BANENG HOLDINGS BHD - National University of …libapps2.nus.edu.sg/nus_hl/baneng2003.pdfNOTICE OF ANNUAL GENERAL MEETING 2 BANENG HOLDINGS BHD (307139-W) Resolution 1 Resolution 2

Annual Report 2003

BANENGHOLDINGSBHD (307139-W)

2 Notice of Annual General Meeting

4 Statement Accompanying the Notice of AGM

5 Corporate Information

6 Corporate Structure

7 Profile of Directors

11 Chairman’s Statement

13 Corporate Governance Statement

17 Statement of Directors’ Responsibilities for Preparingthe Financial Statements

18 Statement on Internal Control

20 Audit Committee Report

23 Other Information Required by the Listing Requirements of Bursa Malaysia Securities Berhad

25 Financial Statements

57 List of Properties

58 Analysis of Shareholdings

61 Form of Proxy

CONTENTS

NOTICE OF ANNUAL GENERAL MEETING

2 BANENG HOLDINGS BHD (307139-W)

Resolution 1

Resolution 2

Resolution 3Resolution 4

Resolution 5

Resolution 6

Resolution 7

NOTICE BE AND IS HEREBY GIVEN that the Ninth AnnualGeneral Meeting of the Company will be held at DiamondRoom, Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 BatuPahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. toconsider the following purposes:-

AGENDA

1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December,

2003 together with the Directors’ and Auditors’ Reports thereon.

2. To approve the payment of Directors’ fee for the financial year ended 31 December, 2003.

3. To re-elect the following retiring Directors who retire by rotation and being eligible, offer

themselves for re-election in accordance with the Article 101(a) of the Company’s Articles of

Association:-

i) Mr. Lim Meng Hee

ii) Dr. Ng Soon Lim

4. To re-elect the retiring Director, Mr. Chai Koh Wah who retires and being eligible, offer himself for

re-election in accordance with the Article 102(c) of the Company’s Articles of Association.

5. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending

31 December, 2004 and to authorise the Directors to fix the Auditors’ remuneration.

6. As special business:-

To consider and if thought fit, to pass with or without modifications, the following resolutions:-

ORDINARY RESOLUTION

Authority To Issue Share Pursuant To Section 132D of the Companies Act, 1965

“That subject always to the Companies Act, 1965, the Articles of Association of the Company and

the approvals of the relevant government/regulatory authorities, the Directors be and are hereby

authorized, pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the

Company at any time until the conclusion of the next Annual General Meeting of the Company and

upon such terms and conditions and for such purposes as the Directors may, in their absolute

discretion, deem fit provided that the aggregate number of shares to be issued pursuant to this

resolution does not exceed 10% of the issued capital of the Company for the time being and that

the Directors are also empowered to obtain the approval from Bursa Malaysia Securities Berhad

(formerly known as Malaysia Securities Exchange Berhad) for the listing of and quotation for the

additional shares to be issued.”

NOTICE OF ANNUAL GENERAL MEETING

BANENG HOLDINGS BHD (307139-W) 3

Resolution 8

SPECIAL RESOLUTION

Proposed Amendments to the Articles of Association

“That subject to the approval of Bursa Malaysia Securities Berhad (formerly known as Malaysia

Securities Exchange Berhad) pursuant to Article 147 of the Company’s Articles of Association,

Article 1 of the Company’s Articles of Association be amended by deleting the following existing

definition in entirety and to adopt the new definition:-

Existing definition New definition

“Exchange” means Kuala Lumpur “Exchange” means Bursa Malaysia Securities

Stock Exchange (30632P) Berhad (formerly known as

Malaysia Securities Exchange Berhad)

7. To transact any other ordinary business of which due notice has been given in accordance with

the Companies Act, 1965.

By Order Of The Board

TEO SOON MEI (MAICSA 7018590)

Company Secretary

Melaka

Dated: 3 June, 2004

Explanatory Notes On Special Business

1. The Ordinary Resolution proposed under item 6 above, if

passed, will empower the Directors to issue shares up to

10% of the issued capital of the Company for the time

being for such purposes as the Directors may consider to

be in the interest of the Company. This authority, unless

revoked or varied by the Company in a general meeting,

will expire at the conclusion of the next Annual General

Meeting of the Company, or the expiration of period within

which the next Annual General Meeting is required by law

to be held, whichever is earlier.

2. The proposed adoption of the Special Resolution under

item 6 above is in line with the demutualization of Kuala

Lumpur Stock Exchange.

NOTES:

1. A member of the Company who is entitled to attend and

vote at the meeting is entitled to appoint more than two

proxies to attend and vote in his stead and he shall specify

the proportion of his shareholdings to be represented by

each proxy. A member may appoint any person to be his

proxy without limitation and the provision of Section

149(1)(b) of the Companies Act, 1965 shall not apply to

the Company.

2. Where a member is an authorised nominee as defined

under the Securities Industry (Central Depository) Act,

1991, it may appoint more than (1) proxy in respect of

each securities account it holds with ordinary shares of the

Company standing to the credit of the said securities

account.

3. The instrument appointing a proxy must be in writing

under the hand of the appointor or of his attorney duly

authorised in writing or, if such appointor is a corporation,

either under its common seal or under the hand of an

officer or attorney duly authorised.

4. The instrument appointing a proxy, together with the

power of attorney (if any) or other authority (if any) under

which the instrument is signed or a notarially certified copy

of that power or authority shall be deposited at the

Registered Office of the Company at Lot 4979 21/2 Miles,

Jalan Tanjung Laboh, 83000 Batu Pahat, Johor not less

than 48 hours before the time for holding the meeting or

otherwise the instrument appointing the proxy will not be

treated as valid.

STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETINGPURSUANT TO PARAGRAPH 8.28(2) OF THE LISTING REQUIREMENTS OF THE BURSA MALAYSIA SECURITIES BERHAD

(FORMERLY KNOWN AS MALAYSIA SECURITIES EXCHANGE BERHAD)


Details of the particulars of all the retiring Directors namely, Mr. Lim Meng Hee, Dr. Ng Soon Lim and Mr. Chai Koh Wah are set

out in pages 8 to 10 of the Annual Report of the Company for the Financial year ended 31 December 2003.

DIRECTORS STANDING FOR RE-ELECTION

Directors who are retiring and standing for re-election at the Ninth Annual General Meeting of the Company to be held at

Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 Batu Pahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. are

as follows:-

1. The Directors who are retiring and standing for re-election in accordance to Article 101(a) of the Company’s Articles

of Association:-

• Mr. Lim Meng Hee

• Dr. Ng Soon Lim

2. Mr. Chai Koh Wah, the Director who is retiring and standing for re-election in accordance to Article 102(c) of the

Company’s Articles of Association.

A total of Five (5) Board of the Directors’ Meetings were held during the financial year ended 31 December, 2003 and all

the Board of Directors’ meetings were held at the registered office of the Company at Lot 4979 21/2 Miles, Jalan Tanjung Laboh,

83000 Batu Pahat, Johor except for the Board of Directors’ Meeting held on 29 May, 2003, which was held at Diamond Room,

Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 Batu Pahat, Johor. The date and time of the Board of the Directors’ Meetings

were as follows:-

Date of the Board Meeting Time

23 February 2003 1200

26 April 2003 1530

29 May 2003 1530

23 August 2003 1530

22 November 2003 1600

Details of attendance at board meetings held during the financial year ended 31 December 2003.

Name of Director Date of appointment No. of Meetings attended

Mr. Lim Meng Hee 31 May, 2001 5

Dr. Ng Soon Lim 31 May, 2001 5

Mr. Chai Koh Wah 25 April, 2004 -

Y. Bhg. Tan Sri A. Rahim bin Tamby Chik Non-Executive Chairman

Mdm. Lim Choon Hiok Managing Director

Mr. Lim Meng Hong Executive Director

Mr. Lim Meng Hee Executive Director

Dr. Ng Soon Lim Independent Non-Executive Director

Mr. Chai Koh Wah Independent Non-Executive Director (appointed on 25/4/2004)

Mr. Keah Say Wan Independent Non-Executive Director (resigned on 15/3/2004)

CORPORATE INFORMATION


Audit Committee

Dr. Ng Soon Lim (Chairman)

Mr. Lim Meng Hong

Mr. Chai Koh Wah (appointed on 25.4.2004)

Mr. Keah Say Wan (resigned on 15.3.2004)

Nomination Committee

Y. Bhg. Tan Sri A. Rahim bin Tamby Chik (Chairman)

Dr. Ng Soon Lim

Mr.Chai Koh Wah (appointed on 25.4.2004)


Remuneration Committee

Mdm. Lim Choon Hiok (Chairman)

Dr. Ng Soon Lim

Mr. Chai Koh Wah (appointed on 25.4.2004)


Registered Office

Lot 4979, 21/2 Miles, Jalan Tanjung Laboh

83000 Batu Pahat, Johor Darul Takzim

Tel : 607-4355 701

Fax : 607-4318 322

Date and Place of Incorporation

Incorporated in Malaysia on 11 July, 1994

Principal Bankers

EON Bank Berhad

Malayan Banking Berhad

HSBC Bank Malaysia Berhad

Bumiputra-Commerce Bank Berhad

Registrar

Securities Services (Holdings) Sdn Bhd

Level 7 Menara Milenium, Jalan Damanlela

Pusat Bandar Damansara, Damansara Heights

50490 Kuala Lumpur

Tel : 603-2095 7077/2084 9000

Fax : 603-2094 0040/2095 0292

Company Secretary

Ms. Teo Soon Mei (MAICSA 7018590)

Auditors

Ernst & Young

Graha Maju (Bangunan PKNM)

Tingkat 10, Lot 1, Jalan Graha Maju

75300 Melaka

Tel : 606-2831 399

Fax : 606-2841 799

Web-Site Address

www.baneng.com.my

Stock Exchange

The Main Board of Bursa Malaysia Securities Berhad

CORPORATE STRUCTURE


Baneng Holdings Bhd

100%Chenille

InternationalPte Ltd

100%Baneng

IndustriesSdn Bhd

100%BanengTradingSdn Bhd

100%Maxlin

Garments Sdn Bhd

100%BanengLesotho(Pty) Ltd

55%Seri Pertamas

GarmentManufacturer

Sdn Bhd

PROFILE OF DIRECTORS


Name : Y. Bhg. Tan Sri A. Rahim bin Tamby Chik

Age : 54

Nationality : Malaysian

Qualification : Degree in Bachelor of Economics (Honours) and Doctorate of Philosophy in Business

Administration.

Position in Company : Non-Executive Chairman. He is also the Chairman of the Nomination Committee.

Working experience : He was appointed to the Board of the Company on 31 May 2001. He was the Parliamentary

Secretary for the Ministry of Primary Industries and Trade Industries between 1978 and 1981.

A Deputy Minister of the Ministry of Home Affairs between 1981 and 1982; and was the Chief

Minister of Melaka between 1982 and 1994. Currently is involved in business. He also sits on the

boards of several other private limited companies.

Other directorship of Public companies : None

The family relationship with any director and/

or major shareholder of the Company : None

List of convictions for offences within the past 10 years

other than traffic offences, if any : None

Number of board meetings attended in the financial year : 4 / 5

Name : Mdm. Lim Choon Hiok

Age : 48


Qualification : Completed her secondary education and obtained her Malaysian Certificate of Education

in 1974.

Position in Company : Managing Director. She is also the Chairman of the Remuneration Committee.

Working experience : She was appointed to the Board of the Company on 31 May 2001. She has been with the

Baneng Group for the past 18 years and is in charge of the overall direction and management of

the Baneng Group of companies. She also sits on the boards of several other private limited

companies.



or major shareholder of the Company : She is the sister to Mr. Lim Meng Hong and Mr. Lim

Meng Hee who are also directors of the Company. She

is also the sister to Ms. Lim Poh Choo who is a major

shareholder of the Company.

List of convictions for Company : None






Name : Mr. Lim Meng Hong

Age : 45


Qualification : Degree in Bachelor of Economics. Fellow member of the CPA Australia and a Chartered

Accountant of the Malaysian Institute of Accountants (MIA).

Position in Company : Executive Director. He is also a Member of the Audit Committee.

