KUB -AR31-12-2004.pdf - insage

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KUB MALAYSIA BERHAD (6022-D)KUB.comJalan Yap Kwan Seng50450 Kuala LumpurTel: 603 2718 9666Fax: 603 2718 9055www.kub.com

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o u r n a t i o nKUB Malaysia Berhad is a diversified organization encompassing several industries and sectors. Nevertheless, it is a synergistic organization

supported by loyal and visionary members of staff. "Our Nation" and "Harmony" is pictured through a child who reflects the hope of the nation

and potential customer for the Company whilst the kaleidoscope of colors reflects the diversity, creativity as well as determination of members

of KUB Malaysia family in developing and providing excellent products and services for customers and stakeholders.

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K U B M A L A Y S I A B E R H A D

contents

i n t e g r i t y

2

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3contents

t r u s t

v i s i o n

p r i n c i p l e s

4 notice of annual general meeting 5 statement accompanying notice of 40th annual general meeting

6 corporate information 8 corporate structure 10 board of directors 12 directors’ profile 16 senior management team

18 chairman’s statement 24 business division 26 chief executive officer review of operation

30 statement on corporate governance 36 additional compliance information 37 statement on internal control

39 board audit committee report 45 analysis of shareholding 48 directors’ report 52 statement by directors

53 statutory declaration 54 reports of the auditors 55 balance sheet 57 income statement

58 statement of changes in equity 59 cash flow statements 62 notes to the financial statements

104 list of properties 111 proxy form

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notice of annual general meeting

Resolution 1

Resolution 2

Resolution 3Resolution 4

Resolution 5

Resolution 6

Resolution 7

NOTICE IS HEREBY GIVEN THAT the 40th Annual General Meeting of KUB Malaysia Berhad will be held at the Dewan Tun Dr Ismail,Putra World Trade Centre (PWTC), 50480 Kuala Lumpur on Thursday, 23 June 2005 at 10.00 a.m to conduct the following business:-

AGENDAORDINARY BUSINESS1. To receive the Audited Financial Statements for the financial year ended 31 December 2004 together with the Reports of the

Directors and Auditors thereon.

2. To accept the retirement of Datuk Haji Ahmad Shahibuddin Haji Mohd Nor who retires pursuant to Article 97 of the Company’sArticles of Association and is not seeking re-election.

3. To re-elect the following Directors who retire pursuant to Article 102 of the Company's Articles of Association.(i) Dato' Nordin Baharuddin(ii) Rosman Abdullah

4. To approve the Directors' fees for the year 2004.

5. To re-appoint Messrs KPMG Desa Megat & Co. as Auditors of the Company and to authorise the Directors to fix their remuneration.

SPECIAL BUSINESS6. To consider and if thought fit to pass the following Ordinary Resolution:-

“THAT pursuant to Section 132D of the Companies Act,1965 and subject always to the approval of the relevant authorities,the Directors be and are hereby empowered to issue shares in the Company from time to time and upon such terms and conditionsand for such purposes the Directors may deem fit provided that the aggregate number of shares issued pursuant to thisresolution does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be andare also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa MalaysiaSecurities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of theCompany.”

ANY OTHER ORDINARY BUSINESS7. To transact any other ordinary business of which due notice shall have been given in accordance with the Companies Act, 1965

and/or the Articles of Association.

By Order of the BoardYM TUNKU ALIZAN RAJA MUHAMMAD ALIAS (BC/T/342)AIDA HANIZA ADNAN (LS006623)HARNITA HARMAIN (LS008063)Secretaries

Kuala Lumpur1 June 2004

4K U B M A L A Y S I A B E R H A D

Notes :-1. A member of the Company entitled to attend and vote at the abovementioned Meeting is entitled to appoint one other person or persons, whether a member or not as his/her proxy/proxies to attend and vote in

his/her stead. Where a member appoints two or more proxies, the member shall specify the proportion of the member's shareholding to be represented by each proxy.

2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised or if the appointer is a corporation, either under its common seal or the hand of its attorney.

3. The Proxy Form must be deposited at the office of the Company’s Share Registrar, Symphony Share Registrars Sdn Bhd (formerly known as Malaysian Share Registration Services Sdn Bhd), Level 26, MenaraMulti Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur by hand or fax to 03-27212530 not less than twenty-four (24) hours before the time for holding the Meeting or any adjournmentthereof.

4. Explanatory Notes on Special Business: Ordinary Resolution (7), if passed, will give the Directors of the Company, from the date of the above Meeting, authority to issue and allot ordinary shares from the unissued capital of the Company being for suchpurposes as the Directors consider would be in the interest of the Company. This authority will, unless revoked or varied by the Company in the general meeting, expire at the next Annual General Meeting.

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statementaccompanying notice

of the 40th annualgeneral meeting

1. THE DIRECTORS WHO ARE STANDING FOR RE-ELECTION AT THE 40TH ANNUAL GENERAL MEETING OF THE COMPANY

Directors retiring pursuant to Article 102 of the Articles of Association:-(a) Dato' Nordin Baharuddin(b) Rosman Abdullah

Further details of the two (2) Directors seeking re-election are set out in their respective profiles which appear in the Directors' profiles on pages 14 and 15 ofthis Annual Report.

2. GENERAL MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2004

The 39th Annual General Meeting & Extraordinary General Meeting were held consecutively on 30 June 2004 at 10.00 a.m. at Dewan Tun Dr Ismail, Putra WorldTrade Centre (PWTC), 50480 Kuala Lumpur.

3. BOARD MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2004

All Board Meetings were held at the Board Room, Level 23 KUB.com, 12 Jalan Yap Kwan Seng, 50450 Kuala Lumpur.

(b) Details of attendance of the Directors at the Board Meetings for thefinancial year ended 31 December 2004 are as follows:

* Izham Yusoff was appointed as Managing Director & Chief Executive on 1 July 2004 and resigned as Director on 18 May 2005. He was re-designated as theChief Executive Officer of KUB effective 18 May 2005.

^ Datuk Mohd Hashim Hassan (Resigned w.e.f. 25 March 2005)§ Tan Sri Datuk Dr. Johari Mat (Resigned w.e.f. 19 May 2005)> Tuan Haji Ahmad Kamal Abdullah Al-Yafii (Resigned w.e.f. 19 May 2005)

(a) A total of eight (8) Board Meetings were held during the financial yearended 31 December 2004 as follows:-

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No. Date of Board Meetings Time1. 19 February 2004 10.00 a.m.2. 27 April 2004 2.30 p.m.3. 27 May 2004 2.30 p.m.4. 17 June 2004 10.30 a.m.5. 12 July 2004 2.30 p.m.6. 26 August 2004 11.00 a.m.7. 9 November 2004 9.30 a.m.8. 28 December 2004 2.30 p.m.

Name of Directors No. meetings attendedDatuk Hassan Harun 8/8^Datuk Mohd Hashim Hassan 8/8Datuk Haji Ahmad Shahibuddin Haji Mohd Nor 8/8Dato' Kamilia Ibrahim 6/8Dato' Ir. Harun Ahmad Saruji 8/8§ Tan Sri Datuk Dr. Johari Mat 6/8>Tuan Haji Ahmad Kamal Abdullah Al-Yafii 7/8* Izham Yusoff 3/3

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6corporateinformation

company secretaries YM Tunku Alizan Raja Muhammad Alias (BC/T/342)

(Appointed w.e.f. 18 May 2005)

Aida Haniza Adnan (LS006623)

Harnita Harmain (LS008063)

registered office Level 21, KUB.com12 Jalan Yap Kwan Seng50450 Kuala LumpurTel: 603-2718 9666 Fax: 603-2718 9055www.kub.com

board of directors Datuk Hassan HarunNon-Independent Non-Executive DirectorChairman

Dato’ Kamilia IbrahimNon-Independent Non-Executive DirectorDeputy Chairman

Datuk Haji Ahmad Shahibuddin Haji Mohd NorIndependent Non-Executive DirectorDirector

Dato’ Ir. Harun Ahmad SarujiIndependent Non-Executive DirectorDirector

Dato’ Nordin BaharuddinIndependent Non-Executive DirectorDirector(Appointed w.e.f. 19 May 2005)

Rosman AbdullahIndependent Non-Executive DirectorDirector(Appointed w.e.f. 19 May 2005)

i n f o r

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corporateinformation

share registrar Symphony Share Registrars Sdn Bhd(378993-D)

(formerly known as Malaysian Share Registration Services Sdn Bhd)

Level 26, Menara Multi PurposeCapital Square,No. 8, Jalan Munshi Abdullah50100 Kuala Lumpur Tel: 603-2721 2222Fax: 603-2721 2530

auditors Messrs KPMG Desa Megat & Co(Firm No. AF0759)Wisma KPMG, Jalan DungunDamansara Heights50490 Kuala LumpurTel: 603-2095 3388Fax: 603-2095 0971

a m b i t i o n

7A N N U A L R E P O R T 2 0 0 4

m a t i o n

principle bankers Bumiputra-Commerce Bank BerhadMaybank BerhadAffin Bank Berhad

stock exchange listing The Main Board,Bursa Malaysia Securities Berhad

stock short code KUB 6784

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8corporate structure


100%100%

Information &

Communications

Technology (ICT)

Energy

Properties,

Engineering &

Construction

(PEC)

Education &

Training (E&T)

100% KUB Telekomunikasi Sdn Bhd

70% KUB-Fujitsu Telecommunications (Malaysia) Sdn Bhd

60% Tele Dynamics Sdn Bhd

100% Universiti Tun Abdul Razak Sdn Bhd (UNITAR)

100% ITTAR Sdn Bhd

100% ITTAR-IPP (PJ) Sdn Bhd

100% ITTAR-ILP (Prai) Sdn Bhd

100% Academy of Knowledge & Accounting for Leadership Sdn Bhd (AKAL)

100% KUB Development Berhad

100% KUB Realty Sdn Bhd

100% KUB Realty (PJ) Sdn Bhd

100% Peraharta Sdn Bhd

55% Bina Alam Bersatu Sdn Bhd

s e c u r i t y

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corporate structure

9100%

100%

Manufacturing, Plantation,

Listed Associates, Consumer Products

& Others

Food, Beverage& Events

Summit Petroleum (Malaysia) Sdn Bhd 100%

KUB Power Sdn Bhd 100%

Progas Pakistan (Pvt.) Ltd. 41%

A&W (Malaysia) Sdn Bhd 100%

A&W Restaurants (Thailand) Co., Ltd 100%

KUB Singgahsana (PJ) Sdn Bhd 100%

Creative Communications & Events Sdn Bhd 100%

KUB Tekstil Sdn Bhd 100%

KUB Agrotech Group 100%

Utama Steel Works Sdn Berhad 51%

KUB-Berjaya Enviro Sdn Bhd 40%

Computer Forms (Malaysia) Berhad 32%

United Chemical Industries Berhad 24.81%

a d v a n c e m e n t

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10board of directors

Datuk Hassan HarunNon-Independent Non-Executive Director

Chairman

Dato’ Kamilia IbrahimNon-Independent Non-Executive Director

Deputy Chairman

Datuk Haji Ahmad Shahibuddin Haji Mohd NorIndependent Non-Executive Director

Director

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11board of directors

Dato’ Ir. Harun Ahmad SarujiIndependent Non-Executive Director

Director

Rosman AbdullahIndependent Non-Executive Director

Director

Dato’ Nordin BaharuddinIndependent Non-Executive Director

Director

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director’s profile

Datuk Hassan HarunNon-Independent Non-Executive DirectorChairman

Datuk Hassan Harun, aged 60, Malaysian, was appointed to the Boardof KUB Malaysia Berhad on 26 February 1997. Currently, he also servesas Chairman of another public-listed company in the KUB Group,Computer Forms (Malaysia) Berhad. In addition, he chairs severalcompanies in the Group, including Universiti Tun Abdul Razak Sdn Bhd(UNITAR), ITTAR Sdn Bhd, KUB Telekomunikasi Sdn Bhd, Bina AlamBersatu Sdn Bhd and Tele Dynamics Sdn Bhd.

Apart from corporate responsibilities, Datuk Hassan is involved inpolitics, the development of IT, education and entrepreneurship. He wasa member of the UMNO Supreme Council for 12 years until 2004 andhe is currently a member of Board of the National Higher Education FundCorporation. Datuk Hassan had also served as a member of theBumiputera Information and Communications Technology DevelopmentCouncil and Bumiputera Entrepreneur Development Council.

He was conferred a DBA (Hon) by I.M.C. UK and a D. Mgmt (Hon) byUniversiti Teknologi Malaysia. Datuk Hassan also graduated with aMaster in Management from the Asian Institute of Management, Manilaand B.A. (Hons) from Universiti Malaya.

Datuk Hassan is deemed conflict of interest with the Company by virtueof his shareholdings in Daya Profil Sdn Bhd, a major shareholder ofSumber Serata Sdn Bhd which is a substantial shareholder of KUBMalaysia Berhad.

He does not have any family relationship with any Director and has neverbeen convicted of any offence over the past 10 years.

Dato' Kamilia IbrahimNon-Independent Non-Executive DirectorDeputy ChairmanMember of Board Nomination CommitteeMember of Board Investment CommitteeMember of Board Remuneration Committee

Dato' Kamilia Ibrahim, aged 53, Malaysian, was appointed to theBoard of KUB Malaysia Berhad on 28 April 1997.

She sits on the Boards of several KUB Malaysia Berhad subsidiariesincluding ITTAR Sdn Bhd, Universiti Tun Abdul Razak Sdn Bhd(UNITAR), Pernida Berhad and Restoran Kualiti Sdn Bhd. In addition,she is the Chairman of ITTAR-IPP (PJ) Sdn Bhd and ITTAR-ILP (Prai)Sdn Bhd.

Presently, she is the principal partner in her law firm, whichspecializes in property, commercial, banking and shipping laws.Politically active, she has been an elected member of the WanitaUMNO National Executive Council since 1987 and heads its LegalAffairs Bureau. She has served as a member of the National IslamicCouncil Malaysia since 2000 and currently is the President of theMuslim Women Consultative Council Malaysia (YADIM). She wasappointed in 2004 as a Commissioner for the Royal CommissionEnhancing the Operation and the Management of The RoyalMalaysian Police.

She obtained her LLB and LLM from Universiti Malaya and her Dip. in Syariah Law & Practice from the International IslamicUniversity of Malaysia (IIUM).

She does not have any family relationship with any Director and/ormajor shareholder of KUB Malaysia Berhad. She has never beenconvicted of any offence over the past 10 years and has no conflictof interest with KUB Malaysia Berhad.


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director’s profile

Datuk Haji Ahmad Shahibuddin Haji Mohd Nor, aged 61, Malaysian, was appointed to theBoard of KUB Malaysia Berhad on 28 April 1997.

In addition, he is a Director of KUB Agrotech Sdn Bhd and KUB Sepadu Sdn Bhd.

Although he is a trained teacher, he has gained substantial experience in governmentagencies. He earned his B.A. and Dip. Ed. From Universiti Malaya and began his teachingcareer in 1966 before attaining the position of Kelantan Deputy Director of Education in1982. In government, he served as the Chairman of FELCRA Malaysia Berhad from 1993until 2000 and was the Chairman of South Kelantan Development Authority or KESEDARfrom 1991 until 1992. He has served as a Member of the National Tobacco Board since1986 until 2002. In politics, he was chief of UMNO Bachok Division from 1976 until 2003,an EXCO Member for Kelantan from 1986 until 1990, a member of UMNO Supreme Councilfrom 1987 until 1995 and was the Kelantan UMNO Liaison Committee's Secretary from1984 until 2000.

He does not have any family relationship with any Director and/or major shareholder of KUBMalaysia Berhad. He has never been convicted of any offence over the past 10 years andhas no conflict of interest with KUB Malaysia Berhad.

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Datuk Haji Ahmad Shahibuddin HajiMohd NorIndependent Non-Executive DirectorDirectorChairman of Board NominationCommitteeMember of Board Audit CommitteeMember of Board RemunerationCommittee

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director’s profile(continued)

Dato' Ir. Harun Ahmad SarujiIndependent Non-Executive DirectorDirectorChairman of Board Remuneration CommitteeMember of Board Audit CommitteeMember of Board Nomination Committee

Dato' Ir. Harun Ahmad Saruji, aged 68, Malaysian, has served theMalaysian Government for 35 years and his last position was as theChief Executive Officer of the Perak State Development Corporation(Perbadanan Kemajuan Negeri Perak), the leading state agency in thedevelopment and promotion of industries, new townships, housingestates and commercial centers.

He obtained his BSc. in Civil Engineering from the University of Brighton,UK and is a Member of the Institute of Engineers, Malaysia and aProfessional Engineer of the Board of Engineers, Malaysia.

He was appointed to the Board of KUB Malaysia Berhad on 1 January1993 and also serves on the Board of KUB subsidiaries.

He is presently the Chairman of Perak Corporation Berhad (PCB), aCompany listed on the Main Board of Bursa Malaysia Securities Berhadand serves as Director in several PCB subsidiaries.

He does not have any family relationship with any Director and/or majorshareholder of KUB Malaysia Berhad. He has never been convicted ofany offence over the past 10 years and has no conflict of interest withKUB Malaysia Berhad.

Dato' Nordin BaharuddinIndependent Non-Executive DirectorDirectorChairman of Board Audit Committee

Dato' Nordin Baharuddin, aged 56, Malaysian, was appointed to theBoard of KUB Malaysia Berhad on 19 May 2005.

Dato' Nordin retired as Chairman of Ernst & Young Malaysia in 2004after 35 years in the accounting and auditing sector in Malaysia andoverseas.

He is a Fellow of the Institute of Chartered Accountants in England andWales and a Member of the Chartered Institute of Taxation, London.He is active in local professional accounting bodies through hismembership of and serving as Vice-President of the MalaysianInstitute of Certified Public Accountants, Council Member andChairman of the Accounting and Auditing Committee and PracticeReview Committee of the Malaysian Institute of Accountants, andMember of the Malaysian Financial Reporting Foundation. Notably,Dato' Nordin is also a Member of the Mongolian Institute of CertifiedPublic Accountants and helped develop the profession in Mongolia aswell as provided professional advice to the corporate sector throughhis participation as Partner in Charge of Ernst & Young Mongolia.

Dato' Nordin is acknowledged for promoting best practices in riskmanagement and corporate governance.

He does not have any family relationship with any Director and/ormajor shareholder of KUB Malaysia Berhad. He has never beenconvicted of any offence over the past 10 years and has no conflictof interest with KUB Malaysia Berhad.

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15director’s profile

(continued)

Rosman Abdullah, aged 38, Malaysian, was appointed to the Board of KUB Malaysia Berhadon 19 May 2005.

An accountant by profession, Rosman has over 16 years' experience in corporate andbusiness management, corporate finance, accounting and auditing. He is a charteredmember of the Malaysian Institute of Accountants, and a member of the Australian Societyof Certified Practising Accountants. He holds a Bachelor of Commerce (Accounting) degreefrom the Australian National University, Australia and had attended the AdvancedManagement Programme at Oxford University in year 2000.

Currently, he is the Corporate Affairs Director of PECD Berhad, a company listed on theMain Board of Bursa Malaysia Securities Berhad. Previously, he had served as theExecutive Director of Malaysia Airports Holdings Berhad (MAHB) from 1997 until 2003 andas Experienced Manager at Arthur Anderson & Co. from 1989 to 1997.

At present, he also serves as Chairman of MESDAQ-listed Datascan Berhad and asindependent director of Kumpulan Fima Berhad, a company listed on Bursa Malaysia's MainBoard.

He does not have any family relationship with any Director and/or major shareholder of KUBMalaysia Berhad. He has never been convicted of any offence over the past 10 years andhas no conflict of interest with KUB Malaysia Berhad.

Rosman AbdullahIndependent Non-Executive DirectorDirector

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16senior management team

Mohd Shahar Yope @ YahyaGroup General Manager

Group Corporate Planning Division

Hiruddin HashimGroup General Manager

Group Human Resource & Corporate Services Division

Nik Fazila Nik ShihabuddinGroup General Manager

Group Finance Division

Aida Haniza AdnanGroup General Manager / Company Secretary

Group Legal & Secretarial Division

Izham YusoffChief Executive Officer

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senior management team

Prof Dr. Syed Hamid AljunidHead, Education & Training Division

Wan Mohd Nor Wan AhmadHead, Energy Division

Ab. Aziz MohamedHead, Information & Communications Technology Division

Natrah AbdullahHead, Food, Beverage & Events Division

Mohd Hatar IsmailHead, Property, Engineering & Construction Division

Nazrul Hisham Abdul HamidChief Internal Auditor

Group Internal Audit Division

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chairman’sstatement

Then on 5 May 1991, I was elected as one of five newmembers of the co-op's Board of Directors representingUMNO, and subsequently, I was elected as Chairman tosalvage the co-operative. With the help of a new board ofdirectors, Koperasi set out to become market-orientedand to seek new products, brands, markets and otherpartners. We also unlocked the value of assets, such asPusat Bandar Damansara (PBD), in which Koperasi had a30% stake. Although PBD's book value was negativegiven its debt of RM450 million, the development'smarket value was RM600 million. Instead of a cash sale,we worked with PBD's other owners to sell PBD toDamansara Realty Berhad (DRB) through a verysuccessful corporate exercise. In return for thatKoperasi's 30% in PBD, DRB allotted to Koperasi 166million shares, of which 133 million shares were speciallymeant for Koperasi members as an enticement for themto increase their subscription in Koperasi as well asattract new members under a membership drive scheme.Post-distribution of the DRB shares, members enjoyedmore than 100% returns on their initial investments inKoperasi. The remainder of the DRB shares were sold tosettle debts and to invest in other businesses andcompanies.

The exercise was an unqualified success, achieving allits objectives, including increasing its membershipsubscriptions from RM19 million to RM130 million andcompletely turning around KUB into a profitable co-operative.

After a 3-year overhaul from 1991 involving numerousingenious value-creation schemes through acquisitions,mergers and capital market exercises like the DRB andDatuk Keramat exercises, Koperasi ended FY1995 withabout RM400 million in gross assets, compared toliabilities of RM123 million and a negative shareholders'fund of RM51 million as at our takeover point in May1991. The co-operative had made good and rewardedits members with asset growth and profitability.

