,407

Borrowings 18 105,521 103,712 80,000 90,000Deferred tax liabilities 25 54,656 30,070 - -

Non-current liabilities 160,177 133,782 80,000 90,000

613,841 500,330 322,783 246,407


Non-Distributable DistributableShare Share Other Retained

Note capital premium reserves profits TotalRM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2003As previously stated 141,066 32 80,924 99,880 321,902Prior year adjustment 26 - - (18,482) 18,482 -

At 1 July 2003(restated) 141,066 32 62,442 118,362 321,902

Issue of ordinary sharespursuant to ESOS 22 728 22 - - 750

Acquisition of subsidiaries - - (29) - (29)Net profit for the year - - - 40,343 40,343Dividends paid 11 - - - (7,073) (7,073)

At 30 June 2004 141,794 54 62,413 151,632 355,893

At 1 July 2004As previously stated 141,794 54 80,895 133,150 355,893Prior year adjustment 26 - - (18,482) 18,482 -

At 1 July 2004(restated) 141,794 54 62,413 151,632 355,893

Issue of ordinary shares:Acquisition of subsidiaries 22 12,689 53,292 - - 65,981Pursuant to ESOS 22 66 2 - - 68

Foreign exchange differencesarising during the year - - (59) - (59)

Net profit for the year - - - 37,619 37,619Dividends paid 11 - - - (14,186) (14,186)

At 30 June 2005 154,549 53,348 62,354 175,065 445,316

consolidated statement of changes in equityFor the year ended 30 June 2005



company statement of changes in equityFor the year ended 30 June 2005

Non-Distributable Distributable

Share Share RetainedNote capital premium profits Total

RM’000 RM’000 RM’000 RM’000

At 1 July 2003 141,066 32 7,168 148,266

Issue of ordinary sharespursuant to ESOS 22 728 22 - 750

Net profit for the year - - 14,464 14,464

Dividends paid 11 - - (7,073) (7,073)

At 30 June 2004 141,794 54 14,559 156,407

At 1 July 2004 141,794 54 14,559 156,407

Issue of ordinary shares:Acquisition of

subsidiaries 22 12,689 53,292 - 65,981Pursuant to ESOS 22 66 2 - 68

Net profit for the year - - 34,513 34,513

Dividends paid 11 - - (14,186) (14,186)

At 30 June 2005 154,549 53,348 34,886 242,783


Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROMOPERATING ACTIVITIES

Profit before taxation 48,962 47,724 43,568 16,649

Adjustments for:Bad debts written off - 78 - -Depreciation of property, plant and equipment 22,429 20,323 - -Dividend income - - (44,310) (16,694)Gain on disposal of property, plant and equipment (3) (1) - -Interest expense 16,773 13,049 6,502 6,770Interest income (3,055) (1,115) (6,504) (6,606)Inventories written off 9 14 - -Negative goodwill written off (13,200) - - -Property, plant and equipment scrapped 182 5 - -

Operating profit/(loss) before workingcapital changes 72,097 80,077 (744) 119

Increase in inventories (9,192) (44,329) - -Decrease/(increase) in receivables 23,787 (21,681) 1,642 3,265(Decrease)/increase in payables (11,323) 25,347 4,247 11,541

Cash generated from operations 75,369 39,414 5,145 14,925Interest paid (16,773) (13,049) (6,502) (6,770)Taxation paid (11,453) (8,267) - -Taxation refunded 2 - - -

Net cash generated from/(used in)operating activities 47,145 18,098 (1,357) 8,155

CASH FLOWS FROM INVESTING ACTIVITIES

Additional investments in a subsidiary - - - (4,049)Acquisition of subsidiaries (Note 13) (12,801) (8,832) (16,565) (8,833)Purchase of property, plant and equipment

(Note 12 (b)) (48,251) (39,691) - -Proceeds from disposal of property, plant

and equipment 54 17 - -Interest received 3,055 1,115 6,504 6,606Net dividends received - - 35,255 14,509

Net cash (used in)/generated frominvesting activities (57,943) (47,391) 25,194 8,233

cash flow statementsFor the year ended 30 June 2005



cash flow statementsFor the year ended 30 June 2005 (Cont’d)

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of ordinary shares 68 750 68 750Repayment of Fixed Rate Serial Bonds (10,000) - (10,000) -Drawdown of short term revolving credits 19,501 - - -Drawdown of term loans 22,800 6,929 - -Repayment of term loans (2,176) (1,661) - -Payments of hire purchase financing (2,268) (1,199) - -Drawdown of bankers’ acceptances 1,708,678 1,530,910 - -Repayment of bankers’ acceptances (1,675,789) (1,511,784) - -Dividends paid (14,186) (7,073) (14,186) (7,073)

Net cash generated from/(used in) financingactivities 46,628 16,872 (24,118) (6,323)

NET INCREASE/(DECREASE) IN CASHAND CASH EQUIVALENTS 35,830 (12,421) (281) 10,065

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR 30,473 42,894 13,506 3,441

EFFECT OF EXCHANGE RATEDIFFERENCES (1) - - -

CASH AND CASH EQUIVALENTS ATEND OF YEAR (NOTE 17) 66,302 30,473 13,225 13,506


1. Corporate Information

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 13 to the 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 the Bursa 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 2,225 (2004: 1,722) and 8 (2004: 8) respectively.

The financial statements were authorised for issue by the Board of Directors in accordance witha resolution of the directors on 21 October 2005.

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 except for 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 MASB Approved Accounting Standards in Malaysia.

(b) Basis of Consolidation

Subsidiaries

The consolidated financial statements include the financial statements of the Company and all its subsidiaries. Subsidiaries are those entities in which the Group has power to exercise control over the financial and operating policies so as to obtain 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 income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities of the subsidiaries are measured at their fair values at the date of acquisition. The difference between the cost of an acquisition and the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition is 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 consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered.

notes to the financial statements30 June 2005



notes to the financial statements30 June 2005 (Cont’d)

2. Significant Accounting Policies (Cont’d)

(b) Basis of Consolidation (Cont’d)

Subsidiaries (Cont’d)

The gain or loss on disposal of a subsidiary company is the difference between net disposal proceeds and the Group’s share 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 assets and liabilities of the acquiree as at acquisition date and theminorities’ share of movements in the acquiree’s equity since then.

(c) Negative Goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a 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 statement over the weighted average useful life of those assets. Negative goodwill in excess of the fair values of the non-monetary assets acquired 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 plan of acquisition and can be measured reliably, but which are not identifiable liabilities at the date of acquisition, that portion of 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 and measurement 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 in the 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 policy for the recognition and measurement of impairment losses is in accordance with Note 2(o).


(e) Property, Plant and Equipment and Depreciation (Cont’d)

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 market value basis. Any revaluation increase is credited to equity as a revaluation surplus, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is recognised in the income statement to the extent of the decrease previously recognised. A revaluation decrease is first offset against unutilised previously recognised revaluation surplus in respect of the same asset and the balance is thereafter recognised as an expense. Upon the disposal of revalued assets, the attributable revaluation surplus remaining in the revaluation reserve is transferred to retained profits.

