2 Notice of Annual General Meeting
4 Statement Accompanying the Notice of AGM
5 Corporate Information
6 Corporate Structure
7 Profile of Directors
11 Chairman’s Statement
13 Corporate Governance Statement
17 Statement of Directors’ Responsibilities for Preparingthe Financial Statements
18 Statement on Internal Control
20 Audit Committee Report
23 Other Information Required by the Listing Requirements of Bursa Malaysia Securities Berhad
25 Financial Statements
57 List of Properties
58 Analysis of Shareholdings
61 Form of Proxy
CONTENTS
NOTICE OF ANNUAL GENERAL MEETING
2 BANENG HOLDINGS BHD (307139-W)
Resolution 1
Resolution 2
Resolution 3Resolution 4
Resolution 5
Resolution 6
Resolution 7
NOTICE BE AND IS HEREBY GIVEN that the Ninth AnnualGeneral Meeting of the Company will be held at DiamondRoom, Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 BatuPahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. toconsider the following purposes:-
AGENDA
1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December,
2003 together with the Directors’ and Auditors’ Reports thereon.
2. To approve the payment of Directors’ fee for the financial year ended 31 December, 2003.
3. To re-elect the following retiring Directors who retire by rotation and being eligible, offer
themselves for re-election in accordance with the Article 101(a) of the Company’s Articles of
Association:-
i) Mr. Lim Meng Hee
ii) Dr. Ng Soon Lim
4. To re-elect the retiring Director, Mr. Chai Koh Wah who retires and being eligible, offer himself for
re-election in accordance with the Article 102(c) of the Company’s Articles of Association.
5. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending
31 December, 2004 and to authorise the Directors to fix the Auditors’ remuneration.
6. As special business:-
To consider and if thought fit, to pass with or without modifications, the following resolutions:-
ORDINARY RESOLUTION
Authority To Issue Share Pursuant To Section 132D of the Companies Act, 1965
“That subject always to the Companies Act, 1965, the Articles of Association of the Company and
the approvals of the relevant government/regulatory authorities, the Directors be and are hereby
authorized, pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the
Company at any time until the conclusion of the next Annual General Meeting of the Company and
upon such terms and conditions and for such purposes as the Directors may, in their absolute
discretion, deem fit provided that the aggregate number of shares to be issued pursuant to this
resolution does not exceed 10% of the issued capital of the Company for the time being and that
the Directors are also empowered to obtain the approval from Bursa Malaysia Securities Berhad
(formerly known as Malaysia Securities Exchange Berhad) for the listing of and quotation for the
additional shares to be issued.”
NOTICE OF ANNUAL GENERAL MEETING
BANENG HOLDINGS BHD (307139-W) 3
Resolution 8
SPECIAL RESOLUTION
Proposed Amendments to the Articles of Association
“That subject to the approval of Bursa Malaysia Securities Berhad (formerly known as Malaysia
Securities Exchange Berhad) pursuant to Article 147 of the Company’s Articles of Association,
Article 1 of the Company’s Articles of Association be amended by deleting the following existing
definition in entirety and to adopt the new definition:-
Existing definition New definition
“Exchange” means Kuala Lumpur “Exchange” means Bursa Malaysia Securities
Stock Exchange (30632P) Berhad (formerly known as
Malaysia Securities Exchange Berhad)
7. To transact any other ordinary business of which due notice has been given in accordance with
the Companies Act, 1965.
By Order Of The Board
TEO SOON MEI (MAICSA 7018590)
Company Secretary
Melaka
Dated: 3 June, 2004
Explanatory Notes On Special Business
1. The Ordinary Resolution proposed under item 6 above, if
passed, will empower the Directors to issue shares up to
10% of the issued capital of the Company for the time
being for such purposes as the Directors may consider to
be in the interest of the Company. This authority, unless
revoked or varied by the Company in a general meeting,
will expire at the conclusion of the next Annual General
Meeting of the Company, or the expiration of period within
which the next Annual General Meeting is required by law
to be held, whichever is earlier.
2. The proposed adoption of the Special Resolution under
item 6 above is in line with the demutualization of Kuala
Lumpur Stock Exchange.
NOTES:
1. A member of the Company who is entitled to attend and
vote at the meeting is entitled to appoint more than two
proxies to attend and vote in his stead and he shall specify
the proportion of his shareholdings to be represented by
each proxy. A member may appoint any person to be his
proxy without limitation and the provision of Section
149(1)(b) of the Companies Act, 1965 shall not apply to
the Company.
2. Where a member is an authorised nominee as defined
under the Securities Industry (Central Depository) Act,
1991, it may appoint more than (1) proxy in respect of
each securities account it holds with ordinary shares of the
Company standing to the credit of the said securities
account.
3. The instrument appointing a proxy must be in writing
under the hand of the appointor or of his attorney duly
authorised in writing or, if such appointor is a corporation,
either under its common seal or under the hand of an
officer or attorney duly authorised.
4. The instrument appointing a proxy, together with the
power of attorney (if any) or other authority (if any) under
which the instrument is signed or a notarially certified copy
of that power or authority shall be deposited at the
Registered Office of the Company at Lot 4979 21/2 Miles,
Jalan Tanjung Laboh, 83000 Batu Pahat, Johor not less
than 48 hours before the time for holding the meeting or
otherwise the instrument appointing the proxy will not be
treated as valid.
STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETINGPURSUANT TO PARAGRAPH 8.28(2) OF THE LISTING REQUIREMENTS OF THE BURSA MALAYSIA SECURITIES BERHAD
(FORMERLY KNOWN AS MALAYSIA SECURITIES EXCHANGE BERHAD)
4 BANENG HOLDINGS BHD (307139-W)
Details of the particulars of all the retiring Directors namely, Mr. Lim Meng Hee, Dr. Ng Soon Lim and Mr. Chai Koh Wah are set
out in pages 8 to 10 of the Annual Report of the Company for the Financial year ended 31 December 2003.
DIRECTORS STANDING FOR RE-ELECTION
Directors who are retiring and standing for re-election at the Ninth Annual General Meeting of the Company to be held at
Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 Batu Pahat, Johor on Saturday, 26 June, 2004 at 2.30 p.m. are
as follows:-
1. The Directors who are retiring and standing for re-election in accordance to Article 101(a) of the Company’s Articles
of Association:-
• Mr. Lim Meng Hee
• Dr. Ng Soon Lim
2. Mr. Chai Koh Wah, the Director who is retiring and standing for re-election in accordance to Article 102(c) of the
Company’s Articles of Association.
A total of Five (5) Board of the Directors’ Meetings were held during the financial year ended 31 December, 2003 and all
the Board of Directors’ meetings were held at the registered office of the Company at Lot 4979 21/2 Miles, Jalan Tanjung Laboh,
83000 Batu Pahat, Johor except for the Board of Directors’ Meeting held on 29 May, 2003, which was held at Diamond Room,
Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 Batu Pahat, Johor. The date and time of the Board of the Directors’ Meetings
were as follows:-
Date of the Board Meeting Time
23 February 2003 1200
26 April 2003 1530
29 May 2003 1530
23 August 2003 1530
22 November 2003 1600
Details of attendance at board meetings held during the financial year ended 31 December 2003.
Name of Director Date of appointment No. of Meetings attended
Mr. Lim Meng Hee 31 May, 2001 5
Dr. Ng Soon Lim 31 May, 2001 5
Mr. Chai Koh Wah 25 April, 2004 -
Y. Bhg. Tan Sri A. Rahim bin Tamby Chik Non-Executive Chairman
Mdm. Lim Choon Hiok Managing Director
Mr. Lim Meng Hong Executive Director
Mr. Lim Meng Hee Executive Director
Dr. Ng Soon Lim Independent Non-Executive Director
Mr. Chai Koh Wah Independent Non-Executive Director (appointed on 25/4/2004)
Mr. Keah Say Wan Independent Non-Executive Director (resigned on 15/3/2004)
CORPORATE INFORMATION
BANENG HOLDINGS BHD (307139-W) 5
Audit Committee
Dr. Ng Soon Lim (Chairman)
Mr. Lim Meng Hong
Mr. Chai Koh Wah (appointed on 25.4.2004)
Mr. Keah Say Wan (resigned on 15.3.2004)
Nomination Committee
Y. Bhg. Tan Sri A. Rahim bin Tamby Chik (Chairman)
Dr. Ng Soon Lim
Mr.Chai Koh Wah (appointed on 25.4.2004)
Mr. Keah Say Wan (resigned on 15.3.2004)
Remuneration Committee
Mdm. Lim Choon Hiok (Chairman)
Dr. Ng Soon Lim
Mr. Chai Koh Wah (appointed on 25.4.2004)
Mr. Keah Say Wan (resigned on 15.3.2004)
Registered Office
Lot 4979, 21/2 Miles, Jalan Tanjung Laboh
83000 Batu Pahat, Johor Darul Takzim
Tel : 607-4355 701
Fax : 607-4318 322
Date and Place of Incorporation
Incorporated in Malaysia on 11 July, 1994
Principal Bankers
EON Bank Berhad
Malayan Banking Berhad
HSBC Bank Malaysia Berhad
Bumiputra-Commerce Bank Berhad
Registrar
Securities Services (Holdings) Sdn Bhd
Level 7 Menara Milenium, Jalan Damanlela
Pusat Bandar Damansara, Damansara Heights
50490 Kuala Lumpur
Tel : 603-2095 7077/2084 9000
Fax : 603-2094 0040/2095 0292
Company Secretary
Ms. Teo Soon Mei (MAICSA 7018590)
Auditors
Ernst & Young
Graha Maju (Bangunan PKNM)
Tingkat 10, Lot 1, Jalan Graha Maju
75300 Melaka
Tel : 606-2831 399
Fax : 606-2841 799
Web-Site Address
www.baneng.com.my
Stock Exchange
The Main Board of Bursa Malaysia Securities Berhad
CORPORATE STRUCTURE
6 BANENG HOLDINGS BHD (307139-W)
Baneng Holdings Bhd
100%Chenille
InternationalPte Ltd
100%Baneng
IndustriesSdn Bhd
100%BanengTradingSdn Bhd
100%Maxlin
Garments Sdn Bhd
100%BanengLesotho(Pty) Ltd
55%Seri Pertamas
GarmentManufacturer
Sdn Bhd
PROFILE OF DIRECTORS
BANENG HOLDINGS BHD (307139-W) 7
Name : Y. Bhg. Tan Sri A. Rahim bin Tamby Chik
Age : 54
Nationality : Malaysian
Qualification : Degree in Bachelor of Economics (Honours) and Doctorate of Philosophy in Business
Administration.
