Chairman's Statement Corporate Information Notice of Annual General Meeting Board of Directors 10. Directors' Profile 11-13

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3 CONTENTS Chairman's Statement Corporate Information Notice of Annual General Meeting Board of Directors 10 Directors' Profile Statement on Corporate Governance Audit Committee Report Statement on Internal Control 21 Additional Compliance Information 22 Directors' Responsibility Statement 23 Directors' Report and Audited Financial Statements Analysis of Shareholdings List of Properties 74 Proxy Form

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5 CHAIRMAN S STATEMENT BACKGROUND BLD Plantation Bhd. ("BLDP") is principally an investment holding company and provides management services while its subsidiaries are involved in cultivation and processing of oil palm, sales of related products, integrated composting process and other ancillary activities, namely integrated cattle farming. BLDP was listed on the Main Board of Bursa Malaysia Securities Berhad on 21 July As of 31 December 2004, the Group has approximately a total of 50,900 hectares ("ha") land for oil palm plantation of which around 16,600 ha are planted areas and around 9,300 ha are matured areas. INDUSTRY TREND AND DEVELOPMENT The Malaysian oil palm industry recorded an impressive performance in The production of crude palm oil ("CPO") soared to the highest level in the Malaysian oil palm industry's history, increasing to million tonnes from million tonnes in The increase was mainly attributed to the large expansion in matured areas, as well as improvement in the oil extraction rate from 19.75% in 2003 to 20.03% in The projected slow growth in domestic production and steady export demand is expected to reduce the impact of a slight recovery in world oils and fats supply situation and higher local palm oil carry-over stocks. This is expected to mitigate the pressure on local CPO price in On the production front, CPO production is projected to increase marginally to million tonnes. (Source: Overview of the Malaysian Oil Palm Industry 2004 by the Malaysian Palm Oil Board) GROUP PERFORMANCE For the financial year ended 2004, the Group recorded a revenue of RM144 million and profit after tax of RM28 million compared to revenue of RM87 million and profit after tax of RM15 million in period ended 2003 which was a period from 9 June 2003 to 31 December 2003 because the acquisition of its subsidiaries were completed on 9 June The increase in CPO and palm kernel ("PK") prices have contributed to the increase in the Group's revenue and profit after tax. The CPO production increased by approximately 4.2% to 79,600 metric tonnes as compared with last year's production. The Group achieved earnings per share of sen for financial year ended 2004 as compared to sen for period ended Weeding cost were reduced by about 30% as compared to last year partially through the integrated cattle rearing project in the matured areas of Bintulu Lumber Development Sdn. Bhd. ("BLD"). On 1 December 2004, BLD was awarded the Oil Palm Nursery Certificate of Competency by the Malaysian Palm Oil Board who found BLD to have achieved a high standard of competency in respect of all aspects of infrastructures, facilities and nursery practices. BLD also received the Safety Award 2004 from KTS Risk Management in January 2005 for its outstanding safety performance in manufacturing and miscellaneous factories and plantation sector. 03

6 CHAIRMAN S STATEMENT (contd.) DEVELOPMENT i) BLD aims to increase its planted hectarage in Igan and Lambir oil palm plantations. This new planting will come into production 3 years after field planting which will generate more income. ii) To ensure that nothing will go to waste, we believe in optimum utilisation of the oil palm resources. Towards this end, a) b) BLD recycles the palm oil mill waste materials such as empty fruit bunches, fibre and mill effluent for organic compost to supplement the use of inorganic fertilizer and pruned palm fronds are chipped with a mechanical chipper to produce animal feed for the cattle. SIGNIFICANT EVENTS Last year also saw the successful acquisition by our subsidiary company, BLD, on four (4) parcels of land in Miri Division totaling 10,213 ha from Hazelland Sdn Bhd and Merak Murni Sdn Bhd. PROSPECT The Group shall continue to invest in the expansion of oil palm plantation areas. Whilst the prospect of the Group is subjected to the variation of CPO prices, it will continuously and relentlessly endeavour to achieve satisfactory performance. DIVIDEND At the forthcoming Annual General Meeting, a final gross dividend of 10 sen per share less 28% tax in respect of the financial year ended 31 December 2004, will be proposed for shareholders' approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in shareholders' equity as an appropriation of retained profit in the financial year ended 31 December APPRECIATION On behalf of the Board of Directors, I would like to express my sincere gratitude and appreciation to the management team and employees for their commitment and contribution. I would also like to extend my heartfelt thanks to our customers, business associates and shareholders for their continued support, co-operation and confidence in the Group. We assure you that we will continue to make an effort to perform better in years ahead to uphold your trust in us. 04