Construction work-in-progress is not depreciated until it is completed and ready for use. No depreciation is provided on plantations. Replanting cost is written off in the income statements. Leasehold lands are depreciated over the period of the respective leases which range from 57 years to 99 years. Depreciation of other property, plant and equipment is provided for on a straight line basis to write off the cost or valuation of each asset to its residual value over the estimated 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 the net carrying amount is recognised in the income statement and the unutilised portion of the revaluation surplus on that item is taken directly to retained profits.

(f) Plantation Development Expenditure

All expenses incurred in land preparation, planting and development of crops up to maturity are capitalised as cost of plantation; 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 foreventual field planting, are valued at cost.

(ii) Palm and soya bean oil products

These are stated at the lower of cost (determined using the first-in, first-out basis) andnet realisable value. Cost includes direct materials, direct labour, other direct costs andappropriate production overheads. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.






(g) Inventories (Cont’d)

(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, are valued 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 call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts.

(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 values and the present value of the minimum leasepayments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable 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, are recognised as an expense in the income statement over the term of the relevant lease so as to produce a constant periodic 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 as described in Note 2(e).

(ii) Operating leases

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term 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 probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the 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 of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, 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 liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax 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 is an 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 the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

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






(m) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and 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 transactionsTransactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date of the transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at that date, unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward contracts are used. Non-monetary items initially denominated in foreign currencies, which are carried at historical cost are translated using the historical rate as of the date of acquisition and non-monetary items which 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 entitiesFinancial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to the assets and liabilities, and at exchange rates at the dates of the transactions with respect to the income statement. All resulting 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 of the Company and translated at the exchange rate ruling at the date of the transaction.


(n) Foreign Currencies (Cont’d)

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

2005 2004RM 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 indication of impairment. If any such indication exists, impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows.

An impairment loss is recognised as an expense in the income statement immediately, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of any unutilised previously 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 provisions of 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 expense or 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 a net basis or to realise the asset and settle the liability simultaneously.

(i) Trade Receivables

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

(ii) Trade Payables

Trade payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(iii) Interest-Bearing Borrowings

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






(p) Financial Instruments (Cont’d)

(iii) Interest-Bearing Borrowings (Cont’d)

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the 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 the weighted average of the borrowing costs applicable to the Group’s borrowings that are outstanding during the financial year.

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

(iv) Equity Instruments

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

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

(v) Derivative Financial Instruments

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

Interest rate swap contracts:Net differentials in interest receipts and payments arising from interest rate swap contracts are recognised as interest income or expense over the period of the contract.

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

3. RevenueGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Gross dividends from subsidiaries - - 44,310 16,694Rental income 4,496 8,887 - -Sales of diesel and lubricants 14,144 11,731 - -Sales of palm oil products 1,166,965 1,153,068 - -Sales of soft oil products 20,833 16,606 - -Sales of stones and gravel 111 118 - -

1,206,549 1,190,410 44,310 16,694

4. Profit from Operations

Profit from operations is stated aftercharging/(crediting):

Staff costs (Note 5) 19,317 15,703 - -Non-executive directors’ remuneration

(Note 6) 82 66 - -Auditors’ remuneration- Current year 82 66 10 10- Overprovision in prior year (1) - - -

Bad debts written off - 78 - -Depreciation of property, plant

and equipment (Note 12) 22,429 20,323 - -Hire of equipment 68 108 - -Hire of oil tankers 161 186 - -Inventories written off 9 14 - -Property, plant and equipment scrapped 182 5 - -Rental of premises 231 263 - -Gain on disposal of property, plant

and equipment (3) (1) - -Income from hire of equipment (83) (1) - -Income from rental of jetty (2,911) (2,448) - -Negative goodwill written off (13,200) - - -Road toll charges (31) (25) - -





5. Staff CostsGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Salaries and wages 18,202 14,949 - -Employees Provident Fund 1,056 699 - -Social security costs 59 55 - -

19,317 15,703 - -

Included in staff costs of the Group are executive directors’ remuneration amounting to RM1,784,000 (2004: RM1,676,000) as further disclosed in Note 6.

6. Directors’ RemunerationGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Directors of the Company

Executive:

Salaries and other emoluments 968 947 - -Bonus 503 471 - -

1,471 1,418 - -

Non-Executive:Fees 82 66 -

-

1,553 1,484 - -

Directors of Subsidiaries

Executive:

Salaries and other emoluments 226 189 - -Bonus 87 69 - -

313 258 - -

1,866 1,742 - -

6. Directors’ Remuneration (Cont’d)Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

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

remuneration excludingbenefits-in-kind (Note 5) 1,784 1,676 - -

Total non-executive directors’remuneration (Note 4) 82 66 - -

Total directors’ remunerationexcluding benefits-in-kind 1,866 1,742 - -

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

Number of Directors2005 2004

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

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

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

Group and Company2005 2004‘000 ‘000

At 1 July 4,119 4,735Exercised - (616)

At 30 June 4,119 4,119

The share options were granted on the same terms and conditions as those offered to other employees of the Group as disclosed in Note 22.





7. Interest IncomeGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Interest income from:Foreign currency deposits 26 95 - -Fixed deposits 106 135 73 65Interest rate swap 1,177 - - -Negotiable certificate of deposits 478 639 - -Overdue accounts 1,268 246 6,431 6,541

3,055 1,115 6,504 6,606

8. Finance Costs

Interest expense on:Bank overdrafts 61 66 - -Bankers’ acceptances 7,501 5,169 - -Fixed Rate Serial Bonds 6,502 6,770 6,502 6,770Hire purchase 186 179 - -Overdue accounts 58 - - -Short term revolving credits 52 - - -Term loans 2,413 865 - -

16,773 13,049 6,502 6,770

9. Taxation

Income tax:Malaysian income tax 9,463 6,099 9,055 2,185Labuan offshore tax 13 20 - -

Overprovided in prior years:Malaysian income tax - (51) - -

9,476 6,068 9,055 2,185

9. Taxation (Cont’d)Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Deferred taxation (Note 25):Relating to origination and reversal

of temporary differences (705) 2,050 - -Under/(over)provided in prior years 4,879 (1,053) - -

4,174 997 - -

13,650 7,065 9,055 2,185

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

2005 2004RM’000 RM’000

Group

Profit before taxation 48,962 47,724

Taxation at statutory tax rate of 28% (2004: 28%) 13,709 13,363Effect of income subject to tax rate of 20%* (80) (44)Effect of income subject to Labuan offshore tax (109) (588)Effect of income not subject to tax (2,210) (227)Effect of expenses not deductible for tax purposes 411 196Effect of expenses eligible for double deduction (1,045) (823)Effect of utilisation of previously unutilised unabsorbed

reinvestment allowances brought forward fromprevious years - (3,586)

Effect of utilisation of current year’s reinvestment allowances (507) -Deferred tax assets recognised on current year’s reinvestment

and investment tax allowances (1,398) (122)Under/(over)provision of deferred tax in prior years 4,879 (1,053)Overprovision of tax expense in prior years - (51)

Tax expense for the year 13,650 7,065





9. Taxation (Cont’d)2005 2004

RM’000 RM’000

Company

Profit before taxation 43,568 16,649

Taxation at statutory tax rate of 28% (2004: 28%) 12,199 4,661Effect of income not subject to tax (3,353) (2,578)Effect of expenses not deductible for tax purposes 209 102

Tax expense for the year 9,055 2,185

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

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Tax savings during the financial yeararising from:

Utilisation of tax losses broughtforward from previous years 531 133 - -

Utilisation of current year capital allowances 1,289 5,320 - -Utilisation of unabsorbed capital allowances

brought forward from previous years - 381 --

Utilisation of unabsorbed reinvestmentallowances brought forward fromprevious years - 3,586 - -

10. 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 shares in issue during the financial year.