Position in Company : Non-Executive Chairman. He is also the Chairman of the Nomination Committee.
Working experience : He was appointed to the Board of the Company on 31 May 2001. He was the Parliamentary
Secretary for the Ministry of Primary Industries and Trade Industries between 1978 and 1981.
A Deputy Minister of the Ministry of Home Affairs between 1981 and 1982; and was the Chief
Minister of Melaka between 1982 and 1994. Currently is involved in business. He also sits on the
boards of several other private limited companies.
Other directorship of Public companies : None
The family relationship with any director and/
or major shareholder of the Company : None
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 4 / 5
Name : Mdm. Lim Choon Hiok
Age : 48
Nationality : Malaysian
Qualification : Completed her secondary education and obtained her Malaysian Certificate of Education
in 1974.
Position in Company : Managing Director. She is also the Chairman of the Remuneration Committee.
Working experience : She was appointed to the Board of the Company on 31 May 2001. She has been with the
Baneng Group for the past 18 years and is in charge of the overall direction and management of
the Baneng Group of companies. She also sits on the boards of several other private limited
companies.
Other directorship of Public companies : None
The family relationship with any director and/
or major shareholder of the Company : She is the sister to Mr. Lim Meng Hong and Mr. Lim
Meng Hee who are also directors of the Company. She
is also the sister to Ms. Lim Poh Choo who is a major
shareholder of the Company.
List of convictions for Company : None
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 5 / 5
PROFILE OF DIRECTORS
8 BANENG HOLDINGS BHD (307139-W)
Name : Mr. Lim Meng Hong
Age : 45
Nationality : Malaysian
Qualification : Degree in Bachelor of Economics. Fellow member of the CPA Australia and a Chartered
Accountant of the Malaysian Institute of Accountants (MIA).
Position in Company : Executive Director. He is also a Member of the Audit Committee.
Working experience : He was appointed to the Board of the Company on 31 May 2001. Prior to joining Baneng Group
of companies in 1992 as a Group Financial Controller, he was the Group Financial Controller with
Jardine Matheson Private Limited. Currently, he also sits on the boards of several other private
limited companies.
Other directorship of Public companies : None
The family relationship with any director and/
or major shareholder of the Company : He is the brother of Ms. Lim Choon Hiok and Mr. Lim
Meng Hee who are also directors of the Company. He is
also the brother to Ms. Lim Poh Choo who is a major
shareholder of the Company.
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 4 / 5
Name : Mr. Lim Meng Hee
Age : 40
Nationality : Malaysian
Qualification : Completed his secondary education and obtained his Sijil Pelajaran Malaysia in 1982.
Position in Company : Executive Director.
Working experience : He was appointed to the Board of the Company on 31 May 2001. He joined the Baneng Group
of companies in 1986 and has more than 17 years experience in the textile and apparel industry.
Currently, he is responsible for the overall direction and management of the apparel division of
the Company.
Other directorship of Public companies : None
The family relationship with any director and/
or major shareholder of the Company : He is the brother to Ms. Lim Choon Hiok and Mr. Lim
Meng Hong who are also directors of the Company. He
is also the brother to Ms. Lim Poh Choo who is a major
shareholder of the Company.
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 5 / 5
PROFILE OF DIRECTORS
BANENG HOLDINGS BHD (307139-W) 9
Name : Dr. Ng Soon Lim
Age : 56
Nationality : Malaysian
Qualification : Graduated from the University of Malaya in 1973 in Medicine (MBBS Malaya).
Position in Company : Independent Non-Executive Director. He was appointed as the Chairman of the Audit Committee
on 25 April, 2004. He is a Member of the Nomination and the Remuneration Committees. He was
also appointed as a Senior Independent Non-Executive Director on 4 September, 2002 in
compliance with the Code on Corporate Governance.
Working experience : He was appointed to the Board of the Company on 31 May 2001. Upon graduation in 1973, he
worked for the Government until 1977 where he became a general medical practitioner with his
own medical practice until to date.
Other directorship of Public companies : None
The family relationship with any director and/
or major shareholder of the Company : None
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 5 / 5
Name : Mr. Keah Say Wan (resigned on 15 March 2004)
Age : 43
Nationality : Malaysian
Qualification : Graduated from the University of Malaya in 1986 with a Bachelor of Law ( Honours )
Position in Company : Independent Non-Executive Director. He is the Chairman of the Audit Committee and a Member
of the Nomination and the Remuneration Committees. He resigned as the Independent Non-
Executive Director of the Company on 15 March, 2004.
Working experience : He was appointed to the Board of the Company on 31 May 2001. After being called to the
Malaysian Bar in 1987, he joined the legal practice of Mohd Yamin Ismail and Partner as a legal
assistant for 3 years. In 1990 he set-up a legal firm with a partner and has been the managing
partner of the firm till todate. He sits on the Board of the Hokkien Association in Batu Pahat and
also several other private limited companies.
Other directorship of Public companies : None
The family relationship with any director and/
or major shareholder of the Company : None
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 5 / 5
PROFILE OF DIRECTORS
10 BANENG HOLDINGS BHD (307139-W)
Name : Mr. Chai Koh Wah (appointed on 25 April 2004)
Age : 45
Nationality : Malaysian
Qualification : Hold a Bachelor of Economics from La Trobe University (Australia) in 1982. He is a Chartered
Accountant of the Malaysian Institute of Accountants. He is also a Fellow member of CPA
Australia and an associate of the Malaysian Institute of Taxation.
Position in Company : Independent Non-Executive Director. He is also a Member of the Audit, the Nomination and the
Remuneration Committees.
Working experience : He was appointed to the Board of the Company on 25 April 2004 as an Independent Non-
Executive Director. He is an approved company auditor and has more than 20 years of
experience in the auditing and accounting profession.
Other directorship of Public companies : None
The family relationship with any director/
or major shareholder of the Company : None
List of convictions for offences within the past 10 years
other than traffic offences, if any : None
Number of board meetings attended in the financial year : 0
CHAIRMAN’S STATEMENT
BANENG HOLDINGS BHD (307139-W) 11
To all our valued shareholders,
On behalf of the Board of Directors, I am pleased to present
to you the Annual Report and Financial Statements of the
Group and the Company for the financial year ended 31
December 2003.
Industry Overview
It has been another challenging year for the whole textile and
apparel industry. During the financial year under review, the
industry continued to face intense competition from lower
cost and huge labour-pool countries such as India, Vietnam
and the People’s Republic of China.
Towards trade liberalization in 2005, the global market for the
industry will see huge changes. Globalisation provides buyers
with opportunities to get cheaper products than before,
especially the traditional trading markets in USA and EU
countries.
In additional to that, buyers are given more options to decide
when and what to buy: they are unwilling to commit orders in
advance as they need to respond to the market trend in terms
of fashions and designs. Thus, a shorter production lead time
is essential for the manufacturers.These directly result in the
compulsory strengthening of manufacturers’ production
efficiency and order responsiveness.
On top of that, the big retailers are identifying their sourcing
partners who can manufacture for them a wider range of
products. They will like to increase their portfolios with those
established vertically set-up manufacturers who can provide
more competitive prices, shorter leadtimes and wider range of
products in different countries of production depending on
their strengths. This will narrow down their sourcing and
eventually achieve their objectives and yet quality and ethical
issues can still be managed objectively.
Financial Highlights
For the financial ended 31 December 2003, the Group
recorded a consolidated turnover of RM275.9 million
compared to RM317.7 million in the preceding year. Pre-tax
profit for the current financial year decreased to RM2.9 million
as compared to RM19.2 million in 2002 while profit after tax
was reported at RM3.7 million compared to RM18.9 million in
the preceding year.
The reduction in profitability is mainly attributed to the fabric
division within the Group. This is due to the direct impact of
pricing competition from China after its entrance as WTO
member. The Group has taken necessary measures to
downsize the division and forming new strategy for its
operation; mainly to concentrate and expanding in the niche
market that is the apparel divisions.