Working experience : He was appointed to the Board of the Company on 31 May 2001. Prior to joining Baneng Group

of companies in 1992 as a Group Financial Controller, he was the Group Financial Controller with

Jardine Matheson Private Limited. Currently, he also sits on the boards of several other private

limited companies.



or major shareholder of the Company : He is the brother of Ms. Lim Choon Hiok and Mr. Lim

Meng Hee who are also directors of the Company. He is

also the brother to Ms. Lim Poh Choo who is a major





Name : Mr. Lim Meng Hee

Age : 40


Qualification : Completed his secondary education and obtained his Sijil Pelajaran Malaysia in 1982.

Position in Company : Executive Director.

Working experience : He was appointed to the Board of the Company on 31 May 2001. He joined the Baneng Group

of companies in 1986 and has more than 17 years experience in the textile and apparel industry.

Currently, he is responsible for the overall direction and management of the apparel division of

the Company.



or major shareholder of the Company : He is the brother to Ms. Lim Choon Hiok and Mr. Lim

Meng Hong who are also directors of the Company. He

is also the brother to Ms. Lim Poh Choo who is a major







Name : Dr. Ng Soon Lim

Age : 56


Qualification : Graduated from the University of Malaya in 1973 in Medicine (MBBS Malaya).

Position in Company : Independent Non-Executive Director. He was appointed as the Chairman of the Audit Committee

on 25 April, 2004. He is a Member of the Nomination and the Remuneration Committees. He was

also appointed as a Senior Independent Non-Executive Director on 4 September, 2002 in

compliance with the Code on Corporate Governance.

Working experience : He was appointed to the Board of the Company on 31 May 2001. Upon graduation in 1973, he

worked for the Government until 1977 where he became a general medical practitioner with his

own medical practice until to date.







Name : Mr. Keah Say Wan (resigned on 15 March 2004)

Age : 43


Qualification : Graduated from the University of Malaya in 1986 with a Bachelor of Law ( Honours )

Position in Company : Independent Non-Executive Director. He is the Chairman of the Audit Committee and a Member

of the Nomination and the Remuneration Committees. He resigned as the Independent Non-

Executive Director of the Company on 15 March, 2004.

Working experience : He was appointed to the Board of the Company on 31 May 2001. After being called to the

Malaysian Bar in 1987, he joined the legal practice of Mohd Yamin Ismail and Partner as a legal

assistant for 3 years. In 1990 he set-up a legal firm with a partner and has been the managing

partner of the firm till todate. He sits on the Board of the Hokkien Association in Batu Pahat and

also several other private limited companies.









Name : Mr. Chai Koh Wah (appointed on 25 April 2004)

Age : 45


Qualification : Hold a Bachelor of Economics from La Trobe University (Australia) in 1982. He is a Chartered

Accountant of the Malaysian Institute of Accountants. He is also a Fellow member of CPA

Australia and an associate of the Malaysian Institute of Taxation.

Position in Company : Independent Non-Executive Director. He is also a Member of the Audit, the Nomination and the

Remuneration Committees.

Working experience : He was appointed to the Board of the Company on 25 April 2004 as an Independent Non-

Executive Director. He is an approved company auditor and has more than 20 years of

experience in the auditing and accounting profession.


The family relationship with any director/




Number of board meetings attended in the financial year : 0

CHAIRMAN’S STATEMENT


To all our valued shareholders,

On behalf of the Board of Directors, I am pleased to present

to you the Annual Report and Financial Statements of the

Group and the Company for the financial year ended 31

December 2003.

Industry Overview

It has been another challenging year for the whole textile and

apparel industry. During the financial year under review, the

industry continued to face intense competition from lower

cost and huge labour-pool countries such as India, Vietnam

and the People’s Republic of China.

Towards trade liberalization in 2005, the global market for the

industry will see huge changes. Globalisation provides buyers

with opportunities to get cheaper products than before,

especially the traditional trading markets in USA and EU

countries.

In additional to that, buyers are given more options to decide

when and what to buy: they are unwilling to commit orders in

advance as they need to respond to the market trend in terms

of fashions and designs. Thus, a shorter production lead time

is essential for the manufacturers.These directly result in the

compulsory strengthening of manufacturers’ production

efficiency and order responsiveness.

On top of that, the big retailers are identifying their sourcing

partners who can manufacture for them a wider range of

products. They will like to increase their portfolios with those

established vertically set-up manufacturers who can provide

more competitive prices, shorter leadtimes and wider range of

products in different countries of production depending on

their strengths. This will narrow down their sourcing and

eventually achieve their objectives and yet quality and ethical

issues can still be managed objectively.

Financial Highlights

For the financial ended 31 December 2003, the Group

recorded a consolidated turnover of RM275.9 million

compared to RM317.7 million in the preceding year. Pre-tax

profit for the current financial year decreased to RM2.9 million

as compared to RM19.2 million in 2002 while profit after tax

was reported at RM3.7 million compared to RM18.9 million in

the preceding year.

The reduction in profitability is mainly attributed to the fabric

division within the Group. This is due to the direct impact of

pricing competition from China after its entrance as WTO

member. The Group has taken necessary measures to

downsize the division and forming new strategy for its

operation; mainly to concentrate and expanding in the niche

market that is the apparel divisions.

Business Overview

Being a fully vertically integrated fabric and apparel

manufacturer, we offer a one-stop services and solutions

to our customers ranging from design and product

development, technical and sampling services, sourcing and

logistic management. With large and established production

set-ups, we are able to offer more value-added services to

our end customers in terms of sharper pricing, shorter lead

time to delivery and enhanced quality controls. With our

established creditability, we believe we can serve our

customers better and act as their strategic partners.

With Malaysia as our headquarter, our growth will continue to

be around this region. Countries which are in proximity to our

headquarter and with abundant source of labour will be our

target production base. With the establishment of our current

strategic operating locations, besides having our production

presence in Malaysia, Brunei and Lesotho, we are looking into

acquisitions of more established garment factories in lower

cost countries like Sri Lanka, Vietnam, Cambodia and China.

These are our future identified countries for the Group’s future

potential production bases. With these, we believe we can

provide sharper pricing, shorter leadtimes and a wider range

of products for our valued customers.

CHAIRMAN’S STATEMENT


The management is prudent on the competitiveness of the

fabric division in the international market in Year 2004.

However, with our expansions into more apparel production

bases, the fabric division will enhance and complement the

apparel division in terms of production leadtimes which is very

important for us to get nearer to the customers.

As the apparel industry is becoming more and more

globalized, there is a growing trend for established customers

to select manufacturers who have sizeable capabilities which

are strategically located and most importantly, with ability to

offer cost-competitive solutions.

Our marketing arms with Research & Development, designs

and technical supports will enhance and give the full supports

for the necessary first hand information in areas where our

customers’ needs can be met. Such knowledge is very

important as it provides and enhances the confidence levels

for our customers.

Future Prospects and Challenges

Despite the improved economic outlook for 2004, external

factors such as price deflation, the weaken US Dollar, un-

pegging of Ringgit Malaysia against US Dollar, fluctuation in

cotton price, political instability and new quota-free and duty

free system in 2005 have created many uncertainties in the

industry.

With a good established network of customers, we believe

that we are able to further advance the business and explore

more business opportunities in the future.

In order to keep up with various market changes, we are

embarking on the following:

a. We will be expanding the range and profile of our

customers beyond our current main market in the United

State of America. In this respect, we are exploring new

markets in China, Middle East and Asean countries;

b. We will continue to expand and upgrade our production

capacities and capabilities worldwide. This continuity to

look for and expand into countries suitable for us and

increase the Group’s performance will help us to ensure

further growth;

c. We will continue to improve our efficiency and

productivity through production management and

process refinement. We will also continue to invest in

more efficient ways of production and in management

tools. We will set aside a budget to automate part of our

production process to cater for more complicated and

value styling jobs.

d. We will continue to explore and integrate into other

domains of the value chain of the fabric and apparel

business. Where opportunities arise, we will expand our

capabilities and business by acquiring or forming

strategic partnerships or joint ventures with other

manufacturers in these domains, who can add value to

our business by allowing us to have greater involvement

in businesses on which our present business is reliant.

We believe that this will give us additional competitive

edge over our competitors.

Acknowledgement and Appreciations

On behalf of the Board, I would like to extend out deepest

appreciation to our shareholders, valued customers,

financiers and business associates and especially to our

employees for their continued supports, commitments and

confidence in the Group.

Y. Bhg. Tan Sri A Rahim Bin Tamby ChikChairman

CORPORATE GOVERNANCE STATEMENT


The Board recognizes the significance of practicing good and sound corporate governance in preserving and enhancingshareholders’ value.

The Board of Directors is pleased to report that throughout the financial year under review, it had applied the Principles ofCorporate Governance and the Best Practices in Corporate Governance as set out in Part 1 and 2 of the Malaysian Code ofCorporate Governance (the “Code”) pursuant to Paragraph 15.26 of the Listing Requirements of Bursa Malaysia SecuritiesBerhad whilst managing and directing the business and operations for the Company and its group of companies.

A. Board of Directors

1. Board Duties and Responsibilities

The Board assumes full responsibilities to lead and control the Group’s direction and operation for the enhancementof the long-term shareholders’ value. The Board is responsible for the overall corporate governance, strategicformulations, business conduct and stewardship of the Group’s resources.

The Directors, with their diverse background and experience collectively bring with them a wide range of businessacumen, management skills and expertise in areas such as finance, accounting, marketing, operations and auditing.

There is a clear division of responsibilities between the Chairman and Managing Director of the Company to ensure abalance of power and authority. The Managing Director and the Executive Directors are responsible for implementingthe policies and decision of the Board, overseeing the day to day operations as well as coordinating and monitoringthe implementation of business and corporate strategies.

The independent non-executive Directors play a pivotal role in providing objective and independent judgement to thedecision making of the Board. Dr. Ng Soon Lim was appointed on the 4 September 2002 as the Senior IndependentNon-Executive Director to whom shareholders may convey their concerns to.

2. Board Composition and Balance

The Board currently consists of six (6) members. The Board comprises the Chairman who is Non independent non-executive, one (1) managing director, two (2) executive directors and two (2) independent non-executive directors.A brief profile of each Director is presented on pages 7 to 10 of this annual report.

The Board’s composition complies with the provisions of the Code and paragraph 15.02 of the ListingRequirements of Bursa Malaysia Securities Berhad that require a minimum of two (2) directors or one third of theBoard to be independent Directors. The Three (3) Directors holding executive office represent the interest of thelargest shareholders of the Company and the investment of remaining shareholders is fairly reflected in the Boardrepresentation.

No individual or a group of individuals dominate the decision making of the Board and enable the Board to effectivelydischarge its principle responsibilities as set out in the Code.

3. Board Meetings

The Board meets on a quarterly basis, with additional meetings convened as and when necessary. Five (5) boardmeetings were held during the financial year ended 31 December 2003 and the Directors’ attendance are as follows:

Director Attendance

Y. Bhg. Tan Sri A. Rahim Bin Tamby Chik 4Mdm. Lim Choon Hiok 5Mr. Lim Meng Hong 4Mr. Lim Meng Hee 5Dr. Ng Soon Lim 5Mr. Chai Koh Wah (appointed on 25 April 2004) -

Mr. Keah Say Wan (resigned on 15 March 2004) 5

All Directors have complied with the minimum attendance at the Board meetings as stipulated by the Listing

Requirements of Bursa Malaysia Securities Berhad.



4. Supply of Information

The Directors have full access to all information and records of the Group. The meeting agenda, together with reports

and preposition papers for each meeting are circulated prior to the meeting to ensure the Directors have sufficient time

to consider and deliberate on the matters to be discussed at Board meetings.

Senior Management staffs as well as the external auditor are invited to attend Board meetings to provide their views

and explanations on certain agenda items tabled to the Board, and to furnish their clarification on issues that may be

raised by the Directors.

The Directors are updated by the Company Secretary on new statutory as well as regulatory requirements relating to

the duties and responsibilities. Full Board have ready access to the Company Secretary. The Directors have the right

to engage independent professional advise (if necessary) at the Company’s expense in furtherance of their duties.

5. Board Committees

The Board of Directors has established several Board Committees to delegate their duties. This includes the Audit

Committee, the Nomination Committee and the Remuneration Committee.

The Chairman of the respective committee will brief the Board on the matters discussed at the meetings and minutes

of those meetings are circulated to the full Board. The ultimate responsibilities for the decision on all matters are

reserved for the Board.