7 CORPORATE INFORMATION Board of Directors Dato Sri (Dr.) Lau Hui Kang Chairman Dato Henry Lau Lee Kong Executive Director Tuan Haji Wan Abdillah bin Wan Hamid Executive Director Robert Lau Hui Yew Non-Executive Director Chong Chon Chee Independent Non-Executive Director YB Tuan Haji Hamden bin Haji Ahmad Independent Non-Executive Director Audit Committee Chong Chon Chee Dato Henry Lau Lee Kong YB Tuan Haji Hamden bin Haji Ahmad Remuneration Committee Dato Henry Lau Lee Kong Chong Chon Chee Robert Lau Hui Yew Registered Office Level 6, Crown Towers, 88, Jalan Pending, Kuching, Sarawak, Malaysia Tel: Fax: Auditors Ernst & Young Chartered Accountants Principal Bankers Malayan Banking Berhad RHB Bank Berhad HSBC Bank Malaysia Berhad Company Secretary Alvin Lau Lee Jen (MIA ) Listing Main Board of Bursa Malaysia Securities Berhad Stock Code 5069 Stock Name BLDPLNT Share Registrar Symphony Share Registrars Sdn Bhd Level 26 Menara Multi Purpose Capital Square No. 8 Jalan Munshi Abdullah Kuala Lumpur Tel: Fax:

8 CORPORATE INFORMATION (contd.) LIST OF SUBSIDIARY COMPANIES OF BLD PLANTATION BHD. Name of Company Date of Incorporation Equity Interest (%) Issued and Paid-up Share Capital (RM) Principal Activities Bintulu Lumber Development Sdn. Bhd. 20 October % 30,625,000 Cultivation of oil palm, processing of Fresh Fruit Bunches and sales of related products Kirana Palm Oil Refinery Sdn. Bhd. 17 August % 14,550,000 Dormant (Intended for palm oil refinery) Grand Mutual Sdn. Bhd. 5 January % 16,500,000 Cultivation of oil palm Niamas Istimewa Sdn. Bhd. 29 September % 2,064,720 Cultivation of oil palm BLD Resources Sdn. Bhd. 13 May % 2 Dormant (Intended for oil palm plantation) 06

9 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company ("BLDP") will be held at the Auditorium, Level 9, Crown Towers, 88, Jalan Pending, Kuching, Sarawak on Friday, 24 June 2005 at a.m. for the following purposes :- AGENDA To receive the Audited Financial Statements for the financial year ended 31 December To approve the payment of the Directors' fees for the financial year ended 31 December To approve the increase of Directors' fees amounting to RM63,000 bringing the total Directors' fees for the financial year ending 31 December 2005 to RM248,000. To approve the payment of Directors' fees for the financial year ending 31 December To declare a final dividend of 10 sen per share less 28% tax in respect of the financial year ended 31 December To re-elect the following Directors who retire in accordance with Article 84 of the Company's Articles of Association and being eligible, have offered themselves for re-election :- (i) Dato Henry Lau Lee Kong (ii) Tuan Haji Wan Abdillah bin Wan Hamid (iii) Chong Chon Chee (iv) Robert Lau Hui Yew (v) YB Tuan Haji Hamden bin Haji Ahmad To consider and if thought fit, pass the following resolution pursuant to Section 129 of the Companies Act, 1965 :- "THAT Dato Sri (Dr.) Lau Hui Kang, who retires pursuant to Section 129 of the Companies Act, 1965 be and is hereby re-appointed as a director of the Company to hold office until the next Annual General Meeting of the Company." To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. As special business To consider and if thought fit, pass the following resolution as ordinary resolution :- Proposed renewal of shareholders' mandate and new shareholders' mandate for recurrent related party transactions of a revenue or trading nature ("Proposed Shareholders' Mandates") (Resolution 1) (Resolution 2) (Resolution 3) (Resolution 4) (Resolution 5) (Resolution 6) (Resolution 7) (Resolution 8) (Resolution 9) (Resolution 10) (Resolution 11) (Resolution 12) (Resolution 13) 07