2005 2004

Net profit for the year (RM’000) 37,619 40,343Weighted average number of ordinary shares in issue (‘000) 141,857 141,362

Basic earnings per share (sen) 26.52 28.54



10. Earnings Per Share (Cont’d)

(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 granted to employee.

2005 2004

Net profit for the year (RM’000) 37,619 40,343

Weighted average number of ordinary shares in issue 141,857 141,362Effect of dilution:

Share options 4,271 4,240

Adjusted weighted average number of ordinary shares inissue and issuable 146,128 145,602

Diluted earnings per share (sen) 25.74 27.71

11. DividendsNet Dividends

Amount per Ordinary Share2005 2004 2005 2004

RM’000 RM’000 Sen Sen

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

Final tax exempt dividend of 10%, on141,860,000 ordinary shares, paid on15 March 2005 14,186 - 10.00 -

14,186 7,073 10.00 5.00

At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the financial year ended 30 June 2005, of 10% on 154,548,632 ordinary shares, amounting to a dividend payable of RM15,454,863 (10 sen per ordinary share) will be proposed for 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 ending 30 June 2006.



12. 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

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost/ValuationAt 1 July 2004 344,496 145,038 17,255 1,850 477 32,238 541,354Additions 16,862 6,252 3,392 260 43 22,692 49,501Disposals - (77) (20) - (5) - (102)Write-offs (109) (94) - (6) - - (209)Exchange reserve - - - - - (58) (58)Reclassification 10,126 33,833 - - - (43,959) -Acquisition of subsidiaries

(Note 13) 146,185 525 929 260 - 3,919 151,818

At 30 June 2005 517,560 185,477 21,556 2,364 515 14,832 742,304

Representing:At cost 260,690 185,477 21,556 2,364 515 14,832 485,434At valuation 256,870 - - - - - 256,870

517,560 185,477 21,556 2,364 515 14,832 742,304

Accumulated DepreciationAt 1 July 2004 13,230 50,842 10,993 815 190 - 76,070Charge for the year 5,420 14,468 2,290 211 40 - 22,429Disposals - (33) (16) - (2) - (51)Write-offs (13) (13) - (1) - - (27)Acquisition of subsidiaries

(Note 13) 1,575 423 884 108 - - 2,990

At 30 June 2005 20,212 65,687 14,151 1,133 228 - 101,411

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

Land, Plant, Furniture,Plantations Machinery Tractors Fixtures Construction

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

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net Book ValueAt 30 June 2005At cost 248,119 119,790 7,405 1,231 287 14,832 391,664At valuation 249,229 - - - - - 249,229

497,348 119,790 7,405 1,231 287 14,832 640,893

At 30 June 2004At cost 80,271 94,196 6,262 1,035 287 32,238 214,289At valuation 250,995 - - - - - 250,995

331,266 94,196 6,262 1,035 287 32,238 465,284

Depreciation chargefor 2004 4,615 12,847 2,670 152 39 - 20,323

* Land, Plantations and Buildings of the Group:

LeaseholdLand Plantations Buildings Total

RM’000 RM’000 RM’000 RM’000Cost/ValuationAt 1 July 2004 129,089 135,581 79,826 344,496Additions 11,653 2,291 2,918 16,862Write-offs - - (109) (109)Reclassification 3,007 - 7,119 10,126Acquisition of subsidiaries 62,268 79,572 4,345 146,185

At 30 June 2005 206,017 217,444 94,099 517,560

Representing:At cost 82,577 91,969 86,144 260,690At valuation 123,440 125,475 7,955 256,870

206,017 217,444 94,099 517,560






LeaseholdLand Plantations Buildings Total

RM’000 RM’000 RM’000 RM’000

* Land, Plantations and Buildings of the Group: (Cont’d)

Accumulated DepreciationAt 1 July 2004 2,200 - 11,030 13,230Charge for the year 1,686 - 3,734 5,420Write-offs - - (13) (13)Acquisition of subsidiaries 167 - 1,408 1,575

At 30 June 2005 4,053 - 16,159 20,212

Net Book ValueAt 30 June 2005:At cost 84,440 91,969 71,710 248,119At valuation 117,524 125,475 6,230 249,229

201,964 217,444 77,940 497,348

At 30 June 2004:At cost 7,985 10,106 62,180 80,271At valuation 118,904 125,475 6,616 250,995

126,889 135,581 68,796 331,266

Depreciation charge for 2004 1,464 - 3,151 4,615

(a) Details of the latest independent professional valuations of leasehold land, plantations andbuildings owned by the subsidiaries at 30 June 2005 are as follows:

ValuationDate of valuation Description of Properties Amount Basis of Valuation

RM’000

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

and buildings

256,870

At 30 June 2005, had the revalued leasehold land, plantations and buildings of the Group been carried at historical cost, the net book value would have been RM57,990,165 (2004: RM58,270,722).


(b) During the financial year, the Group acquired property, plant and equipment at aggregate cost of RM49,501,306 (2004: RM43,383,106) of which RM1,250,000 (2004: RM3,692,000) was acquired by means of hire purchase arrangements. Net book value of property, plant and equipment held under hire purchase arrangements is as follows:

Group2005 2004

RM’000 RM’000

Tractors and vehicles 4,012 4,103

(c) Leasehold land and plantations with an aggregate amount of RM170,242,243 (2004: RM175,620,000) have been charged to financial institutions to secure the RM100 million Al-Bai Bithaman Ajil Fixed Rate Serial Bonds for the Company.

13. Investments in SubsidiariesCompany

2005 2004RM’000 RM’000

Unquoted shares, at cost 389,922 307,376

Details of the subsidiaries are as follows:

Country of Equity Interest Name of Subsidiaries Incorporation Held (%) Principal Activities

2005 2004

Subsidiaries of the Company

Kwantas Oil Sdn. Bhd. Malaysia 100 100 Operation of palm oilmills, kernel crushing plant,palm oil refinery plant,the wholesaling and supplyof diesel and lubricants, and trading of refined soya bean oil

Kwantas Plantations Malaysia 100 100 Operation of oil palmSdn. Bhd. plantations and a

stone and gravel quarry





13. Investments in Subsidiaries (Cont’d)


2005 2004

Subsidiaries of the Company

Haranky Sdn. Bhd. Malaysia 100 100 Operation of an oil palmplantation

Palm Energy Sdn. Bhd. Malaysia 100 100 Operation of a Biomasspower plant

Kwantas International Inc. Malaysia 100 100 International trading

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

plants, and trading of palm oils and fats products

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

Dong Ma Palm Industires People’s 100 - Operation of soap noodle,(Zhangjiagang) Co. Ltd. * Republic oleochemicals and

of China gycerine plants (currently at development stage)

Dong Ma (Guangzhou People’s 51 - Operation of soap noodleFree Trade Zone) Republic plant and trading activitiesOleochemicals Co. Ltd. * of China in the free trade area

(currently at development stage)

Kwantas Land Malaysia 100 - Operation of oil palmDevelopment Sdn. Bhd. plantations

Kwantas Oleo Sdn. Bhd. Malaysia 100 - Operation of an oil palmplantation



2005 2004

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 palmplantation

Benar Bersatu Sdn. Bhd. Malaysia 100 100 Operation of an oil palmplantation

* 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 Palm Industries (Zhangjiagang) Co. Ltd. and 51% equity interest in Dong Ma (Guangzhou Free Trade Zone) Oleochemicals Co. Ltd., both of which are incorporated in The People’s Republic of China and 100% equity interest in Kwantas Land Development Sdn. Bhd. and Kwantas Oleo Sdn. Bhd., both of which are incorporated in Malaysia, for a total consideration of RM82,545,884 consisting of cash of RM16,564,986 and the issue of 12,688,632 new ordinary shares of RM1 each of the Company at an issue price of RM5.20 each.