6. Appointments to the Board

The Nomination Committee is empowered by the Board and its term of reference to bring to the Board

recommendations as to the appointment of new Directors. The Committee reviews the effectiveness of the Board, its

Committees and the contributions of each individual Director on an annual basis. The Committees also keeps under

review the Board structure, size, composition and mix of skills, business acumen and the competencies required for

the Board to effectively discharged its duties.

The memberships of the Nomination Committee during the year are as follows:

Chairman : Y. Bhg. Tan Sri A. Rahim bin Tamby Chik

Member : Dr. Ng Soon Lim

Mr. Chai Koh Wah (appointed on 25 April 2004)

Mr. Keah Say Wan (resigned on 15 March 2004)

This Committee is empowered to bring the Board recommendations on appointment of any new director and would

ensure that Board has an appropriate balance of expertise and ability. The Nomination Committee had on 25 April,

2004 made its recommendation on the appointment of Mr. Chai Koh Wah as an Independent Non-Executive Director

of the Company to the Board of Directors for approval to fill in the vacancy created due to the resignation of Mr. Keah

Say Wan as the Independent Non-Executive Director of the Company on 15 March, 2004.

The Nomination Committee met one time during the financial year where all members were present. The Nomination

Committee met to:-

i) Approve the principles and processes of assessing Board effectiveness and performance evaluation of Senior

Management; and

ii) Deliberate and approve performance objectives and standards for the Board and the contributions of each

individual director.



A. Board of Directors (Cont’d)

7. Directors’ Training

All Directors except for Mr Chai Koh Wah have completed the Mandatory Accreditation Program conducted by the

Research Institute of Investment Analyst Malaysia. The Directors will be undergoing the Continuing Education

Programs and other relevant training programs as a continuous effort to enhance their skills and knowledge to

effectively discharge their duties.

8. Re-Election of Directors

In accordance to the Company’s Articles of Association, all newly appointed directors shall retire from office at the

close of the next Annual General Meeting and shall then be eligible for re-election. The Articles also provided that at

least one-third of the Board or the number nearest to one-third are subject to retirement and are eligible for re-election

at the Annual General Meeting at least once every three years.

Details of Directors seeking re-election at the forthcoming annual general meeting are disclosed in the statement

accompanying the Notice of annual general meeting as set out on page 4 of this annual report.

B. Directors’ Remuneration

The Board recognizes the need to structure the remuneration packages for Directors so as to be able to attract, retain and

motivate Directors of the right caliber required to mange the Company and to align the interests of the Directors with those

of the shareholders.

The Remuneration Committee is responsible for setting the remuneration policy framework and making recommendations

to the Board on the remuneration and other terms of employment for the Executive Directors of the Group. The terms of

reference of the Remuneration Committee are clearly defined to its members. The determination of remuneration of Non

Executive Directors is a matter for the Board as a whole. The individual concerned has abstains from deliberations in

respect of their own remuneration.

The memberships of the Remuneration Committee during the year are as follows:

Chairman : Mdm. Lim Choon Hiok

Member : Dr. Ng Soon Lim

Mr. Chai Koh Wah (appointed on 25 April 2004)

Mr. Keah Say Wan (resigned on 15 March 2004)

The remuneration of the Executive Directors of the Company is structured so as to link rewards to corporate and individual

performance. Reference have also been made to established survey findings on directors’ allowance, roles and

remuneration of listed firms for proposing the remuneration packages of the Executive Directors of the Company. The

remuneration of the Non-Executive Directors is fixed after taking into consideration their level of experience and responsibilities.

The Remuneration Committee has on 27 February, 2004, reviewed annually the performance of the Executive Directors and

furnished recommendations to the Board on specific adjustments. In accordance with the Company’s Articles of

Association, the Directors’ remuneration is subject to Shareholders’ approval.



B. Directors’ Remuneration (Cont’d)

The Company’s Directors’ aggregate remuneration is categorized into appropriate components are as follows:

Non-Executive Directors Executive DirectorsRM’000 RM’000

Fees 108 182

Salaries and other emoluments - 889

Contribution to EPF - 68

Bonus - 57

Allowances 7 -

Total 115 1,196

The number of Directors of the Company who served during the financial year and whose aggregate remuneration from

the Group failing within the respective band are as follows:

Non-Executive Directors Executive Directors

Below RM50,000 2 -

RM50,001 – RM250,000 1 1

RM250,001 – RM450,000 - -

RM450,001 – RM650,000 - 2

C. Shareholders

The Board recognizes the importance of maintaining active communication with its shareholders and timely dissemination

of information concerning the Group’s business performance. Announcements on various disclosures and the quarterly

financial reports are made to Bursa Malaysia Securities Berhad and the annual reports provide shareholders and the

investing public with an overview of the Group’s performance.

The principal forum for dialogue with shareholders is the general meeting of the Company. Appropriate notice of meeting

would be communicated depending on the purpose of the meeting. The notice would be accompanied by the prescribed

documents or statement providing explanation of the intended agenda to facilitate full understanding and evaluation. All

Directors are available to provide responses to questions from the shareholders during the general meeting.

D. Accountability and Audit

1. Financial Reporting

The Board aims to provide a true and fair assessment of the Group’s financial performance and a balanced assessment

of the Group’s prospects through the quarterly financial reports to the Bursa Malaysia Securities Berhad and the

annual report to shareholders.

The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the

Group and the Company as at the end of the accounting period and of the results of the operations and cash flows

for the period then ended. In preparing the financial statements, the Directors have ensured that applicable approved

accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been consistently applied, and

made reasonable and prudent judgements and estimates.



D. Accountability and Audit (Cont’d)

2. Internal Control

The Directors are fully aware of their responsibilities to maintain a sound system of internal control to safeguard

shareholders’ investment and the Group’s assets.

The Statement of Internal Control furnished on pages 18 to 19 of this Annual Report provides an overview on the

state of internal controls within the Group.

3. Audit Committee

The roles of the Audit Committee together with their duties and summary of the activities during the year are set out

in the Audit Committee Report on pages 20 to 22 of this Annual Report.

4. Relationship with External Auditors

The Board has established an appropriate and transparent relationship with the Company’s external auditors in seeking

professional advice through the Audit Committee.

The Audit Committee meets with the external auditors whenever it deem necessary to discuss the audit plan, annual

financial statements and their audit findings.

E. Compliance with Best Practices

The Board has throughout the financial year complied with the best practices as set out in Part 2 of the Code.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR PREPARING THE FINANCIAL STATEMENTS

The Board is required by the Companies Act, 1965 to prepare the financial statements so as to give true and fair view of the state

of affairs of the Company and the Group at the financial year end, and of the results and cash flows of the Company and the

Group for the financial year under review.

The Directors have used suitable accounting policies and applied them consistently, made judgments and estimates that are

prudent and reasonable, and adopted applicable accounting standards during the preparation of the financial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the

financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the

Companies Act, 1965.

In addition, the Directors are also responsible for taking reasonable steps to safeguard the assets of the Group and to detect and

prevent any fraud as well as any other irregularities.

The collective approval by the Board on this Statement was tabled on 25 April, 2004.

STATEMENT ON INTERNAL CONTROL


Introduction

Paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors of listed

companies to include in its annual report a “statement about the state of internal control of the listed issuer as a group”.

The Board is committed in maintaining a sound system of internal control in the Group and is pleased to provide the following

statement which outlines the nature and scope of internal controls of the Group during the year.

The Board is ultimately responsible for the Group’s system of internal control and risk management, including the establishment

of an appropriate control environment and framework as well as reviewing its adequacy and integrity. Due to the inherent

limitations in any system of internal controls, such a system is designed to manage rather than eliminate the risk of failure to

achieve business and corporate objectives and can only provide reasonable and not absolute assurance against materials

misstatement or loss. The system of internal controls covers risk management and financial, organizational, operational and

compliance controls.

Risk Management Framework

Although there is no formal structured risk management framework was developed, the Board fully recognizes the importance

and supports the content of the Internal Control Guidance. The Board continually reviews the adequacy and effectiveness of the

risk management process through regular informal management and departmental meetings held by the Executive Directors and

key management staff in each operating unit.

Key risks identified includes but not exclusively, competitors’ activities through market information, buyers’ compliance, market

changes, production scheduling, quality control, financial planning and human management.

Internal Control Process

The Board is committed in maintaining a strong and effective internal control structure to compliment the proper conduct of the

Group’s business operations. The internal control process is reviewed regularly, informally by the managing directors through their

close involvement in daily business operation, to ensure effectiveness and business objectives are achieved in a controlled

environment.

Major internal control elements of the Group include but not exclusive:

a) Financial and credit control

Personnel are carefully selected to prevent any misconduct. Authorisation limits are set to minimise risk of unauthorised

transaction. Purchasing function were centralised at Head Office to ensure minimise mishandlings as well as to leverage

on the Group’s purchasing power

b) Organizational structure

The Group has established a clear organisational structure with defined lines of reporting, responsibility and delegation

of authority.

c) Reporting and reviewing

Timely financial reports were submitted to Top Management for review, monitoring of results with management action

taken, where necessary.

d) Monitoring of business units

Regular visits to business units by Executive Directors to ensure compliance with the Group’s policies and procedures.

Regular informal evaluation are conducted with manager in charged on areas and matters pertinent to the business units

for compliance.

STATEMENT ON INTERNAL CONTROL


Internal Control Process (Cont’d)

The Board has reviewed the effectiveness of the internal control through the above processes and is not aware of any significant

deficiencies in the Group’s system of internal control for the year under review which may resulted in any material losses,

contingencies or uncertainties that would require disclosure in the Group’s annual report. Apart from the above internal

framework, the Group also relies on findings by the external auditors.

In the absence of any formal internal control department, the Board believes they are capable of safeguarding shareholders’

investment by constant monitoring and reviewing of the above processes. Nevertheless, the Board is constantly looking out for

a suitable out-sourcing support.

The Board remained committed towards operating a sound system of internal control and strives for continuous improvement to

further enhance the Group’s system of internal framework.

AUDIT COMMITTEE REPORT


A. Establishment and Memberships

The membership of the Audit Committee is as follow:

Chairman : Dr. Ng Soon Lim/Independent Non-Executive Director (appointed on 25 April 2004)

Mr. Keah Say Wan/Independent Non-Executive Director (resigned on 15 March 2004)

Member : Mr. Lim Meng Hong/Executive Director

Mr. Chai Koh Wah/Independent Non-Executive Director

Mr. Lim Meng Hong and Mr. Chai Koh Wah are members of the Malaysian Institute of Accountants.

B. Terms of Reference

The terms of reference of the Audit Committee are as follows:-

Composition

The Company shall appoint an AuditCommittee from amongst its directors and shall consist of not less than three (3) in

numbers of whom a majority shall be independent directors. No alternate director is appointed as a member of the

Committee and at least one (1) member of the Committee:-

(a) Shall be a member of the Malaysian Institute of Accountants; or

(b) If he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’ working

experiences and:-

(i) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

(ii) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the

Accountants Act 1967.

The members of the Audit Committee shall elect a Chairman from among their members who shall be an independent

director. In the event of any vacancy in the Committee resulting in the non-compliance of the above stated conditions, the

company shall fill the vacancy within three (3) months. The Board of directors of the company shall review the term of office

and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether

such audit committee and members have carried out their duties in accordance with their terms of reference.

Rights

The Audit Committee shall, in accordance with a procedure to be determined by the Board of directors and at the cost of

the Company:

(a) have authority to investigate any matter within its terms of reference;

(b) have the resources which are required to perform its duties;

(c) have full and unrestricted access to any information pertaining to the company;

(d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function

or activity (if any);

(e) be able to obtain independent professional or other advice; and

(f) be able to convene meetings with the external auditors, excluding the attendance of the executive members of the

committee, whenever deemed necessary.

Where the Committee is of the view that a matter reported by it to the board of directors of the company has not been

satisfactorily resolved resulting in a breach of the Listing Requirements of Kuala Lumpur Stock Exchange, the Audit

Committee shall promptly report such matter to the Kuala Lumpur Stock Exchange.



B. Terms of Reference (Cont’d)

Meeting

The Audit Committee shall meet at least each quarter of a financial year and such additional meetings as the Chairman shall

decide in order to fulfill its duties. The Company Secretary or any person appointed by the Audit Committee shall act as

Secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda

and other supporting explanatory documentation for circulation to the Committee Members prior to each meeting. The

Secretary will also be responsible for keeping the minutes of the meetings of the Audit Committee, and circulating them to

Committee Members and to other members of the Board of Directors. The Chairman of the Audit Committee shall convene

a meeting of the audit committee to consider any matter the external auditor believes should be brought to the attention

of the directors or shareholders. Other directors and employees must attend any particular Audit Committee meeting only

at the Audit Committee’s invitation, specific to the relevant meeting.

