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ANNUAL REPORT 2003Developments BerhadCompany No. 7574-DIncorporated in Malaysia

ManagementForestCommitted to

Sustainable

GroupFinancial Highlights

Lingui Developments Berhad (7574-D) • Incorporated in Malaysia

FinancialStatistics

Timber & PlywoodTrading & ServicesManufacturing – Rubber Properties & Quarry Operations

Group segment results before interest and taxation

2003 2002 2001 2000 1999RM’000 RM’000 RM’000 RM’000 RM’000

PerformanceRevenueProfit before taxation EarningsEarnings excluding exceptional items Earnings before interest, tax,

depreciation, amortisation and exceptional items

Funds Employed Shareholders’ fundsNet tangible assets (sen) Earnings (sen) Earnings excluding exceptional items (sen) Gross dividend (sen)

Return on Shareholders’ Funds (%)

983,08930,41912,60612,606

166,676

996,447163.4

2.32.31.0

1.3

719,8615,8824,9554,955

94,575

828,957170.0

1.01.00.5

0.6

699,524119,433106,02222,841

115,809

737,719151.321.74.70.5

14.4

592,270102,42379,73779,737

170,370

633,787130.016.416.41.25

12.6

522,618110,978105,280105,280

182,781

587,650120.521.621.61.25

17.9

2003RM’000

61,8658,760

(1,466)3,540

72,699

2002RM’000

7,0706,812

(1,833)2,234

14,283

Note: The Group financial highlights have been adjusted to account for MASB 25: Income Taxes which has been adopted retrospectively. Earnings per share are based on profit after taxation, minority interests and extraordinary items and the weighted average number of ordinary shares outstanding as at 30 June.

Turnover 2003: RM983 million

Trading & Services 9%

Manufacturing – Rubber 1%

Properties & Quarry Operations 2%

Timber & Plywood 88%

Turnover 2002: RM720 million

Trading & Services 6%

Manufacturing – Rubber 2%

Properties & Quarry Operations 2%

Timber & Plywood 90%

Contents

ANNUAL REPORT 2003

Contents 1

Overview of Lingui’s Operations 2Board of Directors 3Corporate Information 3Board of Directors’ Profile 4 – 5Corporate Calendar 6 – 7Group Corporate Structure 8Chairman’s Statement 10 – 18Sustainable Forest Management 19Statement on Corporate Governance 20 – 25Statement on Internal Control 26 – 27Audit Committee 28 – 30Financial Statements 32 – 83Analysis of Shareholdings 84 – 86List of Properties 87 – 93Other Information 94 – 95Notice of Annual General Meeting 96 – 101Statement AccompanyingNotice of Annual General Meeting 102Form of Proxy

The Cover Design represents Lingui Developments Berhad’s commitment to SustainableForest Management today, for the well-being of generations tomorrow. The picturemontage rests on a background of hi-tech grid lines, symbolizing our confident approachto long-term growth and progress of the Group.

Overview ofLingui’s Operations


Overview of Lingui’s Operations2

N

NEWZEALAND

AUSTRALIA

SOUTH EAST ASIA

M A L A Y S I A

I N D O N E S I A

SINGAPORE

B O R N E O

SU

MA

TE

RA

Jakarta

Sarawak

SabahKUALA

LUMPUR

T H A I L A N D

Sarawak

Bintulu

Mukah

Sibu

Sarikei

BandarSri Aman

Kapit

KUCHING

Miri

Limbang

• Quarry

• Plywood Manufacturing Plant• Moulded Doorskin Manufacturing Plant

• Radiata Pine Plantation

• Plywood Manufacturing Plants• FibreBoard Manufacturing Plant

• Door Manufacturing Plant• Rubber Retread Compound Manufacturing Plant

T0413 Samling Plywood (Miri) Sdn. Bhd.

T0412 Samling Plywood (Baramas) Sdn. Bhd.

T0411 Samling Plywood (Baramas) Sdn. Bhd.

T0405 Samling Plywood (Lawas) Sdn. Bhd.

T0404 Samling Plywood (Lawas) Sdn. Bhd.

Legend

T3283 Samling Plywood (Bintulu) Sdn. Bhd.

T3282 Samling Plywood (Bintulu) Sdn. Bhd.

BRUNEI

T0411T0404

T0405

T0413

T0412

T3282

T3283

CorporateInformation

ANNUAL REPORT 2003

Board of Directors, Corporate Information 3

SECRETARIES Tan Ghee KiatT.V. Sekhar a/l T. G. Venkatesan

AUDIT COMMITTEE Chan Hua EngDato’ Seri Datuk Dr. Haji

Jalaluddin bin Abdul RahimGeh Cheng HooiCheam Dow Toon

REGISTERED OFFICE Level 42, Menara MaxisKuala Lumpur City Centre50088 Kuala LumpurTel: 03-2382 3999Fax: 03-2162 9311

BANKERSMalayan Banking BerhadRHB Bank BerhadHSBC Bank Malaysia BerhadBumiputera-Commerce Bank BerhadUnited Overseas Bank (Malaysia) BerhadAmFinance BerhadOCBC Bank (Malaysia) BerhadANZ Investment Bank

REGISTRAR Lawco Corporate Services Sdn. Bhd.,Suite 6.01, 6th Floor, Wisma Technip241 Jalan Tun Razak50400 Kuala LumpurTel: 03-2730 1811Fax: 03-2148 7868

AUDITORSKPMGWisma KPMG, Jalan DungunDamansara Heights50490 Kuala LumpurTel: 03-2095 3388

SOLICITORSKadir, Andri Aidham & PartnersChooi & CompanyReddi & CoMinterEllisonRuddWatts

Chan Hua Eng Chairman

Dato’ Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim Deputy Chairman

Yaw Chee Ming Managing Director

Geh Cheng Hooi Director

Cheam Dow Toon Finance Director

Board ofDirectors

Board of Directors’ Profile


Board of Directors’ Profile4

Chan Hua Eng a Malaysian citizen, aged 75, the Chairman of Lingui Developments

Berhad (“Lingui”), holds a Bachelor of Law from the University of Bristol. He is a

Barrister of Middle Temple and an Associate Member of the Institute of Taxation in

the United Kingdom (“UK”). He was a Partner of Shearn Delamore & Co since 1960

and retired as its Senior Partner in 1987. He was appointed to the Board of the

Company on 28 March 1990 and has been the Chairman since 8 November 1990. He

is currently a director of several other public listed companies in Malaysia, namely,

Malayan Cement Berhad, Carlsberg Brewery Malaysia Berhad, Pacific & Orient

Berhad, Rohas-Euco Industries Berhad and Glenealy Plantations (Malaya) Berhad

(“Glenealy”).

CHAN HUA ENGIndependent

Non-Executive Director

Dato’ Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim a Malaysian citizen, aged 63,

an Independent Non- Executive Director, has been a Director of Lingui since 6 July

1985. He holds a Masters in Business Administration and PhD in Business

Administration from Warnborough University, United Kingdom and is also a

“Fellow” Member of the British Graduates Association. He has held positions with the

Malaysian Government.

DATO’ SERIDATUK DR. HAJI

JALALUDDIN BIN ABDUL RAHIM

IndependentNon-Executive

Director

Geh Cheng Hooi a Malaysian citizen, aged 69, an Independent Non-Executive

Director, was appointed a Director on 28 March 1990. He is a “Fellow” of the

Institute of Chartered Accountants in England and Wales and a Member of the

Malaysian Institute of Certified Public Accountants. He was the Senior Partner of

Peat Marwick Mitchell (now known as KPMG) from 1979 to 1989. He currently sits

on the Boards of several public companies in Malaysia including Star Publications

(Malaysia) Berhad, PB Trustee Services Berhad, LPI Capital Berhad, Paramount

Corporation Berhad, The Bank of Nova Scotia Berhad, Tien Wah Press Holdings

Berhad, NCB Holdings Berhad, PLUS Expressway Berhad, UTAR Education

Foundation, Malayan Flour Mills Berhad, Lonpac Insurance Berhad and Huaren

Education Foundation.

GEH CHENG HOOIIndependent

Non-Executive Director

Board of Directors’ Profile (continued)

ANNUAL REPORT 2003

Board of Directors’ Profile 5

Yaw Chee Ming a Malaysian citizen, aged 44, the Managing Director of Lingui, was

appointed a Director on 4 July 1989. He holds a Master of Business Administration

from the University of Southern California in the United States of America. He is also

the Managing Director of Glenealy which is listed on the Main Board of the Kuala

Lumpur Stock Exchange and the Chief Executive Officer of Samling Strategic

Corporation Sdn. Bhd. (“SSC”) which has diversified interests including forest

management, downstream wood-based processing and property development.

YAW CHEE MINGNon-Independent

ExecutiveDirector

Cheam Dow Toon a Malaysian citizen, aged 49, the Finance Director of Lingui, was

appointed a Director on 7 March 1994. On 1 July 1997, he was appointed the Finance

Director of Lingui and Glenealy. He is an Associate Member of The Chartered

Institute of Management Accountants, UK, a graduate of The Institute of Chartered

Secretaries and Administrators, UK and a Member of the Malaysian Institute of

Accountants. Prior to coming back to Malaysia in 1981, he was trained in the UK with

a Multinational Company in Management Accounting and was a Divisional

Accountant in one of its Operating Division. He was the Financial Controller and

Company Secretary of Dunlop Estates Berhad from 1983 to 1987 and also the Group

Company Secretary of Multi-Purpose Holdings Berhad from 1986 to 1987. Further,

he completed the Wharton Advanced Management Programme from Wharton

Business School, the University of Pennsylvania in 1999. He is also presently the Vice

President (Corporate Finance) of SSC and a Director of Amalania Koko Berhad.

CHEAM DOW TOONNon-Independent

ExecutiveDirector

2002

CorporateCalendar


Corporate Calendar6

9 October 2002 During the last financial year, the Company had proposed the following:• Proposed acquisition of 24,000,000 ordinary shares of RM1.00 each in Samling Plywood (Miri) Sdn. Bhd.

(“SPM”), representing 60% of the entire issued and paid up ordinary share capital of SPM for an indicativepurchase consideration of RM89,554,589 to be satisfied by the issuance of 74,628,824 new ordinary sharesof RM0.50 each in the Company at an issue price of RM1.20 per share based on the audited adjusted nettangible assets of SPM as at 30 September 2002

• Proposed acquisition of approximately 385,942 Class “B” Redeemable Preference Shares (RPS “B”) inTreeOne (Malaysia) Sdn. Bhd. (“TOM”) from the shareholders of Glenealy Plantations (Malaya) Berhad(“Glenealy”) (other than Lingui Developments Berhad (“Lingui”)) to be satisfied by the issuance of47,638,076 new ordinary shares of RM0.50 each in the Company at an issue price of RM1.20 per share onthe basis of approximately 645 new ordinary shares of RM0.50 each in the Company for every 5.23 RPS Bto be acquired.[ hereinafter referred to as (“the Proposed Acquisitions”) ]

The parties concerned in the Proposed Acquisition of SPM namely, the Company, Samling Strategic CorporationSdn. Bhd. (“SSC”) and Tapah Plantation Sdn. Bhd. (“TP”) had mutually agreed to extend the Cut Off Date, beingthe date to obtain all the applicable approvals mentioned in the Conditional Sale of Shares Agreement (“SSA”)to 540 days from the date of the SSA, being 24 September 2001.

31 October 2002 Approval by shareholders of the Company at an Extraordinary General Meeting inrespect of the Proposed Acquisitions.

All conditions precedent contained in the SSA in respect of the Proposed Acquisition of 60% Equity Interest inSPM had been fulfilled.

28 November 2002 The Company’s shareholding in Grand Paragon Sdn. Bhd. (“GP”) was changedfrom 100% to 80% following the subscription of shares in the Company’s subsidiary, GP by Mr. Yeoh Keat Hinand Mr. John William Smith for a total of 400,000 ordinary shares of RM1.00 each at par for cash.

19 December 2002 The Company’s wholly-owned sub-subsidiary company, Hikurangi Forest FarmsLimited had entered into a Facility Agreement with ANZ Investment Bank, a division of ANZ Banking Group(New Zealand) Limited and Certain Financial Institutions listed there in for a loan of NZD122 million comprisingtwo tranches:(a) NZD tranche of NZD24,400,000 and,(b) USD tranche of USD46,800,000.

26 December 2002 Completion of the proposed acquisition of 60% equity interest in SPM with theissue and allotment of 74,628,824 new ordinary shares of RM0.50 each in Lingui to SSC and TP.

On the same date, the Company entered into a SSA with Nissho Iwai Corporation (“NIC”) for the ProposedAcquisition for the Remaining 40% Equity Interest in SPM.

2003Corporate Calendar 7

ANNUAL REPORT 2003

Corporate Calendar (continued)

15 January 2003 The Bondholders of the Company’s 5 years - 8% p.a. and 7 years - 8.5% p.a. FixedRate Bonds of RM150 million each had granted their respective sanction to the Company to create or permit tosubsist a security interest as security in respect of the NZD122 million Facility Agreement, upon the whole or anypart of the Company’s and / or any of its subsidiaries undertakings, assets or revenues that will in aggregateexceed 5% of the net tangible assets value of the Company.

29 January 2003 Approval from the Sarawak Department of Forestry in respect of the ProposedAcquisition for the Remaining 40% of Equity Interest in SPM.

10 March 2003 Approval from the Ministry of International Trade and Industry in respect of theProposed Acquisition for the Remaining 40% Equity Interest in SPM.

18 March 2003 The Company’s subsidiary company, TreeOne Holdings Sdn. Bhd. changed its name toTreeOne Logistic Services Sdn. Bhd. (“TOLS”).

3 April 2003 Sanction obtained from the High Court of Malaya in respect of the Proposed Acquisition ofRPS “B” (the proposed scheme of arrangement of Glenealy under Section 176 and other sections of theCompanies Act, 1965) in accordance to its petition.

3 April 2003 Approval from the Securities Commission in respect of the Proposed Acquisition for theRemaining 40% Equity Interest in SPM.

11 April 2003 The Company and Perkapalan Damai Timur Sdn. Bhd. had subscribed for a total of 9,998ordinary shares of RM1.00 each in TOLS. The consideration for the subscription was arrived by way of mutualdiscussion and was effected and satisfied by cash which resulted in a change of the Company’s equity interest inTOLS from 100% to 97%.

28 April 2003 Approval from the Foreign Investment Committee in respect of the Proposed Acquisitionfor the Remaining 40% Equity Interest in SPM.

6 June 2003 The Company had issued and allotted 47,638,076 new ordinary shares of RM0.50 each to theshareholders of Glenealy (other than Lingui) for 385,942 RPS “B” in TOM.

20 June 2003 Approval by the shareholders of the Company at an Extraordinary General Meeting inrespect of the Proposed Acquisition for the Remaining 40% Equity Interest in SPM.

13 August 2003 Completion of the Proposed Acquisition for the remaining 40% Equity Interest in SPMwith the issue and allotment of 49,752,549 new ordinary shares of RM0.50 each in Lingui to NIC.

100%

SamlingPlywood

(Baramas)Sdn. Bhd.

100%

SamlingPlywood(Lawas)

Sdn. Bhd.

100%

Lingui CorporationSdn. Bhd.

100%

Grand ParagonSdn. Bhd.

100%

TreeOne(Malaysia)Sdn. Bhd.

100%

SamlingAgro-ForestryManagement

Sdn. Bhd.

100%

TreeOne LogisticServices Sdn. Bhd.

(formerly knownas TreeOne

Holdings Sdn. Bhd.)

100%

StigangResourcesSdn. Bhd.

40%

SepangarChemicalIndustry

Sdn. Bhd.

LinguiDevelopments Berhad

100%

TreeOne B.V.

45%

Samling FibreBoard Sdn. Bhd.

100%

Hikurangi ForestFarms Limited

100%

East CoastForests Limited

100%

Tasman Forestry(Gisborne) Limited

100%

Hock LeeRubber Products

Sdn. Bhd.

100%

Hock LeeEnterprises (M)

SendirianBerhad

100%

Bukit ParehQuarry

SendirianBerhad

36.02%

GlenealyPlantations

(Malaya) Berhad

100%

TreeOne(NZ) Limited

100%

Miri PartsTrading

Sdn. Bhd.

100%

TinjarTransportSdn. Bhd.

Samling Plywood(Bintulu)

Sdn. Bhd.

100%

Samling Plywood(Miri)

Sdn. Bhd.

100%

Tamex TimberSdn. Bhd.

100%

SamlingDorFoHomSdn. Bhd.

35% 100%

AlpenviewSdn. Bhd.

100%

Ang Cheng HoQuarry Sdn. Bhd.

100%

Hock LeePlantationsSdn. Bhd.

- Timber

- Investment Holding

- Properties and Quarries

- Manufacturing

- Trading

- Dormant

8 Group Corporate Structure


GroupCorporate Structureas at 30 September 2003

Chairman’s Statement 10 - 18

Sustainable Forest Management (SFM) 19

Statement on Corporate Governance 20 - 25

Statement on Internal Control 26 - 27

Audit Committee 28 - 30

Chairman’sStatement

The financial year under review started on a positive note with

timber prices moving on an upward trend in the first quarter

from the lows experienced in the previous financial year. The

Group’s growth was further enhanced with the completion in

the second quarter of the financial year of its acquisition of a

60% equity interest acquisition in Samling Plywood (Miri) Sdn.

Bhd. (“SPM”) which owns a five-line plywood mill and holds

a timber concession license with an area measuring 204,895

hectares. However, the advent of Severe Acute Respiratory

Syndrome (“SARS”) and the Iraqi war in the beginning of the

third quarter of the financial year derailed what would have

been a more promising year when it caused timber prices to

soften worldwide and also added complications to the Group’s

cost containment efforts with fuel prices increasing sharply. In

spite of this, timber prices for the full financial year under

review were still higher than that of the previous financial year.

For the financial year under review, the Group achieved earnings before interest,tax, depreciation and amortisation of RM167.0 million which was 76% higherthan that of the previous financial year. The Directors have also reviewed thecarrying costs of the New Zealand plantations and based on current Radiata pineprices, have written off an amount equivalent to the interest that had beencapitalised for the financial year under review of RM28.6 million to the incomestatement. After the write-off, profit before tax achieved for the financial yearunder review was RM30.4 million which improved by 417% compared to theprevious financial year.


Chairman’s Statement10

Chairman’s Statement (continued)

Log Trading The unusually wet weather conditions experienced throughout the financial yearunder review had somewhat curtailed the Group’s harvesting plans.Shipments were also affected by the Iraqi war and the spread ofSARS as less vessels called at the Sarawakian ports during thatperiod. Nevertheless, the Group achieved higher log export volumesof 472,637m3, an increase of 48% from the previous financial yearmainly due to consolidation of extra sales of 38,939m3 from the newsubsidiary, SPM since November 2002 and the commencement ofhelilogging in certain high terrain areas.

The Group’s log trading export markets were still principally focused on Japan, Taiwan, China and India.Despite the slower housing starts and downstream operations in Japan, the Group has managed to expandits log export volumes to its loyal traditional buyers in Japan, which buy mainly the premium grade logs.

The average selling price achieved for log sales also improved, benefiting from the improvement in pricesin the first quarter of the financial year as uncertainty of log supplies caused buyers to replenish and stockup on their positions. This improvement in prices resulted in offsetting the effect of the softening timberprices during the second and third quarter of the financial year following the uncertainties created by theIraq war and SARS. The World Health Organisation has since lifted the SARS warning for China whichshould restimulate trade in China.

Other developments have also helped checked prices from sliding further. The continued ban of illegallogging in Indonesia has stemmed the flooding of illegal logs into the market, thus providing some supportto log prices during the financial year under review. The Indonesian government’s announcement ofvarious measures to reduce timber harvest levels to enable the country to produce sustained flow of logsfor the domestic industries was positive news to the market. The Japanese government’s recent signing ofan “action plan” on illegal logging with the Indonesian government which contains measures to addressillegal logging and the development of a tracking system for harvested logs further provided stability tothe market. Indonesia is now on track in taking positive steps to address the issue of illegal logging whichshould augur well for the log markets.

48%

...the Groupachieved higher log

export volumes of

an increase of472,637m3,

LOG PRODUCTION

M3

( in

’ 0

00

)

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

JAN

FE

B

MA

R

AP

R

MA

Y

JUN

20032002

0

30

60

90

120

150

ANNUAL REPORT 2003

Chairman’s Statement 11


Plywood The Group’s traditional markets of Japan, South Korea, China, Taiwan and USA continuedto be the major destinations for the Group’s plywood exports in the financialyear under review although there were not much fresh leads in demand, inparticular Japan as it waits for news of the new standards for buildingmaterials which were introduced with effect from July 2003.

The Group plywood export volumes during the financial year under reviewhad increased to 377,050m3 compared to 305,569m3 in the previous financialyear. This was principally due to the inclusion of 78,899m3 of sales by SPMwhich was consolidated since November 2002. Export sales would have been

higher if not for a temporary shutdown of approximately three months at one of the Group’s plywood millsfor maintenance works and installation of a new boiler.

The prices of plywood had generally moved in tandem with the log prices during the financial year underreview except that they were subject to greater variance and volatility. The average selling price achievedfor the financial year under review had improved to USD291 per m3 compared to USD247 per m3 in theprevious financial year. The Group’s continued focus on niche plywood products which are not subject toas wide a fluctuation as commodity grade plywood has paid dividends as prices obtained during thefinancial year under review were generally more stable and better than commodity grade plywood.

Competition and supply from Indonesian producers continued to influence the market and the movementof plywood prices. Although plywood exports from Indonesia had generally fallen due to lack of freshcapital for new investments and reinvestment coupled with dwindling wood resources for productionwhich had been restricted by more stringent survelliance to prevent illegal logging, existing producers stillstrived to protect their market share by selling very competitively.

Housing starts in Japan which had been the mover of plywood prices had remained lacklustre in thefinancial year under review. However new challenges have emerged with the announcement of theimplementation of a new Japanese Agricultural Standard (“JAS”) with effect from July 2003. This newstandard which regulates the emission of formaldehyde from building materials has added a newrequirement for the already high quality standard of exports to Japan. The Group’s newly acquired mill inSPM which obtained the JAS certificate in May 2003 was able to capitalise on this to obtain premiumprices for exports to Japan for the two months to June 2003. As at the date of this report, another mill inthe Group has successfully obtained the JAS certificate for general and structural plywood. Thecertifications obtained range from F2 star to F4 star grade for various types of plywood.

Plywood export to China has been on the decrease as China’s owntimber downstream manufacturing activities expanded.Increasing capital were being invested in anticipation of theexpected increase in demand in timber products as China’seconomy expands. China’s own locally expanding plywoodoperations has grown to be a major competitor to importedplywood for market share in China. With the advantage of lowerlabour and land costs, competition with the locally producedcommodity grade plywood has been tough. The Group basicallyfocused on niche products, like container flooring so as to avoiddirect competition. On the positive side, the strong demand forpanel products by China has provided the fairly volatile timbermarket with a positive stabilising factor.

377,050m3

...plywood exportvolumes during the

financial year underreview had increased to




ANNUAL REPORT 2003



During the financial year under review, the Group managed to increase its plywood exports to USA andthis trend is expected to be maintained in the current financial year. The recent cut in interest rates hasspurred the economy and residential construction has been strong for panel products.

Timber Support Services The Group’s continuing efforts in enhancing productivity through betterlogistics management and improved manpower and machineryperformance also helped the Group improve its production volumes.

The performance of Timber Support Services was to a certain extentinfluenced by weather conditions in the logging operational areas. Theexceptionally wet conditions experienced during the financial yearunder review had resulted in difficulties by the Group’s contractingarm in fully transporting all the extracted logs down to the open sea for

sale by the licensees. This was most pronounced in the fourth quarter of the financial year under review. The dropin calls by vessels at Sarawakian ports during the Iraqi war and SARS period further aggravated the position bycausing a backlog of harvested logs that need to be transported down to the port and sold. The strong logisticsmanagement that the Group had in place helped alleviate this problem to a certain extent. As a result of this, theperformance of the contracting companies for the financial year under review was below that of the previousfinancial year. The riverine transportation business, although affected by higher diesoline prices, performed well,returning a profit contribution which was just 20% below that from the previous financial year. During the rainyperiods, the timber support services unit took the opportunity to overhaul, repair and maintain their equipmentand fleet so that productivity will increase when they are operational during dry weather.

During the financial year under review, the Group’s purchasing arm, Miri Parts Trading Sdn. Bhd. continued tosource for cheaper prices for spare parts purchases by seeking alternative supplies as well as negotiating withcurrent suppliers, maintaining high quality of parts at the same time.

FibreBoard The fibreboard business turned around in the financial year under review but has yet tocontribute positively to the Group’s financial results.

Sales volumes increased with higher value panels being sold. While Japan and Chinawill continue to be the main markets for the fibreboard business, the Group hascontinued its efforts towards penetrating new markets to increase its sales volumesthrough intensified marketing efforts focusing mainly on its “specialty” products suchas EO (zero formaldehyde emission) grade boards andhigh density fibreboard (“HDF”) which fetch premiumprices. The result of these efforts was that average net

selling prices achieved in the financial year under review were 4% higher than theprevious financial year.