10 NOTICE OF ANNUAL GENERAL MEETING (contd.) "THAT approval be and is hereby given to the Company and its subsidiaries to renew the shareholders' mandate and to obtain new shareholders' mandate to give effect to the specified Recurrent Related Party Transactions with the specific classes of the related parties as outlined in Point 3(b) (pages 3 to 8) of the Circular dated 31 May 2005, which are necessary for the BLDP Group's day-to-day operations subject further to the following :- (a) (b) AND THAT such approval shall continue to be in force until :- (a) (b) the transactions are in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those available to the public and not to the detriment of the minority shareholders; and disclosure is made in the annual report a breakdown of the aggregate value of transactions conducted pursuant to the Proposed Shareholders' Mandates during the financial year; the conclusion of the next Annual General Meeting ("AGM") of the Company; or the expiration of the period within which the next AGM of the Company subsequent to the date it is required to be held pursuant to Section 143(1) of the Malaysian Companies Act, 1965 (the "Act") [but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act]; or (c) revoked or varied by resolution passed by the shareholders in general meeting; whichever is the earlier; AND THAT the Directors of the Company be authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the Proposed Shareholders' Mandates." 10. To transact any other business of which due notice shall have been given in accordance with the Company's Articles of Association and Companies Act,

11 NOTICE OF ANNUAL GENERAL MEETING (contd.) NOTICE OF DIVIDEND ENTITLEMENT NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of the members at the Annual General Meeting, a final dividend of 10 sen per share less 28% tax in respect of the financial year ended 31 December 2004 will be paid on 29 July 2005 to depositors whose names appear in the Record of Depositors on 15 July A depositor shall qualify for entitlement only in respect of :- a. b. Shares deposited into the depositor's securities account before 4.00 p.m. on 15 July 2005 in respect of transfers; and Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By order of the Board Alvin Lau Lee Jen (MIA 13153) Company Secretary 31 May 2005 Kuching, Sarawak Explanatory notes on special business 1. Ordinary resolution in relation to the proposed renewal of shareholders' mandate and new shareholders' mandate for recurrent related party transactions of a revenue or trading nature. The proposed resolution No. 13 if passed, will authorise the Company and each of its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature with the related companies as identified in Point 3(b) (pages 3 to 8) of the Circular to Shareholders dated 31 May 2005, which are necessary for the BLDP Group's day-to-day operations, provided that such transactions are in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those available to the public and not to the detriment of the minority shareholders. By obtaining the shareholders' mandates and a renewal of the same on an annual basis, the necessity to convene separate meetings from time to time to seek shareholders' approval as and when such recurrent related party transactions occur would not arise. This would reduce substantial administrative time and costs associated with the convening of such meetings without compromising on the corporate objectives of the BLDP Group or adversely affecting the business opportunities available to the BLDP Group. Notes :- 1. Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company, a proxy may but need not be a member of the Company The proxy form must be deposited at the registered office of the Company at Level 6, Crown Towers, 88 Jalan Pending, Kuching, Sarawak not less than forty-eight (48) hours before the time for holding the meeting. The proxy form appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or if such appointor is a corporation, under its common seal or the hand of its attorney. A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specified the proportion of his shareholding to be represented by each proxy. Each proxy appointed, shall represent a minimum of 100 shares. 09