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19After serving the KUB Malaysia Group in both executive and advisory leadership capacities since 1991, I will finally retire in 2005.

It has been a long and eventful journey with the Group. Mirroring life, the Group has chalked up many triumphs and enduredcountless painful rites of passage, such as business closures and economic downturns. In fact, the Group is a textbook businesscase study and students of the business world have a score of lessons to learn from the legacy of KUB's collective wisdom andexperiences.

KUB Malaysia started life in 1977 as a co-operative known as Koperasi Usaha Bersatu Malaysia Berhad (Koperasi), with just3,293 members and a paid-up capital of RM300,000. The co-op's goal was to collect funds from individual members to investin large-scale business projects that would help achieve Malay economic parity in line with the goals of the NEP. But a combinationof factors resulted in massive losses and by the end of the eighties the co-op faltered on the brink of bankruptcy.

Then on 5 May 1991, I was elected as one of five new members of the co-op's Board of Directors representing UMNO, andsubsequently, I was elected as Chairman to salvage the co-operative. With the help of a new board of directors, Koperasi set outto become market-oriented and to seek new products, brands, markets and other partners. We also unlocked the value of assets,such as Pusat Bandar Damansara (PBD), in which Koperasi had a 30% stake. Although PBD's book value was negative given itsdebt of RM450 million, the development's market value was RM600 million. Instead of a cash sale, we worked with PBD's otherowners to sell PBD to Damansara Realty Berhad (DRB) through a very successful corporate exercise. In return for Koperasi's 30%in PBD, DRB allotted to Koperasi 166 million shares, of which 133 million shares were specially meant for Koperasi members asan enticement for them to increase their subscription in Koperasi as well as to attract new members under a membership drivescheme. Post-distribution of the DRB shares, members enjoyed more than 100% returns on their initial investments in Koperasi.The remainder of the DRB shares were sold to settle debts and to invest in other businesses and companies.

The exercise was an unqualified success, achieving all its objectives, including increasing its membership subscriptions fromRM19 million to RM130 million and completely turning around KUB into a profitable co-operative.

After a 3-year overhaul from 1991 involving numerous ingenious value-creation schemes through acquisitions, mergers andcapital market exercises like the DRB and Datuk Keramat exercises Koperasi ended FY1995 with about RM400 million in grossassets, compared to liabilities of RM123 million and a negative shareholders' fund of RM51 million as at our takeover point inMay 1991. The co-operative had made good and rewarded its members with asset growth and profitability.

To take KUB to greater heights, the former Prime Minister Tun Dr. Mahathir Mohamad urged KUB to transform from a co-operativeto a company for various reasons, including enhanced efficiency and productivity, and to add shareholder value by making theirinvestments liquid and easily marketable. Taking the cue seriously, the Koperasi undertook a bold, major and unprecedentedcorporate exercise to metamorphose itself into a company listed on the Kuala Lumpur Stock Exchange (now known as BursaMalaysia Securities Berhad) with a paid-up capital of RM504 million.

chairman’sstatement

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20chairman’s statement (continued)

The exercise chalked up a few firsts anywhere, including an amendment to the nation's Cooperative Act to enable Koperasi tobecome a company. This historic event and its process also helped to resolve a few other problems, namely to facilitate theclosure of the moribund Bumiputra Stock Exchange and the rescue of its lone listed company, Permodalan Perak Berhad, whichwas used as a vehicle for Koperasi to transform into a KLSE public listed company.

However, the Cinderella story ended abruptly when the Asian Financial Crisis struck mercilessly soon after its listing on the mainbourse on 18th August 1997. The crisis triggered a meltdown of the region's bourses and KUB's shares plummeted to as lowas RM0.35 sen per share. Its investment in Sime Bank was reduced to ground zero and caused Sime Darby to abandon itsagreed plan to purchase KUB's 30% stake in Sime Bank for RM1.2 billion. It rendered KUB almost penniless and impaired itsbusinesses across the board. Consequently KUB could not realize its approved plan to take over Malaysian Mining CorporationBerhad from Permodalan Nasional Berhad causing the abortion of all subsequent schemes including the development plan of itscore business as part of its listing requirement.

Crippled and its struggle to survive compounded by the political turmoil enveloping the nation then, KUB was once again on theverge of collapse. The ensuing protracted negotiation to salvage its investment in Sime Bank, almost made KUB a victim of apolitical fall-out. However, its management tenacity and professionalism was rewarded with the successful sale of the bank staketo RHB bagging RM823.8 million which enabled it to pay all its RM424 million bank borrowings, refinance its existing businesses,buy KUB.com, A&W and Summit Petroleum, and invest in UNITAR and ICT start-ups. Unfortunately the 1999 respite wastemporary. The dot.com crash worldwide ensued which attributed to the failure of most of its ICT start-up investments. Theperiod between August 1997 to 2000 was truly nightmarish and traumatic, an experience never to be repeated, but due to KUB'sinherent strengths and resilience, it sailed through the turbulence successfully.

In 2001, we began to bite the bullet and restructure extensively - once again. The detoxification speaks for itself: the Group isfar stronger today with over RM800 million in revenues for FY2004 and a clean balance sheet. Most of our businesses - whetherthey are start-ups like UNITAR or KUB Tekstil or restructured acquisitions like Summit Petroleum and Tele Dynamics - aregenerating significant revenues and adequate cashflows and profits. We have new and exciting businesses in hand, like ProgasPakistan (Pvt.) Ltd. and the Bukit Tagar waste management concession. Our successful concerted 30-month restructuringexercise means we are a "turnaround story" for the second time, and we are now on analysts' radar screens as a stock to watch.There is also a noticeable increase in non-Malay shareholders in KUB Malaysia. It is estimated that over 20% of equity is in thehands of non-Malay institutional and retail shareholders, which is a heartening vote of confidence given the broad investmentalternatives outside KUB Malaysia.

The trials of the past 7 years have been excruciatingly painful and difficult, but they are now behind us, and we are now in astronger position to reach our ultimate goal, which is to be a Malaysian sogososha or trading house with a portfolio of goodsand services that will help us weather economic booms and busts. It is worth emphasizing that KUB is not a single product orservice company but a conglomerate.

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21chairman’s statement

(continued)

Review of 2004 Our rich portfolio mix was a major factor in our improved performance for FY2004. Group revenue grew 27.9% to RM799.8million while operating profit before exceptional items, provisions and write-offs, and finance costs improved 77% to RM14.8million.

Continually improving the quality of division performance has been the key to enhancing Group results. Despite a competitivelandscape, all Divisions posted improvements in turnover except Education & Training (E&T). All Group Divisions, except Food &Beverage (F&B), recorded profits before tax and impairment losses for FY2004, which demonstrates the benefits of our intensivecorporate restructuring strategies and our focus on a culture of performance and accountability.

The E&T Division recorded a loss before tax and impairment losses of (RM0.9) million, against a loss before tax of (RM2.6) millionlast year, benefiting from cost consolidation and the shutting-down of non-profitable branches that were dragging down thedivision's performance. However, turnover dropped by 6% to RM60.6 million due to lower student enrolment, especially forvocational and information technology courses, and intense competition as a result of sea changes in government policiesregarding post-secondary educational opportunities, especially the introduction of government community colleges, and theuncontrollable proliferation of public and private colleges and universities.

The Information & Communications Technology (ICT) Division recorded a higher turnover of RM261.8 million against RM200.9million in 2003 due to new commitments from major clients like Telekom Malaysia and Putrajaya Holdings. Due to thinning ofmargin in this competitive sector, profit before tax and impairment losses fell to RM5.2 million as against profit before tax ofRM7.6 million in FY2003.

The Energy Division improved its turnover to RM195.9 million, an increase of RM47.4 million from FY2003, while profit beforetax more than doubled from RM2.5 million for FY2003 to RM6.2 million for FY2004. Despite the challenging uptrend in LPGprices in FY2003, the sector successfully sold a higher cumulative tonnage for the year.

The F&B Division recorded a turnover of RM52.7 million. Anchor brand A&W accounted for 6% of the Group's revenue, due toan increased number of strategically-located outlets both in Malaysia and Thailand and a revised menu that caters to thetastebuds of modern consumers. A&W recorded pre-tax losses of RM31.2 million due to impairment losses made on goodwill.

Despite the excellent performance at Division level, the Group registered a loss after tax of RM18.05 million mainly due toimpairment losses, provisions and write-offs of RM52.0 million on assets such as property, plant & equipment, intangible assets,inventories and receivables. Fortunately, extraordinary gains of RM48.9 million from various asset divestments and waivers ofdebt cushioned the impact of the write-offs. On the bright side, this prudent decision to write down assets in order to fairly reflectcurrent market values has helped clean up the balance sheet and placed the Group on a solid footing for the future making theattainability of profits for FY2005 brighter.

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22chairman’s statement (continued)

In 2004, we began to wind down our ongoing divestment programme, as we have already stripped away the targeted non-coreassets. In future, instead of divestment, we intend to find means of adding and unlocking existing asset values in order to deliverbetter values and returns to shareholders. Nevertheless, the divestment strategy has worked well; the Group has utilised part ofthe proceeds to pare down debt to RM199.5 million in 2004 from RM225.5 million at end-2003. Lowering our debt has createdsignificant annual interest savings of RM2 million.

Despite heavy divestments and hefty provisions and losses over the last 30 months, KUB still remains fundamentally strongbased on existing businesses invested or acquired over the years since 1991 prior to 2002. The Group's Net Tangible Assets(NTA) per share increased to 76 sen as at 31 December 2004 compared to 69 sen as at 31 December 2003. We are confidentthat FY2005 will end with even better NTA.

Division-specific tactics paid off handsomely in 2004, and we will maintain and further refine this success strategy in 2005. TheGroup will keep investing in the branding, marketing and sales infrastructure in order to expand the sales volumes and marketshare of our brands and subsidiary companies.

Where the bigger picture is concerned, the Group will continue to push the envelope in pursuing operational excellence, structuralcost reductions and significant margin improvements.

New executive appointments added vigor to the Group's boardroom, although the Group lost significant talent with the departureof our former managing director Dato' Che Khalib Mohamad Noh on 30 June 2004 and director Datuk Mohd Hashim Hassan on25 March 2005. Two other directors, Tan Sri Datuk Dr. Johari Mat and Tuan Haji Ahmad Kamal Abdullah Al-Yafii also resignedrecently on 19 May 2005.

The Board extends many thanks to Dato' Che Khalib who ably managed the Group for 1 1/2 years with boundless energy,instituting extensive corporate downsizing that created a vastly leaner, more productive and sustainable organization. Bouquetsare also due to Datuk Mohd Hashim, Tan Sri Johari and Tuan Haji Ahmad Kamal, whose guidance and wisdom will be sorelymissed.

On 1 July 2004, the Group welcomed Encik Izham Yusoff on board as a member of the management team. His experience atAmanah Raya Berhad and as Assistant to the Managing Director at EON Berhad has earned him considerable experience inservice industries, which will stand him in good stead in managing KUB Malaysia Berhad.

In 2005, we also saw MOF Inc., becoming a substantial shareholder of KUB when it purchased a 23.6% stake from theLiquidators. With the investment, KUB is now partially a Government-Linked Company (GLC).

2005 Outlook

Boardroom and Shareholding Changes

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A N N U A L R E P O R T 2 0 0 4

23chairman’s statement

(continued)

In pursuit of productivity and returns, the Group has undergone a considerable transformation in recent years, which could nothave been achieved without our people. On behalf of the Board, I would like to say kudos to all of our staff for their loyalty,dedication, commitment and determination, despite the difficult challenges. Their efforts have laid the solid foundations on whichwe are now building a stronger business.

Strategic guidance and governance are vital elements in business, and I am indebted to the Board for their valuable wisdom andcontributions to the Group. Finally, on behalf of the Board, I thank the shareholders for their enduring support and loyalty towardsthe Group through periods of both crisis and prosperity.

In the year ahead, we will extend our services to more people, expand our relationships with both the public and private sectors,and enlarge the scope and horizon of our diverse businesses. We have already made an excellent start in 2005 and are clearlyfocused on the challenges ahead. Enriching shareholder value is at the top of our agenda and we will continue to manage ourbalance sheet prudently to ensure that the revenues generated by our businesses will be used wisely to maximise value creation.

Although I will be retiring soon, I am confident that I will leave KUB Malaysia Berhad in good hands. It is my sincere wish that mysuccessors will not ignore KUB's history and its collective wisdom. There are ample lessons to be learnt from KUB's ever-evolvingbusiness and culture, which are dynamic due to rapid changes in the business environment in Malaysia and worldwide, not onlybecause of new technological influences but also the challenges arising from the advent of China and India as new economicpowers in the coming years, impacting directly on Malaysia and KUB.

I also hope that forthcoming generations of KUB management will continue to run KUB like a school for many young managersfresh from colleges and universities from around the world. Investment in the training and exposure of these young managers tothe real business world pays off in the long run, creating a deep reservoir of talent for Malaysia.

Finally, I am confident that KUB can evolve into an exemplary Malaysian business corporation as opposed to a Bumiputra orChinese business entity, as it is a microcosm of a dream Malaysian company. Given its history of bouncing back from crisis uponcrisis, I believe that KUB is capable of reaching much greater heights in future.

Thank you.

Datuk Hassan HarunChairman

Acknowledgements

A/R Final-0091/2/05 31/05/2005 1:12 pm Page 23

a s p i r a t


business division

e d u c ainformation & communications

technology (ICT)

energy

A/R Final-0091/2/05 31/05/2005 1:13 pm Page 24

i o n s

A N N U A L R E P O R T 2 0 0 4

25business division

education & training

(E&T)

food, beverage &

events (FBE)

property, engineering &

construction (PEC)

t i o n

A/R Final-0091/2/05 31/05/2005 1:13 pm Page 25


Throughout the past few years, the Group has undergone a massivecatharsis in the shape of consolidation and restructuring. To be honest, thenecessary therapy of making substantial provisions and selling off non-synergistic assets to service debts has affected the Group's financialtrack record.

The good news is that this phase is over. With the coming of 2005, we areimmersed in the next phase: development. Our strategy now is to unlockthe value of our diverse assets that have the potential to grow andcontribute positively to the Group. In future, we are confident that there willbe growth in businesses, sales, market share and profits, which will helpfulfill our mission to deliver profitable returns to our shareholders.

Key to this strategy of maximizing value will be coordinated and synergisticbrand development programs and marketing campaigns. We will leveragethe strengths of our mature brands to strengthen our younger brands andcreate synergies across our different businesses. For example, one of the Group's strongest consumer brands is A&W. For 2005 and in thefuture, the Group intends to capitalize on A&W's brand recognition power by utilizing A&W as a springboard to market the Group's otherconsumer brands.

At the same time, we believe that as a responsible corporate citizen, oneof our goals is to help improve the quality of human life by delivering thebest services and products at the best prices. This mission underlies thepurpose of all our core businesses: Energy (Energy), Information &Communications Technology (ICT), and Education & Training (E&T), as wellas our auxiliary businesses such as Food, Beverage & Events (FBE),Property, Engineering & Construction (PEC), Plantations and Manufacturing(Others). We are also guided by this principle when embarking on newbusinesses such as Environmental Services.

chief executive officer review of operation

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A N N U A L R E P O R T 2 0 0 4

27chief executive officer

review of operation

Core Businesses' Review and Prospects

Despite increased fuel and logistics costs, the Group's Liquefied Petroleum Gas (LPG) business retainedits market share of about 7% and its status as Malaysia's leading independent LPG company in 2004,distributing in excess of 100,000 metric tonnes (MT) of LPG under the Solar and KUB Gas brands.

KUB owns 40% equity in a joint venture company, Progas Pakistan (Pvt.). Ltd., which has made the largest-ever investment of UDS40 million in Pakistan’s LPG industry. Pakistan’s budding LPG sector, offers vastpotential due to industry deregulation and a dynamic annual growth rate of 17.2 percent. Under Phase 1of the JV, completed in 2003, Progas built fully-integrated bottling facilities and storage tanks of 2,030MT in Port Qasim, Karachi. Phase 2 targets the completion of the import terminal and additional storagetanks of 6,000 MT in 2005, as well as the implementation of marketing programmes and a distributionnetwork to stimulate sales and logistics.

This key project will spur Pakistan's economic growth and improve living standards by providing first-classinfrastructure, high-value jobs and an alternative fuel source that is cleaner, safer and cheaper.

ICT maintained its position as the Group's leading business in terms of revenues and profits, relying on astrategy of courting both public sector and private sector business. Contracts from Government relatedcompanies worth more than RM100 million accounted for the bulk of revenue streams in FY2004.Furthermore, subsidiary KUB-Fujitsu Telecommunications Sdn Bhd secured a contract to supply DigitalSubscriber Line Access Multiplexer (DSLAM) Systems worth RM26.4 million from major client TelekomMalaysia Berhad in January 2004 in collaboration with KT Network Corporation of South Korea.

In line with the Group's mission of delivering better solutions that benefit people, subsidiary KUBTelekomunikasi Sdn Bhd embarked on a project to design and manufacture Malaysia's first RemoteTerminal Digital Subscriber Line Access Multiplexer (RTDSLAM) and IPDSLAM in tandem with LucentTechnologies of USA and has won Supply Contracts with Telekom Malaysia totaling RM25 million for rollingout in 2005.

Energy

ICT

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28chief executive officer review of operation(continued)

Universiti Tun Abdul Razak (UNITAR), with an enrollment of 8,000students throughout the country, has expanded its course offerings,including the Bachelor of Education programme, to meet thegrowing needs of the country for trained manpower in line with aknowledge society.

In line with its flexibility and capacity to venture into the globalenvironment, UNITAR has recently collaborated with the AsianUniversity of Bangladesh and Northwood University, U.S.A. forstudents to transfer credits to and from UNITAR and earn degreesin the areas of Business and Management.

UNITAR is proud to announce that its R&D has achievedconsiderable success in creating an effective support system forenhancing e-learning within and outside the country. With thisachievement, the UNITAR e-learning model is expected to be aninternational source model of reference for countries aspiring toundertake Life-Long Learning projects.

The Group is confident that Malaysia's long-standing fast-foodfranchise A&W will further improve in 2005, as the cessation ofwrite-offs and amortizations will boost its financial profile. Toincrease sales, the Group is opening new branches and reworkingA&W's menu and marketing campaigns, in addition to focusing onevent management and industrial catering.

The Group plans to open more restaurants in strategic suburbanspots in Malaysia and Thailand in 2005, on top of the existing 60outlets currently in operation. All 31 restaurants in Malaysia and the29 outlets in Thailand serve a wholly halal menu, which has beenexpanded to include new dishes and desserts. For 2005 alone, wehave allocated RM3 million to refurbish our restaurants and promotethe A&W chain throughout Malaysia. A&W will also leverage itsexpertise in birthday parties to market its events and cateringservices.

Education &Training

Food, Beverage & Events

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29A N N U A L R E P O R T 2 0 0 4

chief executive officerreview of operation

(continued)

A N N U A L R E P O R T 2 0 0 4

Environmental services offer significant potential in Malaysia's maturing economy,where an affluent population is generating increasing waste that must be dealt within a sustainable fashion. The Group has identified important environmental projectsthat fit its mission to create a better quality of life, and which could be a long-termsource of business growth.

In the key Bukit Tagar concession, the Group has a 40% stake in the joint venturecompany KUB-Berjaya Enviro Sdn Bhd which will build, operate, maintain and managethe Bukit Tagar sanitary landfill over a 40-year concession period. Berjaya GroupBerhad owns the majority stake of 60% in KUB-Berjaya Enviro. The Bukit Tagar landfillis geared to handle waste from the Federal territories of Kuala Lumpur and Putrajaya,which generate in excess of 6,000 tones of waste daily. The first phase of the 800haBukit Tagar landfill has been designed to handle 3,000 tones of solid waste daily andthe entire site will be able to handle in excess of 2 million tones of waste annuallyonce all facilities are completed by 2006. Tipping or disposal charges are undernegotiation with the authorities, and will be disclosed when finalized.

The best strategies are irrelevant without the right people to execute them. TheGroup is committed to a two-pronged human resource policy of hiring new talentsand grooming existing staff through intensive training. In 2004, we set up theAcademy of Knowledge, Accounting and Leadership (AKAL), which will deliver trainingin relevant areas like ethics, governance, finance and management. I am proud tonote that our people have responded well to professional development training andthey are a credit to the Group.

The support of our people has been essential in ensuring a smooth handover fromthe previous Group Managing Director, Dato' Che Khalib Mohd Noh. In particular, I amvery grateful to Dato' Che Khalib for leaving a legacy of far-reaching corporatereforms that has made it easier to lead the Group on a new route of growth anddevelopment.

Finally, I wish to express my sincere thanks to the Board for their valuable guidanceand support of management policies. I am indebted for your confidence and willstrive to work harder and better in 2005.

Izham YusoffChief Executive Officer

EnvironmentalServices

Human CapitalDevelopment

Awards and Achievements

In 2004, the Group secured several prestigious awards andcertifications at national and international level that demonstrateour excellence and competitiveness across business divisions.

Energy company Summit Petroleum received the 10 Year OSHAAward at the National OSHA Excellence Awards (AnugerahCemerlang Keselamatan dan Kesihatan Pekerjaan PeringkatKebangsaan) 2004.

In E&T, UNITAR underwent SIRIM's stringent ISO SurveillanceAudit in September 2004 and successfully retained theISO9001:2000 certification for 2004/2005.

60%-owned ICT company Tele Dynamics Sdn Bhd dominated atToshiba's awards competitions, winning a Gold Award (HardwareCategory) and a Silver Award (Network Category) at the ToshibaRegional Quality Service Campaign 2004 (Electronic Imaging);the Outstanding Demonstration Award and a Gold Award at theToshiba e-STUDIO Grand Demonstration Contest; and a GoldAward for Overall Performance and a Sales Master Award andSilver Award in the Senior League Category at the ToshibaBusiness Communication Systems/PABX Distributors Salescompetition.

In FBE, A&W Thailand won major awards from international fastfoods franchisor YUM! Brands Inc., which is the world's secondlargest fast foods franchisor after McDonalds, and owner of thePizza Hut, KFC, Taco Bell, Long John Silver's and A&Wfranchises. The YUM! Champions Club singled out A&W Thailandfor Best Outlet Restaurant General Manager and Best NewProduct Launch for the "Waffle to Go".