On the production side, steps implemented to producing high quality boards paid offas the boards produced met the stringent requirements of buyers, especially in Japan.The implementation of Japanese Industrial Standard (“JIS”) effective July 2003 forhousing products will add another dimension to the marketing of boards to Japan.The plant is currently preparing for the necessary audit to obtain the certification.Reject rates were also kept low through effective quality checks.

4%... average netselling prices

achieved... were

higher...




Door Volume of doors sold by Grand Paragon Sdn. Bhd. (“GP”) in the financial year under review hadincreased by 72 % from the previous financial year with its market focus mainly in theUnited Kingdom (“UK”). It complements SDF by using SDF’s moulded doorskins tomanufacture moulded doorskin doors for sale to the UK. GP is still building up its customerbase and as such, it incurred a loss of RM4.1 million for the financial year under review.

GP successfully attained the Chain of Custody Certificate during thefinancial year which certifies that at least 70% of the wood used inthe engineered doors and moulded skin doors have been harvestedfrom forests which meet the stringent environmental, social andeconomic standards. With this certificate, GP will be able to meetvarious customers’ requests that its doors be FSC certified, thusincreasing its market reach.

As part of the Group’s drive to promote efficiency, the component plant in Kuala Baram, Sarawak has beenrelocated to its assembly and finishing plant in Sungei Buluh, Selangor. Additional plant and equipmenthad been purchased for the new skin door factory to meet the increase in demand.

Doorskin Samling DorFoHom Sdn. Bhd. (“SDF”) in which the Group has a 35% equity interestcontributed positively to the Group’s results in the financial year under review.

With better acceptance of the SDF’s doorskin products, export sales volume had increasedby over 20% with exports mainly to USA, Eastern Europe and Russia. This was alsoassisted by the expansion of the range of products / patterns to capture new markets. Newmoulds were purchased during the financial year under review for this purpose. With theincrease in production volumes to cater for the better sales, average cost per doorskin hadbeen brought down. This had enabled the Group to quote much more competitively tocapture market share. The production process has been smooth with conscious efforts beingmade by the operators to improve the production processes through careful planning andanalyses of the production flow.

During the financial year, SDF was accredited the Chain of Custody Certificate from theForest Stewardship Council A.C. (“FSC”) which certifies that at least 30% of woodcontent used in the manufacturing of doorskin is from sustainable forests which meetstringent environment, social and economic standards. The obtaining of this certificate hasenabled the company to position itself more favourably to market to countries which aremore environmentally conscious.20%

...export sales volumehad increased by over

72%

Volume of doorssold by Grand

Paragon... hadincreased by

New Zealand - Forest Plantation The Group’s New Zealand forest plantation covers agross area of 35,057 hectares. Commercial harvesting commenced in October 2002and a total volume of 118,563 tonnes of Radiata pine were harvested since then tillJune 2003 for local and export sales.

Positive cash flows were generated from the operations during the financial yearunder review, although margins were squeezed as log prices realised had beenunder pressure due to the strengthening of the New Zealand Dollar against the USDollar. Higher freight charges were experienced due to increased fuel prices. An

ANNUAL REPORT 2003



Chemicals The Company’s associate, Sepangar Chemical Industry Sdn. Bhd. (“SCI”) continued tocontribute positively to the Group’s results. Margins for SCI werehowever squeezed during the financial year following the rise inraw material prices such as phenol, melamine and methanol intandem with the upward trend in oil prices.

During the financial year under review, SCI had investedapproximately RM12.5 million (equivalent to USD3.3 million) in aformalin and formaldehyde adhesive resin plant at Yong Yu Village,

Sanxin Town, Zhangjiagang City, Jiangsu Province in China. This expansion was aimed at tapping into thefast growing downstream wood processing industry in China.

SCI will continue to play a key role to ensure that the supply of glue to the Group meets the ever changingneeds of the customers and the requirements of standards enforced by new regulations.

earnings before interest, tax, depreciation and amortisation of NZD1.5 million was achieved for the financialyear under review during which, various roads, bridges and landings costing approximately about NZD3.0million were constructed to facilitate the extraction of logs from areas that were being harvested.

The New Zealand forest plantations are expected to contribute positively to the Group as harvest volumesincrease to reach optimal harvesting levels of about 700,000 m3 within the next few years. Ongoing studiesare being done to understand the wood properties better so that the Group will be able to maximise the valueof the wood when full harvesting commences.

During the year under review, the Group refinanced its loan obligations that were incurred to purchase the NewZealand forest plantations. The new loan arranged with ANZ Investment Bank has a structure that closelymatches the principal repayment schedule to the woodflow profile of the forest.

NZD1.5 million

An earnings before interest, tax,depreciation and amortisation of

Manufacturing - Rubber The price war for rubber compounds in the local market continuedinto the financial year under review. Margins continued to benarrowed with rising raw material costs. This business incurred aloss of RM2.1 million for the financial year under review. Theemphasis during the financial year under review was to containcost, maintain strict credit control and increase export volumes.Export sales had improved by 12%, contributing 45 % of total salesin the financial year under review. The company will continue toexpand on its market base through international promotions andthe introduction of new tread patterns.12%Export sales

had improved by


Corporate Governance The Board continues to exhort the principles and best practices ofgood corporate governance as described on pages 20 to 25 These practices are instilled throughout theGroup and form part of the forums and meetings held by various departments within the Group in thefinancial year under review and from time to time thereafter.

Corporate Developments The Group completed its acquisition of a 60% equity interestacquisition in Samling Plywood Miri Sdn. Bhd. (“SPM”) on 26 December 2002. On the same date, theCompany entered into a Sale of Shares Agreement with Nissho Iwai Corporation (“NIC”) to acquire theremaining 40% equity interest in SPM. That acquisition will afford the Group a greater pool of timberresources at its disposal which will enhance the Group’s competitiveness through economies of scale andsynergy. It will also translate into a wider range of plywood products as well as log species available forour customers.

On 6 June 2003, the Group also completed the Proposed Scheme of Arrangement which involved theproposed acquisition of approximately 385,942 Class “B” Redeemable Preference Shares (RPS “B”) inTreeOne (Malaysia) Sdn. Bhd. (“TOM”) from the shareholders of Glenealy Plantations (Malaya) Berhad(“Glenealy”) (other than the Company) by the issuance and allotment of 47,638,076 new ordinary sharesof RM0.50 each in the Company at an issue price of RM1.20 per share on the basis of 645 new ordinaryshares of RM0.50 each in the Company for every 5.23 RPS B acquired. This effectively eliminates theGroup’s obligation to Glenealy on the RPS “B”.

To further streamline the Group’s finances, the Company’s wholly-owned sub-subsidiary company,Hikurangi Forest Farms Limited (“HFF”) entered into a Facility Agreement with ANZ Investment Bankon 19 December 2002, a division of ANZ Banking Group (New Zealand) Limited and Certain FinancialInstitutions listed therein for a loan of NZD122 million comprising two tranches:

(a) NZD tranche of NZD24,400,000 and,(b) USD tranche of USD46,800,000

repayable over 12 years to refinance the Company’s syndicated US Dollar term loan which was obtainedto finance the acquisition of HFF in August 2000 and also to provide working capital for the Group.



Properties and Quarry Operations The Quarry division recorded a strongperformance during the financial year under review with animprovement in profit before taxation of about 60% over theprevious financial year. The sales volume of aggregates hadincreased by about 48 % from the previous financial year mainlyfrom crusher run sales to new customers involved in roadprojects located in the Central Region of Sarawak. Marketing

campaigns were also stepped up to sell the less popular sized aggregates at competitive prices.

To reduce the likelihood of bad debts, sales were made only tocustomers with good credit standing. In efforts to maintainmargins, increased emphasis was also placed on repair andmaintenance costs. Scheduled repairs were strictly adhered to, tominimise incidences of unplanned production stoppages due tobreakdowns. 48%

The sales volume ofaggregates had increasedby about


Sustainable Forest Management There has been increased awareness amongstconsumers regarding the environmental impact of logging activities, which has resulted in purchasingpreferences for products that are eco-friendly. It has become increasingly important for the Group to buildpertinent relationships with consumers, shareholders and public in this respect. As such, we have dedicatedpage 19 on Sustainable Forest Management in this year’s Annual Report to explain the ongoing Group’sefforts in ensuring operational activities are economically viable, environmentally compatible and sociallyacceptable as a forest resource management.

Outlook The current financial year is expected to be a challenging one for the Group as the outlookfor the timber market is still one of uncertainty. Although present prices have recovered slightly, there areno firm indications that it will be sustained.

Effective enforcement against illegal logging in Indonesia will be a key factor on the timber market for thecoming financial year. The Indonesian authorities have taken proactive steps to stop deforestation inIndonesia and this has resulted in various memoranda of understanding being signed with various bodiesand governments. It is hoped that these accords will be strictly enforced. The recent announcement of anexpected reduction in the harvestable volumes in Indonesia for the coming year as part of theGovernment’s plan to control the rate of harvest will hopefully be translated into reality, thus causing logsupply to shrink and prices to improve as a consequence. This will also impact upon plywood productionas log resources available for input into its processes will shrink. Plywood prices may rise if this happens.Your Company is in the fortunate position of having its own log resources.

Risk Management Comprehensive and pro-active risk management is a high priority of theBoard and forms an integral part of the Group’s activities and operations.

During the financial year under review, the risk function was commenced under the implementation of awell-defined risk management framework that combines centralised policy setting with broad oversight.The Group’s risk management mechanism is designed to identify, analyse and manage risks at an earlystage and to regularly monitor risk exposures in a volatile and rapidly changing environment. The Grouptakes a prudent and conservative approach to risk that is fully aligned with long-term business strategy andfirmly believes that risk management must be firmly embedded at operational level if it is to be sustainableand effective. This approach to risk is underpinned by strong professionalism, executive sponsorship anda risk function, which is independent of the operational business units.

Corporate Social Responsibility The Group continues to provide various forms ofeducation assistance to its employees to further enhance and develop their skills. Scholarships have beenawarded to all-round high achievers to pursue engineering and forestry courses at renowned localuniversities. During the financial year under review, four scholars joined the Group upon successfulcompletion of their university education.

The Community Services Department which was set up to build on-going relationship with the nativecommunities in areas that the Group operates undertook various community projects during the financialyear under review. This included supplies of medicine, building materials for house construction andgenerator sets.

ANNUAL REPORT 2003



Japan will remain a key market for timber producers, principally due to the better prices that can beobtained from this market. Although there were no fresh leads in demand for the past few years, anyupsurge in housing starts will augur well for the industry. As stated before, the implementation of the newJapanese Agricultural Standard (“JAS”) which regulates the emission of formaldehyde from buildingmaterials with effect from July 2003 will add on new requirements for higher quality products. CurrentlyJAS certified products are fetching a premium in the market but as more mills obtain certification, thismay put downward pressure on prices. Your Group has positioned itself for this change and as at the dateof this report, two of the Group’s mills have been JAS certified.

Competition for the Chinese market is likely to intensify in the current year with more locally producedpanels products coming on stream. Direct competition will be tough due to China’s competitive positionbrought about by low labour cost. On a positive note, demand from China is growing as it embarks onmajor infrastructure and development programmes, notably construction for the 2008 Olympics. Theextent of how much that demand can be met from internal resources is not exactly clear but it is expectedthat a significant part of the demand will still be met from imports.

Challenges from Non-Government Organizations (NGOs) campaigning against UK timber merchantsimporting timber products from Indonesia on the grounds that they are manufactured from illegallysourced logs have intensified. This may cause a shift in supply to Malaysian products which will augurwell for the Group. On the local front, there will be shifting changes to the logging scene with increasedusage of smaller logs from tree plantation sources. The Group has geared itself to enhance competitivenessby diversifying into value added products to maximise the utilisation of such logs. Additional investmentshave been made in new machinery for the purpose of peeling smaller logs for producing veneer.

To face the challenges ahead in an increasingly competitive market, improving customer relationship andunderstanding customers’ needs through constant dialogue and follow up will be one of high priority forthe Group. Increased focus will be put into brand building that increases the identity and visibility of ourproducts and improve the distribution of our products by targeting the right channels and outlets. Strategieswill also be developed to shorten the supply chain and reach more end users. To moderate its exposure toprice volatility from commodity type products, the Group will continue to venture into more nicheproducts where the variation in prices is less. To improve on productivity, employees will be motivatedthrough various incentive schemes to bring their output levels to higher benchmarks set.

Dividends In deciding the proposed dividends for the financial year under review, your Board hasconsidered the improved performance balanced with the need for capital preservation to generate futureprofits and growth. With this consideration in mind, your Board proposes a first and final dividend of 1.0sen per share less income tax of 28% amounting to RM4,749,400 (2002: 0.5 sen per share less income taxof 28% amounting to RM1,755,400) for the financial year ended 30 June 2003 subject to the approval ofshareholders at the forthcoming Annual General Meeting.

Acknowledgement On behalf of the Board, I would like to express our appreciation to allemployees for their continued dedication and teamwork during the financial year. We also wish to thank ourcustomers, business partners, bankers, the authorities and shareholders for the continued support of the Group.

Chan Hua Eng R OBE

Chairman

26 August 2003



Sustainable Forest Management (SFM)

As mentioned in the Chairman’s Statement, the Group has been actively working on programmes such thatits operational activities are economically viable, environmentally compatible and socially acceptable asa forest resource management. Together with the Samling Group, the Group’s timber segment (collectivelyreferred to as “the Group”) has devised forest management programmes that balance development andsustainability.

To date, the Group has implemented sustainable forest management practices in its licensed timber areasof T/0412 and T/0411 in Ulu Baram, Sarawak.

In this era of globalisation, it is no longer sufficient for forestry enterprises to meet local laws andregulations but there is an inherent expectation to observe transparent and holistic forestry practicesconforming to international standards. The industry is currently at face with a ‘credibility gap’ of whethertimber is produced from legal sources and well-managed forest.

Sustainable forest management and certification is an independent third-party assessment of forestmanagement practices which are credible and science-based.

The Group has partnered Forest Department Sarawak (FDS), supported by GTZ in a Malaysian-GermanTechnical Cooperation Project to implement SFM to achieve standards which:

• ensure forests are managed for its diversity of forest resources, conservation, eco-systems and needsof the communities living therein

• follow a written Forest Management Plan (FMP) that details principles regarding the management ofproduction, protection and communal use of the forests. The FMP is subject to regular reviews in linewith ongoing research findings of Permanent Sample Plots (PSPs) and Compliance Assessment of theharvesting operations

• minimise negative environmental impacts to the forest by carrying out Reduced Impact Logging (RIL)and other practices which give rise to environmental preservation, and

• promote co-existence among the forest communities and closer relations with government agencies tolead in social development projects

A SFM Centre has been set up in the forest concessions with trained personnel to administer SFMimplementation on a full commercial scale. A Task Force Committee comprising nearby localcommunities, FDS and the Group’s representative hold regular forums to discuss social issues and toexpedite social development projects.

SFM and certification in these two timber areas have generated great attention amongst our buyers as wellas local and international organisations. This will certainly be the way forward for the timber industry. Asa result of the Group’s forest policies, its timber concessions remain a renewable resource and also hometo a wide range of wildlife.

ANNUAL REPORT 2003

Sustainable Forest Management 19

Statement onCorporate GovernanceThe Board of Directors of Lingui Developments Berhad (“Lingui” or “the Company”) is pleased to report on theapplication of the principles of corporate governance contained in the Malaysian Code of Corporate Governance(“the Code”) and the extent of compliance with the best practices of the Code as required under the ListingRequirements of Kuala Lumpur Stock Exchange (“KLSE”) by the Company. These principles and best practiceshave been applied throughout the financial year ended 30 June 2003 to ensure that the affairs of the Group aremanaged in accordance with the applicable standards of good corporate governance and any departures from theCode have been narrated accordingly.

D I R E C TO R S

The BoardThe Group is headed by an effective Board which leads and controls the Group to discharge its stewardshipresponsibilities. The Board’s principal responsibility is to determine the strategic direction of the Group and tooversee the proper conduct of its business and operations. The Directors have through various Board meetingsdiscussed various corporate affairs pertaining to the Group including its overall strategy and plans.

Board BalanceThere are five Board members out of which three are independent non-executive directors. Saved where asituation of conflict of interest arises, the three independent non-executive directors that are affected do notvote but are otherwise independent.

The Chairman’s and the Managing Director’s roles and responsibilities are divided to ensure that there is abalance of power and authority. This balance ensures that all matters brought before the Board are fully,adequately and objectively discussed taking into account interest of various stakeholders including minoritys h a r e h o l d e r s .

Being a Board with a relatively small number of Directors, the Board felt that it is not necessary to identify aSenior Independent Non-Executive Director of the Board in the Annual Report to whom concerns may beconveyed. Concerns can be conveyed either to the Chairman or any of the Non-Executive Directors.

The Directors are professionals in the field of finance, accounting, legal, and experienced civil administrators.To g e t h e r, they provide the Group with a wide range of technical skills and experience to ensure that the Groupcontinues to be competitive with a strong reputation for professional competence. The Executive Directorswith their intimate knowledge of the business take on the primary responsibility for leadership of the Groupwhilst the Non-Executive Directors bring independent judgement on a broader view on the Group’s businesson issues of strategy, business performance, resources and standards of conduct.

A brief description of the background of each Director is presented on pages 4 to 5.

For the last financial year, there were 5 Board meetings. The number of Directors’ meeting held in the periodeach Director held office during the financial year and the number of meetings attended by each Director wasas follows:

Number of meetings attended (first figure) / number of meetings held while in office (second figure)

N a m e Board Meeting

Chan Hua Eng 5 / 5D a t o ’ Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim 5 / 5Geh Cheng Hooi 3 / 5Yaw Chee Ming 5 / 5Cheam Dow To o n 5 / 5


Statement on Corporate Governance20

Statement on Corporate Governance ( c o n t i n u e d )

All members of the Board comply with the limitation of directorship requirements under the ListingRequirements of KLSE and have completed the Directors’ Mandatory Accreditation Programme organised bythe KLSE.

Formal Board Committees established by the Board in accordance with the Code include the A u d i tCommittee, Nomination Committee and Remuneration Committee to assist the Board in execution of itsduties. These Committees operate under clearly defined terms of reference and the outcome of the Committeemeetings will be reported by the Chairman of the Committee to the Board and such reports are incorporatedin the Board papers.

Audit CommitteeThe Audit Committee was established on 20 April 1994 and is chaired by Mr. Chan Hua Eng. Other membersof the Audit Committee are Mr. Geh Cheng Hooi, Dato’ Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim andM r. Cheam Dow Toon. The terms of reference and summary of activities of the Audit Committee are set outon pages 28 to 30.

Nomination CommitteeThe Nomination Committee was established on 28 August 2001 and is chaired by Mr. Chan Hua Eng. Othermembers of the Nomination Committee are Dato’ Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim and Mr.Geh Cheng Hooi. The terms of reference of the Nomination Committee are:

• To annually review the required mix of skills and experience and other qualities, including corecompetencies which Non-Executive Directors should bring to the Board for it to function efficiently ande ff e c t i v e l y

• To annually assess the effectiveness of the Board as a whole

• To recommend to the Board new candidates for appointment as Directors if there is a need for additionalBoard members

• To consider, in making its recommendations, candidates for directorships proposed by the ManagingDirector and within the boundaries of practicality, by any senior executive or any Director or shareholder

• To recommend to the Board, Directors to sit on Board Committees

• To annually review and assess the effectiveness of other Board Committees

• To annually review and assess the contribution of each individual Director.

A meeting was held during the financial year and an independent consultant has been appointed to assess theB o a r d ’s effectiveness and competency for consideration by the Nomination Committee.

Remuneration CommitteeThe Remuneration Committee was established on 28 August 2001 and is chaired by Mr. Chan Hua Eng. Othermembers of the Remuneration Committee are Dato’ Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim and Mr.Geh Cheng Hooi. The terms of reference of the Remuneration Committee are:

• To review and recommend to the Board the remuneration of each Executive Director in all its form so asto link rewards to corporate and individual performance.

• To review and approve yearly staff increments and bonuses proposed by management.

There were two meetings held during the financial year. Items deliberated upon at the meetings include theG r o u p ’s Incentive Plan together with the proposed bonus for the financial year ended 30 June 2002. T h eservice agreements for the Managing Director and Finance Director were also reviewed and tabled to theBoard for approval.

ANNUALREPORT 2003

Statement on Corporate Governance 21


Supply of InformationThe Board is supplied with information on a timely basis to enable it to effectively discharge its duties andresponsibilities. As a general rule, all Board papers have to be distributed at least a week before the Boardmeeting so that the Directors would have adequate time to read and understand the matters that will bediscussed at the meeting.

Other than the quarterly Board meetings to discuss and review the quarterly results of the Group forannouncement to the KLSE, the Board meets annually to discuss the Group’s annual budget and businessplans. Board meetings are also held whenever necessary to discuss various business and corporate mattersincluding corporate exercises, new major investments and significant changes in regulatory requirements thata ffect the Group. Periodically Board meetings are held at locations within the Group’s operating business toenable the Directors to obtain a better understanding and perspective of the Group’s business. When a newDirector joins the Board, an induction program will be held for that Director to introduce him to the Groupbusinesses and operations.

The Board has constant access to and interaction with senior management. It also has access to the advice andservices of the Company Secretary.

Appointments to the BoardThe Nomination Committee as part of their terms of reference is responsible for making recommendations tothe Board on the appointment of Directors. In making these recommendations, the Nomination Committeeconsiders the composition of the Board and the required mix of skills and experience which the NominationCommittee feels is necessary for the effective management of the Group.

Re-election to the BoardThe Articles of Association of the Company require all Directors, including the Managing Director, to retirefrom office and submit themselves for re-election at least once in three years in compliance with the ListingRequirements of KLSE.

Pursuant to Section 129 (6) of the Companies Act, 1965, any Director over the age of seventy (70) is requiredto retire annually upon the conclusion of the Annual General Meeting. A resolution for his re-appointment,would have to be passed by special resolution requiring a majority of three quarters of the votes of suchmembers of the Company who are present and voting.

D I R E C TO R S ’ R E M U N E R AT I O N

The Level and Make-Up of Remuneration and Pro c e d u reThe level of remuneration of each Director must reflect the level of responsibility and commitment that goes withBoard membership.

The remuneration of the Executive Directors has been structured to link rewards to the individual and Groupperformance. It reflects his level of responsibility, contribution and commitment that he has made to the Group.The level of remuneration of the Executive Directors has to be considered by the Remuneration Committee aspart of its terms of reference.




Other than the Chairman, each Board member receives the same level of remuneration because the RemunerationCommittee has considered that each of them brings to the Board their respective skills and therefore they areconsidered to have contributed equally to the Board’s deliberations and duties.

D i r e c t o r s ’R e m u n e r a t i o nThe aggregate Directors’ remuneration paid or payable or otherwise made available to all Directors of theCompany during the financial year was as follows:

C a t e g o r y F e e s Salaries and other emoluments B e n e f i t s - i n - k i n d( R M ’ 0 0 0 ) ( R M ’ 0 0 0 ) ( R M ’ 0 0 0 )

Executive Directors 9 0 7 1 7 N i lNon-Executive Directors 1 6 0 - -

The number of Directors whose income from the Company falling within the following bands were:

N u m b e r N u m b e r

E x e c u t i v e RM300,000 to RM350,000 1 N o n - E x e c u t i v e Less than RM50,000 2D i r e c t o r s RM350,001 to RM400,000 - D i r e c t o r s RM51,000 to RM100,000 1

RM400,001 to RM450,000 -RM450,001 to RM500,000 1

The Board has considered the Code’s Principle B III requiring the disclosure of details of the remuneration ofeach Director against the backdrop of compliance with a related disclosure required under the ListingRequirements of KLSE, that is, the disclosure of an analysis of Directors’ Remuneration by applicable bands ofR M 5 0 , 0 0 0 .

The Board is of the view that the transparency and accountability aspects of corporate governance as applicablefor Directors’ Remuneration are adequately served by the “band disclosures” made.

S H A R E H O L D E R S

Dialogue Between the Company and InvestorsThe Board of Directors recognizes the importance of shareholders and investors communications and reports ona timely basis all material information in relation to the Group. The Company communicates with the generalpublic through the annual reports, quarterly announcements and other corporate announcements to the KLSE.Dialogues are held with financial analysts from time to time to discuss the Group’s past performance and thegeneral market conditions for businesses in which the Group is involved. A meeting with the press is normallyheld after the Annual General Meeting and other general meetings between the Board and members of the press.

The Annual General MeetingThe Annual General Meeting provides the Board with an important forum for shareholder communication. T h eBoard, before the passing of the resolution to adopt the accounts, will invite shareholders to ask questions andshareholders are encouraged to actively participate. To enable shareholders to fully understand certain specialbusiness, a full explanation of the effects of the proposed resolutions are included in the notices.

ANNUALREPORT 2003



A C C O U N TA B I L I T Y AND A U D I T

Financial Report i n gIn presenting the annual financial statements and the quarterly announcements to shareholders, the Board hastaken reasonable steps to ensure the financial statements are true and fair reflection of the Group’s position andprospects. This also applies to circulars to shareholders and other documents that are submitted to the authoritiesand regulators.

Internal Contro lThe Group’s Statement on Internal Control is set out on pages 26 to 27.

