BANENG HOLDINGS BHD ( W)

Transcription

1 Annual Report 2003

2 BANENG HOLDINGS BHD ( W)

3 CONTENTS 2 Notice of Annual General Meeting 4 Statement Accompanying the Notice of AGM 5 Corporate Information 6 Corporate Structure 7 Profile of Directors 11 Chairman s Statement 13 Corporate Governance Statement 17 Statement of Directors Responsibilities for Preparing the Financial Statements 18 Statement on Internal Control 20 Audit Committee Report 23 Other Information Required by the Listing Requirements of Bursa Malaysia Securities Berhad 25 Financial Statements 57 List of Properties 58 Analysis of Shareholdings 61 Form of Proxy

4 NOTICE OF ANNUAL GENERAL MEETING NOTICE BE AND IS HEREBY GIVEN that the Ninth Annual General Meeting of the Company will be held at Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, Batu Pahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. to consider the following purposes:- AGENDA 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December, 2003 together with the Directors and Auditors Reports thereon. 2. To approve the payment of Directors fee for the financial year ended 31 December, Resolution 1 Resolution 2 3. To re-elect the following retiring Directors who retire by rotation and being eligible, offer themselves for re-election in accordance with the Article 101(a) of the Company s Articles of Association:- i) Mr. Lim Meng Hee ii) Dr. Ng Soon Lim 4. To re-elect the retiring Director, Mr. Chai Koh Wah who retires and being eligible, offer himself for re-election in accordance with the Article 102(c) of the Company s Articles of Association. 5. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending 31 December, 2004 and to authorise the Directors to fix the Auditors remuneration. Resolution 3 Resolution 4 Resolution 5 Resolution 6 6. As special business:- To consider and if thought fit, to pass with or without modifications, the following resolutions:- ORDINARY RESOLUTION Authority To Issue Share Pursuant To Section 132D of the Companies Act, 1965 That subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant government/regulatory authorities, the Directors be and are hereby authorized, pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the Company at any time until the conclusion of the next Annual General Meeting of the Company and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors are also empowered to obtain the approval from Bursa Malaysia Securities Berhad (formerly known as Malaysia Securities Exchange Berhad) for the listing of and quotation for the additional shares to be issued. Resolution 7 2 BANENG HOLDINGS BHD ( W)

5 NOTICE OF ANNUAL GENERAL MEETING SPECIAL RESOLUTION Proposed Amendments to the Articles of Association That subject to the approval of Bursa Malaysia Securities Berhad (formerly known as Malaysia Securities Exchange Berhad) pursuant to Article 147 of the Company s Articles of Association, Article 1 of the Company s Articles of Association be amended by deleting the following existing definition in entirety and to adopt the new definition:- Existing definition New definition Exchange means Kuala Lumpur Exchange means Bursa Malaysia Securities Stock Exchange (30632P) Berhad (formerly known as Malaysia Securities Exchange Berhad) Resolution 8 7. To transact any other ordinary business of which due notice has been given in accordance with the Companies Act, By Order Of The Board TEO SOON MEI (MAICSA ) Company Secretary Melaka Dated: 3 June, 2004 Explanatory Notes On Special Business 1. The Ordinary Resolution proposed under item 6 above, if passed, will empower the Directors to issue shares up to 10% of the issued capital of the Company for the time being for such purposes as the Directors may consider to be in the interest of the Company. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company, or the expiration of period within which the next Annual General Meeting is required by law to be held, whichever is earlier. 2. The proposed adoption of the Special Resolution under item 6 above is in line with the demutualization of Kuala Lumpur Stock Exchange. NOTES: 1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint more than two proxies to attend and vote in his stead and he shall specify the proportion of his shareholdings to be represented by each proxy. A member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 2. Where a member is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991, it may appoint more than (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. The instrument appointing a proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if such appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 4. The instrument appointing a proxy, together with the power of attorney (if any) or other authority (if any) under which the instrument is signed or a notarially certified copy of that power or authority shall be deposited at the Registered Office of the Company at Lot /2 Miles, Jalan Tanjung Laboh, Batu Pahat, Johor not less than 48 hours before the time for holding the meeting or otherwise the instrument appointing the proxy will not be treated as valid. BANENG HOLDINGS BHD ( W) 3

6 STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING PURSUANT TO PARAGRAPH 8.28(2) OF THE LISTING REQUIREMENTS OF THE BURSA MALAYSIA SECURITIES BERHAD (FORMERLY KNOWN AS MALAYSIA SECURITIES EXCHANGE BERHAD) Details of the particulars of all the retiring Directors namely, Mr. Lim Meng Hee, Dr. Ng Soon Lim and Mr. Chai Koh Wah are set out in pages 8 to 10 of the Annual Report of the Company for the Financial year ended 31 December DIRECTORS STANDING FOR RE-ELECTION Directors who are retiring and standing for re-election at the Ninth Annual General Meeting of the Company to be held at Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, Batu Pahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. are as follows:- 1. The Directors who are retiring and standing for re-election in accordance to Article 101(a) of the Company s Articles of Association:- Mr. Lim Meng Hee Dr. Ng Soon Lim 2. Mr. Chai Koh Wah, the Director who is retiring and standing for re-election in accordance to Article 102(c) of the Company s Articles of Association. A total of Five (5) Board of the Directors Meetings were held during the financial year ended 31 December, 2003 and all the Board of Directors meetings were held at the registered office of the Company at Lot /2 Miles, Jalan Tanjung Laboh, Batu Pahat, Johor except for the Board of Directors Meeting held on 29 May, 2003, which was held at Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, Batu Pahat, Johor. The date and time of the Board of the Directors Meetings were as follows:- Date of the Board Meeting Time 23 February April May August November Details of attendance at board meetings held during the financial year ended 31 December Name of Director Date of appointment No. of Meetings attended Mr. Lim Meng Hee 31 May, Dr. Ng Soon Lim 31 May, Mr. Chai Koh Wah 25 April, BANENG HOLDINGS BHD ( W)

7 CORPORATE INFORMATION Y. Bhg. Tan Sri A. Rahim bin Tamby Chik Non-Executive Chairman Mdm. Lim Choon Hiok Managing Director Mr. Lim Meng Hong Executive Director Mr. Lim Meng Hee Executive Director Dr. Ng Soon Lim Independent Non-Executive Director Mr. Chai Koh Wah Independent Non-Executive Director (appointed on 25/4/2004) Mr. Keah Say Wan Independent Non-Executive Director (resigned on 15/3/2004) Audit Committee Dr. Ng Soon Lim (Chairman) Mr. Lim Meng Hong Mr. Chai Koh Wah (appointed on ) Mr. Keah Say Wan (resigned on ) Nomination Committee Y. Bhg. Tan Sri A. Rahim bin Tamby Chik (Chairman) Dr. Ng Soon Lim Mr.Chai Koh Wah (appointed on ) Mr. Keah Say Wan (resigned on ) Remuneration Committee Mdm. Lim Choon Hiok (Chairman) Dr. Ng Soon Lim Mr. Chai Koh Wah (appointed on ) Mr. Keah Say Wan (resigned on ) Registered Office Lot 4979, 2 1 /2 Miles, Jalan Tanjung Laboh Batu Pahat, Johor Darul Takzim Tel : Fax : Date and Place of Incorporation Incorporated in Malaysia on 11 July, 1994 Registrar Securities Services (Holdings) Sdn Bhd Level 7 Menara Milenium, Jalan Damanlela Pusat Bandar Damansara, Damansara Heights Kuala Lumpur Tel : / Fax : / Company Secretary Ms. Teo Soon Mei (MAICSA ) Auditors Ernst & Young Graha Maju (Bangunan PKNM) Tingkat 10, Lot 1, Jalan Graha Maju Melaka Tel : Fax : Web-Site Address Stock Exchange The Main Board of Bursa Malaysia Securities Berhad Principal Bankers EON Bank Berhad Malayan Banking Berhad HSBC Bank Malaysia Berhad Bumiputra-Commerce Bank Berhad BANENG HOLDINGS BHD ( W) 5

8 CORPORATE STRUCTURE Baneng Holdings Bhd 100% Chenille International Pte Ltd 100% Baneng Industries Sdn Bhd 100% Maxlin Garments Sdn Bhd 55% Seri Pertamas Garment Manufacturer Sdn Bhd 100% Baneng Trading Sdn Bhd 100% Baneng Lesotho (Pty) Ltd 6 BANENG HOLDINGS BHD ( W)

9 PROFILE OF DIRECTORS Name : Age : 54 Nationality : Qualification : Position in Company : Working experience : Y. Bhg. Tan Sri A. Rahim bin Tamby Chik Malaysian Other directorship of Public companies : The family relationship with any director and/ or major shareholder of the Company : List of convictions for offences within the past 10 years other than traffic offences, if any : Degree in Bachelor of Economics (Honours) and Doctorate of Philosophy in Business Administration. Non-Executive Chairman. He is also the Chairman of the Nomination Committee. He was appointed to the Board of the Company on 31 May He was the Parliamentary Secretary for the Ministry of Primary Industries and Trade Industries between 1978 and A Deputy Minister of the Ministry of Home Affairs between 1981 and 1982; and was the Chief Minister of Melaka between 1982 and Currently is involved in business. He also sits on the boards of several other private limited companies. None None None Number of board meetings attended in the financial year : 4 / 5 Name : Age : 48 Nationality : Qualification : Position in Company : Working experience : Mdm. Lim Choon Hiok Malaysian Other directorship of Public companies : The family relationship with any director and/ or major shareholder of the Company : List of convictions for Company : List of convictions for offences within the past 10 years other than traffic offences, if any : Completed her secondary education and obtained her Malaysian Certificate of Education in Managing Director. She is also the Chairman of the Remuneration Committee. She was appointed to the Board of the Company on 31 May She has been with the Baneng Group for the past 18 years and is in charge of the overall direction and management of the Baneng Group of companies. She also sits on the boards of several other private limited companies. None She is the sister to Mr. Lim Meng Hong and Mr. Lim Meng Hee who are also directors of the Company. She is also the sister to Ms. Lim Poh Choo who is a major shareholder of the Company. None None Number of board meetings attended in the financial year : 5 / 5 BANENG HOLDINGS BHD ( W) 7

10 PROFILE OF DIRECTORS Name : Age : 45 Nationality : Qualification : Position in Company : Working experience : Mr. Lim Meng Hong Malaysian Other directorship of Public companies : The family relationship with any director and/ or major shareholder of the Company : List of convictions for offences within the past 10 years other than traffic offences, if any : Degree in Bachelor of Economics. Fellow member of the CPA Australia and a Chartered Accountant of the Malaysian Institute of Accountants (MIA). Executive Director. He is also a Member of the Audit Committee. He was appointed to the Board of the Company on 31 May Prior to joining Baneng Group of companies in 1992 as a Group Financial Controller, he was the Group Financial Controller with Jardine Matheson Private Limited. Currently, he also sits on the boards of several other private limited companies. None He is the brother of Ms. Lim Choon Hiok and Mr. Lim Meng Hee who are also directors of the Company. He is also the brother to Ms. Lim Poh Choo who is a major shareholder of the Company. None Number of board meetings attended in the financial year : 4 / 5 Name : Age : 40 Nationality : Mr. Lim Meng Hee Malaysian Qualification : Completed his secondary education and obtained his Sijil Pelajaran Malaysia in Position in Company : Executive Director. Working experience : Other directorship of Public companies : The family relationship with any director and/ or major shareholder of the Company : List of convictions for offences within the past 10 years other than traffic offences, if any : He was appointed to the Board of the Company on 31 May He joined the Baneng Group of companies in 1986 and has more than 17 years experience in the textile and apparel industry. Currently, he is responsible for the overall direction and management of the apparel division of the Company. None He is the brother to Ms. Lim Choon Hiok and Mr. Lim Meng Hong who are also directors of the Company. He is also the brother to Ms. Lim Poh Choo who is a major shareholder of the Company. None Number of board meetings attended in the financial year : 5 / 5 8 BANENG HOLDINGS BHD ( W)