A/R Final-0091/2/05 31/05/2005 1:13 pm Page 29


30statement on corporate governance

KUB Malaysia Board of Directors ('the Board") is committed to thehighest standards of corporate governance throughout the Group. TheBoard is accountable to the Company's shareholders for goodgovernance and this statement describes how the principles of goodgovernance and the best practices of the Malaysian Code on CorporateGovernance ("the Code") enforced by the disclosure requirement of theBursa Malaysia Securities Berhad ("BMSB") listing requirements, areapplied by the Group.

The Board is pleased to disclose that the Company has applied all theprinciples and is in compliance with all the best practices of corporategovernance set out under the Code.

A THE BOARD OF DIRECTORS

The Board is responsible to lead and direct the Group in an effectivemanner and discharged its responsibilities in the manner describedbelow:

1. Board Composition and Balance

As at the date of this statement, the Board consists of seven (7)members comprising three (3) non-independent non-executiveDirectors, one (1) executive Director and three (3) independentDirectors.

The Board is ultimately responsible for the Group's corporategovernance, strategic direction, overseeing the investments ofthe Company, establishing goals for management andmonitoring the achievement of these goals. The Board'sauthority is defined and communicated through KUBManagement Guide.

The Directors, collectively bring with them a wide range ofexpertise in areas such as finance, business, legal, and technicalexperience. A brief profile of each Director appear on pages 12to 15 of this annual report. The profile indicates the high leveland range of business experience amongst board memberswhich is essential to manage effectively a business of the sizeand complexity of the Group.

The Board composition complies with paragraph 15.02 of theListing Requirements of BMSB, which requires a minimum of two(2) Directors, or one third (1/3) of the Board members,whichever is the higher, to be independent Directors.

In order to promote a balance of power and authority, the officesof Chairman and Managing Director & Chief Executive have beenheld separately. The Board is led by the Chairman, Datuk HassanHarun and the executive management is led by Encik IzhamYusoff, the Managing Director & Chief Executive. The Board hasidentified and appointed Dato' Kamilia Ibrahim on 1 July 2004 asthe senior independent non-executive Director, to whom anyconcerns pertaining to the Group may be conveyed. However,Dato’ Kamilia was appointed as Deputy Chairman of KUBMalaysia Berhad on 20 April 2005 and member of the ExecutiveCommittee. As such, she ceased to be the Senior IndependentDirector with effect therefrom.

The roles of Chairman and the Managing Director & ChiefExecutive are clearly defined in their individual positiondescriptions. The Chairman provides coherent leadership andassumes the responsibility for the effective running of the Board,as well as represents the Board to the shareholders. TheManaging Director & Chief Executive, supported by his team ofmanagement, is responsible for the day-to-day management ofthe business, organisational effectiveness as well asimplementation of Board's policies and decisions.

2. Board Meetings & Attendance

The Board is highly dedicated and has exhibited utmostcommitment to the Group, evidenced by its members'attendance record. During the financial year ended 31 December 2004, eight (8) Board meetings were held. Therecord of attendance at Board meetings is as follows:

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31statement on

corporate governance

* Redesignation from independent to non-independent non-executive Director and appointed as Deputy Chairman on 20 April 2005

3 Access to and Supply of Quality Information and Advice

All relevant papers, which are comprehensive and encompass both quantitative and qualitative factors, for deliberation by the Board are circulatedin advance to its Directors to facilitate focused discussion and effective decision-making process. Members of the senior management team andprofessional advisers are invited into Board meetings to provide the necessary information and attend to the Board's enquiries on relevant issues,enabling the Board to make informed decisions premised on in-depth knowledge. There is also a formal procedure sanctioned by the Board ofDirectors, whether as a full board or in their individual capacity, for Directors to obtain independent professional advice at the Company's expense.

A balance of financial and non-financial information is encapsulated in the papers covering the Group's strategies, financial results, overallperformance of the Group, budgets, corporate proposals, major investments, business directions and corporate governance matters for theBoard's deliberation at the Board meetings.

All Directors have unrestricted access to all relevant information to discharge their responsibilities, as well as access to the advice and services oftwo (2) Company Secretaries who are responsible to ensure that Board meeting procedures are observed, and applicable laws and regulations arecomplied with.

Director Meetings AttendedDatuk Hassan Harun 8/8Non-independent non-executive Director

Izham Yusoff 3/3Non-independent Executive Director (Appointed w.e.f. 1 July 2004)

Tan Sri Datuk Dr Johari Mat 6/8Non-independent Non-executive Director

Datuk Haji Ahmad Shahibuddin Haji Mohd Nor 8/8Independent Non-executive Director

Dato' Kamilia Ibrahim 6/8*Non-independent Non-executive Director

Dato' Ir Harun Ahmad Saruji 8/8Independent Non-executive Director

Tuan Haji Ahmad Kamal Abdullah Al-Yafii 7/8Independent Non-executive Director

Datuk Mohd Hashim Hassan 8/8Non-independent Non-executive Director (Resigned w.e.f. 25 March 2005)

Dato' Che Khalib Mohamad Noh 4/4Non-independent Executive Director (Resigned w.e.f. 30 June 2004)

Ahmad Rodzi Pawanteh 6/7Non-independent Executive Director (Resigned w.e.f. 23 November 2004)

A/R Final-0091/2/05 31/05/2005 1:13 pm Page 31


statement oncorporate governance (continued)

Board meetings are scheduled in advance at the turn of the new calendar,allowing the Directors to plan ahead and enter the calendar year'smeetings into their individual schedules.

B BOARD STRUCTURE AND EFFECTIVENESS

In executing its responsibilities, the Board delegates certainresponsibilities to its Committees as follows:

(i) Board Audit Committee ("BAC")(ii) Board Nomination Committee ("BNC")(iii) Board Remuneration Committee ("BRC")(iv) Board Investment Committee ("BIC")(v) Executive Committee ("EXCO")

All committees have clearly defined terms of reference outlining theirresponsibilities and operating procedures. The Chairman of the variouscommittees will report to the Board the outcome of the committeesmeetings. These committees were formed in order to enhance businessand operational efficiency as well as efficacy. However, the Board retainsfull responsibilities for the direction and control of the Company and theGroup.

(i) Board Audit Committee

Explained on pages 39 to 44 of this annual report.

(ii) Board Nomination Committee

The Nomination Committee consists of the following members:

Name of members

Datuk Haji Ahmad Shahibuddin Haji Mohd NorChairman, Independent Non-executive Director

Dato' Kamilia IbrahimNon-independent Non-executive Director

Dato' Ir. Harun Ahmad SarujiIndependent Non-executive Director

During the financial year, the Committee met twice with full attendance.

The Nomination Committee is empowered by the Board to bring to theBoard recommendations as to the appointment of new Directors forKUB Malaysia Berhad and its subsidiaries.

In addition, the Committee will review the required mix of skills,experience and other core competencies, which the non-executiveDirectors should bring to the Board. The Committee believes that theBoard's current composition possesses the required mix of skills andcore competencies necessary for the Board's effective discharge ofits duties.

(iii) Board Remuneration Committee

The Remuneration Committee consists of the following members:

Name of members

Dato' Ir. Harun Ahmad SarujiChairman, Independent Non-executive Director

Datuk Haji Ahmad Shahibuddin Haji Mohd NorIndependent Non-executive Director


During the financial year 2004, the Committee met once with fullattendance.

The policy practised on Directors' remuneration by the RemunerationCommittee is to provide the remuneration package needed to attract,retain and motivate the Directors of the quality required to manage thebusinesses of the Group and to align the interests of the Directors withthose of the shareholders.

The Committee is responsible for recommending to the Board theremuneration framework for Directors as well as the remunerationpackages of executive Directors. Nevertheless, it is the ultimateresponsibility of the entire Board to approve the remuneration of theDirectors. None of the executive Directors participated in any way indetermining their individual remuneration.

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33statement on

corporate governance(continued)

The executive Directors' remuneration comprises basic salary andGroup's other customary benefits made available whereappropriate. The non-executive Directors' remuneration comprisesfees and allowances where the determination is balanced withtheir expected roles and responsibilities.

(iv) Board Investment Committee

The Investment Committee consists of the following members:

Name of members

Tan Sri Datuk Dr Johari MatChairman, Non-Independent Non-executive Director

Tuan Haji Ahmad Kamal Abdullah Al-YafiiIndependent Non-executive Director


The Board Investment Committee was established in June 2004.

The Committee is responsible to make recommendation to theBoard in relation to the management of Group's investment anddivestment activities. The Committee oversees all projects whichrequire an investment and divestment of more than RM10 millionand Group capital expenditure of more than RM1 million.

The first meeting was held on 12 January 2005 with full attendance.

(v) Executive Committee

The Executive Committee consists of the following members:

Name of members

Datuk Hassan Harun (Appointed w.e.f. 5 April 2005) Chairman, Non-independent Non-executive Director

Tan Sri Datuk Dr Johari MatNon-independent Non-executive Director

Dato' Kamilia Ibrahim (Appointed w.e.f. 20 April 2005)Non-independent Non-executive Director

Izham Yusoff Non-independent Executive Director* Following the resignation of Datuk Mohd Hashim Hassan as the EXCO Chairman on 25 March

2005, Datuk Hassan Harun was appointed as the Chairman of the EXCO effective from 5 April2005.

During the year the financial year, the Committee met fourteen(14) times with full attendance.

The EXCO is delegated with such powers to ensure the smoothand effective running of the Company and their authority is statedin KUB Management Guide.

All Board papers will have to be tabled to the EXCO for reviewbefore they are presented to the Board for review anddeliberation. This is to ensure that information contained therein iscomplete, accurate and relevant, enabling the Board to make aninformed decision based on the information provided.

Appointment to the Board

The Board Nomination Committee is responsible for makingrecommendations in respect of any appointment to the Board. Inmaking the recommendations, the Board Nomination Committeeconsiders the required blend of skills and experience with which theDirectors should be equipped.

Any new nomination received is put to the full Board for assessmentand endorsement. The appointment of members is carried outthrough a proper selection process, which is consistent with theArticles of Association of the Company. The Company Secretary willalso ensure that all appointments are properly made, and that legaland regulatory obligations are met. The Board Nomination Committeeconsidered one nomination received during the year.

Re-election of Directors

In accordance with the Company's Articles of Association, all of theDirectors who are appointed by the Board are subject to election byshareholders at the first Annual General Meeting after theirappointment and are subject to re-election once every 3 years.

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34statement on corporate governance (continued)

Continuing Professional Development

All Directors are provided with appropriate professional developmenttraining to enhance the business acumen and professionalism indischarging their fiduciary duties to the Company.

Apart from attending the Mandatory Accreditation Programme andContinuing Educational Programme accredited by BMSB, theDirectors are also equipped with business exposure through visits tooperation sites.

Directors' Remuneration

The Board Remuneration Committee recommends to the Board theremuneration package for the executive Director, which isbenchmarked to the market and information from independentsources on the package for similar position in a select group ofcomparable companies.

The Board determines fees payable to the non-executive Directorsupon recommendation made by the Board Remuneration Committeeafter considering the rates comparable to other relevant companies,and such fees are tabled to the shareholders of the Company forapproval.

The aggregate remuneration of Directors are categorised intoappropriate components for the financial year ended 31 December2004, as follows:-

The number of Directors whose remuneration falls into the followingbands during the financial year ended 31 December 2004 are asfollows:-

The Board is of the opinion that, while individual Directors'remuneration is not disclosed, information provided above, which ismade in accordance with Bursa Malaysia's Listing Requirements, issufficient to provide an understanding and basis for evaluation ofKUB's corporate governance.

C CONTINUOUS COMMUNICATION WITH SHAREHOLDERS

The Company communicates with its shareholders and investorsprimarily through its Annual General Meeting (AGM), annual report, thequarterly financial statements and the various disclosures andannouncements made to BMSB.

At the AGM, the shareholders are given opportunity to ask theirquestions and seek clarification on the businesses and performanceof the Group.

Additionally, shareholders can also have access to information byaccessing the corporate website at www.kub.com. This website ismaintained by the Group and provides up-to-date information to itsshareholders as well as stakeholders at large.

No of Directors Executive Non Executive TotalRange of Remuneration Director Directors(RM)

0 - 50,000 5 5

50,001 - 100,000 1 1

150,001 - 200,000 1 1

200,001 - 250,000 1 1 2

350,001 - 400,000 1 1

Total 3* 7* 10

Note *: Includes a new appointment and 3 resignations of Directors.

Salaries Bonus/ Benefits Fees Total (RM)(RM) Allowances in Kind (RM)

(RM) (RM)

Executive 515,385 259,115 5,372 11,300 791,172Directors

Non-Executive – 240,000 252,000 492,000Directors-

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35statement on

corporate governance (continued)

D ACCOUNTABILITY AND AUDIT

1 Financial Reporting

The Board aims to provide and present a balance and meaningfulassessment of the Group's financial performance and prospectsat the end of the financial year, primarily through the annualfinancial statements, quarterly announcement to shareholders aswell as Chairman's statement and review of operations in theannual report.

The BAC assists the Board in scrutinising information fordisclosure in the reports and the overall quality of the financialreporting.

2 Directors' Responsibility Statement (Pursuant to Paragraph 15.27(a) of BMSB ListingRequirement)

The Board is accountable for ensuring that the financialstatements present a true and fair view of the state of affairs ofthe Group and of the Company as at the end of the financial yearand of their profit or loss and cashflows for the year then ended.In preparing the financial statements, the Directors have ensuredthat applicable approved accounting standards in Malaysia and theprovisions of the Companies Act, 1965 have been applied.

In preparing the financial statements, the Directors have selectedand applied consistently suitable accounting policies and madereasonable and prudent judgements and estimates

The Directors also have general responsibility for taking suchsteps as are reasonably open to them to safeguard the assets ofthe Group and to prevent and detect fraud and other irregularities.

3 Relationship with Auditors

Through the BAC, the Board maintains an active, transparent andprofessional relationship with the external auditors, Messrs KPMGDesa Megat & Co. The BAC meets with the external auditorswithout the presence of management at least once a year in itsaim to establish a transparent and appropriate relationship. TheBAC report is provided on pages 39 to 44.

4 Internal Control

The Code requires the Board to maintain a sound system ofinternal controls to safeguard shareholders' investment and theGroup's assets. The Group's Statement on Internal Controlspursuant to Paragraph 15.27(b) of the BMSB Listing Requirementis set out on page 37 to 38.

This statement is made in accordance with a resolution of the Board of Directors dated 26 April 2005.

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36additional complianceinformation

The following information is provided in compliance withParagraph 9.25 of the Listing Requirements of BMSB:-

a) Non-audit fees

The amount of non-audit fees paid to the External Auditors bythe Group for the financial year ended 31 December 2004,amounted to RM54,696.

b) Recurrent Related Party Transactions

The Company has obtained professional services fromcertain of its non-executive directors during the year. Theseservices were in relation to legal advisory services. Theamount was not significant, since it did not exceed RM 1million per year and did not surpass the 1% of revenuethreshold, and thus did not warrant an announcement.

c) Imposition of Sanctions/Penalties

During the financial year, no sanctions and/or penalties wereimposed on the Company, its subsidiaries, Directors orManagement by the relevant regulatory authority.

d) Material Contracts

During the financial year, there were no financial contractsentered into by the Company and its subsidiaries (not beingcontracts entered into in the ordinary course of business)involving directors and substantial shareholders.

e) Variation in Results

There was no variance of 10% or more between the resultsof the financial year 2004 and the unaudited resultspreviously announced.

f) Revaluation Policy on Landed Properties

The revaluation policy on landed properties is as set out inthe financial statements.

g) Profit Guarantee

The Company did not give any profit guarantee during thefinancial year.

h) Share Buyback

There is no share buyback during the financial year.

i) American Depository Receipt (ADR) or GlobalDepository Receipt (GDR)

The Company did not sponsor any ADR or GDR programmeduring the financial year.

j) Options, Warrant or Convertible Securities

During the financial year, no options, warrant or convertiblesecurities were issued by the Company.

This statement is made in accordance with a resolution of the Board of Directors dated 26 April 2005

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A N N U A L R E P O R T 2 0 0 4

37statement of

internal control

Introduction

This statement is made pursuant to the Listing Requirements of BursaMalaysia Securities Berhad with regard to the Group's compliance withthe Principles and Best Practices provisions relating to internal controlsas stipulated in the Malaysian Code on Corporate Governance (the "Code").

The Board is pleased to present hereinafter the annual update on theGroup's state of internal controls coupled with work done during the yearunder review.

Board Responsibility

The Board of Directors affirms that it is ultimately responsible for theGroup's system on internal control that includes the assurance of itsadequacy and integrity at all times, and its alignment with our businessobjectives. However, it should be noted that this system is designed tomanage rather than to eliminate the risks of failure to achieve businessobjectives and as such, could only provide reasonable but not absoluteassurance against material misstatement or loss.

The Board has established an ongoing process for identifying,evaluating and managing significant risks faced by the Group except forthe material joint ventures and associated companies. The process hasbeen in place throughout the year and up to the date of approval of theannual report and financial statements. It has been regularly reviewed bythe Board and accords with the Statement on Internal Control: Guidancefor Directors for Public Listed Companies ("Internal Control Guidance").

Enterprise Wide Risk Management Framework

The Board acknowledges that the identification and the management ofprincipal risks play an important and integral part in achieving theGroup's business objectives and the management of its dailyoperations.

The Group has outsourced the establishment of the Enterprise WideRisk Management Framework to a firm of professional accountants inDecember 2004. Apart from the responsibility to identify principal risksand ensuring the implementation of appropriate system to manage

these risks as set out in the Code, the objective of this exercise is toinculcate and embed risk management throughout the Group. Theproject commenced in January 2005 and is expected to be completedby December 2005.

KEY INTERNAL CONTROL SYSTEM

Control Structure

The Board is fully committed to ensuring that a proper controlenvironment is maintained at the Group. The key elements of theGroup's internal control system are listed below:

Board Committees

Specific Board responsibilities have been delegated to committeesestablished with formalised and specific terms of reference, to assistthe Board in the execution of its responsibilities.

The following are the committees established:

• Board Audit Committee (Please refer to page 39 for further explanation)

• Board Nomination Committee(Please refer to page 32 for further explanation)

• Board Remuneration Committee(Please refer to page 32 for further explanation)

• Board Investment Committee(Please refer to page 33 for further explanation)

• Executive Committee(Please refer to page 33 for further explanation)

These committees have the authority to examine all matters within theirscope and terms of reference and report back to the Board on aperiodic basis with their recommendations for review or approval by theBoard, where appropriate.

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38statement ofinternal control(continue)

Organisational Structure

The Board has put in place a defined organisational structure that isdirectly aligned to the strategic and operational demand of the business.Each operational unit is headed by reliable and responsible personnel whoare fully accountable to ensure that the business activities areimplemented with full compliance with the Group's objectives and policies.

Policies and Limits of Authority

The delegation of responsibilities to the Board Committees and themanagement as well as the delineation of their respective authority limitshave been clearly defined in the KUB Management Guide (KUBMaG) andthe establishment of similar authority guides for all the active subsidiariesof the Group, which have since been reviewed and approved forimplementation by KUB management as well as the respective Boards ofthe subsidiaries. The exercise was completed in October 2004. At theoperational level, procedures are in place to guide the management in itsday-to-day operation.

Monitoring and Review

Financial and Operational Review

The Board Committees together with the respective business divisionsreview the quarterly financial statements and performance of the Group indetail before they are tabled to the Board for their review and approval.Monthly performance reports produced by business divisions arecompared against the approved performance budget.

The Board through Board Audit Committee, regularly reviews reports frominternal audit on internal control, to help ensure the adequacy and integrityof the internal control system of the Group.

Business Plan and Budget Review

The Group undertakes a detailed business planning and budgetingprocess each year, to establish plans and targets against whichperformance is monitored on an ongoing basis.

The Executive Committee and senior management play a significant rolein the stages of strategy review and update, which include, among othersreviewing the plan before its finalisation, and the budget approval processto ensure that the plan developed reflects the corporate intent of theGroup and that resource allocation is strategically aligned.

Internal Audit

The establishment of a Group Internal Audit Department ("GIAD") since1997 is to provide independent assurance to Board Audit Committee("BAC") on adequacy and integrity of internal control system in place tomanage risks across the Group. GIAD reports functionally to the BAC andadministratively to the Managing Director & Chief Executive. The BACplays an oversight role in maintaining the system of internal control atboth sectors and divisional level. The BAC and GIAD perform their dutiesto uphold a constant level of integrity and competency in operational,financial, and business functions and to assure that the applicable laws,regulations, rules, directives and guidelines are complied with. Details ofthe work done during the year of review are as follow:

• GIAD develops an internal audit plan and executes internal auditprojects based on this plan. The internal audit function adopts a risk-based approach with independent and objective reports on the stateof internal control. The Department also assists the BAC andManaging Director & Chief Executive in investigating certain issuesidentified.

• GIAD has also set up an in-house risk management coordination team.Since then, the team has procured a risk management system inSeptember 2004, set up the Risk Management Steering Committeeand is in the midst of finalising the reporting framework.

Conclusion

The Board is of the view that the state of the Group's internal controlsystem is sufficient to safeguard shareholders' investment and theGroup's assets. There was no material control failure or weakness thathas resulted in material loss that requires disclosure in the Group's annualreport for the financial year under review.

This Statement is made in accordance with the resolution of the Board of Directors dated 26 April 2004.

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39board audit

committee report

The Board of Directors is pleased to present the report on the Board AuditCommittee ("BAC") for the year ended 31 December 2004.

The BAC was established by a resolution of the Board on 7 May 1997 toassist the Board of Directors in fulfilling its responsibilities in accordancewith its terms of reference outlined on pages 40 to 44 of the annualreport.

Membership

The BAC currently comprises three (3) Directors as follows:

1. Tuan Haji Ahmad Kamal Abdullah Al-Yafii - Chairman(Independent non-executive Director)

2. Datuk Haji Ahmad Shahibuddin Haji Mohd Nor(Independent non-executive Director)

3. Dato' Ir. Harun Ahmad Saruji(Independent non-executive Director)

The BAC is governed by its revised terms of reference as set out onpages 40 to 44 of the annual report. The terms of reference was revisedon the 26 April 2005 to strengthen the oversight function of the BAC.Tuan Haji Ahmad Kamal Abdullah Al-Yafii, an independent non-executiveDirector, is also a member of the Malaysian Institute of Accountants.