Relationship with the AuditorsThe Board of Directors and the Audit Committee have established transparent and appropriate relationships withthe external auditors. Continuous communications are held with the external auditors throughout the financialyear and the external auditors participate in Audit Committee meetings at least once a year.

The role of the Audit Committee with the external auditors is set out on pages 28 to 30.

OTHER DISCLOSURES

Directors’ Responsibility StatementThe Directors are required to give a responsibility statement in respect of the preparation of the auditedfinancial statements under paragraph 15.27(a) of Listing Requirements of KLSE.

In preparing the financial statements, the Directors are required to:

• prepare the financial statements on a going-concern basis;

• comply with the applicable approved accounting standards in Malaysia and the provisions of theCompanies Act, 1965;

• adopt and consistently apply appropriate accounting policies;

• make estimates and assumptions that are reasonable.

The Directors are responsible for ensuring the Company and Group keep proper accounting records whichdisclose with reasonable accuracy at any time the financial position of the Company and Group and toenable them to ensure that the financial statements comply with the provisions of the Companies Act,1965.

The Directors have a general responsibility for taking such steps as are reasonably open to them tosafeguard the assets of the Company and Group, to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution by the Board of Directors dated 26 August 2003.



In the case of election or re-election of Directors, the notice of meeting will state which Directors are standingfor election or re-election with a brief description on the Director which will include age, relevant experienceand date of appointment to the Board.


Family RelationshipExcept as disclosed in Note 29 (Related Parties) to the financial statements, none of the other Directorshave any family relationship with any director and / or major shareholder of the Company.

Conflict of InterestExcept as disclosed in Note 29 (Related Parties) to the financial statements, none of the Directors have anyrelated party transactions with the Company and the Group.

Convictions for OffencesNone of the Company’s Directors have ever had any convictions for offences.

Contracts Relating to LoansThere were no contracts relating to loans entered into by the Company and its subsidiaries involvingDirectors’and major shareholders’ interest.

Imposition of Sanctions and / or PenaltiesThere were no sanctions and / or penalties imposed on the Company and its subsidiaries, Directors ormanagement by the relevant regulatory bodies.

Non-Audit FeesThe amount of non-audit fees paid to the external auditors by the Group for the financial year amountedto RM10,000. These were mainly for their role as reporting accountants for corporate exercises during thefinancial year.

Profit Estimate, Forecast or ProjectionsThere was no variance between the results for the financial year and the unaudited results previouslyannounced. The Company did not release any profit estimate, forecast or projections for the financial year.

Profit GuaranteesDuring the financial year, there were no profit guarantees given by the Company.

Material ContractsMaterial contracts that have been entered into by the Company and its subsidiaries involving Directors’and / or major shareholders’ interest are disclosed under “Other Information” on pages 94 to 95 of thisAnnual Report.

Revaluation of Landed PropertiesThe Company does not have a policy of revaluing its landed properties.

Share BuybacksDuring the financial year, there were no share buybacks by the Company.

Options, Warrants or Convertible SecuritiesThe Company has not issued any options, warrants or convertible securities in the financial year.

American Depository Receipt (ADR) or Global Depository Receipt (GDR)ProgrammeDuring the financial year, the Company did not sponsor any ADR or GDR programme.

ANNUALREPORT 2003


Statement onI n t e r n a l C o n t r o lI n t ro d u c t i o nThe Malaysian Code on Corporate Governance requireslisted companies to maintain a sound system of internalcontrol to safeguard shareholders’ investments and theG r o u p ’s assets. The Listing Requirements of KualaLumpur Stock Exchange (“KLSE”) require directors oflisted companies to include a statement in the annualreports on the state of their internal controls. The KLSE’sStatement on Internal Control: Guidance for Directors ofPublic Companies (“Guidance”) provides guidance forcompliance with these requirements. Set out below is theB o a r d ’s Internal Control Statement, which has beenprepared in accordance with the Guidance.

Responsibilities of the BoardThe Board of Directors (“The Board”) of LinguiDevelopments Berhad (“Lingui” or “the Company”)recognises the importance of sound internal controls andrisk management practices for good corporate governance.The Board affirms its overall responsibility for the Group’ssystem of internal controls and risk management, and forreviewing the adequacy and integrity of those systems.Nevertheless, it is imperative to note that any controlsystem can only provide reasonable, and not absolute,assurance against material misstatement or loss. T h eobjective of the system of internal controls is not toeliminate risk completely, but to enable the Group toachieve its corporate objectives within a managed riskprofile. The effectiveness of internal controls should beassessed in this context.

Risk ManagementThe Board firmly believes that risk management must beembedded within the daily operations of the Lingui Group,from strategy formulation through to business planningand processes. Through understanding risks, decisionmakers are better able to evaluate the impact of a particularaction or decision on the achievement of the Group’sobjectives. In this context, the Board has implemented anongoing process for identifying, evaluating and managingsignificant risks that may impede the achievement of itsbusiness. This process was in operation throughout theyear and up to the date of the approval of the A n n u a lReport and Financial Statements.

A Risk Management Framework sets out the Group’sunderlying approach to risk management to safeguard theinvestments of shareholders and the assets of the Groupand clearly defines the risk management reportingstructure. To this end, a Risk Management Unit co-

ordinates the risk response and is the custodian for theG r o u p ’s risk management policy, that clearly definesL i n g u i ’s overall policy in handling significant risksidentified and the strategies to manage these risks. Linefunctions in all subsidiary companies of the Group areresponsible for establishing and implementing risk andcontrol systems for their areas of responsibility.

The key elements of the Group’s risk assessment processtake into account all significant aspects of internal controlincluding: risk assessment; internal control activities;information, communication and monitoring. Keybusiness risks are categorised so as to highlight the sourceof the risk, and scored to reflect the financial, operationaland compliance impact of the risk and the likelihood of itsoccurrence. The key constituents of the risk assessmentprocess, advocated by the Board and applied on a Group-wide basis, is summarised as follows:

• Define strategic objectives• Risk identification• Risk categorisation and ranking• Risk treatment through action planning• Risk monitoring and review

The Board, in its efforts to embed the process throughoutthe Group, has implemented a monitoring and reportingprocess to continuously evaluate and monitor significantrisks in a structured manner, through establishedprocedures for reporting and monitoring of risk andcontrols. The Risk Management Unit has prepared aStrategic Plan that will involve regular risk assessmentexercises with all companies under the Group on an annualbasis. The Board also promotes risk awareness throughoutthe Group by placing importance on representation bymanagement on the system of internal controls and theimplementation of action plans under their directresponsibility through control self-assessment (CSA) on aquarterly basis.

It is imperative to note that certain risks are inherent to thetimber industry and hence beyond the direct control of theBoard; the controls implemented by management arelimited to those that the Group is able to minimise andmanage. Inherent risks include fluctuating market pricesfor timber and timber products, adverse weatherconditions affecting operations and the tenure of timberc o n c e s s i o n s .

The Directors have a general responsibility for taking suchsteps as are reasonably open to them to safeguard the


Statement on Internal Control26

Statement on Internal Control ( c o n t i n u e d )

assets of the Company and Group, to prevent and detectfraud and other irregularities.

Internal Contro lThe Group’s internal control system is based on a cleardefinition of responsibility and delegation of authority to anumber of Board and Management Committees. Specificresponsibilities have been delegated to relevant BoardCommittees, all of which act in accordance withformalised terms of reference.

Policies and procedures for virtually all business andsupport activities are formalised and updated to reflectcurrent practices. Supervisory efforts are made to ensurethat policies and procedures are strictly adhered to and anydeviations are addressed accordingly. The Group has takenevery measure to ensure that its operations are incompliance with regulations imposed by authorities.

The Group’s system of internal control is also based on aframework of regular management information andadministrative procedures, the most pertinent of which aredescribed below:

• The Board of Directors reviews the operational andfinancial performance of the Group every quarter andmanagement meetings are conducted at operationsl e v e l .

• Budgets are prepared annually and submitted to theBoard of Directors for approval. Variances from thebudgets are monitored monthly by management.

• Divisions set divisional objectives, which are alignedto the Company’s overall strategic goals. Individualsare also set individual objectives, which are aligned tothe divisional objectives. Work activities aresupervised and Key Result Indicators are defined tofacilitate the monitoring and evaluation of actualresults against targ e t s .

• Proposals for major capital expenditure andinvestment by the Group are reviewed and approvedby the Board of Directors. All other purchases andpayments are approved according to formalised limitsof authority.

• The Remuneration Committee evaluates and reviewsthe remuneration packages of the Executive Directorsand senior management and the total payment of theG r o u p .

• New contracts and legally enforceable agreements arevetted by the Group’s Legal Department.

• Most companies have ISO9001 and ISO9002accreditation for their operational processes and theBoard is placing specific emphasis on adherence tosustainable forest management practices throughoutits timber operations.

• Periodic Reviews of the internal control system arecarried out by the internal audit function and results ofsuch reviews are reported regularly to the A u d i tCommittee. The internal audit function therebyprovides independent assurance to the Board on thee ffectiveness of the Group’s system of internal control.

• The Audit Committee holds regular meetings todeliberate on findings and recommendations forimprovement by both the internal and externalauditors on the state of the internal control system andreports back to the Board.

A s s u r a n c eThe Internal Audit function carries out internal audit ofL i n g u i ’s Group of Companies and operates inaccordance with standards defined in the Internal AuditCharter and The Internal Audit Manual. The annualaudit plan approved by the Audit Committee which isbased in part, on the risk analysis undertaken by theRisk Management Unit and in so doing, providesindependent assurance to the Board on the efficiencyand effectiveness of Lingui Group’s system of internalcontrol.

C o n c l u s i o nThe Group’s Risk Management strategy does not focus onrisk avoidance but on the identification and managementof an acceptable level of risk. As expected, some internalcontrol weaknesses were identified during the financialperiod under review, all of which have been or are in theprocess of being addressed by management. None of thesecontrol weaknesses has resulted in any material loss thatwould require disclosure in the Group’s Annual Report.

The Board is of the opinion that the system of internalcontrols in the Group is satisfactory and demonstrateso b j e c t i v i t y. In accordance with international best practices,continuous steps are being taken by the Board to enhancethe Group’s internal control system in response to theconstantly changing environment in which the Groupo p e r a t e s .

ANNUALREPORT 2003

Statement on Internal Control 27

AuditC o m m i t t e eThe Audit Committee was established to act as aCommittee of the Board of Directors, with the terms ofreference set out herein. Its primary function is to assistthe Board of Directors in fulfilling the followingoversight objectives on the Group activities:

( a ) Assess the Group’s process relating to its risk andcontrol environment,

( b ) Oversee financial reporting and

( c ) Evaluate the internal and external audit process.

M e m b e r sThe present members of the Audit Committee comprise:

Chan Hua EngChairman - Independent Non-Executive Dire c t o r

Geh Cheng HooiIndependent Non-Executive Dire c t o r

D a t o ’Seri Datuk Dr. Haji Jalaluddin Bin Abdul RahimIndependent Non-Executive Dire c t o r

Cheam Dow To o nFinance Dire c t o r

M e e t i n g sThe Audit Committee convened four meetings during thefinancial year, which were attended by all membersexcept for Mr. Geh Cheng Hooi, who attended two out ofthe four meetings held. The meetings were appropriatelystructured through the usage of agendas, which weredistributed to members with sufficient notification.

Representatives of the external auditors, Messrs KPMG,the Head of Internal Audit, the General Manager ofFinance as well as certain executive directors alsoattended the meetings upon invitation.

S u m m a ry of Audit CommitteeA c t i v i t i e sThe activities of the Audit Committee for the financialyear under review include, inter alia, the following:

• Reviewed with the external auditors’ on the natureand scope of their audit for the financial year, auditreport, management letter and assistance given bythe company’s officers. The Audit Committee alsoheld discussions with the external auditors withoutthe presence of any Executive Board members.

• Reviewed the independence and objectivity of theexternal auditors and the services provided, andconsidered and recommended to the Board forapproval of the audit fees payable.

• Reviewed the Internal Audit Department’s plan, resources, programmes, findings andrecommendations. Held discussions with the Boardon the improvement opportunities and reviewedmanagement corrective action plans andimplementation.

• Reviewed the annual revenue and capital budgets,and the quarterly and annual financial performance.Discussed and reviewed with Executive Boardmembers on the business operations, opportunitiesand risks.

• Reviewed the related party transactions entered intoby the Group.

• Reviewed the Group’s compliance in particular thequarterly and year-end financial statements with theListing Requirements of Kuala Lumpur StockExchange (“KLSE”), Malaysian A c c o u n t i n gStandards Board (“MASB”) and other relevant legaland regulatory requirements, and recommending theannouncements to the Board for approval.

• Reviewed the extent of the Group’s compliancewith provisions set out under the Malaysian Codeon Corporate Governance and Statement onInternal Control pursuant to the ListingRequirements of KLSE.

• Reviewed the Group’s systems and practices forthe identification and management of risk.

• Reviewed pertinent issues and matters that had asignificant impact on the results of the Group.

Terms and Reference of the Audit Committee

1 . M e m b e r s h i pThe Audit Committee shall be appointed by the Boardfrom amongst the Directors of the Company and shallconsist of not less than three members with a majority ofIndependent Non-Executive Directors.

A member shall not have family relationship with anyExecutive Director of the Company or of any relatedcompany or relationship which would interfere withindependent judgment.


Audit Committee28

Audit Committee ( c o n t i n u e d )

A quorum shall be three members, a majority of whichshall be Independent Non-Executive Directors.

The Chairman of the Audit Committee shall be elected bythe members of the Audit Committee and shall be anIndependent Non-Executive Director.

2 . Attendance at MeetingsThe heads of finance and internal audit and arepresentative of the external auditors shall normallyattend the meetings.

The Audit Committee may, as and when deemedn e c e s s a r y, invite other Board members and seniormembers to attend the meetings.

The Company Secretary shall be the secretary of the A u d i tC o m m i t t e e .

3 . F requency of MeetingsThe Audit Committee shall hold at least four meetingsduring each financial year.

The Audit Committee shall meet at least once during thefinancial year with the external auditors and internalauditors without the presence of the Executive Boardm e m b e r s .

4 . P roceedings of MeetingsIn the absence of the Chairman, the Audit Committee shallappoint one of the Independent Non-Executive memberspresent to chair that meeting.

Decisions on matters raised at any meetings shall bedecided by a majority of votes of the members present.

5 . A u t h o r i t yThe Audit Committee is authorised by the Board toinvestigate any activity within its terms of reference. It isauthorised to seek any information it requires from anyemployee and all employees are directed to co-operatewith any requests made by the Audit Committee.

The Audit Committee is authorised by the Board to obtainoutside legal or other independent professional advice andto secure the attendance of outsiders with relevantexperience and expertise if it considers this necessary.

The Audit Committee shall have direct communicationchannels with the internal and external auditors, and they

shall be able to convene meetings with the externalauditors whenever deemed necessary.

Where the Audit Committee is of the view that a matterreported by it to the Board has not been satisfactorilyresolved resulting in a breach of the Listing Requirementsof KLSE, the Audit Committee shall promptly report suchmatter to the KLSE.

6 . D u t i e sThe duties of the Audit Committee shall be:

• To recommend the appointment of the externalauditors, the audit fee and any other terms ofe n g a g e m e n t .

• To discuss with the external auditors on the audit planbefore the commencement of the annual audit andensure co-ordination where more than one audit firm isi n v o l v e d .

• To review the quarterly and annual financialstatements before submission to the Board, focusingparticularly on:

- any changes in accounting policies and practice;

- significant adjustments arising from the audit;

- the going concern assumption; and

- compliance with applicable approved accountingstandards and other legal requirements.

• To discuss with the external auditors on any major auditfindings and the management’s response, and problemsand reservations arising from the annual audits (in theabsence of the management where necessary).

• Review the Internal Audit Charter, budget and staff i n gof the Internal Audit Department.

• To review the internal audit programme, considermajor findings of internal audit investigations andm a n a g e m e n t ’s response and review the level of co-ordination between the internal and external auditors.

• Direct and where appropriate supervise any specialprojects or investigation considered necessary, andreview investigation reports on any major defalcations,frauds and thefts.

• To review any appraisal or assessment of the seniors t a ff members of the Internal Audit Department,approve any appointment or termination of senior staffmembers of the department, and to inform itself ofresignations of internal audit staff members andprovide the resigning staff member an opportunity tosubmit his / her reasons for resigning.

ANNUALREPORT 2003

Audit Committee 29

• To consider any related party transactions that mayarise within the Company or Group.

• To keep under review the effectiveness of internalcontrol systems, and in particular, review the externala u d i t o r s ’ management letter and management’sr e s p o n s e .

• To consider other related matters, as defined by theB o a r d .

7 . R e p o rting Pro g r a m m eThe Company Secretary shall circulate the minutes of theAudit Committee to all members of the Board.

Internal Audit FunctionThe Internal Audit Department is independent of theactivities or operations of other operating units. Itsprincipal role is to undertake independent, regular andsystematic reviews of the systems of internal control soas to provide reasonable assurance that such systemscontinue to operate satisfactorily and eff e c t i v e l y. InternalAudit shall provide the Audit Committee withindependent and objective reports on the state of theinternal control of the various operating units within theGroup and the extent of compliance of units with theG r o u p ’s established policies and procedures and relevantstatutory requirements.

The activities of the Internal Audit Department for thefinancial year include, inter alia, the following:

• Reviewed and agreed with the Audit Committee onthe audit strategy and approach plan, scope of work,resource requirements and programmes, and apprisethem on the audit activities on a quarterly basis.

• Reviewed the risks identification processes andsystem of internal controls in all key operatingprocesses and activities using a cycle audit approach,reported findings, made recommendations andfollowed up to ensure satisfactory control ism a i n t a i n e d .

• Assisted management with the continuousimprovement of controls and procedures, and spreadgood practices throughout the Group.

• Carried out certain investigative assignments.

• Reviewed related party transactions.


Audit Committee30

Audit Committee ( c o n t i n u e d )

Financial StatementsDirectors’ Report 32 - 35

Statement by Directors 36

Statutory Declaration 36

Report of Auditors 37

Balance Sheets 38

Income Statements 39

Consolidated Statement of Changes in Equity 40

Statement of Changes in Equity 41

Cash Flow Statements 42 - 43

Notes to the Financial Statements 44 - 83


Directors’Repor t32

Directors’ Report

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of theCompany for the year ended 30 June 2003.

Principal activitiesThe Company is principally engaged in investment and property holding and provision of management services, whilstthe principal activities of the subsidiaries are as stated in Note 30 to the financial statements. There have been nosignificant changes in the nature of these activities during the financial year.

Results

Group CompanyRM’000 RM’000

Net profit for the year 12,606 5,682

Reserves and provisionsThere were no material transfers to or from reserves and provisions during the year except as disclosed in the financialstatements.

DividendsSince the end of the previous financial year, the Company paid a final dividend of 1% less tax totalling RM1,755,400 inrespect of the year ended 30 June 2002 on 16 December 2002.

The final dividend recommended by the Directors in respect of the year ended 30 June 2003 is 2% less tax totallingRM4,749,400.

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

Chan Hua EngDato’Seri Datuk Dr. Haji Jalaluddin bin Abdul RahimYaw Chee MingGeh Cheng HooiCheam Dow Toon

In accordance with Article 91 of the Company’s Articles of Association, Cheam Dow Toon retires by rotation at theAnnual General Meeting and being eligible, offers himself for re-election.

In accordance with Section 129 of the Companies Act, 1965, Chan Hua Eng, being over seventy years of age, retires atthe Annual General Meeting and seeks re-appointment under the provision of Section 129(6) of the said Act to holdoffice until the next Annual General Meeting.

The holdings and deemed holdings in the ordinary shares of the Company of those who were Directors at year end asrecorded in the Register of Directors’Shareholdings are as follows:

Number of ordinary shares of RM0.50 eachAt At % of

1.7.2002 Bought Sold 30.6.2003 shareholding

Direct interestChan Hua Eng 58,333 96,290 - 154,623 *Dato’Seri Datuk Dr.

Haji Jalaluddin bin Abdul Rahim 212,976 - - 212,976 *

Geh Cheng Hooi 5,000 - - 5,000 *Cheam Dow Toon 20,000 9,030 - 29,030 *

Indirect interestDato’Seri Datuk Dr.

Haji Jalaluddin bin Abdul Rahim 321,666 - - 321,666 *

Yaw Chee Ming 229,532,125 39,286,209 - 268,818,334 44.07Geh Cheng Hooi 3,333 - - 3,333 *

* Less than 1%

By virtue of his interest in the shares of the Company, Yaw Chee Ming is deemed to have interest in the shares of all thesubsidiaries to the extent that the Company has an interest.

Directors’ benefitsSince the end of the previous financial year, no Director of the Company has received nor become entitled to receive anybenefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directorsas shown in the financial statements or the fixed salary of a full time employee of the Company) by reason of a contractmade by the Company or a related corporation with the Director or with a firm of which the Director is a member, orwith a company in which the Director has a substantial financial interest, other than those disclosed in Note 29 to thefinancial statements and benefits which may have arisen from the acquisition of Samling Plywood (Miri) Sdn. Bhd., acompany connected to a Director.

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

Issue of shares During the financial year, the Company issued:

i ) 74,628,824 ordinary shares of RM0.50 each at an issue price of RM1.20 per share to satisfy the purchase considerationfor the acquisition of 60% equity interest in Samling Plywood (Miri) Sdn. Bhd. and

i i ) 47,638,076 ordinary shares of RM0.50 each at an issue price of RM1.20 per share to satisfy the purchase considerationfor the acquisition of Class ‘B’ Redeemable Preference Shares of a subsidiary from an associate company.

Directors’Report ( c o n t i n u e d )

ANNUALREPORT 2003

Directors’Report 33


Directors’Repor t34


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

Significant events during the year

Acquisition of Samling Plywood (Miri) Sdn. Bhd.On 1 November 2002, the Company completed the acquisition of 60% equity interest in Samling Plywood (Miri) Sdn.Bhd. (“SPM”) from Samling Strategic Corporation Sdn. Bhd. and Tapah Plantation Sdn. Bhd. (“TP”) for a purchaseconsideration of RM89,554,589 satisfied by the issuance of 74,628,824 new ordinary shares of RM0.50 each in theCompany at an issue price of RM1.20 per new ordinary share.

On 26 December 2002, the Company entered into a Conditional Sale of Share Agreement with Nissho Iwai Corporation(“NIC”) for the proposed acquisition of 16,000,000 ordinary shares of RM1 each in SPM, representing the remaining40% of the equity interest in SPM for a purchase consideration of RM59,703,059 to be satisfied by the issuance of49,752,549 new ordinary shares of RM0.50 each in the Company at an issue price of RM1.20 per new ordinary share.

As of the date of this report, the Company has obtained approvals from the Sarawak Department of Forestry, the Ministryof International Trade and Industry, the Securities Commission and the Foreign Investment Committee vide theirapproval letters dated 29 January 2003, 10 March 2003, 3 April 2003 and 28 April 2003 and the shareholders of theCompany at an Extraordinary General Meeting held on 20 June 2003. On 13 August 2003, the acquisition was completedwith the issuance and allotment of 49,752,549 ordinary shares of RM0.50 each in the Company to NIC.

Acquisition of Class “B” Redeemable Preference Shares of TreeOne (Malaysia) Sdn. Bhd.On 6 June 2003, the Company completed the acquisition of 385,942 Class ‘B’ Redeemable Preference Shares of RM1each (“RPS ‘B’”) in TreeOne (Malaysia) Sdn. Bhd. from the shareholders (other than the Company) of GlenealyPlantations (Malaya) Berhad, an associate, for a purchase consideration of RM57,165,691 satisfied by the issuance of47,638,076 new ordinary shares of RM0.50 each in the Company at an issue price of RM1.20 per new ordinary share.Subsequent to this acquisition, the Company has redeemed the RPS ‘B’.

Other statutory information Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps toascertain that:

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

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

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

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

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

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Groupand of the Company misleading or inappropriate, or

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


ANNUALREPORT 2003

Directors’Repor t 35

At the date of this report, there does not exist:

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

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

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

In the opinion of the Directors, except for the change in accounting policy on adoption of MASB 25 as disclosed in Note26 to the financial statements, the results of the operations of the Group and of the Company for the financial year ended30 June 2003 have not been substantially affected by any item, transaction or event of a material and unusual nature norhas any such item, transaction or event occurred in the interval between the end of that financial year and the date of thisreport.

Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed in accordance with a resolution of the Directors:

Chan Hua Eng

Yaw Chee Ming

Kuala Lumpur,26 August 2003


Statement by Directors, Statutory Declaration36

Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 38 to 83, are drawn up in accordance with theprovisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a trueand fair view of the state of affairs of the Group and of the Company at 30 June 2003 and of the results of their operationsand cash flows for the year ended on that date.

Signed in accordance with a resolution of the Directors:

Chan Hua Eng Yaw Chee Ming


Statutory DeclarationPursuant to Section 169(16) of the Companies Act, 1965

I, Cheam Dow Toon, the Director primarily responsible for the financial management of Lingui Developments Berhad,do solemnly and sincerely declare that the financial statements set out on pages 38 to 83, are, to the best of myknowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and byvirtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed in Kuala Lumpur on 26 August 2003.