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

2005 2004RM’000 RM’000

Revenue - 2,171Profit from operations - 2,171Net profit for the year - 2,151






Acquisition of Subsidiaries (Cont’d)

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

2005 2004RM’000 RM’000

Property, plant and equipment 148,828 8,832(Negative goodwill)/goodwill on consolidation (13,200) 29Inventories 659 -Trade and other receivables 6,854 2,052Cash and bank balances 3,764 95Trade and other payables (44,801) (5)Tax payable - (20)Deferred tax liabilities (19,558) -

Group’s share of net assets 82,546 10,983

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

2005 2004RM’000 RM’000

Property, plant and equipment (Note 12) 148,828 8,832Inventories 659 -Trade and other receivables 6,854 -Cash and bank balances 3,764 1Trade and other payables (44,801) (29)Deferred tax liabilities (Note 25) (19,558) -

Group’s share of net assets 95,746 8,804(Negative goodwill)/goodwill on acquisition (13,200) 29

Cost of acquisition 82,546 8,833

Purchase consideration satisfied by:Cash 16,565 8,833Ordinary shares issued, at fair value (Note 22(a)) 65,981 -

Total cost of acquisition 82,546 8,833

Cash outflow arising on acquisition:Purchase consideration satisfied by cash 16,565 8,833Cash and cash equivalents of subsidiaries acquired (3,764) (1)

Net cash outflow of the Group 12,801 8,832

14. InventoriesGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

CostOil palm seedlings 481 882 - -Palm products 25,457 - - -Soya bean oil products 923 20 - -Stores and supplies 6,191 4,825 - -

33,052 5,727 - -

Net realisable valuePalm products 84,420 101,903 - -

117,472 107,630 - -

15. Trade Receivables

Trade receivables 74,715 73,597 - -

Less: Provision for doubtful debts (41) (41) - -

74,674 73,556 - -

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.





16. Other ReceivablesGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Due from a subsidiary - - 95,000 96,615Tax recoverable 4,728 2,505 3 3Advances 1,761 29,133 - -Deposits 2,876 353 - -Deposits for acquisition of machinery 27,995 22,514 - -Sundry receivables 10,139 8,620 - 27Prepayments 596 798 - -

48,095 63,923 95,003 96,645Less: Provision for doubtful debts (60) (60) - -

48,035 63,863 95,003 96,645

The amount due from a subsidiary is unsecured, bears interest at 6.77% (2004: 6.77%) per annum 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.

17. Cash and Cash EquivalentsGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Cash on hand and at banks 33,423 7,827 79 55Deposits with licensed banks 33,105 22,646 13,146 13,451

Cash and bank balances 66,528 30,473 13,225 13,506Bank overdraft (Note 18) (226) - - -

Cash and cash equivalents 66,302 30,473 13,225 13,506

Cash deposited in the designated Finance Service Reserve account and Commodities Reserveaccount amounting to RM13,007,450 (2004: RM13,385,000) are not available for use by theGroup as these amounts are reserved for the redemption of Al-Bai’ Bithaman Ajil Fixed Rate Serial Bonds as stated in Note 18.

The average effective interest rate of deposits of the Group and of the Company at the balance sheet date was 2.00% (2004: 2.65%) per annum.

The average maturity of deposits of the Group and of the Company as at the end of the financial year was ranging from 1 day to 30 days (2004: 30 days).

18. BorrowingsGroup Company

2005 2004 2005 2004Short Term Borrowings RM’000 RM’000 RM’000 RM’000

Secured:Bankers’ acceptances 174,364 141,475 - -Short term revolving credits 23,301 3,800 - -Term loans 10,670 2,176 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 10,000 10,000 10,000 10,000Hire purchase payables (Note 19) 1,243 1,940 - -

219,578 159,391 10,000 10,000

Unsecured:Bank overdraft (Note 17) 226 - - -

219,804 159,391 10,000 10,000

Long Term Borrowings

Secured:Term loans 24,947 12,817 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 80,000 90,000 80,000 90,000Hire purchase payables (Note 19) 574 895 - -

105,521 103,712 80,000 90,000

Total Borrowings

Bank overdraft 226 - - -Bankers’ acceptances 174,364 141,475 - -Short term revolving credits 23,301 3,800 - -Term loans 35,617 14,993 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 90,000 100,000 90,000 100,000Hire purchase payables (Note 19) 1,817 2,835 - -

325,325 263,103 90,000 100,000





18. Borrowings (Cont’d)Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Maturity of borrowings(excluding hire purchase payable):

Within one year 218,561 157,451 10,000 10,000More than 1 year and less than 2 years 31,572 12,310 20,000 10,000More than 2 years and less than 5 years 73,375 67,819 60,000 60,0005 years or more - 22,688 - 20,000

323,508 260,268 90,000 100,000

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

Group Company2005 2004 2005 2004

% % % %

Bankers’ acceptances 2.81 3.35 - -Short term revolving credits 4.11 2.50 - -Term loans 4.76 6.00 - -Al-Bai’ Bithaman Ajil Fixed Rate

Serial Bonds 6.77 6.77 6.77 6.77

The bankers’ acceptances for a subsidiary company of the Group are secured by corporate guarantees from the Company; a letter of negative pledge from the Company; a letter of undertaking from the Company; and a joint and several guarantee from certain directors of the Company.

The short term revolving credits for certain subsidiary companies of the Group are secured by negative pledge on properties from two of the subsidiary companies; a third party legal charge over landed properties of a subsidiary companies; and a third party legal charge over landedproperty of a third party.

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

18. Borrowings (Cont’d)

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 Commodities Reserve 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.

19. Hire Purchase PayablesGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Minimum lease payments:Not later than 1 year 1,326 2,105 - -Later than 1 year and not later than 2 years 423 877 - -Later than 2 years and not later than 5 years 183 46 - -

1,932 3,028 - -Less: Future finance charges (115) (193) - -

Present value of finance lease liabilities 1,817 2,835 - -

Present value of finance lease liabilities:Not later than 1 year 1,243 1,940 - -Later than 1 year and not later than 2 years 396 850 - -Later than 2 years and not later than 5 years 178 45 - -

1,817 2,835 - -

Analysed as:Due within 12 months (Note 18) 1,243 1,940 - -Due after 12 months (Note 18) 574 895 - -

1,817 2,835 - -

The hire purchase liabilities bore interest at the balance sheet date of between 3.90% to 4.85% (2004: 3.30% to 4.85%) per annum.