Business Overview
Being a fully vertically integrated fabric and apparel
manufacturer, we offer a one-stop services and solutions
to our customers ranging from design and product
development, technical and sampling services, sourcing and
logistic management. With large and established production
set-ups, we are able to offer more value-added services to
our end customers in terms of sharper pricing, shorter lead
time to delivery and enhanced quality controls. With our
established creditability, we believe we can serve our
customers better and act as their strategic partners.
With Malaysia as our headquarter, our growth will continue to
be around this region. Countries which are in proximity to our
headquarter and with abundant source of labour will be our
target production base. With the establishment of our current
strategic operating locations, besides having our production
presence in Malaysia, Brunei and Lesotho, we are looking into
acquisitions of more established garment factories in lower
cost countries like Sri Lanka, Vietnam, Cambodia and China.
These are our future identified countries for the Group’s future
potential production bases. With these, we believe we can
provide sharper pricing, shorter leadtimes and a wider range
of products for our valued customers.
CHAIRMAN’S STATEMENT
12 BANENG HOLDINGS BHD (307139-W)
The management is prudent on the competitiveness of the
fabric division in the international market in Year 2004.
However, with our expansions into more apparel production
bases, the fabric division will enhance and complement the
apparel division in terms of production leadtimes which is very
important for us to get nearer to the customers.
As the apparel industry is becoming more and more
globalized, there is a growing trend for established customers
to select manufacturers who have sizeable capabilities which
are strategically located and most importantly, with ability to
offer cost-competitive solutions.
Our marketing arms with Research & Development, designs
and technical supports will enhance and give the full supports
for the necessary first hand information in areas where our
customers’ needs can be met. Such knowledge is very
important as it provides and enhances the confidence levels
for our customers.
Future Prospects and Challenges
Despite the improved economic outlook for 2004, external
factors such as price deflation, the weaken US Dollar, un-
pegging of Ringgit Malaysia against US Dollar, fluctuation in
cotton price, political instability and new quota-free and duty
free system in 2005 have created many uncertainties in the
industry.
With a good established network of customers, we believe
that we are able to further advance the business and explore
more business opportunities in the future.
In order to keep up with various market changes, we are
embarking on the following:
a. We will be expanding the range and profile of our
customers beyond our current main market in the United
State of America. In this respect, we are exploring new
markets in China, Middle East and Asean countries;
b. We will continue to expand and upgrade our production
capacities and capabilities worldwide. This continuity to
look for and expand into countries suitable for us and
increase the Group’s performance will help us to ensure
further growth;
c. We will continue to improve our efficiency and
productivity through production management and
process refinement. We will also continue to invest in
more efficient ways of production and in management
tools. We will set aside a budget to automate part of our
production process to cater for more complicated and
value styling jobs.
d. We will continue to explore and integrate into other
domains of the value chain of the fabric and apparel
business. Where opportunities arise, we will expand our
capabilities and business by acquiring or forming
strategic partnerships or joint ventures with other
manufacturers in these domains, who can add value to
our business by allowing us to have greater involvement
in businesses on which our present business is reliant.
We believe that this will give us additional competitive
edge over our competitors.
Acknowledgement and Appreciations
On behalf of the Board, I would like to extend out deepest
appreciation to our shareholders, valued customers,
financiers and business associates and especially to our
employees for their continued supports, commitments and
confidence in the Group.
Y. Bhg. Tan Sri A Rahim Bin Tamby ChikChairman
CORPORATE GOVERNANCE STATEMENT
BANENG HOLDINGS BHD (307139-W) 13
The Board recognizes the significance of practicing good and sound corporate governance in preserving and enhancingshareholders’ value.
The Board of Directors is pleased to report that throughout the financial year under review, it had applied the Principles ofCorporate Governance and the Best Practices in Corporate Governance as set out in Part 1 and 2 of the Malaysian Code ofCorporate Governance (the “Code”) pursuant to Paragraph 15.26 of the Listing Requirements of Bursa Malaysia SecuritiesBerhad whilst managing and directing the business and operations for the Company and its group of companies.
A. Board of Directors
1. Board Duties and Responsibilities
The Board assumes full responsibilities to lead and control the Group’s direction and operation for the enhancementof the long-term shareholders’ value. The Board is responsible for the overall corporate governance, strategicformulations, business conduct and stewardship of the Group’s resources.
The Directors, with their diverse background and experience collectively bring with them a wide range of businessacumen, management skills and expertise in areas such as finance, accounting, marketing, operations and auditing.
There is a clear division of responsibilities between the Chairman and Managing Director of the Company to ensure abalance of power and authority. The Managing Director and the Executive Directors are responsible for implementingthe policies and decision of the Board, overseeing the day to day operations as well as coordinating and monitoringthe implementation of business and corporate strategies.
The independent non-executive Directors play a pivotal role in providing objective and independent judgement to thedecision making of the Board. Dr. Ng Soon Lim was appointed on the 4 September 2002 as the Senior IndependentNon-Executive Director to whom shareholders may convey their concerns to.
2. Board Composition and Balance
The Board currently consists of six (6) members. The Board comprises the Chairman who is Non independent non-executive, one (1) managing director, two (2) executive directors and two (2) independent non-executive directors.A brief profile of each Director is presented on pages 7 to 10 of this annual report.
The Board’s composition complies with the provisions of the Code and paragraph 15.02 of the ListingRequirements of Bursa Malaysia Securities Berhad that require a minimum of two (2) directors or one third of theBoard to be independent Directors. The Three (3) Directors holding executive office represent the interest of thelargest shareholders of the Company and the investment of remaining shareholders is fairly reflected in the Boardrepresentation.
No individual or a group of individuals dominate the decision making of the Board and enable the Board to effectivelydischarge its principle responsibilities as set out in the Code.
3. Board Meetings
The Board meets on a quarterly basis, with additional meetings convened as and when necessary. Five (5) boardmeetings were held during the financial year ended 31 December 2003 and the Directors’ attendance are as follows:
Director Attendance
Y. Bhg. Tan Sri A. Rahim Bin Tamby Chik 4Mdm. Lim Choon Hiok 5Mr. Lim Meng Hong 4Mr. Lim Meng Hee 5Dr. Ng Soon Lim 5Mr. Chai Koh Wah (appointed on 25 April 2004) -
Mr. Keah Say Wan (resigned on 15 March 2004) 5
All Directors have complied with the minimum attendance at the Board meetings as stipulated by the Listing
Requirements of Bursa Malaysia Securities Berhad.
CORPORATE GOVERNANCE STATEMENT
14 BANENG HOLDINGS BHD (307139-W)
4. Supply of Information
The Directors have full access to all information and records of the Group. The meeting agenda, together with reports
and preposition papers for each meeting are circulated prior to the meeting to ensure the Directors have sufficient time
to consider and deliberate on the matters to be discussed at Board meetings.
Senior Management staffs as well as the external auditor are invited to attend Board meetings to provide their views
and explanations on certain agenda items tabled to the Board, and to furnish their clarification on issues that may be
raised by the Directors.
The Directors are updated by the Company Secretary on new statutory as well as regulatory requirements relating to
the duties and responsibilities. Full Board have ready access to the Company Secretary. The Directors have the right
to engage independent professional advise (if necessary) at the Company’s expense in furtherance of their duties.
5. Board Committees
The Board of Directors has established several Board Committees to delegate their duties. This includes the Audit
Committee, the Nomination Committee and the Remuneration Committee.
The Chairman of the respective committee will brief the Board on the matters discussed at the meetings and minutes
of those meetings are circulated to the full Board. The ultimate responsibilities for the decision on all matters are
reserved for the Board.
6. Appointments to the Board
The Nomination Committee is empowered by the Board and its term of reference to bring to the Board
recommendations as to the appointment of new Directors. The Committee reviews the effectiveness of the Board, its
Committees and the contributions of each individual Director on an annual basis. The Committees also keeps under
review the Board structure, size, composition and mix of skills, business acumen and the competencies required for
the Board to effectively discharged its duties.
The memberships of the Nomination Committee during the year are as follows:
Chairman : Y. Bhg. Tan Sri A. Rahim bin Tamby Chik
Member : Dr. Ng Soon Lim
Mr. Chai Koh Wah (appointed on 25 April 2004)
Mr. Keah Say Wan (resigned on 15 March 2004)
This Committee is empowered to bring the Board recommendations on appointment of any new director and would
ensure that Board has an appropriate balance of expertise and ability. The Nomination Committee had on 25 April,
2004 made its recommendation on the appointment of Mr. Chai Koh Wah as an Independent Non-Executive Director
of the Company to the Board of Directors for approval to fill in the vacancy created due to the resignation of Mr. Keah
Say Wan as the Independent Non-Executive Director of the Company on 15 March, 2004.
The Nomination Committee met one time during the financial year where all members were present. The Nomination
Committee met to:-
i) Approve the principles and processes of assessing Board effectiveness and performance evaluation of Senior
Management; and
ii) Deliberate and approve performance objectives and standards for the Board and the contributions of each
individual director.
CORPORATE GOVERNANCE STATEMENT
BANENG HOLDINGS BHD (307139-W) 15
A. Board of Directors (Cont’d)
7. Directors’ Training
All Directors except for Mr Chai Koh Wah have completed the Mandatory Accreditation Program conducted by the
Research Institute of Investment Analyst Malaysia. The Directors will be undergoing the Continuing Education
Programs and other relevant training programs as a continuous effort to enhance their skills and knowledge to
effectively discharge their duties.