Cheam Dow Toon

Before me:

Tee Kian @ Tee Sing(No W193)Commissioner for Oaths

Report of the Auditorsto the members of Lingui Developments Berhad (Company No. 7574-D) (Incorporated in Malaysia)

ANNUALREPORT 2003

Report of the Auditors 37

We have audited the financial statements set out on pages 38 to 83. The preparation of the financial statements is theresponsibility of the Company’s Directors. Our responsibility is to express an opinion on the financial statements basedon our audit.

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

In our opinion:

(a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 andapplicable approved accounting standards in Malaysia so as to give a true and fair view of:

i) the state of affairs of the Group and of the Company at 30 June 2003 and the results of their operations and cashflows for the year ended on that date; and

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

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

The subsidiaries in respect of which we have not acted as auditors are identified in Note 30 to the financial statementsand we have considered their financial statements and the auditors’ reports thereon.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’sfinancial statements are in form and content appropriate and proper for the purposes of the preparation of theconsolidated financial statements and we have received satisfactory information and explanations required by us forthose purposes.

The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not includeany comment made under subsection (3) of Section 174 of the Act.

KPMGFirm Number: AF 0758Chartered Accountants

Jimmy Leow Min FongPartnerApproval Number: 595/03/04(J/PH)



Balance Sheets38

Balance Sheetsat 30 June 2003

Group CompanyNote 2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Property, plant and equipment 2 729,007 533,926 2,242 2,360 Forest assets 3 930,697 873,519 - -Investments in subsidiaries 4 - - 712,631 938,748 Investments in associates 5 163,789 193,389 54,730 54,730Amount due from subsidiaries 6 - - 568,914 246,391Timber concession 7 76,274 44,169 - -

1,899,767 1,645,003 1,338,517 1,242,229 Current assets Inventories 8 156,645 111,090 - -Trade and other receivables 9 286,417 233,001 7,639 9,750Dividend receivables - - 21,672 8,825Tax recoverable 39,151 37,358 28,635 18,779Cash and cash equivalents 10 53,272 24,138 12,760 12,544

535,485 405,587 70,706 49,898

Current liabilities Trade and other payables 11 292,217 237,796 4,880 74,061Borrowings 12 186,294 184,722 46,775 92,806Taxation 41,111 28,368 - -

519,622 450,886 51,655 166,867

Net current assets / (liabilities) 15,863 (45,299) 19,051 (116,969)

1,915,630 1,599,704 1,357,568 1,125,260

Financed by:Capital and reservesShare capital 13 304,939 243,805 304,939 243,805Reserves 14 691,508 585,152 427,146 339,111

996,447 828,957 732,085 582,916

Minority shareholders’interests 15 59,663 - - -

Long term and deferred liabilitiesRedeemable preference shares of subsidiary 16 - 89,343 - -Amount due to subsidiaries 6 - - 319,979 106,113Borrowings 12 286,658 162,649 - 136,800Bonds 17 297,076 295,999 297,076 295,999Deferred tax liabilities 18 275,786 222,756 8,428 3,432

859,520 770,747 625,483 542,344

1,915,630 1,599,704 1,357,568 1,125,260

The notes set out on pages 44 to 83 form an integral part of, and should be read in conjunction with these financial statements.

Income Statementsfor the year ended 30 June 2003

ANNUALREPORT 2003

Income Statements 39

Group CompanyNote 2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Revenue - continuing operations: existing 873,063 719,861 38,843 40,882 - continuing operations: new acquisition 110,026 - - -

19 983,089 719,861 38,843 40,882

Operating profit - continuing operations: existing 60,361 11,319 34,772 37,699 - continuing operations: new acquisition 9,078 - - -

19 69,439 11,319 34,772 37,699 Financing costs 20 (49,778) (15,825) (31,848) (38,312) Interest income 529 1,496 7,754 7,507 Share of profit of associates 10,229 8,892 - -

Profit before taxation 30,419 5,882 10,678 6,894

Tax expense - Company and subsidiaries (13,352) 3,766 (4,996) (4,041)- associates (2,956) (4,693) - -

22 (16,308) (927) (4,996) (4,041)

Profit after taxation 14,111 4,955 5,682 2,853Minority interests (1,505) - - -

Net profit for the year 12,606 4,955 5,682 2,853

Earnings per ordinary share (sen) 23 2.33 1.02

Unpaid proposed dividend per ordinary share-net (sen) 1.00 0.50 1.00 0.50

Dividend paid per ordinary share-net (sen) 0.50 0.50 0.50 0.50



Consolidated Statement of Changes in Equity40

Consolidated Statement of Changes in Equityfor the year ended 30 June 2003

Non-distributable DistributableShare Share Exchange Fair valuation Retained Proposed

Note capital premium reserve reserve profits dividend TotalRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

GROUPAt 1 July 2001 243,805 11,271 (76,915) 92,549 502,323 1,755 774,788Effect of adopting

MASB 25 26 - - - (24,729) (12,340) - (37,069)

Restated balance 243,805 11,271 (76,915) 67,820 489,983 1,755 737,719Currency translation

differences - - 106,965 - - - 106,965Realisation of fair valuation

reserve of associate - - - (4,230) 4,230 - -Goodwill on acquisition of

subsidiary written off 27 - - - - (18,927) - (18,927)Net gain / (loss) not recognised

in the income statement - - 106,965 (4,230) (14,697) - 88,038

Net profit before restatement - - - - 2,895 - 2,895Effect of adopting

MASB 25 26 - - - - 2,060 - 2,060

Net profit for the year - - - - 4,955 - 4,955Proposed dividend - - - - (1,755) 1,755 -Dividend paid 25 - - - - - (1,755) (1,755)

At 30 June 2002 243,805 11,271 30,050 63,590 478,486 1,755 828,957

At 1 July 2002 243,805 11,271 30,050 63,590 478,486 1,755 828,957Currency translation

differences - - 13,715 - - - 13,715 Goodwill on acquisition of

subsidiary written off 27 - - - - (2,318) - (2,318)Net gain / (loss) not recognised

in the income statement - - 13,715 - (2,318) - 11,397Issue of shares 13 61,134 85,587 - - - - 146,721Issuance of shares expenses

written off 14 - (1,479) - - - - (1,479)Net profit for the year - - - - 12,606 - 12,606Proposed dividend - - - - (4,749) 4,749 -Dividend paid 25 - - - - - (1,755) (1,755)

At 30 June 2003 304,939 95,379 43,765 63,590 484,025 4,749 996,447

Note 13 Note 14 Note 14 Note 14 Note 14 Note 14


Statement of Changes in Equityfor the year ended 30 June 2003

ANNUALREPORT 2003

Statement of Changes in Equity 41

Non-distributable DistributableShare Share Retained Proposed

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

COMPANYAt 1 July 2001 243,805 11,271 324,987 1,755 581,818Net profit for the year - - 2,853 - 2,853Proposed dividend - - (1,755) 1,755 -Dividend paid 25 - - - (1,755) (1,755)

At 30 June 2002 243,805 11,271 326,085 1,755 582,916Net profit for the year - - 5,682 - 5,682 Issue of shares 13 61,134 85,587 - - 146,721Issuance of shares

expenses written off 14 - (1,479) - - (1,479)Proposed dividend - - (4,749) 4,749 -Dividend paid 25 - - - (1,755) (1,755)

At 30 June 2003 304,939 95,379 327,018 4,749 732,085

Note 13 Note 14 Note 14 Note 14



Cash Flow Statements 42

Cash Flow Statementsfor the year ended 30 June 2003

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities

Profit before taxation 30,419 5,882 10,678 6,894

Adjustments for:Allowance for doubtful debts 13,322 4,983 - -Amortisation of timber concession 5,695 4,015 - -Depreciation 81,313 70,349 127 161 Depletion of forest crops 6,996 - - -Dividend income - - (38,399) (40,467)Financing costs 49,778 15,825 31,848 38,312Gain on disposal of property, plant and equipment (913) (859) - -Gain on deemed disposal of subsidiary (400) - - -Interest income (529) (1,496) (7,754) (7,507)Share of profit of associates (10,229) (8,892) - -Property, plant and equipment written off 3 13 - -Unrealised foreign exchange losses / (gain) 68 (79) 1,067 -Write-down of forest crops to net realisable value 1,195 - - -

Operating profit / (loss) before workingcapital changes 176,718 89,741 (2,433) (2,607)

Changes in working capital:Inventories (31,796) 9,262 - -Trade and other receivables (47,715) 20,396 2,113 (360)Trade and other payables (9,622) 16,493 (240) 11Deposits pledged (17,874) 39,781 (216) (12,541)

Cash generated from / (used in) operations 69,711 175,673 (776) (15,497) Taxes (paid) / refunded (12,660) (767) - 671

Net cash generated from / (used in) operating activities 57,051 174,906 (776) (14,826)

Cash flows from investing activitiesDividends received 1,495 1,615 15,697 20,647 Purchase of property, plant and equipment (i) (51,811) (33,352) (9) (13) Additions of forest assets (10,303) (12,663) - -Proceeds from disposal of property, plant and equipment 1,737 3,130 - -Proceeds from issuance of shares in subsidiary 400 - - -(Advances to) / Repayment from subsidiaries - - (19,509) 92,425 Subscription of shares in subsidiaries - - (10) (1,600) Acquisition of subsidiaries (Note 27) (4,653) (34,266) - -Subscription of shares in associates - (16,914) - (4,180) Interest received 529 1,496 7,754 7,507

Net cash (used in) / generated from investing activities (62,606) (90,954) 3,923 114,786


Cash Flow Statements ( c o n t i n u e d )

ANNUALREPORT 2003

Cash Flow Statements 43

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Cash flows from financing activities

Dividend paid to shareholders (1,755) (1,755) (1,755) (1,755) Advances from / (Repayment to) subsidiaries - - 212,212 (6,637)Proceeds from borrowings 256,511 58,742 - 30,000Repayment of borrowings (186,387) (98,181) (182,400) (98,664) Net repayment of finance lease liabilities (13,723) (18,791) - -Interest paid (49,821) (46,127) (30,772) (37,236)

Net cash generated from / (used in) financing activities 4,825 (106,112) (2,715) (114,292)

Net (decrease) / increase in cash and cash equivalents (730) (22,160) 432 (14,332) Cash and cash equivalents at beginning of year (30,357) (6,015) (17,203) (2,871) Foreign exchange difference on opening balances 446 (2,182) - -

Cash and cash equivalents at end of year (ii) (30,641) (30,357) (16,771) (17,203)

i) Purchase of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of RM102,447,000(2002 - RM59,482,000) of which RM50,636,000 (2002 - RM26,130,000) was acquired by means of term loansand finance leases.

ii) Cash and Cash Equivalents

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

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Cash and bank balances 12,803 5,926 4 3Deposits 40,469 18,212 12,756 12,541 Bank overdrafts (47,827) (36,283) (16,775) (17,206)

5,445 (12,145) (4,015) (4,662) Less:Fixed deposits and bank balances held as security value (36,086) (18,212) (12,756) (12,541)

(30,641) (30,357) (16,771) (17,203)



Notes to the Financial Statements44

Notes to the Financial Statements

1. Summary of significant accounting policies

The following accounting policies are adopted by the Group and the Company and are consistent with those adoptedin previous years except for the adoption of the following:

i) MASB 22, Segmental Reporting; ii) MASB 23, Impairment of Assets; iii) MASB 25, Income Taxes; and iv) MASB 27, Borrowing Costs

The effects of the changes in the above accounting policies are disclosed in Note 26 to these financial statements.

(a) Basis of accountingThe financial statements of the Group and of the Company are prepared on the historical cost basis, except asdisclosed in the notes to the financial statements and in compliance with the provisions of the Companies Act, 1965and applicable approved accounting standards in Malaysia.

(b) Basis of consolidationSubsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power,directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from itsactivities. The financial statements of subsidiaries are included in the consolidated financial statements from thedate that control effectively commences until the date that control effectively ceases. Subsidiaries are consolidatedusing the acquisition method of accounting except for certain subsidiaries which are consolidated using the mergermethod of accounting as disclosed in Note 30.

A subsidiary is excluded from consolidation when control is intended to be temporary if the subsidiary is acquiredand held exclusively with a view of its subsequent disposal in the near future and it has not previously beenconsolidated or it operates under severe long term restrictions which significantly impair its ability to transfer fundsto the Company. Subsidiaries excluded on these grounds are accounted for as investments.

Under the acquisition method of accounting, the results of subsidiaries acquired or disposed during the year areincluded from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of thesubsidiaries’ net assets are determined and these values are reflected in the Group financial statements. Thedifference between the acquisition cost and the fair values of the subsidiaries’net assets is reflected as goodwill ornegative goodwill as appropriate.

Under the merger method of accounting, the results of the subsidiaries are presented as if the companies had beencombined throughout the current and previous financial years. The difference between the cost of acquisition andthe nominal value of the share capital and reserves of the merged subsidiaries is taken to merger reserve or adjustedagainst suitable reserve in the case of debit balance.

Intragroup transactions and balances and the resulting unrealised profits are eliminated on consolidation. Unrealisedlosses resulting from intragroup transactions are also eliminated unless cost cannot be recovered.

(c) Associates Associates are those enterprises in which the Group has significant influence, but not control, over the financial andoperating policies.

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

Notes to the Financial Statements ( c o n t i n u e d )

ANNUALREPORT 2003

Notes to the Financial Statements 45

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

Premium on acquisition is calculated based on the fair value of net assets acquired.

(d) Property, plant and equipmentFreehold land is stated at cost. All other property, plant and equipment are stated at cost less accumulateddepreciation.

Property, plant and equipment retired from active use and held for disposals are stated at the carrying amount at thedate when the asset is retired from active use, less impairment losses, if any.

DepreciationFreehold land is not amortised. Leasehold land is amortised in equal instalments over the period of the respectiveleases which range from 24 to 83 years. The straight-line method is used to write off the cost of the other assetsover the term of their estimated useful lives at the following principal annual rates:

Building 2% - 10%

Roads, bridges and fences 5.55% - 8.33% or amortised by equal

instalments over the remaining life

of the concession

Machinery, furniture, equipment,

river crafts and wharfs 5% - 20%

Motor vehicles 12% - 25%

(e) Forest assets

Forest assets include forest land and forest crop.

Freehold forest land is not depreciated. Forest crops are stated at the lower of cost of acquisition or development,less the timber assets harvested or market valuation. The forest crop will only be written down to market value ifthere is an impairment in value which is other than temporary. All costs, including funding costs, are capitalised toeach stand of growing timber until the first substantial harvest of that stand. Cost capitalisation commences orrecommences when preparation for forestry activity is initiated. A stand is defined generally as a continuous blockof trees of the same age, species and silviculture regime. A forest is the sum of all stands within geographicallyrelated areas.

Income from harvesting operations offset by the direct costs of production are taken to earnings when realised. Therelated capitalised costs of timber are written off as depletion.

(f) Finance leases

Leases in which the Group and the Company assume substantially all the risks and rewards of ownership areclassified as finance leases. Assets acquired by way of finance leases are stated at an amount equal to the lower oftheir fair values and the present value of the minimum lease payments at the inception of the leases, lessaccumulated depreciation.




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

(g) InvestmentsLong term investments in subsidiaries and associates are stated at cost in the Company, less impairment loss whereapplicable.

(h) Timber concessionTimber concession is the cost of the rights conferred upon subsidiaries to extract timber, which is expiring in May2013 and August 2018.

The timber concession is amortised over the remaining life of the concession on the basis that the subsidiary isallowed to extract approximately similar annual quantities of timber over the period of the license in accordancewith State Government’s sustainable timber management policy.

(i) Goodwill / Negative goodwillGoodwill arising on acquisition represents the excess of the cost of the acquisition over the fair values of the netidentifiable assets acquired. Goodwill is written off against reserves upon acquisition of subsidiaries.

Negative goodwill represents the excess of the fair values of the net identifiable assets acquired over the cost ofacquisition. To the extent that negative goodwill relates to an expectation of future losses and expenses that areidentified in the plan of acquisition and can be measured reliably, but which have not yet been recognised, it isrecognised in the income statement when the future losses and expenses are recognised. Any remaining negativegoodwill, but not exceeding the fair values of the non-monetary assets acquired, is recognised in the incomestatement over the weighted average useful life of those assets that are depreciable / amortised. Negative goodwillin excess of the fair values of the non-monetary assets acquired is recognised immediately in the reserves.

(j) InventoriesInventories are stated at the lower of cost and net realisable value with weighted average cost being the main basisfor cost. Cost of timber logs, work-in-progress and manufactured inventories include raw materials, direct labourand a proportion of manufacturing overheads. Cost of raw materials, stores and consumables includes all direct andindirect expenditure incurred in bringing the inventories to their present location and condition.

(k) ReceivablesReceivables are stated at cost less allowance for doubtful debts. Known bad receivables are written off and specificallowances are made for receivables considered to be doubtful of collection.

(l) Cash and cash equivalentsCash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investmentswhich have an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cashequivalents are presented net of bank overdrafts and pledged deposits.

(m) ImpairmentThe carrying amount of the Group’s assets, other than inventories, deferred tax assets and financial assets (otherthan investments in subsidiaries and associates), are reviewed at each balance sheet date to determine whether thereis any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Animpairment loss is recognised whenever the carrying amount of an asset or the cash-generating unit to which itbelongs exceeds its recoverable amount. Impairment losses are recognised in the income statement.


ANNUALREPORT 2003


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

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amountand it is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that wouldhave determined, net of depreciation or amortisation, if no impairment loss had been recognised. The reversal isrecognised in the income statement.

(n) Income tax Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the incomestatement except to the extent that it relates to items recognised directly to equity, in which case it is recognised inequity.

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

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax basesof assets and liabilities and their carrying amount in the financial statements. Temporary differences are notrecognised for the initial recognition of assets or liabilities that is not a business combination and that at the timeof the transaction affects neither accounting nor taxable profit. The amount of deferred tax provided is based on theexpected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enactedor substantially enacted at the balance sheet date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available againstwhich the temporary differences can be utilised.

(o) Foreign currency

i) Foreign currency transactionsTransactions in foreign currencies are translated to Ringgit Malaysia at rates of exchange ruling at the date ofthe transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date aretranslated to Ringgit Malaysia at the foreign exchange rates ruling at that date. Foreign exchange differencesarising on translation are recognised in the income statement.

ii) Financial statements of foreign operationsThe Group’s foreign operations are not considered an integral part of the Company’s operations. Accordingly,the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising onconsolidation, are translated to Ringgit Malaysia at exchange rates ruling at the balance sheet date. The revenuesand expenses of foreign operations are translated to Ringgit Malaysia at average exchange rates applicablethroughout the year. Foreign exchange differences arising on translation are recognised directly in equity.

Exchange differences arising on a monetary item that, in substance, forms part of the Group’s net investment ina foreign subsidiary would be classified as equity in the Group’s financial statements until the disposal of thenet investment, at which time the cumulative amount of the exchange differences which have been deferred andwhich relate to that foreign subsidiary would be recognised as income or as expense in the same period in whichthe gain or loss on disposal is recognised.




The closing rates used in the translation of foreign currency monetary assets and liabilities and the financialstatements of foreign operations are as follows:

2003 2002

USD1 RM3.80 RM3.80NZD1 RM2.21 RM1.86EUR1 RM4.34 RM3.76

(p) Derivative financial instrumentsThe Group uses derivative financial instruments, including interest rate swaps and forward foreign exchangecontracts, to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing andinvestment activities.

Derivative financial instruments used for hedging purposes are not revalued to fair value at balance sheet date andgain or loss from the hedging activities is recognised in the income statement upon the occurrence of the hedgedtransactions. The initial investment cost is expensed to the income statement.

(q) Preference share capitalPreference share capital is classified as equity if it is redeemable and dividends are discretionary at the option ofthe issuer.

Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of theshareholders and dividends thereon are recognised in the income statement as interest expense.

(r) Interest bearing borrowingsInterest bearing borrowings are recognised initially at cost, less attributable transaction costs. Subsequent to initialrecognition, interest bearing borrowings are stated at amortised cost with any difference between cost andredemption value being recognised in the income statement over the period of the borrowings on an effectiveinterest basis.

(s) LiabilitiesBorrowings, trade and other payables are stated at cost.

(t) Revenue

i) Goods sold Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised inthe income statement when the significant risks and rewards of ownership have been transferred to the buyer.

ii) Services renderedRevenue from services rendered is recognised in the income statement as and when the services are performedor rendered and on an accrual basis.

iii) Dividend incomeDividend income is recognised when the rights to receive payment is established.

iv) Interest incomeInterest income is recognised in the income statement as it accrues, taking into account the effective yield onthe asset.


ANNUALREPORT 2003


(u) Financing costs

All interest and other costs incurred in connection with borrowings are expensed as incurred when borrowing costsare associated with assets acquired and are not ready for their intended use.

For forest assets, borrowing costs incurred on borrowings used to finance forest assets, less any investment incomeon the temporary investment of these borrowings are capitalised, not exceeding its recoverable amount or netrealisable value.

Cost of issuance of bonds has been deferred and capitalised as part of the fair value of the bonds. The cost ofissuance is amortised to the income statement so as to give a constant periodic coupon rate on the outstanding bondat the end of each accounting period.

The interest component of finance lease payments is recognised in the income statement so as to give a constantperiodic rate of interest on the outstanding liability at the end of each accounting period.

2. Property, plant and equipment

Machinery,Long term Short term furniture,

Freehold leasehold leasehold Roads, equipment,land and land and land and bridges and river crafts Motorbuildings buildings buildings fences and wharfs vehicles Total

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

GROUPCostAt 1 July 2002 34,477 166,535 7,518 94,265 699,054 25,716 1,027,565Additions 744 6,646 - 16,158 77,975 924 102,447Disposals - (760) - - (3,143) (570) (4,473)Write off - - - - (105) - (105)Acquisition of subsidiary 109,399 - - 41,981 109,031 675 261,086Exchange differences - 19 - 901 478 - 1,398

At 30 June 2003 144,620 172,440 7,518 153,305 883,290 26,745 1,387,918

Accumulated depreciationAt 1 July 2002 3,811 33,543 2,016 21,114 414,325 18,830 493,639Charge for the year 1,408 5,725 176 10,796 61,457 2,103 81,665Disposals - (89) - - (3,006) (550) (3,645)Write off - - - - (105) - (105)Acquisition of subsidiary 13,223 - - 10,101 63,331 380 87,035Exchange differences - 13 - 63 246 - 322

At 30 June 2003 18,442 39,192 2,192 42,074 536,248 20,763 658,911

Net book valueAt 30 June 2003 126,178 133,248 5,326 111,231 347,042 5,982 729,007

At 30 June 2002 30,666 132,992 5,502 73,151 284,729 6,886 533,926

Depreciation charge for the year ended 30 June 2002 863 4,700 178 7,724 54,690 2,345 70,500




2. Property, plant and equipment ( c o n t i n u e d )

Freehold Furniturebuildings and equipment Total

RM’000 RM’000 RM’000

COMPANYCostAt 1 July 2002 2,392 746 3,138Additions - 9 9

At 30 June 2003 2,392 755 3,147

Accumulated depreciationAt 1 July 2002 188 590 778Charge for the year 48 79 127

At 30 June 2003 236 669 905

Net book value At 30 June 2003 2,156 86 2,242

At 30 June 2002 2,204 156 2,360

Depreciation charge for the year ended 30 June 2002 48 113 161

Depreciation charge for the year is allocated as follows:

Group Company2003 2002 2003 2002RM’000 RM’000 RM’000 RM’000

Income statement 81,313 70,349 127 161Forest assets 352 151 - -

81,665 70,500 127 161

SecurityCertain freehold and long term leasehold properties, plant, machinery and equipment of the Group with total netbook value of RM21,118,000 (2002 - RM21,102,000) are charged to banks as security for borrowings (Note 12).

Assets under finance leaseIncluded in property, plant and equipment of the Group are plant and machinery and motor vehicles with net bookvalues amounting to RM79,885,000 and RM191,000 (2002 - RM38,379,000 and RM132,000), respectively whichwere acquired under finance lease arrangements.


ANNUALREPORT 2003


3. Forest assets

Forest Forest Totalland crop 2003 2002

RM’000 RM’000 RM’000 RM’000

GROUPAt cost:At 1 July 47,257 826,262 873,519 683,036Additions - 10,655 10,655 44,192Depletions - (6,996) (6,996) -Write down to net realisable value - (1,195) (1,195) -Exchange differences 8,913 45,801 54,714 146,291

At 30 June 56,170 874,527 930,697 873,519

Included in forest assets are borrowing costs capitalised at rate of Nil (2002 - 3.84% to 5.78%) for the year (2002 -RM31,378,000), and depreciation of property, plant and equipment of RM352,000 (2002 - RM151,000).

The forest assets are charged to banks as security for borrowings (Note 12).