A quorum shall consist of a majority of members present who must be independent directors.

Functions

The functions of the Audit Committee are as follow:-

1. review the following and report the same to the board of directors of the Company:-

(a) the audit plan with the external auditor.

(b) with the external auditor its evaluation of the system of internal controls.

(c) the audit report with the external auditors.

(d) the assistance given by the employees of the Company to the external auditor.

(e) the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary

authority to carry out its work.

(f) the internal audit programme, processes, the results of the internal audit programme, processes or investigation

undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function.

(g) the quarterly results and year end financial statements, prior to the approval by the board of directors, focusing

particularly on:-

(i) changes in or implementation of major accounting policy changes.

(ii) significant and unusual events; and

(iii) compliance with accounting standards and other legal requirements.

(h) any related party transaction and conflict of interest situation that may arise within the company or group including

any transaction, procedure or course of conduct that raises questions of management integrity.

(i) any letter of resignation from the external auditors of the company; and

(j) whether there is reason (supported by grounds) to believe that the company’s external auditor is not suitable

for re-appointment; and

2. to recommend the nomination of a person or persons as external auditors.

Summary of Audit Committee Activities

The Audit Committee held a total of five (5) meetings during the financial year ended 31 December 2003. The Senior

Management and a representative of the external auditors normally attend the Committee meetings. Other Board

members may attend meetings upon invitation of the Committee. The Minutes of the Audit Committee meeting have been

extended to all members of the Board of Directors and significant issues discussed at the Board Meetings. The attendance

of each Audit Committee member were as follows:-



B. Terms of Reference (Cont’d)

Summary of Audit Committee Activities (Cont’d)

Audit Committee Member Total no. of meetings held during the year Meetings Attended

Keah Say Wan

(resigned on 15 March 2004) 5 5

Ng Soon Lim 5 5

Lim Meng Hong 5 4

Chai Koh Wah

(appointed on 25 April 2004) 5 -

During the financial year, the activities undertaken by the Audit Committee include:-

a. Review of the quarterly unaudited financial results of the Group prior making the recommendations to the Board ofDirectors for approval ;

b. Review of inter-company transactions and/or any related party transactions or conflict of interest situations that arosewithin the Group or the Company;

c. Discussion on the Company's Corporate Governance process and the application of the key principles and bestpractices of Corporate Governance and the compliance with the Listing Requirement of Bursa Malaysia Securities Berhad;

d. Discussion and review of the semi annual returns pursuant to the Paragraph 8.02 of Chapter 8 of the ListingRequirements of the Bursa Malaysia Securities Berhad;

e. Discussion and review of the proposed amendments to the Listing Requirements of Bursa Malaysia Securities Berhad;f. Review the annual audited financial statements of the Group and the Company for the financial year ended

31 December, 2003 and made recommendations to the Board of Directors for approval;g. Discussion and review on the external auditors’ reports in relation to audit and accounting issues arising from the audit;

andh. Discussing and reviewing the external auditors’ scope of work.

Relationship with External auditors

The Audit Committee’s terms of reference formalises the relationship with the External Auditors. Through the AuditCommittee, the Company has maintained a formal and transparant relationship with its auditors in seeking professionaladvice and ensuring compliance with its auditors in seeking professional advice and ensuring compliance with theMalaysian Accounting Standard Board (“MASB”) standards of accounting policies and methods when the Group’sfinancial statements are prepared.

Non-audit fees

The amount of non-audit fee paid to the external auditors by the Group and the Company for the financial year amountedto RM16,000 and RM9,000 respectively.

Internal Control and Risk Managment

The committee recognizes the importance of an independant and a well established internal audit function in obtaining theassurance it requires regarding the effectiveness of the internal control system.

The Group believes that although it does not have a formal internal audit department and a risk management committee;informal identification of internal control system and evaluation of business risk carried out during management anddepartmental meetings are sufficient to safeguard shareholders’ investment and the Group’s assets. The Group currentlyalso relies on findings of the external auditors. Such internal control findings and business risks are discussed andaddressed by the Audit Committee where appropriate. The corrective and preventive actions are implemented wherenecessary. The Audit Committee will review the need for setting up the internal Audit Department from time to time.

OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTSOF BURSA MALAYSIA SECURITIES BERHAD


a. Material Contracts

Save for the following, neither the Company nor any of its subsidiaries has entered into any material contracts involving

Directors’ and major shareholders’ interest, either still subsisting at the end of the financial year under review or

entered into since the end of the previous financial year:-

i) A Conditional Sale and Purchase agreement between Baneng Industries Sdn Bhd (“BISB”), a wholly-owned

subsidiary of the Company and Mr. Lim Thian Hock @ Lim Thiam Hock dated 14 November, 2003 for the purchase

by Baneng Industries Sdn Bhd of a piece of land together with an Industrial Building known as Lot PTD 17076,

Mukim of Simpang Kanan, District of Batu Pahat, State of Johor held under H.S. (D) 22056, containing an area of

0.7098 hectares situated at Lorong 5, Batu 31/2, Jalan Kluang, 83000 Batu Pahat, Johor Darul Takzim for the total

cash consideration of RM9,950,000 (Ringgit Malaysia Nine Million and Nine Hundred Fifty Thousand Only)

(Proposed Acquisition by Baneng Industries); and

ii) A Conditional Sale and Purchase agreement between Maxlin Garments Sdn Bhd (“Maxlin”), a wholly-owned

subsidiary of Baneng Industries Sdn Bhd and Regnistar Corporation Sdn Bhd (“Regnistar”) dated 14 November,

2003 for the purchase by Maxlin Garments Sdn Bhd of a piece of land together with an Industrial Building known

as Lot P.T.D. 3235 held under H.S. (D) 38473 and Lot P.T.D. 3236 held under H.S. (D) 38474 for respectively both

of Mukim of Minyak Beku, District of Batu Pahat, State of Johor containing an area of 4,481.9194 square metres

and 11,015.6175 square metres respectively situated at Plot 4 & 5, Lot 163, Batu 6, Jalan Tanjong Laboh, 83000

Batu Pahat, Johor Darul Takzim for the total cash consideration of RM6,200,000 (Ringgit Malaysia Six Million and

Two Hundred Thousand Only) (“Proposed Acquisition by Maxlin”).

The substantial shareholders and directors of the Company, BISB and Maxlin as at 20 May, 2004 who are deemed

related and their relationship with the Vendors are as follows:-

i) Proposed Acquisition by Baneng Industries

The Company BISB Maxlin

Lim Choon Hiok Managing Director, Director, Director,

substantial shareholder substantial shareholder * substantial shareholder*

Lim Meng Hong” Director Alternate Director to Director

Lim Choon Hiok and

Y. Bhg. Tan Sri A Rahim

Bin Tamby Chik

Lim Meng Hee1 Director - -

Lim Thian Hock @

Lim Thiam Hock2 - Directorº -

Lim Poh Choo3 Substantial shareholder* - -

Upaya Mendaki

Sdn Bhd3^ Substantial shareholder Substantial shareholder* Substantial Shareholder*

(*) Deemed interested by virtue of Section 6A of the Companies Act, 1965.

(") Mr. Lim Meng Hong is the brother of Lim Choon Hiok and brother-in-law of Lim Thian Hock @ Lim Thiam Hock.

(1) Mr. Lim Meng Hee is also the brother of Lim Choon Hiok and brother-in-law of Lim Thian Hock @ Lim Thiam Hock.

(2) Mr. Lim Thian Hock @ Lim Thiam Hock, husband of Lim Choon Hiok, is the vendor for the Proposed

Acquisition by Baneng Industries and was a director of Baneng Industries up to 18 November, 2003.

OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTSOF BURSA MALAYSIA SECURITIES BERHAD


a. Material Contracts (Cont’d)

i) Proposed Acquisition by Baneng Industries (Cont’d)

(º) As at 19 November, 2003, Mr. Lim Thian Hock @ Lim Thiam Hock ceased to be a director of BanengIndustries Sdn Bhd. Therefore, Mr. Lim Meng Hong ceased to an Alternate Director to Lim Thian Hock @Lim Thiam Hock..

(3) Persons connected to the interested directors. Ms. Lim Poh Choo is the sister of Ms. Lim Choon Hiok, Mr.Lim Meng Hong and Mr. Lim Meng Hee while Mr. Lim Thian Hock @ Lim Thiam Hock is the spouse of Ms.Lim Choon Hiok.

(^) The Directors and substantial shareholders of Upaya Mendaki Sdn Bhd are Ms. Lim Choon Hiok and Ms.Lim Poh Choo.

ii) Proposed Acquisition by Maxlin

Regnistar is the vendor for the Proposed Acquisition by Maxlin and Maxlin is the purchaser. The substantial shareholders of Regnistar are Ms. Lim Choon Hiok and Mr. Lim Thian Hock @ Lim Thiam Hock. Mr. Lim ThianHock @ Lim Thiam Hock, a director of Regnistar, is also a substantial shareholder of Regnistar with Ms. Lim Choon Hiok.

b. Conflict of Interests

None of the Directors has any conflict of interest with the Company except for Ms. Lim Choon Hiok, Mr. Lim MengHong and Mr. Lim Meng Hee are deemed interested in the following related party transactions:-

i) A Conditional Sale and Purchase agreement between Baneng Industries Sdn Bhd, a wholly-owned subsidiary ofthe Company and Mr. Lim Thian Hock @ Lim Thiam Hock dated 14 November, 2003 for the purchase by BanengIndustries Sdn Bhd of a piece of land together with an Industrial Building known as Lot PTD 17076, Mukim ofSimpang Kanan, District of Batu Pahat, State of Johor held under H.S. (D) 22056, containing an area of 0.7098hectares situated at Lorong 5, Batu 31/2, Jalan Kluang, 83000 Batu Pahat, Johor Darul Takzim for the total cashconsideration of RM9,950,000 (Ringgit Malaysia Nine Million and Nine Hundred Fifty Thousand Only);

ii) A Conditional Sale and Purchase agreement between Maxlin Garments Sdn Bhd, a wholly-owned subsidiary ofBaneng Industries Sdn Bhd and Regnistar Corporation Sdn Bhd dated 14 November, 2003 for the purchase byMaxlin Garments Sdn Bhd of a piece of land together with an Industrial Building known as Lot P.T.D. 3235 heldunder H.S. (D) 38473 and Lot P.T.D. 3236 held under H.S. (D) 38474 for respectively both of Mukim of MinyakBeku, District of Batu Pahat, State of Johor containing an area of 4,481.9194 square metres amd 11,015.6175square metres respectively situated at Plot 4 & 5, Lot 163, Batu 6, Jalan Tanjong Laboh, 83000 Batu Pahat, JohorDarul Takzim for the total cash consideration of RM6,200,000 (Ringgit Malaysia Six Million and Two HundredThousand Only).

c. Sanctions And/Or Penalties

There were no sanctions or penalties imposed on the Company and its subsidiaries, directors or management by therelevant regulatory bodies.

d. American Depository Receipt (ADR)/Global Depository Receipt (GDR)

The Company did not sponsor any ADR or GDR program.

e. Share Buy-backs

The Company did not enter into any share buy-backs tansactions during the financial year.

f. Options, Warrants or Convertible Securities

There were no options, warrants or convertible securities being exercised during the financial year.

g. Revaluation Policy

The Company and the Group do not have a policy on revaluation of land and buildings.

26 Directors’ Report

29 Statement by Directors

29 Statutory Declaration

30 Report of the Auditors

31 Income Statements

32 Balance Sheets

33 Statements of Changes in Equity

34 Cash Flow Statements

35 Notes to the Financial Statements

FINANCIAL STATEMENTS

DIRECTORS’ REPORT


The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the

Company for the financial year ended 31 December 2003.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services. The principal activities of

the subsidiaries are described in Note 12 to the financial statements.