12 BOARD OF DIRECTORS 1. Dato Sri (Dr.) Lau Hui Kang Chairman (not in the picture) 2. Dato Henry Lau Lee Kong Executive Director Tuan Haji Wan Abdillah bin Wan Hamid Executive Director Chong Chon Chee Independent Non-Executive Director 5. YB Tuan Haji Hamden bin Haji Ahmad Independent Non-Executive Director 6. Robert Lau Hui Yew Non-Executive Director 7. Alvin Lau Lee Jen Company Secretary 10

13 DIRECTORS PROFILE Dato Sri (Dr.) Lau Hui Kang Chairman Dato Henry Lau Lee Kong Executive Director Dato Sri (Dr.) Lau Hui Kang, a Malaysian aged 79, was appointed as Executive Deputy Chairman of the Company on 9 June 2003 and subsequently appointed as Chairman on 11 December He has more than 40 years of experience in timber and oil palm industries. He is one of the founders of BLD and has been the Managing Director since its incorporation. Through his stewardship, BLD has been successfully transformed from a timber-based company into a profitable oil palm plantation company. He is the Executive Chairman of KTS Group and has been instrumental in developing KTS Group into a diversified corporation. In addition, he sits on the boards of several other companies, associations, educational, charitable and welfare organizations. In recognition of his contribution to the society, he was awarded the Panglima Negara Bintang Sarawak (PNBS) in July 1985 by the Sarawak Government. He is a major shareholder of the Company. His son, Dato Henry Lau Lee Kong, is the Executive Director and a major shareholder of the Company. Dato Henry Lau Lee Kong, a Malaysian aged 53, was appointed as Executive Director of the Company on 2 May He graduated from University of Adelaide, Australia with a Bachelor of Engineering in 1978 and is a member of the Association of Professional Engineers, Scientists and Managers Australia. He is responsible for overseeing the overall management of BLDP Group and the formulation and implementation of the BLDP Group's business strategies and development of future expansion plans for BLDP Group. He has been a director of BLD since He is also the Managing Director of KTS Group and sits on the boards of several other companies. He was awarded the Panglima Setia Bintang Sarawak (PSBS) on 11 September 2004 in conjunction with Tuan Yang Terutama Yang Di- Pertua Negeri Sarawak Tun Datuk Patinggi Abang Haji Muhammad Salahuddin's 83rd Birthday. He is a major shareholder of the Company. His father, Dato Sri (Dr.) Lau Hui Kang is the Chairman and major shareholder of the Company. Dato Henry Lau is the Chairman of the Risk Management Committee and Remuneration Committee and a member of the Audit Committee of the Company. 11

14 DIRECTORS PROFILE (contd.) Tuan Haji Wan Abdillah bin Wan Hamid Executive Director Robert Lau Hui Yew Non-Executive Director Tuan Haji Wan Abdillah bin Wan Hamid, a Malaysian aged 51, was appointed as Executive Director of the Company on 2 May He attended a Diploma in Accountancy Course at Mara Institute of Technology (UiTM) in He was a Government Officer for about 19 years until 1994, last attached as Broadcasting Journalist with Radio Television Malaysia (RTM). He was appointed as Director of BLD in 1990 and since 1996, he has been actively involved in corporate policies and day-to-day operations of the Group. He holds directorship in several public limited companies and is a member of the Institute of Approved Company Secretaries since June He is a major shareholder of the Company and a member of the Risk Management Committee. He has no family relationship with any Director and is the brother to Wan Mohd. Shebli bin Wan Hamid, a major shareholder of the Company. Robert Lau Hui Yew, a Malaysian aged 40, was appointed as Non-Executive Director of the Company on 9 June He graduated from the University of Hull, England with Bachelor of Law (LLB) in 1988 and a Barrister-at Law in Upon graduation, he worked in a local law firm as an advocate from 1991 to In 1993, he became a partner of Messrs. Stephen & Wong Advocates. He holds directorship in several public limited companies. He is a major shareholder of the Company and a member of the Remuneration Committee. He has no family relationship with any Director and is the son of Lau Swee Lau Sui Guang, a major shareholder of the Company. 12