4. Investments in subsidiaries

Company2003 2002

RM’000 RM’000

Unquoted shares, at costAt 1 July 938,748 937,148Additions - ordinary shares (Note 32) 89,555 1,600

- RPS ‘B’(Note 32) 57,166 -Redemption - RPS ‘B’ (57,166) -

- RPS ‘A’ (315,672) -

712,631 938,748

In previous year, investment in a subsidiary, Samling Plywood (Bintulu) Sdn. Bhd., of RM56,420,000 had beenpledged to Glenealy Plantations (Malaya) Berhad (“Glenealy”) as security for a put option agreement wherebyGlenealy had an irrevocable right to put to and require the Company to purchase from Glenealy 385,942Redeemable Cumulative Preference Shares “B” (“RPS ‘B’”) of RM1 each held in a subsidiary, TreeOne (Malaysia)Sdn. Bhd. at an option price of RM148.12 per share. During the year, the Company has acquired the RPS ‘B’fromGlenealy and redeemed the same from the subsidiary (Note 32). The Company has also redeemed all of itsinvestment of Redeemable Preference Shares ‘A’ (“RPS ‘A’”) in TreeOne (Malaysia) Sdn. Bhd.

Details of the subsidiaries are shown in Note 30.




Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

At cost:Quoted shares in Malaysia 269,083 269,083 - -Unquoted shares 90,414 90,414 54,730 54,730

359,497 359,497 54,730 54,730Premium on acquisition written off (134,657) (134,657) - -Share of post acquisition losses (28,873) (31,451) - -Capital distribution* (32,178) - - -

163,789 193,389 54,730 54,730

Represented by:Group’s share of net assets 163,789 193,389

Market value of quoted shares 56,512 76,045

* This represents the proportionate share of the capital distribution by Glenealy through the reduction of its issuedand paid-up share capital pursuant to a scheme of arrangement during the year. The capital distribution is offsetagainst the redemption of Redeemable Preference Shares ‘B’ held by Glenealy in a subsidiary, TreeOne(Malaysia) Sdn. Bhd.

The associates of the Group, all of which are incorporated in Malaysia are as follows:

Effective equity interest2003 2002 Principal activities

% %

Glenealy Plantations (Malaya) Berhad 36.02 36.02 Investment holding, operation of oil palm plantations, oil millsand forest plantations.

Samling DorFoHom Sdn. Bhd.* 35.00 35.00 Manufacture and sale of moulded door skin.

Samling Fibre Board Sdn. Bhd. 45.00 45.00 Manufacture and sale of high and medium-density fibre board.

Sepangar Chemical Industry Sdn. Bhd.* 40.00 40.00 Manufacture and sale of formalinand various types of formaldehyde adhesive resins.

* Held by the Company

6. Amounts due from / (to) subsidiaries

Amount due from subsidiaries comprise advances which are unsecured, interest free and not expected to bereceivable within the next twelve months. Advances amounting to RM240,717,000 (2002 - RM244,074,000) bearinterest at rates ranging from 2.99% to 7.40% (2002 - 7.4% to 8.25%) per annum.

5. Investments in associates


ANNUALREPORT 2003


Amount due to subsidiaries comprise advances which are unsecured, interest free and not expected to be payablewithin the next twelve months except for advances amounting to RM196,242,000 (2002 - Nil) with interest whichis determined on a formula based on certain profitability level of the Company. During the year, there was nointerest charge as the Company had not registered the stipulated profit level.

Group2003 2002

RM’000 RM’000

CostAt 1 July 52,199 52,199Acquisition of subsidiary 37,800 -

89,999 52,199

Accumulated amortisationAt 1 July (8,030) (4,015)Amortisation charge for the year (5,695) (4,015)

(13,725) (8,030)

Net book value at 30 June 76,274 44,169

7. Timber concession

Group2003 2002

RM’000 RM’000

Timber logs 62,755 47,790Raw materials 7,309 7,763Work-in-progress 17,680 10,903Manufactured inventories 31,071 12,934Stores and consumables 37,830 31,700

156,645 111,090

Included in manufactured inventories are inventories value at net realisable value amounting to RM3,131,000(2002 - RM2,055,000 ).

8. Inventories




Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Trade receivables 279,399 221,121 - -Less: Allowance for doubtful debts (20,745) (7,423) - -

258,654 213,698 - -

Other receivables 15,745 13,615 3,200 336Less: Allowance for doubtful debts (2,070) (2,070) - -

13,675 11,545 3,200 336

Deposits 1,048 822 183 183Prepayments 13,040 6,936 3,092 3,435Amount due from subsidiaries - - 1,164 5,796

286,417 233,001 7,639 9,750

In previous year, export trade receivables of a subsidiary amounting to RM12,452,000 had been assigned to banksas security for borrowings of the Company (Note 12).

Amount due from subsidiaries comprise advances, which are unsecured, interest free and have no fixed terms ofrepayment.

9. Trade and other receivables

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Deposits with:Licensed banks 16,093 16,201 11,710 10,530Licensed finance companies 24,376 2,011 1,046 2,011

40,469 18,212 12,756 12,541

Cash and bank balances 12,803 5,926 4 3

53,272 24,138 12,760 12,544

The deposits with licensed banks and finance companies bear interest of 2.20% to 3.70% (2002 - 2.20% to 3.20%)per annum.

Deposits with licensed bank and licensed finance companies of the Company comprise Debt Service ReserveAccounts maintained for coupon payments and principal repayment of the Bond of the Company (Note 17).

10. Cash and cash equivalents


ANNUALREPORT 2003


Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Trade payables 177,644 163,179 - -Other payables 57,740 26,183 73 73Accrued expenses 56,833 48,434 4,807 5,047Amount due to subsidiaries - - - 68,941

292,217 237,796 4,880 74,061

Amount due to subsidiaries comprise advances which are unsecured, interest free and have no fixed terms ofrepayment.

11. Trade and other payables

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

CurrentOverdrafts - unsecured 46,176 33,366 16,775 17,206

- secured 1,651 2,917 - -Bankers' acceptances - unsecured 40,174 35,615 - -

- secured 4,508 2,175 - -Revolving credit - unsecured 71,000 54,000 30,000 30,000Trust receipts - secured - 1,208 - -Term loans - secured 3,440 46,460 - 45,600Finance lease liabilities - secured 19,345 8,981 - -

186,294 184,722 46,775 92,806

Non-currentTerm loans - secured 249,805 152,345 - 136,800Finance lease liabilities - secured 36,853 10,304 - -

286,658 162,649 - 136,800

Bank overdraft, bankers’ acceptances and trust receipts of a subsidiary are secured by way of fixed and floatingcharge over all the assets whilst bankers’ acceptances and trust receipts of another subsidiary are secured by wayof charge over the freehold land and certain plant and machinery.

Bank overdrafts and trust receipts bear interest at 7.00% to 7.65% (2002 - 7.00% to 8.40%) per annum. Bankers’acceptances are discounted at 2.88% to 4.91% (2002 - 2.83% to 5.00%) per annum. Revolving credit bears interest

12. Borrowings

Deposits with licensed banks and bank balances of the Group and the Company amounting to RM36,086,000 andRM12,756,000 (2002 - RM18,212,000 and RM12,541,000) respectively have been pledged as securities for bankborrowings of the Group and Company (Note 12).




at 3.60% to 4.15% (2002 - 3.60% to 3.89%) per annum. Finance lease liabilities bear fixed interest rates rangingfrom 4.10% to 4.70% (2002 - 4.40% to 6.00%) per annum.

The secured term loan of the Company of USD48 million which had been fully settled during the year (equivalentto RM182 million) was subject to interest rate ranging from 3.38% to 3.84% (2002 - 3.84% to 5.78%). This termloan was secured by assignment of export receivables of a subsidiary (Note 9), charge over cash and deposits in theCollection Account (“CA”) and accounts which were opened or were to be opened with monies from CA and themortgages over the forest asset (Note 3). It was repayable in 56 scheduled monthly instalments ranging from USD1million to USD2 million commencing in July 2001.

The details of the outstanding secured term loans as at 30 June 2003, which are obtained by the subsidiaries are asfollows:

Outstanding balance Repayment terms Securities Interestat 30 June 2003

RM9 million Equal quarterly instalments of Third party legal charge over the land At 7.25%(2002 - RM10 million) RM485,000 over period of and building and specific debenture (2002 - 7.65%)

5 years commencing April 2003. over machinery and equipment per annum.financed of a subsidiary (Note 2).

RM6 million Monthly instalments of Fixed and floating charge over all At 7.25%(2002 - RM7 million) RM125,000 commencing the assets of a subsidiary (Note 2). (2002 - 8.01%)

April 2003. per annum.

USD46.8 million and Fixed semi annual instalments Mortgages over all interests in forest USD LIBOR + NZD24.4 million equivalent commencing 30 June 2008 crop and land of the subsidiary 1.35% and Billto RM178 million and and a bullet repayment of and a fixed and floating charge over rate NZD +RM54 million NZD21.1 million and USD35.2 all assets of the subsidiary and 1.35% (2002 -(2002 - Nil and Nil) million respectively on its subsidiaries as well as all ordinary Nil and Nil)respectively and accrued 31 December 2014. shares of the subsidiary. per annum.interest of NZD2.7 millionequivalent to RM6 million.

Debt repayment schedule

Total Under 1 year 1 – 5 years Over 5 yearsRM’000 RM’000 RM’000 RM’000

GROUPOverdrafts 47,827 47,827 - -Bankers' acceptances 44,682 44,682 - -Revolving credit 71,000 71,000 - -Term loans 253,245 3,440 14,625 235,180Finance lease liabilities 56,198 19,345 36,853 -

472,952 186,294 51,478 235,180

COMPANYOverdrafts 16,775 16,775 - -Revolving credit 30,000 30,000 - -

46,775 46,775 - -


ANNUALREPORT 2003


Finance lease liabilities

Finance lease liabilities are payable as follows:

Gross Interest Principal Gross Interest Principal2003 2003 2003 2002 2002 2002

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

GROUPLess than one year 22,743 3,398 19,345 9,448 467 8,981Between one and

five years 40,867 4,014 36,853 10,840 536 10,304

63,610 7,412 56,198 20,288 1,003 19,285

Group and Company2003 2002

RM’000 RM’000

Ordinary shares of RM0.50 eachAuthorised 500,000 500,000

Issued and fully paidAs at 1 January 243,805 243,805Issued during the year 61,134 -

As at 31 December 304,939 243,805

13. Share capital

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Non-distributableShare premium 95,379 11,271 95,379 11,271Exchange reserve 43,765 30,050 - -Fair valuation reserve 63,590 63,590 - -

202,734 104,911 95,379 11,271

DistributableRetained profits 484,025 478,486 327,018 326,085Proposed dividend 4,749 1,755 4,749 1,755

488,774 480,241 331,767 327,840

691,508 585,152 427,146 339,111

14. Reserves




The final dividend recommended by the Directors is 2% less tax (2002 - 1% less tax) totalling RM4,749,400 (2002- RM1,755,400) whereby a proposed dividend reserve has been allocated for it.

During the year, share premium of RM85,587,000 arose from the issuance of 122,268,000 ordinary shares ofRM0.50 each, issued at a premium of RM1.20 each per share (Note 32). The related expenses of RM1,479,000 werewritten off against the share premium.

The fair valuation reserve arose in 2001 from the acquisition of subsidiaries from an associate whereby theidentifiable assets and liabilities of the subsidiaries were restated to fair values and from the acquisition ofsubsidiaries by an associate from the Company whereby the fair values had been ascribed to the assets and liabilitiesof those subsidiaries.

Subject to agreement by the Inland Revenue Board, the Company has sufficient Section 108 tax credit and taxexempt income to frank approximately RM76,432,000 of its retained profits, at 30 June 2003 if paid out asdividends.

This consists of the minority shareholders’ shares of identifiable assets and liabilities based on the post-acquisitionfair values of the identifiable assets and liabilities, less amortisation of the fair values.

15. Minority shareholders’ interests

Redeemable Preference Shares of subsidiary was in respect of Redeemable Preference Shares ‘B’ (“RPS ‘B’”)issued by subsidiary, TreeOne (Malaysia) Sdn. Bhd. (“TOM”) to Glenealy Plantations (Malaya) Berhad(“Glenealy”), an associate of the Company. Included in the cost of the RPS ‘B’ was a redemption premium ofapproximately RM88,740,000.

Glenealy was holding 603,183 RPS ‘B’ of RM1 each in TOM. The shares were redeemable at RM148.12 per RPS‘B’ after the third anniversary of the date of its issue, but in any event shall on the fifth anniversary redeem alloutstanding shares and have the rights to receive dividend at a rate equal to the redemption price multiplied by therate of 1.0% above the three months fixed deposit rate of Malayan Banking Berhad.

During the year, Glenealy had redeemed 385,942 RPS ‘B’in conjunction with the Proposed Scheme of Arrangementof Glenealy. Pursuant to the scheme, Lingui through its subsidiary, Alpenview Sdn. Bhd. has also received 217,241RPS ‘B’from Glenealy being its entitlement as a 36.02% shareholder in Glenealy in view of the capital repaymentand distribution by Glenealy. As such, upon the completion of the scheme, Lingui held 603,183 RPS ‘B’ or 100%of the RPS ‘B’ in TOM. As at year end, these RPS ‘B’shares were fully redeemed.

16. Redeemable Preference Shares of subsidiary


ANNUALREPORT 2003



RM’000 RM’000

Nominal value 300,000 300,000Deferred issuance cost (4,001) (5,078)Accrued interest 4,340 4,475

300,339 299,397Less: Current portion

- deferred issuance cost 1,077 1,077- accrued interest (4,340) (4,475)

297,076 295,999

The terms of redemption of the bonds are as follow:

Outstanding balance at 30 June 2003 Redemption terms Interest

RM150 million (2002 - RM150 million) Redeemable at par in April 2006. At 8% (2002 - 8%) per annum.RM150 million (2002 - RM150 million) Redeemable at par in April 2008. At 8.5% (2002 - 8.5%) per annum.

The bonds are secured by Debt Service Reserve Accounts which are maintained for coupon payments and principalrepayment (Note 10).

Significant covenants for the bonds are as follows:

i) Gearing ratio of the Group shall not exceed the following levels during each of the financial years ending on30 June:

Year Gearing ratio

2003 0.852004 0.802005 and thereafter 0.75

ii) Interest coverage ratio of the Group shall equal or exceed 2 times at all times; and

iii) So long as there are no borrowings of the Company which are due and unpaid, the Company may declare andpay dividends, which shall not exceed retained profits for the relevant year and in the event the Company wishesto pay dividends in excess of such amount, the consent of trustee must be obtained.

17. Bonds




18. Deferred tax

Movement in deferred tax assets and liabilities (prior to offsetting of balances) during the year are as follows:

Charged / (credited)to Income Acquisition

At Statement of subsidiary Exchange At1.7.2002 (Note 22) (Note 27) differences 30.6.2003RM’000 RM’000 RM’000 RM’000 RM’000

GROUPDeferred tax liabilitiesProperty, plant and equipment 50,156 (5,685) 15,103 - 59,574Forest assets 183,520 (7,093) - 35,575 212,002Timber concession 12,367 (1,595) 10,584 - 21,356Other items 131 (131) - - -

Total 246,174 (14,504) 25,687 35,575 292,932

Charged / (credited)to Income Acquisition

At Statement of subsidiary Exchange At1.7.2002 (Note 22) (Note 27) differences 30.6.2003RM’000 RM’000 RM’000 RM’000 RM’000

GROUPDeferred tax assetsProvisions (230) (463) - - (693)Property, plant and equipment (40) 23 - - (17)Tax losses (9,296) 208 - - (9,088)Capital allowances (13,852) 6,504 - - (7,348)

Total (23,418) 6,272 - - (17,146)

Net credited to income statement (8,232)

Charged toIncome Statement

At 1.7.2002 (Note 22) At 30.6.2003RM’000 RM’000 RM’000

COMPANYDeferred tax liabilitiesDividends receivable 3,432 4,996 8,428


ANNUALREPORT 2003


Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assetsagainst current tax liabilities and when the deferred taxes relate to the same taxation authority. The followingamounts, determined after appropriate offsetting, are as follows:

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Deferred tax liabilities 292,932 246,174 8,428 3,432Deferred tax assets (17,146) (23,418) - -

275,786 222,756 8,428 3,432

No deferred tax assets is recognised for the following items:

The unutilised tax losses and deductible temporary differences do not expire under current tax legislation. Deferredtax assets have not been recognised in respect of these items because it is not probable that future taxable profit willbe available against which the Group can utilise the benefits.

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Deductible temporary differences (10,604) (4,629) (76) (40)Unutilised tax losses (11,037) (7,795) (5,294) (2,558)

(21,641) (12,424) (5,370) (2,598)




Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Revenue- sale of goods 737,478 498,325 - -- trading and services 245,611 221,536 444 415- gross dividend income - - 38,399 40,467

983,089 719,861 38,843 40,882Cost of sales (863,761) (673,051) - -

119,328 46,810 38,843 40,882Other operating income 12,885 13,099 - -Distribution costs (9,929) (6,866) - -Administration expenses (44,507) (34,326) (4,071) (3,183)Other operating expenses (8,338) (7,398) - -

Operating profit 69,439 11,319 34,772 37,699

Operating profit is arrived at after crediting:Foreign exchange gain

- realised 343 103 - -- unrealised - 79 - -

Gross dividend income- from subsidiaries - - 35,199 39,267- unquoted associate - tax exempt - - 3,200 1,200

Gain on disposal of property plant and equipment 913 859 - -Gain on deemed disposal of subsidiary 400 - - -Rental income

- equipment 2,569 2,248 - -- properties 857 830 124 124

and after charging:Allowance for doubtful debts 13,322 4,983 - -Amortisation of timber concession (Note 7) 5,695 4,015 - -Auditors’remuneration 379 342 25 22Depletion of forest crops (Note 3) 6,996 - - -Directors’remuneration

- fees 250 250 250 250- other emoluments 717 488 717 488

Depreciation (Note 2) 81,313 70,349 127 161Property, plant and equipment written off 3 13 - -Foreign exchange loss

- realised 139 - - -- unrealised 68 - 1,067 -

Rental charges -- equipment 14,610 12,216 86 86- premises 3,201 3,430 222 222- logging roads, land and log pond 1,428 577 - -

Write-down of forest crops to net realisable value (Note 3) 1,195 - - -

19. Operating profit


ANNUALREPORT 2003


Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Interest payable- Term loans 10,675 1,240 3,644 10,627- Revolving credit 2,429 2,100 1,221 948- Overdrafts 2,803 2,172 1,156 911- Finance leases 2,454 1,700 - -- Bankers’acceptances 2,214 1,612 - -- Bonds 24,750 5,744 24,750 24,750- Redeemable preference shares 2,236 - - -- Others 1,140 181 - -

Other financing costs 1,077 1,076 1,077 1,076

49,778 15,825 31,848 38,312

In previous year, certain borrowing costs of the Company had been capitalised into forest assets at the Group level(Note 3).

20. Financing costs

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Staff costs- Income statements 121,381 96,493 964 482- Forest assets 1,930 1,205 - -

123,311 97,698 964 482

The number of employees of the Group and of the Company (including Directors) at the end of the year was 6,831(2002 - 4,912) and 2 (2002 - 3) respectively.

21. Employee information




Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Current tax expenseMalaysian 14,105 7,608 - -Overseas 7,498 5,480 - -(Over) / under provision of Malaysian tax expense in prior year (19) 2,136 - 609

21,584 15,224 - 609

Deferred tax (reversal) / expenseOrigination and reversal of temporary differences (8,232) (18,990) 4,996 3,432

(8,232) (18,990) 4,996 3,432

Tax expense on share of profit of associates 2,956 4,693 - -

16,308 927 4,996 4,041

22. Tax expense

Reconciliation of effective tax rate

2003 2002RM’000 RM’000

GROUPProfit before taxation 30,419 5,882

Income tax using Malaysian tax rates 8,517 1,647Non-deductible expenses 7,567 2,474Double-deduction (5,182) (9,259)Unrecognised deferred tax assets 2,581 1,296Deferred tax assets recognised - (2,060)Non-taxable income (112) -

13,371 (5,902)(Over) / under provision in prior years (19) 2,136Tax expense on share of profit of associates 2,956 4,693

Tax expense 16,308 927

COMPANYProfit before taxation 10,678 6,894

Income tax using Malaysian tax rates 2,990 1,930Non-deductible expenses 2,127 1,287Unrecognised tax assets 776 551Tax exempt income (897) (336)

4,996 3,432Under provision in prior years - 609

Deferred tax expense 4,996 4,041

GROUPDeferred tax liability recognised directly in equityRelating to foreign exchange translation 35,575 33,184


ANNUALREPORT 2003


23. Earnings per ordinary share - Group

Weighted average number of ordinary shares

2003 2002’000 ’000

Issued ordinary shares at beginning of the year 487,611 487,611Effect of shares issued in November 2002 49,480 -Effect of shares issued in June 2003 3,915 -

Weighted average number of ordinary shares 541,006 487,611

The calculation of basic earnings per share is based on the net profit attributable to shareholders of RM12,606,000(2002 - RM4,955,000) and the weighted average number of ordinary shares outstanding as at 30 June 2003 of541,006,000 (2002 - 487,611,000).

Segment information is presented in respect of the Group’s business and geographical segments. The primaryformat, business segments, is based on the Group’s management and internal reporting structure. Inter-segmentpricing is determined based on negotiated terms.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can beallocated on a reasonable basis. Unallocated items mainly comprise interest-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expectedto be used for more than one period.

Business segmentsThe Group comprises the following main business segments:

Timber and plywood Extraction and sale of timber, manufacturing of plywood and veneer and forest plantation.

Trading and services Spare parts, petrol, oil and lubricant traders,insurance agents and provision of repair services.

Manufacturing - rubber Manufacturing of rubber retread compounds.

Properties and quarry operations Property investment, management and letting ofindustrial properties and quarry licensee and operator.

Plantation Operation of oil palm plantations and oil millsderived from the Group’s investment in an associate.

Geographical segmentsThe timber and plywood segment is also operated in another principal geographical area in New Zealand. The othersegments are operated in Malaysia.

In presenting information on the basis of geographical segments, segment revenue is based on the geographicallocation of operations. Segment assets are also based on the geographical location of assets.

24. Segmental information




Trading Properties Timber and and Manufacturing and quarry

plywood services - rubber operations Plantation Eliminations ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2003

Business segmentsRevenue from external

customers 863,111 90,716 12,211 17,051 - - 983,089Inter-segment revenue - 108,759 - 347 - (109,106) -

Total revenue 863,111 199,475 12,211 17,398 - (109,106) 983,089

Segment result 61,865 8,760 (1,466) 3,540 - - 72,699

Unallocated corporate expenses (3,260)

Interest expense (49,778)Interest income 529Share of profit

of associates 851 9,378 10,229

Profit before taxation 30,419Tax expense (16,308)Minority interest (1,505)

Net profit for the year 12,606

2002

Business segmentsRevenue from external

customers 656,208 40,001 10,953 12,699 - - 719,861Inter-segment revenue - 118,231 - 395 - (118,626) -

Total revenue 656,208 158,232 10,953 13,094 - (118,626) 719,861

Segment result 7,070 6,812 (1,833) 2,234 - - 14,283

Unallocated corporate expenses (2,964)

Interest expense (15,825)Interest income 1,496Share of profit

of associates 2,318 6,574 8,892

Profit before taxation 5,882Tax expense (927)

Net profit for the year 4,955

24. Segmental information ( c o n t i n u e d )


ANNUALREPORT 2003


Trading Properties Timber and and Manufacturing and quarry

plywood services - rubber operations Plantation Eliminations ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2003

Segment assets 2,046,313 111,524 19,703 43,954 - - 2,221,494Investment in associates 60,935 - - - 102,854 - 163,789Unallocated assets 49,969

Total assets 2,435,252

Segment liabilities (188,897) (95,608) (1,790) (4,339) - - (290,634)Unallocated liabilities (1,148,171)

Total liabilities (1,438,805)

Capital expenditure 107,343 323 303 2,851 - - 110,820

Depreciation and amortisation (80,474) (1,936) (1,176) (3,422) - - (87,008)Non-cash expenses other

than depreciation andamortisation (20,252) (1,000) - (261) - - (21,513)

2002

Segment assets 1,667,150 55,010 19,289 57,388 - - 1,798,837Investment in associates 63,672 - - - 129,717 - 193,389Unallocated assets 58,364

Total assets 2,050,590

Segment liabilities (139,056) (87,203) (1,256) (3,192) (7,089) - (237,796)Unallocated liabilities (983,837)

Total liabilities (1,221,633)

Capital expenditure 100,066 590 1,027 635 - - 102,318

Depreciation and amortisation (66,785) (2,704) (1,152) (3,723) - - (74,364)Non-cash expenses other than

depreciation and amortisation (4,983) - - - - - (4,983)





Malaysia Outside Malaysia Consolidated2003 2002 2003 2002 2003 2002

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

Geographical segmentsRevenue from external customers

by location of operations 960,803 712,301 22,286 7,560 983,089 719,861

Segment assets by location of assets 1,380,029 1,118,319 1,005,254 873,907 2,385,283 1,992,226

Unallocated assets by location of assets 49,969 58,364 - - 49,969 58,364

1,429,998 1,176,683 1,005,254 873,907 2,435,252 2,050,590

Capital expenditure by location of assets 94,969 55,446 15,851 46,872 110,820 102,318


25. Dividend


RM’000 RM’000

Final dividend paid:1% per share less tax for 2002 (2002 - 1% per share less tax for 2001) 1,755 1,755

The proposed final dividend of 2% less tax totalling RM4,749,400, which has not been accounted for in thefinancial statements is based on the enlarged share capital of 659,630,441 ordinary shares of RM0.50 each aftercompletion of the issuance and allotment of 49,752,549 ordinary shares of RM0.50 each in the Company to NisshoIwai Corporation pursuant to the completion of the acquisition of remaining 40% of the equity interest in SamlingPlywood (Miri) Sdn. Bhd. (Note 32).