11 PROFILE OF DIRECTORS Name : Age : 56 Nationality : Qualification : Position in Company : Working experience : Dr. Ng Soon Lim Malaysian Other directorship of Public companies : The family relationship with any director and/ or major shareholder of the Company : List of convictions for offences within the past 10 years other than traffic offences, if any : Graduated from the University of Malaya in 1973 in Medicine (MBBS Malaya). Independent Non-Executive Director. He was appointed as the Chairman of the Audit Committee on 25 April, He is a Member of the Nomination and the Remuneration Committees. He was also appointed as a Senior Independent Non-Executive Director on 4 September, 2002 in compliance with the Code on Corporate Governance. He was appointed to the Board of the Company on 31 May Upon graduation in 1973, he worked for the Government until 1977 where he became a general medical practitioner with his own medical practice until to date. None None None Number of board meetings attended in the financial year : 5 / 5 Name : Mr. Keah Say Wan (resigned on 15 March 2004) Age : 43 Nationality : Malaysian Qualification : Graduated from the University of Malaya in 1986 with a Bachelor of Law ( Honours ) Position in Company : Independent Non-Executive Director. He is the Chairman of the Audit Committee and a Member of the Nomination and the Remuneration Committees. He resigned as the Independent Non- Executive Director of the Company on 15 March, Working experience : Other directorship of Public companies : The family relationship with any director and/ or major shareholder of the Company : List of convictions for offences within the past 10 years other than traffic offences, if any : He was appointed to the Board of the Company on 31 May After being called to the Malaysian Bar in 1987, he joined the legal practice of Mohd Yamin Ismail and Partner as a legal assistant for 3 years. In 1990 he set-up a legal firm with a partner and has been the managing partner of the firm till todate. He sits on the Board of the Hokkien Association in Batu Pahat and also several other private limited companies. None None None Number of board meetings attended in the financial year : 5 / 5 BANENG HOLDINGS BHD ( W) 9

12 PROFILE OF DIRECTORS Name : Mr. Chai Koh Wah (appointed on 25 April 2004) Age : 45 Nationality : Qualification : Position in Company : Working experience : Malaysian Other directorship of Public companies : The family relationship with any director/ or major shareholder of the Company : List of convictions for offences within the past 10 years other than traffic offences, if any : Hold a Bachelor of Economics from La Trobe University (Australia) in He is a Chartered Accountant of the Malaysian Institute of Accountants. He is also a Fellow member of CPA Australia and an associate of the Malaysian Institute of Taxation. Independent Non-Executive Director. He is also a Member of the Audit, the Nomination and the Remuneration Committees. He was appointed to the Board of the Company on 25 April 2004 as an Independent Non- Executive Director. He is an approved company auditor and has more than 20 years of experience in the auditing and accounting profession. Number of board meetings attended in the financial year : 0 None None None 10 BANENG HOLDINGS BHD ( W)

13 CHAIRMAN S STATEMENT To all our valued shareholders, On behalf of the Board of Directors, I am pleased to present to you the Annual Report and Financial Statements of the Group and the Company for the financial year ended 31 December Industry Overview It has been another challenging year for the whole textile and apparel industry. During the financial year under review, the industry continued to face intense competition from lower cost and huge labour-pool countries such as India, Vietnam and the People s Republic of China. Towards trade liberalization in 2005, the global market for the industry will see huge changes. Globalisation provides buyers with opportunities to get cheaper products than before, especially the traditional trading markets in USA and EU countries. In additional to that, buyers are given more options to decide when and what to buy: they are unwilling to commit orders in advance as they need to respond to the market trend in terms of fashions and designs. Thus, a shorter production lead time is essential for the manufacturers.these directly result in the compulsory strengthening of manufacturers production efficiency and order responsiveness. On top of that, the big retailers are identifying their sourcing partners who can manufacture for them a wider range of products. They will like to increase their portfolios with those established vertically set-up manufacturers who can provide more competitive prices, shorter leadtimes and wider range of products in different countries of production depending on their strengths. This will narrow down their sourcing and eventually achieve their objectives and yet quality and ethical issues can still be managed objectively. Financial Highlights For the financial ended 31 December 2003, the Group recorded a consolidated turnover of RM275.9 million compared to RM317.7 million in the preceding year. Pre-tax profit for the current financial year decreased to RM2.9 million as compared to RM19.2 million in 2002 while profit after tax was reported at RM3.7 million compared to RM18.9 million in the preceding year. The reduction in profitability is mainly attributed to the fabric division within the Group. This is due to the direct impact of pricing competition from China after its entrance as WTO member. The Group has taken necessary measures to downsize the division and forming new strategy for its operation; mainly to concentrate and expanding in the niche market that is the apparel divisions. Business Overview Being a fully vertically integrated fabric and apparel manufacturer, we offer a one-stop services and solutions to our customers ranging from design and product development, technical and sampling services, sourcing and logistic management. With large and established production set-ups, we are able to offer more value-added services to our end customers in terms of sharper pricing, shorter lead time to delivery and enhanced quality controls. With our established creditability, we believe we can serve our customers better and act as their strategic partners. With Malaysia as our headquarter, our growth will continue to be around this region. Countries which are in proximity to our headquarter and with abundant source of labour will be our target production base. With the establishment of our current strategic operating locations, besides having our production presence in Malaysia, Brunei and Lesotho, we are looking into acquisitions of more established garment factories in lower cost countries like Sri Lanka, Vietnam, Cambodia and China. These are our future identified countries for the Group s future potential production bases. With these, we believe we can provide sharper pricing, shorter leadtimes and a wider range of products for our valued customers. BANENG HOLDINGS BHD ( W) 11

14 CHAIRMAN S STATEMENT The management is prudent on the competitiveness of the fabric division in the international market in Year However, with our expansions into more apparel production bases, the fabric division will enhance and complement the apparel division in terms of production leadtimes which is very important for us to get nearer to the customers. As the apparel industry is becoming more and more globalized, there is a growing trend for established customers to select manufacturers who have sizeable capabilities which are strategically located and most importantly, with ability to offer cost-competitive solutions. Our marketing arms with Research & Development, designs and technical supports will enhance and give the full supports for the necessary first hand information in areas where our customers needs can be met. Such knowledge is very important as it provides and enhances the confidence levels for our customers. b. We will continue to expand and upgrade our production capacities and capabilities worldwide. This continuity to look for and expand into countries suitable for us and increase the Group s performance will help us to ensure further growth; c. We will continue to improve our efficiency and productivity through production management and process refinement. We will also continue to invest in more efficient ways of production and in management tools. We will set aside a budget to automate part of our production process to cater for more complicated and value styling jobs. d. We will continue to explore and integrate into other domains of the value chain of the fabric and apparel business. Where opportunities arise, we will expand our capabilities and business by acquiring or forming strategic partnerships or joint ventures with other manufacturers in these domains, who can add value to our business by allowing us to have greater involvement in businesses on which our present business is reliant. We believe that this will give us additional competitive edge over our competitors. Acknowledgement and Appreciations On behalf of the Board, I would like to extend out deepest appreciation to our shareholders, valued customers, financiers and business associates and especially to our employees for their continued supports, commitments and confidence in the Group. Future Prospects and Challenges Despite the improved economic outlook for 2004, external factors such as price deflation, the weaken US Dollar, unpegging of Ringgit Malaysia against US Dollar, fluctuation in cotton price, political instability and new quota-free and duty free system in 2005 have created many uncertainties in the industry. Y. Bhg. Tan Sri A Rahim Bin Tamby Chik Chairman With a good established network of customers, we believe that we are able to further advance the business and explore more business opportunities in the future. In order to keep up with various market changes, we are embarking on the following: a. We will be expanding the range and profile of our customers beyond our current main market in the United State of America. In this respect, we are exploring new markets in China, Middle East and Asean countries; 12 BANENG HOLDINGS BHD ( W)

15 CORPORATE GOVERNANCE STATEMENT The Board recognizes the significance of practicing good and sound corporate governance in preserving and enhancing shareholders value. The Board of Directors is pleased to report that throughout the financial year under review, it had applied the Principles of Corporate Governance and the Best Practices in Corporate Governance as set out in Part 1 and 2 of the Malaysian Code of Corporate Governance (the Code ) pursuant to Paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad whilst managing and directing the business and operations for the Company and its group of companies. A. Board of Directors 1. Board Duties and Responsibilities The Board assumes full responsibilities to lead and control the Group s direction and operation for the enhancement of the long-term shareholders value. The Board is responsible for the overall corporate governance, strategic formulations, business conduct and stewardship of the Group s resources. The Directors, with their diverse background and experience collectively bring with them a wide range of business acumen, management skills and expertise in areas such as finance, accounting, marketing, operations and auditing. There is a clear division of responsibilities between the Chairman and Managing Director of the Company to ensure a balance of power and authority. The Managing Director and the Executive Directors are responsible for implementing the policies and decision of the Board, overseeing the day to day operations as well as coordinating and monitoring the implementation of business and corporate strategies. The independent non-executive Directors play a pivotal role in providing objective and independent judgement to the decision making of the Board. Dr. Ng Soon Lim was appointed on the 4 September 2002 as the Senior Independent Non-Executive Director to whom shareholders may convey their concerns to. 2. Board Composition and Balance The Board currently consists of six (6) members. The Board comprises the Chairman who is Non independent nonexecutive, one (1) managing director, two (2) executive directors and two (2) independent non-executive directors. A brief profile of each Director is presented on pages 7 to 10 of this annual report. The Board s composition complies with the provisions of the Code and paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad that require a minimum of two (2) directors or one third of the Board to be independent Directors. The Three (3) Directors holding executive office represent the interest of the largest shareholders of the Company and the investment of remaining shareholders is fairly reflected in the Board representation. No individual or a group of individuals dominate the decision making of the Board and enable the Board to effectively discharge its principle responsibilities as set out in the Code. 3. Board Meetings The Board meets on a quarterly basis, with additional meetings convened as and when necessary. Five (5) board meetings were held during the financial year ended 31 December 2003 and the Directors attendance are as follows: Director Attendance Y. Bhg. Tan Sri A. Rahim Bin Tamby Chik 4 Mdm. Lim Choon Hiok 5 Mr. Lim Meng Hong 4 Mr. Lim Meng Hee 5 Dr. Ng Soon Lim 5 Mr. Chai Koh Wah (appointed on 25 April 2004) - Mr. Keah Say Wan (resigned on 15 March 2004) 5 All Directors have complied with the minimum attendance at the Board meetings as stipulated by the Listing Requirements of Bursa Malaysia Securities Berhad. BANENG HOLDINGS BHD ( W) 13