8. Re-Election of Directors
In accordance to the Company’s Articles of Association, all newly appointed directors shall retire from office at the
close of the next Annual General Meeting and shall then be eligible for re-election. The Articles also provided that at
least one-third of the Board or the number nearest to one-third are subject to retirement and are eligible for re-election
at the Annual General Meeting at least once every three years.
Details of Directors seeking re-election at the forthcoming annual general meeting are disclosed in the statement
accompanying the Notice of annual general meeting as set out on page 4 of this annual report.
B. Directors’ Remuneration
The Board recognizes the need to structure the remuneration packages for Directors so as to be able to attract, retain and
motivate Directors of the right caliber required to mange the Company and to align the interests of the Directors with those
of the shareholders.
The Remuneration Committee is responsible for setting the remuneration policy framework and making recommendations
to the Board on the remuneration and other terms of employment for the Executive Directors of the Group. The terms of
reference of the Remuneration Committee are clearly defined to its members. The determination of remuneration of Non
Executive Directors is a matter for the Board as a whole. The individual concerned has abstains from deliberations in
respect of their own remuneration.
The memberships of the Remuneration Committee during the year are as follows:
Chairman : Mdm. Lim Choon Hiok
Member : Dr. Ng Soon Lim
Mr. Chai Koh Wah (appointed on 25 April 2004)
Mr. Keah Say Wan (resigned on 15 March 2004)
The remuneration of the Executive Directors of the Company is structured so as to link rewards to corporate and individual
performance. Reference have also been made to established survey findings on directors’ allowance, roles and
remuneration of listed firms for proposing the remuneration packages of the Executive Directors of the Company. The
remuneration of the Non-Executive Directors is fixed after taking into consideration their level of experience and responsibilities.
The Remuneration Committee has on 27 February, 2004, reviewed annually the performance of the Executive Directors and
furnished recommendations to the Board on specific adjustments. In accordance with the Company’s Articles of
Association, the Directors’ remuneration is subject to Shareholders’ approval.
CORPORATE GOVERNANCE STATEMENT
16 BANENG HOLDINGS BHD (307139-W)
B. Directors’ Remuneration (Cont’d)
The Company’s Directors’ aggregate remuneration is categorized into appropriate components are as follows:
Non-Executive Directors Executive DirectorsRM’000 RM’000
Fees 108 182
Salaries and other emoluments - 889
Contribution to EPF - 68
Bonus - 57
Allowances 7 -
Total 115 1,196
The number of Directors of the Company who served during the financial year and whose aggregate remuneration from
the Group failing within the respective band are as follows:
Non-Executive Directors Executive Directors
Below RM50,000 2 -
RM50,001 – RM250,000 1 1
RM250,001 – RM450,000 - -
RM450,001 – RM650,000 - 2
C. Shareholders
The Board recognizes the importance of maintaining active communication with its shareholders and timely dissemination
of information concerning the Group’s business performance. Announcements on various disclosures and the quarterly
financial reports are made to Bursa Malaysia Securities Berhad and the annual reports provide shareholders and the
investing public with an overview of the Group’s performance.
The principal forum for dialogue with shareholders is the general meeting of the Company. Appropriate notice of meeting
would be communicated depending on the purpose of the meeting. The notice would be accompanied by the prescribed
documents or statement providing explanation of the intended agenda to facilitate full understanding and evaluation. All
Directors are available to provide responses to questions from the shareholders during the general meeting.
D. Accountability and Audit
1. Financial Reporting
The Board aims to provide a true and fair assessment of the Group’s financial performance and a balanced assessment
of the Group’s prospects through the quarterly financial reports to the Bursa Malaysia Securities Berhad and the
annual report to shareholders.
The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the
Group and the Company as at the end of the accounting period and of the results of the operations and cash flows
for the period then ended. In preparing the financial statements, the Directors have ensured that applicable approved
accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been consistently applied, and
made reasonable and prudent judgements and estimates.
CORPORATE GOVERNANCE STATEMENT
BANENG HOLDINGS BHD (307139-W) 17
D. Accountability and Audit (Cont’d)
2. Internal Control
The Directors are fully aware of their responsibilities to maintain a sound system of internal control to safeguard
shareholders’ investment and the Group’s assets.
The Statement of Internal Control furnished on pages 18 to 19 of this Annual Report provides an overview on the
state of internal controls within the Group.
3. Audit Committee
The roles of the Audit Committee together with their duties and summary of the activities during the year are set out
in the Audit Committee Report on pages 20 to 22 of this Annual Report.
4. Relationship with External Auditors
The Board has established an appropriate and transparent relationship with the Company’s external auditors in seeking
professional advice through the Audit Committee.
The Audit Committee meets with the external auditors whenever it deem necessary to discuss the audit plan, annual
financial statements and their audit findings.
E. Compliance with Best Practices
The Board has throughout the financial year complied with the best practices as set out in Part 2 of the Code.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR PREPARING THE FINANCIAL STATEMENTS
The Board is required by the Companies Act, 1965 to prepare the financial statements so as to give true and fair view of the state
of affairs of the Company and the Group at the financial year end, and of the results and cash flows of the Company and the
Group for the financial year under review.
The Directors have used suitable accounting policies and applied them consistently, made judgments and estimates that are
prudent and reasonable, and adopted applicable accounting standards during the preparation of the financial statements.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the
financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the
Companies Act, 1965.
In addition, the Directors are also responsible for taking reasonable steps to safeguard the assets of the Group and to detect and
prevent any fraud as well as any other irregularities.
The collective approval by the Board on this Statement was tabled on 25 April, 2004.
STATEMENT ON INTERNAL CONTROL
18 BANENG HOLDINGS BHD (307139-W)
Introduction
Paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors of listed
companies to include in its annual report a “statement about the state of internal control of the listed issuer as a group”.
The Board is committed in maintaining a sound system of internal control in the Group and is pleased to provide the following
statement which outlines the nature and scope of internal controls of the Group during the year.
The Board is ultimately responsible for the Group’s system of internal control and risk management, including the establishment
of an appropriate control environment and framework as well as reviewing its adequacy and integrity. Due to the inherent
limitations in any system of internal controls, such a system is designed to manage rather than eliminate the risk of failure to
achieve business and corporate objectives and can only provide reasonable and not absolute assurance against materials
misstatement or loss. The system of internal controls covers risk management and financial, organizational, operational and
compliance controls.
Risk Management Framework
Although there is no formal structured risk management framework was developed, the Board fully recognizes the importance
and supports the content of the Internal Control Guidance. The Board continually reviews the adequacy and effectiveness of the
risk management process through regular informal management and departmental meetings held by the Executive Directors and
key management staff in each operating unit.
Key risks identified includes but not exclusively, competitors’ activities through market information, buyers’ compliance, market
changes, production scheduling, quality control, financial planning and human management.
Internal Control Process
The Board is committed in maintaining a strong and effective internal control structure to compliment the proper conduct of the
Group’s business operations. The internal control process is reviewed regularly, informally by the managing directors through their
close involvement in daily business operation, to ensure effectiveness and business objectives are achieved in a controlled
environment.
Major internal control elements of the Group include but not exclusive:
a) Financial and credit control
Personnel are carefully selected to prevent any misconduct. Authorisation limits are set to minimise risk of unauthorised
transaction. Purchasing function were centralised at Head Office to ensure minimise mishandlings as well as to leverage
on the Group’s purchasing power
b) Organizational structure
The Group has established a clear organisational structure with defined lines of reporting, responsibility and delegation
of authority.
c) Reporting and reviewing
Timely financial reports were submitted to Top Management for review, monitoring of results with management action
taken, where necessary.
d) Monitoring of business units
Regular visits to business units by Executive Directors to ensure compliance with the Group’s policies and procedures.
Regular informal evaluation are conducted with manager in charged on areas and matters pertinent to the business units
for compliance.
STATEMENT ON INTERNAL CONTROL
BANENG HOLDINGS BHD (307139-W) 19
Internal Control Process (Cont’d)
The Board has reviewed the effectiveness of the internal control through the above processes and is not aware of any significant
deficiencies in the Group’s system of internal control for the year under review which may resulted in any material losses,
contingencies or uncertainties that would require disclosure in the Group’s annual report. Apart from the above internal
framework, the Group also relies on findings by the external auditors.
In the absence of any formal internal control department, the Board believes they are capable of safeguarding shareholders’
investment by constant monitoring and reviewing of the above processes. Nevertheless, the Board is constantly looking out for
a suitable out-sourcing support.
The Board remained committed towards operating a sound system of internal control and strives for continuous improvement to
further enhance the Group’s system of internal framework.
AUDIT COMMITTEE REPORT
20 BANENG HOLDINGS BHD (307139-W)
A. Establishment and Memberships
The membership of the Audit Committee is as follow:
Chairman : Dr. Ng Soon Lim/Independent Non-Executive Director (appointed on 25 April 2004)
Mr. Keah Say Wan/Independent Non-Executive Director (resigned on 15 March 2004)
Member : Mr. Lim Meng Hong/Executive Director
Mr. Chai Koh Wah/Independent Non-Executive Director
Mr. Lim Meng Hong and Mr. Chai Koh Wah are members of the Malaysian Institute of Accountants.