26. Changes in accounting policies and prior year adjustments

In the current year, the Group and the Company adopted four (4) new MASB Standards. The adoption of these newstandards resulted in changes in accounting policies as follows:-

(a) MASB 22, Segmental Reporting, which have been adopted prospectively;

(b) MASB 23, Impairment of Assets, which is applied prospectively. The restatement of comparative figures andprior year adjustment are therefore not presented;

(c) MASB 25, Income Taxes, which has been adopted retrospectively. Comparative figures have been adjusted toreflect the change in this accounting policy; and


ANNUALREPORT 2003


(d) MASB 27, Borrowing Costs, which is applied retrospectively. Comparative figures have not been restated as theprevious accounting policy was in line with the accounting standard.

The adoption of MASB 25 has resulted in the Group recognising in full all taxable temporary differences.Previously, deferred tax liabilities were not provided if no liability was expected to arise in the foreseeable futureand there were no indications the timing differences will reverse thereafter. Deferred tax assets are now recognisedwhen it is probable that taxable profits will be available against which the deferred tax asset can be utilised.

Prior year adjustments

Change in accounting policyThe change in accounting policy due to the adoption of MASB 25 has been accounted for by restating comparativesand adjusting the opening balance of retained profits at 1 July 2001 as disclosed in Note 34 and the statement ofchanges in equity respectively.

27. Acquisition and deemed disposal of subsidiaries

AcquisitionDuring the year, the Company acquired 60% equity interest in Samling Plywood (Miri) Sdn. Bhd. for aconsideration of RM89,554,589 satisfied by the issuance of 74,628,824 new ordinary shares of RM0.50 each in theCompany at an issue price of RM1.20 per new ordinary shares. The acquisition was accounted for using theacquisition method of accounting. For the eight (8) months ended 30 June 2003, the subsidiary contributed a netprofit of RM3,163,000 to the consolidated net profit for the year.

In respect of previous year, the Group, through its wholly owned subsidiary, Tamex Timber Sdn. Bhd., on 1 July2001 has completed the acquisition of 100% interest in Miri Parts Trading Sdn. Bhd. The acquisition was accountedfor using the acquisition method of accounting. For the twelve (12) months ended 30 June 2002, the subsidiarycontributed a net profit of RM2,332,000 to the consolidated net profit for the year.

Effect of acquisitionsThe acquisitions had the following effects on the Group’s assets and liabilities as at 30 June 2003.

2003 2002RM’000 RM’000

Property, plant and equipment 174,051 14,925Timber concession 37,800 -Current assets 36,289 83,216Current liabilities (77,058) (86,762) Deferred taxation (Note 18) (25,687) (306)Minority interest’s share of identifiable assets and liabilities (58,158) -

Net assets acquired 87,237 11,073Goodwill on acquisition 2,318 18,927

89,555 30,000Consideration satisfied by issuance of shares (89,555) -Cash and cash equivalents of the subsidiaries 4,653 4,266

Cash flow on acquisition net of cash acquired 4,653 34,266




27. Acquisition and deemed disposal of subsidiaries ( c o n t i n u e d )

Deemed disposalOn 28 November 2003, a subsidiary issued 400,000 ordinary shares of RM1 each at RM1 each to third parties. As a result, the Company and Group’s effective shareholding in the subsidiary decreased from 100% to 80%. At thedate of disposal, the net liabilities of the subsidiary was RM5,744,588 and the minority interest’s share of its netliabilities is limited to the cost of investment of RM400,000.

GroupRM’000 RM’000

Net liabilities (400) -Gain on deemed disposal 400 -

- -Consideration received, satisfied in cash 400 -

Group Company2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000

Property, plant and equipmentAuthorised and contracted for 29,179 917 - -Authorised but not contracted for 27,571 35,140 - 100

56,750 36,057 - 100

Investments Authorised and contracted for 59,703 84,080 59,703 84,080Authorised but not contracted for - 57,166 - 57,166

116,453 177,303 59,703 141,346

28. Commitments

29. Related parties

Identity of related partiesThe Group has related party relationships with companies connected to certain of its Directors and major shareholdersof the Company and associates.

In accordance with Section 4.1.5 of Practice Note No. 12 / 2001 of the Listing Requirements of Kuala Lumpur StockExchange (“KLSE”), the details of recurrent related parties transactions conducted during the financial year ended 30June 2003 pursuant to the shareholders’mandate are disclosed hereunder. The related parties below are as defined underthe Listing Requirements of KLSE and include transactions with associates, Glenealy Plantations (Malaya) Berhad(“Glenealy”), Samling DorFoHom Sdn. Bhd. (“Samling DorFoHom”) and Samling Fibre Board Sdn. Bhd. (“SamlingFibre Board”).

Details of the related party relationships, which are having related party transactions with the Group are as follows:

( a ) Yaw Holding Sdn. Bhd. (“Yaw Holding”), its subsidiaries and associates (“Yaw Holding Gro u p ” )Yaw Chee Ming, the Managing Director of the Company, is also a Director in Yaw Holding and Yaw HoldingG r o u p .


ANNUALREPORT 2003


Datuk Yaw Teck Seng is the father of Yaw Chee Ming. Hence, Datuk Yaw Teck Seng and Yaw Chee Ming arepersons connected to each other.

Datuk Yaw Teck Seng and Yaw Chee Ming are both deemed major shareholders of the Company by virtue of theirsubstantial shareholdings through Yaw Holding (direct and indirect interests of 100% collectively) in SamlingStrategic Corporation Sdn. Bhd. (“Samling Strategic”), Strategic Corporation Sdn. Bhd., Megadasa Sdn. Bhd. andPlieran Sdn. Bhd.

Cheam Dow Toon, a Director of the Company is also a Director of Samling Strategic, a subsidiary of Yaw Holding.He also owns 29,030 ordinary shares of RM0.50 each in the Company;

( b ) Perkapalan Damai Ti m u r Sdn. Bhd. (“Perkapalan Damai Ti m u r ” )Wan Morshidi bin Tuanku Abdul Rahman and Datuk Abdul Hamed bin Sepawi are both deemed majorshareholders of the Company by virtue of their substantial shareholdings in Perkapalan Damai Timur (directinterest of 40% and 60% respectively). Wan Morshidi bin Tuanku Abdul Rahman and Datuk Abdul Hamed binSepawi are also deemed major shareholders (through Perkapalan Damai Timur) in certain companies of the Ya wHolding Group namely Limbang Trading (Bintulu) Sdn. Bhd. (indirect interest of 25%), Samling DorFoHom(indirect interest of 30%), Samling Manufacturing Plantation Sdn. Bhd. (through Samling DorFoHom) (indirectinterest of 21%) and Sorvino Holdings Sdn. Bhd. (indirect interest of 51%).

Cheam Dow Toon is a Director of Samling DorFoHom, a company in which Yaw Holding (through SamlingStrategic) and Perkapalan Damai Timur are major shareholders;

( c ) R a v e n s c o u rt Sdn. Bhd. (“Ravenscourt”) and Syarikat Reloh Sdn. Bhd. (“Syarikat Reloh”)Yaw Chee Ming is a major shareholder of Ravenscourt (direct and indirect interests of 56% collectively) andSyarikat Reloh (direct interests of 70% collectively).

Wan Morshidi bin Tuanku Abdul Rahman and Datuk Abdul Hamed bin Sepawi are both deemed majorshareholders of Ravenscourt (through Perkapalan Damai Timur) (direct and indirect interests of 44%);

Datuk Yaw Teck Seng and Yaw Chee Ming are major shareholders of Syarikat Reloh (collectively direct interestsof 70%).

( d ) 3D Networks Sdn. Bhd. (“3D Networks”)Yaw Chee Ming, a Director of 3D Networks, is also deemed a major shareholder of 3D Networks (indirect interestof 100%) by virtue of his substantial shareholding in Planet One Pte. Ltd.;

( e ) Glenealy Plantations (Malaya) Berhad (“Glenealy”) and its subsidiaries (“Glenealy Gro u p ” )Yaw Chee Ming is the Managing Director of Glenealy, an associate of the Group. Datuk Yaw Teck Seng and Ya wChee Ming are both deemed major shareholders of Glenealy (indirect interests of 51.2% collectively) by virtue oftheir substantial shareholdings through Yaw Holding in Samling Strategic and Alpenview Sdn. Bhd.( “ A l p e n v i e w ’’). Alpenview is a wholly-owned subsidiary of the Company.

Cheam Dow Toon is a Director of Glenealy and he also owns 14,000 ordinary shares of RM1.00 each in Glenealy.

Chan Hua Eng, is the common Chairman of the Company and Glenealy. By virtue of his common directorship andhis direct equity interest in the Company of 154,623 ordinary shares of RM0.50 each and 2,000 ordinary shares ofRM1.00 each in Glenealy, he is deemed interested in the Recurrent Transactions between the Lingui Group and theGlenealy Group;

( f ) Hap Seng Consolidated Berhad (“Hap Seng”) and its subsidiaries (“Hap Seng Gro u p ” )Chan Hua Eng, is the Chairman of the Company and was a former Director of Hap Seng. By virtue of his formercommon directorship and his direct and indirect equity interests in the Company and Hap Seng of 154,623 ordinaryshares of RM0.50 each and 70,000 ordinary shares of RM1.00 each respectively, he was deemed interested in the




Recurrent Transactions between the Lingui Group and the Hap Seng Group.

Geh Cheng Hooi, is a Director of the Company and was a former Director of Hap Seng. By virtue of his former commondirectorship and his direct and indirect equity interest in Lingui of 8,333 ordinary shares of RM0.50 each, he wasdeemed interested in the Recurrent Transactions between the Lingui Group and the Hap Seng Group;

( g ) Barama Company Pte. Ltd. (“Barama”), Samling Singapore Pte. Ltd. (“Samling Singapore”) andI n t e rwil Trading AG (“Interw i l ” )Datuk Yaw Teck Seng is deemed to be a major shareholder of Barama, Samling Singapore and Interwil by virtue of hissubstantial shareholding in Samling International Ltd. (“Samling International”)(direct and indirect interests of 100%c o l l e c t i v e l y ) ;

( h ) Majulaba Sdn. Bhd. (“Majulaba”)Yaw Chee Ming is a Director and major shareholder of Majulaba (direct interest of 30%);

( i ) Juta Syabas Sdn. Bhd. (“Juta”), Profiton Sdn. Bhd. (“Profiton”) and Orient Elite Sdn. Bhd. (“Orient”)Hiew Chung Chin is the brother of Datuk Yaw Teck Seng. Hence, Hiew Chung Chin and Datuk Yaw Teck Seng aredeemed persons connected to each other.

Hiew Chung Chin, a Director of Miri Parts Trading Sdn. Bhd. (“Miri Parts”), a subsidiary of the Company is also aDirector and major shareholder of Juta (direct and indirect interests of 39%), Profiton (direct interest of 22%) and Orient(direct and indirect interests of 100%).

Soo Mei Kong, Director of Miri Parts, is also a Director and major shareholder of Profiton (direct interest of 22%);

( j ) Nissho Iwai Corporation (“NIC”), its subsidiaries and associates (“NIC Gro u p ” )NIC is a major shareholder of Samling Plywood (Miri) Sdn. Bhd. (direct interest 40%), Samling Housing Products Sdn.Bhd. (direct interest of 9%) and Samling Fibre Board (direct interest of 30%);

( k ) Arif Hemat Sdn. Bhd. (“Arif Hemat”)Wan Morshidi bin Tuanku Abdul Rahman by virtue of his substantial shareholdings in Arif Hemat is deemed a majorshareholder in certain companies of the Yaw Holding Group namely Arif Hemat Properties Sdn. Bhd., Sarawak Land(Miri City) Sdn. Bhd., Insan Sejati Sdn. Bhd. and Kemena Resort Sdn. Bhd.;

( l ) Sarku Engineering Sdn. Bhd. and Sarku Resources Sdn. Bhd. (“Sarku”)Yaw Chee Ming was a former Director of Sarku. By virtue of his former common directorship, he was deemedinterested in the Recurrent Transactions between Lingui Group and Sarku;

( m ) Merawa Sdn. Bhd. (“Merawa”)Wan Morshidi bin Tuanku Abdul Rahman was a former Director of Merawa;

( n ) Finemould Industries (M) Sdn. Bhd. (“Finemould”)Yeoh Keat Hin, a Director and major shareholder of Grand Paragon Sdn. Bhd. (“Grand Paragon”), a subsidiary of theCompany is a major shareholder of Finemould;

( o ) Rohden UK Ltd. (“Rohden”)John William Smith, a Director and major shareholder of Grand Paragon, is a Director and major shareholder of Rohden.Yeoh Keat Hin is also a Director of Rohden; and

( p ) T W W Holdings Sdn. Bhd. (“TWW H o l d i n g s ” )Yeoh Keat Hin, a Director and major shareholder of Grand Paragon is also a Director and major shareholder of T W WH o l d i n g s .


ANNUALREPORT 2003


Transactions with companies connected to certain Directors and major shareholders of the Company are as follows:

Group

2003 2002RM’000 RM’000

Timber logging contract fees receivableYaw Holding Group 35,128 31,432Ravenscourt 33,334 46,477Syarikat Reloh 12,405 13,617Glenealy Group - 121

Timber logging contract fees payableYaw Holding Group 102,691 89,690

Disposal of property, plant and equipmentGlenealy Group - 38Yaw Holding Group 110 -

Agency commission payableYaw Holding Group 1,172 788Rohden 432 -

Purchase of property, plant and equipmentYaw Holding Group 6,070 8,991Yaw Holding Group and Perkapalan Damai Timur 1,849 82Hap Seng Group 13,230 8,453Juta 13 -Samling Singapore 2,368 -

Sawing, kiln drying and blanking service receivableYaw Holding Group 35 395

Sale of kiln dry timber and finger joint materialsYaw Holding Group 513 531Ravenscourt 39 -Finemould 125 -

Construction of roads and trucking incomeYaw Holding Group 5,387 5,872Ravenscourt 2,448 3,734Syarikat Reloh 102 346

Purchase of fuel, spare parts and other materialsYaw Holding Group 80 199Yaw Holding Group and Perkapalan Damai Timur 7,355 3,872Hap Seng Group 2,724 2,307Ravenscourt 8 135Samling Singapore - 217NIC Group 36 -

29. Related parties ( c o n t i n u e d )




Group

2003 2002RM’000 RM’000

Sales of fuel, spare parts and other materialsYaw Holding Group 75,747 54,234Ravenscourt 779 793Barama 44 1,580Syarikat Reloh 6 15Juta 3 9Majulaba 15 4Yaw Holding Group and Perkapalan Damai Timur 3,091 2,003Profiton 2,336 1,851Glenealy Group 921 502NIC Group 1,078 -Yaw Holding Group and Arif Hemat 25 -Sarku 79 -Yaw Holding Group and NIC Group 111 -

Rental of equipment / premises payableYaw Holding Group 14,990 14,706Glenealy 108 108 Yaw Holding Group and Perkapalan Damai Timur 10 -

Purchase of air ticketsYaw Holding Group 391 400

Sale of timber logs and plywoodYaw Holding Group 11,059 28,839Ravenscourt 313 -Interwil 2,284 2,168Yaw Holding Group and Perkapalan Damai Timur 5 23NIC Group 48,421 -Yaw Holding Group and Arif Hemat 1 -Yaw Holding Group and NIC Group 2,921 -

Purchase of timber logs and plywoodYaw Holding Group 49,246 36,119Syarikat Reloh 8,350 6,945Ravenscourt 10,896 5,906Yaw Holding Group and Perkapalan Damai Timur 5,990 5,771Glenealy Group - 159

Rental / equipment incomeYaw Holding Group 1,262 2,2303D Networks 120 120Yaw Holding Group and Perkapalan Damai Timur 341 467Glenealy Group 46 132Sarku 979 -



ANNUALREPORT 2003


Group

2003 2002RM’000 RM’000

Lighterage income receivableYaw Holding Group 11,224 13,533Ravenscourt 2,792 3,426Syarikat Reloh 1,183 1,668Yaw Holding Group and Perkapalan Damai Timur 785 511Majulaba 913 667Glenealy Group - 27NIC Group 321 -Merawa 1,734 -

Lighterage fees payableYaw Holding Group 4,131 4,458Orient 467 467

Medical fees payableYaw Holding Group 36 17

Hotel accommodation chargesYaw Holding Group and Arif Hemat 140 137

Plywood marketing fees payableNIC 114 -

Web chargesYaw Holding Group 48 -

Management fees payableYaw Holding Group 769 656Samling International 390 350TWW Holdings 106 -

Management fees receivableYaw Holding Group and Perkapalan Damai Timur 120 120Glenealy Group 30 59

Repair and reconditioning payableYaw Holding Group 5 -Yaw Holding Group and Perkapalan Damai Timur 9,639 9,965Yaw Holding Group and NIC Group 10 -

Repair and reconditioning receivableYaw Holding Group 647 1,110Barama 85 -Glenealy Group 2 -Yaw Holding Group and Perkapalan Damai Timur 11 -

Sale of doorsRohden 2,316 -

Security services receivableYaw Holding Group - 654





Group

2003 2002RM’000 RM’000

Insurance income receivableJuta 20 20Orient 5 3Yaw Holding Group and Perkapalan Damai Timur 905 924Ravenscourt 148 165Yaw Holding Group 3,412 4,073Glenealy Group 574 447Barama 52 -NIC Group 832 -Profiton 1 -Merawa 1 -Yaw Holding Group and Arif Hemat 225 216

Food, ration and consumables expensesJuta 285 464Yaw Holding Group 3 -

Training revenueYaw Holding Group 13 169

Dividend payable for Redeemable Preference Shares ‘B’Glenealy 3,495 3,790

These transactions have been entered into in the normal course of business and have been transacted on a willingbuyer willing seller basis, although settlements for certain transactions exceed the normal credit terms

Other significant related party transactionsOther significant related party transactions, in respect of related parties as defined in MASB 8, Related Parties butare not regarded as related parties under Chapter 10 Para 10.08 of the Listing Requirements of KLSE is with anassociate, Sepangar Chemical Industry Sdn. Bhd.

Group2003 2002

RM’000 RM’000

AssociatePurchase of glue 25,994 17,835

Significant transactions with subsidiaries, other than disclosed elsewhere in the financial statements, are as follows:

Company2003 2002

RM’000 RM’000

SubsidiariesManagement fees receivable 320 290 Interest receivable 7,347 7,318

These transactions have been entered into in the normal course of business and have been transacted on a willingbuyer willing seller basis.



ANNUALREPORT 2003


The principal activities of the companies in the Group, their places of incorporation and the interest of LinguiDevelopments Berhad are as follows:

Issued and paid EffectiveCountry of up ordinary ownership

Name of company Principal activities incorporation share capital interest2003 2002

% %

Samling Plywood Manufacturing of plywood and veneer, Malaysia RM20,250,000 100 100(Baramas) Sdn. Bhd. extraction and sale of timber

Samling Plywood Extraction and sale of timber logs Malaysia RM3 100 100(Lawas) Sdn. Bhd.

TreeOne (Malaysia) Sdn. Bhd. Investment holding Malaysia RM1,000,000 100 100

Samling Plywood Manufacturing of plywood and veneer, Malaysia RM25,000,000 100 100(Bintulu) Sdn. Bhd. extraction and sale of timber

Tamex Timber Sdn. Bhd. Contractor for timber extraction Malaysia RM1,001,000 100 100

Samling Agro - Forestry Dormant Malaysia RM2 100 100Management Sdn. Bhd.

Ang Cheng Ho Quarry licensee and operator Malaysia RM6,600,000 100 100Quarry Sdn. Bhd.

Stigang Resources Sdn. Bhd. Quarry licensee and operator Malaysia RM6,121,530 100 100

Alpenview Sdn. Bhd. Investment holding Malaysia RM1,000,000 100 100

Lingui Corporation Sdn. Bhd. Provision of management services Malaysia RM2 100 100

Hock Lee Plantations Investment holding and management Malaysia RM7,262,400 100 100Sdn. Bhd. and letting of industrial properties

TreeOne Logistic Services Dormant Malaysia RM10,000 97 100Sdn. Bhd. (formerly known as TreeOne Holdings Sdn. Bhd.)

Grand Paragon Sdn. Bhd. Manufacturing and marketing doors Malaysia RM2,000,000 80 100

Samling Plywood (Miri) Manufacturing of plywood and veneer, Malaysia RM40,000,000 60 -Sdn. Bhd. extraction and sale of timber

Subsidiaries of Tamex Timber Sdn. Bhd.

Tinjar Transport Sdn. Bhd. Transportation Services Malaysia RM2,476,000 100 100

Miri Parts Trading Sdn. Bhd. Spare parts, petrol, oil and lubricant Malaysia RM200,000 100 100traders, insurance agents andprovision of repair and services

30. Companies in the Group




Issued and paid EffectiveCountry of up ordinary ownership

Name of company Principal activities incorporation share capital interest2003 2002

% %

Subsidiary of Ang Cheng Ho Quarry Sdn. Bhd.

Bukit Pareh Quarry Sendirian Berhad Dormant Malaysia RM3 100 100

Subsidiaries of TreeOne (Malaysia) Sdn. Bhd.

TreeOne B.V.* Investment holding Netherlands NLG40,000 100 100

TreeOne (NZ) Limited* Investment holding New Zealand NZD10,000 100 100

Subsidiary of TreeOne (NZ) Limited

Hikurangi Forest Farms Limited* Forest plantation New Zealand NZD1,200,000 100 100

Subsidiaries of Hikurangi Forest Farms Limited

East Coast Forests Limited* Forest plantation New Zealand NZD2,000 100 100

Tasman Forestry (Gisborne) Limited* Forest plantation New Zealand NZD42,500,000 100 100

Subsidiaries of Hock Lee Plantations Sdn. Bhd.

Hock Lee Rubber Products Sdn. Bhd. Manufacturing of rubber Malaysia RM13,000,000 100 100retread compounds

Hock Lee Enterprises (M) Property investment and Malaysia RM13,700,000 100 100Sendirian Berhad letting of industrial properties

* Audited by member firms of KPMG International

All the subsidiaries are consolidated using the acquisition method of accounting except for Samling Plywood(Bintulu) Sdn. Bhd. and Tamex Timber Sdn. Bhd. which are consolidated using the merger method of accounting.As allowed by the transitional provision of MASB 21, Business Combinations, the consolidation method of thesubsidiaries have not been reviewed as the standard has been adopted prospectively.

31. Contingent liability (unsecured)

A subsidiary, Samling Plywood (Baramas) Sdn. Bhd. together with the State Government of Sarawak and a thirdparty are being jointly sued by Penans (“1st and 2nd applications”) of four longhouses and settlements situated ontimber concession areas held by the subsidiary. The Penans are seeking declaration that they have native customaryrights over their claimed land located within the said timber concession areas. The subsidiary filed defence andcounterclaim on 12 November 1998. The plaintiffs also filed a reply and defence to counterclaim on 24 November1998. On 15 January 2003 the Court has granted leave to the subsidiary to amend its defence and counterclaim. On14 January 2003, another application (“3rd application”) was taken out by a party for and on behalf of some of theinhabitants of the longhouses to have themselves added as plaintiff in this action. The hearing of the 1st and 2ndapplications and 3rd application are now fixed on 1 October 2003 and 13 October 2003 respectively. The outcomeof the legal suits, according to the subsidiary’s solicitor cannot be ascertained at this stage.


ANNUALREPORT 2003


Another subsidiary, Tamex Timber Sdn. Bhd. together with the Superintendent of Lands and Surveys DepartmentBintulu Division and the State Government of Sarawak are being jointly sued by Kayans Longhouse Communities(“The plaintiffs”) of longhouses and settlements situated on timber concession areas held by the subsidiary. Theplaintiffs are claiming for various reliefs including declarations that issuance of the land title and / or provisionallease of that parcel of land at and / or around the Longhouse communities of that area was unconstitutional andwrongful. The subsidiary had on 7 August 2003 filed its defence and counterclaim against the plaintiffs. Theplaintiffs have requested for an extension of time up to 31 August 2003 to file its reply and defence to thecounterclaim. The subsidiary’s solicitors are currently studying the plaintiff’s claims and the outcome of the legalsuits cannot be ascertained at this stage.

32. Significant events during the year

Acquisition of Samling Plywood (Miri) Sdn. Bhd.On 1 November 2002, the Company completed the acquisition of 60% equity interest in Samling Plywood (Miri)Sdn. Bhd. (“SPM”) from Samling Strategic Corporation Sdn. Bhd. and Tapah Plantation Sdn. Bhd. (“TP”) for apurchase consideration of RM89,554,589 satisfied by the issuance of 74,628,824 new ordinary shares of RM0.50each in the Company at an issue price of RM1.20 per new ordinary share.

On 26 December 2002, the Company entered into a Conditional Sale of Share Agreement with Nissho IwaiCorporation (“NIC”) for the proposed acquisition of 16,000,000 ordinary shares of RM1 each in SPM, representingthe remaining 40% of the equity interest in SPM for a purchase consideration of RM59,703,059 to be satisfied bythe issuance of 49,752,549 new ordinary shares of RM0.50 each in the Company at an issue price of RM1.20 pernew ordinary share.