15 DIRECTORS PROFILE (contd.) Chong Chon Chee Independent Non-Executive Director YB Tuan Haji Hamden bin Haji Ahmad Independent Non-Executive Director Chong Chon Chee, a Malaysian aged 56, was appointed as Independent Non-Executive Director of the Company on 9 June He is a Certified Financial Planner. He obtained a Master of Business Administration (MBA) from Heriot-Watt University, Edinburgh in 1999 and graduated from Universiti Sains Malaysia with Bachelor of Science, majoring in Biology and Chemistry in YB Tuan Haji Hamden bin Haji Ahmad, a Malaysian aged 57, was appointed as Independent Non-Executive Director of the Company on 4 February He is a Chartered Accountant by profession and obtained his membership of the Association of Chartered Certified Accountants (ACCA) from the London School of Accountancy, United Kingdom in He is a Fellow member of ACCA. He worked with Standard Chartered Bank Berhad from 1974 to 2002 with last post being held as the Senior Manager, Corporate & Institutional (East Malaysia) for the bank. He is the Chairman of the Audit Committee and a member of the Remuneration Committee. He has no family relationship with any Director and/or major shareholder of the Company. He started his career as a Chief Accountant with the Sarawak Land Development Board from 1978 to Later, he set up his own accounting firm, Hamden Kiu dan Rakan- Rakan in He is currently an elected member of Dewan Undangan Negeri and holds directorship in several private limited companies. Since 25 July 2003, he has held the position of Independent Non-Executive Director in Naim Cendera Holdings Berhad, a company listed on the Main Board of Bursa Malaysia Securities Berhad. He is a member of the Audit Committee. He has no family relationship with any Director and/or major shareholder of the Company. Note: None of the Directors have any conflict of interest with the Company nor any conviction for any offence within the past 10 years. 13

16 STATEMENT ON CORPORATE GOVERNANCE 1. BOARD OF DIRECTORS Board Responsibilities The Board and Management are committed to ensure that good corporate governance is observed throughout the Group. The Board is responsible for the Group's strategic plans, business plans, business performance, succession planning, risk management, investor relations, internal control and management information system of the Group. Board Balance The Board of Directors has six members comprising of two Executive Directors, two Independent Non-Executive Directors and two Non-Executive Directors. The Board consists of professionals with experience and qualifications in various fields such as law, public services, accounting and finance as well as those with long extensive experience in the trade which the Group is involved in. This current composition are vital to successfully direct and supervise the Company's business activities. The Board recognizes the importance and contribution of its Independent Non-Executive Directors. They represent an element of objectivity, independent judgement and check and balance of the Board. The Board has not identified an Independent Non-Executive Director to whom concerns regarding the Company can be conveyed. All concerns regarding the Company may be conveyed to any director. Board Committees The Board has established the following committees:- (i) Audit Committee The Audit Committee Report is set out on pages 18 to 20 of this Annual Report. (ii) Remuneration Committee The Remuneration Committee Report is set out on page 16 of this Annual Report. Board Meetings The Board had held 5 meetings for the financial year ended 31 December The attendance of Directors are as follows :- 14

17 STATEMENT ON CORPORATE GOVERNANCE (contd.) Directors Dato Sri (Dr.) Lau Hui Kang Dato Henry Lau Lee Kong Tuan Haji Wan Abdillah bin Wan Hamid YB Tuan Haji Hamden bin Haji Ahmad Chong Chon Chee Robert Lau Hui Yew No. of meetings attended Supply of Information The Company Secretary, in consultation with the Chairman and Executive Directors, issues formal agenda for each meeting. All Directors have access to the advice and services of the Company Secretary together with all information within the Group. The appointment and removal of Company Secretary are matters for the Board as a whole. The Board recognizes that the Chairman is entitled to the strong and positive support of the Company Secretary who is responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. Directors are informed that they may take independent professional advice, if necessary and appropriate in furtherance of their duties, at the expense of the Company. Appointments to the Board All appointments are currently carried out based on general consensus and as such the Board is of the opinion that a separate Board Committee to oversee the appointment of new directors may not currently be required. Directors' Training All members of the Board have attended the Mandatory Accreditation Training Programme prescribed by Bursa Malaysia Securities Berhad. The Board will continuously attend training programmes and seminars to keep abreast with relevant developments under the Continuing Education Programme prescribed by Bursa Malaysia Securities Berhad. Informal orientation programmes are undertaken by new members of the Board to familiarize themselves with the various operations of the Group. The programmes include: briefing by Executive Director and Operations Managers; and site visits to the mill and plantation Re-election of Directors Directors over 70 years of age will retire at the Annual General Meeting but can seek re-appointment as Director to hold office until the next Annual General Meeting under Section 129 (6) of the Companies Act, In accordance with the Company's Article of Association, all new Directors appointed would retire at the Annual General Meeting following their appointment and are eligible for re-election. All Directors are to retire from office at least once in three years. 15