Meetings

During the financial year, the BAC met seven (7) times, with full attendanceof all its members.

The Managing Director & Chief Executive and the Company Secretarywere present during all the meetings except for the private session withthe external auditors. The Head of Internal Audit, representatives of theexternal auditors, Messrs KPMG Desa Megat and Co., as well as thesenior management personnel also attended the relevant meetings uponinvitation.

Summary of activities of the Board Audit Committee

The following activities were carried out by the BAC during the financialyear ended 31 December 2004:

a) Financial Results and Corporate Governance

• Reviewed the external auditors' scope of work and audit plans forthe year. Prior to the audit, representatives from the externalauditors presented their audit strategy and plan.

• Reviewed the quarterly unaudited financial results andannouncements to Bursa Malaysia Securities Berhad ("BMSB")before recommending to the Board for approval.

• Reviewed the Company's compliance, in particular the quarterlyand year-end financial statements with the Listing Requirements ofBMSB, Malaysian Accounting Standards Board ("MASB") and otherlegal and regulatory requirements.

• Reviewed the annual report and the audited financial statements ofthe Group prior to submission to the Board for their considerationand approval. The review was to ensure that the audited financialstatements were drawn up in accordance with the provisions ofthe Companies Act, 1965 and the applicable approved accountingstandards approved by MASB.

• Reviewed with the external auditors the results of audit, auditreport and management letter, including the management'sresponse.

• Reviewed the minutes of meetings of the BAC Committee.

• Consideration and recommendation to the Board for approval ofthe audit fees payable to the external auditors as disclosed in Note17 of the Financial Statements.

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board audit committee report(continued)

• Met with the external auditors once during the year without thepresence of the Executive Director and management.

• Reviewed the application of corporate governance principlesand the Group's compliance with the best practices set outunder the Malaysian Code on Corporate Governance for thepurpose of preparing the Corporate Governance Statement andStatement on Internal Control pursuant to the ListingRequirements of BMSB.

b) Internal Audit and Risk Management

• Reviewed the internal audit reports presented by the GroupInternal Audit Department on findings and recommendation withrespect to the adequacy and integrity of the internal controlsystem. Discussed with management, actions taken to improvethe system of internal control based on improvementopportunities identified in the internal audit reports.

• Reviewed the Internal Audit Plan for year 2005.

• Reviewed the Internal Audit Department's resourcerequirements, programmes and plans for the financial yearunder review.

• Considered and recommended to the Board for approval of theoutsourcing of the establishment of Enterprise Wide RiskManagement Framework to a firm of professional accountants.

Internal Audit Function

The Group has an Internal Audit Department, which assists the BAC indischarging its duties and responsibilities throughout the financial yearunder review. The principal role of the department is to undertakeindependent regular and systematic reviews of the internal controlsystems, so as to provide the BAC with independent and objectivefeedback and reports that such systems continue to operate

satisfactorily and effectively. The Group Internal Audit Department adoptsa risk-based approach in preparing its internal audit strategy and plan.

During the financial year, a total of fourteen (14) internal auditassignments were carried out according to the internal audit plan, whichhad been approved by the BAC. The internal audit covered the financialand non-financial aspects of the various Divisions involving Information& Communication Technology, Energy, Properties, Engineering &Construction, Education & Training, Food, Beverage & Events andOthers.

The resulting reports from the internal audits undertaken wereforwarded to the management for attention and necessary correctiveactions as recommended. The management is responsible for ensuringthat corrective actions on reported weaknesses are taken within therequired time frame.

Terms of reference of the board audit committee

1. OBJECTIVES OF THE COMMITTEE

The primary function of the Committee is to assist the Board toimplement and support the following oversight objectives for theKUB Group of Companies:

• Assess the Group's processes relating to its risks and controlenvironment;

• Oversee financial reporting;

• Evaluate the internal and external audit processes including thereview of the adequacy of scope, functions and reporting ofinternal and external auditors;

• Maintain, through regularly scheduled meetings, a direct line ofcommunication between the Board, external auditors,management and internal auditors; and

This Report is made in accordance with a resolution of the Board of Directors dated 26 April 2005.

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41board audit

committee report(continued)

• Convene meetings and confidential audience without thepresence of executives of the Committee and the managementany time they desire and request and a minimum of once ayear, through the Chairman of the Committee.

2. COMPOSITION OF THE COMMITTEE

The composition of the committee shall take into consideration thefollowing:

• The Board shall appoint the Members, where the majority shallconsist of mainly independent non-executive Directors. TheCommittee shall, at all times, comply with the relevantprovisions of the Bursa Malaysia Listing Requirements("BMLR").

• The period of appointment shall be concurrent with their tenureon the Board unless otherwise decided by the Board and inaccordance to the BMLR that a listed issuer must fill thevacancy within 3 months of the vacancy.

• The composition of the Committee must not be less than three(3) Members.

• Where the Members for any reason are reduced to less thanthree (3), the Board shall within three (3) months of the event,appoint such number of new Members as may be required tomake up the minimum number of three (3) Members and inaccordance with the general requirements of the BMLR.

• The Members shall elect a Chairman from amongst themselveswho is an independent Director.

• At least one member of the BAC must comply with section15.10(1)(c) (i)-(ii) of the BMLR.

• Members of the Committee may relinquish their membership inthe Committee with prior written notice to the Secretary andmay continue to serve as Directors of the Company.

3. SECRETARY OF THE COMMITTEE

The Company Secretary shall be the Secretary of the Committee.

4. AUTHORITY OF THE COMMITTEE

In carrying out its duties and responsibilities, the Committee shallhave:

• Authority to investigate into any activities within its terms ofreference. It is authorised to seek any information it requiresfrom any employee and all employees are directed tocooperate on any request made by the BAC.

• The authority to obtain outside legal or other independentprofessional advice and to secure the attendance of outsideparties with relevant experience and expertise, if it considersthis necessary.

• Direct communication channels with both external and internalauditors.

• The authority to convene meetings with external auditors, withno executives present, when deemed necessary.

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5. RESPONSIBILITIES AND DUTIES OF THE COMMITTEE

In fulfilling its objectives, the Committee shall undertake thefollowing responsibilities and duties:

a) Internal Audit and Risk Management

• Review the adequacy of the scope, functions andresources of the internal audit and risk managementfunction and that it has the necessary authority to carryout its works.

• Review the internal audit and risk managementprogramme, processes, the results of the internal auditand risk management programme, processes orinvestigation undertaken and whether or not appropriateaction is taken on the recommendations of the internalaudit and risk management function.

• Review any appraisal or assessment of the performanceof members of the internal audit function.

• Review the internal audit and risk management reports,which highlight the operational risks, recommendation andmanagement's response.

• Discuss with management on actions taken to improve thesystem of internal controls, based on operational risksidentified in the internal audit and risk managementreports.

b) External Audit

• Review with the external auditors their audit plan, scope oftheir audits, their evaluation of the system of internalcontrols and their audit report.

• Evaluate with the external auditors the assistance given bythe employees to the external auditors.

• Evaluate the performance of the external auditors andmake recommendations to the Board of Directors on theirappointment and remuneration.

• Review any letter of resignation from the external auditors.

• Where there is reason (supported by grounds) to believethat the external auditors are not suitable forreappointment, the Committee is to recommend thenomination and remuneration of a person or persons asexternal auditors.

c) Financial Reporting

• Meet with management and the external auditors todiscuss the scope of their audit, to evaluate the auditreport on the financial statements and the results of theaudit before recommending for approval by the Board.

• Review the quarterly results and year end financialstatements for recommendation to the Board of Directorsfor approval, focusing particularly on:

ii) Changes in or implementation of new accountingpolicies;

ii) Significant and unusual events;iii) The going concern assumption; andiv) Compliance with accounting standards and other

legal requirements.

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A N N U A L R E P O R T 2 0 0 4

43board audit

committee report(continued)

This Statement is made in accordance with the resolution of the Board of Directors dated 26 April 2005.

• Review the nature and resolution of any significantaccounting and auditing problems encountered duringexamination, the nature of any significant adjustments,reclassifications or additional disclosures proposed by theexternal auditors that are currently significant or maybecome significant in the future, the adequacy and impactof any changes in the accounting policies or principlesduring the year, reasons for major fluctuations in financialstatement balances for the current year compared to prioryear.

d) Related Party Transactions

• Review any related party transactions and conflict ofinterest situation that may arise within the Group includingany transaction, procedure or course of conduct thatraises the question of management integrity.

e) Others

• Consider and evaluate other matters as judgedappropriate by the Committee or as authorised by theBoard and as required by the general requirements set upby local authorities or any other government authorities.

• Act upon the Board of Directors' request to investigateand report on any issues or concerns in regard to themanagement of the Company.

• To promptly report to BMSB matters reported by the BACto the Board of Directors of the Company which have notbeen satisfactorily resolved, resulting in a breach of theBMLR.

• Upon the request of the external auditors, the Chairman ofthe BAC shall convene a meeting of the BAC to considerany matter the external auditors believe should be broughtto the attention of the Directors or shareholders.

6. COMMITTEE MEETINGS

The Committee meetings shall take into consideration the following:

• The Committee shall convene meetings as and when required,provided that the Committee shall meet at least four (4) timesa year.

• The Chairman of the Committee, or the Secretary on therequisition of the Members, shall at any time summon ameeting of the Members by giving due notice. It shall not benecessary to give notice of a Committee meeting to anyMember absent from Malaysia.

• No business shall be transacted at any meeting of theCommittee unless a quorum is present. A quorum must be inaccordance to BMLR Section 15.19, where the majority of themembers present must be independent Directors. Two (2)members of the Committee shall constitute a quorum.

• The majority of the members present must be independentnon-executive Directors.

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• The Chairman of the Committee shall chair the Committeemeetings and in his absence, the members present shall elect oneof their members to be Chairman of the meeting.

• The Secretary shall draw up an agenda for each meeting, inconsultation with the Chairman of the Committee. The agenda shallbe sent to all Members of the Committee and any other personswho may be required to attend the meeting.

• The Secretary shall prepare the minutes of the meeting anddistribute it to each Member. The minutes of the Committee shallbe confirmed and signed by the Chairman of the Committee or thepresiding Chairman of the next succeeding meeting.

• The minutes of each meeting shall be entered into the minutes bookkept at the registered office of the Company under the custodian ofthe Company Secretary. The minutes book shall be opened for theinspection of the Board, external auditor, internal auditor,management and other persons deemed appropriate by theCompany Secretary.

• Subject to the requirement to conduct the required meetings, inappropriate circumstances, the Committee may deal with mattersby way of circular reports and resolution in lieu of convening aformal meeting.

• Appropriate officers of the Company or professional advisors maybe invited to attend the meetings where the Committee considerstheir presence necessary.

• All recommendations and findings of the Committee shall besubmitted to the Board for approval.

7. DISCLOSURE

The Committee shall assist the Board in making certain disclosuresconcerning the activities of the Committee such as in the Statementon Corporate Governance, Statement on Internal Control and BoardAudit Committee Report to be issued in the Annual Report.

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A N N U A L R E P O R T 2 0 0 4

45analysis of

shareholding

Distribution of Shareholding as at 25 April 2005

Size of Shareholdings No. of shareholders % of shareholders Total holdings % of total holdings

Less than 100 6,476 9.73 293,120 0.06100 - 1,000 31,635 47.50 21,847,893 4.111,001 - 10,000 26,326 39.53 74,877,149 14.1010,001 - 100,000 2,036 3.06 53,058,918 9.99100,001 to less than 5% 120 0.18 103,648,979 19.515% and above 2 0.00 277,470,407 52.23

Total 66,595 100.00 531,196,466 100

List of Substantial Shareholders (5% and above) as at 25 April 2005

No. Name Shareholdings % Shares held

1. Cimsec Nominees (Tempatan) Sdn Bhd 146,844,520 27.64A/C Pengurusan Danaharta Nasional BerhadFor Sumber Serata Sdn Bhd

2. Minister of Finance, Incorporated 130,625,887 24.59

List of Directors’ Shareholdings as at 25 April 2005

Direct IndirectShareholdings % Shares Held Shareholdings % Shares Held

Datuk Hassan Harun 926,259 0.17 146,844,520* 27.64Datuk Haji Ahmad Shahibuddin Haji Mohd Nor 12,005 0.00 0 0Dato’ Kamilia Ibrahim 3,000 0.00 0 0Dato’ Ir. Harun Ahmad Saruji 15,105 0.00 0 0Tan Sri Datuk Dr. Johari Mat 0 0.00 0 0Tuan Haji Ahmad Kamal Abdullah Al-Yafii 0 0.00 0 0Izham Yusoff 0 0.00 0 0

*Deemed interest held through his substantial shareholding in Daya Profil Sdn Bhd, a major shareholder of Sumber Serata Sdn Bhd, which is a substantialshareholder of KUB Malaysia Berhad.

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analysis ofshareholding(continued)

46

No. Name Shareholding Percentage1 Cimsec Nominees (Tempatan) Sdn Bhd 146,844,520 27.64

A/C Pengurusan Danaharta Nasional Berhad for Sumber Serata Sdn Bhd2 Minister of Finance, Incorporated 130,625.887 24.593 Cimsec Nominees (Tempatan) Sdn Bhd 20,000,000 3.77

A/C Pengurusan Danaharta Nasional Berhad for Sasaran Era Sdn Bhd4 Mayban Trustees Berhad 15,146,083 2.85

A/C Koperasi Usaha Bersatu Malaysia Berhad5 Menteri Kewangan Malaysia Section 29 (SICDA) 14,937,529 2.816 OSK Nominees (Tempatan) Sdn Bhd 14,202,114 2.67

A/C Danaharta Managers Sdn Bhd for Puncak Kinta Sdn Bhd7 HSBC Nominees (Tempatan) Sdn Bhd 2,325,000 0.44

A/C OSK-UOB Emerging Opportunity Unit Trust (4611)8 RC Nominees (Tempatan) Sdn Bhd 2,000,000 0.38

A/C Perbadanan Kemajuan Negeri Perak (No 1) 9 Cimsec Nominees (Tempatan) Sdn Bhd 1,733,300 0.33

A/C Commerce Life Assurance Bhd (1) 10 Mayban Nominees (Tempatan) Sdn Bhd 1,631,600 0.31

A/C Lifetime Dana Barakah (230122) 11 Cimsec Nominees (Tempatan) Sdn Bhd A/C Lembaga Tabung Haji 1,319,200 0.2512 Citicorp Nominees (Asing) Sdn Bhd 1,251,400 0.24

A/C DFA Emerging Markets Fund 13 Amanah Raya Nominees (Tempatan) Sdn Bhd A/C Lifetime Dana Mubarak 1,202,600 0.2314 Cimsec Nominees (Tempatan) Sdn Bhd 1,126,000 0.21

A/C Telekom Malaysia Berhad 15 Asia Life (M) Berhad As Beneficial Owner (PF) 1,099,900 0.2116 Tan Kar Meng 1,093,100 0.2117 Cimsec Nominees (Tempatan) Sdn Bhd 1,072,600 0.20

A/C Commerce Asset Holding Berhad (43) 18 Chong Ah Him @ Chong Kum Kwan 898,200 0.1719 Bimsec Nominees (Tempatan) Sdn Bhd 833,000 0.16

A/C Syarikat Takaful Malaysia Berhad (CAFM) 20 Yeo Jui Heok @ Yeo Wei Seng 573,500 0.1121 Universal Trustee (Malaysia) Berhad A/C KL City Smallcap Fund 554,200 0.1022 Kenanga Nominees (Tempatan) Sdn Bhd 535,630 0.10

A/C Hassan Bin Harun 23 Abu Hassan Bin Omar 510,585 0.1024 Soon Foo Mun 510,000 0.1025 Lim Shiu Ho 500,018 0.0926 Gan Lam Seong 480,000 0.0927 AMMB Nominees (Tempatan) Sdn Bhd 442,000 0.08

A/C AmAssurance Berhad (LF 1/48-1) 28 Syed Mohd Yusof Bin Tun Syed Nasir 438,160 0.08 29 AMMB Nominees (Tempatan) Sdn Bhd 437,400 0.08

A/C AmAssurance Berhad (GF 1/149-0)30 Bimsec Nominees (Tempatan) Sdn Bhd 423,000 0.08

A/C Syarikat Takaful Malaysia Berhad (Family Takaful - (PSA 2)

List of Top 30

Shareholders as at

25 April 2005

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47A N N U A L R E P O R T 2 0 0 4

48 directors’ report 52 statement by directors 53 statutory declaration 54 report of the Auditors

55 balance sheets 57 income statements 58 statement of changes in equity 59 cash flow statements

62 notes to the financial statements 104 list of Properties 111 proxy form

F I N A N C I A L S T A T E M E N T S

Financial 0091/2/05 31/05/2005 1:12 pm Page 47

48directors’ report

for the year ended 31 December 2004


The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2004.

Principal activities

The Company is principally engaged in investment holding and the provision of management services to companies in the Group, whilst the principalactivities of the subsidiaries are mainly in the business of education and training, information and communications technology, liquefied petroleum gasand food and beverages. The details of the subsidiaries’ principal activities are as stated in Note 25 to the financial statements. There has been nosignificant change in the nature of these activities during the financial year.

ResultsGroup Company

RM’000 RM’000

Net loss for the year(18,050) (214,522)

================== ==================

Reserves and provisions

There were no material transfers to or from reserves and provisions during the year except as disclosed in the financial statements.

Dividends

No dividend was paid during the year and the Directors do not recommend any dividend to be paid for the year under review.

Directors of the Company

Directors who served since the date of the last report are:

Datuk Hassan HarunDatuk Haji Ahmad Shahibuddin Haji Mohd NorDato’ Kamilia IbrahimDato’ Ir. Harun Ahmad SarujiTan Sri Datuk Dr. Johari Mat Ahmad Kamal Abdullah Al-YafiiIzham Yusoff (appointed on 1 July 2004)Dato’ Che Khalib Mohamad Noh (resigned on 30 June 2004)Ahmad Rodzi Pawanteh (resigned on 23 November 2004)Datuk Mohd Hashim Hassan (resigned on 25 March 2005)



(continued)


The holdings and deemed holdings in the ordinary shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of thosewho were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary sharesAt At

1.1.2004 Bought Sold 31.12.2004Shareholdings in the Company in whichDirectors have direct interest

Datuk Hassan Harun 1,126,259 – 200,000 926,259Datuk Haji Ahmad Shahibuddin Haji Mohd Nor 12,005 – – 12,005Dato’ Kamilia Ibrahim 3,000 – – 3,000Dato’ Ir. Harun Ahmad Saruji 15,105 – – 15,105

Shareholdings in the Company in whicha Director has indirect interest

Datuk Hassan Harun* 147,580,150 – 735,630 146,844,520

* Deemed interest held through his substantial shareholdings in Daya Profil Sdn. Bhd., a major shareholder of Sumber Serata Sdn. Bhd., which is asubstantial shareholder in KUB Malaysia Berhad.

None of the other Directors holding office at 31 December 2004 had any interest in the ordinary shares of the Company and of its related corporationsduring the financial year.

Directors’ benefits

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefitincluded in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of acontract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in whichthe Director has a substantial financial interest, other than as disclosed in the financial statements.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefitsby means of the acquisition of shares in or debentures of the Company or any other body corporate.

Issue of shares

During the financial year, the Company increased its issued and paid-up capital from RM504,620,391 to RM531,196,466 by additional issue of20,877,777 and 5,698,298 new ordinary shares of RM1.00 each at RM1.80 per share on 10 June 2004 and 18 October 2004 respectively, asconsideration on the transfer of six parcels of land gazetted under Malay Reserved land and two parcels of land under Restriction-in-interest title land fromKoperasi Usaha Bersatu Malaysia Berhad. These new shares rank pari passu with the existing ordinary shares.

There are no other changes in the issued and paid up capital of the Company during the financial year.

A N N U A L R E P O R T 2 0 0 4


directors’ report(continued)



Options granted over unissued shares

No options were granted to any person to take up unissued shares of the Company during the financial year.

Other statutory information

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) all current assets have been stated at the lower of cost and net realisable value.

At the date of this report, the Directors are not aware of any circumstances:

i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group and in the Companyinadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the Group and in the Company financial statements misleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleadingor inappropriate, or

iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group andof the Company misleading.

At the date of this report there does not exist:

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of anyother person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period oftwelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and ofthe Company to meet their obligations as and when they fall due.

In the opinion of the Directors, other than as disclosed in the financial statements, the results of the operations of the Group and of the Company forthe financial year ended 31 December 2004 have not been substantially affected by any item, transaction or event of a material and unusual naturenor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

50



(continued)


Auditors

The auditors, Messrs KPMG Desa Megat & Co., have indicated their willingness to accept re-appointment.

Signed in accordance with a resolution of the Directors:

Datuk Hassan Harun

Izham Yusoff

Kuala Lumpur,

Date: 26 April 2005

A N N U A L R E P O R T 2 0 0 4


statement by directors

pursuant to Section 169(15)of the Companies Act, 1965


In the opinion of the Directors, the financial statements set out on pages 55 to 103 are drawn up in accordance with the provisions of the CompaniesAct, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of the state of affairs of the Group and of theCompany at 31 December 2004 and of the results of their operations and cash flows for the year ended on that date.

Signed in accordance with a resolution of the Directors:

Datuk Hassan Harun

Izham Yusoff

Kuala Lumpur,

Date: 26 April 2005

52


53statutory

declaration

pursuant to Section 169(16) of theCompanies Act, 1965

I, Nik Fazila Nik Mohamed Shihabuddin, the Officer primarily responsible for the financial management of KUB Malaysia Berhad, do solemnly andsincerely declare that the financial statements set out on pages 55 to 103 are, to the best of my knowledge and belief, correct and I make this solemndeclaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed in Kuala Lumpur on 26 April 2005.

Nik Fazila Nik Mohamed Shihabuddin

Before me:A N N U A L R E P O R T 2 0 0 4


54report of the auditors

to the members ofKUB Malaysia Berhad


We have audited the financial statements set out on pages 55 to 103. The preparation of the financial statements is the responsibility of the Company’s Directors.