16 CORPORATE GOVERNANCE STATEMENT 4. Supply of Information The Directors have full access to all information and records of the Group. The meeting agenda, together with reports and preposition papers for each meeting are circulated prior to the meeting to ensure the Directors have sufficient time to consider and deliberate on the matters to be discussed at Board meetings. Senior Management staffs as well as the external auditor are invited to attend Board meetings to provide their views and explanations on certain agenda items tabled to the Board, and to furnish their clarification on issues that may be raised by the Directors. The Directors are updated by the Company Secretary on new statutory as well as regulatory requirements relating to the duties and responsibilities. Full Board have ready access to the Company Secretary. The Directors have the right to engage independent professional advise (if necessary) at the Company s expense in furtherance of their duties. 5. Board Committees The Board of Directors has established several Board Committees to delegate their duties. This includes the Audit Committee, the Nomination Committee and the Remuneration Committee. The Chairman of the respective committee will brief the Board on the matters discussed at the meetings and minutes of those meetings are circulated to the full Board. The ultimate responsibilities for the decision on all matters are reserved for the Board. 6. Appointments to the Board The Nomination Committee is empowered by the Board and its term of reference to bring to the Board recommendations as to the appointment of new Directors. The Committee reviews the effectiveness of the Board, its Committees and the contributions of each individual Director on an annual basis. The Committees also keeps under review the Board structure, size, composition and mix of skills, business acumen and the competencies required for the Board to effectively discharged its duties. The memberships of the Nomination Committee during the year are as follows: Chairman Member : Y. Bhg. Tan Sri A. Rahim bin Tamby Chik : Dr. Ng Soon Lim Mr. Chai Koh Wah (appointed on 25 April 2004) Mr. Keah Say Wan (resigned on 15 March 2004) This Committee is empowered to bring the Board recommendations on appointment of any new director and would ensure that Board has an appropriate balance of expertise and ability. The Nomination Committee had on 25 April, 2004 made its recommendation on the appointment of Mr. Chai Koh Wah as an Independent Non-Executive Director of the Company to the Board of Directors for approval to fill in the vacancy created due to the resignation of Mr. Keah Say Wan as the Independent Non-Executive Director of the Company on 15 March, The Nomination Committee met one time during the financial year where all members were present. The Nomination Committee met to:- i) Approve the principles and processes of assessing Board effectiveness and performance evaluation of Senior Management; and ii) Deliberate and approve performance objectives and standards for the Board and the contributions of each individual director. 14 BANENG HOLDINGS BHD ( W)

17 CORPORATE GOVERNANCE STATEMENT A. Board of Directors (Cont d) 7. Directors Training All Directors except for Mr Chai Koh Wah have completed the Mandatory Accreditation Program conducted by the Research Institute of Investment Analyst Malaysia. The Directors will be undergoing the Continuing Education Programs and other relevant training programs as a continuous effort to enhance their skills and knowledge to effectively discharge their duties. 8. Re-Election of Directors In accordance to the Company s Articles of Association, all newly appointed directors shall retire from office at the close of the next Annual General Meeting and shall then be eligible for re-election. The Articles also provided that at least one-third of the Board or the number nearest to one-third are subject to retirement and are eligible for re-election at the Annual General Meeting at least once every three years. Details of Directors seeking re-election at the forthcoming annual general meeting are disclosed in the statement accompanying the Notice of annual general meeting as set out on page 4 of this annual report. B. Directors Remuneration The Board recognizes the need to structure the remuneration packages for Directors so as to be able to attract, retain and motivate Directors of the right caliber required to mange the Company and to align the interests of the Directors with those of the shareholders. The Remuneration Committee is responsible for setting the remuneration policy framework and making recommendations to the Board on the remuneration and other terms of employment for the Executive Directors of the Group. The terms of reference of the Remuneration Committee are clearly defined to its members. The determination of remuneration of Non Executive Directors is a matter for the Board as a whole. The individual concerned has abstains from deliberations in respect of their own remuneration. The memberships of the Remuneration Committee during the year are as follows: Chairman Member : Mdm. Lim Choon Hiok : Dr. Ng Soon Lim Mr. Chai Koh Wah (appointed on 25 April 2004) Mr. Keah Say Wan (resigned on 15 March 2004) The remuneration of the Executive Directors of the Company is structured so as to link rewards to corporate and individual performance. Reference have also been made to established survey findings on directors allowance, roles and remuneration of listed firms for proposing the remuneration packages of the Executive Directors of the Company. The remuneration of the Non-Executive Directors is fixed after taking into consideration their level of experience and responsibilities. The Remuneration Committee has on 27 February, 2004, reviewed annually the performance of the Executive Directors and furnished recommendations to the Board on specific adjustments. In accordance with the Company s Articles of Association, the Directors remuneration is subject to Shareholders approval. BANENG HOLDINGS BHD ( W) 15

18 CORPORATE GOVERNANCE STATEMENT B. Directors Remuneration (Cont d) The Company s Directors aggregate remuneration is categorized into appropriate components are as follows: Non-Executive Directors RM 000 Executive Directors RM 000 Fees Salaries and other emoluments Contribution to EPF - 68 Bonus - 57 Allowances 7 - Total 115 1,196 The number of Directors of the Company who served during the financial year and whose aggregate remuneration from the Group failing within the respective band are as follows: Non-Executive Directors Executive Directors Below RM50, RM50,001 RM250, RM250,001 RM450, RM450,001 RM650,000-2 C. Shareholders The Board recognizes the importance of maintaining active communication with its shareholders and timely dissemination of information concerning the Group s business performance. Announcements on various disclosures and the quarterly financial reports are made to Bursa Malaysia Securities Berhad and the annual reports provide shareholders and the investing public with an overview of the Group s performance. The principal forum for dialogue with shareholders is the general meeting of the Company. Appropriate notice of meeting would be communicated depending on the purpose of the meeting. The notice would be accompanied by the prescribed documents or statement providing explanation of the intended agenda to facilitate full understanding and evaluation. All Directors are available to provide responses to questions from the shareholders during the general meeting. D. Accountability and Audit 1. Financial Reporting The Board aims to provide a true and fair assessment of the Group s financial performance and a balanced assessment of the Group s prospects through the quarterly financial reports to the Bursa Malaysia Securities Berhad and the annual report to shareholders. The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and the Company as at the end of the accounting period and of the results of the operations and cash flows for the period then ended. In preparing the financial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been consistently applied, and made reasonable and prudent judgements and estimates. 16 BANENG HOLDINGS BHD ( W)

19 CORPORATE GOVERNANCE STATEMENT D. Accountability and Audit (Cont d) 2. Internal Control The Directors are fully aware of their responsibilities to maintain a sound system of internal control to safeguard shareholders investment and the Group s assets. The Statement of Internal Control furnished on pages 18 to 19 of this Annual Report provides an overview on the state of internal controls within the Group. 3. Audit Committee The roles of the Audit Committee together with their duties and summary of the activities during the year are set out in the Audit Committee Report on pages 20 to 22 of this Annual Report. 4. Relationship with External Auditors The Board has established an appropriate and transparent relationship with the Company s external auditors in seeking professional advice through the Audit Committee. The Audit Committee meets with the external auditors whenever it deem necessary to discuss the audit plan, annual financial statements and their audit findings. E. Compliance with Best Practices The Board has throughout the financial year complied with the best practices as set out in Part 2 of the Code. STATEMENT OF DIRECTORS RESPONSIBILITIES FOR PREPARING THE FINANCIAL STATEMENTS The Board is required by the Companies Act, 1965 to prepare the financial statements so as to give true and fair view of the state of affairs of the Company and the Group at the financial year end, and of the results and cash flows of the Company and the Group for the financial year under review. The Directors have used suitable accounting policies and applied them consistently, made judgments and estimates that are prudent and reasonable, and adopted applicable accounting standards during the preparation of the financial statements. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act, In addition, the Directors are also responsible for taking reasonable steps to safeguard the assets of the Group and to detect and prevent any fraud as well as any other irregularities. The collective approval by the Board on this Statement was tabled on 25 April, BANENG HOLDINGS BHD ( W) 17

20 STATEMENT ON INTERNAL CONTROL Introduction Paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors of listed companies to include in its annual report a statement about the state of internal control of the listed issuer as a group. The Board is committed in maintaining a sound system of internal control in the Group and is pleased to provide the following statement which outlines the nature and scope of internal controls of the Group during the year. The Board is ultimately responsible for the Group s system of internal control and risk management, including the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity. Due to the inherent limitations in any system of internal controls, such a system is designed to manage rather than eliminate the risk of failure to achieve business and corporate objectives and can only provide reasonable and not absolute assurance against materials misstatement or loss. The system of internal controls covers risk management and financial, organizational, operational and compliance controls. Risk Management Framework Although there is no formal structured risk management framework was developed, the Board fully recognizes the importance and supports the content of the Internal Control Guidance. The Board continually reviews the adequacy and effectiveness of the risk management process through regular informal management and departmental meetings held by the Executive Directors and key management staff in each operating unit. Key risks identified includes but not exclusively, competitors activities through market information, buyers compliance, market changes, production scheduling, quality control, financial planning and human management. Internal Control Process The Board is committed in maintaining a strong and effective internal control structure to compliment the proper conduct of the Group s business operations. The internal control process is reviewed regularly, informally by the managing directors through their close involvement in daily business operation, to ensure effectiveness and business objectives are achieved in a controlled environment. Major internal control elements of the Group include but not exclusive: a) Financial and credit control Personnel are carefully selected to prevent any misconduct. Authorisation limits are set to minimise risk of unauthorised transaction. Purchasing function were centralised at Head Office to ensure minimise mishandlings as well as to leverage on the Group s purchasing power b) Organizational structure The Group has established a clear organisational structure with defined lines of reporting, responsibility and delegation of authority. c) Reporting and reviewing Timely financial reports were submitted to Top Management for review, monitoring of results with management action taken, where necessary. d) Monitoring of business units Regular visits to business units by Executive Directors to ensure compliance with the Group s policies and procedures. Regular informal evaluation are conducted with manager in charged on areas and matters pertinent to the business units for compliance. 18 BANENG HOLDINGS BHD ( W)

21 STATEMENT ON INTERNAL CONTROL Internal Control Process (Cont d) The Board has reviewed the effectiveness of the internal control through the above processes and is not aware of any significant deficiencies in the Group s system of internal control for the year under review which may resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group s annual report. Apart from the above internal framework, the Group also relies on findings by the external auditors. In the absence of any formal internal control department, the Board believes they are capable of safeguarding shareholders investment by constant monitoring and reviewing of the above processes. Nevertheless, the Board is constantly looking out for a suitable out-sourcing support. The Board remained committed towards operating a sound system of internal control and strives for continuous improvement to further enhance the Group s system of internal framework. BANENG HOLDINGS BHD ( W) 19