18 STATEMENT ON CORPORATE GOVERNANCE (contd.) 2. DIRECTORS' REMUNERATION The Remuneration Committee was established on 11 December The Members of the Remuneration Committee are:- Dato Henry Lau Lee Kong Chairman, Executive Director Chong Chon Chee Member, Independent Non-Executive Director Robert Lau Hui Yew Member, Non-Executive Director The duties of the Committee are as follows: a. Recommend to the Board the remuneration of the Executive and Non-Executive Director. b. Assist the Board in ensuring that the remuneration of the Directors reflect the responsibility and commitment of the Directors concerned. The remuneration of the Directors will be a matter decided by the Board as a whole with the Directors concerned abstraining and voting on decisions in respect of his own remuneration. Directors' fees are to be approved by shareholders at the Annual General Meeting ("AGM") based on recommendation of the Board. The Remuneration Committee has met three times during the financial year, which was attended by all the members of the Committee. Details of the remuneration for the Directors of the Company for the financial year ended 31 December 2004 are set out in Note 7 to the financial statements. 3. SHAREHOLDERS Dialogue between the Company and Investors The Board believes in clear and regular communication with its shareholders and institutional investors through timely announcements with regard to the Company's quarterly results, corporate proposals and other required announcements. 16

19 STATEMENT ON CORPORATE GOVERNANCE (contd.) Annual General Meeting The Board understands that the Annual General Meeting is a principal forum for dialogue with shareholders. Opportunities were made for shareholders to raise questions pertaining to the business activities of the Group during the Annual General Meeting. 4. ACCOUNTABILITY AND AUDIT Financial Reporting In presenting the annual financial statements and quarterly announcements, the Directors aim to present a balanced and understandable assessment of the Group's position and prospects. These financial statements are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards of Malaysian Accounting Standards Board (MASB). Internal Control The Statement on Internal Control is provided in page 21. Relationship with Auditors The Audit Committee maintain a formal and transparent relationship with the auditors. 5. STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES IN CORPORATE GOVERNANCE The Directors considered that for the financial year ended 31 December 2004, the Company had principally complied or was in the process of complying with the Best Practices of the Malaysian Code of Corporate Governance. This Statement is made in accordance with resolution of the Board of Directors dated 26 April

20 AUDIT COMMITTEE REPORT The Audit Committee was formed on 13 June The members are as follows:- Chong Chon Chee Chairman, Independent Non-Executive Director YB Tuan Haji Hamden bin Haji Ahmad* Member, Independent Non-Executive Director Dato Henry Lau Lee Kong Member, Executive Director *YB Tuan Haji Hamden bin Haji Ahmad is a member of MIA TERMS OF REFERENCE 1. Size and Composition The Audit Committee shall be appointed by the Directors from amongst their number which shall consist of not less than three members, the majority of whom shall be Non-Executive and Independent Directors, and free from any relationship, which might in the opinion of the Board of Directors, interfere with the exercise of independent judgement in carrying out the functions of the Audit Committee. No alternate Director can be a member of the Audit Committee. The members of the Audit Committee shall elect a Chairman from among their number who is a Non-Executive and Independent Director. At least one member of the Committee must be a member of the Malaysian Institute of Accountants ("MIA") or if he is not a member of the MIA, he must have at least 3 years' working experience and: (a) (b) (c) he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or 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; or he must have a degree/master/doctorate in accounting or finance and at least 3 years' post qualification experience in accounting or finance; or (d) he must have at least 7 years of experience being a Chief Financial Officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation. 2. Retirement and Resignation The Board shall, within three months of a vacancy occurring in the Audit Committee which results in the number of members reduced to below three, appoint such number of new members as may be required to make up the minimum number of three members. 18