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

We conducted our audit in accordance with approved Standards on Auditing in Malaysia. These standards require that we plan and perform the audit to obtain allthe information and explanations which we consider necessary to provide us with evidence to give reasonable assurance that the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. An audit alsoincludes an assessment of the accounting principles used and significant estimates made by the Directors as well as evaluating the overall adequacy of thepresentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion.

In our opinion:(a) the financial statements are 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 state of affairs of the Group and of the Company at 31 December 2004 and the results of their operations and cash flows for the year ended on thatdate; and

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

(b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and the subsidiaries of which we haveacted as auditors have been properly kept in accordance with the provisions of the said Act.

The subsidiaries in respect of which we have not acted as auditors are identified in Note 25 of the financial statements and we have considered their financialstatements and the auditors’ reports thereon.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and contentappropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanationsrequired by us for those purposes.

The audit reports on the financial statements of the subsidiaries which have been audited were not subject to any qualification and did not include any commentmade under subsection (3) of Section 174 of the Act.

KPMG Desa Megat & Co.Firm Number: AF 0759Chartered Accountants

Abdullah Abu SamahPartnerApproval Number: 2013/06/06(J)

Kuala Lumpur,Date: 26 April 2005


55balance sheets

at 31 December 2004

Group CompanyNote 2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Property, plant and equipment 2 325,521 366,602 2,592 6,603

Investments in subsidiaries 3 – – 211,945 214,945

Amount due from subsidiaries 4 – – 254,194 426,869

Investments in associates 5 24,483 22,577 23,522 20,894

Other investments 6 38,485 35,204 37,987 34,706

Development expenditure 7 100,191 134,129 2,057 3,021

Intangible assets 8 29,445 54,255 – –

Deferred tax assets 9 12,235 11,940 – ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

530,360 624,707 532,297 707,038

Current assets

Inventories 10 63,638 46,481 – – Other investments 6 – 7,625 – 7,625 Development expenditure 7 – 662 – – Trade and other receivables 11 293,516 241,073 596 7,519Tax recoverable 5,847 4,244 604 – Cash and cash equivalents 12 79,677 57,674 20,819 4,597

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––442,678 357,759 22,019 19,741

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Current liabilities

Trade and other payables 13 303,919 319,232 12,038 49,261Borrowings 14 105,254 123,136 13,826 22,296Taxation 2,541 1,176 – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––411,714 443,544 25,864 71,557

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net current assets/(liabilities) 30,964 (85,785) (3,845) (51,816)–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

561,324 538,922 528,452 655,222===================== ===================== ===================== =====================

A N N U A L R E P O R T 2 0 0 4


56balance sheets(continued)

at 31 December 2003



RM’000 RM’000 RM ‘000 RM’000

Financed by:

Capital and reserves

Share capital 15 531,196 504,620 531,196 504,620Reserves (98,189) (100,965) (78,714) 114,547

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––433,007 403,655 452,482 619,167

Minority shareholders’ interests 16 29,647 28,260 – –

Long term and deferred liabilities

Amount due to subsidiaries 4 – – 34,850 13,383Borrowings 14 94,291 102,306 41,120 22,672Deferred tax liabilities 9 4,379 4,701 – –

98,670 107,007 75,970 36,055–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

561,324 538,922 528,452 655,222===================== ===================== ===================== =====================

The financial statements were approved and authorised for issue by the Board of Directors on 26 April 2005.

The notes set out on pages 62 to 103 form an integral part of, and should be read in conjunction with, these financial statements.


57income statements



RM’000 RM’000 RM ‘000 RM’000

Revenue 17 799,811 625,281 1,918 3,361===================== ===================== ===================== =====================

Operating profit/(loss) 17 4,231 (4,216) (213,029) (36,311)

Interest expense (14,210) (17,737) (2,830) (4,130)

Interest income 1,053 1,134 733 216

Share of (loss)/profit of associates (1,053) 680 – ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Loss before tax (9,979) (20,139) (215,126) (40,225)

Tax expense 19 (6,684) (7,323) 604 (265)–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Loss after taxation (16,663) (27,462) (214,522) (40,490)

Less: Minority interests (1,387) (2,153) – – –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Net loss for the year (18,050) (29,615) (214,522) (40,490)===================== ===================== ===================== =====================

Basic loss per ordinary share (sen) 20 (3.5) (5.9)===================== =====================

A N N U A L R E P O R T 2 0 0 4



58statements ofchanges in equity



––––------------------------------- Non distributable ----------------------------------Share Share Capital Translation Accumulatedcapital premium reserves reserves losses Total

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

At 1 January 2003 504,620 295,862 15,715 1,171 (380,379) 436,989

Net loss for the year – – – – (29,615) (29,615)

Currency translation differences – – – (3,719) – (3,719)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––504,620 295,862 15,715 (2,548) (409,994) 403,655

At 31 December 2003

Issue of shares 26,576 21,261 – – – 47,837

Net loss for the year – – – – (18,050) (18,050)

Currency translation differences – – – (435) – (435)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

At 31 December 2004 531,196 317,123 15,715 (2,983) (428,044) 433,007===================== ===================== ===================== ===================== ===================== =====================

Company

At 1 January 2003 504,620 295,862 4,613 – (145,438) 659,657

Net loss for the year – – – – (40,490) (40,490)–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

504,620 295,862 4,613 – (185,928) 619,167At 31 December 2003

Issue of shares 26,576 21,261 – – – 47,837

Net loss for the year – – – – (214,522) (214,522)–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

At 31 December 2004 531,196 317,123 4,613 – (400,450) 452,482===================== ===================== ===================== ===================== ===================== =====================



59cash flow statements


Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Cash flows from operating activities

Loss before taxation (9,979) (20,139) (215,126) (40,225)

Adjustments for:Allowance for diminution in value of other investment – 31 – 31Allowance for amount due from subsidiaries – – 228,422 37,759Amortisation 6,969 9,062 519 647Depreciation 36,571 40,622 704 1,072Gain on disposal of property, plant and equipment (2,036) (2,605) (2,234) (1,594)Gain on disposal of an investment (24,998) – (24,998) –Gain on disposal of a land held for property development (16,504) – – – (Gain)/Loss on disposal of subsidiaries (436) 1,600 – – Waiver of debt (5,053) – – – Impairment loss on goodwill 21,810 – – –Impairment loss on investment of associates 1,041 – 1,372 –Impairment loss on investment in a subsidiary – – 3,000 –Impairment losses on property, plant and equipment 8,762 3,378 – –Impairment losses on land held for property development 18,441 – – –Interest expense 14,210 17,737 2,830 4,130Interest income (1,053) (1,134) (733) (216)Share of loss/(profit) of associates 1,053 (680) – – Write off of development expenditure 809 952 445 952

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––Operating profit/(loss) before working capital changes 49,607 48,824 (5,799) 2,556

(Increase)/Decrease in working capital:Inventories (25,773) 11,081 – – Trade and other receivables (55,902) (20,614) 6,923 7,710Trade and other payables 34,589 (22,324) 357 3,261

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––Cash generated from operations 2,521 16,967 1,481 13,527Income taxes paid (5,936) (8,174) – (265)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––Net cash (used in)/generated from operating activities (3,415) 8,793 1,481 13,262

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

A N N U A L R E P O R T 2 0 0 4


60cash flow statements(continued)



Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Cash flows from investing activities

Purchase of property, plant and equipment (28,348) (22,337) (418) (4,112)Development expenditure (2,812) (1,477) – –Acquisition of a subsidiary company, net

of cash and cash equivalents acquired – – – (50) Proceeds from disposal of subsidiaries,

net of cash and cash equivalent (Note 28) 2,800 380 – –Proceeds from disposal of property, plant and equipment 23,112 18,622 5,959 3,093Proceeds from disposal of an investment 32,623 – 32,623 –Proceeds from disposal of a land held for property development 39,313 – – –Advances to subsidiaries – – (59,800) (38,471) Repayment from subsidiaries – – 35,777 20,148Investment in an associate (4,000) – (4,000) –Other investment (3,281) – (3,281) –Interest received 1,053 1,134 733 216Decrease/(Increase) in pledged deposits with licensed banks 373 7,628 (716) 7,738

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Net cash generated from/(used in) investing activities 60,833 3,950 6,877 (11,438)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Cash flows from financing activitiesInterest paid (14,210) (17,737) (2,830) (4,130)Drawdown/(Payment) of finance lease/hire purchase liabilities 807 1,206 478 (8,444)Drawdown of short term borrowings 29,533 10,549 4,500 – Drawdown of term loans 48,700 – 20,000 –Repayment of term loans (78,879) (23,417) (15,000) –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Net cash (used in)/generated from financing activities (14,049) (29,399) 7,148 (12,574) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net increase/(decrease) in cash and cash equivalents 43,369 (16,656) 15,506 (10,750)

Cash and cash equivalents at beginning of year 6,773 23,404 4,588 15,338

Foreign exchange differences 12 25 – – –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Cash and cash equivalents at end of year 50,154 6,773 20,094 4,588===================== ===================== ===================== =====================


61cash flow statements

(continued)


i) Cash and cash equivalents

Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Cash and bank balances 33,484 36,175 782 278Deposits (excluding Group:

RM9,059,000 (2003 - RM9,432,000)Company: RM725,000 (2003 - RM9,000) pledged as security for banking facilities) 37,134 12,067 19,312 4,310

Bank overdrafts (20,464) (41,469) – ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

50,154 6,773 20,094 4,588===================== ===================== ===================== =====================

A N N U A L R E P O R T 2 0 0 4



62notes to thefinancial statements


1. Summary of significant accounting policies

The following accounting policies are adopted by the Group and by the Company and are consistent with those adopted in previous years exceptfor the adoption of the following:

(i) MASB 31, Accounting for Government Grants and Disclosure of Government Assistance; and(ii) MASB 32, Property Development Activities.

Apart from the new policies and extended disclosures where required by these new standards, there is no effect on these financialstatements.

(a) Basis of accounting

The financial statements of the Group and of the Company are prepared on the historical cost basis except as disclosed in the notes tothe financial statements and in compliance with the provisions of the Companies Act, 1965 and applicable approved accounting standardsin Malaysia.

(b) Basis of consolidation

Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, togovern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements ofsubsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date thatcontrol effectively ceases. Subsidiaries are consolidated using the acquisition method of accounting except for certain subsidiaries whichare consolidated using the merger method of accounting.

A subsidiary is excluded from consolidation when either control is intended to be temporary if the subsidiary is acquired and heldexclusively with a view of its subsequent disposal in the near future and it has not previously been consolidated or it operates under severelong term restrictions which significantly impair its ability to transfer funds to the Company. Subsidiaries excluded on these grounds areaccounted for as investments.

Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the year are included from the dateof acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined andthese values are reflected in the Group financial statements. The difference between the acquisition cost and the fair values of thesubsidiaries’ net assets is reflected as goodwill or reserve on consolidation as appropriate.

Under the merger method of accounting, the results of the subsidiaries are presented as if the companies had been combined throughoutthe current and previous financial years. The difference between the cost of acquisition and the nominal value of the share capital andreserves of the subsidiaries is taken to merger reserve.

Intragroup transactions and balances and the resulting unrealised profits are eliminated on consolidation. Unrealised losses resulting fromintragroup transactions are also eliminated unless cost cannot be recovered.


63notes to the

financial statements(continued)

1. Summary of significant accounting policies (continued)

(c) Associates

Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies.

The consolidated financial statements include the total recognised gains and losses of associates on an equity accounted basis from thedate that significant influence effectively commences until the date that significant influence effectively ceases.

Unrealised profits arising on transactions between the Group and its associates which are included in the carrying amount of the relatedassets and liabilities are eliminated partially to the extent of the Group’s interests in the associates. Unrealised losses on such transactionsare also eliminated partially unless cost cannot be recovered.

Goodwill on acquisition is calculated based on the carrying value of net assets acquired.

(d) Property, plant and equipment

Freehold land is stated at cost less accumulated impairment losses. All other property, plant and equipment are stated at cost/valuationless accumulated depreciation and accumulated impairment losses.

Depreciation

Freehold land is not amortised. Leasehold land is amortised in equal instalments over the period of the respective leases which rangesfrom 50 to 99 years. The straight-line method is used to write off the cost of the assets over the term of their estimated useful lives at thefollowing principal annual rates:

Factory and buildings 2% – 10%Plant, equipment and vehicles 10% – 331/3%Courseware 12.5%

(e) Intangible asset

(i) Goodwill

Goodwill represents the excess of the cost of acquisition over the fair values of the net identifiable assets acquired and is stated atcost less accumulated amortisation and accumulated impairment losses.

Goodwill is amortised from the date of initial recognition over its estimated useful life of not more than 20 years.

In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate.

(ii) Concession costs

Concession costs are in respect of the rights to operate Institute Latihan Perindustrian Prai. Concession costs are stated at costless accumulated amortisation. The concession costs are amortised over the concession period of 25 years.

A N N U A L R E P O R T 2 0 0 4


64notes to thefinancial statements(continued)



(f) Development expenditure

(i) Development costs

Development cost comprises expenditure incurred on a plan or design for the production of new products or services prior to thecommencement of commercial production or use. The expenditure is capitalised if the products or services are technically andcommercially feasible and the Group has sufficient resources to complete the development. It includes cost of materials, direct labourand appropriate proportion of overheads. Capitalised development expenditure is amortised over a period of 5 to 10 years on astraight line basis so as to reflect the pattern over which the related future economic benefits is expected to flow from thedevelopment activities. The amortisation commences when the product or service is available for sale.

(ii) Plantation development expenditure

Plantation development expenditure includes the costs incurred on the land, plantation infrastructure and development andcapitalisation of interest expense on loans and advances utilised to finance on-going development. The capitalisation of interest isceased when the plantation is ready for its intended use.

Plantation expenditure incurred for the land development, planting and trees maintenance is capitalised until maturity in the plantationdevelopment accounts. Upon maturity, the expenditure incurred is amortised based on estimated annual yield over 25 years.

(iii) Land held for property development

Land held for property development consist of land or such portions thereof on which no development activities have been carriedout or where development activities are not expected to be completed within the Group’s normal operating cycle of 2 to 3 years.Such land is classified as non-current asset and is stated at cost less accumulated impairment losses.

Land held for property development is reclassified as property development costs at the point when development activities havecommenced and where it can be demonstrated that the development activities can be completed within the Group’s normal operatingcycle of 2 to 3 years.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions,conversion fees and other relevant levies. Where the Group had previously recorded the land at revalued amount, it continues to retainthis amount as its surrogate cost as allowed by MASB 32.

(iv) Property development costs

Property development costs comprise costs associated with the acquisition of land and all costs that are directly attributable todevelopment activities or that can be allocated on a reasonable basis to such activities.

Property development costs not recognised as an expense is recognised as an asset and is stated at the lower of cost and netrealisable value.

The excess of revenue recognised in the income statement over billings to purchasers is shown as accrued billings under trade andother receivables and the excess of billings to purchasers over revenue recognised in the income statement is shown as progressbillings under trade and other payables.


65notes to the



(f) Development expenditure (continued)

(v) Developed properties held for sale

Completed properties held for sale are stated at the lower of cost and net realisable value. Cost consists of costs associated withthe acquisition of land, direct costs and appropriate proportions of common costs attributable to developing the properties tocompletion.

(g) Amount due from contract customers

Amount due from contract customers on construction contracts is stated at cost plus attributable profits less foreseeable losses and lessprogress billings. Cost includes all direct construction costs and other related costs. Where progress billings exceed the aggregate amountdue from contract customers plus attributable profits less foreseeable losses, the net credit balance on all such contracts is shown in tradeand other payables as amount due to contract customers.

(h) Finance leases

Leases in which the Group and the Company assume substantially all the risks and rewards of ownership are classified as finance leases.Assets acquired by way of finance leases are stated at an amount equal to the lower of their fair values and the present value of theminimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses.

In calculating the present value of the minimum lease payments, the discount rate is the interest rate implicit in the lease, if this ispracticable to determine; if not, the Group’s incremental borrowing rate is used.

(i) Investments

Long term investments in subsidiaries and associates are stated at cost in the Company, less impairment loss where applicable.

Other long term investments are stated at cost. An allowance is made when the Directors are of the view that there is a diminution in theirvalue which is other than temporary.

Current unquoted investments are stated at the lower of cost and net realisable value.

(j) Trade and other receivables

Trade and other receivables are stated at cost less allowance for doubtful debts.

A N N U A L R E P O R T 2 0 0 4





(k) Provisions

A provision is recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle apresent obligation (legal or constructive) as a result of a past event and a reliable estimate can be made of the amount.

(l) Liabilities

Borrowings and trade and other payables are stated at cost.

(m) Inventories

Raw materials, work-in-progress and manufactured inventories/ finished goods/ merchandise are stated at the lower of cost and netrealisable value with weighted average cost being the main basis for cost. For work-in-progress and manufactured inventories/ finishedgoods, cost consists of materials, direct labour and an appropriate proportion of fixed and variable production overheads.

(n) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks. For the purpose of the cash flow statement, cashand cash equivalents are presented net of bank overdrafts and pledged deposits.

(o) Impairment

The carrying amount of the Group’s assets, other than inventories, assets arising from construction contracts, deferred tax assets andfinancial assets (other than investments in subsidiaries and associates), are reviewed at each balance sheet date to determine whetherthere is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss isrecognised whenever the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its recoverable amount.Impairment losses are recognised in the income statement.

The recoverable amount is the greater of the asset’s net selling price and its value in use. In assessing value in use, estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value ofmoney and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amountis determined for the cash generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exceptional naturethat is not expected to recur and subsequent external events have occurred that reverse the effect of that event.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverableamount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would havedetermined, net of depreciation or amortisation, if no impairment loss has been recognised. The reversal is recognised in the incomestatement.


67notes to the



(p) Capitalisation of borrowing costs

Borrowing costs incurred on capital work-in-progress, property development costs and gross amount due from contract customers arecapitalised. Capitalisation of borrowing costs will cease when the assets are ready for their intended use.

The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the weighted average of the borrowingcosts applicable to the Group’s borrowings that are outstanding during the year, other than borrowings made specifically for the purposeof financing a specific capital work-in-progress, property under development or gross amount due from contract customers, in which casethe actual borrowing cost incurred on that borrowing less any investment income on the temporary investment of that borrowing will becapitalised.

Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted.

(q) Income tax

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to theextent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted atthe balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities andtheir carrying amounts in the financial statements. Temporary differences are not recognised for goodwill not deductible for tax purposesand the initial recognition of assets or liabilities that at the time of the transaction affects neither accounting nor taxable profit. The amountof deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, usingtax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the assetcan be utilised.

(r) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to Ringgit Malaysia at rates of exchange ruling at the date of the transactions.Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Ringgit Malaysia at theforeign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the incomestatement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translatedto Ringgit Malaysia at the foreign exchange rates ruling at the date of the transactions.

A N N U A L R E P O R T 2 0 0 4





(r) Foreign currency (continued)

(ii) Financial statements of foreign operations

The Group’s foreign operations are not considered an integral part of the Company’s operations. Accordingly, the assets and liabilitiesof foreign operations, including fair value adjustments arising on consolidation, are translated to Ringgit Malaysia at exchange ratesruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Ringgit Malaysia at averageexchange rates applicable throughout the year. Foreign exchange differences arising on translation are recognised directly in equity.

The closing rates used in the translation of foreign currency monetary assets and liabilities and the financial statements of foreignoperations are as follows:

1USD RM3.80 (2003: 1USD RM3.80)1SGD RM2.28 (2003: 1SGD RM2.23)100Baht RM9.54 (2003: 100Baht RM9.58)

(s) Discontinuing operations

A discontinuing operation is a clearly distinguishable component of the Group’s business that is disposed or terminated pursuant to a singleplan which represents a separate major line of business or geographical area of operations and can be distinguished operationally and forfinancial reporting purposes.

(t) Revenue

(i) Goods sold and services rendered

Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised in the income statementwhen the significant risks and rewards of ownership have been transferred to the buyer.

Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transactionat the balance sheet date. The stage of completion is measured by reference to the proportion that contract costs incurred forcontract work performed to date that reflect work performed bear to the total estimated contract costs. Where the outcome of thetransaction cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

(ii) Construction contracts

Revenue from fixed price construction contracts is recognised on the proportion that contract costs incurred for contract workperformed to date that reflect work performed bear to the total estimated contract costs.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costsincurred that is probable to be recoverable and contract costs are recognised as an expense in the period in which they are incurred.

An expected loss on a contract is recognised immediately in the income statement.


69notes to the



(t) Revenue (continued)

(iii) Property development

Revenue from property development activities is recognized based on the stage of completion measured by reference to theproportion that property development costs incurred for work performed to date bear to the estimated total property developmentcosts.

Where the financial outcome of a property development activity cannot be reliably estimated, property development revenue isrecognized only to the extent of property development costs incurred that is probable will be recoverable, and property developmentcosts on the development units sold are recognized as an expense in the period in which they are incurred.

Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognized immediatelyin the income statement.

(iv) Dividend income

Dividend income is recognised when the right to receive payment is established.

(v) Interest income

Interest income is recognised in the income statement as it accrues, taking into account the effective yield on the asset.

(u) Expenses

Financing costs

All interest and other costs incurred in connection with borrowings, other than that capitalised in accordance with Note 1(p), are expensedas incurred. The interest component of finance lease payments is recognised in the income statement so as to give a constant periodicrate of interest on the outstanding liability at the end of each accounting period.

(v) Employee benefits

(i) Short term benefits

Wages, salaries, bonuses and society security contributions are recognised as an expense in the year in which the associatedservices are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave arerecognised when services are rendered by employees that increases their entitlement to future compensated absences, and shortterm non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans

Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as incurred.