22 AUDIT COMMITTEE REPORT A. Establishment and Memberships The membership of the Audit Committee is as follow: Chairman : Dr. Ng Soon Lim/Independent Non-Executive Director (appointed on 25 April 2004) Mr. Keah Say Wan/Independent Non-Executive Director (resigned on 15 March 2004) Member : Mr. Lim Meng Hong/Executive Director Mr. Chai Koh Wah/Independent Non-Executive Director Mr. Lim Meng Hong and Mr. Chai Koh Wah are members of the Malaysian Institute of Accountants. B. Terms of Reference The terms of reference of the Audit Committee are as follows:- Composition The Company shall appoint an AuditCommittee from amongst its directors and shall consist of not less than three (3) in numbers of whom a majority shall be independent directors. No alternate director is appointed as a member of the Committee and at least one (1) member of the Committee:- (a) Shall be a member of the Malaysian Institute of Accountants; or (b) If he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experiences and:- (i) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or (ii) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act The members of the Audit Committee shall elect a Chairman from among their members who shall be an independent director. In the event of any vacancy in the Committee resulting in the non-compliance of the above stated conditions, the company shall fill the vacancy within three (3) months. The Board of directors of the company shall review the term of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether such audit committee and members have carried out their duties in accordance with their terms of reference. Rights The Audit Committee shall, in accordance with a procedure to be determined by the Board of directors and at the cost of the Company: (a) have authority to investigate any matter within its terms of reference; (b) have the resources which are required to perform its duties; (c) have full and unrestricted access to any information pertaining to the company; (d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any); (e) be able to obtain independent professional or other advice; and (f) be able to convene meetings with the external auditors, excluding the attendance of the executive members of the committee, whenever deemed necessary. Where the Committee is of the view that a matter reported by it to the board of directors of the company has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Kuala Lumpur Stock Exchange, the Audit Committee shall promptly report such matter to the Kuala Lumpur Stock Exchange. 20 BANENG HOLDINGS BHD ( W)

23 AUDIT COMMITTEE REPORT B. Terms of Reference (Cont d) Meeting The Audit Committee shall meet at least each quarter of a financial year and such additional meetings as the Chairman shall decide in order to fulfill its duties. The Company Secretary or any person appointed by the Audit Committee shall act as Secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and other supporting explanatory documentation for circulation to the Committee Members prior to each meeting. The Secretary will also be responsible for keeping the minutes of the meetings of the Audit Committee, and circulating them to Committee Members and to other members of the Board of Directors. The Chairman of the Audit Committee shall convene a meeting of the audit committee to consider any matter the external auditor believes should be brought to the attention of the directors or shareholders. Other directors and employees must attend any particular Audit Committee meeting only at the Audit Committee s invitation, specific to the relevant meeting. A quorum shall consist of a majority of members present who must be independent directors. Functions The functions of the Audit Committee are as follow:- 1. review the following and report the same to the board of directors of the Company:- (a) the audit plan with the external auditor. (b) with the external auditor its evaluation of the system of internal controls. (c) the audit report with the external auditors. (d) the assistance given by the employees of the Company to the external auditor. (e) the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work. (f) the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function. (g) the quarterly results and year end financial statements, prior to the approval by the board of directors, focusing particularly on:- (i) changes in or implementation of major accounting policy changes. (ii) significant and unusual events; and (iii) compliance with accounting standards and other legal requirements. (h) any related party transaction and conflict of interest situation that may arise within the company or group including any transaction, procedure or course of conduct that raises questions of management integrity. (i) any letter of resignation from the external auditors of the company; and (j) whether there is reason (supported by grounds) to believe that the company s external auditor is not suitable for re-appointment; and 2. to recommend the nomination of a person or persons as external auditors. Summary of Audit Committee Activities The Audit Committee held a total of five (5) meetings during the financial year ended 31 December The Senior Management and a representative of the external auditors normally attend the Committee meetings. Other Board members may attend meetings upon invitation of the Committee. The Minutes of the Audit Committee meeting have been extended to all members of the Board of Directors and significant issues discussed at the Board Meetings. The attendance of each Audit Committee member were as follows:- BANENG HOLDINGS BHD ( W) 21

24 AUDIT COMMITTEE REPORT B. Terms of Reference (Cont d) Summary of Audit Committee Activities (Cont d) Audit Committee Member Total no. of meetings held during the year Meetings Attended Keah Say Wan (resigned on 15 March 2004) 5 5 Ng Soon Lim 5 5 Lim Meng Hong 5 4 Chai Koh Wah (appointed on 25 April 2004) 5 - During the financial year, the activities undertaken by the Audit Committee include:- a. Review of the quarterly unaudited financial results of the Group prior making the recommendations to the Board of Directors for approval ; b. Review of inter-company transactions and/or any related party transactions or conflict of interest situations that arose within the Group or the Company; c. Discussion on the Company's Corporate Governance process and the application of the key principles and best practices of Corporate Governance and the compliance with the Listing Requirement of Bursa Malaysia Securities Berhad; d. Discussion and review of the semi annual returns pursuant to the Paragraph 8.02 of Chapter 8 of the Listing Requirements of the Bursa Malaysia Securities Berhad; e. Discussion and review of the proposed amendments to the Listing Requirements of Bursa Malaysia Securities Berhad; f. Review the annual audited financial statements of the Group and the Company for the financial year ended 31 December, 2003 and made recommendations to the Board of Directors for approval; g. Discussion and review on the external auditors reports in relation to audit and accounting issues arising from the audit; and h. Discussing and reviewing the external auditors scope of work. Relationship with External auditors The Audit Committee s terms of reference formalises the relationship with the External Auditors. Through the Audit Committee, the Company has maintained a formal and transparant relationship with its auditors in seeking professional advice and ensuring compliance with its auditors in seeking professional advice and ensuring compliance with the Malaysian Accounting Standard Board ( MASB ) standards of accounting policies and methods when the Group s financial statements are prepared. Non-audit fees The amount of non-audit fee paid to the external auditors by the Group and the Company for the financial year amounted to RM16,000 and RM9,000 respectively. Internal Control and Risk Managment The committee recognizes the importance of an independant and a well established internal audit function in obtaining the assurance it requires regarding the effectiveness of the internal control system. The Group believes that although it does not have a formal internal audit department and a risk management committee; informal identification of internal control system and evaluation of business risk carried out during management and departmental meetings are sufficient to safeguard shareholders investment and the Group s assets. The Group currently also relies on findings of the external auditors. Such internal control findings and business risks are discussed and addressed by the Audit Committee where appropriate. The corrective and preventive actions are implemented where necessary. The Audit Committee will review the need for setting up the internal Audit Department from time to time. 22 BANENG HOLDINGS BHD ( W)

25 OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD a. Material Contracts Save for the following, neither the Company nor any of its subsidiaries has entered into any material contracts involving Directors and major shareholders interest, either still subsisting at the end of the financial year under review or entered into since the end of the previous financial year:- i) A Conditional Sale and Purchase agreement between Baneng Industries Sdn Bhd ( BISB ), a wholly-owned subsidiary of the Company and Mr. Lim Thian Lim Thiam Hock dated 14 November, 2003 for the purchase by Baneng Industries Sdn Bhd of a piece of land together with an Industrial Building known as Lot PTD 17076, Mukim of Simpang Kanan, District of Batu Pahat, State of Johor held under H.S. (D) 22056, containing an area of hectares situated at Lorong 5, Batu 3 1 /2, Jalan Kluang, Batu Pahat, Johor Darul Takzim for the total cash consideration of RM9,950,000 (Ringgit Malaysia Nine Million and Nine Hundred Fifty Thousand Only) (Proposed Acquisition by Baneng Industries); and ii) A Conditional Sale and Purchase agreement between Maxlin Garments Sdn Bhd ( Maxlin ), a wholly-owned subsidiary of Baneng Industries Sdn Bhd and Regnistar Corporation Sdn Bhd ( Regnistar ) dated 14 November, 2003 for the purchase by Maxlin Garments Sdn Bhd of a piece of land together with an Industrial Building known as Lot P.T.D held under H.S. (D) and Lot P.T.D held under H.S. (D) for respectively both of Mukim of Minyak Beku, District of Batu Pahat, State of Johor containing an area of 4, square metres and 11, square metres respectively situated at Plot 4 & 5, Lot 163, Batu 6, Jalan Tanjong Laboh, Batu Pahat, Johor Darul Takzim for the total cash consideration of RM6,200,000 (Ringgit Malaysia Six Million and Two Hundred Thousand Only) ( Proposed Acquisition by Maxlin ). The substantial shareholders and directors of the Company, BISB and Maxlin as at 20 May, 2004 who are deemed related and their relationship with the Vendors are as follows:- i) Proposed Acquisition by Baneng Industries The Company BISB Maxlin Lim Choon Hiok Managing Director, Director, Director, substantial shareholder substantial shareholder * substantial shareholder* Lim Meng Hong Director Alternate Director to Director Lim Choon Hiok and Y. Bhg. Tan Sri A Rahim Bin Tamby Chik Lim Meng Hee 1 Director - - Lim Thian Lim Thiam Hock 2 - Directorº - Lim Poh Choo 3 Substantial shareholder* - - Upaya Mendaki Sdn Bhd 3^ Substantial shareholder Substantial shareholder* Substantial Shareholder* (*) Deemed interested by virtue of Section 6A of the Companies Act, (") Mr. Lim Meng Hong is the brother of Lim Choon Hiok and brother-in-law of Lim Thian Lim Thiam Hock. ( 1 ) Mr. Lim Meng Hee is also the brother of Lim Choon Hiok and brother-in-law of Lim Thian Lim Thiam Hock. ( 2 ) Mr. Lim Thian Lim Thiam Hock, husband of Lim Choon Hiok, is the vendor for the Proposed Acquisition by Baneng Industries and was a director of Baneng Industries up to 18 November, BANENG HOLDINGS BHD ( W) 23

26 OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD a. Material Contracts (Cont d) i) Proposed Acquisition by Baneng Industries (Cont d) (º) As at 19 November, 2003, Mr. Lim Thian Lim Thiam Hock ceased to be a director of Baneng Industries Sdn Bhd. Therefore, Mr. Lim Meng Hong ceased to an Alternate Director to Lim Thian Lim Thiam Hock.. ( 3 ) Persons connected to the interested directors. Ms. Lim Poh Choo is the sister of Ms. Lim Choon Hiok, Mr. Lim Meng Hong and Mr. Lim Meng Hee while Mr. Lim Thian Lim Thiam Hock is the spouse of Ms. Lim Choon Hiok. (^) The Directors and substantial shareholders of Upaya Mendaki Sdn Bhd are Ms. Lim Choon Hiok and Ms. Lim Poh Choo. ii) Proposed Acquisition by Maxlin Regnistar is the vendor for the Proposed Acquisition by Maxlin and Maxlin is the purchaser. The substantial shareholders of Regnistar are Ms. Lim Choon Hiok and Mr. Lim Thian Lim Thiam Hock. Mr. Lim Thian Lim Thiam Hock, a director of Regnistar, is also a substantial shareholder of Regnistar with Ms. Lim Choon Hiok. b. Conflict of Interests None of the Directors has any conflict of interest with the Company except for Ms. Lim Choon Hiok, Mr. Lim Meng Hong and Mr. Lim Meng Hee are deemed interested in the following related party transactions:- i) A Conditional Sale and Purchase agreement between Baneng Industries Sdn Bhd, a wholly-owned subsidiary of the Company and Mr. Lim Thian Lim Thiam Hock dated 14 November, 2003 for the purchase by Baneng Industries Sdn Bhd of a piece of land together with an Industrial Building known as Lot PTD 17076, Mukim of Simpang Kanan, District of Batu Pahat, State of Johor held under H.S. (D) 22056, containing an area of hectares situated at Lorong 5, Batu 3 1 /2, Jalan Kluang, Batu Pahat, Johor Darul Takzim for the total cash consideration of RM9,950,000 (Ringgit Malaysia Nine Million and Nine Hundred Fifty Thousand Only); ii) A Conditional Sale and Purchase agreement between Maxlin Garments Sdn Bhd, a wholly-owned subsidiary of Baneng Industries Sdn Bhd and Regnistar Corporation Sdn Bhd dated 14 November, 2003 for the purchase by Maxlin Garments Sdn Bhd of a piece of land together with an Industrial Building known as Lot P.T.D held under H.S. (D) and Lot P.T.D held under H.S. (D) for respectively both of Mukim of Minyak Beku, District of Batu Pahat, State of Johor containing an area of 4, square metres amd 11, square metres respectively situated at Plot 4 & 5, Lot 163, Batu 6, Jalan Tanjong Laboh, Batu Pahat, Johor Darul Takzim for the total cash consideration of RM6,200,000 (Ringgit Malaysia Six Million and Two Hundred Thousand Only). c. Sanctions And/Or Penalties There were no sanctions or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies. d. American Depository Receipt (ADR)/Global Depository Receipt (GDR) The Company did not sponsor any ADR or GDR program. e. Share Buy-backs The Company did not enter into any share buy-backs tansactions during the financial year. f. Options, Warrants or Convertible Securities There were no options, warrants or convertible securities being exercised during the financial year. g. Revaluation Policy The Company and the Group do not have a policy on revaluation of land and buildings. 24 BANENG HOLDINGS BHD ( W)