20. Trade Payables

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

21. Other PayablesGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Due to subsidiaries - - 165,030 160,983Due to directors 95 171 - -Accruals and provisions 3,653 3,704 10 10Amounts due to contractors and suppliers 1,999 1,870 - -Deposits received 3,259 4,645 - -Sundry payables 15,194 6,152 327 127Retention sum 668 147 - -

24,868 16,689 165,367 161,120

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

22. Share CapitalNumber of OrdinaryShares of RM1 Each Amount2005 2004 2005 2004‘000 ‘000 RM’000 RM’000

Authorised:

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

Issued and fully paid:

At 1 July 141,794 141,066 141,794 141,066Issued during the year:

Acquisition of subsidiaries (Note 13) 12,689 - 12,689 -Pursuant to ESOS 66 728 66 728

At 30 June 154,549 141,794 154,549 141,794

22. Share Capital (Cont’d)

(a) Ordinary Shares Issued for Acquisition of Subsidiaries

During the financial year, the Company issued 12,688,632 new ordinary shares of RM1 each at an issue price of RM5.20 per ordinary shares amounting to RM65,980,898 as full discharge of purchase consideration for the acquisition of Kwantas Land Development Sdn. Bhd. and Kwantas Oleo Sdn. Bhd. The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company.

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

The Kwantas Corporation Berhad Employee Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 18 December 2000. Subsequently, certain amendments to the by-laws of the ESOS were approved by the shareholders at an Extraordinary General Meeting held on 28 May 2002. The ESOS was 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 grant options 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 and any executive directors holding office in a full-time executive capacity of the Group, shall be eligible to participate in the ESOS.

(iii) The total number of shares to be issued under the ESOS shall not exceed in aggregate 10% of the issued share capital of the Company at any point of time during the tenure of the ESOS and out of which not more than 50% of the shares shall be allocated, in aggregate, to directors and senior management. In addition, not more than 10% of the shares available under the ESOS shall be allocated to any individual director or employee who, either singly or collectively through 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 Official List issued by Bursa Malaysia Securities Berhad for the 5market days immediately preceding the date on which the option is granted less, if the Options Committee shall so determine at their discretion from time to time, a discount of not more than 10% or the par value of the shares of the Company of RM1.






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

(v) An option granted under the ESOS shall be capable of being exercised by the granteeby notice in writing to the Company commencing from the date of the offer but before the expiry of five years from the date of the receipt of 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 respects with the existing ordinary shares of the Company other than as may be specified in a resolution approving the 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 any share issue of any other company.

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 ‘000 ‘000 ‘000 ‘000 ‘000

200510.04.2001 09.04.2006 1.03 2,509 - (66) - 2,44312.10.2002 11.10.2007 1.71 3,500 - - - 3,500

6,009 - (66) - 5,943

200410.04.2001 09.04.2006 1.03 3,237 - (728) - 2,50912.10.2002 11.10.2007 1.71 3,500 - - - 3,500

6,737 - (728) - 6,009

Number of share options vested:2005 2004‘000 ‘000

At 1 July 6,009 6,737At 30 June 5,943 6,009


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

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 ‘000 RM’0002005July 2004 - June 2005 1.03 5.05 66 68

Less: Par value of ordinary shares (66)

Share premium 2

2004July 2003 - June 2004 1.03 2.88 - 5.20 728 750

Less: Par value of ordinary shares (728)

Share premium 22

23. Other Reserves (Non-Distributable)Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Asset Revaluation Reserve 62,413 62,413 - -

Foreign Exchange ReserveAt 1 July - - - -Arising in the year (59) - - -

At 30 June (59) - - -

62,354 62,413 - -





23. Other Reserves (Non-Distributable) (Cont’d)

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) Foreign Exchange ReserveThe foreign exchange reserve represents foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries.

24. Retained Profits

As at 30 June 2005, the Company has tax exempt profits available for distribution of approximately RM17,464,000 (2004: RM19,680,000), 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-exempt income account to frank the payment of dividends out of its entire retained profits as at 30 June 2005.

25. Deferred TaxGroup Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

At 1 July 25,344 24,347 - -Recognised in the income statement

(Note 9) 4,174 997 - -Acquisition of subsidiaries (Note 13) 19,558 - - -

At 30 June 49,076 25,344 - -

Presented after appropriate offsettingas follows:

Deferred tax assets (5,580) (4,726) - -Deferred tax liabilities 54,656 30,070 - -

49,076 25,344 - -

25. 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’000

At 1 July 2004 34,642Recognised in the income statement 15,195Acquisition of subsidiaries 17,875

At 30 June 2005 67,712

At 1 July 2003 32,493Recognised in the income statement 2,149

At 30 June 2004 34,642

Deferred Tax Assets of the Group:

Tax Losses Unabsorbedand Investment

Unabsorbed TaxAllowances Allowances Others Total

RM’000 RM’000 RM’000 RM’000

At 1 July 2004 (2,791) (6,504) (3) (9,298)Recognised in the income statement (4,779) (963) - (5,742)Acquisition of subsidiaries (3,313) - - (3,313)

At 30 June 2005 (10,883) (7,467) (3) (18,353)

At 1 July 2003 (1,761) (6,382) (3) (8,146)Recognised in the income statement (1,030) (122) - (1,152)

At 30 June 2004 (2,791) (6,504) (3) (9,298)





26. Change in Accounting Policy and Prior Year Adjustment

Negative Goodwill on Consolidation

Prior to 1 July 2004, the difference between the cost of an acquisition and the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition was included in the consolidated balance sheet as goodwill or negative goodwill. The directors consider that

t h echange to recognise negative goodwill in the income statement gives a fairer presentation of the results and the financial position of the Group. This change in accounting policy has been accounted for retrospectively and the effects of this change are as follows:

Group2005 2004

RM’000 RM’000Effect on retained profits:At 1 July, as previously stated 133,150 99,880Effect of change in accounting policy 18,482 18,482

At 1 July, as restated 151,632 118,362

Effect on other reserves:At 1 July, as previously stated 80,924 80,895Effect of change in accounting policy (18,482) (18,482)

At 1 July, as restated 62,442 62,413

Effect on net profit for the year:Net profit before change in accounting policy 24,419 40,343Effect of change in accounting policy 13,200 -

Net profit for the year 37,619 40,343

Comparative amount for negative goodwill of the Group as at 30 June 2004 has been restatedas

follows:Previously

Stated Adjustments RestatedRM’000 RM’000 RM’000

Negative goodwill on consolidation 18,482 (18,482) -

27. Commitments Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Capital expenditure

Approved and contracted for 27,800 16,219 - -

28. Contingent Liabilities

Unsecured

(i) The Company has provided corporate guarantees to secure banking facilities granted to a subsidiary company. The amount utilised and outstanding as at 30 June 2005 amounted to approximately RM174 million (2004: RM120 million).

(ii) The Group is disputing a claim amounting to approximately RM5 million from RHB Bank Berhad on an alleged foreign currency forward 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.

(iii) A dispute between Enco Engineering Sdn. Bhd. (“Enco”) and Palm Energy Sdn. Bhd. (“PESB”), a wholly owned subsidiary of the Company, in the purchase by the latter of a 9.8 Mega Watt co-generation power plant. PESB is claiming for liquidated damages, loss of productive/revenue and refurbishment costs totalling approximately RM4,070,000. Enco counter claimed the balance of the original contract sum amounting to RM1,005,357 and variation order works totalling RM1,021,295. An arbitrator has been appointed and arbitration process is on going.