A N N U A L R E P O R T 2 0 0 4




2. Property, plant and equipmentPlant,

Long term Factory equipmentGroup Freehold leasehold and and

land land buildings vehicles Courseware TotalRM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost

Opening balance 14,287 8,574 241,486 344,867 32,479 641,693Additions 2,485 – 3,326 20,107 2,430 28,348Disposals/write offs – – (28,781) (10,992) (9) (39,782)Exchange difference – – (28) (16) – (44)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––Closing balance 16,772 8,574 216,003 353,966 34,900 630,215

============================================================================================================ =====================Depreciation and

impairment lossesAccumulated depreciation – 1,232 37,211 168,210 14,198 220,851 Accumulated impairment

losses 1,361 – 9,846 43,033 – 54,240

Opening balance 1,361 1,232 47,057 211,243 14,198 275,091Depreciation charge for the year – 88 3,687 28,540 4,256 36,571Disposals/write offs – – (7,408) (8,288) (2) (15,698)Impairment losses for the year – – – 6,549 2,213 8,762Exchange difference – – (19) (13) – (32)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––Accumulated depreciation – 1,320 35,189 188,449 18,452 243,410Accumulated impairment

losses 1,361 – 8,128 49,582 2,213 61,284

Closing balance 1,361 1,320 43,317 238,031 20,665 304,694====================================================================================================================================

Net book value

At 31 December 2004 15,411 7,254 172,686 115,935 14,235 325,521

At 31 December 2003 12,926 7,342 194,429 133,624 18,281 366,602====================================================================================================================================

For the year ended31 December 2003Depreciation charge – 68 5,343 30,261 4,950 40,622Impairment losses – – – 3,378 – 3,378

====================================================================================================================================


71notes to the


2. Property, plant and equipment (continued)

Factory EquipmentCompany and and

buildings vehicles TotalCost RM’000 RM’000 RM’000

Opening balance 7,139 3,586 10,725Additions – 418 418Disposals (5,498) – (5,498)

––––––––––––––––––––––––––––––– –––––––––––––––––Closing balance 1,641 4,004 5,645

====================================== =====================

Depreciation and impairment losses

Accumulated depreciation 127 2,277 2,404Accumulated impairment losses 1,718 – 1,718

Opening balance 1,845 2,277 4,122Depreciation charge for the year 17 687 704Disposals (1,773) – (1,773)

Accumulated depreciation 89 2,964 3,053Accumulated impairment losses – – –

Closing balance 89 2,964 3,053 ====================================== =====================

Net book value

At 31 December 2004 1,552 1,040 2,592====================================== =====================

At 31 December 2003 5,294 1,309 6,603====================================== =====================

For the year ended 31 December 2003Depreciation charge 97 975 1,072

====================================== =====================

A N N U A L R E P O R T 2 0 0 4




2. Property, plant and equipment (continued)

Security

The following property, plant and equipment are pledged to banks as security for borrowing purposes:

Group2004 2003

RM ‘000 RM’000At net book value:Freehold land 9,072 1,447Long term leasehold land 5,405 971Factory and buildings 120,123 111,775Plant, equipment and vehicles 37,966 3,775

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––172,566 117,968

===================== =====================

Assets under hire purchase and finance lease

Included in the property, plant and equipment of the Group are plant, equipment and motor vehicles acquired under hire purchase and leaseagreements with net book value amounting to RM3,591,000 (2003 - RM3,848,000).

3. Investments in subsidiaries

Company2004 2003

RM ‘000 RM’000

Unquoted shares, at cost 230,130 230,130Less: Impairment losses (18,185) (15,185)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––211,945 214,945

===================== =====================Details of the subsidiaries are shown in Note 25.


73notes to the


A N N U A L R E P O R T 2 0 0 4

4. Amount due from/(to) subsidiaries

Company2004 2003

RM ‘000 RM’000

Amount due from subsidiaries 628,566 572,819Less: Allowance for doubtful debts (374,372) (145,950)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––254,194 426,869

===================== =====================Amount due to subsidiaries (34,850) (13,383)

===================== =====================

The amount due from/(to) subsidiaries are non-trade in nature, interest free and unsecured except for the following amounts due from subsidiaries:

Company2004 2003

RM ‘000 RM’000

Unsecured bear interest at 4.8% to 10.1% per annum(2003 - 6.1% to 9.5% per annum) 8,536 13,300

===================== =====================




5. Investments in associates

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Quoted shares 35,096 35,096 35,096 35,096Unquoted shares 21,993 17,993 20,269 16,269Share of post acquisition reserves (328) 725 – – Less: Impairment losses (32,278) (31,237) (31,843) (30,471)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––24,483 22,577 23,522 20,894

===================== ===================== ===================== =====================Represented by:Group’s share of net assets other than goodwill 28,968 26,021Less: Impairment losses other than goodwill (11,041) (10,000)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––17,927 16,021

===================== =====================Goodwill on acquisition 27,793 27,793Less: Impairment losses on goodwill (21,237) (21,237)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––6,556 6,556

===================== =====================24,483 22,577

===================== =====================

Market value of quoted associates 7,964 15,967 7,964 15,967===================== ===================== ===================== =====================

Details of the associates are shown in Note 26.


75notes to the


6. Other investments

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Quoted shares 2 2 – – Unquoted shares 38,818 43,162 38,318 42,662

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––38,820 43,164 38,318 42,662

Less: Allowance for diminution in valueUnquoted shares (335) (335) (331) (331)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––38,485 42,829 37,987 42,331

Less: Unquoted shares - current portion – (7,625) – (7,625) –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

38,485 35,204 37,987 34,706===================== ===================== ===================== =====================

Market value of quoted investments 2 2===================== =====================

7. Development expenditure

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Development costs (Note 7.1) 7,076 9,649 – 712Plantation development expenditure (Note 7.2) 57,021 56,414 2,057 2,309Land held for property development (Note 7.3) 36,094 68,066 – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––100,191 134,129 2,057 3,021

===================== ===================== ===================== =====================

A N N U A L R E P O R T 2 0 0 4




7. Development expenditure (continued)Group Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

7.1 Development costsAt 1 January 43,047 42,975 3,672 3,928Additions during the year 288 328 – – Transfer to other investment – (256) – (256)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––43,335 43,047 3,672 3,672

Accumulated amortisation (22,943) (20,891) (1,464) (1,197) Accumulated impairment losses on development costs (13,316) (12,507) (2,208) (1,763)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––At 31 December 7,076 9,649 – 712

===================== ===================== ===================== =====================For the year ended 31 December 2004Amortisation charge 2,052 3,463 267 394Impairment losses 809 952 445 952

===================== ===================== ===================== =====================

7.2 Plantation development expenditureGroup Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

At 1 JanuaryLong term leasehold land

– at cost 20,450 20,450 2,312 2,312Plantation infrastructure 8,859 8,859 – – Plantation development 34,312 33,163 1,883 1,883

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––63,621 62,472 4,195 4,195

Additions during the year 2,524 1,149 – – –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

66,145 63,621 4,195 4,195Accumulated amortisation (9,124) (7,207) (2,138) (1,886)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––At 31 December 57,021 56,414 2,057 2,309

===================== ===================== ===================== =====================Amortisation during the year 1,917 1,598 252 253

===================== ===================== ===================== =====================

Leasehold land amounting to RM15,863,000 (2003 - RM16,128,000) are charged to the banks for banking facilities of the Group.


77notes to the


7. Development expenditure (continued)

7.3 Land held for property development

Group2004 2003

RM ‘000 RM’000CostAt 1 January 101,795 101,795Addition 11,584 – Disposal (29,171) –

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––At 31 December 84,208 101,795

- - - - - - - - - - - - - - - - - - - - - - - - - -

Accumulated impairment lossesAt 1 January 33,729 33,729Impairment losses for the year 18,385 – Disposal (4,000) –

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––At 31 December 48,114 33,729

- - - - - - - - - - - - - - - - - - - - - - - - - -

Carrying amount at 31 December 36,094 68,066===================== =====================

SecurityProperties amounting to RM26,357,000 (2003 - RM19,395,000) have been charged to secure banking facilities granted to the Group.

A N N U A L R E P O R T 2 0 0 4




7. Development expenditure (continued)

7.4 Property development costs

Group2004 2003

RM ‘000 RM’000At 1 JanuaryFreehold land - at cost 8,091 8,091Development costs 24,449 24,751Accumulated costs charged to income statement (31,878) (28,783)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––662 4,059

Add: Costs incurred during the yearDevelopment costs – 1,270

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––662 5,329

Less: Cost recognised in Income Statements – (3,095)Transfer to inventories (507) (1,572)Cost written–off (155) –

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––– 662

===================== =====================At 31 December

Freehold land - at cost 8,091 8,091Development costs 24,449 26,021Accumulated costs charged to income statement (32,540) (33,450)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––– 662

===================== =====================


79notes to the


8. Intangible assetsConcession

Group Goodwill costs TotalRM’000 RM’000 RM’000

CostAt 1 January/31 December 99,291 1,946 101,237

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Amortisation and impairment losses

Accumulated amortisation 8,441 420 8,861Accumulated impairment losses 38,121 – 38,121

Opening balance 46,562 420 46,982Charge for the year 2,916 84 3,000Impairment losses 21,810 – 21,810

Accumulated amortisation 11,357 504 11,861Accumulated impairment losses 59,931 – 59,931

Closing balance 71,288 504 71,792===================== ===================== =====================

Net book valueAt 31 December 2004 28,003 1,442 29,445

===================== ===================== =====================At 31 December 2003 52,729 1,526 54,255

===================== ===================== =====================

9. Deferred tax

The amounts, determined after appropriate offsetting, are as follows:Group

2004 2003RM ‘000 RM’000

Deferred tax liabilities 4,379 4,701Deferred tax assets (12,235) (11,940)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––(7,856) (7,239)

===================== =====================

Deferred tax liabilities and assets are offset where there is a legally enforceable right to set off current tax assets against current tax liabilitiesand where the deferred taxes relate to the same taxation authority.

A N N U A L R E P O R T 2 0 0 4




9. Deferred tax (continued)

The recognised deferred tax assets and liabilities (before offsetting) are as follows:Group

2004 2003RM ‘000 RM’000

Property, plant and equipment- capital allowance 4,379 10,357Unabsorbed capital allowances (7,523) (7,639)Unutilised tax losses (4,235) (6,221)Allowances (477) (3,736)

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––(7,856) (7,239)

===================== =====================

No deferred tax assets have been recognised for the following items:

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Unutilised tax losses 128,779 130,868 21,114 16,719Unabsorbed capital allowances 90,354 25,981 4,063 3,308Deductible temporary differences 28,257 60,323 (559) (471)

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––247,390 217,172 24,618 19,556

===================== ===================== ===================== =====================

The above do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is notprobable that future taxable profit will be available against which the Group can utilise the benefits.

The Group and Company have tax losses carried forward of RM144 million (2003 - RM153 million) and RM21 million (2003 - RM17 million)respectively which give rise to the recognised and unrecognised deferred tax assets in respect of unutilised tax losses above.


81notes to the


10. InventoriesGroup

2004 2003RM ‘000 RM’000

At cost:Developed properties held for sale 1,000 1,417Raw materials 5,657 4,108Work-in-progress 10,357 3,530Finished goods 28,566 29,237Parts and components 18,058 8,189

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––63,638 46,481

===================== =====================

Raw materials and parts and components of RM1,839,000 (2003 - RM1,402,000) are carried at net realisable value.

11. Trade and other receivables

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Trade receivables 236,332 167,256 – – Amount due from contract customers (Note 11.1) 3,942 3,751 – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––240,274 171,007 – –

Other receivables, deposits and prepayments 52,908 69,559 596 7,519Amount due from associates 334 507 – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––293,516 241,073 596 7,519

===================== ===================== ===================== =====================

A N N U A L R E P O R T 2 0 0 4




11. Trade and other receivables (continued)

11.1 Amount due (to)/from contract customersGroup

2004 2003RM ‘000 RM’000

Aggregate cost incurred to date 170,505 275,521Add: Attributable profits 14,722 21,621

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––185,227 297,142

Less: Progress billings (184,110) (299,317)–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

1,117 (2,175)Amount due to contract customers (Note 13) 2,825 5,926

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––Amount due from contract customers 3,942 3,751

===================== =====================

Group

Progress billing receivable

Included in progress billings receivable are retentions amounting to RM1,146,000 (2003 - RM2,087,000).

12. Cash and cash equivalents

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Cash and bank balances 33,484 36,175 782 278Deposits - Licensed banks 46,193 21,499 20,037 4,319

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––79,677 57,674 20,819 4,597

===================== ===================== ===================== =====================

Group

Included in the Group’s cash and bank balances is RM605,000 (2003 - RM2,146,000), the utilisation of which is subject to the HousingDevelopers (Housing Development Account) (Amendment) Regulations 2002.

Included in fixed deposits is RM9,059,000 (2003 - RM9,432,000) pledged for banking facilities of the Group.


83notes to the


13. Trade and other payablesGroup Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

Trade payables 119,555 83,056 – – Amount due to Koperasi Usaha Bersatu Malaysia Berhad

for acquisition of land – 37,580 – 37,580Unearned tuition fees 32,106 35,870 – – Deposits received 38,901 34,319 3,101 5,676 Accrued contract cost 32,888 20,033 – – Other payables and accrued expenses 72,660 95,710 8,937 6,005Amount due to associates 4,984 6,738 – –Amount due to contract customers (Note 11) 2,825 5,926 – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––303,919 319,232 12,038 49,261

===================== ===================== ===================== =====================

14. BorrowingsGroup Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

CurrentRevolving credit - unsecured 4,452 5,263 – 1,000

- secured 13,670 10,420 5,500 – Term loans - secured 15,353 41,796 7,780 21,000Overdrafts - secured 8,991 27,600 – –

- unsecured 11,473 13,869 – – Banker’s acceptances - secured 29,444 6,802 – –

- unsecured 20,687 16,235 – – Finance lease and hire purchase liabilities 1,184 1,151 546 296

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––105,254 123,136 13,826 22,296

===================== ===================== ===================== =====================

Non-currentLong term loans - secured 91,262 100,051 39,220 21,000 Finance lease and hire purchase liabilities 3,029 2,255 1,900 1,672

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––94,291 102,306 41,120 22,672

===================== ===================== ===================== =====================Total 199,545 225,442 54,946 44,968

===================== ===================== ===================== =====================

A N N U A L R E P O R T 2 0 0 4




14. Borrowings (Continued)

Terms and debt repayment schedule

The revolving credit is subject to interest rates between 4.6% to 7.0% (2003 - 4.8% to 7.6%) per annum. The overdrafts and term loans aresubject to interest rates between 7.0% to 8.4% (2003 - 6.4% to 9.5%) per annum. Hire purchase/finance leases are subject to a fixed interestrates of between 3.75% to 13.9% (2003 - 3.9% to 12%) per annum. Bankers’ acceptances are subject to interest between 3.6% to 4.2% (2003- 1.0% and 8.5%) per annum.

Overdrafts and term loans of certain subsidiaries are secured by way of fixed and floating charges over the subsidiaries’ property, plant andequipment (Note 2).

The term loans are repayable in equal monthly and yearly installments over periods ranging from 1 year to 15 years.

Finance lease and hire purchase liabilities

Finance lease and hire purchase liabilities are payable as follows:

Payments Interest Principal Payments Interest Principal2004 2004 2004 2003 2003 2003

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Less than one year 1,441 257 1,184 1,529 378 1,151Between one and five years 3,411 382 3,029 2,737 482 2,255

––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––4,852 639 4,213 4,266 860 3,406

========================================================== ==========================================================

Payments Interest Principal Payments Interest Principal2004 2004 2004 2003 2003 2003

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Company

Less than one year 750 204 546 473 177 296Between one and five years 2,263 363 1,900 2,106 434 1,672

––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––3,013 567 2,446 2,579 611 1,968

========================================================== ==========================================================


85notes to the


15. Share capitalGroup and Company2004 2003

RM ‘000 RM’000

Authorised Ordinary shares of RM1.00 each 1,000,000 1,000,000===================== =====================

Redeemable Convertible Preference Shares A of RM0.10 eachCreated during the year 200 –

===================== =====================Redeemable Convertible Preference Shares B of RM0.10 each

Created during the year 2,000 – ===================== =====================

Issued and fully paid Ordinary shares of RM1.00 eachOpening balance 504,620 504,620Issue of shares 26,576 –

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––Closing balance 531,196 504,620

===================== =====================

The Company issued 20,877,778 and 5,698,298 new ordinary shares of RM1.00 each at RM1.80 per share on 10 June 2004 and 18 October2004 respectively, to Koperasi Usaha Bersatu Malaysia Berhad (in liquidation) as consideration on the transfer of six parcels of land gazettedunder Malay Reserved land and two parcels of land under Restriction-in-interest title land.

The shareholders of the Company, via a special resolution passed in the Extraordinary General Meeting held on 30 June 2004, pursuant toproposed Scheme of Arrangement under Section 176 of the Companies Act, 1965 between A&W Malaysia Sdn Bhd and its Scheme Creditors,approved for the Company to issue New Redeemable Convertible Preference Shares (“RCPS”) of the Company of RM0.10 each at an issue priceof RM1.00 each to Scheme A and Scheme B creditors of A&W Malaysia Sdn. Bhd. The RCPS A and B have a tenure of 5 years commencing fromand including date of issue. Prior to the conversion of the RCPS A and B, the RCPS A and B do not carry the right to vote, except where thebusiness of the meeting includes consideration of resolutions specifically to:(a) reduce the capital of KUB;(b) dispose of the whole of KUB’s property, business and undertaking;(c) wind-up KUB;(d) alter the Articles of Association of KUB which affects the rights of the KUB RCPS-A holders; or(e) vary or abrogate any of the special rights or conditions attached to the KUB RCPS-A holders.

The RCPS A is entitled to profits at determined rates (as below) and was accrued upfront; and RCPS B is entitled to dividend (cumulative) payableannually in arrears at the end of each financial year; and the rates are:

Dividend/profit rate

Year 1 3%Year 2 3%Year 3 4%Year 4 5%Year 5 5%

A N N U A L R E P O R T 2 0 0 4




15. Share capital (continued)

The shareholders of the Company have on the same date, approved for the Company to issue 10,741,651 new ordinary shares of the Companyof RM1.00 each of an issue price of RM1.00 each to Scheme C creditors of A&W Malaysia Sdn. Bhd. In addition, the Shareholders also approvedfor the Company to issue 20,216,840 new ordinary shares of the Company of RM1.00 each at an issue price of RM1.00 each to Scheme A andB creditor of A&W Malaysia Sdn. Bhd. upon conversion of their respective RCPS A and RCPS B.

16. Minority shareholders’ interests

This consists of minority shareholders’ proportion of share capital and reserves of subsidiaries.

17. Operating profit/(loss)

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Revenue- contract revenue 219,764 122,820 – – - sale of goods 509,565 423,232 – – - services 68,892 73,283 1,301 1,054- sale of properties 1,240 4,874 – – - interest – – 267 1,235- dividend 350 1,072 350 1,072

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––799,811 625,281 1,918 3,361

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Contract costs recognised as an expense (198,125) (104,326) – – Cost of sales (408,585) (337,772) – – Cost of services (44,761) (46,454) – – Cost of properties sold (400) (4,954) – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––(651,871) (493,506) – –

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Gross profit 147,940 131,775 1,918 3,361Distribution costs (19,843) (19,107) – – Administration expenses (74,473) (94,805) (4,807) (4,771)Other operating expenses (115,787) (52,520) (239,771) (45,552)Other operating income 66,394 30,441 29,631 10,651

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––(143,709) (135,991) (214,947) (39,672)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Operating profit/(loss) 4,231 (4,216) (213,029) (36,311)

===================== ===================== ===================== =====================


87notes to the


17. Operating profit/(loss) (continued)Group Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

Operating profit/(loss) is arrived at after crediting:-Gain on disposal of property, plant and equipment 2,036 2,605 2,234 1,594 Gain on disposal of an investment 24,998 – 24,998 –Gain on disposal of a landed property 16,504 – – –Gain on disposal of a subsidiary 436 – – –Waiver of debt 5,053 – – –Rental income 292 199 78 113Write back of allowance for doubtful debts 243 410 – – Write back of allowance for amount due from subsidiaries – – – 6,927Write back of allowance for foreseeable loss – 136 – –

===================== ===================== ===================== =====================

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000and after charging:Allowance for amount due from subsidiaries – – 228,422 37,759Amortisation of development costs 2,052 3,463 267 394 Allowance for diminution in value of other investment – 31 – 31 Allowance for doubtful debts 7,613 5,812 – –Amortisation of intangible assets 3,000 4,001 – – Amortisation of plantation development expenditure 1,917 1,598 252 253Auditors’ remuneration 387 422 21 23 Company’s Directors

Remuneration 1,015 864 1,015 864Fees 263 263 263 263

Depreciation 36,571 40,622 704 1,072Impairment losses on goodwill 21,810 – – – Impairment loss on investment in associates 1,041 – 1,372 – Impairment loss on investment in subsidiaries – – 3,000 –Impairment losses on property, plant and equipment 8,762 3,378 – –Impairment losses on property development 18,385 – – –Inventories written down 1,238 1,638 – – Loss on disposal of subsidiaries – 1,600 – – Rental expense on land and buildings 8,052 11,401 962 969Realised loss on foreign exchange 8 65 – – Write off of development expenditure 809 952 445 952

===================== ===================== ===================== =====================

The estimated monetary value of Directors’ benefits-in-kind is RM5,372 (2003 - RM7,350).

A N N U A L R E P O R T 2 0 0 4




18. Employee informationGroup Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

Employees Provident Fund 8,155 7,913 581 544Other staff costs (emoluments of Directors and staff) 70,792 70,564 4,653 4,456

===================== ===================== ===================== =====================

The number of employees of the Group and of the Company (including Executive Directors) at the end of the year was 3,231 (2003 - 2,878) and68 (2003 - 59) respectively.

19. Tax expenseGroup Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

Current tax expense Malaysian - current 6,785 5,068 – 265 - prior year (156) 388 (604) –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––6,629 5,456 (604) 265

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Deferred tax expenseOrigination and reversal of temporary differences 55 771 – – Effect of previously unrecognised tax losses – 1,096 – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––6,684 7,323 (604) 265

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Reconciliation of effective tax expense

Loss before taxation (9,979) (20,139) (215,126) (40,225)===================== ===================== ===================== =====================

Income tax using Malaysian tax rate (2,794) (5,639) (60,235) (11,263)Non-deductible expenses 15,670 7,579 86,398 11,473Non-taxable gain (13,157) – (27,582) – Effect of deferred tax assets not recognised 8,461 6,054 1,419 55Tax incentives (1,340) (1,059) – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––6,840 6,935 – 265

(Over)/Underprovision in prior years (156) 388 (604) ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Tax expense/(recoverable) 6,684 7,323 (604) 265===================== ===================== ===================== =====================


89notes to the


20. Loss per ordinary share - Group

Basic loss per share

The calculation of basic loss per share is based on the net loss attributable to ordinary shareholders of RM18,050,000 (2003 - RM29,615,000)and the weighted average number of ordinary shares outstanding during the year of 517,007,000 (2003 - 504,620,000).