27 FINANCIAL STATEMENTS 26 Directors Report 29 Statement by Directors 29 Statutory Declaration 30 Report of the Auditors 31 Income Statements 32 Balance Sheets 33 Statements of Changes in Equity 34 Cash Flow Statements 35 Notes to the Financial Statements

28 DIRECTORS REPORT The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and provision of management services. The principal activities of the subsidiaries are described in Note 12 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year. RESULTS Group RM 000 Company RM 000 Profit after taxation 3, Minority interests (1,076) - Net profit for the year 2, There were no material transfers to or from reserves or provisions during the financial year. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS The amount of dividends paid by the Company since 31 December 2002 were as follows: RM 000 In respect of financial year ended 31 December 2002 Final tax exempt dividend of 5% paid on 15 August ,000 The directors do not recommend the payment of any dividend of the current financial year. DIRECTORS The names of the directors of the Company in office since the date of the last report and at the date of this report are: Y. Bhg. Tan Sri A Rahim Bin Tamby Chik Lim Choon Hiok Lim Meng Hong Lim Meng Hee Keah Say Wan resigned on 15 March 2004 Dr. Ng Soon Lim Chai Koh Wah appointed on 25 April BANENG HOLDINGS BHD ( W)

29 DIRECTORS REPORT DIRECTORS BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable 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 related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 26 to the financial statements. DIRECTORS INTERESTS According to the register of directors shareholdings, the interests of directors in office at the end of the financial year in shares in the Company during the financial year were as follows: Direct Interest Number of Ordinary Shares at RM1 Each 1 January 31 December 2003 Bought Sold 2003 Y. Bhg. Tan Sri A Rahim Bin Tamby Chik 100, ,000 Lim Choon Hiok 12,857, ,857,727 Lim Meng Hong 161, ,774 Indirect Interest Lim Choon Hiok 18,325, ,325,886 Lim Choon Hiok by virtue of her interest in shares of the Company is also deemed interested in shares of all the Company s subsidiaries to the extent the Company has an interest. None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. 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. BANENG HOLDINGS BHD ( W) 27

30 DIRECTORS REPORT OTHER STATUTORY INFORMATION (CONT D) (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence 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. SUBSEQUENT EVENTS The subsequent events are as disclosed in Note 27 to the financial statements. 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 LIM CHOON HIOK LIM MENG HONG Melaka, Malaysia Date: 25 April, BANENG HOLDINGS BHD ( W)

31 STATEMENT DIRECTORS BY DIRECTORS REPORT PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, LIM CHOON HIOK and LIM MENG HONG, being two of the directors of BANENG HOLDINGS BHD., do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 31 to 56 are drawn up in accordance with applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2003 and 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 LIM CHOON HIOK LIM MENG HONG Melaka, Malaysia Date: 25 April, 2004 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, LIM CHOON HIOK, being the Director primarily responsible for the financial management of BANENG HOLDINGS BHD., do solemnly and sincerely declare that the accompanying financial statements set out on pages 31 to 56 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed LIM CHOON HIOK at Melaka in the State of Melaka on 25 April, 2004 LIM CHOON HIOK Before me, Commissioner For Oaths BANENG HOLDINGS BHD ( W) 29

32 REPORT OF THE AUDITORS TO THE MEMBERS OF BANENG HOLDINGS BHD. (Incorporated in Malaysia) We have audited the accompanying financial statements set out on pages 31 to 56. These financial statements are the responsibility of the Company s directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable 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 31 December 2003 and of the results and the cash flows of the Group and of the Company for the year then ended; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and its 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 we have not acted as auditors, as indicated in Note 12 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditor s reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidated financial statements and in respect of subsidiaries incorporated in Malaysia did not include any comment required to be made under Section 174 (3) of the Act. Ernst & Young AF: 0039 Chartered Accountants Lee Ah Too No. 2187/09/05(J) Partner Melaka, Malaysia Date: 25 April, BANENG HOLDINGS BHD ( W)

33 INCOME DIRECTORS STATEMENTS REPORT FOR THE YEAR ENDED 31 DECEMBER 2003 Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue 3 275, , ,142 Cost of sales (238,280) (258,928) - - Gross profit 37,645 58, ,142 Other operating income Administrative expenses (20,424) (20,885) (258) (833) Selling and marketing expenses (2,881) (5,373) - - Profit from operations 4 14,574 32, ,341 Finance costs, net 7 (11,717) (13,740) - - Profit before taxation 2,857 19, ,341 Taxation (375) (42) - Profit after taxation 3,681 18, ,341 Minority interests (1,076) (2,646) - - Net profit for the year 2,605 16, ,341 Basic earnings per share (sen) The accompanying notes form an integral part of the financial statements. BANENG HOLDINGS BHD ( W) 31

34 BALANCE SHEETS AS AT 31 DECEMBER 2003 Group Company Note RM 000 RM 000 RM 000 RM 000 NON-CURRENT ASSETS Property, plant and equipment , , Investment in subsidiaries ,203 59,203 Due from a subsidiary ,334 19, , ,318 79,537 79,190 CURRENT ASSETS Inventories 14 74,095 73, Trade receivables , , Other receivables 16 33,833 16, Marketable securities Cash and bank balances 18 11,789 11, , , CURRENT LIABILITIES Borrowings , , Trade payables 19,914 20, Other payables 21 7,989 10,271 3, Tax payables , ,858 3, NET CURRENT ASSETS/(LIABILITIES) 13,727 22,434 (2,992) , ,752 76,545 79,455 FINANCED BY : Share capital 22 60,000 60,000 60,000 60,000 Reserves 43,959 44,353 16,545 19,455 Shareholders equity 103, ,353 76,545 79,455 Reserve on consolidation 37,165 37, Minority interests 14,724 13, , ,166 76,545 79,455 Borrowings 19 23,334 38, Deferred taxation 23 1,759 2, Non-current liabilities 25,093 41, , ,752 76,545 79,455 The accompanying notes form an integral part of the financial statements. 32 BANENG HOLDINGS BHD ( W)

35 STATEMENTS OF DIRECTORS CHANGES IN REPORT EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 Non-distributable Distributable Foreign Share Share exchange Retained capital premium reserve profits Total RM 000 RM 000 RM 000 RM 000 RM 000 Group At 31 December ,000 8,203 (1,057) 11,483 69,629 Public issue at RM2.10 per share 9,000 9, ,900 Shares issue expenses - (2,013) - - (2,013) Currency translation differences ** - - 1,623-1,623 Net profit for the year ,214 16,214 At 31 December ,000 16, , ,353 Currency translation differences ** Net profit for the year ,605 2,605 Dividends (Note 10) (3,000) (3,000) At 31 December ,000 16, , ,959 Company At 31 December ,000 8, ,227 Public issue at RM2.10 per share 9,000 9, ,900 Shares issue expenses - (2,013) - - (2,013) Net profit for the year ,341 3,341 At 31 December ,000 16,090-3,365 79,455 Net profit for the year Dividends (Note 10) (3,000) (3,000) At 31 December ,000 16, ,545 ** representing net gains/(losses) not recognised in the income statement The accompanying notes form an integral part of the financial statements. BANENG HOLDINGS BHD ( W) 33

36 CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 Group Company RM 000 RM 000 RM 000 RM 000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 2,857 19, ,341 Adjustments for: Bad and doubtful debts Depreciation 15,285 15, Dividends income - - (300) (4,052) Gain on disposal of property, plant and equipment (86) (8) - - Interest expense 11,915 14, Interest income (198) (310) - - Operating profit/(loss) before working capital changes 29,773 48,637 (168) (711) Increase in inventories (1,094) (9,007) - - (Increase)/decrease in receivables (3,940) (35,255) (Decrease)/increase in payables (3,362) (3,347) 2,798 (396) Cash generated from/(used in) operations 21,377 1,028 2,916 (821) Interest paid (11,915) (14,050) - - Income tax paid (240) (549) - - Net cash generated from/(used in) operating activities 9,222 (13,571) 2,916 (821) CASH FLOWS FROM INVESTING ACTIVITIES Advance to a subsidairy - - (347) (19,987) Dividends received ,980 Purchase of property, plant and equipment (4,657) (27,697) - - Proceeds from disposal of property, plant and equipment Interest received Net cash used in investing activities (4,045) (26,798) (89) (16,007) CASH FLOWS FROM FINANCING ACTIVITIES Drawdown of hire purchase Proceeds from issuance of shares - 18,900-18,900 Shares issue expenses paid - (2,013) - (2,013) Drawdown of term loans - 9, Dividend paid (3,000) (95) (3,000) - Repayment of term loans (11,806) (8,611) - - Repayment of hire purchase (4,205) (12,089) - - Short term borrowings 11,915 32, Net cash (used in)/generated from financing activities (6,611) 38,119 (3,000) 16,887 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,434) (2,250) (173) 59 EFFECTS OF EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,197 13, * CASH AND CASH EQUIVALENTS AT END OF YEAR 9,763 11,197 (114) 59 * RM2 The accompanying notes form an integral part of the financial statements. 34 BANENG HOLDINGS BHD ( W)