B. Terms of Reference
The terms of reference of the Audit Committee are as follows:-
Composition
The Company shall appoint an AuditCommittee from amongst its directors and shall consist of not less than three (3) in
numbers of whom a majority shall be independent directors. No alternate director is appointed as a member of the
Committee and at least one (1) member of the Committee:-
(a) Shall be a member of the Malaysian Institute of Accountants; or
(b) If he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’ working
experiences and:-
(i) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or
(ii) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the
Accountants Act 1967.
The members of the Audit Committee shall elect a Chairman from among their members who shall be an independent
director. In the event of any vacancy in the Committee resulting in the non-compliance of the above stated conditions, the
company shall fill the vacancy within three (3) months. The Board of directors of the company shall review the term of office
and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether
such audit committee and members have carried out their duties in accordance with their terms of reference.
Rights
The Audit Committee shall, in accordance with a procedure to be determined by the Board of directors and at the cost of
the Company:
(a) have authority to investigate any matter within its terms of reference;
(b) have the resources which are required to perform its duties;
(c) have full and unrestricted access to any information pertaining to the company;
(d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function
or activity (if any);
(e) be able to obtain independent professional or other advice; and
(f) be able to convene meetings with the external auditors, excluding the attendance of the executive members of the
committee, whenever deemed necessary.
Where the Committee is of the view that a matter reported by it to the board of directors of the company has not been
satisfactorily resolved resulting in a breach of the Listing Requirements of Kuala Lumpur Stock Exchange, the Audit
Committee shall promptly report such matter to the Kuala Lumpur Stock Exchange.
AUDIT COMMITTEE REPORT
BANENG HOLDINGS BHD (307139-W) 21
B. Terms of Reference (Cont’d)
Meeting
The Audit Committee shall meet at least each quarter of a financial year and such additional meetings as the Chairman shall
decide in order to fulfill its duties. The Company Secretary or any person appointed by the Audit Committee shall act as
Secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda
and other supporting explanatory documentation for circulation to the Committee Members prior to each meeting. The
Secretary will also be responsible for keeping the minutes of the meetings of the Audit Committee, and circulating them to
Committee Members and to other members of the Board of Directors. The Chairman of the Audit Committee shall convene
a meeting of the audit committee to consider any matter the external auditor believes should be brought to the attention
of the directors or shareholders. Other directors and employees must attend any particular Audit Committee meeting only
at the Audit Committee’s invitation, specific to the relevant meeting.
A quorum shall consist of a majority of members present who must be independent directors.
Functions
The functions of the Audit Committee are as follow:-
1. review the following and report the same to the board of directors of the Company:-
(a) the audit plan with the external auditor.
(b) with the external auditor its evaluation of the system of internal controls.
(c) the audit report with the external auditors.
(d) the assistance given by the employees of the Company to the external auditor.
(e) the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary
authority to carry out its work.
(f) the internal audit programme, processes, the results of the internal audit programme, processes or investigation
undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function.
(g) the quarterly results and year end financial statements, prior to the approval by the board of directors, focusing
particularly on:-
(i) changes in or implementation of major accounting policy changes.
(ii) significant and unusual events; and
(iii) compliance with accounting standards and other legal requirements.
(h) any related party transaction and conflict of interest situation that may arise within the company or group including
any transaction, procedure or course of conduct that raises questions of management integrity.
(i) any letter of resignation from the external auditors of the company; and
(j) whether there is reason (supported by grounds) to believe that the company’s external auditor is not suitable
for re-appointment; and
2. to recommend the nomination of a person or persons as external auditors.
Summary of Audit Committee Activities
The Audit Committee held a total of five (5) meetings during the financial year ended 31 December 2003. The Senior
Management and a representative of the external auditors normally attend the Committee meetings. Other Board
members may attend meetings upon invitation of the Committee. The Minutes of the Audit Committee meeting have been
extended to all members of the Board of Directors and significant issues discussed at the Board Meetings. The attendance
of each Audit Committee member were as follows:-
AUDIT COMMITTEE REPORT
22 BANENG HOLDINGS BHD (307139-W)
B. Terms of Reference (Cont’d)
Summary of Audit Committee Activities (Cont’d)
Audit Committee Member Total no. of meetings held during the year Meetings Attended
Keah Say Wan
(resigned on 15 March 2004) 5 5
Ng Soon Lim 5 5
Lim Meng Hong 5 4
Chai Koh Wah
(appointed on 25 April 2004) 5 -
During the financial year, the activities undertaken by the Audit Committee include:-
a. Review of the quarterly unaudited financial results of the Group prior making the recommendations to the Board ofDirectors for approval ;
b. Review of inter-company transactions and/or any related party transactions or conflict of interest situations that arosewithin the Group or the Company;
c. Discussion on the Company's Corporate Governance process and the application of the key principles and bestpractices of Corporate Governance and the compliance with the Listing Requirement of Bursa Malaysia Securities Berhad;
d. Discussion and review of the semi annual returns pursuant to the Paragraph 8.02 of Chapter 8 of the ListingRequirements of the Bursa Malaysia Securities Berhad;
e. Discussion and review of the proposed amendments to the Listing Requirements of Bursa Malaysia Securities Berhad;f. Review the annual audited financial statements of the Group and the Company for the financial year ended
31 December, 2003 and made recommendations to the Board of Directors for approval;g. Discussion and review on the external auditors’ reports in relation to audit and accounting issues arising from the audit;
andh. Discussing and reviewing the external auditors’ scope of work.
Relationship with External auditors
The Audit Committee’s terms of reference formalises the relationship with the External Auditors. Through the AuditCommittee, the Company has maintained a formal and transparant relationship with its auditors in seeking professionaladvice and ensuring compliance with its auditors in seeking professional advice and ensuring compliance with theMalaysian Accounting Standard Board (“MASB”) standards of accounting policies and methods when the Group’sfinancial statements are prepared.
Non-audit fees
The amount of non-audit fee paid to the external auditors by the Group and the Company for the financial year amountedto RM16,000 and RM9,000 respectively.
Internal Control and Risk Managment
The committee recognizes the importance of an independant and a well established internal audit function in obtaining theassurance it requires regarding the effectiveness of the internal control system.
The Group believes that although it does not have a formal internal audit department and a risk management committee;informal identification of internal control system and evaluation of business risk carried out during management anddepartmental meetings are sufficient to safeguard shareholders’ investment and the Group’s assets. The Group currentlyalso relies on findings of the external auditors. Such internal control findings and business risks are discussed andaddressed by the Audit Committee where appropriate. The corrective and preventive actions are implemented wherenecessary. The Audit Committee will review the need for setting up the internal Audit Department from time to time.
OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTSOF BURSA MALAYSIA SECURITIES BERHAD
BANENG HOLDINGS BHD (307139-W) 23
a. Material Contracts
Save for the following, neither the Company nor any of its subsidiaries has entered into any material contracts involving
Directors’ and major shareholders’ interest, either still subsisting at the end of the financial year under review or
entered into since the end of the previous financial year:-
i) A Conditional Sale and Purchase agreement between Baneng Industries Sdn Bhd (“BISB”), a wholly-owned
subsidiary of the Company and Mr. Lim Thian Hock @ Lim Thiam Hock dated 14 November, 2003 for the purchase
by Baneng Industries Sdn Bhd of a piece of land together with an Industrial Building known as Lot PTD 17076,
Mukim of Simpang Kanan, District of Batu Pahat, State of Johor held under H.S. (D) 22056, containing an area of
0.7098 hectares situated at Lorong 5, Batu 31/2, Jalan Kluang, 83000 Batu Pahat, Johor Darul Takzim for the total
cash consideration of RM9,950,000 (Ringgit Malaysia Nine Million and Nine Hundred Fifty Thousand Only)
(Proposed Acquisition by Baneng Industries); and
ii) A Conditional Sale and Purchase agreement between Maxlin Garments Sdn Bhd (“Maxlin”), a wholly-owned
subsidiary of Baneng Industries Sdn Bhd and Regnistar Corporation Sdn Bhd (“Regnistar”) dated 14 November,
2003 for the purchase by Maxlin Garments Sdn Bhd of a piece of land together with an Industrial Building known
as Lot P.T.D. 3235 held under H.S. (D) 38473 and Lot P.T.D. 3236 held under H.S. (D) 38474 for respectively both
of Mukim of Minyak Beku, District of Batu Pahat, State of Johor containing an area of 4,481.9194 square metres
and 11,015.6175 square metres respectively situated at Plot 4 & 5, Lot 163, Batu 6, Jalan Tanjong Laboh, 83000
Batu Pahat, Johor Darul Takzim for the total cash consideration of RM6,200,000 (Ringgit Malaysia Six Million and
Two Hundred Thousand Only) (“Proposed Acquisition by Maxlin”).
The substantial shareholders and directors of the Company, BISB and Maxlin as at 20 May, 2004 who are deemed
related and their relationship with the Vendors are as follows:-
i) Proposed Acquisition by Baneng Industries
The Company BISB Maxlin
Lim Choon Hiok Managing Director, Director, Director,
substantial shareholder substantial shareholder * substantial shareholder*
Lim Meng Hong” Director Alternate Director to Director
Lim Choon Hiok and
Y. Bhg. Tan Sri A Rahim
Bin Tamby Chik
Lim Meng Hee1 Director - -
Lim Thian Hock @
Lim Thiam Hock2 - Directorº -
Lim Poh Choo3 Substantial shareholder* - -
Upaya Mendaki
Sdn Bhd3^ Substantial shareholder Substantial shareholder* Substantial Shareholder*
(*) Deemed interested by virtue of Section 6A of the Companies Act, 1965.