Weighted average number of ordinary shares2004 2003

Units’000 Units’000

Issued ordinary shares at beginning of the year 504,620 504,620Effect of new issue of ordinary shares in June 2004 11,497 – Effect of new issue of ordinary shares in October 2004 890 –

–––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––Weighted average number of ordinary shares 517,007 504,620

===================== =====================

Diluted loss per share

The calculation of diluted loss per share is based on the net loss attributable to ordinary shareholders of RM18,050,000 (2003 - RM29,615,000)and the weighted average number of ordinary shares outstanding during the year of 562,154,000 (2003 - 531,196,466) calculated as follows:

2004 2003Units’000 Units’000

Issued ordinary shares at beginning of the year 504,620 504,620Effect of new issue of ordinary shares as consideration for

acquisition of certain Malay-Reserve and Restriction-in-Title land (Note 15) 26,576 26,576Effect of new issue of ordinary shares pursuant to Scheme of Arrangement under Section 176

of the Companies Act, 1965 between A&W Malaysia Sdn Bhd and its Scheme Creditors 30,958 – –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Number of ordinary shares (diluted) 562,154 531,196===================== =====================

The diluted loss per ordinary share results in decreased loss per share and therefore it is not shown.

A N N U A L R E P O R T 2 0 0 4




21. Segmental information

Segment information is presented in respect of the Group’s business. The primary format, business segments, is based on the Group’smanagement and internal reporting structure. Inter-segment pricing is determined based on negotiated terms.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonablebasis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more thanone accounting period.

Business segments:

The Group comprises the following main business segments:

Education and training (“E&T”) Online and conventional education.

Information and communications technology (“ICT”) Information technologies, telecommunication services and their related infrastructures.

Liquefied petroleum gas (“LPG”) Bottling and trading of LPG.

Food and beverages (“F&B”) Quick - service restaurants and hotelier.

Properties, engineering & construction (“PEC”) Development, construction and management of residential and commercial properties,including engineering and civil works.

Others Investment holding, manufacturing of mild steel pipes and garments, oil palm plantation,trading of consumer products and advertising/ event management services.

The Group operates mainly in Malaysia.

2004 E&T ICT LPG F&B PEC Others Elimination ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Business segments

Revenue from externalcustomers 60,639 261,170 195,919 52,707 135,126 94,250 – 799,811

Inter-segment revenue – 644 – – 5,359 1,941 (7,944) – –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total revenue 60,639 261,814 195,919 52,707 140,485 96,191 (7,944) 799,811=====================================================================================================================


91notes to the


21. Segmental information (continued)


Segment result

Operating profit /(loss) (4,890) 6,880 6,604 (29,237) 2,154 22,720 – 4,231Interest expenses (458) (1,539) (443) (1,924) (4,786) (5,277) 217 (14,210)Interest income – 269 – – 119 882 (217) 1,053Share of losses

of associates – (446) – – – (607) – (1,053)Tax expense (531) (2,152) – – (2,892) (1,109) – (6,684)Minority interests – (1,449) – – 62 – – (1,387)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Net profit /(loss)

for the year (5,879) 1,563 6,161 (31,161) (5,343) 16,609 – (18,050)=====================================================================================================================


Business segments

Revenue from externalcustomers 66,399 200,926 148,530 46,478 74,229 88,719 – 625,281

Inter-segment revenue – – – – 7,539 2,011 (9,550) ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total revenue 66,399 200,926 148,530 46,478 81,768 90,730 (9,550) 625,281=====================================================================================================================

Segment result

Operating profit /(loss) (1,835) 6,985 3,315 (8,338) (1,390) (2,953) – (4,216)Interest expenses (717) (799) (859) (2,411) (5,866) (7,085) – (17,737)Interest income – 158 – 390 441 145 – 1,134Share of profit/(loss)

of associates – 1,258 – – – (578) – 680Tax expense (514) (3,172) (316) – (2,091) (1,230) – (7,323)Minority interests – (1,219) – – (934) – – (2,153)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Net profit /(loss)

for the year (3,066) 3,211 2,140 (10,359) (9,840) (11,701) – (29,615)=====================================================================================================================

A N N U A L R E P O R T 2 0 0 4




21. Segmental information (Continued)


Segment assets 129,347 207,722 143,156 31,745 242,780 193,805 – 948,555

Investment in associates – 1,792 – – – 22,691 – 24,483–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total assets 129,347 209,514 143,156 31,745 242,780 216,496 – 973,038=====================================================================================================================

Total liabilities 63,426 145,338 74,231 53,426 47,231 156,379 – 540,031=====================================================================================================================

Capital expenditure 5,374 5,177 7,747 5,861 2,771 1,418 – 28,348Impairment losses 4,456 – – 21,810 18,947 4,785 – 49,998Depreciation and

amortisation 15,220 2,745 8,637 5,473 6,050 5,415 – 43,540


Segment assets 125,913 166,055 125,558 62,043 298,819 181,502 – 959,890

Investment in associates – 2,238 – – – 20,338 – 22,576–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total assets 125,913 168,293 125,558 62,043 298,819 201,840 – 982,466=====================================================================================================================

Total liabilities 57,283 97,192 64,996 54,993 131,662 172,685 – 578,811=====================================================================================================================

Capital expenditure 4,312 5,802 4,594 3,571 1,155 2,903 – 22,337Impairment losses 20 2,041 – 1,317 – – – 3,378Depreciation and

amortisation 18,335 4,493 8,361 5,691 6,055 6,749 – 49,684


93notes to the


22. Contingent liabilities - unsecuredCompany

2004 2003RM ‘000 RM’000

Guarantees and contingencies relating to borrowings of subsidiaries 85,345 98,445===================== =====================

Litigation

Claims brought against two subsidiaries by suppliers totaling RM17,916,000 for debt recovery for which the cases are still pending resolutionare as follows:

(i) Claim for supply of computer software, hardware and consultancy services of RM3,036,345. The subsidiary filed counterclaim forRM404,343 in aggregate comprising liquidated ascertained damages and payment for supply of equipment. The Court directed a particularIT Consultant be appointed to determine the validity of the claim and counterclaim. On 23 October 2003 the appointed consultant attendedcourt and was given directions by Court as to the scope of the appointment. The Consultant has prepared the Reports and the case is nowfixed for Case management on 26 May 2005; and

(ii) Claim for outstanding sum of USD3,915,692 due to sale and delivery of liquefied petroleum gas. Claim was filed in Hong Kong High Court.The subsidiary filed Acknowledgement of Service of Writ and an application for Stay of Proceedings Pending reference of Dispute toArbitration, on 28 September 2004 and 25 October 2004 respectively. The application for Stay of Proceedings is now fixed for Hearingon 4 May 2005.

The liabilities have been accrued for in the financial statements for the year ended 31 December 2004.

23. CommitmentsGroup Company

2004 2003 2004 2003RM’000 RM’000 RM ‘000 RM’000

Capital commitments:Property, plant and equipment

Authorised but not contracted for 31,872 39,339 165 68 Contracted but not provided for in the financial statements 5,427 10,257 4,500 10,257

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––37,299 49,596 4,665 10,325

InvestmentsContracted but not provided for in the financial statements 1,000 1,000 1,000 1,000

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––38,299 50,596 5,665 11,325

===================== ===================== ===================== =====================

A N N U A L R E P O R T 2 0 0 4




23. Commitments (continued)

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

Lease and repurchase commitments:

Less than a year 1,125 – – – Between one and five years 4,873 – – – More than five years 20,018 – – –

–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––26,016 – – –

===================== ===================== ===================== =====================

24. Related parties

Controlling related party relationships are as follows:

i) Its subsidiaries as disclosed in Note 25.

ii) The major shareholder of the Company, Datuk Hassan Harun, through his substantial shareholdings in Daya Profil Sdn. Bhd., which in turnis a major shareholder of Sumber Serata Sdn. Bhd., a major shareholder in KUB Malaysia Berhad.

Significant related party transactions

Significant related party transactions other than those disclosed elsewhere in the financial statements are as follows:

Group Company2004 2003 2004 2003

RM’000 RM’000 RM ‘000 RM’000

SubsidiariesRental payable – – 961 969Service and maintenance fees payable – – 265 315Administration and support fees receivable – – 540 781Interest income – – 484 1,235

===================== ===================== ===================== =====================

AssociatesPurchases of telecommunications equipment 4,126 12,010

===================== =====================

The above transactions have been entered into in the normal course of business and have been established under negotiated terms.


95notes to the


25. Subsidiaries

The principal activities of the companies in the Group, all incorporated in Malaysia (unless otherwise stated) and the interest of KUB MalaysiaBerhad are shown below:-

Equity InterestName of Company Principal Activities 2004 2003

25.1 Direct subsidiaries of the Company

KUB Ekuiti Sdn. Bhd. Investment holding. 100% 100%KUB Prasarana Sdn. Bhd. ~ Ceased operations during the year. 100% 100%Peraharta Sdn. Bhd. Property management. 100% 100%Perbiba Sdn. Bhd. Property development. 100% 100%Pernida Berhad Distributor of cigarettes. 86% 86%Peramining Sdn. Bhd.+< Investment trading. 100% 100%Utama Steel Works Sendirian Berhad.~ Manufacturing and installation of steel pipes and fittings. 51% 51%Pelita Espipi Sendirian Berhad.+~< Dormant. 100% 100%Restoran Kualiti Sdn. Bhd. ~ Investment holding. 100% 100%Summit Petroleum (Malaysia) Sdn. Bhd. Bottling and trading of liquefied petroleum gas. 100% 100%Gerik Timber Industries Sdn. Bhd.+~ Dormant. 100% 100%Perdaris Development Sdn. Bhd.+ Dormant. 100% 100%Perinding Plantations Sdn. Bhd.+ Dormant. 100% 100%Creative Communications & Events Sdn. Bhd.~ Provision of event management and advertising services. 100% 100%Academy of Knowledge for Education and trainingAccountant and Leadership Sdn. Bhd.# 100% –

25.2 Subsidiaries of KUB Ekuiti Sdn. Bhd.

Bina Alam Bersatu Sdn. Bhd. Civil engineering works, building works and housing development. 55% 55%ITTAR Sdn. Bhd. ~ Education and training. 100% 100%KUB Agrotech Sdn. Bhd. Plantation and estate management. 100% 100%KUB Development Berhad ~ Property development and project management. 100% 100%KUB Gas Sdn. Bhd. ~ Bottling and trading of liquefied petroleum gas. 100% 100%KUB Power Sdn. Bhd. Constructions of power substations. 100% 100%KUB Realty Sdn. Bhd. ~ Property management and investment holding. 100% 100%KUB Teknologi Sdn. Bhd.+~< Dormant. 100% 100%KUB Telekomunikasi Sdn. Bhd. Assembling and commissioning of telecommunication equipment. 100% 100%KUB Sistem Sdn. Bhd.+~ Dormant. 100% 100%KUB Tekstil Sdn. Bhd. Garment manufacturing and trading. 100% 100%KUBTrus Sdn. Bhd.+< Dormant. 100% 100%Maga Textile (M) Sdn. Bhd.+~< Dormant. 100% 100%Pembinaan Efektif (M) Sdn. Bhd.+< Dormant. 60% 60%

A N N U A L R E P O R T 2 0 0 4




25. Subsidiaries (continued)Equity Interest

Name of Company Principal Activities 2004 2003

Tele Dynamics Sdn. Bhd. Providing information communication technology 60% 60%systems, solutions and services.

Universiti Tun Abdul Razak Sdn. Bhd. Higher education and training. 100% 100%Affluent Vision Sdn. Bhd. Dormant. 100% 100%KUBAKI Pte. Ltd. * +< Dormant. 60% 60%KUB Drilling Sdn. Bhd.+ Dormant. 100% 100%KUB Hotel and Resort Management Sdn. Bhd.+ Dormant. 100% 100%KUB Microelectronics Sdn. Bhd.+~< Dormant. 78.5% 78.5%KUB-TIS Controls Sdn. Bhd.+ Dormant. 100% 100%Perumahan KUB Sdn. Bhd.+ Dormant. 100% 100%Verein Sdn. Bhd.+ Dormant. 100% 100%Villa-Annexe Sdn. Bhd.+ Dormant. 100% –

25.3 Subsidiaries of Bina Alam Bersatu Sdn. Bhd.

Cocoa Valley Sdn. Bhd.~ Property development. 70% 70%Apsley Sdn. Bhd. Investment holding. 100% 100%Bina Alam Bersatu Development Sdn. Bhd.~ Dormant. 100% 100%Bina Alam Management Sdn. Bhd. +< Dormant. 100% 100%

25.4 Subsidiaries of ITTAR Sdn. Bhd.

ITTAR-IPP (PJ) Sdn. Bhd. Hospitality education and training. 100% 100%ITTAR-ILP (Prai) Sdn. Bhd. Technical and vocational training. 100% 100%

25.5 Subsidiaries of KUB Agrotech Sdn. Bhd.

KUB Sepadu Sdn. Bhd. Oil palm plantation. 60% 60%Radiant Orchards Sdn. Bhd.+ Dormant. 100% 100%

25.6 Subsidiaries of KUB Hotel and Resort Management Sdn. Bhd.

KUB Singgahsana (PJ) Sdn. Bhd.~ Hotel management. 100% 100%KUB Sajilera Sdn. Bhd.+ Dormant. 100% 100%KUB Singgahsana (Langkawi) Sdn. Bhd. +< Dormant. 100% 100%

25.7 Subsidiaries of KUB Telekomunikasi Sdn. Bhd.

KUB-Fujitsu Telecommunications Assembling and commissioning of telecommunication equipment. 70% 70%(Malaysia) Sdn. Bhd.

KUB Research Sdn. Bhd.~ Technical research. 100% 100%Cybertrek (Malaysia) Sdn. Bhd.+~< Dormant. 100% 100%


97notes to the


25. Subsidiaries (Continued)Equity Interest


25.8 Subsidiaries of KUB Teknologi Sdn. Bhd.

VisionScape Sdn. Bhd. (in liquidation) + Dormant. 51% 51%

25.9 Subsidiaries of Tele Dynamics Sdn. Bhd.

Tele Dynamics Global Com Sdn. Bhd. Providing information communication technology 100% 100%systems, solutions and services.

Tele Portable Sdn. Bhd. Rental of information communication system. 100% 100%Tele Dynamics Atec Sdn. Bhd. Providing information communication technology 100% 100%

systems, solutions and services.Tele Dynamics SWD Sdn. Bhd. Provision software research, development, solutions and services. 60% 60%

25.10 Subsidiary of Universiti Tun Abdul Razak Sdn. Bhd.

United Multimedia Sdn. Bhd. ~ Trading of multimedia learning and provision of IT related services. 100% 100%

25.11 Subsidiaries of KUB Realty Sdn. Bhd.

KUB Realty (PJ) Sdn. Bhd.~ Property management. 100% 100%KUB Sinar Sdn. Bhd. +< Dormant. 100% 100%

25.12 Subsidiaries of KUB Development Berhad

Kesina Development Sdn. Bhd. Property development and project management. 100% 100%KUB-Astana Development Sdn. Bhd.+~ Dormant. 51% 51%Adil Perdana Sdn. Bhd.+~ Dormant. 70% 70%

25.13 Subsidiary of KUB Microelectronics Sdn. Bhd.

KUB Microelectronics Sales Dormant. 100% 100%and Service Sdn. Bhd.+

25.14 Subsidiary of Perbiba Sdn. Bhd.

Principal Properties Sdn. Bhd. + ## Dormant. – 100%

25.15 Subsidiary of Peraharta Sdn. Bhd.

Villa-Annexe Sdn. Bhd.+ Dormant. – 100%

25.16 Subsidiary of Apsley Sdn. Bhd.

Lembayung Sukma Sdn. Bhd.~ Dormant. 80% 80%

A N N U A L R E P O R T 2 0 0 4




25. Subsidiaries (continued)Equity Interest


25.17 Subsidiaries of Restoran Kualiti Sdn. Bhd.

A&W (Malaysia) Sdn. Bhd.~ Operating a chain of restaurants. 100% 100% A&W (Singapore) Pte. Ltd. *+< Dormant. 100% 100% A&W Restaurants (Thailand) Co., Ltd. ^@ ~ Food and beverage catering through retail outlets. 100% –

25.18 Subsidiaries of A&W (Malaysia) Sdn. Bhd.

A&W Properties Sdn. Bhd. Properties management. 100% 100%TDM Mark-Well Sdn. Bhd. Dormant. 100% 100% Prosperous Avenue Sdn. Bhd. Dormant. 100% 100% Dysec (M) Sdn. Bhd. Dormant. 60% 60% Limpahan Laksana Sdn. Bhd. Dormant. 60% 60%Pleasant Harmony Sdn. Bhd. Dormant. 60% 60% Syarikat Ayam Mutiara Sdn. Bhd. Dormant. 55% 55%

25.19 Subsidiaries of A&W (Singapore) Pte. Ltd.

A&W Restaurants (Thailand) Co., Ltd. ^@ ~ Food and beverage catering through retail outlets. - 100%Harbour Place Developments Pte. Ltd.*+< Dormant. 100% 100%

25.20 Subsidiary of A&W Restaurants (Thailand) Co., Ltd.

A&W Distribution Company Limited^@~ Dormant. 95% 95%

* Incorporated in Singapore. ^ Incorporated in Thailand. # Acquired during the year.## Disposed during the year@ Audited by member firm of KPMG International.+ The financial statements are audited by another firm of accountants.< Consolidated using unaudited management financial statements. The net assets and results of these companies are not significant to the

Group.~ The auditors report on the financial statements includes an emphasis of matter on the uncertainty over the ability to continue on a going

concern. The financial statements have been prepared on a going concern basis as the Directors of these companies believe that therewould be continued financial support from KUB. Where necessary, appropriate adjustments have been made to the carrying value ofinvestments at Company level and to the carrying value of assets at Group level.


99notes to the


26. Associates

The associates of the Group, all incorporated in Malaysia, are as follows:-Equity Interest


26.1 Direct associates of the Company

Mambang Di Awan Sdn. Bhd. ^ Extraction and sale of tin ore. 37.5% 37.5%Polyolefins Pipe Berhad ^ Manufacture, marketing and installation of polyethelene and 30% 30%

polypropylene pipes.Rimba Raya Sdn. Bhd. ^ Dormant. 20% 20%Computer Forms (Malaysia) Berhad * Printing and distributing of computer forms, stock forms 32% 32%

and specialised forms.United Chemical Industries Berhad ^ Dormant. 24.8% 24.8% KUB-Berjaya Enviro Sdn. Bhd. # ^ Sanitary waste management. 40% –

26.2 Associates of United Multimedia Sdn. Bhd.

UMM Nadi Sdn. Bhd.^ Dormant. 30% 30%UMM Hijau Sdn. Bhd. ^ Dormant. 30% 30% UMM Synergy Corporation Sdn. Bhd. ^ Dormant. 30% 30%UMM BT Media Sdn. Bhd. ^ Dormant. 30% 30%UMM Avex Sdn. Bhd. ^ Dormant. 30% 30%

26.3 Associate of KUB Telekomunikasi Sdn. Bhd.

Sphairon (Malaysia) Sdn. Bhd. ^ Manufacturing and distribution of wireless local loop system. 49% 49%

26.4 Associate of Aspley Sdn. Bhd.

Lambaian Indah Sdn. Bhd. Dormant. 50% 50%

26.5 Associate of Lembayung Sukma Sdn. Bhd.

Lembayung Greens Sdn. Bhd. Dormant. 40% 40%

26.6 Associates of A&W (Malaysia) Sdn. Bhd.

Success United Corporation Sdn. Bhd. ^ Dormant. 40% 40%Relk Food Services Sdn. Bhd. ^ Fast food business. 49% 49%

26.7 Associate of Villa-Annexe Sdn. Bhd.

Pembinaan Efektif (M) Sdn. Bhd. Dormant. 40% 40%

A N N U A L R E P O R T 2 0 0 4




26. Associates (continued)Equity Interest


26.8 Direct associates of KUB Ekuiti Sdn. Bhd.

Editry Sdn. Bhd.^ Dormant. 41% 41%

# Acquired during the year.* The Group’s share of results in Computer Forms (Malaysia) Berhad, a company listed on the Bursa Malaysia Securities Berhad, which has a

31 March year end, has been equity accounted for based on the announcement of its results.^ The results have been equity accounted for based on the unaudited management accounts

27. Financial instruments

Financial risk management objectives and policies

Exposure to credit, interest rate and currency risk arises in the normal course of the Group and the Company’s business. The Board reviews andagrees policies for managing each of these risks and they are summarised below.

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ad-hoc basis. Credit evaluations are performed on allcustomers requiring credit over a certain amount. The Group and the Company do not require collateral in respect of financial assets. Fixeddeposits are placed only with licensed financial institutions.

At balance sheet date, there were no significant concentrations of credit risk within the Group. The maximum exposure to credit risk for the Groupand for the Company was represented by the carrying amount of each financial asset.

Foreign currency risk

The Group and the Company incur foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than RinggitMalaysia. The currencies giving rise to this risk are primarily US dollars, Singapore dollars and Thailand bahts.

The Group and Company do not hedge transactions denominated in US dollars by purchasing forward currency contracts at present given thegovernment’s “peg”. The Group and Company also do not hedge the exposures in Singapore dollars and Thailand bahts as these transactionsare funded by the operations in these countries. However, the Board keeps this policy under review.


101notes to the


27. Financial instruments (continued)

The following table shows information about the Group’s exposure to interest rate risk.

Effective interest rates and repricing analysis

In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheetdate and the periods in which they reprice or mature, whichever is earlier.