37 NOTES TO THE FINANCIAL DIRECTORS STATEMENTS REPORT 31 DECEMBER CORPORATE INFORMATION The principal activities of the Company are investment holding and provision of management services. The principal activities of the subsidiaries are described in Note 12. There have been no significant changes in the nature of the principal 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 Bursa Malaysia Securities Berhad. The principal place of business of the Company is located at Lot 4979, 2 1 /2 Miles, Jalan Tanjung Laboh, Batu Pahat, Johor. The number of employees in the Group at the end of the financial year was 2,970 (2002 : 3,626). There was no employee in the Company at the end of the financial year. The accounting records of the Company are maintained by the employees of a subsidiary. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 25 April 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 and comply with the provisions of the Companies Act, 1965 and applicable Approved Accounting Standards in Malaysia. During the financial year ended 31 December 2003, the Group and the Company adopted the following MASB Standards for the first time: MASB 25 Income Taxes MASB 27 Borrowing Costs MASB 28 Discontinuing Operations MASB 29 Employee Benefits The adoption of MASB 25, MASB 27, MASB 28 and MASB 29 have not given rise to any adjustments to the opening balances of retained profits of the prior and current year or to changes in comparatives. (b) Basis of Consolidation The consolidated financial statements include the financial statements of the Company and all its subsidiaries. Subsidiaries are those companies in which the Group has a long term equity interest and where it has power to exercise control over the financial and operating policies so as to obtain benefits therefrom. 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 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 a subsidiary are measured at their fair values at the date of acquisition and these values are reflected in the consolidated balance sheet. 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. Intragroup 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. The gain or loss on disposal of a subsidiary company is the difference between net disposal proceed and the Group s share of its net assets together with any unamortised balance of goodwill and exchange differences which were not previously recognised in the consolidated income statement. Minority interest is measured at the minorities share of the post acquisition fair values of the identifiable assets and liabilities of the acquiree. BANENG HOLDINGS BHD ( W) 35

38 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER SIGNIFICANT ACCOUNTING POLICIES (CONT D) (c) Investments in Subsidiary 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(l). On disposal of such investment, the difference between net disposal proceeds and their carrying amounts is recognised in the income statement. (d) Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(l). Freehold land and capital work-in-progress are not depreciated. Depreciation of other property, plant and equipment is provided for on the reducing balance basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates: Buildings 2% Plant and machinery 10% Air conditioners 10% Factory and office equipment 10% Furniture and fittings 10% Electrical installations 10% Forklifts and motor vehicles 20% 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. (e) Inventories Inventories are stated at the lower of cost (determined on the first-in, first-out basis) and net realisable value. Cost of work-in-progress and finished goods include direct materials, direct labour, other direct costs and appropriate 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. (f) Cash and Cash Equivalents For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank and deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts. (g) Hire Purchase Assets acquired by way of hire purchase are stated at an amount equal to the lower of their fair values and the present value of the minimum hire purchase payments at the inception of the hire purchase, 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 hire purchase payments, the discount factor used is the interest rate implicit in the hire purchase, when it is practicable to determine; otherwise, the Company s incremental borrowing rate is used. 36 BANENG HOLDINGS BHD ( W)

39 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER SIGNIFICANT ACCOUNTING POLICIES (CONT D) (g) Hire Purchase (Cont d) Hire purchase payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total hire purchase commitments and the fair value of the assets acquired, are recognised as an expense in the income statement over the term of the relevant hire purchase 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 assets acquired under hire purchase is consistent with that for depreciable property, plant and equipment as described in Note 2(d). (h) 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 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 charged or credited 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. Prior to the adoption of MASB25 Income Taxes on 1 January 2003, deferred tax was provided for using the liability method in respect of significant timing differences and deferred tax assets were not recognised unless there was reasonable expectation of their realisation. (i) Employee Benefits (i) Short term benefits Wages, 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 plans As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund ( EPF ). Some of the Group s foreign subsidiaries make contributions to their respective countries' statutory pension schemes. Such contributions are recognised as an expense in the income statement as incurred. Prior to the adoption of MASB 29 Employee Benefits on 1 January 2003, no liability was recognised for the obligations in respect of short-term employee benefits in the form of accumulating compensated absences. BANENG HOLDINGS BHD ( W) 37

40 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER SIGNIFICANT ACCOUNTING POLICIES (CONT D) (j) 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) Sales of goods Revenue relating to sale of goods is recognised net of sales discounts and returns upon the transfer of risks and rewards. (ii) Dividend income Dividend income is recognised when the shareholder's right to receive payment is established. (iii) Revenue from services Revenue from services rendered is recognised net of service taxes and discounts as and when the services are performed. (k) Foreign Currencies (i) Foreign currency transactions Transactions 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 exchange rate that existed when the values were determined. All exchange rate differences are taken to the income statement. (ii) Foreign entities Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to 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 included in the foreign exchange reserve in shareholders 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. The principal exchange rates used for every unit of foreign currency ruling at balance sheet date are as follows: RM RM United States Dollar Singapore Dollar Brunei Dollar (l) 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. Reversal of impairment losses recognised in prior years is recorded when the impairment losses recognised for the asset no longer exist or have decreased. 38 BANENG HOLDINGS BHD ( W)

41 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER SIGNIFICANT ACCOUNTING POLICIES (CONT D) (m) 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, 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 charged directly to 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) Marketable Securities Marketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost is determined on the weighted average basis while market value is determined based on quoted market values. Increases or decreases in the carrying amount of marketable securities are recognised in the income statement. On disposal of marketable securities, the difference between net disposal proceeds and the carrying amount is recognised in the income statement. (ii) Trade and Other Receivables Trade and other 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. The Group's normal trade credit term ranges from 30 to 120 days. Other credit terms are assessed and approved on a case-by-case basis. (iii) Trade and Other Payables Trade and other payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received. The normal trade credit terms granted to the Group range from 30 to 90 days. (iv) Interest-Bearing Borrowings Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs. Borrowing costs directly attributable to the acquisition and construction 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. All other borrowing costs are recognised as an expense in the income statement as an expense in the period in which they are incurred. (v) 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. BANENG HOLDINGS BHD ( W) 39

42 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER REVENUE Revenue of the Group and of the Company consists of the following: Group Company RM 000 RM 000 RM 000 RM 000 Management fees Dividend income ,052 Sales of goods 275, , , , , PROFIT FROM OPERATIONS Profit from operations is stated after charging/(crediting): Group Company RM 000 RM 000 RM 000 RM 000 Auditors remuneration - statutory audit other services Bad and doubtful debts Depreciation 15,285 15, Directors fees Rental of premises 1,260 1, Rental of machinery Rental income (8) (8) - - Staff costs (Note 5) 39,438 48, Dividend income from subsidiaries - - (300) (4,052) Gain on disposal of property, plant and equipment (86) (8) - - (Gain)/loss on foreign exchange (56) STAFF COSTS Group Company RM 000 RM 000 RM 000 RM 000 Wages and salaries 34,922 43, Pension cost - defined contribution plans Other staff related expenses 3,530 4, ,438 48, Included in staff costs and directors' fees of the Group are executive directors' remuneration amounting to RM1,619,000 (2002: RM2,052,000) as further disclosed in Note BANENG HOLDINGS BHD ( W)

43 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER DIRECTORS REMUNERATION Group Company RM 000 RM 000 RM 000 RM 000 Directors of the Company Executive: Salaries and other emoluments 889 1, Fees Bonus Pension costs - defined contribution plan ,196 1, Non-Executive: Allowances Fees Other directors Executive: Salaries and other emoluments Fees Non-Executive: Fees Total 1,825 2, FINANCE COSTS, NET Group RM 000 RM 000 Interest expense 11,915 14,050 Interest income (198) (310) 11,717 13,740 BANENG HOLDINGS BHD ( W) 41

44 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER TAXATION Group Company RM 000 RM 000 RM 000 RM 000 Tax expense for the year: - Malaysian income tax Foreign tax Overprovided in prior year (350) Deferred tax Relating to origination and reversal of temporary differences (Note 23) (1,050) (35) - - (824) Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2002: 28%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. A subsidiary located at Brunei was granted tax exemption for a period of five years expiring on 26 May 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: RM 000 RM 000 Group Profit before taxation 2,857 19,235 Taxation at Malaysian statutory tax rate of 28% (2002 : 28%) 800 5,386 Effect of different tax rates in other countries (1) (2) Expenses not deductible for tax purposes Income not subject to tax (170) - Pioneer income not subject to tax (670) (1,636) Utilisation of current year's reinvestment allowances (248) (3,218) Balancing charge arising from intragroup disposal of property, plant and equipment not subject to tax (71) - Deferred tax assets on reinvestment allowances recognised during the year (227) (518) Tax rebate (25) (24) Overprovision of income tax in prior years (350) - Tax expense for the year (824) 375 Company Profit before taxation 132 3,341 Taxation at Malaysian statutory tax rate of 28% (2002 : 28%) Income not subject to tax - (1,063) Expenses not deductible for tax purposes Tax expense for the year BANENG HOLDINGS BHD ( W)

45 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER EARNINGS PER SHARE 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. Group RM 000 RM 000 Net profit for the year 2,605 16,214 Weighted average number of ordinary shares in issue 60,000 56,250 Basic earning per share (sen) Diluted earnings per share has not been presented as there was no potential changes in paid up share capital. 10. DIVIDENDS Amount Net Dividends per Share RM 000 RM 000 Sen Sen In respect of financial year 2002 Final tax exempt dividend of 5%, paid on 15 August, , PROPERTY, PLANT AND EQUIPMENT Group Cost Plant machinery, equipment and Capital Land and electrical Other Work-inbuildings* installations assets** progress Total RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January , ,540 15, ,056 Additions 1,190 5,769 1, ,509 Disposals - (119) (892) - (1,011) At 31 December , ,190 16,062 1, ,554 Accumulated Depreciation At 1 January ,473 58,124 8,141-69,738 Charge for the year ,253 1,346-15,285 Disposals - (52) (631) - (683) At 31 December ,159 71,325 8,856-84,340 BANENG HOLDINGS BHD ( W) 43

46 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER PROPERTY, PLANT AND EQUIPMENT (CONT D) Plant machinery, equipment and Capital Land and electrical Other Work-inbuildings* installations assets** progress Total RM 000 RM 000 RM 000 RM 000 RM 000 Net Book Value At 31 December , ,865 7,206 1, ,214 At 31 December , ,416 7, ,318 Depreciation charge for ,048 1,416-15,058 ** Other assets comprise air conditioners, furniture and fittings, office equipment, motor vehicles and renovation. * LAND AND BUILDINGS Group Cost Boiler house, store room, roads, Freehold Factory bridge land buildings and fencing Total RM 000 RM 000 RM 000 RM 000 At 1 January ,317 34, ,772 Additions - 1, ,190 At 31 December ,317 35, ,962 Accumulated Depreciation At 1 January , ,473 Charge for the year At 31 December , ,159 Net Book Value At 31 December ,317 32, ,803 At 31 December ,317 31, ,299 Depreciation charge for BANENG HOLDINGS BHD ( W)

47 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER 2003 (a) Net book value of property, plant and equipment held under hire purchase arrangements are as follows: Group RM 000 RM 000 Plant, machinery and equipment 4,578 21,741 Office equipment and motor vehicles ,121 22,664 (b) Property, plant and equipment acquired during the financial year were by means of: Group RM 000 RM 000 Cash payment 4,657 27,697 Hire purchase financing 3, ,509 28,418 (c) All the property, plant and equipment of the Group have been pledged to financial institutions for banking facilities granted to the subsidiaries. 12. INVESTMENT IN SUBSIDIARIES Company RM 000 RM 000 Unquoted shares, at cost - in Malaysia 55,123 55,123 - outside Malaysia 4,080 4,080 59,203 59,203 BANENG HOLDINGS BHD ( W) 45