29. Significant Related Party Transactions Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

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 800 1,035 - -





29. Significant Related Party Transactions (Cont’d) Group Company

2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000

Trade transactions (Cont’d)

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

Sales of diesel 1,176 590 - -

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 455 970 - -

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

Freight charges paid 12,841 12,703 - -

The directors are of the opinion that all the transactions above 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 transactions with unrelated parties.

30. Other Significant Events

On 22 June 2005, the Company acquired 100% equity interest in Dong Ma Palm Industries (Zhangjiagang) Co. Ltd., a company incorporated in The People’s Republic of China, for a total consideration of USD2,559,166 (RM9,724,986).

On 22 June 2005, the Company acquired 51% equity interest in Dong Ma (Guangzhou FreeT r a d e

Zone) Oleochemicals Co. Ltd., a company incorporated in The People’s Republic of China, for a total consideration of USD1,800,000 (RM6,840,000).

30. Other Significant Events (Cont’d)

On 30 June 2005, the Company acquired 250,000 ordinary shares of RM1 each, representing 100% equity interest in Kwantas Land Development Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM63,352,702.

On 30 June 2005, the Company acquired 2 ordinary shares of RM1 each, representing 100% equity interest in Kwantas Oleo Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM2,628,196.

31. 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 the development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group’s policy is not to engage in 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-bearing assets as at 30 June 2005. The investments in financial assets are mainly short term in nature and have been mostly placed 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 reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes.

T h eGroup also uses hedging instruments such as interest rate swaps to minimize its exposure to interest rate volatility.

The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their respective notes. As at the balance sheet date, the Group has entered into interest rate swaps with the following notional amounts and maturities:

Notional Amount2005 2004

RM’000 RM’000

More than 1 year and less than 5 years 90,000 100,000

The fixed interest rates relating to interest rate swaps at the balance sheet date was 6% (2004: 6%) per annum.





31. Financial Instruments (Cont’d)

(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 and sales give rise to foreign exchange exposures.

Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. Material foreign currency transactionexposures are hedged, mainly with derivative financial instruments such as forward foreign exchange contracts.

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

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

UnitedFunctional Currency of StatesGroup Companies Dollars Total

RM’000 RM’000

At 30 June 2005:Ringgit Malaysia 91,669 91,669Chinese Renminbi (34,380) (34,380)

57,289 57,289

At 30 June 2004:Ringgit Malaysia 62,686 62,686Chinese Renminbi (3,800) (3,800)

58,886 58,886

As at balance sheet date, the Group had entered into forward foreign exchange contractswith the following notional amounts and maturities:

TotalWithin Notional

Currency 1 year AmountRM’000 RM’000

At 30 June 2005:Forwards used to hedge

anticipated sales United States Dollar - -

At 30 June 2004:Forwards used to hedge

anticipated sales United States Dollar 138,945 138,945


(d) Liquidity Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Groupstrives to maintain available banking facilities at a reasonable level to its overall debtposition. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

(e) Credit Risk

Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. Credit risk is minimised and monitored by limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored 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 of credit 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 principles as 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 date approximated their fair values except for the followings:

Group CompanyCarrying Fair Carrying Fair

Note Amount Value Amount ValueRM’000 RM’000 RM’000 RM’000

Financial Assets

At 30 June 2005:Advances to a subsidiary 16 - - 95,000 *

At 30 June 2004:Advances to a subsidiary 16 - - 96,615 *






(f) Fair Values (Cont’d)

Group CompanyCarrying Fair Carrying Fair


Financial Liabilities

At 30 June 2005:Advances from subsidiaries 21 - - 165,030 *

At 30 June 2004:Advances from subsidiaries 21 - - 160,983 *

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

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

Group CompanyNominal/ Net Nominal/ NetNotional Fair Notional Fair


At 30 June 2005:Contingent liabilities 28 7,027 ** 174,000 **Interest rate swap agreement 90,000 2,605 - -

At 30 June 2004:Contingent liabilities 28 7,027 ** 120,000 **Interest rate swap agreement 100,000 3,919 - -Forward foreign

exchange contracts 138,945 348 - -

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


(f) Fair Values (Cont’d)

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 based on incremental rates of comparable borrowing arrangements.

(iii) Derivative Financial InstrumentsThe fair value of an interest swap is the amount that would be payable or receivable upon termination of the position at the balance sheet date, and is calculated as the difference between present value of the estimated future cash flows at the contracted rate compared to that calculated at the market rate at the balance sheet. The fair valueof a forward foreign currency contract is the amount that would be payable or

r e c e i v a b l eon termination of the outstanding position arising and is determined by reference to the difference between the contracted rate and forward exchange rate as at the balance sheet date applied to a contract of similar quantum and maturity profile.

32. Segment Information

(a) Business Segments

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

(i) Biomass 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.

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 transactions with unrelated parties.





32. Segment Information (Cont’d)

(a) Business Segments (Cont’d)

Palm Trading ofBiomass products industrialenergy processing Plantations products Others Elimination ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2005

RevenueExternal sales - 1,199,926 - 6,512 111 - 1,206,549Inter-segment sales 6,895 581 61,502 534 50 (69,562) -

Total revenue 6,895 1,200,507 61,502 7,046 161 (69,562) 1,206,549

ResultProfit from operations 1,149 13,067 48,782 702 (1,020) 62,680Interest income 3,055Finance costs (16,773)Taxation (13,650)

Profit after taxation 35,312Minority interests 2,307

Net profit for the year 37,619

AssetsSegment assets 39,536 651,119 424,937 9,933 530,857 (703,200) 953,182

LiabilitiesSegment liabilities 17,334 395,501 112,023 2,312 264,655 (292,307) 499,518

Other InformationCapital expenditure 3,680 39,806 6,015 - - 49,501Depreciation 1,571 16,820 3,644 - 394 22,429


(a) Business Segments (Cont’d)

Palm Trading ofBiomass products industrialenergy processing Plantations products Others Elimination ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2004

RevenueExternal sales - 1,184,776 - 5,516 118 - 1,190,410Inter-segment sales 9,571 581 47,622 594 50 (58,418) -

Total revenue 9,571 1,185,357 47,622 6,110 168 (58,418) 1,190,410

ResultProfit from operations 4,048 28,863 26,318 570 (141) 59,658Interest income 1,115Finance costs (13,049)Taxation (7,065)

Profit after taxation 40,659Minority interests (316)

Net profit for the year 40,343

AssetsSegment assets 36,813 527,826 275,088 9,140 450,624 (553,959) 745,532

LiabilitiesSegment liabilities 15,773 268,929 47,313 2,062 270,519 (225,612) 378,984

Other InformationCapital expenditure 1,731 34,049 7,603 - - 43,383Depreciation 1,551 15,040 3,260 78 394 20,323






(b) Geographical Segments

Although the Group’s four major business segments are managed on a worldwide basis, theyoperate in two principal geographical areas of the world. In Malaysia, its home country, the Group’s areas of operation are principally manufacturing and sale of palm products. Other operations in Malaysia include oil palm plantations, biomass energy plant and trading of industrial products.