(") Mr. Lim Meng Hong is the brother of Lim Choon Hiok and brother-in-law of Lim Thian Hock @ Lim Thiam Hock.
(1) Mr. Lim Meng Hee is also the brother of Lim Choon Hiok and brother-in-law of Lim Thian Hock @ Lim Thiam Hock.
(2) Mr. Lim Thian Hock @ Lim Thiam Hock, husband of Lim Choon Hiok, is the vendor for the Proposed
Acquisition by Baneng Industries and was a director of Baneng Industries up to 18 November, 2003.
OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTSOF BURSA MALAYSIA SECURITIES BERHAD
24 BANENG HOLDINGS BHD (307139-W)
a. Material Contracts (Cont’d)
i) Proposed Acquisition by Baneng Industries (Cont’d)
(º) As at 19 November, 2003, Mr. Lim Thian Hock @ Lim Thiam Hock ceased to be a director of BanengIndustries Sdn Bhd. Therefore, Mr. Lim Meng Hong ceased to an Alternate Director to Lim Thian Hock @Lim Thiam Hock..
(3) Persons connected to the interested directors. Ms. Lim Poh Choo is the sister of Ms. Lim Choon Hiok, Mr.Lim Meng Hong and Mr. Lim Meng Hee while Mr. Lim Thian Hock @ Lim Thiam Hock is the spouse of Ms.Lim Choon Hiok.
(^) The Directors and substantial shareholders of Upaya Mendaki Sdn Bhd are Ms. Lim Choon Hiok and Ms.Lim Poh Choo.
ii) Proposed Acquisition by Maxlin
Regnistar is the vendor for the Proposed Acquisition by Maxlin and Maxlin is the purchaser. The substantial shareholders of Regnistar are Ms. Lim Choon Hiok and Mr. Lim Thian Hock @ Lim Thiam Hock. Mr. Lim ThianHock @ Lim Thiam Hock, a director of Regnistar, is also a substantial shareholder of Regnistar with Ms. Lim Choon Hiok.
b. Conflict of Interests
None of the Directors has any conflict of interest with the Company except for Ms. Lim Choon Hiok, Mr. Lim MengHong and Mr. Lim Meng Hee are deemed interested in the following related party transactions:-
i) A Conditional Sale and Purchase agreement between Baneng Industries Sdn Bhd, a wholly-owned subsidiary ofthe Company and Mr. Lim Thian Hock @ Lim Thiam Hock dated 14 November, 2003 for the purchase by BanengIndustries Sdn Bhd of a piece of land together with an Industrial Building known as Lot PTD 17076, Mukim ofSimpang Kanan, District of Batu Pahat, State of Johor held under H.S. (D) 22056, containing an area of 0.7098hectares situated at Lorong 5, Batu 31/2, Jalan Kluang, 83000 Batu Pahat, Johor Darul Takzim for the total cashconsideration of RM9,950,000 (Ringgit Malaysia Nine Million and Nine Hundred Fifty Thousand Only);
ii) A Conditional Sale and Purchase agreement between Maxlin Garments Sdn Bhd, a wholly-owned subsidiary ofBaneng Industries Sdn Bhd and Regnistar Corporation Sdn Bhd dated 14 November, 2003 for the purchase byMaxlin Garments Sdn Bhd of a piece of land together with an Industrial Building known as Lot P.T.D. 3235 heldunder H.S. (D) 38473 and Lot P.T.D. 3236 held under H.S. (D) 38474 for respectively both of Mukim of MinyakBeku, District of Batu Pahat, State of Johor containing an area of 4,481.9194 square metres amd 11,015.6175square metres respectively situated at Plot 4 & 5, Lot 163, Batu 6, Jalan Tanjong Laboh, 83000 Batu Pahat, JohorDarul Takzim for the total cash consideration of RM6,200,000 (Ringgit Malaysia Six Million and Two HundredThousand Only).
c. Sanctions And/Or Penalties
There were no sanctions or penalties imposed on the Company and its subsidiaries, directors or management by therelevant regulatory bodies.
d. American Depository Receipt (ADR)/Global Depository Receipt (GDR)
The Company did not sponsor any ADR or GDR program.
e. Share Buy-backs
The Company did not enter into any share buy-backs tansactions during the financial year.
f. Options, Warrants or Convertible Securities
There were no options, warrants or convertible securities being exercised during the financial year.
g. Revaluation Policy
The Company and the Group do not have a policy on revaluation of land and buildings.
26 Directors’ Report
29 Statement by Directors
29 Statutory Declaration
30 Report of the Auditors
31 Income Statements
32 Balance Sheets
33 Statements of Changes in Equity
34 Cash Flow Statements
35 Notes to the Financial Statements
FINANCIAL STATEMENTS
DIRECTORS’ REPORT
26 BANENG HOLDINGS BHD (307139-W)
The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the
Company for the financial year ended 31 December 2003.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and provision of management services. The principal activities of
the subsidiaries are described in Note 12 to the financial statements.
There have been no significant changes in the nature of the principal activities during the financial year.
RESULTS
Group CompanyRM’000 RM’000
Profit after taxation 3,681 90
Minority interests (1,076) -
Net profit for the year 2,605 90
There were no material transfers to or from reserves or provisions during the financial year.
In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not
substantially affected by any item, transaction or event of a material and unusual nature.
DIVIDENDS
The amount of dividends paid by the Company since 31 December 2002 were as follows:
RM’000
In respect of financial year ended 31 December 2002
Final tax exempt dividend of 5% paid on 15 August 2003 3,000
The directors do not recommend the payment of any dividend of the current financial year.
DIRECTORS
The names of the directors of the Company in office since the date of the last report and at the date of this report are:
Y. Bhg. Tan Sri A Rahim Bin Tamby Chik
Lim Choon Hiok
Lim Meng Hong
Lim Meng Hee
Keah Say Wan resigned on 15 March 2004
Dr. Ng Soon Lim
Chai Koh Wah appointed on 25 April 2004
DIRECTORS’ REPORTDIRECTORS’ REPORT
BANENG HOLDINGS BHD (307139-W) 27
DIRECTORS’ BENEFITS
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company
was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or
any other body corporate.
Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits
included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 6 to the
financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company
or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial
financial interest, except as disclosed in Note 26 to the financial statements.
DIRECTORS’ INTERESTS
According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares
in the Company during the financial year were as follows:
Number of Ordinary Shares at RM1 Each1 January 31 December
2003 Bought Sold 2003
Direct Interest
Y. Bhg. Tan Sri A Rahim Bin Tamby Chik 100,000 - - 100,000
Lim Choon Hiok 12,857,727 - - 12,857,727
Lim Meng Hong 161,774 - - 161,774
Indirect Interest
Lim Choon Hiok 18,325,886 - - 18,325,886
Lim Choon Hiok by virtue of her interest in shares of the Company is also deemed interested in shares of all the Company’s
subsidiaries to the extent the Company has an interest.
None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related
corporations during the financial year.
OTHER STATUTORY INFORMATION
(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took
reasonable steps:
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision
for doubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had been
made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the
ordinary course of business had been written down to an amount which they might be expected so to realise.
(b) At the date of this report, the directors are not aware of any circumstances which would render:
(i) it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequate to any substantial
extent; and
(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.
DIRECTORS’ REPORT
28 BANENG HOLDINGS BHD (307139-W)
OTHER STATUTORY INFORMATION (CONT’D)
(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render
adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or
inappropriate.
(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or
financial statements of the Group and of the Company which would render any amount stated in the financial statements
misleading.
(e) As at the date of this report, there does not exist:
(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which
secures the liabilities of any other person; or
(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.
(f) In the opinion of the directors:
(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve
months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet
their obligations when they fall due; and
(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial
year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the
Company for the financial year in which this report is made.
SUBSEQUENT EVENTS
The subsequent events are as disclosed in Note 27 to the financial statements.
AUDITORS
The auditors, Ernst & Young, have expressed their willingness to continue in office.
Signed on behalf of the Board
in accordance with a
resolution of the directors
LIM CHOON HIOK LIM MENG HONG
Melaka, Malaysia
Date: 25 April, 2004
DIRECTORS’ REPORTSTATEMENT BY DIRECTORSPURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965
BANENG HOLDINGS BHD (307139-W) 29
We, LIM CHOON HIOK and LIM MENG HONG, being two of the directors of BANENG HOLDINGS BHD., do hereby
state that, in the opinion of the directors, the accompanying financial statements set out on pages 31 to 56 are drawn up in
accordance with applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as
to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2003 and of the results
and the cash flows of the Group and of the Company for the year then ended.
Signed on behalf of the Board
in accordance with a
resolution of the directors
LIM CHOON HIOK LIM MENG HONG
Melaka, Malaysia
Date: 25 April, 2004
STATUTORY DECLARATIONPURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, LIM CHOON HIOK, being the Director primarily responsible for the financial management of BANENG HOLDINGS BHD.,
do solemnly and sincerely declare that the accompanying financial statements set out on pages 31 to 56 are in my opinion correct,
and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory
Declarations Act, 1960.