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

RESULTS

Group CompanyRM’000 RM’000

Profit after taxation 3,681 90

Minority interests (1,076) -

Net profit for the year 2,605 90

There were no material transfers to or from reserves or provisions during the financial year.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not

substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

The amount of dividends paid by the Company since 31 December 2002 were as follows:

RM’000

In respect of financial year ended 31 December 2002

Final tax exempt dividend of 5% paid on 15 August 2003 3,000

The directors do not recommend the payment of any dividend of the current financial year.

DIRECTORS

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

Y. Bhg. Tan Sri A Rahim Bin Tamby Chik

Lim Choon Hiok

Lim Meng Hong

Lim Meng Hee

Keah Say Wan resigned on 15 March 2004

Dr. Ng Soon Lim

Chai Koh Wah appointed on 25 April 2004

DIRECTORS’ REPORTDIRECTORS’ REPORT


DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company

was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or

any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits

included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 6 to the

financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company

or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial

financial interest, except as disclosed in Note 26 to the financial statements.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares

in the Company during the financial year were as follows:

Number of Ordinary Shares at RM1 Each1 January 31 December

2003 Bought Sold 2003

Direct Interest

Y. Bhg. Tan Sri A Rahim Bin Tamby Chik 100,000 - - 100,000

Lim Choon Hiok 12,857,727 - - 12,857,727

Lim Meng Hong 161,774 - - 161,774

Indirect Interest

Lim Choon Hiok 18,325,886 - - 18,325,886

Lim Choon Hiok by virtue of her interest in shares of the Company is also deemed interested in shares of all the Company’s

subsidiaries to the extent the Company has an interest.

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

corporations during the financial year.

OTHER STATUTORY INFORMATION

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

reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision

for doubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had been

made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the

ordinary course of business had been written down to an amount which they might be expected so to realise.

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

(i) it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequate to any substantial

extent; and

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

DIRECTORS’ REPORT


OTHER STATUTORY INFORMATION (CONT’D)

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render

adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or

inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or

financial statements of the Group and of the Company which would render any amount stated in the financial statements

misleading.

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

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which

secures the liabilities of any other person; or

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

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve

months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet

their obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial

year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the

Company for the financial year in which this report is made.

SUBSEQUENT EVENTS

The subsequent events are as disclosed in Note 27 to the financial statements.

AUDITORS

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

Signed on behalf of the Board

in accordance with a

resolution of the directors

LIM CHOON HIOK LIM MENG HONG

Melaka, Malaysia

Date: 25 April, 2004

DIRECTORS’ REPORTSTATEMENT BY DIRECTORSPURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965


We, LIM CHOON HIOK and LIM MENG HONG, being two of the directors of BANENG HOLDINGS BHD., do hereby

state that, in the opinion of the directors, the accompanying financial statements set out on pages 31 to 56 are drawn up in

accordance with applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as

to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2003 and of the results

and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board

in accordance with a

resolution of the directors

LIM CHOON HIOK LIM MENG HONG

Melaka, Malaysia


STATUTORY DECLARATIONPURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

I, LIM CHOON HIOK, being the Director primarily responsible for the financial management of BANENG HOLDINGS BHD.,

do solemnly and sincerely declare that the accompanying financial statements set out on pages 31 to 56 are in my opinion correct,

and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory

Declarations Act, 1960.

Subscribed and solemnly declared by the

abovenamed LIM CHOON HIOK at

Melaka in the State of Melaka

on 25 April, 2004 LIM CHOON HIOK

Before me,

Commissioner For Oaths

REPORT OF THE AUDITORSTO THE MEMBERS OF BANENG HOLDINGS BHD. (Incorporated in Malaysia)


We have audited the accompanying financial statements set out on pages 31 to 56. These financial statements are the responsibility

of the Company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as

well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for

our opinion.

In our opinion:

(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and

applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of:

(i) the financial position of the Group and of the Company as at 31 December 2003 and of the results and the cash flows

of the Group and of the Company for the year then ended; and

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

(b) the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of

which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as

auditors, as indicated in Note 12 to the financial statements, being financial statements that have been included in the

consolidated financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the

Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial

statements and we have received satisfactory information and explanations required by us for those purposes.

The auditor’s reports on the financial statements of the subsidiaries were not subject to any qualification material to the

consolidated financial statements and in respect of subsidiaries incorporated in Malaysia did not include any comment required

to be made under Section 174 (3) of the Act.

Ernst & Young Lee Ah TooAF: 0039 No. 2187/09/05(J)

Chartered Accountants Partner

Melaka, Malaysia


DIRECTORS’ REPORTINCOME STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003


Group Company2003 2002 2003 2002

Note RM’000 RM’000 RM’000 RM’000

Revenue 3 275,925 317,669 390 4,142

Cost of sales (238,280) (258,928) - -

Gross profit 37,645 58,741 390 4,142

Other operating income 234 492 - 32

Administrative expenses (20,424) (20,885) (258) (833)

Selling and marketing expenses (2,881) (5,373) - -

Profit from operations 4 14,574 32,975 132 3,341

Finance costs, net 7 (11,717) (13,740) - -

Profit before taxation 2,857 19,235 132 3,341

Taxation 8 824 (375) (42) -

Profit after taxation 3,681 18,860 90 3,341

Minority interests (1,076) (2,646) - -

Net profit for the year 2,605 16,214 90 3,341

Basic earnings per share (sen) 9 4.3 28.8

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

BALANCE SHEETSAS AT 31 DECEMBER 2003


Group Company2003 2002 2003 2002

Note RM’000 RM’000 RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 11 167,214 174,318 - -

Investment in subsidiaries 12 - - 59,203 59,203

Due from a subsidiary 13 - - 20,334 19,987

167,214 174,318 79,537 79,190

CURRENT ASSETS

Inventories 14 74,095 73,001 - -

Trade receivables 15 107,629 121,187 - -

Other receivables 16 33,833 16,335 308 594

Marketable securities 17 4 4 - -

Cash and bank balances 18 11,789 11,765 17 59

227,350 222,292 325 653

CURRENT LIABILITIES

Borrowings 19 185,297 168,021 131 -

Trade payables 19,914 20,994 - -

Other payables 21 7,989 10,271 3,186 388

Tax payables 423 572 - -

213,623 199,858 3,317 388

NET CURRENT ASSETS/(LIABILITIES) 13,727 22,434 (2,992) 265

180,941 196,752 76,545 79,455

FINANCED BY :

Share capital 22 60,000 60,000 60,000 60,000

Reserves 43,959 44,353 16,545 19,455

Shareholders’ equity 103,959 104,353 76,545 79,455

Reserve on consolidation 37,165 37,165 - -

Minority interests 14,724 13,648 - -

155,848 155,166 76,545 79,455

Borrowings 19 23,334 38,777 - -

Deferred taxation 23 1,759 2,809 - -

Non-current liabilities 25,093 41,586 - -

180,941 196,752 76,545 79,455


DIRECTORS’ REPORTSTATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2003


Non-distributable DistributableForeign

Share Share exchange Retainedcapital premium reserve profits Total

RM’000 RM’000 RM’000 RM’000 RM’000

Group

At 31 December 2001 51,000 8,203 (1,057) 11,483 69,629

Public issue at RM2.10 per share 9,000 9,900 - - 18,900

Shares issue expenses - (2,013) - - (2,013)

Currency translation differences ** - - 1,623 - 1,623

Net profit for the year - - - 16,214 16,214

At 31 December 2002 60,000 16,090 566 27,697 104,353

Currency translation differences ** - - 1 - 1


Dividends (Note 10) - - - (3,000) (3,000)

At 31 December 2003 60,000 16,090 567 27,302 103,959

Company

At 31 December 2001 51,000 8,203 - 24 59,227

Public issue at RM2.10 per share 9,000 9,900 - - 18,900

Shares issue expenses - (2,013) - - (2,013)


At 31 December 2002 60,000 16,090 - 3,365 79,455

Net profit for the year - - - 90 90

Dividends (Note 10) - - - (3,000) (3,000)

At 31 December 2003 60,000 16,090 - 455 76,545

** representing net gains/(losses) not recognised in the income statement


CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003


Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES


Adjustments for:

Bad and doubtful debts - 612 - -

Depreciation 15,285 15,058 - -

Dividends income - - (300) (4,052)

Gain on disposal of property, plant and equipment (86) (8) - -

Interest expense 11,915 14,050 - -

Interest income (198) (310) - -

Operating profit/(loss) before working capital changes 29,773 48,637 (168) (711)

Increase in inventories (1,094) (9,007) - -

(Increase)/decrease in receivables (3,940) (35,255) 286 286

(Decrease)/increase in payables (3,362) (3,347) 2,798 (396)

Cash generated from/(used in) operations 21,377 1,028 2,916 (821)

Interest paid (11,915) (14,050) - -

Income tax paid (240) (549) - -

Net cash generated from/(used in) operating activities 9,222 (13,571) 2,916 (821)

CASH FLOWS FROM INVESTING ACTIVITIES

Advance to a subsidairy - - (347) (19,987)

Dividends received - - 258 3,980

Purchase of property, plant and equipment (4,657) (27,697) - -

Proceeds from disposal of property, plant and equipment 414 589 - -

Interest received 198 310 - -

Net cash used in investing activities (4,045) (26,798) (89) (16,007)

CASH FLOWS FROM FINANCING ACTIVITIES

Drawdown of hire purchase 485 - - -

Proceeds from issuance of shares - 18,900 - 18,900

Shares issue expenses paid - (2,013) - (2,013)

Drawdown of term loans - 9,057 - -

Dividend paid (3,000) (95) (3,000) -

Repayment of term loans (11,806) (8,611) - -

Repayment of hire purchase (4,205) (12,089) - -

Short term borrowings 11,915 32,970 - -

Net cash (used in)/generated from financing activities (6,611) 38,119 (3,000) 16,887

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,434) (2,250) (173) 59

EFFECTS OF EXCHANGE RATE CHANGES - 225 - -

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 11,197 13,222 59 *

CASH AND CASH EQUIVALENTS AT END OF YEAR 9,763 11,197 (114) 59

* RM2


DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003


1. CORPORATE INFORMATION

The principal activities of the Company are investment holding and provision of management services. The principalactivities of the subsidiaries are described in Note 12. There have been no significant changes in the nature of the principalactivities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Boardof Bursa Malaysia Securities Berhad. The principal place of business of the Company is located at Lot 4979, 21/2 Miles,Jalan Tanjung Laboh, 83000 Batu Pahat, Johor.

The number of employees in the Group at the end of the financial year was 2,970 (2002 : 3,626). There was no employeein the Company at the end of the financial year. The accounting records of the Company are maintained by the employeesof a subsidiary.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directorson 25 April 2004.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical cost conventionand comply with the provisions of the Companies Act, 1965 and applicable Approved Accounting Standards in Malaysia.

During the financial year ended 31 December 2003, the Group and the Company adopted the following MASBStandards for the first time:

MASB 25 Income Taxes

MASB 27 Borrowing Costs

MASB 28 Discontinuing Operations

MASB 29 Employee Benefits

The adoption of MASB 25, MASB 27, MASB 28 and MASB 29 have not given rise to any adjustments to the openingbalances of retained profits of the prior and current year or to changes in comparatives.

(b) Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries.Subsidiaries are those companies in which the Group has a long term equity interest and where it has power toexercise control over the financial and operating policies so as to obtain benefits therefrom.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting,the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statementfrom the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities ofa subsidiary are measured at their fair values at the date of acquisition and these values are reflected in theconsolidated balance sheet. The difference between the cost of an acquisition and the fair value of the Group’s shareof the net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balance sheet asgoodwill or negative goodwill arising on consolidation.

Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidatedfinancial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costscannot be recovered.

The gain or loss on disposal of a subsidiary company is the difference between net disposal proceed and the Group’sshare of its net assets together with any unamortised balance of goodwill and exchange differences which were notpreviously recognised in the consolidated income statement.

Minority interest is measured at the minorities’ share of the post acquisition fair values of the identifiable assets andliabilities of the acquiree.

NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003


2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(c) Investments in Subsidiary

The Company’s investments in subsidiaries are stated at cost less impairment losses. The policy for the recognition and

measurement of impairment losses is in accordance with Note 2(l).

On disposal of such investment, the difference between net disposal proceeds and their carrying amounts is

recognised in the income statement.

(d) Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for

the recognition and measurement of impairment losses is in accordance with Note 2(l).