21 AUDIT COMMITTEE REPORT (contd.) 3. Authority The Audit Committee is authorized by the Board to:- (a) (b) investigate any activity within its terms of reference; have the resources which are required to perform its duties; (c) (d) (e) seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Audit Committee; have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity, if any; obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary; and (f) convene meeting of the Audit Committee, excluding the attendance of the Executive Directors if deemed necessary, to consider any matter the external auditor believes should be brought to the attention of the Board of Directors or shareholders. 4. Duties The duties of the Committee are as follows: To review:- (a) with the external and internal auditors: their respective audit plan, the audit report - major findings and management's responses thereof, and their evaluation of the Group's system of internal control; (b) (c) the assistance given by the Group's employees to both the internal and external auditors; the effectiveness of the internal control systems including the adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work; (d) the audit fees proposed by external auditors; (e) the appointment (and re-appointment), resignation and dismissal of the external and internal auditors; (f) the appraisal of the performances of the internal and external auditors; (g) the quarterly and annual financial statements of the Company and the Group, focusing on the matters set out below, and thereafter to recommend for Board's approval:- - any changes in accounting policies and practices; - significant adjustments arising from the audit; - the going concern assumption; and - compliance with accounting standards and regulatory requirements; (h) any related party transactions that may arise within the Company or Group; 19

22 AUDIT COMMITTEE REPORT (contd.) (i) (j) to review the Company's Statement on Internal Control prior to approval by the Board; and any other functions as may be agreed to by the Audit Committee and the Board or as may be required or empowered by statutory legislation or guidelines prepared by relevant governing authorities. 5. Procedure of Audit Committee (a) (b) A quorum shall be two members and a majority of members present must be Independent Directors. The Finance Director or Finance Controller and Head of Internal Audit shall normally attend meetings. A representative of external auditors shall attend as and when required. The Company Secretary shall be the secretary of the Audit Committee. Minutes of each meeting shall be kept and distributed to each member of the Audit Committee. (c) The Chairman of the Audit Committee shall report in each meeting to the Board. (d) The Audit Committee shall meet as and when the need arises provided that it shall meet at least four times a year. The Audit Committee shall meet with the external auditor without the presence of Executive Director and Management at least once a year. 6. Review of Audit Committee The term of office and performance of the Audit Committee and each of the members shall be reviewed by the Board at least once every three years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference. MEETINGS During the financial year ended 31 December 2004, four meetings were held. All the members during the financial year attended the meetings. The Audit Committee carried out the following activities during the year:- (1) Review the audited Financial Statements before recommending them for Board's approval; (2) Review the unaudited Quarterly Financial Results before recommending them for Board's approval; (3) Review audit plans for the financial year prepared by external auditors and internal auditors; (4) Meet the external auditors without any management executives present except the Company Secretary; and (5) Review related party transactions. 20