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

Total Revenue from Segment CapitalExternal Customers Assets Expenditure

2005 2004 2005 2004 2005 2004RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Malaysia 1,098,925 1,179,905 841,737 694,647 29,122 18,546

The People’s Republicof China 107,624 10,505 111,445 50,885 20,379 24,837

Consolidated 1,206,549 1,190,410 953,182 745,532 49,501 43,383

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

(Built-Up) BUILDING VALUE OR REVALUATIONRM’000

CL 095317196, KPSB 5,260 ha Leasehold - Oil Palm 125,091 30 June 2001Lamag, District of expiring PlantationKinabatangan, Sabah 31/12/2077

PL 096290069, Koyah HSB 1,122.9 ha Leasehold - Oil Palm 23,011 30 June 2001Locality, Off KM 39, expiring PlantationJln Lahad Datu-Sandakan, 31/12/2077District of Kinabatangan,Sabah.

CL 095318504 KPSB 1,768.7 ha Leasehold - Oil Palm 42,938 30 June 2001CL 095318513 expiring PlantationCL 095318522 31/12/2087CL 095318531 exceptCL 095318540 CL 095318559CL 095318559 expiringSg Pin Locality, KM 50, 31/12/2086Jln Lahad Datu-Sandakan,District of Kinabatangan,Sabah.

CL 075376117, District KPSB 2.434 ha Leasehold - Vacant Land 36 27 July 1991 of Sandakan, Sabah. expiring

31/12/2062

Unit No. 5/R7/4, KOSB 1490 sq. ft Pending strata 8 yrs Apartment for 117 7 January 1994Api-Api Centre, title used byKota Kinabalu, Sabah. Management

CL 115379336 MESB 14.15 ha Leasehold 7 yrs Palm Oil 32,700 30 June 2003Jalan Kuching, Off expiring Product Jalan Dermaga, District 31/12/2088 Processingof Lahad Datu, Sabah Complex

(Refinery & Kernal Crushing)

CL 095319065 ABSB 282.6 ha Leasehold - Oil Palm 6,316 30 June 2001Kinabatangan, District expiring Plantationof Kinabatangan, Sabah 31/12/2087

CL 095317007 BBSB 202.7 ha Leasehold - Oil Palm 4,618 30 June 2001Latangan, District of expiring PlantationKinabatangan, Sabah 31/12/2086

CL 095316395 KPSB 1,534 ha Leasehold - Oil Palm 20,924 30 June 2001Sungai Kinabatangan, expiring PlantationDistrict of Kinabatangan, Sabah 31/12/2887

TL 117509832 KOSB 5 ha Leasehold - Vacant 91 14 March 1997New Wharf Road, expiringDistrict of Lahad Datu, 31/12/2094 Sabah

properties of the group



properties of the group (cont’d)



Lot 49, Export KOSB 2.19 acres Pending - Vacant 826 2 October 1999Oriented Industrial submission ofZone, Kota Kinabalu master title

CL 015493697 KOSB 0.453 ha Leasehold - Vacant 942 26 July 2000Kuala Mengatal, expiringSepangar Bay, 31/12/2081Kota Kinabalu

CL 075339954 KOSB 3.84 acres Leasehold - Vacant 1,263 15 August 20008 Mile, Jln Labuk, expiringSandakan 09/07/2887

CL 095332184 KPSB 9.42 ha Leasehold - Oil Palm 72 29 June 2002 Sungai Latangan, expiring PlantationKinabatangan 31/12/2098

CL 095330662 KPSB 10.01 ha Leasehold - Oil Palm 75 8 January 2001Sungai Lokan, expiring PlantationKinabatangan 31/12/2096

Title: (2001) No.4 DMGZFTZ 9,990 m2 Leasehold 2 yrs Bulking 14,508 31 January 2002No.15, Jinqiao Road, expiring Installation,Guangzhou Free Trade Zone, 24/10/2051 Edible OilGuangzhou, China Complex

and OfficeBuilding

Title: (2003) No.BSQ-F2 DMGZFTZ 3,840 m2 Leasehold - Bulking 9,559 20 August 2003Guangzhou Free Trade Zone expiring Installation andGuangzhou, China 21/08/2053 Edible Oil

Complex

Title: (2002) No.23 DMZJGFTZ 20,006 m2 Leasehold - Bulking 1,547 21 June 2002Zhangjiagang Free Trade Zone expiring Installation andZhangjiagang, China 13/08/2052 Edible Oil

Complex

CL 095332451 KPSB 12.12 ha Leasehold - Oil Palm 43 20 October 2003 Kg. Kinabatangan, expiring PlantationDistrict of Kinabatangan, 31/12/2098Sabah

CL 115415631 KPSB 30.08 ha Leasehold - Oil Palm 250 17 May 2004CL 115415640 expiring PlantationCL 115415659 31/12/2098CL 115415668CL 115415677 Ulu Segama, Districtof Lahad Datu, Sabah



CL 115311138 PESB 6.94 acres Leasehold - Power Plant 1,986 31 July 2004Mile 2 1/2, expiringJln Kastam Baru, 31/12/2058District of Lahad Datu,Sabah

CL 015331932 KOSB 0.59 acres Leasehold - Vacant 788 27 October 2004Luyang, expiringDistrict of Kota Kinabalu 31/12/2912

NCR Land at KOSB 14.416 ha - - Vacant 4,000 24 May 2005Ulu BalingianSibu

Lot 767, Block 20 KOSB 16.194 ha Leasehold - Vacant 5,588 16 February 2005Kemena Land District expiring

17/06/2062

Ladang Pintasan 4 KLDSB 1,597.57 ha Leasehold - Oil Palm 32,477 30 June 2005(318 titles) expiring from Plantation

31/12/2093 -31/12/2095


31/12/2093 -31/12/2096

Ladang Pintasan 6 KLDSB 878.93 ha Leasehold - Oil Palm 12,765 30 June 2005(172 titles) expiring from Plantation

24/06/2034 -19/09/2099


31/12/2093 -31/12/2100

Ladang Sg Koyah KLDSB 83.42 ha Leasehold - Oil Palm 787 30 June 2005(5 titles) expiring from Plantation

31/12/2083 -31/12/2096

Ladang Haranky 2 KLDSB 205.01 ha Leasehold - Oil Palm 5,916 30 June 2005(29 titles) expiring Plantation

31/12/2091

KM28 & 30 of KLDSB 7.93 ha Leasehold - Oil Palm 240 30 June 2005Jalan Lahad Datu expiring Plantation(2 titles)







Ladang Pintasan 9 KLDSB 522.33 ha Leasehold - Vacant 3,919 30 June 2005(113 titles) expiring

31/12/2096

Koyah Lands KLDSB 114.55 ha Leasehold - Vacant 570 30 June 2005(19 titles) expiring

19/09/2099

CL 115414161 KLDSB 171.50 ha Leasehold - Vacant 2,279 30 June 2005KM 14.5 of expiringJalan Lahad Datu 31/12/2098

CL 095330000 KOLEO 202.30 ha Leasehold - Oil Palm 5,052 30 June 2005Ladang Bikasjaya expiring Plantation

31/12/2097

CL 095332442 KPSB 12.18 ha Leasehold - Oil Palm 69 07 April 2005Kg. Kinabatangan expiring PlantationDistrict of Kinabatangan 31/12/2098

CL 095331696 KPSB 16.17 ha Leasehold - Oil Palm 131 07 April 2005CL 095331703 expiring PlantationSg. Latangan 31/12/2098District of Kinabatangan

Title: (2005) No.BSQ-K21 DMO 35,001 m2 Leasehold - Vacant 4,916 30 June 2005Guangzhou Free Trade Zone expiringGuangzhou, China 09/03/2055


The Company has 1,626 shareholders as at 20 October 2005. There is only one class of shares,namely, ordinary shares of RM1.00 each.