Freehold land and capital work-in-progress are not depreciated. Depreciation of other property, plant and equipment

is provided for on the reducing balance basis to write off the cost of each asset to its residual value over the estimated

useful life at the following annual rates:

Buildings 2%

Plant and machinery 10%

Air conditioners 10%

Factory and office equipment 10%

Furniture and fittings 10%

Electrical installations 10%

Forklifts and motor vehicles 20%

Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and

the net carrying amount is recognised in the income statement.

(e) Inventories

Inventories are stated at the lower of cost (determined on the first-in, first-out basis) and net realisable value. Cost of

work-in-progress and finished goods include direct materials, direct labour, other direct costs and appropriate

production overheads. Net realisable value represents the estimated selling price less all estimated costs to completion

and costs to be incurred in marketing, selling and distribution.

(f) Cash and Cash Equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank and

deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of

outstanding bank overdrafts.

(g) Hire Purchase

Assets acquired by way of hire purchase are stated at an amount equal to the lower of their fair values and the present

value of the minimum hire purchase payments at the inception of the hire purchase, less accumulated depreciation and

impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present

value of the minimum hire purchase payments, the discount factor used is the interest rate implicit in the hire purchase,

when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used.




(g) Hire Purchase (Cont’d)

Hire purchase payments are apportioned between the finance costs and the reduction of the outstanding liability.

Finance costs, which represent the difference between the total hire purchase commitments and the fair value of the

assets acquired, are recognised as an expense in the income statement over the term of the relevant hire purchase so

as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for assets acquired under hire purchase is consistent with that for depreciable property, plant

and equipment as described in Note 2(d).

(h) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount

of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been

enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the

tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax

liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible

temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will

be available against which the deductible temporary differences, unused tax losses and unused tax credits can be

utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from

initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the

transaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the

liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised

directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a

business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or

negative goodwill.

Prior to the adoption of MASB25 Income Taxes on 1 January 2003, deferred tax was provided for using the liability

method in respect of significant timing differences and deferred tax assets were not recognised unless there was

reasonable expectation of their realisation.

(i) Employee Benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the

associated services are rendered by employees of the Group. Short term accumulating compensated absences

such as paid annual leave are recognised when services are rendered by employees that increase their entitlement

to future compensated absences, and short term non-accumulating compensated absences such as sick leave are

recognised when the absences occur.

(ii) Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees

Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries make contributions to their respective countries'

statutory pension schemes. Such contributions are recognised as an expense in the income statement as incurred.

Prior to the adoption of MASB 29 Employee Benefits on 1 January 2003, no liability was recognised for the obligations in

respect of short-term employee benefits in the form of accumulating compensated absences.




(j) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the

enterprise and the amount of the revenue can be measured reliably.

(i) Sales of goods

Revenue relating to sale of goods is recognised net of sales discounts and returns upon the transfer of risks and

rewards.

(ii) Dividend income

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

(iii) Revenue from services

Revenue from services rendered is recognised net of service taxes and discounts as and when the services are

performed.

(k) Foreign Currencies

(i) Foreign currency transactions

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date

of the transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit

Malaysia at exchange rates ruling at that date, unless hedged by forward foreign exchange contracts, in which

case the rates specified in such forward contracts are used. Non-monetary items initially denominated in foreign

currencies, which are carried at historical cost are translated using the historical rate as of the date of

acquisition and non-monetary items which are carried at fair value are translated using exchange rate that existed

when the values were determined. All exchange rate differences are taken to the income statement.

(ii) Foreign entities

Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to

the assets and liabilities, and at exchange rates at the dates of the transactions with respect to the income

statement. All resulting translation differences are included in the foreign exchange reserve in shareholders’ equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities

of the Company and translated at the exchange rate ruling at the date of the transaction.

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

2003 2002RM RM

United States Dollar 3.80 3.80

Singapore Dollar 2.17 2.17

Brunei Dollar 2.17 2.17

(l) Impairment of Assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is

any indication of impairment. If any such indication exists, impairment is measured by comparing the carrying values

of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use,

which is measured by reference to discounted future cash flows.

An impairment loss is recognised as an expense in the income statement immediately. Reversal of impairment losses

recognised in prior years is recorded when the impairment losses recognised for the asset no longer exist or have decreased.




(m) Financial Instruments

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

provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual

arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported

as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to

equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle

either on a net basis or to realise the asset and settle the liability simultaneously.

(i) Marketable Securities

Marketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost

is determined on the weighted average basis while market value is determined based on quoted market values.

Increases or decreases in the carrying amount of marketable securities are recognised in the income statement.

On disposal of marketable securities, the difference between net disposal proceeds and the carrying amount is

recognised in the income statement.

(ii) Trade and Other Receivables

Trade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified.

An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

The Group's normal trade credit term ranges from 30 to 120 days. Other credit terms are assessed and approved

on a case-by-case basis.

(iii) Trade and Other Payables

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

goods and services received. The normal trade credit terms granted to the Group range from 30 to 90 days.

(iv) Interest-Bearing Borrowings

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

Borrowing costs directly attributable to the acquisition and construction of qualifying assets, which are assets that

necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of

the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised as an expense in the income statement as an expense in the period in

which they are incurred.

(v) Equity Instruments

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

which they are declared.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity

transaction costs comprise only those incremental external costs directly attributable to the equity transaction

which would otherwise have been avoided.



3. REVENUE

Revenue of the Group and of the Company consists of the following:

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Management fees - - 90 90

Dividend income - - 300 4,052

Sales of goods 275,925 317,669 - -

275,925 317,669 390 4,142

4. PROFIT FROM OPERATIONS

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

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Auditors’ remuneration

- statutory audit 97 95 25 23

- other services 16 27 9 9

Bad and doubtful debts - 612 - -

Depreciation 15,285 15,058 - -

Directors’ fees 472 702 78 318

Rental of premises 1,260 1,364 - -

Rental of machinery 73 - - -

Rental income (8) (8) - -

Staff costs (Note 5) 39,438 48,993 - -

Dividend income from subsidiaries - - (300) (4,052)

Gain on disposal of property, plant and equipment (86) (8) - -

(Gain)/loss on foreign exchange (56) 323 - -

5. STAFF COSTS

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Wages and salaries 34,922 43,397 - -

Pension cost - defined contribution plans 986 982 - -

Other staff related expenses 3,530 4,614 - -

39,438 48,993 - -

Included in staff costs and directors' fees of the Group are executive directors' remuneration amounting to RM1,619,000

(2002: RM2,052,000) as further disclosed in Note 6.



6. DIRECTORS’ REMUNERATION

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Directors of the Company

Executive:

Salaries and other emoluments 889 1,426 - -

Fees 182 417 - 240

Bonus 57 - - -

Pension costs - defined contribution plan 68 - - -

1,196 1,843 - 240

Non-Executive:

Allowances 7 - - -

Fees 108 108 78 78

115 108 78 78

Other directors

Executive:

Salaries and other emoluments 332 121 - -

Fees 91 88 - -

423 209 - -

Non-Executive:

Fees 91 89 - -

Total 1,825 2,249 78 318

7. FINANCE COSTS, NET

Group2003 2002

RM’000 RM’000

Interest expense 11,915 14,050

Interest income (198) (310)

11,717 13,740



8. TAXATION

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Tax expense for the year:

- Malaysian income tax 541 369 42 -

- Foreign tax 35 41 - -

576 410 42 -

Overprovided in prior year (350) - - -

226 410 42 -

Deferred tax

Relating to origination and reversal of

temporary differences (Note 23) (1,050) (35) - -

(824) 375 42 -

Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2002: 28%) of the estimated assessable

profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. A

subsidiary located at Brunei was granted tax exemption for a period of five years expiring on 26 May 2006.

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax

expense at the effective income tax rate of the Group and of the Company is as follows:

2003 2002RM’000 RM’000

Group

Profit before taxation 2,857 19,235

Taxation at Malaysian statutory tax rate of 28% (2002 : 28%) 800 5,386

Effect of different tax rates in other countries (1) (2)

Expenses not deductible for tax purposes 138 387

Income not subject to tax (170) -

Pioneer income not subject to tax (670) (1,636)

Utilisation of current year's reinvestment allowances (248) (3,218)

Balancing charge arising from intragroup disposal of

property, plant and equipment not subject to tax (71) -

Deferred tax assets on reinvestment allowances recognised during the year (227) (518)

Tax rebate (25) (24)

Overprovision of income tax in prior years (350) -

Tax expense for the year (824) 375

Company

Profit before taxation 132 3,341

Taxation at Malaysian statutory tax rate of 28% (2002 : 28%) 37 935

Income not subject to tax - (1,063)

Expenses not deductible for tax purposes 5 128

Tax expense for the year 42 -



9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of ordinary

shares in issue during the financial year.

Group2003 2002

RM’000 RM’000

Net profit for the year 2,605 16,214

Weighted average number of ordinary shares in issue 60,000 56,250

Basic earning per share (sen) 4.3 28.8

Diluted earnings per share has not been presented as there was no potential changes in paid up share capital.

10. DIVIDENDS

Amount Net Dividends per Share2003 2002 2003 2002

RM’000 RM’000 Sen Sen

In respect of financial year 2002

Final tax exempt dividend of 5%,

paid on 15 August, 2003 3,000 - 5 -

11. PROPERTY, PLANT AND EQUIPMENT

Plantmachinery,equipment

and CapitalLand and electrical Other Work-in-

buildings* installations assets** progress TotalRM’000 RM’000 RM’000 RM’000 RM’000

Group

Cost

At 1 January 2003 43,772 183,540 15,938 806 244,056

Additions 1,190 5,769 1,016 534 8,509

Disposals - (119) (892) - (1,011)

At 31 December 2003 44,962 189,190 16,062 1,340 251,554

Accumulated Depreciation

At 1 January 2003 3,473 58,124 8,141 - 69,738

Charge for the year 686 13,253 1,346 - 15,285

Disposals - (52) (631) - (683)

At 31 December 2003 4,159 71,325 8,856 - 84,340



11. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Plantmachinery,equipment

and CapitalLand and electrical Other Work-in-

buildings* installations assets** progress TotalRM’000 RM’000 RM’000 RM’000 RM’000

Net Book Value

At 31 December 2003 40,803 117,865 7,206 1,340 167,214

At 31 December 2002 40,299 125,416 7,797 806 174,318

Depreciation charge for 2002 594 13,048 1,416 - 15,058

** Other assets comprise air conditioners, furniture and fittings, office equipment, motor vehicles and renovation.

* LAND AND BUILDINGS

Boilerhouse,

store room,roads,

Freehold Factory bridgeland buildings and fencing Total

RM’000 RM’000 RM’000 RM’000

Group

Cost

At 1 January 2003 8,317 34,920 535 43,772

Additions - 1,040 150 1,190

At 31 December 2003 8,317 35,960 685 44,962

Accumulated Depreciation

At 1 January 2003 - 3,147 326 3,473

Charge for the year - 669 17 686

At 31 December 2003 - 3,816 343 4,159

Net Book Value

At 31 December 2003 8,317 32,144 342 40,803

At 31 December 2002 8,317 31,773 209 40,299

Depreciation charge for 2002 - 580 14 594



(a) Net book value of property, plant and equipment held under hire purchase arrangements are as follows:

Group2003 2002

RM’000 RM’000

Plant, machinery and equipment 4,578 21,741

Office equipment and motor vehicles 543 923

5,121 22,664

(b) Property, plant and equipment acquired during the financial year were by means of:

Group2003 2002

RM’000 RM’000

Cash payment 4,657 27,697

Hire purchase financing 3,852 721

8,509 28,418

(c) All the property, plant and equipment of the Group have been pledged to financial institutions for banking facilities granted

to the subsidiaries.

12. INVESTMENT IN SUBSIDIARIES

Company2003 2002

RM’000 RM’000

Unquoted shares, at cost

- in Malaysia 55,123 55,123

- outside Malaysia 4,080 4,080

59,203 59,203



Details of the subsidiaries are as follows:

Name of Country of Equity InterestSubsidiaries incorporation Held (%) Principal activities

2003 2002

Subsidiaries of the Company

Baneng Industries Malaysia 100 100 Manufacturing, knitting and

Sdn. Bhd. dyeing of all types of fabrics,

(“BISB”) garments and related products.

Chenille International Singapore 100 100 Trading of garments and

Pte Ltd * provision of agency services.

Seri Pertamas Brunei 55 55 Manufacturing of garments.