23 STATEMENT ON INTERNAL CONTROL RESPONSIBILITY The Board is responsible for the Group's system of internal control which includes the establishment of an appropriate control environment and reviewing its adequacy and integrity. Due to the inherent limitations in system of internal control, the system is designed to manage rather than eliminate the risk or failure to achieve business objectives. The system can only provide reasonable but not absolute assurance against material misstatement or loss. ENTERPRISE RISK MANAGEMENT FRAMEWORK In December 2003, the Board, together with external consultants, KPMG, undertook an exercise to review the existing risk management processes of its major business units with the aim of formalising the risk management functions across the Group. A consolidated risk profile of the Group and a summary of key findings were developed during the year and presented to the Board. During the year under review, the Board has established a Risk Management Committee comprising representatives from the Board and management to report and monitor key risks affecting the business. The Board is taking steps to strengthen the ongoing process of identifying, evaluating and monitoring significant risks faced by the Group. INTERNAL AUDIT FUNCTION The Group did not have an internal audit department. The Group has outsourced the internal audit function to carry out risk-based internal audit. OTHER KEY ELEMENTS OF INTERNAL CONTROL. The Group has incorporated the following key elements into its system of internal control:... An organisational structure that lays down clear lines of responsibility and reporting. Regular visits by the Executive Directors to the Group estates to monitor the state of affairs there. During the visits, managers of the respective estates report on the progress and performance of the estates and discuss with a view of resolving key operational and management issues. The budgeting process includes the preparation of budgets by individual units which are approved by the Board. Actual results are monitored and compared against budgets whilst material variances, if any, are being investigated. Reporting mechanism whereby Executive Directors receive monthly performance and plantation statistics. Clearly documented internal policies and procedures set out in a series of manuals have been implemented. These manuals are subject to regular review and improvement. The Board is of the opinion that the existing system of internal control is adequate to achieve the Group's business objective. The Board will continuously assess the adequacy of the Group's system of internal control and make improvements to the systems as and when necessary. 21

24 ADDITIONAL COMPLIANCE INFORMATION The following additional information is provided in compliance with Bursa Malaysia Securities Listing Requirements:- 1. Utilisation of Proceeds Raised from Corporate Proposals A total gross proceeds of RM41.40 million was raised from public issue of million new ordinary shares of RM1.00 each at an issue price of RM2.00 per ordinary share pursuant to the listing of the Company on the Main Board of the Bursa Malaysia Securities Berhad on 21 July, 2003 and the status of the utilization of proceeds raised are as follows:- RM'000 Gross proceeds from Public Issue 41,420 Share issue expenses (2,463) Acquisition of property, plant and equipment (3,703) Repayment of bank borrowings (14,300) Plantation expenditure (20,187) Working expenses (767) Net proceeds as at 31 December ====== Share Buybacks There were no share buybacks by the Company during the financial year. Options, Warrants or Convertible Securities There were no options, warrants or convertible securities issued during the financial year. American Deposit Receipt ('ADR') or Global Deposit Receipt ('GDR') The Company did not sponsor any ADR or GDR programme during the financial year. Imposition of Sanctions/Penalties There were no material sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the relevant authorities during the financial year. Non-audit Fees Non-audit fees of RM13,000 was paid to the external auditors for the financial year ended 31 December Profit Estimate, Forecast or Projection No material variance arose between the audited results for the financial year and the unaudited results previously announced. Profit Guarantee There was no profit guarantee given by the Company during the financial year. Related Party Transactions The value and the type of related party transactions are shown on page 64 of the Annual Report Material Contracts There were no material contracts entered into by the Company or its subsidiaries which involve directors and major shareholders, either still subsisting at the end of the financial year ended 31 December 2004 or entered into since the previous financial year. Revaluation Policy on Landed Properties There were no revaluation policies adopted on landed properties during the financial year. 22

25 DIRECTORS RESPONSIBILITY STATEMENT Directors' responsibility statement in respect of the preparation of the audited financial statements. The Directors are required by the Companies Act, 1965 to ensure that financial statements prepared for the financial year give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of their results and cash flows for the financial year. The Directors consider that in presenting the financial statements, the Group has used appropriate accounting policies that are consistently applied and supported by reasonable and prudent judgements and estimates. The Directors have a general responsibility for ensuring the Group and the Company keep accounting records and financial statements, which disclose with reasonable accuracy the financial positions of the Group and of the Company. The Directors have taken steps to ensure that such financial statements comply with the Companies Act, 1965, approved accounting standards in Malaysia and other regulatory provisions. The Directors are also responsible for taking steps that are reasonably open to them to safeguard the assets of the Group and prevent and detect fraud and other irregularities. This Statement is made in accordance with a resolution of the Board of Directors dated 26 April