Subscribed and solemnly declared by the
abovenamed LIM CHOON HIOK at
Melaka in the State of Melaka
on 25 April, 2004 LIM CHOON HIOK
Before me,
Commissioner For Oaths
REPORT OF THE AUDITORSTO THE MEMBERS OF BANENG HOLDINGS BHD. (Incorporated in Malaysia)
30 BANENG HOLDINGS BHD (307139-W)
We have audited the accompanying financial statements set out on pages 31 to 56. These financial statements are the responsibility
of the Company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as
well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion:
(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and
applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of:
(i) the financial position of the Group and of the Company as at 31 December 2003 and of the results and the cash flows
of the Group and of the Company for the year then ended; and
(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(b) the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of
which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as
auditors, as indicated in Note 12 to the financial statements, being financial statements that have been included in the
consolidated financial statements.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the
Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial
statements and we have received satisfactory information and explanations required by us for those purposes.
The auditor’s reports on the financial statements of the subsidiaries were not subject to any qualification material to the
consolidated financial statements and in respect of subsidiaries incorporated in Malaysia did not include any comment required
to be made under Section 174 (3) of the Act.
Ernst & Young Lee Ah TooAF: 0039 No. 2187/09/05(J)
Chartered Accountants Partner
Melaka, Malaysia
Date: 25 April, 2004
DIRECTORS’ REPORTINCOME STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 31
Group Company2003 2002 2003 2002
Note RM’000 RM’000 RM’000 RM’000
Revenue 3 275,925 317,669 390 4,142
Cost of sales (238,280) (258,928) - -
Gross profit 37,645 58,741 390 4,142
Other operating income 234 492 - 32
Administrative expenses (20,424) (20,885) (258) (833)
Selling and marketing expenses (2,881) (5,373) - -
Profit from operations 4 14,574 32,975 132 3,341
Finance costs, net 7 (11,717) (13,740) - -
Profit before taxation 2,857 19,235 132 3,341
Taxation 8 824 (375) (42) -
Profit after taxation 3,681 18,860 90 3,341
Minority interests (1,076) (2,646) - -
Net profit for the year 2,605 16,214 90 3,341
Basic earnings per share (sen) 9 4.3 28.8
The accompanying notes form an integral part of the financial statements.
BALANCE SHEETSAS AT 31 DECEMBER 2003
32 BANENG HOLDINGS BHD (307139-W)
Group Company2003 2002 2003 2002
Note RM’000 RM’000 RM’000 RM’000
NON-CURRENT ASSETS
Property, plant and equipment 11 167,214 174,318 - -
Investment in subsidiaries 12 - - 59,203 59,203
Due from a subsidiary 13 - - 20,334 19,987
167,214 174,318 79,537 79,190
CURRENT ASSETS
Inventories 14 74,095 73,001 - -
Trade receivables 15 107,629 121,187 - -
Other receivables 16 33,833 16,335 308 594
Marketable securities 17 4 4 - -
Cash and bank balances 18 11,789 11,765 17 59
227,350 222,292 325 653
CURRENT LIABILITIES
Borrowings 19 185,297 168,021 131 -
Trade payables 19,914 20,994 - -
Other payables 21 7,989 10,271 3,186 388
Tax payables 423 572 - -
213,623 199,858 3,317 388
NET CURRENT ASSETS/(LIABILITIES) 13,727 22,434 (2,992) 265
180,941 196,752 76,545 79,455
FINANCED BY :
Share capital 22 60,000 60,000 60,000 60,000
Reserves 43,959 44,353 16,545 19,455
Shareholders’ equity 103,959 104,353 76,545 79,455
Reserve on consolidation 37,165 37,165 - -
Minority interests 14,724 13,648 - -
155,848 155,166 76,545 79,455
Borrowings 19 23,334 38,777 - -
Deferred taxation 23 1,759 2,809 - -
Non-current liabilities 25,093 41,586 - -
180,941 196,752 76,545 79,455
The accompanying notes form an integral part of the financial statements.
DIRECTORS’ REPORTSTATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 33
Non-distributable DistributableForeign
Share Share exchange Retainedcapital premium reserve profits Total
RM’000 RM’000 RM’000 RM’000 RM’000
Group
At 31 December 2001 51,000 8,203 (1,057) 11,483 69,629
Public issue at RM2.10 per share 9,000 9,900 - - 18,900
Shares issue expenses - (2,013) - - (2,013)
Currency translation differences ** - - 1,623 - 1,623
Net profit for the year - - - 16,214 16,214
At 31 December 2002 60,000 16,090 566 27,697 104,353
Currency translation differences ** - - 1 - 1
Net profit for the year - - - 2,605 2,605
Dividends (Note 10) - - - (3,000) (3,000)
At 31 December 2003 60,000 16,090 567 27,302 103,959
Company
At 31 December 2001 51,000 8,203 - 24 59,227
Public issue at RM2.10 per share 9,000 9,900 - - 18,900
Shares issue expenses - (2,013) - - (2,013)
Net profit for the year - - - 3,341 3,341
At 31 December 2002 60,000 16,090 - 3,365 79,455
Net profit for the year - - - 90 90
Dividends (Note 10) - - - (3,000) (3,000)
At 31 December 2003 60,000 16,090 - 455 76,545
** representing net gains/(losses) not recognised in the income statement
The accompanying notes form an integral part of the financial statements.
CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003
34 BANENG HOLDINGS BHD (307139-W)
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 2,857 19,235 132 3,341
Adjustments for:
Bad and doubtful debts - 612 - -
Depreciation 15,285 15,058 - -
Dividends income - - (300) (4,052)
Gain on disposal of property, plant and equipment (86) (8) - -
Interest expense 11,915 14,050 - -
Interest income (198) (310) - -
Operating profit/(loss) before working capital changes 29,773 48,637 (168) (711)
Increase in inventories (1,094) (9,007) - -
(Increase)/decrease in receivables (3,940) (35,255) 286 286
(Decrease)/increase in payables (3,362) (3,347) 2,798 (396)
Cash generated from/(used in) operations 21,377 1,028 2,916 (821)
Interest paid (11,915) (14,050) - -
Income tax paid (240) (549) - -
Net cash generated from/(used in) operating activities 9,222 (13,571) 2,916 (821)
CASH FLOWS FROM INVESTING ACTIVITIES
Advance to a subsidairy - - (347) (19,987)
Dividends received - - 258 3,980
Purchase of property, plant and equipment (4,657) (27,697) - -
Proceeds from disposal of property, plant and equipment 414 589 - -
Interest received 198 310 - -
Net cash used in investing activities (4,045) (26,798) (89) (16,007)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of hire purchase 485 - - -
Proceeds from issuance of shares - 18,900 - 18,900
Shares issue expenses paid - (2,013) - (2,013)
Drawdown of term loans - 9,057 - -
Dividend paid (3,000) (95) (3,000) -
Repayment of term loans (11,806) (8,611) - -
Repayment of hire purchase (4,205) (12,089) - -
Short term borrowings 11,915 32,970 - -
Net cash (used in)/generated from financing activities (6,611) 38,119 (3,000) 16,887
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,434) (2,250) (173) 59
EFFECTS OF EXCHANGE RATE CHANGES - 225 - -
CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 11,197 13,222 59 *
CASH AND CASH EQUIVALENTS AT END OF YEAR 9,763 11,197 (114) 59
* RM2
The accompanying notes form an integral part of the financial statements.
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 35
1. CORPORATE INFORMATION
The principal activities of the Company are investment holding and provision of management services. The principalactivities of the subsidiaries are described in Note 12. There have been no significant changes in the nature of the principalactivities during the financial year.
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Boardof Bursa Malaysia Securities Berhad. The principal place of business of the Company is located at Lot 4979, 21/2 Miles,Jalan Tanjung Laboh, 83000 Batu Pahat, Johor.
The number of employees in the Group at the end of the financial year was 2,970 (2002 : 3,626). There was no employeein the Company at the end of the financial year. The accounting records of the Company are maintained by the employeesof a subsidiary.
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directorson 25 April 2004.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements of the Group and of the Company have been prepared under the historical cost conventionand comply with the provisions of the Companies Act, 1965 and applicable Approved Accounting Standards in Malaysia.
During the financial year ended 31 December 2003, the Group and the Company adopted the following MASBStandards for the first time:
MASB 25 Income Taxes
MASB 27 Borrowing Costs
MASB 28 Discontinuing Operations
MASB 29 Employee Benefits
The adoption of MASB 25, MASB 27, MASB 28 and MASB 29 have not given rise to any adjustments to the openingbalances of retained profits of the prior and current year or to changes in comparatives.
(b) Basis of Consolidation
The consolidated financial statements include the financial statements of the Company and all its subsidiaries.Subsidiaries are those companies in which the Group has a long term equity interest and where it has power toexercise control over the financial and operating policies so as to obtain benefits therefrom.
Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting,the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statementfrom the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities ofa subsidiary are measured at their fair values at the date of acquisition and these values are reflected in theconsolidated balance sheet. The difference between the cost of an acquisition and the fair value of the Group’s shareof the net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balance sheet asgoodwill or negative goodwill arising on consolidation.
Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidatedfinancial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costscannot be recovered.
The gain or loss on disposal of a subsidiary company is the difference between net disposal proceed and the Group’sshare of its net assets together with any unamortised balance of goodwill and exchange differences which were notpreviously recognised in the consolidated income statement.
Minority interest is measured at the minorities’ share of the post acquisition fair values of the identifiable assets andliabilities of the acquiree.