Garment Manufacturer

Sdn. Bhd. *

Subsidiaries of BISB

Maxlin Garments Malaysia 100 100 Manufacturing of garments.

Sdn. Bhd.

Baneng Trading Malaysia 100 100 Manufacturing and knitting

Sdn. Bhd. of fabrics. Temporary ceased

operation in current financial year.

* Audited by firms of auditors other than Ernst & Young.

13. DUE FROM A SUBSIDIARY

The amount due from a subsidiary is unsecured, interest free and not receivable within the next twelve months.

14. INVENTORIES

Group2003 2002

RM’000 RM’000

At cost:

Raw materials 21,382 22,309

Work-in-progress 21,700 23,355

Finished goods 22,782 25,718

Consumable supplies 1,950 1,619

67,814 73,001

At net realisable value:

Finished goods 6,281 -

74,095 73,001



15. TRADE RECEIVABLES

Group2003 2002

RM’000 RM’000

Trade receivables 111,880 125,438

Less : Provision for doubtful debts (4,251) (4,251)

107,629 121,187

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

debtors, except for amounts due from three debtors amounting to approximately RM41,780,000 (2002 : RM61,574,000).

16. OTHER RECEIVABLES

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Other receivables 24,768 14,707 306 592

Deposits and prepayments 4,220 1,628 2 2

Amount paid for acquisition on

2 pieces of freehold land 4,845 - - -

33,833 16,335 308 594

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

debtors, except for amounts due from three debtors amounting to approximately RM9,409,000 (2002 : RM12,610,000),

which represent advances for trade related purposes.

17. MARKETABLE SECURITIES

Group2003 2002

RM’000 RM’000

Quoted shares at cost 4 4

Market value of quoted shares 4 3



18. CASH AND CASH EQUIVALENTS

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Cash on hand and at banks 5,645 2,627 17 59

Deposits with licensed banks 6,144 9,138 - -

Cash and bank balances 11,789 11,765 17 59

Marketable securities (Note 17) 4 4 - -

Less: Bank overdrafts (Note 19) (2,030) (572) (131) -

Cash and cash equivalents 9,763 11,197 (114) 59

The fixed deposits with licensed banks of the Group have been pledged to the banks for banking facilities obtained by the

subsidiaries.

The average interest rate of deposit at the balance sheet date was 3.00% (2002: 4.00%) per annum and the average

maturity of deposit as at the end of the financial year was 365 days (2002: 365 days).

Included in the fixed deposits is an amount of RM3,213,000 (2002 : RM1,828,000) which is registered in the names of a

director and a third party, who hold in trust on behalf of the Group.

19. BORROWINGS

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Short Term Borrowings

Secured:

Bank overdrafts 1,543 511 131 -

Bankers’ acceptances 75,225 72,100 - -

Export credit refinancing 11,217 5,499 - -

Trust receipts 2,556 5,066 - -

Term loans 2,111 3,185 - -

Hire purchase payables (Note 20) 2,076 3,298 - -

94,728 89,659 131 -

Unsecured:

Bank overdrafts 487 61 - -




Foreign export bills payable 163 - - -

Term loans 7,526 1,327 - -

90,569 78,362 - -

185,297 168,021 131 -



19. BORROWINGS (CONT’D)

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Long Term Borrowings

Secured:

Term loans 11,379 6,760 - -

Hire purchase payables (Note 20) 1,829 341 - -

13,208 7,101 - -

Unsecured:

Term loans 10,126 31,676 - -

23,334 38,777 - -

Total Borrowings

Bank overdrafts (Note 18) 2,030 572 131 -



Foreign export bills payable 163 - - -


Term loans 31,142 42,948 - -

Hire purchase payables (Note 20) 3,905 3,639 - -

208,631 206,798 131 -

Maturity of borrowings (excluding hire purchases)

Within one year 183,058 164,723 131 -

Between one and two years 9,903 14,581 - -

Between two and five years 11,765 23,855 - -

204,726 203,159 131 -

The weighted average effective interest rate during the financial year for borrowings, excluding hire purchase payables,

were as follows:

Group2003 2002

% %

Bank overdrafts 7.96 8.00

Bankers’ acceptances 4.27 4.55

Export credit refinancing 3.50 3.50

Foreign export bills payable 5.00 -

Trust receipts 7.92 7.90

Term loans 7.29 8.40

The above bank borrowings are secured by way of fixed and floating charges over all the assets of the subsidiaries.



20. HIRE PURCHASE PAYABLES

Group2003 2002

RM’000 RM’000

Future minimum payments:

Payable within one year 2,385 3,863

Payables between one and five years 1,956 390

4,341 4,253

Less : Finance charges (436) (614)

3,905 3,639

Present value of hire purchase payables

Not later than 1 year 2,076 3,298

Later than 1 year and not later than 2 years 1,687 194

Later than 2 years and not later than 5 years 142 147

3,905 3,639

Analysed as:

Due within 12 months (Note 19) 2,076 3,298

Due after 12 months (Note 19) 1,829 341

3,905 3,639

The hire purchase payables bear interests of between 2.99% to 6.25% (2002 : 3.90% to 5.70%) per annum.

21. OTHER PAYABLES

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Due to subsidiaries - - 3,038 -

Due to directors - 2,158 - -

Sundry payables and accruals 7,989 8,113 148 388

7,989 10,271 3,186 388

The amounts due to subsidiaries and directors are unsecured, interest free and with no fixed terms of repayment.



22. SHARE CAPITAL

Number of OrdinaryShares of RM1 Each Amount

2003 2002 2003 2002’000 ’000 RM’000 RM’000

Group and Company

Authorised 100,000 100,000 100,000 100,000

Issued and fully paid:

At 1 January 60,000 51,000 60,000 51,000

Public issue at RM2.10 per share - 9,000 - 9,000

At 31 December 60,000 60,000 60,000 60,000

23. DEFERRED TAXATION

Group2003 2002

RM’000 RM’000

At 1 January 2,809 2,844

Recognised in the income statements (Note 8) (1,050) (35)

At 31 December 1,759 2,809

Presented after appropriate offsetting as follows:

Deferred tax liabilties 30,806 16,620

Deferred tax assets (29,047) (13,811)

1,759 2,809

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

Deferred Tax Liabilities of the Group:

Acceleratedcapital

allowances Others TotalRM’000 RM’000 RM’000

At 1 January 2003 16,493 127 16,620

Recognised in the income statement 14,218 (32) 14,186

At 31 December 2003 30,711 95 30,806



23. DEFERRED TAXATION (CONT’D)

Deferred Tax Assets of the Group:

UnutilisedReinvestment

AllowanceRM’000

At 1 January 2003 (13,811)

Recognised in the income statement (15,236)

At 31 December 2003 (29,047)

Deferred tax assets have not been recognised in respect of the following items:

2003 2002RM’000 RM’000

Unabsorbed reinvestment allowances 34,360 22,384

The unabsorbed reinvestment allowances are available for offset against future taxable profits of the subsidiaries in which

those items arose.

24. COMMITMENTS

Group2003 2002

RM’000 RM’000

Capital commitment in respect of expenditure contracted for 1,371 1,590

25. CONTINGENT LIABILITIES

Company2003 2002

RM’000 RM’000

Corporate guarantees given to banks for credit facilities

granted to subsidiaries - unsecured 12,277 16,481

26. SIGNIFICANT RELATED PARTY TRANSACTIONS

Company2003 2002

RM’000 RM’000

Dividends received/receivable from subsidiaries 300 4,052

Management fee charged to a subsidiary 90 90



27. SUBSEQUENT EVENTS

(i) On 5 January 2004, the Company has entered into a conditional sale and purchase agreement with its wholly owned

subsidiary, Baneng Industries Sdn Bhd (“BISB”), for the acquisition of BISB’s entire equity interest in Maxlin Garments

Sdn. Bhd. (“Maxlin”), representing 100% equity interest in Maxlin for a cash consideration of RM6,500,000.

(ii) On 17 November 2003, the Company through its wholly owned subsidiary, Maxlin entered into a conditional sale and

purchase agreement for the proposed acquisition of garment operation and manufacturing assets in Kingdom of

Lesotho for a total consideration of USD700,000 (approximately RM2.66 million) from Lekim Textiles (Lesotho) Pty. Ltd..

On the same day, board of directors of the Company has approved to acquire one thousand shares of one Loti (M1.00)

each, representing 100% equity interest in Baneng Lesotho (Proprietary) Limited (“BLesotho”), an entity incorporated

in Kingdom of Lesotho, for a cash consideration of One Thousand Maloti (M1,000) (approximately RM600).

The abovementioned proposed acquisitions were completed subsequent to the end of the financial year.

(iii) On 5 January 2004, the Company entered into a conditional sale and purchase agreement for the proposed acquisition

of 70% equity interest in Seri Azhimu Jaya Garments and Textiles (B) Sdn. Bhd., a company incorporated in Brunei,

comprising 1,400,000 ordinary shares of BND1.00 (approximately RM2.20) each for a total consideration of RM19.6 million.

The abovementioned proposed acquisition is subject to approval from the relevant authorities.

28. SEGMENTAL INFORMATION

(a) Primary reporting segment - Geographical segments

The Group operates in three principal geographical areas of the world and is principally involved in manufacturing of

fabrics and garments.

ConsolidationMalaysia Brunei Singapore adjustments GroupRM’000 RM’000 RM’000 RM’000 RM’000

2003Revenue

External sales 211,762 64,163 - - 275,925

Inter-segment sales 28,829 - 1,962 (30,791) -

Total revenue 240,591 64,163 1,962 (30,791) 275,925

Results

Profit from operations 10,554 3,458 21 541 14,574

Interest income 195 3 - 198

Interest expense (10,842) (1,070) (3) (11,915)

(Loss)/profit before taxation (93) 2,391 18 2,857

Taxation 869 - (45) 824

Profit/(loss) after taxation 776 2,391 (27) 3,681

Minority interests - - - (1,076)

Net profit/(loss) for the year 776 2,391 (27) 2,605



28. SEGMENTAL INFORMATION (CONT’D)

(a) Primary reporting segment - Geographical segments (Cont’d)

ConsolidationMalaysia Brunei Singapore adjustments GroupRM’000 RM’000 RM’000 RM’000 RM’000

Assets and liabilitiesSegment assets 342,946 47,843 3,775 394,564

Segment liabilities 236,231 1,390 1,095 238,716

Other informationCapital expenditure 7,906 331 272 8,509

Depreciation 13,611 1,452 222 15,285

Other non-cash income (86) - - (86)

2002RevenueExternal sales 231,682 85,987 - - 317,669

Inter-segment sales 39,681 - 2,789 (42,470) -

Total revenue 271,363 85,987 2,789 (42,470) 317,669

ResultsProfit from operations 26,704 7,008 38 204 33,954

Interest income 305 5 - 310

Interest expense (13,880) (1,133) (16) (15,029)


Taxation (334) - (41) (375)

Profit/(loss) after taxation 12,795 5,880 (19) 18,860

Minority interests - - - (2,646)

Net profit/(loss) for the year 12,795 5,880 (19) 16,214

Assets and liabilitiesSegment assets 349,582 44,786 2,242 396,610

Segment liabilities 229,280 11,620 544 241,444

Other informationCapital expenditure 27,662 715 41 28,418

Depreciation 13,449 1,378 231 15,058

Other non-cash expenses 378 211 15 604

(b) Secondary reporting segment - Business segments

As the Group is principally involved in the manufacturing of fabrics and garments, segment reporting by business

segment is not prepared.



29. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the

development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks.

(b) Interest Rate Risk

The Group’s primary interest rate risk relates to interest-bearing debt, as the Company had no substantial long-term

interest-bearing assets as at 31 December 2003.

The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The

Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets.

This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of

protection against rate hikes.

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

respective notes.

(c) Foreign Exchange Risk

The Group operates internationally and is exposed to various currencies, mainly United States Dollar, Brunei Dollar and

Singapore Dollar. Foreign currency denominated assets and liabilities together with expected cash flows from highly

probable purchases and sales give rise to foreign exchange exposures.

The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the

property or investment is located or by borrowing in currencies that match the future revenue stream to be generated

from its investments.

Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are

kept to an acceptable level. Material foreign currency transaction exposures are hedged, mainly with derivative financial

instruments such as forward foreign exchange contracts.