______________________ 2004 ______________________ _______________________ 2003 _______________________Effective Effectiveinterest Within 1-5 After interest Within 1-5 After

rate Total 1 year years 5 years rate Total 1 year years 5 yearsGroup % RM’000 RM’000 RM’000 RM’000 % RM’000 RM’000 RM’000 RM’000

Financial assetsCash and cash equivalents 2.9 46,193 45,503 690 – 2.7 21,499 21,499 – –

===========================================================================================================================Financial liabilitiesSecured revolving credit 6.5 13,670 13,670 – – 7.6 10,420 10,420 – – Unsecured revolving credit 7.0 4,452 4,452 – – 6.6 5,263 5,263 – –Secured term loans:

RM Variable rate loans 6.8 76,141 76,141 – – 6.9 92,847 92,847 – – RM Fixed rate loans 7.1 30,474 – 14,750 15,724 8.6 49,000 – 49,000 –

Secured overdrafts:RM 7.0 8,991 8,991 – – 8.3 27,600 27,600 – –

Unsecured overdrafts 8.4 11,473 11,473 – – 8.1 13,869 13,869 – – Secured bankers acceptance 3.6 29,444 29,444 – – 4.7 6,802 6,802 – – Unsecured bankers acceptance 4.2 20,687 20,687 – – 4.5 16,235 16,235 – –

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––195,332 164,858 14,750 15,724 222,036 173,036 49,000 –

===========================================================================================================================

A N N U A L R E P O R T 2 0 0 4




27. Financial instruments (continued)

______________________ 2004 ______________________ _______________________ 2003 _______________________Effective Effectiveinterest Within 1-5 After interest Within 1-5 After

rate Total 1 year years 5 years rate Total 1 year years 5 yearsCompany % RM’000 RM’000 RM’000 RM’000 % RM’000 RM’000 RM’000 RM’000

Financial assetsCash and cash equivalents 3.0 20,037 20,037 – – 2.9 4,319 4,319 – –

===========================================================================================================================Financial liabilitiesUnsecured revolving credits – – – – – 4.8 1,000 1,000 – – Secured revolving credits 4.6 5,500 5,500 – – – – – – –Secured term loan

RM Variable rate loan 6.7 47,000 47,000 – – – – – – –RM Fixed rate loan – – – – – 7.5 42,000 – 42,000 –

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––52,500 52,500 – – 43,000 1,000 42,000 –

===========================================================================================================================

Fair values

Recognised financial instruments

In respect of cash and cash equivalents, trade and other receivables, trade and other payables and short term borrowings, the carrying amounts approximatefair value due to the relatively short term nature of these financial instruments. Carrying amounts of the secured term loans also approximate fair values as theycarry variable interest rates.

The aggregate fair values of other financial assets and liabilities on the balance sheet as at 31 December are represented in the following tables.

2004 2003 2004 2003Carrying amount Fair value Carrying amount Fair value

Group RM’000 RM’000 RM ‘000 RM’000

Financial assetsQuoted shares - long term 16,581 7,964 16,583 15,969

Financial liabilitiesSecured term loans:

RM - fixed rate loan 30,474 31,430 107,229 110,220

The fair value of the quoted shares is their quoted bid price at the balance sheet date. For other financial instruments listed above, fair values have beendetermined by discounting the relevant cash flow using current interest rates for similar instruments at the balance sheet date.


103notes to the


28. Acquisition and disposal of subsidiaries

Acquisition

KUB Malaysia Berhad (“KUB”) had on 1 December 2004, acquired 100% interest in Academy of Knowledge for Accountant and Leadership Sdn.Bhd. (“AKAL”) for a cash consideration of RM2.00. No turnover and profit after tax were contributed by AKAL to the Group results for the financialyear ended 31 December 2004.

Disposal

Perbiba Sdn. Bhd., a wholly owned subsidiary of KUB has disposed-off its wholly owned subsidiary, Principal Properties Sdn. Bhd. (“PPSB”) for acash consideration of RM2,800,000 to a third party, resulting to a gain of RM436,000. No turnover and profit after tax were contributed by PPSBto the Group results for the financial year ended 31 December 2004.

The disposal had the following effect on the Group’s assets and liabilities as at 31 December 2004:2004

RM’000

AssetLand held for property development 2,364

––––––––––––––––––––––––––––––Net asset 2,364Gain on disposal 436

––––––––––––––––––––––––––––––Total consideration/Net cash inflow 2,800

=====================

29. Acquisition of an associate

KUB had on 2 July 2004, acquired 40% interest in KUB-Berjaya Enviro Sdn. Bhd. (“KBE”) for RM1.00. On 13 October 2004 and 20 November2004, the Company further injected RM1,999,999 and RM2,000,000 respectively into KBE, bringing the total investment to date toRM4,000,000 on KBE’s paid-up capital of RM10 million. KBE contributed a loss after tax of RM357,000 to the Group results for the financial yearended 31 December 2004.

30. Event subsequent to the balance sheet date

On 19 January 2005, KUB has surrendered the rights to develop and operate new A&W outlets in Malaysia and Thailand respectively, grantedunder the Development Agreement entered between the Company, A&W Restaurants, Inc. (“AWRI”) and Yorkshire Global Licensing Netherlands,B.V. (“YGL”) on 5 September 2001. The aforesaid rights were surrendered pursuant to the business takeover by Yum! Restaurants International(“Yum!”) from YGL, and Yum! current policy of not granting exclusivity to its other franchisees of all its brands. However, KUB continues to enjoyits right to operate all its existing A&W outlets located in the above countries.

While KUB enters discussion on terms and development plan going forward with Yum!, Yum! has pre-approved for the Company to open andoperate 8 new outlets, and to remodel 4 existing outlets to comply with Yum! Standards.

A N N U A L R E P O R T 2 0 0 4


410list of properties


Location/Address Description Usage Area Tenure Net Book Age of Value Building

(RM’000) (years)

KUB MALAYSIA BERHAD

Lot 10026 & 10027, Oil Palm Plantation Agricultural 853.9 and 305.7 Leasehold (50 years 1,277 –Mukim of Bruas, acres respectively expiring 2021)District of Manjung, Perak

Lot 8982, 8983, 8984, 461 Office Commercial 5,187 sq. feet Leasehold (99 years 779 7& 480 Town of Tanjung Malim, expiring 2083)Perak

KUB REALTY SDN BHD

Lot 411, Section 41, Development Commercial 1.33 acres Freehold 15,000 –Kuala Lumpur

PT No. 51, Seksyen 16, Town Shoplot Malay Commercial 9,845 sq. feet Leasehold (66 years 1,617 14and District of Kota Bharu, Reserve expiring 2061)Kelantan

PT No. TLO 184, Shoplot Malay Reserve Commercial 1,470 sq. feet Leasehold (99 years 258 9 Town of Mersing, Johor expiring 2088)

PT No. 3722 to 3728, Office Building Commercial 16,065 sq. feet Freehold 20,411 10Mukim of Damansara, District of Petaling, Selangor

Lot 1402 & 1440, Hotel & Hostel Commercial 154,667 sq. feet Freehold 12,960 10Mukim of Padang MatsiratDistrict of Langkawi, Kedah

KUB REALTY (PJ) SDN BHD

KUB.com, Block D, Office Building Commercial 198,000 sq. feet Freehold 56,594 6Ground Level, Level 1, Level 6 to Level 23, Megan Phileo Avenue, Jalan Yap Kwan Seng, Kuala Lumpur

KUB.com, Block D, 4 Levels of Car Park Commercial 138,877 sq. feet Freehold 5,836 6Megan Phileo Avenue, Jalan Yap Kwan Seng, Kuala Lumpur



(continued)


(RM’000) (years)

HS(D) 7082 PT 12093 Development Commercial 1,0874 hectares Freehold 5,083 –and HS(D) 7083 PT 12094,Mukim of Dengkil, Daerah Sepang,Negeri Selangor

KUB SEPADU SDN BHD

Lot 221, Block 7, Oya Dalat Oil Palm Plantation Agricultural 1,053 hectares Leasehold (60 years 63 –Land District, Sarawak expiring 2024)



Lot 1, Oya Dalat Land District, Oil Palm Plantation Agricultural 2,278 hectares Leasehold (60 years 5,507 – Sarawak expiring 2050)

Lot 5, Oya Dalat Land District, Oil Palm Plantation Agricultural 1,040 hectares Leasehold (60 years 1,419 –Sarawak expiring 2050)

Lot 6, Oya Dalat Land District, Oil Palm Plantation Agricultural 872 hectares Leasehold (60 years 1,266 –Sarawak expiring 2052)

KUB AGROTECH SDN BHD

PTD No. 3545, Mukim of Paloh, Oil Palm Plantation Agricultural 956.3 hectares Leasehold (99 years 1,823 –PTD No. 3796, Mukim of Kahang, expiring 2086)Kluang District, Johor

PT No. 4901, Mukim of Kahang, Oil Palm Plantation Agricultural 1,700 hectares Leasehold (99 years 4,813 –PT No. 26005 & 26006, expiring 2024)Kluang District, Johor

KUB TEKSTIL SDN BHD

Lot PT 4256, Pengkalan Chepa II Factory & Building Commercial 3.8 acres Leasehold (66 years 3,181 8Industrial Area, Mukim Of Panchor, expiring 2064)Kemumim District, 16100 Kota Bharu, Kelantan

A N N U A L R E P O R T 2 0 0 4


610list of properties(continued)



(RM’000) (years)

KUB DEVELOPMENT BERHAD

PT 515, PT 518, PT 524 Vacant Agricultural Agricultural 46.82 hectares Freehold 4,388 –PT 520 - PT 523, PT 528 - PT 543 Landand PT 546 - PT 555, Place Bukit Mawat, Mukim Ulu Melaka,Daerah Langkawi, Negeri Kedah

Lot No. 2198, 2199, 3578, Vacant Development Agricultural 144.8 acres Freehold 4,015 –3579, 3580 & 3581, Mukim of LandTawar, Baling District, Kedah

Lot No. 55, Mukim of Tawar, Vacant Development Agricultural 145.23 acres Freehold 3,368 –Baling District, Kedah Land

PT No. 3617, Vacant Development Building 6 acres Leasehold 2,181 –Mukim of Sungai Buloh, Land (expiring 2071)Petaling District, Selangor

PT No. 606, Mukim of Serting Ulu, Vacant Industrial Industrial 16.82 acres Leasehold (99 years 809 –Jempol District, Negeri Sembilan Land expiring 2083)

No. 4, Jalan Kasih 5, Taman Kasih, Double Storey Residential 296 sq. metres Freehold 231 2Batu 11, Cheras, 43200 Selangor Semi Detached House

PT 27660, Jalan Kasih 5, Bungalow Lot Residential 625 sq. metres Freehold 99 –Taman Kasih, Batu 11, Cheras, 43200 Selangor

ADIL PERDANA SDN BHDLot No. 272, 273 & 274, Vacant Development Agricultural 209.85 acres Freehold 4,820 –Mukim of Teloi Kiri, LandKuala Muda District, Kedah

UTAMA STEEL WORKS SDN BERHADH.S,(D)ka, 1337/85, Lot 134905, Factory and Office Industrial 9.6 acres Leasehold (60 years 2,406 20Mukim of Hulu Kinta, Perak Building expiring 2045)

A&W (MALAYSIA) SDN BHDH.S.(M) 6245 P.T. 5070, Land Commercial 56,037 sq. feet Leasehold (60 years 242 –Mukim of Chukai, expiring 2053)Kemaman District, Terengganu



(continued)

A N N U A L R E P O R T 2 0 0 4


(RM’000) (years)

Lot No. 1897, Land Commercial 13,966 sq. feet Freehold 473 –Township of Johor Bahru, Johor Bahru District, Johor

A&W PROPERTIES SDN BHD

Unit No. LG-07, Amcorp Mall Retail Lot Commercial 4,605 sq. feet Leasehold (99 years 1,946 6Trade Centre, Jalan Timur expiring 2088)Petaling Jaya, Selangor

A&W RESTAURANTS (THAILAND) CO., LTD.

Silom Complex, Unit 020 & 021, Retail Lot Commercial 3,455 sq. feet Leasehold (20 years 1,098 15Basement Floor, Silom Complex, expiring 2011)Complex Shopping Plaza, Project Silom Road, Bangkrak District, Bangkok

Siam Square, 430/439-40 Retail Lot Commercial 4,821 sq. feet Leasehold (6 years 113 7Siam Square 7, Paruthmwan, expiring 2005)Bangkok

KUB TELEKOMUNIKASI SDN BHD

No. 1 Jalan Selukut 33/27, Factory Building & Industrial & 75,804 sq. feet Freehold 7,936 5Shah Alam Technology Park, 3 Storey Office Annex CommercialSection 33, 40400 Shah Alam, Selangor

PERAHARTA SDN BHD

Lot 4180N, Bangunan Sri Kinta, 4-storey Podium Block Commercial 5,285 sq. Grant in perpetuity 12,135 22Jalan Sultan Idris Shah, Ipoh, Perak and 9-storey Tower Block metres

Lot 534, 535, 539 & 541, 4 1/2-storey Building Commercial 594.56 sq. metres Leasehold (60 years 936 29Wisma Gerik, Jalan Sultan Iskandar, expiring 2035)Gerik, Perak

Lot PT 2684 - 2686 APM Factory, Single Storey Commercial 5,644.42 Leasehold (60 years 765 28Jelapang Industrial Estate, Factory sq. metres expiring 2036)Ipoh, Perak





(RM’000) (years)

Lot 193003-193005, 3 Units of Commercial & 476 sq. metres Leasehold (99 years 381 13 No. 26, 28 & 39, double-storey Residential expiring 2090)Persiaran Orkid 1, Taman Orkid, ShoplotsBatu Gajah, Perak

Lot PT 122810-122813, 4 Units of Double Storey Commercial & 588.71 sq. metres Leasehold (99 years 533 13No. 24, 26, 28 & 30, Shophouses Residential expiring 2090)Laluan Rokan 15, Pekan Razaki, Ipoh, Perak

Lot PT 10174 and PT 10175, Industrial Vacant Land Industrial 2,023.43 Leasehold 66 –Industrial Estate Sri Manjung sq. metresSitiawan, Perak

QT(R) 4395 61A, Seksyen 41, 5 Storey Building Commercial 655.59 Freehold 2,401 10No. 134, Jalan Raja Abdullah, sq. metresKg. Bharu, Kuala Lumpur (Wisma ESPIPI)

SUMMIT PETROLEUM (M) SDN BHD

HS (D) 44395 (formerly PT PTBM/ Office & Plant Industrial 3.35 acres Leasehold 1,813 15A/146/69) Plot 91 Mukim 1, (99 yearsSeberang Perai Tengah District, expiring 2070)Pulau Pinang

Lot 941 & 942, Seksyen 9W, Open-sided structure Industrial 15,926 sq. feet Freehold 4,023 4Bandar Georgetown for storage purposes

PTD 40053 Mukim Tebrau, Office & Plant Industrial 143,609 sq. feet Freehold 1,399 17Johor Bahru District

KUB GAS SDN BHD

PT No. 64540, Industrial Land Commercial 7.77 acres Leasehold (99 years 4,663 –Pulau Indah Industrial Park, expiring 2097)West Port, Port Klang, Selangor

BINA ALAM BERSATU SDN BHD

Lot No. 30960 & 30961, 2 terrace factory lots Industrial 251 sq. metres Leasehold (99 years 543 18Mukim and District of Petaling, rectangular in shape per lot expiring 2086)Selangor with building erected



(continued)

A N N U A L R E P O R T 2 0 0 4


(RM’000) (years)

PT No. 1101-1121, 19 plots of development Commercial & 1,171 acres Leasehold (99 years 2,585 10Mukim of Belanja, Kinta District, land and 2 plots of Residential (1,158.3 acres expiring 2095)Perak commercial land agricultural status

and 12.7 acrescommercial status)

PT No. 9139, Mukim of Setapak, End terrace shoplot Commercial 1,920 sq. feet Freehold 245 21Gombak District, Selangor rectangular in shape

with 3-storey shopoffice

Lot 806, Mukim of Batu Development Commercial 354,246 sq. feet Freehold 46 –Berendam, Melaka

Lot 8713U, Title No. H.S.(D) KA A parcel of limited Commercial 2,149 sq. metres Leasehold (99 years 183 –30729 Ipoh, Kinta District, Perak commercial (free standing expiring 2092)

development land)

Lot 30713, 30701, 30803, 4 apartments Residential 266.36 sq. metres Leasehold (96 years 164 1330908 Taman Batu Permai, expiring 2086)Kuala Lumpur

PT No. 0050357, Agricultural Land Agricultural 1,654 acres Freehold 347 –Mukim of Batu Selangor, Gombak, Selangor

2-8-5, Menara Bukit Ceylon, Condominium Residential 1,410 sq. feet Strata title 320 6Jalan Ceylon, Kuala Lumpur

C-4-5, Kondo Idaman Putera, Condominium Residential 120.10 sq. feet Strata title 166 67 Jalan 6/21D, Medan Idaman, Kuala Lumpur

MAGA TEXTILE (M) SDN BHD

Bayan Lepas Free Industrial Zone, Factory Industrial 46,941 sq. feet Leasehold (60 years 514 24Phase 3, Penang expiring 2040)

Lot No. 876, 5773 & 5774, Factory Industrial 71,095 sq. feet Freehold 1,363 14 Mukim 15, Seberang Perai Tengah District, Penang





(RM’000) (years)

TELEDYNAMICS ATEC SDN BHD

44, Jalan Molek 2/1, Taman Molek, 2-storey Shophouses Commercial 1,920 sq. feet Freehold 282 1481100 Johor Bahru, Johor

TELEDYNAMICS SDN BHD

Lot 188, HICOM Glenmarie Land & Office Building Commercial 67,404 sq. feet Freehold 14,553 <1Industrial Park, Shah Alam, Selangor

PERNIDA BERHAD

Lot No. 2891, 2894, 2983, 2984, Mining Land Mining 320,996.65 Freehold 1,107 –2992, 2993, 2995, 2996, 3001, sq. metres3002, 3005, 3008, 3011, 3039, 3040-3042, 3044, 3054, 3055, 3057, 3058, 3277, 3794 - 3796, 3812, Mukim of Bidor, Batang Padang District, Perak

PN 2801, Lot 315, 3 Storey Shoplot Building 148.64 sq. metres Leasehold (60 years 193 35Bandar Kuala Kangsar, expiring 2029)Daerah Kuala Kangsar, Negeri Perak

KESINA DEVELOPMENT SDN BHD

Lot 1670, Jalan KUB Cendana 4/57, Single Storey Residential 130 sq. metres Freehold 82 2Taman KUB Cendana, Kubang Kerian, Terrace House16150 Kota Bharu

Lot 1735, Jalan KUB Cendana 8/57, Single Storey Residential 376 sq. metres Freehold 159 2Taman KUB Cendana, Kubang Kerian, Semi Detached House16150 Kota Bharu

Lot 1740, Jalan KUB Cendana 5/57, Single Storey Residential 337 sq. metres Freehold 151 2Taman KUB Cendana, Kubang Kerian, Semi Detached House16150 Kota Bharu

Lot 1752, Jalan KUB Cendana 1/57, Bungalow Lot Residential 543 sq. metres Freehold 99 –Taman KUB Cendana, Kubang Kerian,16150 Kota Bharu


proxy form

I/We ........................................................................................................................................................ NRIC.................................................

of .....................................................................................................................................................................................................................

being a member/members of KUB Malaysia Berhad, hereby appoint CHAIRMAN OF THE MEETING*

or ........................................................................................................................................................... NRIC..................................................

of .....................................................................................................................................................................................................................

or failing him ............................................................................................................................................. NRIC................................................

of......................................................................................................................................................................................................................

as my/our proxy to vote for me/us on my/our behalf at the 40th Annual General Meeting of the Company to be held on Thursday, 23 June 2005 andat any adjournment thereof.

* If you wish to appoint other person(s) as your proxy/proxies, kindly delete the words “CHAIRMAN OF THE MEETING” and insert name(s) of thedesired person(s).

My/our proxy is to vote as indicated below:-

With reference to the Agenda set out in the Notice of the Meeting, please indicate an “X” in the spaces provided above on how you wish your vote tobe cast.

Signed this ....... day of ............................... 2005

Signature/Seal

RESOLUTIONS For Against

Resolution 1 To receive the Audited Financial Statements together with the Reports of the Directors and Auditors thereon

Resolution 2 To accept the retirement of Datuk Haji Ahmad Shahibuddin Haji Mohd Nor retiring under Article 97, Articles of Association of the Company

To re-elect the Directors retiring under Article 102, Articles of Association of the Company

Resolution 3 (i) Dato’ Nordin Baharuddin

Resolution 4 (ii) Rosman Abdullah

Resolution 5 To approve the Directors’ fees for the year 2004

Resolution 6 To re-appoint Messrs KPMG Desa Megat & Co as Auditors of the Company and to authorise the Directors to fix their remuneration

Resolution 7 To give authority to the Directors to issue shares under Section 132D of the Companies Act, 1965

Notes :-

1. A member of the Company entitled to attendand vote at the abovementioned Meeting isentitled to appoint one other person orpersons, whether a member or not as his/herproxy/proxies to attend and vote in his/herstead. Where a member appoints two ormore proxies, the member shall specify theproportion of the member's shareholding tobe represented by each proxy.

2. The instrument appointing a proxy shall be inwriting under the hand of the appointer orhis/her attorney duly authorised or if theappointer is a corporation, either under itscommon seal or the hand of its attorney.

3. The Proxy Form must be deposited at theoffice of the Company's Share Registrar,Symphony Share Registrars Sdn Bhd(formerly known as Malaysian ShareRegistration Services Sdn Bhd), Level 26,Menara Multi Purpose, Capital Square, No. 8,Jalan Munshi Abdullah, 50100 Kuala Lumpurby hand or fax to 03-27212222 not less thantwenty-four (24) hours before the time forholding the Meeting or any adjournmentthereof.

(block letters)

(block letters)

(full address)

(full address)

Number ofShares Held


Fold this flap for sealing


Affix Stamp


KUB Malaysia Berhad (6022-D)

Pendaftar SahamMalaysian Share Registrar Services Sdn Bhd (378993-D)Tingkat 26Menara Multi Purpose Capital SquareNo. 8 Jalan Munshi Abdullah50100 Kuala Lumpur


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