As of the date of this report, the Company has obtained approvals from the Sarawak Department of Forestry, theMinistry of International Trade and Industry, the Securities Commission and the Foreign Investment Committeevide their approval letters dated 29 January 2003, 10 March 2003, 3 April 2003 and 28 April 2003 and theshareholders of the Company at an Extraordinary General Meeting held on 20 June 2003. On 13 August 2003, theacquisition was completed with the issuance and allotment of 49,752,549 ordinary shares of RM0.50 each in theCompany to NIC.

Acquisition of Class “B” Redeemable Preference Shares of TreeOne (Malaysia) Sdn. Bhd.On 6 June 2003, the Company completed the acquisition of 385,942 Class ‘B’ Redeemable Preference Shares ofRM1 each (“RPS ‘B’”) in TreeOne (Malaysia) Sdn. Bhd. from the shareholders (other than the Company) ofGlenealy Plantations (Malaya) Berhad, an associate, for a purchase consideration of RM57,165,691 satisfied by theissuance of 47,638,076 new ordinary shares of RM0.50 each in the Company at an issue price of RM1.20 per newordinary share. Subsequent to this acquisition, the Company has redeemed the RPS ‘B’.

33. Financial instruments

Financial risk management objectives and policiesManagement has adopted certain policies on financial risk management with the objective of:(a) ensuring that appropriate funding strategies are adopted to meet the Group's short term and long term funding

requirements taking into consideration the cost of funding, gearing levels and cash flow projections of eachproject and that of the Group;

(b) ensuring that appropriate strategies are also adopted to manage related interest and currency risk funding; and(c) ensuring that credit risks on sales to customers on deferred terms are properly managed.

Action taken by management to address significant financial risks are reviewed and approved by the Board ofDirectors before implementation.




Credit riskThe Group's credit risk arises from sales made on deferred terms. Credit risks and exposures are controlled andmonitored on an on-going basis by setting appropriate credit limits and terms after credit evaluations have beenperformed on customers on a case-by-case basis. Appropriate approval limits are set at different level of credit limitand terms. The Group's diversified business base ensures that there are no significant concentrations of credit riskfor a particular customer.

Interest rate riskThe Group borrows both fixed and floating interest rate loans. Exposure to floating interest rate present the Groupwith a certain element of risk when there are unexpected adverse interest rate movements. The Group's policy is tomanage its interest rate risk, working within an agreed framework, to ensure that there are no unduly exposures tosignificant interest rate movements and rates are appropriately fixed when necessary.

Management exercises a certain element of discretion on whether to borrow at fixed or floating interest rates,depending on the market situation and the outlook prevailing then. In addition, interest rate swap has been enteredfor loans denominated in USD46,800,000 and NZD24,400,000 to ensure that the exposure to changes in interest arefixed for the respective tranches throughout the tenure of the loans with swap rates between 5.32% and 8.86% perannum respectively over the loan period. The Group's short term deposits are placed at fixed rate investments whichmanagement endeavours to obtain the best rate available in the market.

Foreign currency exchange riskThe Group's exposure to currency risk results from transactions entered into by the Company and its subsidiaries incurrencies other than Ringgit Malaysia. The Group primarily enters into forward foreign currency exchangecontracts to limit the exposure on foreign currency trade receivables and payables.

The Group’s main income from timber related business is mostly derived in US Dollars. Nevertheless, theimposition of selective exchange controls by Bank Negara Malaysia effective on 1 September 1998, has pegged theRinggit Malaysia to US Dollars at US$1.00 to RM3.80 and hence mitigated the risks arising from exchangefluctuation. However, the Directors are unable to predict, with any certainty, the movement of the exchange rate inthe future. The movements of US Dollars against Ringgit Malaysia will affect the revenue and costs of someproduction materials, spare parts and equipment purchases. As a result, future currency movements have impact onthe earnings and cash flow of the Group.

The Group’s investment in a New Zealand subsidiary, which is holding the forest assets, may also expose the Groupto foreign currency exchange risk. Future sales derived from the forest assets are expected to be made in theinternational markets and generally would be denominated in US Dollars. Forestry assets, however, aredenominated in NZ Dollars though there is a certain degree of correlation with US Dollars. Therefore, the Group isexposed to a certain degree of risk in the event of fluctuation in NZ Dollars against US Dollars resulting inmovements in Exchange Reserve Account.

During the year, the Group refinanced the USD term loan amounting to RM182,400,000, which were used tofinance the purchase of an investment in a New Zealand subsidiary. The Group through its New Zealand subsidiaryhas obtained new loans denominated in US Dollars and NZ Dollars of USD46,800,000 and NZD24,400,000,equivalent to RM178,000,000 and RM54,000,000 respectively.

As at balance sheet date, the Group does not have any outstanding forward foreign exchange contract.

Liquidity and cash flow riskThe Group maintains sufficient cash and bank funding lines to enable it to meet its short term and long term cashflow requirements. The Group's policy is to finance long term assets with long term funding and short term assetswith short term funding. Short term bridging finance may be used when an urgent need arises to complete anacquisition of a long term asset. In such cases, action will be taken immediately after the completion of suchacquisition to re-arrange the short term bridging finance into a longer term funding structure which matches the cashflows of the long term asset.


ANNUALREPORT 2003


Timber prices are constantly affected by both demand and supply cycles of the timber industry. As a result, themovements of the prices would have significant impact on the Group’s earnings as well as cash flows and liquidity.Whilst efforts have been made to implement certain strategies, there can be no assurance that the Group will be fullyshielded from negative effects resulting from cyclical movements of timber prices.

The following table shows information about exposure to interest rate risk.

Effective interest rates and repricing analysisIn respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicatestheir effective interest rates at the balance sheet date and the periods in which they reprice or mature, whicheveris earlier.

2003 2002Effective Effective

interest interestrate per Within 1–5 After rate per Within 1–5 Afterannum Total 1 year years 5 years annum Total 1 year years 5 years

% RM’000 RM’000 RM’000 RM’000 % RM’000 RM’000 RM’000 RM’000

GROUP

Financial assetsDeposits with financial

institutions 2.20 – 3.70 40,469 40,469 - - 2.20 – 3.20 18,212 18,212 - -

Financial liabilitiesSecured term loans 3.38 – 8.86 253,245 253,245 - - 3.84 – 7.65 198,805 198,805 - -Secured overdrafts 7.00 1,651 1,651 - - 7.00 2,917 2,917 - -Unsecured overdrafts 7.00 – 7.65 46,176 46,176 - - 7.00 – 8.40 33,366 33,366 - -Secured bankers’

acceptances 4.00 – 4.40 4,508 4,508 - - 4.00 – 4.55 2,175 2,175 - -Unsecured bankers’

acceptances 2.88 – 4.91 40,174 40,174 - - 2.83 – 5.00 35,615 35,615 - -Unsecured revolving

credits 3.60 – 4.15 71,000 71,000 - - 3.60 – 3.89 54,000 54,000 - -Secured trust receipts - - - - - 7.00 1,208 1,208 - -Bonds 8.00 – 8.50 297,076 - 147,076 150,000 8.00 – 8.50 295,999 - 145,999 150,000Redeemable Preference

Shares ‘B’ - - - - - 4.00 89,343 89,343 - -

COMPANY

Financial assetsDeposits with financial

institutions 2.20 – 3.70 12,756 12,756 - - 2.20 – 3.20 12,541 12,541 - -Amount due from

subsidiaries 2.99 – 7.40 240,717 240,717 - - 7.40 – 8.25 244,074 244,074 - -

Financial liabilitiesSecured term loans - - - - - 3.84 – 5.78 182,400 182,400 - -Unsecured overdrafts 7.00 – 7.65 16,775 16,775 - - 7.40 – 8.40 17,206 17,206 - -Unsecured revolving

credits 3.60 – 4.15 30,000 30,000 - - 3.60 – 3.89 30,000 30,000 - -Bonds 8.00 – 8.50 297,076 - 147,076 150,000 8.00 – 8.50 295,999 - 145,999 150,000




Fair values

Recognised financial instrumentsIn respect of cash and cash equivalents, trade and other receivables, trade and other payables and short termborrowings, the carrying amounts approximate fair value due to the relatively short term nature of these financiali n s t r u m e n t s .

The aggregate fair values of other financial assets and liabilities carried on the balance sheet as at 30 June areshown below:

The fair values of secured term loans have been determined by discounting the relevant cash flows using currentinterest rates for similar instruments at the balance sheet date.

* It is not practicable to estimate the fair values of bonds and RPS ‘B’ as these instruments are not actively tradedand a reasonable estimate of fair values could not be made without incurring excessive costs. The RPS ‘B’ w a sredeemed at its carrying value during the year.

* * In the opinion of the Directors, it is not practicable to determine the fair values of amounts due from / (to)subsidiaries as the repayment terms are not fixed. However, the Directors do not anticipate that the carryingamounts recorded at balance sheet date to be significantly different from the values that would be eventuallybe received or settled.

2003 2002Carrying Fair Carrying Fair

amount value amount valueRM’000 RM’000 RM’000 RM’000

GROUPFinancial liabilitiesSecured term loans 253,245 253,245 198,805 198,805Bonds 297,076 * 295,999 *Redeemable Preference Shares ‘B’(“RPS ‘B’”) - - 89,343 *

COMPANYFinancial assetsAmount due from subsidiaries 568,914 ** 246,391 **

Financial liabilitiesSecured term loan - - 182,000 182,000Bonds 297,076 * 295,999 *Amount due to subsidiaries 319,979 ** 106,113 **

Unrecognised financial instrumentsThe valuation of financial instruments not recognised in the balance sheet reflects their current market rate at thebalance sheet date.

The contracted amount and fair value of financial instruments not recognised in the balance sheet as at 30 June is:

2003 2002Contracted Fair Contracted Fair

amount value amount valueRM’000 RM’000 RM’000 RM’000

GROUPAND COMPANYFinancial liabilitiesInterest rate swap agreements 232,000 232,000 - -


ANNUALREPORT 2003


The following comparatives have been restated to reflect the change in accounting policies as explained in Note 1.

GroupAs As

restated previously statedRM’000 RM’000

Income statementTaxation 927 2,987Profit after taxation 4,955 2,895

Basic earnings per share 1.02 0.59

Balance sheetDeferred taxation 222,756 207,313Investments in associates 193,389 212,955Reserves 585,152 620,161

Statement of changes in equityRetained profits at 1 July 2001 489,983 502,323Retained profits at 30 June 2002 478,486 488,766Fair valuation reserve at 1 July 2001 67,820 92,549Fair valuation reserve at 30 June 2002 63,590 88,319

34. Comparatives

The financial statements were approved and authorised for issue by the Board of Directors on 26 August 2003.

35. Issuance of financial statements


Analysis of Shareholdings84

Analysis of Shareholdings

As at 30 September 2003

Authorised share capital RM500,000,000Issued and fully paid-up capital RM329,815,221Class of shares Ordinary shares of RM0.50 per share

Distribution of Shareholdings

No. of % No. of % of issuedSize of shareholdings shareholders shareholders shares held capital

1 - 99 173 1.84 5,137 *100 – 1,000 2,836 30.17 2,387,120 0.361,001 – 10,000 5,190 55.23 21,582,587 3.2710,001 – 100,000 1,039 11.05 29,503,204 4.47100,001 – 5% of issued shares 156 1.66 280,272,822 42.505% of issued shares & above 5 0.05 325,879,571 49.40

9,399 100.00 659,630,441 100.00

* Negligible

Substantial Shareholders

Direct IndirectNo. of ordinary % No. of ordinary %

shares of of issued shares of of issuedRM0.50 each capital RM0.50 each capital

1. Samling Strategic Corporation Sdn. Bhd. 188,484,007 28.57 74,500,994 11.292. Strategic Corporation Sdn. Bhd. 67,500,994 10.23 - -3. Perkapalan Damai Timur Sdn. Bhd. 40,818,026 6.19 - -4. Yaw Holding Sdn. Bhd. - - 262,985,001 39.875. Datuk Yaw Teck Seng - - 268,818,334 40.756. Yaw Chee Ming - - 268,818,334 40.757. Datuk Abdul Hamed bin Sepawi - - 40,818,026 6.198. Wan Morshidi bin Tuanku Abdul Rahman - - 40,818,026 6.199. Tapah Plantation Sdn. Bhd. 46,643,015 7.07 - -10. Ahmad bin Su’ut - - 46,643,015 7.0711. Nissho Iwai Corporation 49,752,549 7.54 - -12. Nisshoiwai - Nichimen Holdings Corporation - - 49,752,549 7.54

Analysis of Shareholdings ( c o n t i n u e d )

ANNUALREPORT 2003

Analysis of Shareholdings 85

Thirty Largest Shareholders as at 30 September 2003

No. of % of issuedshares held capital

1. Samling Strategic Corporation Sdn. Bhd. 107,034,007 16.23

2. RHB Capital Nominees (Tempatan) Sdn. Bhd. 81,450,000 12.35Pledged Securities Account for Samling Strategic Corporation Sdn. Bhd.

3. Nissho Iwai Corporation 49,752,549 7.54

4. Tapah Plantation Sdn. Bhd. 46,643,015 7.07

5. AMMB Nominees (Tempatan) Sdn. Bhd. 41,000,000 6.22Pledged Securities Account for Strategic Corporation Sdn. Bhd.

6. Strategic Corporation Sdn. Bhd. 26,500,994 4.02

7. Perkapalan Damai Timur Sdn. Bhd. 24,880,526 3.77

8. HLG Nominee (Asing) Sdn. Bhd. 22,580,000 3.42Commerzbank (SEA) Ltd. for Brizill International Ltd.

9. HLG Nominee (Asing) Sdn. Bhd. 20,044,111 3.04Commerzbank (SEA) Ltd. for Vendalon Investments Ltd.

10. UOBM Nominees (Asing) Sdn. Bhd. 15,945,000 2.42Lei Shing Hong Securities Ltd. for Macleod Assets Limited

11. Mayban Nominees (Tempatan) Sdn. Bhd. 15,937,500 2.42Pledged Securities Account for Perkapalan Damai Timur Sdn. Bhd.

12. HLG Nominee (Asing) Sdn. Bhd. 15,000,000 2.27Commerzbank (SEA) Ltd. for Fentil Navigation Corp.

13. Employees Provident Fund Board 13,725,128 2.08

14. RHB Nominees (Asing) Sdn. Bhd. 12,916,667 1.96Future Developments Corp.

15. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 7,242,666 1.10Skim Amanah Saham Bumiputera

Directors’ Shareholdings

Direct IndirectNo. of ordinary % No. of ordinary %

shares of of issued shares of of issuedRM0.50 each capital RM0.50 each capital

Chan Hua Eng 154,623 0.02 - -Dato’Seri Datuk Dr. Haji Jalaluddin bin Abdul Rahim 212,976 0.03 321,666 0.05Geh Cheng Hooi 5,000 * 3,333 *Yaw Chee Ming - - 268,818,334 40.75Cheam Dow Toon 29,030 * - -

* Negligible


Analysis of Shareholdings86

Analysis of Shareholdings ( c o n t i n u e d )

Thirty Largest Shareholders as at 30 September 2003

No. of % of issuedshares held capital

16. Megadasa Sendirian Berhad 7,000,000 1.06

17. Bumiputra-Commerce Nominees (Tempatan) Sdn. Bhd. 5,833,333 0.88Pledged Securities Account for Plieran Sendirian Berhad

18. ACE Corp 5,250,000 0.80

19. UOBM Nominees (Asing) Sdn. Bhd. 4,891,030 0.74Lei Shing Hong Securities Ltd. for Forrader Corporation

20. UOBM Nominees (Asing) Sdn. Bhd. 4,033,400 0.61Lei Shing Hong Securities Ltd. for Noughton Trading Limited

21. AMMB Nominees (Tempatan) Sdn. Bhd. 3,615,000 0.55Amtrustee Berhad for SBB Dana Al-Ihsan

22. Universal Trustee (Malaysia) Berhad 3,200,300 0.49Malaysian Assurance Alliance Bhd.

23. HLG Nominee (Asing) Sdn. Bhd. 2,580,000 0.39Commerzbank (SEA) Ltd. for Sindix Corporation

24. Arif Hemat Sdn. Bhd. 2,488,778 0.38

25. Universal Trustee (Malaysia) Berhad 2,432,000 0.37SBB High Growth Fund

26. AMMB Nominees (Tempatan) Sdn. Bhd. 2,400,000 0.36KAF Fund Management Sdn. Bhd.

27. HLB Nominees (Asing) Sdn. Bhd. 2,354,250 0.36Pledged Securities Account for Taikichi Ito

28. HSBC Nominees (Asing) Sdn. Bhd. 2,265,300 0.34HSBCIT HK for JF Eastern Smaller Companies Fund (SEA)

29. HLG Nominee (Asing) Sdn. Bhd. 2,066,242 0.31Commerzbank (SEA) Ltd. for Cairney International Ltd.

30. HLG Nominee (Asing) Sdn. Bhd. 2,000,000 0.30Commerzbank (SEA) Ltd. for Business Connections Investment Ltd.

553,061,796 83.85

Voting Rights of ShareholdersEvery member of the Company present or by proxy shall have one vote on a show of hand and in the case of a poll shallhave one vote for every share unit of which he is the holder.

List of Propertiesas at 30 June 2003

ANNUALREPORT 2003

List of Properties 87

Location Tenure Area Approximate Description Net book Effectiveage of and value as at year ofbuilding current use 30 June 2003 purchase

RM’000

Malaysia

Wilayah PersekutuanUnit C-05-09 Freehold 686 sq.m. 5 years Office premise 2,156 1999Unit C-3A-09Megan Phileo Avenue12 Jalan Yap Kwan Seng50450 Kuala Lumpur

SelangorMukim of Sungei Buluh Grant-in 8,072 sq.m. 32 years Industrial land 14,391 1990District of Petaling perpetuity and buildingsSelangorBatu 15 1/2 Sungei Pelong47500 Sungei BuluhSelangor

Mukim of Sungei Buluh Grant-in 73,368 sq.m. 20 – 32 years Rubber 2,376 1990District of Petaling perpetuity compoundSelangor factory andBatu 15 1/2 industrial landSungei Pelong47500 Sungei BuluhSelangor

Mukim of Sungei Buluh Grant-in 40,747 sq.m. 11 – 12 years Industrial land 4,078 1990District of Petaling perpetuity and buildingsSelangorBatu 15 1/2 Sungei Pelong47500 Sungei BuluhSelangor


List of Properties88

List of Properties ( c o n t i n u e d )


RM’000

SarawakFirst Division 99 years lease 36,321 sq.m. - Quarry site 636 1993District of Kuching expiring onNorth Land, Sarawak 12.7.2038Batu 3 1/4Batu Kawa Road93250 Kuching, Sarawak

First Division 99 years 3,885 sq.m. - Quarry site 105 1993District of Kuching leaseNorth Land, Sarawak expiring onBatu 3 1/4 31.7.2038Batu Kawa Road93250 Kuching, Sarawak

First Division 99 years lease 4.378 hectares 6 – 14 years Quarry site 1,601 1993District of Kuching expiring onNorth Land, Sarawak 31.12.2038Batu 3 1/4Batu Kawa Road93250 Kuching, Sarawak

First Division 99 years 3,076 sq.m. - Quarry site 83 1993District of Kuching leaseNorth Land, Sarawak expiring onBatu 3 1/4 31.12.2038Batu Kawa Road93250 Kuching, Sarawak

First Division 99 years lease 7,398 sq.m. - Quarry site 192 1993District of Kuching expiring onNorth Land, Sarawak 31.12.2038Batu 3 1/4Batu Kawa Road93250 Kuching, Sarawak

First Division 99 years lease 12,788 sq.m. - Quarry site 376 1993District of Kuching expiring onNorth Land, Sarawak 31.12.2038Batu 3 1/4Batu Kawa Road93250 Kuching, Sarawak

First Division 60 years lease 3.342 hectares - Vacant 163 1993District of Sentah-Segu expiring on agriculturalLand, Sarawak 12.7.2048 landBatu 15Kuching Serian Road94700 Serian, Sarawak


ANNUALREPORT 2003



RM’000

SarawakFirst Division 99 years lease 4.775 hectares - Vacant 204 1993District of Sentah-Segu expiring on agriculturalLand, Sarawak 31.12.2035 landBatu 15Simanggang Road94700 Serian, Sarawak

First Division 99 years lease 7.778 hectares - Vacant 315 1993District of Sentah-Segu expiring on agriculturalLand, Sarawak 31.12.2036 landBatu 15Kuching Serian Road94700 Serian, Sarawak

First Division 60 years lease 17,321 sq.m. - Vacant 153 1993District of Kuching expiring on agriculturalNorth Land, Sarawak 10.11.2013 landBatu 6 1/2Jalan Penrissen93250 Kuching, Sarawak

First Division 99 years lease 3.938 hectares - Vacant 460 1993District of Kuching expiring on agriculturalNorth Land, Sarawak 31.12.2038 landBatu 7Jalan Penrissen93250 Kuching, Sarawak

Kuching Division Lease expiring 670 sq.m. 18 years 6 units 871 1993District of Kuching on 11.8.2771 of four storeyTown Land, Sarawak shophousesTaman Sri Sarawak MallBlock AJalan Tuanku Abdul Rahman93100 Kuching, Sarawak

Kuching Division 60 years lease 111.6 sq.m. 14 1/2 years 1 unit 252 1993District of Kuching expiring on of four storeyJalan Pending 11.5.2048 shophousesTown Land, Sarawak93450 Kuching, Sarawak

Kuching Division 60 years lease 1,220 sq.m. - Vacant 87 1993District of Kuching expiring on residentialNorth Land, Sarawak 4.6.2047 landStapok, Batu Kawa Road93250 Kuching, Sarawak





RM’000

SarawakKuching Division 99 years lease 1.0684 - Quarry site 22 1992District of Muara expiring on hectaresTuang Land, Sarawak 31.12.2072Bukit Stigang, Kuap93250 Kuching, Sarawak

Kuching Division 99 years lease 3,359 sq.m. - Quarry site 20 1991District of Muara expiring on Tuang Land, Sarawak 9.1.2066Sungai Kuap93250 KuchingSarawak

Kuching Division 60 years lease 364 sq.m. 3 years 4 units 802 2003District of Kuching expiring in of 2 fourTown Land, Sarawak year 2060 storeyJalan Petanak shophouses93250 KuchingSarawak

Kuching Division 60 years lease 802 sq.m. 2 years 3 units 565 2003District of Kuching expiring in of 2 fourNorth Land, Sarawak year 2058 storeyJalan Batu Kawa shophouses93250 KuchingSarawak

First Division 99 years lease 4,532 sq.m. - Quarry site 22 1991District of Muara expiring on Tuang Land, Sarawak 13.1.2074Bukit Stigang93250 KuchingSarawak

First Division 60 years lease 1.1465 15 years Double-storey 1,139 1988District of Kuching expiring on hectares office building Town Land, Sarawak 20.10.2040 and wharfPending Industrial Estate93450 KuchingSarawak

Bintulu Division 60 years lease 352 sq.m. 5 years Double-storey 245 1998Kemena Land District expiring on intermediateSarawak 4.11.2058 terrace house


ANNUALREPORT 2003



RM’000

SarawakLot 367 Block 38 60 years lease 11.34 - Industrial land 26,910 1994Kemena Land District expiring on hectares with plywood Bintulu 24.6.2053 factorySarawak

Lot 388 & Lot 389 60 years lease 20.86 10 years Land with office 39,518 1994Block 32 expiring on hectares and staff quatersKemena Land District 24.6.2053BintuluSarawak

Lot 533 (formerly Leasehold 49.5 11 years Industrial land 33,891 2000Lot 169 & 120) Block 1 expiring hectares with plywood Kuala Baram in year factory and Land District 2051 ancillary buildingsMiri,Sarawak

Lot 495 (formerly Leasehold 17.4 7 years Land with staff 15,354 2000Lot 195) Block 1 expiring sq.m. quartersKuala Baram in year Land District 2055Miri, Sarawak

Lot 191 Block 1 60 years 6.63 10 years Two storey 7,617 2002Kuala Baram expiring on hectares office building, Industrial Estate 14.2.2055 warehouse andMiri, Sarawak workshop

Part of Lot 171 60 years 39.55 11 years Industrial land 44,956 2003Block 1, Kuala Baram expiring on hectares with plywoodLand District 7.10.2051 factoryMiri, Sarawak

Part of Lot 228 60 years 21.46 9 – 11 years Land with 23,106 2003(formerly Lot 131) expiring on hectares staff complexBlock 1, Kuala Baram 28.1.2052 Land DistrictMiri, Sarawak

Lot 2671, Block 5 60 years 540 10 years Staff 255 2003Miri Concession expiring on hectares quarterLand District 27.10.2047 Miri, Sarawak





RM’000

New ZealandOkiwa Forest Freehold 3,021.1 - Forest plantation 5,742 2000Nuhaka North hectaresParitu Survey District

Kopua Forest Freehold 1,048.8 - Forest plantation 1,631 2000Nuhaka North hectaresParitu Survey District

Hineroa Forest Freehold 2,148.7 - Forest plantation 3,343 2000Nuhaka North hectaresSurvey District

Waimanu Forest Freehold 2,068.9 - Forest plantation 3,244 2000Waimata and hectaresWhangaraSurvey District

Wairangi Forest Freehold 5,172.5 - Forest plantation / 8,059 2000Tutamoe hectares Vegetation reserveSurvey District

Te Marunga Forest Freehold 9,748.8 - Forest plantation 15,736 2000Uawa / Tokomaru / hectaresWaingaromiaDistrict

Mangarara Forest Freehold 2,727.2 - Forest plantation 4,244 2000Waimata / hectaresWaingaromiaSurvey District

Huanui Forest Freehold 4,716.0 - Forest plantation 7,338 2000Waingaromia hectaresSurvey District

Findlay Forest Freehold 249.8 - Forest plantation 389 2000Paritu Survey hectaresDistrict

Wakaroa Forest Freehold 892.6 - Forest plantation 1,389 2000Waimata Survey hectaresDistrict


ANNUALREPORT 2003



RM’000

New ZealandWhareongaonga Leasehold 1,100.0 - Forest plantation 1,712 2000Paritu expiring hectaresSurvey District in year 2060

Kaitoa Forest Cutting right 4.7 - Forest plantation 7 2000Waingaromia expiring hectaresSurvey District 25.6.2015

Te Puna Forest Forestry right 122.8 - Forest plantation 187 2000Opoiti Survey expiring 31.1.2029 hectaresDistrict

Read Forest Forestry right 161.8 - Forest plantation 252 2000Opoiti Survey expiring 30.6.2029 hectaresDistrict

Rimuroa Forest Forestry right 50.8 - Forest plantation 68 2000Opoiti Survey expiring 31.8.2029 hectaresDistrict

Mahurangi Forest Forestry right 760.0 - Forest plantation 1,183 2000Opoiti Survey expiring 31.1.2029 hectaresDistrict

Ranganui Forest Forestry right 193.4 - Forest plantation 293 2000Nuhaka North expiring 31.1.2029 hectaresSurvey District

Pohaturoa Forest Forestry right 850.0 - Forest plantation 1,324 2000Hangaroa / Opoiti expiring 31.1.2028 hectaresSurvey District

Dodgshun Forest Forestry right 19.4 - Forest plantation 29 2000Whangara Survey expiring 25.6.2015 hectaresDistrict


Other Information94

Other Information

Material ContractsSave as disclosed below, neither Lingui nor its subsidiary companies have entered into any contracts (not being contractsentered into in the ordinary course of business) which are material within the two (2) years preceding the date of thisCircular:

i) A Sale and Purchase Agreement dated 1 October 2003 made between Samling Plywood (Miri) Sdn. Bhd. (“SPM”)as the Purchaser and Doyon Development Sdn. Bhd. (“Doyon”) as the Vendor in relation to the proposedacquisition of land and housing complex for a total cash consideration of RM25,190,000.

ii) Amendment Agreement dated 23 January 2003 made between Hikurangi Forest Farms Limited (“HikurangiForest”) as the Borrower, TreeOne (NZ) Limited (“TONZ”), East Coast Forests Limited (“East Coast Forests”) andTasman Forestry (Gisborne) Limited (“Tasman Forestry”) as the Guarantors and ANZ Investment Bank, a divisionof ANZ Banking Group (New Zealand) Limited (“ANZ”) as the Agent and several financial institutions mentionedtherein to amend the Facility Agreement.