48 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2003 Details of the subsidiaries are as follows: Name of Country of Equity Interest Subsidiaries incorporation Held (%) Principal activities Subsidiaries of the Company Baneng Industries Malaysia Manufacturing, knitting and Sdn. Bhd. dyeing of all types of fabrics, ( BISB ) garments and related products. Chenille International Singapore Trading of garments and Pte Ltd * provision of agency services. Seri Pertamas Brunei Manufacturing of garments. Garment Manufacturer Sdn. Bhd. * Subsidiaries of BISB Maxlin Garments Malaysia Manufacturing of garments. Sdn. Bhd. Baneng Trading Malaysia Manufacturing and knitting Sdn. Bhd. of fabrics. Temporary ceased operation in current financial year. * Audited by firms of auditors other than Ernst & Young. 13. DUE FROM A SUBSIDIARY The amount due from a subsidiary is unsecured, interest free and not receivable within the next twelve months. 14. INVENTORIES Group RM 000 RM 000 At cost: Raw materials 21,382 22,309 Work-in-progress 21,700 23,355 Finished goods 22,782 25,718 Consumable supplies 1,950 1,619 67,814 73,001 At net realisable value: Finished goods 6,281-74,095 73, BANENG HOLDINGS BHD ( W)

49 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER TRADE RECEIVABLES Group RM 000 RM 000 Trade receivables 111, ,438 Less : Provision for doubtful debts (4,251) (4,251) 107, ,187 The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors, except for amounts due from three debtors amounting to approximately RM41,780,000 (2002 : RM61,574,000). 16. OTHER RECEIVABLES Group Company RM 000 RM 000 RM 000 RM 000 Other receivables 24,768 14, Deposits and prepayments 4,220 1, Amount paid for acquisition on 2 pieces of freehold land 4, ,833 16, The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors, except for amounts due from three debtors amounting to approximately RM9,409,000 (2002 : RM12,610,000), which represent advances for trade related purposes. 17. MARKETABLE SECURITIES Group RM 000 RM 000 Quoted shares at cost 4 4 Market value of quoted shares 4 3 BANENG HOLDINGS BHD ( W) 47

50 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER CASH AND CASH EQUIVALENTS Group Company RM 000 RM 000 RM 000 RM 000 Cash on hand and at banks 5,645 2, Deposits with licensed banks 6,144 9, Cash and bank balances 11,789 11, Marketable securities (Note 17) Less: Bank overdrafts (Note 19) (2,030) (572) (131) - Cash and cash equivalents 9,763 11,197 (114) 59 The fixed deposits with licensed banks of the Group have been pledged to the banks for banking facilities obtained by the subsidiaries. The average interest rate of deposit at the balance sheet date was 3.00% (2002: 4.00%) per annum and the average maturity of deposit as at the end of the financial year was 365 days (2002: 365 days). Included in the fixed deposits is an amount of RM3,213,000 (2002 : RM1,828,000) which is registered in the names of a director and a third party, who hold in trust on behalf of the Group. 19. BORROWINGS Group Company RM 000 RM 000 RM 000 RM 000 Short Term Borrowings Secured: Bank overdrafts 1, Bankers acceptances 75,225 72, Export credit refinancing 11,217 5, Trust receipts 2,556 5, Term loans 2,111 3, Hire purchase payables (Note 20) 2,076 3, ,728 89, Unsecured: Bank overdrafts Trust receipts 4,372 3, Bankers acceptances 71,875 71, Export credit refinancing 6,146 1, Foreign export bills payable Term loans 7,526 1, ,569 78, , , BANENG HOLDINGS BHD ( W)

51 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER BORROWINGS (CONT D) Group Company RM 000 RM 000 RM 000 RM 000 Long Term Borrowings Secured: Term loans 11,379 6, Hire purchase payables (Note 20) 1, ,208 7, Unsecured: Term loans 10,126 31, ,334 38, Total Borrowings Bank overdrafts (Note 18) 2, Bankers acceptances 147, , Export credit refinancing 17,363 7, Foreign export bills payable Trust receipts 6,928 8, Term loans 31,142 42, Hire purchase payables (Note 20) 3,905 3, , , Maturity of borrowings (excluding hire purchases) Within one year 183, , Between one and two years 9,903 14, Between two and five years 11,765 23, , , The weighted average effective interest rate during the financial year for borrowings, excluding hire purchase payables, were as follows: Group % % Bank overdrafts Bankers acceptances Export credit refinancing Foreign export bills payable Trust receipts Term loans The above bank borrowings are secured by way of fixed and floating charges over all the assets of the subsidiaries. BANENG HOLDINGS BHD ( W) 49

52 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER HIRE PURCHASE PAYABLES Group RM 000 RM 000 Future minimum payments: Payable within one year 2,385 3,863 Payables between one and five years 1, ,341 4,253 Less : Finance charges (436) (614) 3,905 3,639 Present value of hire purchase payables Not later than 1 year 2,076 3,298 Later than 1 year and not later than 2 years 1, Later than 2 years and not later than 5 years ,905 3,639 Analysed as: Due within 12 months (Note 19) 2,076 3,298 Due after 12 months (Note 19) 1, ,905 3,639 The hire purchase payables bear interests of between 2.99% to 6.25% (2002 : 3.90% to 5.70%) per annum. 21. OTHER PAYABLES Group Company RM 000 RM 000 RM 000 RM 000 Due to subsidiaries - - 3,038 - Due to directors - 2, Sundry payables and accruals 7,989 8, ,989 10,271 3, The amounts due to subsidiaries and directors are unsecured, interest free and with no fixed terms of repayment. 50 BANENG HOLDINGS BHD ( W)

53 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER SHARE CAPITAL Number of Ordinary Shares of RM1 Each Amount RM 000 RM 000 Group and Company Authorised 100, , , ,000 Issued and fully paid: At 1 January 60,000 51,000 60,000 51,000 Public issue at RM2.10 per share - 9,000-9,000 At 31 December 60,000 60,000 60,000 60, DEFERRED TAXATION Group RM 000 RM 000 At 1 January 2,809 2,844 Recognised in the income statements (Note 8) (1,050) (35) At 31 December 1,759 2,809 Presented after appropriate offsetting as follows: Deferred tax liabilties 30,806 16,620 Deferred tax assets (29,047) (13,811) 1,759 2,809 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: Accelerated capital allowances Others Total RM 000 RM 000 RM 000 At 1 January , ,620 Recognised in the income statement 14,218 (32) 14,186 At 31 December , ,806 BANENG HOLDINGS BHD ( W) 51

54 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER DEFERRED TAXATION (CONT D) Deferred Tax Assets of the Group: Unutilised Reinvestment Allowance RM 000 At 1 January 2003 (13,811) Recognised in the income statement (15,236) At 31 December 2003 (29,047) Deferred tax assets have not been recognised in respect of the following items: RM 000 RM 000 Unabsorbed reinvestment allowances 34,360 22,384 The unabsorbed reinvestment allowances are available for offset against future taxable profits of the subsidiaries in which those items arose. 24. COMMITMENTS Group RM 000 RM 000 Capital commitment in respect of expenditure contracted for 1,371 1, CONTINGENT LIABILITIES Company RM 000 RM 000 Corporate guarantees given to banks for credit facilities granted to subsidiaries - unsecured 12,277 16, SIGNIFICANT RELATED PARTY TRANSACTIONS Company RM 000 RM 000 Dividends received/receivable from subsidiaries 300 4,052 Management fee charged to a subsidiary BANENG HOLDINGS BHD ( W)

55 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER SUBSEQUENT EVENTS (i) On 5 January 2004, the Company has entered into a conditional sale and purchase agreement with its wholly owned subsidiary, Baneng Industries Sdn Bhd ( BISB ), for the acquisition of BISB s entire equity interest in Maxlin Garments Sdn. Bhd. ( Maxlin ), representing 100% equity interest in Maxlin for a cash consideration of RM6,500,000. (ii) On 17 November 2003, the Company through its wholly owned subsidiary, Maxlin entered into a conditional sale and purchase agreement for the proposed acquisition of garment operation and manufacturing assets in Kingdom of Lesotho for a total consideration of USD700,000 (approximately RM2.66 million) from Lekim Textiles (Lesotho) Pty. Ltd.. On the same day, board of directors of the Company has approved to acquire one thousand shares of one Loti (M1.00) each, representing 100% equity interest in Baneng Lesotho (Proprietary) Limited ( BLesotho ), an entity incorporated in Kingdom of Lesotho, for a cash consideration of One Thousand Maloti (M1,000) (approximately RM600). The abovementioned proposed acquisitions were completed subsequent to the end of the financial year. (iii) On 5 January 2004, the Company entered into a conditional sale and purchase agreement for the proposed acquisition of 70% equity interest in Seri Azhimu Jaya Garments and Textiles (B) Sdn. Bhd., a company incorporated in Brunei, comprising 1,400,000 ordinary shares of BND1.00 (approximately RM2.20) each for a total consideration of RM19.6 million. The abovementioned proposed acquisition is subject to approval from the relevant authorities. 28. SEGMENTAL INFORMATION (a) Primary reporting segment - Geographical segments The Group operates in three principal geographical areas of the world and is principally involved in manufacturing of fabrics and garments Revenue Consolidation Malaysia Brunei Singapore adjustments Group RM 000 RM 000 RM 000 RM 000 RM 000 External sales 211,762 64, ,925 Inter-segment sales 28,829-1,962 (30,791) - Total revenue 240,591 64,163 1,962 (30,791) 275,925 Results Profit from operations 10,554 3, ,574 Interest income Interest expense (10,842) (1,070) (3) (11,915) (Loss)/profit before taxation (93) 2, ,857 Taxation (45) 824 Profit/(loss) after taxation 776 2,391 (27) 3,681 Minority interests (1,076) Net profit/(loss) for the year 776 2,391 (27) 2,605 BANENG HOLDINGS BHD ( W) 53

56 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER SEGMENTAL INFORMATION (CONT D) (a) Primary reporting segment - Geographical segments (Cont d) Consolidation Malaysia Brunei Singapore adjustments Group RM 000 RM 000 RM 000 RM 000 RM 000 Assets and liabilities Segment assets 342,946 47,843 3, ,564 Segment liabilities 236,231 1,390 1, ,716 Other information Capital expenditure 7, ,509 Depreciation 13,611 1, ,285 Other non-cash income (86) - - (86) 2002 Revenue External sales 231,682 85, ,669 Inter-segment sales 39,681-2,789 (42,470) - Total revenue 271,363 85,987 2,789 (42,470) 317,669 Results Profit from operations 26,704 7, ,954 Interest income Interest expense (13,880) (1,133) (16) (15,029) Profit before taxation 13,129 5, ,235 Taxation (334) - (41) (375) Profit/(loss) after taxation 12,795 5,880 (19) 18,860 Minority interests (2,646) Net profit/(loss) for the year 12,795 5,880 (19) 16,214 Assets and liabilities Segment assets 349,582 44,786 2, ,610 Segment liabilities 229,280 11, ,444 Other information Capital expenditure 27, ,418 Depreciation 13,449 1, ,058 Other non-cash expenses (b) Secondary reporting segment - Business segments As the Group is principally involved in the manufacturing of fabrics and garments, segment reporting by business segment is not prepared. 54 BANENG HOLDINGS BHD ( W)