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

functional currencies are as follows:

At 31 December 2003:

Ringgit BruneiMalaysia Dollar Total

Functional Currency of Group Companies RM’000 RM’000 RM’000

Trade ReceivablesUnited States Dollar 25,731 13,904 39,635

Trade PayablesRinggit Malaysia - 483 483

Singapore Dollar 2,017 - 2,017

United States Dollar 915 598 598

2,932 1,081 3,098

BorrowingsUnited States Dollar 163 6,388 6,551



29. FINANCIAL INSTRUMENTS (CONT’D)

(c) Foreign Exchange Risk (Cont’d)

As at balance sheet date, the Company has entered into forward foreign exchange contracts with a bank to purchase

US Dollar used to hedge anticipated sales with maturity date within one year at total notional amount of RM3,935,000.

The net unrecognised gains as at 31 December 2003 on forward contracts used to hedge anticipated sales which are

expected to occur during January 2004 amounted to approximately RM5,000 and are deferred until the related sales

occur, at which time they will be included in the measurement of the sales.

All the financial assets and financial liabilities of the Group in prior year are unhedged.

(d) Liquidity Risk

The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure

that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the

Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In

addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As

far as possible, the Group raises committed funding financial institutions and prudently balances its portfolio with some

short term funding so as to achieve overall cost effectiveness.

(e) Credit Risk

Trade receivables are monitored on an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer or counterparty except for the amounts

due from certain debtors of the Group as disclosed in Note 15 and 16. The directors believe that this will not create

significant problems for the Group in view of the length of relationship and close contacts with the management of

these companies.

(f) Fair Values

The fair values of the financial assets, financial liabilities as at the balance sheet date approximate their carrying amount

as shown in the balance sheets.

DIRECTORS’ REPORTLIST OF PROPERTIESAS AT 31 DECEMBER 2003


Land Area Age of Net BookDescription and (Built-up) Building Value

No. Location Existing Use Tenure (’000 sq.ft.) (Years) (’000)

Baneng Industries Sdn Bhd

1 Lot 3398 & 3399, 42 Lorong 5, Office and factory Freehold 158/(162) 3 to 6 8,429

3.5 Mile, Jalan Kluang, buildings

83007 Batu Pahat.

2 Lot 4979, 2.5 Mile Office and factory Freehold 642/(292) 2 to 11 24,135

Jalan Tanjong Laboh buildings

83000 Batu Pahat, Johor.

3 Lot 3890, EMR 2374 Vacant agricultural Freehold 174/(0) - 690

Mukim of Simpang Kanan V land

Batu Pahat, Johor.

4 Lot 3752, GM203 Vacant agricultural Freehold 6/(0) - 27


Batu Pahat, Johor.

5 Lot 3400, EMR 1285 Vacant development Freehold 89/(0) - 1,028


Batu Pahat, Johor.

Maxlin Garments Sdn Bhd

1 HS(D) 10527 PTD 9149 Shophouse/Storage Freehold 1.54/(3.08) 13 46

41, Jalan Bayur, Taman Nira

83000, Batu Pahat, Johor.

2 HS(D) 10525 PTD 9147 Shophouse/Storage Freehold 1.54/(3.08) 13 46

37, Jalan Bayur, Taman Nira

83000, Batu Pahat, Johor.

Seri Pertamas GarmentManufacturer Sdn Bhd

1 Blok Q39-41 Lambak Office and factory Leasehold 87/(50) 6 5,764

Kanan, West Industrial Estate buildings expiring

Bandar Seri Begawan, Brunei. 16 Feb 2023

ANALYSIS OF SHAREHOLDINGSAS AT 20 MAY 2004


Authorised Capital : 60,000,000 shares

Issued and fully paid-up : 60,000,000 ordinary shares of RM1.00 each

Class of shares : RM1.00 Ordinary Share

Voting Rights : 1 vote per Ordinary Share

Number of Shareholders

as at 20 May, 2004 : 1,010

DISTRIBUTION OF SHAREHOLDINGS

Size of Holdings No. of Holders % No. of Shares %

1 - 99 3 0.30 101 0.00

100 – 1,000 501 49.60 357,099 0.60

1,001 – 10,000 402 39.80 1,708,500 2.85

10,001 – 100,000 78 7.72 2,486,700 4.14

100,001 – 2,999,999* 23 2.28 17,920,687 29.87

3,000,000 and above (**) 3 0.30 37,526,913 62.54

Total 1,010 100.00 60,000,000 100.00

Note :

(*) means less than 5% of issued and paid-up share capital

(**) means 5% and above of issued and paid-up share capital

SUBSTANTIAL SHAREHOLDERS AS AT 20 MAY 2004

The Substantial shareholders of Baneng Holdings Bhd (holding 5% or more of the capital) based on the Register of Substantial

shareholdings of the Company and their respective shareholdings are as follows:-

Direct Interest Indirect InterestSubstantial Shareholders No. of Shares % No. of Shares %

Upaya Mendaki Sdn Bhd 18,325,886 30.54 - -

Lim Choon Hiok 12,857,727 21.43 18,325,8861 30.54

Employees Provident Fund Board 6,343,300 10.57 - -

Lim Poh Choo 1,602,613 2.67 18,325,8861 30.54

Note :

(1) Deemed interest by virtue of her shareholdings of more than 15% in Upaya Mendaki Sdn Bhd pursuant to Section 6A of


DIRECTORS’ REPORTANALYSIS OF SHAREHOLDINGSAS AT 20 MAY 2004


DIRECTORS’ INTERESTS IN RELATED CORPORATIONS

Ms. Lim Choon Hiok by virtue of her interest in shares of the Company is also deemed interested in shares of all the Company’s

subsidiaries to the extent the Company has an interest.

None of the other directors in office had any interest in shares in the Company’s related corporations as at 20 May, 2004.

DIRECTORS’ SHAREHOLDERS AS AT 20 MAY 2004

Direct Interest Indirect InterestDirectors No. of Shares % No. of Shares %

Y. Bhg. Tan Sri A Rahim Bin Tamby Chik 100,0000 0.17 - -

Lim Choon Hiok 12,857,727 21.43 18,325,8861 30.54

Lim Meng Hong 161,774 0.27 - -

Lim Meng Hee - - - -

Ng Soon Lim - - - -

Chai Koh Wah (Appointed wef 25.04.2004) - - - -

Keah Say Wan (Resigned wef 15.03.2004) - - - -

Note :

(º) Held through HLG Nominee (Tempatan) Sdn Bhd pledged securities account for Tan Sri A Rahim Bin Tamby Chik

(1) Deemed interest by virtue of her shareholdings of more than 15% in Upaya Mendaki Sdn Bhd pursuant to Section 6A of


ANALYSIS OF SHAREHOLDINGSAS AT 20 MAY 2004


THIRTY LARGEST SHAREHOLDERS AS AT 20 MAY 2004

No Shareholders No. of Shares %

1 Upaya Mendaki Sdn Bhd 18,325,886 30.54

2 Lim Choon Hiok 12,857,727 21.43

3 Employees Provident Fund Board 6,343,300 10.57

4 Lim Cheng Chee 2,356,000 3.93

5 Boo Kee Tong 2,076,700 3.46

6 Ong Mui Eng 1,951,600 3.25

7 Lim Poh Choo 1,602,613 2.67

8 Hoe Koon Teck 1,292,000 2.15

9 TLC Nominees (Tempatan) Sdn Bhd 1,048,500 1.75pledged securities account for Khai Heng Industries Sdn Bhd

10 Malaysian Assurance Alliance Berhad 1,000,000 1.67

11 Perbadanan Nasional Berhad 989,000 1.65


13 TLC Nominees (Tempatan) Sdn Bhd 870,000 1.45pledged securities account for Teo Chin Seng

14 Malaysian Assurance Alliance Berhadas Beneficial Owner (Growth Fund) 700,000 1.17

15 Amanah Raya Nominees (Tempatan) Sdn Bhd 562,000 0.94Dana Johor Pelaboran Johor Berhad

16 Amanah Raya Nominees (Tempatan) Sdn Bhd 528,000 0.88Amanah Saham Johor Pelaboran Johor Berhad

17 Amsec Nominees (Tempatan) Sdn Bhd 500,000 0.83pledged securities account for Lim Tian Chai

18 Malaysian Assurance Alliance Berhad 240,800 0.40as Beneficial Owner (Dana Al-Fayyadh)

19 Lee Yih Leang 239,400 0.40

20 Affin Nominees (Asing) Sdn Bhd 196,900 0.33Eassetmanagement Sdn Bhd for Pure Investor.com inc

21 Bumiputra-Commerce Trustee Berhad 179,100 0.30Amanah Saham Darul Iman

22 Lim Meng Hong 161,774 0.27

23 Yong Hing 148,000 0.25

24 Amsec Nominees (Tempatan) Sdn Bhd 131,100 0.22pledged securities account for Wee Lian Seng

25 Mayban Nominees (Tempatan) Sdn Bhd 117,400 0.20pledged securities account for Koh Choi @ Koh Tian Siew


27 HLG Nominee (Tempatan) Sdn Bhd pledged securities account for A Rahim Bin Tamby Chik 100,000 0.17

28 Amfinance Berhad 84,900 0.14pledged securities account for Yap Beng Poh

29 Yap Shing @ Yap Sue Kim 84,000 0.14

30 Kenanga Nominees (Tempatan) Sdn Bhd 83,400 0.14pledged securities account for Teo Lai Huat

DIRECTORS’ REPORTPROXY FORM

I/We(Full Name In Capital Letters)

of (Full Address)

being a * Member/Members of BANENG HOLDINGS BHD, appoint (Full Name in Capital Letters)

of(Full Address)

or in his absence, (Full Name In Capital Letters)

of (Full Address)

or in his absence, the CHAIRMAN OF THE MEETING, as *my/our proxy to vote for *me/ us and on *my/our behalf at the NinthAnnual General Meeting to be held at Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 Batu Pahat, Johor onSaturday, 26 June, 2004 at 2.30 p.m. and at any adjournment of that meeting.

Please indicate with an “X” in the space provided below how you wish your votes to be casted. If no specific direction as to votingis given, the Proxy will vote or abstain from voting as his discretion.

NO. RESOLUTIONS FOR AGAINST

1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December, 2003 together with the Directors’ and Auditors’ Reports thereon.

2. To approve the payment of Directors’ fee for the financial year ended 31 December, 2003.

3. To re-elect the following retiring Directors who retire by rotation and being eligible, offer themselves for re-election in accordance with the Article 101(a) of the Company’s Articles of Association:-i) Mr. Lim Meng Hee

4. ii) Dr. Ng Soon Lim

5. To re-elect the retiring Director, Mr. Chai Koh Wah who retires and being eligible, offer himself for re-election in accordance with the Article 102(c) of the Company’s Articles of Association.

6. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending 31 December, 2004 and to authorise the Directors to fix Auditors’ remuneration

7. As Special BusinessOrdinary Resolution - Authority to issue shares pursuant to Section 132D of the Companies Act, 1965.

8. Special Resolution – Proposed Amendments to Articles of Association

* Strike out whichever not applicable.

As witness my/our hand this day of , 2004

Signature of Member/Common SealNOTES:

1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint more than two proxies to attend and vote in his stead and heshall specify the proportion of his shareholdings to be represented by each proxy. A member may appoint any person to be his proxy without limitation and theprovision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. Where a member is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991, it may appoint more than (1) proxy inrespect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

3. The instrument appointing a proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if such appointor is acorporation, either under its common seal or under the hand of an officer or attorney duly authorised.

4. The instrument appointing a proxy, together with the power of attorney (if any) or other authority (if any) under which the instrument is signed or a notariallycertified copy of that power or authority shall be deposited at the Registered Office of the Company at Lot 4979 21/2 Miles, Jalan Tanjung Laboh, 83000 BatuPahat, Johor not less than 48 hours before the time for holding the meeting or otherwise the instrument appointing the proxy will not be treated as valid.

Number of Shares Held

BANENG HOLDINGS BHD (307139-W)Incorporated in Malaysia

Baneng Holdings Bhd (307139-W)

Lot 4979, 21/2 Miles,Jalan Tanjung Laboh, 83000 Batu Pahat,Johor Darul Takzim.

STAMP

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Documents

BANENG HOLDINGS BHD - National University of …libapps2.nus.edu.sg/nus_hl/baneng2003.pdfNOTICE OF ANNUAL GENERAL MEETING 2 BANENG HOLDINGS BHD (307139-W) Resolution 1 Resolution 2