The amendments made include the amendment to Schedule 5 of the Facility Agreement by deleting the list ofSecurity Documents set out in that Schedule and replacing it with the following security documents:

(a) Composite General Security Deed given by Hikurangi Forest, East Coast Forests and Tasman Forestry infavour of the Agent;

(b) Specific Security Deed over all ordinary shares in the capital of Hikurangi Forest given by TONZ in favour ofthe Agent;

(c) Deed of Guarantee and Indemnity given by TONZ in favour of the Agent;

(d) Deed of Subordination between the Agent, TONZ and Hikurangi Forest; and

(e) A registrable mortgage of the estates mentioned therein given by each relevant company in favour of the Agent.

iii) Composite General Security Deed dated 23 January 2003 made between Hikurangi Forest, East Coast Forests andTasman Forestry as the Companies and ANZ as the Secured Party whereby each company grants to the SecuredParty a security interest in its personal property and a fixed charge over its other property (i.e. its real property andall of its other present and after-acquired property that is not personal property);

iv) Deed of Guarantee and Indemnity dated 21 January 2003 made between TONZ as the Guarantor and ANZ as theAgent to unconditionally and irrevocably guarantee the due payment of all indebtedness of Hikurangi Forest underthe Facility Agreement;

v) Deed of Subordination dated 21 January 2003 made between TONZ, ANZ and Hikurangi Forest to subordinate allindebtedness of Hikurangi Forest to TONZ or incurred by TONZ on behalf of Hikurangi Forest to the indebtednessof Hikurangi Forest to ANZ in point of priority and right of repayment;

vi) Specific Security Trust Deed dated 21 January 2003 made between TONZ and ANZ whereby TONZ grants securityinterest in the Secured Property in favour of ANZ of i.e the 1,200,000 ordinary shares of Hikurangi Forest held byTONZ, all securities, property or other rights to which a holder of the shares is entitled, the share certificate bearingno. 1 and all proceeds of the shares;

Other Information ( c o n t i n u e d )

ANNUALREPORT 2003

Other Information 95

vii) Conditional Sale of Shares Agreement (“SSA”) made between Lingui Developments Berhad (“Lingui”) and NisshoIwai Corporation (“NIC”) dated 26 December 2002 for the proposed acquisition of the remaining 40% equityinterest in SPM at a consideration of RM59,703,059;

viii) On 19 December 2002, Hikurangi Forest entered into a 12-year term loan facility agreement with ANZ and theFinancial Institutions listed therein (“Facility Agreement”) for the amount of NZD122,000,000.

The term loan is secured against a General Security Deed and Cross Guarantee from Hikurangi Forest and itswholly owned subsidiaries East Coast Forests and Tasman Forestry, registered mortgages over all relevant estatesor interests held in land which form part of the forests held by Hikurangi Forest and Tasman Forestry and amortgage over all ordinary shares in the capital of Hikurangi Forest to be given by TONZ, Hikurangi Forest’sparent company;

ix) Letter dated 19 September 2002 from Lingui and letters dated 9 October 2002 from Samling Strategic CorporationSdn. Bhd. (“Samling Strategic Corporation”) and Tapah Plantation Sdn. Bhd. (“Tapah Plantation”) to extend theCut-Off-Date for a further 180 days from the extension mentioned in (xi) below. The mutually agreed extendedCut-Off-Date is now 540 days from the date of the conditional SSA;

x) Letters dated 8 August 2002 from Lingui, Samling Strategic Corporation and Tapah Plantation to revise the issueprice of the new ordinary shares of RM0.50 each in Lingui which are to be issued pursuant to the conditional SSAdated 24 September 2001 in relation to the acquisition of 24,000,000 ordinary shares or 60% of the entire issuedand paid-up share capital in SPM from RM0.90 per share to RM1.20 per share. The figures “RM0.90” appearingin Clause 1.02 (b) of the conditional SSA shall be substituted with the figures “RM1.20”;

xi) Letters dated 9 May 2002 from Lingui, Samling Strategic Corporation and Tapah Plantation to extend the Cut-Off-Date for a further three (3) months from the extension mentioned in (xii) below. The mutually agreed extended Cut-Off-Date is now 360 days from 24 September 2001, being the date of the conditional SSA. The Letters dated 9 May2002 were also to update the valuation of the landed properties and timber concession as reflected in the conditionalSSAfrom 24 August 2001 to 22 October 2001. Pursuant to the update as at 22 October 2001, the value of the landedproperties remain at RM96,300,000 while the value of the Forest Timber Licence T/0413 held by SPM amounts toRM37,800,000 as compared to the valuation as at 24 August 2001 of RM38,100,000;

xii) Letter dated 21 March 2002 from Lingui and letters dated 22 March 2002 from Samling Strategic Corporation andTapah Plantation to extend the Cut-Off-Date (the date being 180 days from the date of the conditional SSA i.e. 24September 2001, to obtain all the applicable approvals mentioned in the conditional SSA) for an additional three(3) months;

xiii) On 5 February 2002, Tamex Timber Sdn. Bhd. (“Tamex Timber”) and Ekran Berhad (“Ekran”) entered into a Deedof Settlement whereby Tamex Timber agreed to discontinue the civil suit against Ekran for an aggregate sum ofRM5,142,079 being the outstanding road tolls, bridge charges and other charges in connection with the use of theTamex Timber logging road linking Tubau to Bakun for the years 1996 up to 31 October 1999 with no order as tocosts against Ekran and Ekran agreed to pay Tamex Timber a sum of RM350,000, payment of which has been dulycompleted. Pursuant to this Deed of Settlement, the counterclaim filed by Ekran against Tamex Timber for interalia, an injunction to restrain Tamex Timber, by itself, its servant or agent from trespassing into Ekran’s landdescribed as Lot 3, Punan Land Districts was also discontinued.


Notice of Annual General Meeting96

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Thirty Fifth Annual General Meeting of LinguiDevelopments Berhad will be held at the Cempaka Room, Hotel Equatorial, Jalan Sultan Ismail,50250 Kuala Lumpur on Tuesday, 18 November 2003 at 2.30 pm for the following purposes:

Ordinary Business:

To consider and if thought fit, to pass the following ordinary resolutions:

1. To receive and consider the Audited Financial Statements for the year ended 30 June 2003 together with the Reportsof the Directors and Auditors thereon.

Resolution 1

2. To declare a first and final dividend of 1 sen per share less income tax for the year ended 30 June 2003.

Resolution 2

3. To consider and if thought fit, to pass the following resolution pursuant to Section 129(6) of the Companies Act,1965: “THAT Mr. Chan Hua Eng, who is over the age of seventy years and retiring in accordance with Section 129(6) ofthe Companies Act, 1965, be and is hereby re-appointed as Director of the Company to hold office until theconclusion of the next Annual General Meeting of the Company.”

Resolution 3

4. To re-elect Mr. Cheam Dow Toon who retires as Director of the Company pursuant to Article 91 of the Company’sArticles of Association.

Resolution 4

5. To re-appoint Messrs. KPMG as Auditors of the Company to hold office until the conclusion of the next AnnualGeneral Meeting of the Company at a remuneration to be determined by the Directors.

Resolution 5

Special Business:

To consider and if thought fit, to pass the following ordinary resolutions:6. PROPOSED SHAREHOLDERS’ M A N D ATE FOR EXISTING RECURRENT R E L ATED PA RT Y

TRANSACTIONS OF A REVENUE OR TRADING NATURE WITH 3D NETWORKS SDN. BHD.,B A R A M A C O M PA N Y PTE. LTD., GLENEALY P L A N TATIONS (MALAYA) BERHAD AND ITSSUBSIDIARY COMPANIES, INTERWIL TRADING AG, JUTA SYABAS SDN. BHD., MAJULABA SDN.BHD., ORIENT ELITE SDN. BHD., PROFITON SDN. BHD., RAVENSCOURT SDN. BHD., SAMLINGINTERNATIONAL LTD., SAMLING SINGAPORE PTE. LTD., SYARIKAT RELOH SDN. BHD., YAWHOLDING SDN. BHD., ITS SUBSIDIARY AND ASSOCIATED COMPANIES, ARIF HEMAT SDN. BHD.AND PERKAPALAN DAMAI TIMUR SDN. BHD.“THAT subject always to the Companies Act, 1965, the Memorandum and Articles of Association of the Companyand the Listing Requirements of Kuala Lumpur Stock Exchange, approval be and is hereby given to the Companyand / or its subsidiary companies to enter and give effect to the recurrent related party transactions of a revenue ortrading nature which are necessary for the day to day operations [hereinafter referred to as “Recurrent Transactions”]of the Company and / or its subsidiary companies, the particulars of which are set out in Section 2 of the Circularto the Shareholders dated 27 October 2003, with the following Related Parties:

(a) 3D Networks Sdn. Bhd.;(b) Barama Company Pte. Ltd.;

ANNUALREPORT 2003

Notice of Annual General Meeting 97

Notice of Annual General Meeting ( c o n t i n u e d )

(c) Glenealy Plantations (Malaya) Berhad and its subsidiary companies;(d) Interwil Trading AG;(e) Juta Syabas Sdn. Bhd.;(f) Majulaba Sdn. Bhd.;(g) Orient Elite Sdn. Bhd.;(h) Profiton Sdn. Bhd.;(i) Ravenscourt Sdn. Bhd.;(j) Samling International Ltd.;(k) Samling Singapore Pte. Ltd.;(l) Syarikat Reloh Sdn. Bhd.; (m) Yaw Holding Sdn. Bhd., its subsidiary and associated companies; (n) Arif Hemat Sdn. Bhd.; and(o) Perkapalan Damai Timur Sdn. Bhd.;

subject further to the following:

i) the Recurrent Transactions contemplated are in the ordinary course of business and on terms which are notmore favourable to related parties than those generally available to the public, and are not to the detriment ofthe minority shareholders;

ii) disclosure of the breakdown of the aggregate value of the recurrent related party transactions conducted duringthe financial year will be made in the Annual Report based on the following information:

(a) the type of Recurrent Transactions made; and

(b) the names of the related parties involved in each type of the Recurrent Transactions made and theirrelationship with the Company; and

iii) the approval is subject to annual renewal and shall only continue to be in force until:

(a) the conclusion of the next Annual General Meeting of the Company at which the Proposed Shareholders’Mandate will be tabled;

(b) the expiration of the period within which the next Annual General Meeting of the Company after the dateit is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend tosuch extensions as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or

(c) revoked or varied by resolution passed by the shareholders in a general meeting;

whichever is the earlier.

AND THAT the Directors of the Company be and hereby authorised to do all acts and things to give full effect tothe Recurrent Transactions contemplated and / or authorised by this resolution.”

Resolution 6

7. PROPOSED SHAREHOLDERS’ M A N D ATE FOR EXISTING RECURRENT R E L ATED PA RT YTRANSACTIONS OF A REVENUE OR TRADING NATURE WITH HAP SENG CONSOLIDATEDBERHAD AND ITS SUBSIDIARY COMPANIES“THAT subject always to the Companies Act, 1965, the Memorandum and Articles of Association of the Company




and the Listing Requirements of Kuala Lumpur Stock Exchange, approval be and is hereby given to the Companyand / or its subsidiary companies to enter and give effect to the recurrent related party transactions of a revenue ortrading nature which are necessary for the day to day operations [hereinafter referred to as “RecurrentTransactions”] of the Company and / or its subsidiary companies, the particulars of which are set out in Section 2of the Circular to the Shareholders dated 27 October 2003, with Hap Seng Consolidated Berhad and its subsidiarycompanies subject further to the following:











Resolution 7

8. PROPOSED SHAREHOLDERS’ M A N D ATE FOR EXISTING RECURRENT R E L ATED PA RT YTRANSACTIONS OF A REVENUE OR TRADING NATURE WITH NISSHO IWAI CORPORATIONAND ITS SUBSIDIARY COMPANIES“THAT subject always to the Companies Act, 1965, the Memorandum and Articles of Association of the Companyand the Listing Requirements of Kuala Lumpur Stock Exchange, approval be and is hereby given to the Companyand / or its subsidiary companies to enter and give effect to the recurrent related party transactions of a revenue ortrading nature which are necessary for the day to day operations [hereinafter referred to as “RecurrentTransactions”] of the Company and / or its subsidiary companies, the particulars of which are set out in Section 2of the Circular to the Shareholders dated 27 October 2003, with Nissho Iwai Corporation and its subsidiarycompanies subject further to the following:


ANNUALREPORT 2003












Resolution 8

9. PROPOSED SHAREHOLDERS’ M A N D ATE FOR NEW R E C U R R E N T R E L ATED PA RT YTRANSACTIONS OF A REVENUE OR TRADING NATURE WITH ROHDEN U.K. LTD. AND TWWHOLDINGS SDN. BHD.“THAT subject always to the Companies Act, 1965, the Memorandum and Articles of Association of the Companyand the Listing Requirements of Kuala Lumpur Stock Exchange, approval be and is hereby given to the Companyand / or its subsidiary companies to enter and give effect to the recurrent related party transactions of a revenue ortrading nature which are necessary for the day to day operations [hereinafter referred to as “RecurrentTransactions”] of the Company and / or its subsidiary companies, the particulars of which are set out in Section 2of the Circular to the Shareholders dated 27 October 2003, with the following Related Parties:

(a) Rohden U.K. Ltd; and(b) TWW Holdings Sdn. Bhd.;

subject further to the following:














Resolution 9

10. AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965“THAT subject always to the approvals of the relevant authorities, the Directors of the Company be and are herebyempowered pursuant to Section 132D of the Companies Act, 1965 to issue shares in the Company at any time andupon such terms and conditions and for such purposes as the Directors of the Company may in their absolutediscretion deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed10% of the issued capital of the Company as at the date of this Annual General Meeting and that the Directors ofthe Company be and are hereby empowered to obtain the approval for the listing of and quotation for the additionalshares so issued on the Kuala Lumpur Stock Exchange and that such authority shall continue to be in force until theconclusion of the next Annual General Meeting of the Company.”

Resolution 10

Any Other Business:11. To transact any other business for which due notice shall have been given.

By Order of the Board

Tan Ghee Kiat (MICPA 811)T.V. Sekhar (MICPA 1371)Company Secretaries

Kuala Lumpur27 October 2003


ANNUALREPORT 2003


NOTES

1. A member entitled to attend and vote at this Annual General Meeting is entitled to appoint a proxy or proxies (but not morethan two) to attend and vote in his stead. A proxy does not need to be a member and if not a member, need not be anadvocate, an approved company auditor or a person approved by the Registrar of Companies. Provided that, havingappointed a proxy or an attorney to attend in his stead, such member shall personally attend the meeting, his proxy orattorney shall be precluded from attending such meeting.

Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, itmay appoint only one proxy in respect of each Securities Account it holds with ordinary shares of the Company standingto the credit of the said Securities Account.

2. If the appointor is a corporation, the form of proxy should be executed under its common seal, if any, and if none, thenunder the hand of some officer or attorney duly authorised in that behalf.

3. The instrument appointing a proxy must reach the Registered Office of the Company not less than 48 hours before the timeset for this Annual General Meeting or any adjournment thereof.

4. Explanatory note for ordinary resolutions no. 6 – 9 Proposed Shareholders’Mandate for the Recurrent Related PartyTransactions of a Revenue or Trading Nature

Please refer to circular to shareholders dated 27 October 2003 which is circulated together with this Annual Report.

5. Explanatory note for ordinary resolution no. 10 Authority to issue shares pursuant to Section 132D of the Companies Act, 1965

The proposed Ordinary Resolution No. 10, if passed, will give the Directors of the Company, from the date of this AnnualGeneral Meeting, authority to issue and allot ordinary shares from the unissued share capital of the Company for suchpurposes as the Directors of the Company may consider to be in the interest of the Company. This authority will, unlessrevoked or varied by the Company in a general meeting, expire at the next Annual General Meeting of the Company.

6. Shareholders are reminded that pursuant to the Securities Industry (Central Depositories)(Amendment)(No.2) Act, 1998which came into force on 1 November 1998, all shares not deposited with the Malaysian Central Depository Sdn. Bhd. by12.30 pm on 1 December 1998 and not exempted from mandatory deposit, have been transferred to the Ministry of Finance(“MOF”). Accordingly, the eligibility to attend this Annual General Meeting for such shares will be the MOF.

Notice of dividend entitlementNotice is hereby given that the first and final dividend of 1 sen per share less 28% income tax, in respect of the financialyear ended 30 June 2003, if so approved by the shareholders at the Thirty Fifth Annual General Meeting, will be paid on12 December 2003 to shareholders appearing in the Register of Members or Record of Depositors as at the close ofbusiness on 4 December 2003.

Further notice is given that a Depositor shall qualify for entitlement only in respect of:

1. Shares deposited into the depositor’s securities account before 12.30 pm on 2 December 2003 (in respect of shareswhich are exempted from mandatory deposit);

2. Shares transferred into the depositor ’s securities account before 4.00 pm on 4 December 2003 in respect of ordinarytransfers; and

3. Shares bought on the Kuala Lumpur Stock Exchange on a cum entitlement basis according to the Rules of the KualaLumpur Stock Exchange.


Statement Accompanying Notice of Annual General Meeting102

Statement Accompanying Notice of Annual General MeetingPursuant to Paragraph 8.28(2) of the Listing Requirements of the Kuala Lumpur Stock Exchange

1. Directors who are standing for re-election at the Thirty Fifth Annual General Meeting of the Company:

Pursuant to Section 129(6) of the Companies Act, 1965- Mr. Chan Hua Eng

Pursuant to Article 91 of the Company’s Articles of Association- Mr. Cheam Dow Toon

Further details of Directors who are standing for re-election are set out in the appearing on pages 4 to 5 of the AnnualReport.

2. The place, date and time of the Thirty Fifth Annual General Meeting is set out in the Notice of Annual GeneralMeeting.

Form of ProxyLingui Developments Berhad 7574-D

Incorporated in Malaysia

I / We

of

being a member of LINGUI DEVELOPMENTS BERHAD, hereby appoint

of to be my / our proxy / proxies to attend and on a poll to vote for me / us on my / our behalf at the Thirty Fifth AnnualGeneral Meeting of the Company to be held at the Cempaka Room, Hotel Equatorial, Jalan Sultan Ismail, 50250 KualaLumpur on Tuesday, 18 November 2003 at 2.30 p.m. or at any adjournment thereof.

My / Our proxy / proxies is / are to vote as indicated below:

For Against

Resolution 1To receive and consider the Audited Financial Statements for the year ended 30 June 2003 together withthe Reports of the Directors and Auditors thereon.

Resolution 2To declare a first and final dividend of 1 sen per share less income tax for the year ended 30 June 2003.

Resolution 3To consider and if thought fit, to pass the following resolution pursuant to Section 129(6) of theCompanies Act, 1965: “THAT Mr. Chan Hua Eng, who is over the age of seventy years and retiring in accordance with Section129(6) of the Companies Act, 1965, be and is hereby re-appointed as Director of the Company to holdoffice until the conclusion of the next Annual General Meeting of the Company.”

Resolution 4To re-elect Mr. Cheam Dow Toon who retires as Director of the Company pursuant to Article 91 of theCompany’s Articles of Association.

Resolution 5To re-appoint Messrs. KPMG as Auditors of the Company to hold office until the conclusion of the nextAnnual General Meeting of the Company at a remuneration to be determined by the Directors.

Resolution 6To approve Proposed Shareholders’ Mandate for Existing Recurrent Related Party Transactions of aRevenue or Trading Nature with 3D Networks Sdn. Bhd., Barama Company Pte. Ltd., GlenealyPlantations (Malaya) Berhad and its subsidiary companies, Interwil Trading AG, Juta Syabas Sdn. Bhd.,Majulaba Sdn. Bhd., Orient Elite Sdn. Bhd., Profiton Sdn. Bhd., Ravenscourt Sdn. Bhd., SamlingInternational Ltd., Samling Singapore Pte. Ltd., Syarikat Reloh Sdn. Bhd., Yaw Holding Sdn. Bhd., itssubsidiary and associated companies, Arif Hemat Sdn. Bhd. and Perkapalan Damai Timur Sdn. Bhd.

Resolution 7To approve the Proposed Shareholders’ Mandate for Existing Recurrent Related Party Transactions of aRevenue or Trading Nature with Hap Seng Consolidated Berhad and its subsidiary companies.

Resolution 8To approve the Proposed Shareholders’ Mandate for Existing Recurrent Related Party Transactions of aRevenue or Trading Nature with Nissho Iwai Corporation and its subsidiary companies.

Resolution 9To approve the Proposed Shareholders’ Mandate for New Recurrent Related Party Transactions of aRevenue or Trading Nature with Rohden U.K. Ltd. and TWW Holdings Sdn. Bhd.

Resolution 10To authorise the Directors to issue shares not exceeding 10% of the issued share capital.

(Please indicate with an “x” in the spaces provided how you wish your votes to be cast. If you do not do so, the proxy / proxies will vote or abstain fromvoting at his / their discretion).

NOTES

1. A member entitled to attend and vote at this Annual General Meeting is entitled to appoint a proxy or proxies (but not more than two) to attendand vote in his stead. A proxy does not need to be a member and if not a member, need not be an advocate, an approved company auditor or aperson approved by the Registrar of Companies. Provided that, having appointed a proxy or an attorney to attend in his stead, such member shallpersonally attend the meeting, his proxy or attorney shall be precluded from attending such meeting.

Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint only oneproxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

2. If the appointor is a corporation, the form of proxy should be executed under its common seal, if any, and if none, then under the hand of someofficer or attorney duly authorised in that behalf.

3. The instrument appointing a proxy must reach the Registered Office of the Company not less than 48 hours before the time set for this AnnualGeneral Meeting or any adjournment thereof.

Company Secretary

LINGUI DEVELOPMENTS BERHAD (7574-D)

Level 42, Menara MaxisKuala Lumpur City Centre50088 Kuala Lumpur

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S TA M P

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Dated this day of 2003

No of share units held

Signature / Common Seal

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