57 NOTES TO THE DIRECTORS FINANCIAL STATEMENTS REPORT 31 DECEMBER 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. (b) Interest Rate Risk The Group s primary interest rate risk relates to interest-bearing debt, as the Company had no substantial long-term interest-bearing assets as at 31 December The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The Group actively 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. The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their respective notes. (c) Foreign Exchange Risk The Group operates internationally and is exposed to various currencies, mainly United States Dollar, Brunei Dollar and Singapore Dollar. Foreign currency denominated assets and liabilities together with expected cash flows from highly probable purchases and sales give rise to foreign exchange exposures. The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the property or investment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. Material foreign currency transaction exposures 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: At 31 December 2003: Ringgit Brunei Malaysia Dollar Total Functional Currency of Group Companies RM 000 RM 000 RM 000 Trade Receivables United States Dollar 25,731 13,904 39,635 Trade Payables Ringgit Malaysia Singapore Dollar 2,017-2,017 United States Dollar ,932 1,081 3,098 Borrowings United States Dollar 163 6,388 6,551 BANENG HOLDINGS BHD ( W) 55

58 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER FINANCIAL INSTRUMENTS (CONT D) (c) Foreign Exchange Risk (Cont d) As at balance sheet date, the Company has entered into forward foreign exchange contracts with a bank to purchase US Dollar used to hedge anticipated sales with maturity date within one year at total notional amount of RM3,935,000. The net unrecognised gains as at 31 December 2003 on forward contracts used to hedge anticipated sales which are expected to occur during January 2004 amounted to approximately RM5,000 and are deferred until the related sales occur, at which time they will be included in the measurement of the sales. All the financial assets and financial liabilities of the Group in prior year are unhedged. (d) Liquidity Risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding financial institutions and prudently balances its portfolio with some short term funding so as to achieve overall cost effectiveness. (e) Credit Risk 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 or counterparty except for the amounts due from certain debtors of the Group as disclosed in Note 15 and 16. The directors believe that this will not create significant problems for the Group in view of the length of relationship and close contacts with the management of these companies. (f) Fair Values The fair values of the financial assets, financial liabilities as at the balance sheet date approximate their carrying amount as shown in the balance sheets. 56 BANENG HOLDINGS BHD ( W)

59 DIRECTORS LIST OF PROPERTIES REPORT AS AT 31 DECEMBER 2003 Land Area Age of Net Book Description and (Built-up) Building Value No. Location Existing Use Tenure ( 000 sq.ft.) (Years) ( 000) Baneng Industries Sdn Bhd 1 Lot 3398 & 3399, 42 Lorong 5, Office and factory Freehold 158/(162) 3 to 6 8, Mile, Jalan Kluang, buildings Batu Pahat. 2 Lot 4979, 2.5 Mile Office and factory Freehold 642/(292) 2 to 11 24,135 Jalan Tanjong Laboh buildings Batu Pahat, Johor. 3 Lot 3890, EMR 2374 Vacant agricultural Freehold 174/(0) Mukim of Simpang Kanan V land Batu Pahat, Johor. 4 Lot 3752, GM203 Vacant agricultural Freehold 6/(0) - 27 Mukim of Simpang Kanan V land Batu Pahat, Johor. 5 Lot 3400, EMR 1285 Vacant development Freehold 89/(0) - 1,028 Mukim of Simpang Kanan V land Batu Pahat, Johor. Maxlin Garments Sdn Bhd 1 HS(D) PTD 9149 Shophouse/Storage Freehold 1.54/(3.08) , Jalan Bayur, Taman Nira 83000, Batu Pahat, Johor. 2 HS(D) PTD 9147 Shophouse/Storage Freehold 1.54/(3.08) , Jalan Bayur, Taman Nira 83000, Batu Pahat, Johor. Seri Pertamas Garment Manufacturer Sdn Bhd 1 Blok Q39-41 Lambak Office and factory Leasehold 87/(50) 6 5,764 Kanan, West Industrial Estate buildings expiring Bandar Seri Begawan, Brunei. 16 Feb 2023 BANENG HOLDINGS BHD ( W) 57

60 ANALYSIS OF SHAREHOLDINGS AS AT 20 MAY 2004 Authorised Capital : 60,000,000 shares Issued and fully paid-up : 60,000,000 ordinary shares of RM1.00 each Class of shares : RM1.00 Ordinary Share Voting Rights : 1 vote per Ordinary Share Number of Shareholders as at 20 May, 2004 : 1,010 DISTRIBUTION OF SHAREHOLDINGS Size of Holdings No. of Holders % No. of Shares % , , ,001 10, ,708, , , ,486, ,001 2,999,999* ,920, ,000,000 and above (**) ,526, Total 1, ,000, Note : (*) means less than 5% of issued and paid-up share capital (**) means 5% and above of issued and paid-up share capital SUBSTANTIAL SHAREHOLDERS AS AT 20 MAY 2004 The Substantial shareholders of Baneng Holdings Bhd (holding 5% or more of the capital) based on the Register of Substantial shareholdings of the Company and their respective shareholdings are as follows:- Direct Interest Indirect Interest Substantial Shareholders No. of Shares % No. of Shares % Upaya Mendaki Sdn Bhd 18,325, Lim Choon Hiok 12,857, ,325, Employees Provident Fund Board 6,343, Lim Poh Choo 1,602, ,325, Note : ( 1 ) Deemed interest by virtue of her shareholdings of more than 15% in Upaya Mendaki Sdn Bhd pursuant to Section 6A of the Companies Act, BANENG HOLDINGS BHD ( W)

61 ANALYSIS DIRECTORS OF SHAREHOLDINGS REPORT AS AT 20 MAY 2004 DIRECTORS INTERESTS IN RELATED CORPORATIONS Ms. Lim Choon Hiok by virtue of her interest in shares of the Company is also deemed interested in shares of all the Company s subsidiaries to the extent the Company has an interest. None of the other directors in office had any interest in shares in the Company s related corporations as at 20 May, DIRECTORS SHAREHOLDERS AS AT 20 MAY 2004 Direct Interest Indirect Interest Directors No. of Shares % No. of Shares % Y. Bhg. Tan Sri A Rahim Bin Tamby Chik 100, Lim Choon Hiok 12,857, ,325, Lim Meng Hong 161, Lim Meng Hee Ng Soon Lim Chai Koh Wah (Appointed wef ) Keah Say Wan (Resigned wef ) Note : (º) Held through HLG Nominee (Tempatan) Sdn Bhd pledged securities account for Tan Sri A Rahim Bin Tamby Chik ( 1 ) Deemed interest by virtue of her shareholdings of more than 15% in Upaya Mendaki Sdn Bhd pursuant to Section 6A of the Companies Act, BANENG HOLDINGS BHD ( W) 59

62 ANALYSIS OF SHAREHOLDINGS AS AT 20 MAY 2004 THIRTY LARGEST SHAREHOLDERS AS AT 20 MAY 2004 No Shareholders No. of Shares % 1 Upaya Mendaki Sdn Bhd 18,325, Lim Choon Hiok 12,857, Employees Provident Fund Board 6,343, Lim Cheng Chee 2,356, Boo Kee Tong 2,076, Ong Mui Eng 1,951, Lim Poh Choo 1,602, Hoe Koon Teck 1,292, TLC Nominees (Tempatan) Sdn Bhd 1,048, pledged securities account for Khai Heng Industries Sdn Bhd 10 Malaysian Assurance Alliance Berhad 1,000, Perbadanan Nasional Berhad 989, Perbadanan Nasional Berhad 919, TLC Nominees (Tempatan) Sdn Bhd 870, pledged securities account for Teo Chin Seng 14 Malaysian Assurance Alliance Berhad as Beneficial Owner (Growth Fund) 700, Amanah Raya Nominees (Tempatan) Sdn Bhd 562, Dana Johor Pelaboran Johor Berhad 16 Amanah Raya Nominees (Tempatan) Sdn Bhd 528, Amanah Saham Johor Pelaboran Johor Berhad 17 Amsec Nominees (Tempatan) Sdn Bhd 500, pledged securities account for Lim Tian Chai 18 Malaysian Assurance Alliance Berhad 240, as Beneficial Owner (Dana Al-Fayyadh) 19 Lee Yih Leang 239, Affin Nominees (Asing) Sdn Bhd 196, Eassetmanagement Sdn Bhd for Pure Investor.com inc 21 Bumiputra-Commerce Trustee Berhad 179, Amanah Saham Darul Iman 22 Lim Meng Hong 161, Yong Hing 148, Amsec Nominees (Tempatan) Sdn Bhd 131, pledged securities account for Wee Lian Seng 25 Mayban Nominees (Tempatan) Sdn Bhd 117, pledged securities account for Koh Koh Tian Siew 26 Perbadanan Nasional Berhad 110, HLG Nominee (Tempatan) Sdn Bhd pledged securities account for A Rahim Bin Tamby Chik 100, Amfinance Berhad 84, pledged securities account for Yap Beng Poh 29 Yap Yap Sue Kim 84, Kenanga Nominees (Tempatan) Sdn Bhd 83, pledged securities account for Teo Lai Huat 60 BANENG HOLDINGS BHD ( W)

63 BANENG HOLDINGS BHD ( W) Incorporated in Malaysia DIRECTORS PROXY REPORT FORM I/We of being a * Member/Members of BANENG HOLDINGS BHD, appoint of or in his absence, of (Full Name In Capital Letters) (Full Address) (Full Name in Capital Letters) (Full Address) (Full Name In Capital Letters) (Full Address) or in his absence, the CHAIRMAN OF THE MEETING, as *my/our proxy to vote for *me/ us and on *my/our behalf at the Ninth Annual General Meeting to be held at Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, Batu Pahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. and at any adjournment of that meeting. Please indicate with an X in the space provided below how you wish your votes to be casted. If no specific direction as to voting is given, the Proxy will vote or abstain from voting as his discretion. NO. RESOLUTIONS FOR AGAINST 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December, 2003 together with the Directors and Auditors Reports thereon. 2. To approve the payment of Directors fee for the financial year ended 31 December, To re-elect the following retiring Directors who retire by rotation and being eligible, offer themselves for re-election in accordance with the Article 101(a) of the Company s Articles of Association:- i) Mr. Lim Meng Hee 4. ii) Dr. Ng Soon Lim 5. To re-elect the retiring Director, Mr. Chai Koh Wah who retires and being eligible, offer himself for re-election in accordance with the Article 102(c) of the Company s Articles of Association. 6. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending 31 December, 2004 and to authorise the Directors to fix Auditors remuneration 7. As Special Business Ordinary Resolution - Authority to issue shares pursuant to Section 132D of the Companies Act, Special Resolution Proposed Amendments to Articles of Association * Strike out whichever not applicable. Number of Shares Held As witness my/our hand this day of, 2004 NOTES: Signature of Member/Common Seal 1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint more than two proxies to attend and vote in his stead and he shall specify the proportion of his shareholdings to be represented by each proxy. A member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 2. Where a member is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991, it may appoint more than (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. The instrument appointing a proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if such appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 4. The instrument appointing a proxy, together with the power of attorney (if any) or other authority (if any) under which the instrument is signed or a notarially certified copy of that power or authority shall be deposited at the Registered Office of the Company at Lot /2 Miles, Jalan Tanjung Laboh, Batu Pahat, Johor not less than 48 hours before the time for holding the meeting or otherwise the instrument appointing the proxy will not be treated as valid.

64 Please fold here STAMP Baneng Holdings Bhd ( W) Lot 4979, 2 1 /2 Miles, Jalan Tanjung Laboh, Batu Pahat, Johor Darul Takzim. Please fold here