ANALYSIS OF SHAREHOLDINGS

Size of holdings Number of holders % Number of shares %

1-999 248 15.25 66,770 0.041,000-10,000 1,226 75.40 2,956,280 1.9110,001-100,000 118 7.26 3,076,400 1.99100,001-7,727,430 (*) 29 1.78 40,716,172 26.357,727,431 and above (**) 5 0.31 107,733,010 69.71Total 1,626 100.00 154,548,632 100.00

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 Chung 47,094,316 30.472. Kwan Ngen Wah 46,594,316 30.153. DB (Malaysia) Nominee (Asing) Sdn Bhd

BNP Paribas Nominees Singapore Pte Ltd for Greenback Company Inc 12,250,000 7.93

4. Employees Provident Fund Board 10,330,900 6.685. Semangat Fajar Sdn Bhd 8,360,400 5.41

DIRECTORS’ SHAREHOLDINGSNumber of shares held

No Name Direct % Indirect %

1. Kwan Ngen Chung 47,094,316 30.47 - -2. Kwan Ngen Wah 46,594,316 30.15 - -3. Chong Kan Hiung 300,000 0.19 - -4. Kwan Min Nyet 119,000 0.08 - -5. Kwan Jin Nget 90,000 0.06 - -

shareholdings statisticsas at 20 October 2005



LIST OF TOP 30 SHAREHOLDERS AS AT 20 OCTOBER 2005

No. Name Shareholdings %

1. Kwan Ngen Wah 45,745,855 29.60

2. Kwan Ngen Chung 31,045,855 20.09

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

4. Employees Provident Fund Board 10,330,900 6.68

5. Semangat Fajar Sdn Bhd 8,360,400 5.41

6. Bock Wan Chek 7,516,500 4.86

7. HSBC Nominees (Tempatan) Sdn Bhd 7,200,000 4.66Pledged Securities Account for Kwan Ngen Chung

8. Mayban Nominees (Tempatan) Sdn Bhd 5,300,000 3.43Pledged Securities Account for Kwan Ngen Chung

9. Semangat Beringin Sdn Bhd 4,131,700 2.67

10. Mayban Nominees (Tempatan) Sdn Bhd 2,700,000 1.75Maybank International (L) Ltd for Kwan Ngen Chung

11. Englobal (M) Sdn Bhd 2,345,200 1.52

12. Mayban Nominees (Asing) Sdn Bhd 1,756,500 1.14Pledged Securities Account for Bock Wan Chek

13. HLG Nominee (Tempatan) Sdn Bhd 1,289,000 0.83Pledged Securities Account for Ngui Kon Nyuk

14. OSK Nominees (Tempatan) Sdn Bhd 1,285,400 0.83Pledged Securities Account for Ho Sui Khyun

15. Winawarisan Sdn Bhd 1,000,000 0.65


LIST OF TOP 30 SHAREHOLDERS AS AT 20 OCTOBER 2005 (cont’d)

No. Name Shareholdings %

16. HDM Nominees (Tempatan) Sdn Bhd 737,100 0.48Pledged Securities Account for Ang Theng Hian

17. Citigroup Nominees (Tempatan) Sdn Bhd 700,000 0.45Pledged Securities Account for Kwan Ngen Chung

18. Citigroup Nominees (Tempatan) Sdn Bhd 700,000 0.45Pledged Securities Account for Kwan Ngen Wah

19. Kuala Lumpur City Nominees (Tempatan) Sdn Bhd 648,600 0.42Pledged Securities Account for MP Chong

20. Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd 630,000 0.41Pledged Securities Account for Semangat Ceria Sdn Bhd

21. OSK Nominees (Tempatan) Sdn Bhd 428,800 0.28Pledged Securities Account for Chong KL

22. Chong Kan Hiung 300,000 0.19

23. HSBC Nominees (Asing) Sdn Bhd 294,000 0.19Stiching Pensioenfonds ABP

24. Kuala Lumpur City Nominees (Tempatan) Sdn Bhd 274,600 0.18Pledged Securities Account for KL Chong

25. Kwan Chiew Giok 249,800 0.16

26. HSBC Nominees (Asing) Sdn Bhd 157,500 0.10Pictet And Cie for Gestor SA

27. Citigroup Nominees (Asing) Sdn Bhd CBNY for Dfa Emerging Markets Small Cap Series 155,800 0.10

28. Amsec Nominees (Tempatan) Sdn Bhd 155,000 0.10Pledged Securities Account for Chow Pei Lim

29. RHB Nominees (Tempatan) Sdn Bhd 148,461 0.10Kwan Ngen Chung

30. RHB Nominees (Tempatan) Sdn Bhd 148,461 0.10Kwan Ngen Wah



Kwantas Corporation Berhad(company No: 356602-W)

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 Tenth Annual General Meeting of the Company tobe held at the 4th Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah on Wednesday, 14 December2005 at 10.00 a.m. or at any adjournment thereof.

No. Resolutions For Against

1. To receive and adopt the audited financial statements for theyear ended 30 June 2005 together with the Directors’ andAuditors 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’sArticles of Association as Directors of the company:

(a) Kwan Ngen Wah - Resolution 3

(b) Kwan Jin Nget - Resolution 4

(c) Kwan Min Nyet - Resolution 5

4. To re-appoint Messrs Ernst & Young as Auditors of the Company and authorisethe Directors to fix their remuneration - Resolution 6

5. 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 theCompanies Act, 1965 - Resolution 7

(ii) To propose renewal of the existing shareholders’ mandate for recurrentrelated party transactions of a revenue or trading nature. - Resolution 8

(Please indicate with ‘X’ how you wish your vote to be cast. If no specific direction as to voting is given, the proxywill vote or abstain at his discretion.)

Sign this_______________day of ______________2005

Signature of shareholder(s)

No. of Ordinary Shares Held

proxy form

Notes:

A) NOTES ON APPOINTMENT OF PROXY

A member entitled to attend and vote at the meeting is entitled toappoint a proxy to attend and vote instead of him. A proxy may butneed not be a member of the Company. The instrument appointing aproxy must be deposited at the Registered Office of the Company at1st Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah, not less than 48 hours before the time appointed for holdingthe 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 7The proposed resolution is in relation to authority to allot shares pursuant to Section 132D of the Companies Act, 1965 and ifpassed, will give the Directors of the Company, from the date ofthe above general meeting, authority to issue and allot sharesfrom the unissued capital of the Company for such purpose asthe Directors may deem fit and in the interest of the Company.This authority, unless revoked or varied by the Company in general meeting, will expire at the conclusion of the next Annual GeneralMeeting of the Company.

(ii) Resolution 8 The proposed resolution is in relation to the renewal of theexisting shareholders’ mandate for recurrent related party transactions of a revenue or trading nature with related parties in the ordinarycourse of business which are necessary for the Company’s day-to-day operations.

The Secretary

Kwantas Corporation Berhad(Company No : 356602-W)

1st Floor, Fordeco BuildingJalan Singamata

91100 Lahad Datu, Sabah

Stamp/Setem

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