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
36 BANENG HOLDINGS BHD (307139-W)
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(c) Investments in Subsidiary
The Company’s investments in subsidiaries are stated at cost less impairment losses. The policy for the recognition and
measurement of impairment losses is in accordance with Note 2(l).
On disposal of such investment, the difference between net disposal proceeds and their carrying amounts is
recognised in the income statement.
(d) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for
the recognition and measurement of impairment losses is in accordance with Note 2(l).
Freehold land and capital work-in-progress are not depreciated. Depreciation of other property, plant and equipment
is provided for on the reducing balance basis to write off the cost of each asset to its residual value over the estimated
useful life at the following annual rates:
Buildings 2%
Plant and machinery 10%
Air conditioners 10%
Factory and office equipment 10%
Furniture and fittings 10%
Electrical installations 10%
Forklifts and motor vehicles 20%
Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and
the net carrying amount is recognised in the income statement.
(e) Inventories
Inventories are stated at the lower of cost (determined on the first-in, first-out basis) and net realisable value. Cost of
work-in-progress and finished goods include direct materials, direct labour, other direct costs and appropriate
production overheads. Net realisable value represents the estimated selling price less all estimated costs to completion
and costs to be incurred in marketing, selling and distribution.
(f) Cash and Cash Equivalents
For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank and
deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of
outstanding bank overdrafts.
(g) Hire Purchase
Assets acquired by way of hire purchase are stated at an amount equal to the lower of their fair values and the present
value of the minimum hire purchase payments at the inception of the hire purchase, less accumulated depreciation and
impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present
value of the minimum hire purchase payments, the discount factor used is the interest rate implicit in the hire purchase,
when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used.
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 37
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(g) Hire Purchase (Cont’d)
Hire purchase payments are apportioned between the finance costs and the reduction of the outstanding liability.
Finance costs, which represent the difference between the total hire purchase commitments and the fair value of the
assets acquired, are recognised as an expense in the income statement over the term of the relevant hire purchase so
as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.
The depreciation policy for assets acquired under hire purchase is consistent with that for depreciable property, plant
and equipment as described in Note 2(d).
(h) Income Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount
of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been
enacted at the balance sheet date.
Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible
temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences, unused tax losses and unused tax credits can be
utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from
initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the
transaction, affects neither accounting profit nor taxable profit.
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the
liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised
directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a
business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or
negative goodwill.
Prior to the adoption of MASB25 Income Taxes on 1 January 2003, deferred tax was provided for using the liability
method in respect of significant timing differences and deferred tax assets were not recognised unless there was
reasonable expectation of their realisation.
(i) Employee Benefits
(i) Short term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the
associated services are rendered by employees of the Group. Short term accumulating compensated absences
such as paid annual leave are recognised when services are rendered by employees that increase their entitlement
to future compensated absences, and short term non-accumulating compensated absences such as sick leave are
recognised when the absences occur.
(ii) Defined contribution plans
As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees
Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries make contributions to their respective countries'
statutory pension schemes. Such contributions are recognised as an expense in the income statement as incurred.
Prior to the adoption of MASB 29 Employee Benefits on 1 January 2003, no liability was recognised for the obligations in
respect of short-term employee benefits in the form of accumulating compensated absences.
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
38 BANENG HOLDINGS BHD (307139-W)
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(j) Revenue Recognition
Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the
enterprise and the amount of the revenue can be measured reliably.
(i) Sales of goods
Revenue relating to sale of goods is recognised net of sales discounts and returns upon the transfer of risks and
rewards.
(ii) Dividend income
Dividend income is recognised when the shareholder's right to receive payment is established.
(iii) Revenue from services
Revenue from services rendered is recognised net of service taxes and discounts as and when the services are
performed.
(k) Foreign Currencies
(i) Foreign currency transactions
Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date
of the transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit
Malaysia at exchange rates ruling at that date, unless hedged by forward foreign exchange contracts, in which
case the rates specified in such forward contracts are used. Non-monetary items initially denominated in foreign
currencies, which are carried at historical cost are translated using the historical rate as of the date of
acquisition and non-monetary items which are carried at fair value are translated using exchange rate that existed
when the values were determined. All exchange rate differences are taken to the income statement.
(ii) Foreign entities
Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to
the assets and liabilities, and at exchange rates at the dates of the transactions with respect to the income
statement. All resulting translation differences are included in the foreign exchange reserve in shareholders’ equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the Company and translated at the exchange rate ruling at the date of the transaction.
The principal exchange rates used for every unit of foreign currency ruling at balance sheet date are as follows:
2003 2002RM RM
United States Dollar 3.80 3.80
Singapore Dollar 2.17 2.17
Brunei Dollar 2.17 2.17
(l) Impairment of Assets
At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is
any indication of impairment. If any such indication exists, impairment is measured by comparing the carrying values
of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use,
which is measured by reference to discounted future cash flows.
An impairment loss is recognised as an expense in the income statement immediately. Reversal of impairment losses
recognised in prior years is recorded when the impairment losses recognised for the asset no longer exist or have decreased.
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 39
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(m) Financial Instruments
Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual
provisions of the instrument.
Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual
arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported
as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to
equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle
either on a net basis or to realise the asset and settle the liability simultaneously.
(i) Marketable Securities
Marketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost
is determined on the weighted average basis while market value is determined based on quoted market values.
Increases or decreases in the carrying amount of marketable securities are recognised in the income statement.
On disposal of marketable securities, the difference between net disposal proceeds and the carrying amount is
recognised in the income statement.
(ii) Trade and Other Receivables
Trade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified.
An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.
The Group's normal trade credit term ranges from 30 to 120 days. Other credit terms are assessed and approved
on a case-by-case basis.
(iii) Trade and Other Payables
Trade and other payables are stated at cost which is the fair value of the consideration to be paid in the future for
goods and services received. The normal trade credit terms granted to the Group range from 30 to 90 days.
(iv) Interest-Bearing Borrowings
Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs.
Borrowing costs directly attributable to the acquisition and construction of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of
the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised as an expense in the income statement as an expense in the period in
which they are incurred.
(v) Equity Instruments
Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in
which they are declared.
The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity
transaction costs comprise only those incremental external costs directly attributable to the equity transaction
which would otherwise have been avoided.
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
40 BANENG HOLDINGS BHD (307139-W)
3. REVENUE
Revenue of the Group and of the Company consists of the following:
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Management fees - - 90 90
Dividend income - - 300 4,052
Sales of goods 275,925 317,669 - -
275,925 317,669 390 4,142
4. PROFIT FROM OPERATIONS
Profit from operations is stated after charging/(crediting):
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Auditors’ remuneration
- statutory audit 97 95 25 23
- other services 16 27 9 9
Bad and doubtful debts - 612 - -
Depreciation 15,285 15,058 - -
Directors’ fees 472 702 78 318
Rental of premises 1,260 1,364 - -
Rental of machinery 73 - - -
Rental income (8) (8) - -
Staff costs (Note 5) 39,438 48,993 - -
Dividend income from subsidiaries - - (300) (4,052)
Gain on disposal of property, plant and equipment (86) (8) - -
(Gain)/loss on foreign exchange (56) 323 - -
5. STAFF COSTS
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Wages and salaries 34,922 43,397 - -
Pension cost - defined contribution plans 986 982 - -
Other staff related expenses 3,530 4,614 - -
39,438 48,993 - -
Included in staff costs and directors' fees of the Group are executive directors' remuneration amounting to RM1,619,000
(2002: RM2,052,000) as further disclosed in Note 6.
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 41
6. DIRECTORS’ REMUNERATION
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Directors of the Company
Executive:
Salaries and other emoluments 889 1,426 - -
Fees 182 417 - 240
Bonus 57 - - -
Pension costs - defined contribution plan 68 - - -
1,196 1,843 - 240
Non-Executive:
Allowances 7 - - -
Fees 108 108 78 78
115 108 78 78
Other directors
Executive:
Salaries and other emoluments 332 121 - -
Fees 91 88 - -
423 209 - -
Non-Executive:
Fees 91 89 - -
Total 1,825 2,249 78 318
7. FINANCE COSTS, NET
Group2003 2002
RM’000 RM’000
Interest expense 11,915 14,050
Interest income (198) (310)
11,717 13,740
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
42 BANENG HOLDINGS BHD (307139-W)
8. TAXATION
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Tax expense for the year:
- Malaysian income tax 541 369 42 -
- Foreign tax 35 41 - -
576 410 42 -
Overprovided in prior year (350) - - -
226 410 42 -
Deferred tax
Relating to origination and reversal of
temporary differences (Note 23) (1,050) (35) - -
(824) 375 42 -
Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2002: 28%) of the estimated assessable
profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. A
subsidiary located at Brunei was granted tax exemption for a period of five years expiring on 26 May 2006.
A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax
expense at the effective income tax rate of the Group and of the Company is as follows:
2003 2002RM’000 RM’000
Group
Profit before taxation 2,857 19,235
Taxation at Malaysian statutory tax rate of 28% (2002 : 28%) 800 5,386
Effect of different tax rates in other countries (1) (2)
Expenses not deductible for tax purposes 138 387
Income not subject to tax (170) -
Pioneer income not subject to tax (670) (1,636)
Utilisation of current year's reinvestment allowances (248) (3,218)
Balancing charge arising from intragroup disposal of
property, plant and equipment not subject to tax (71) -
Deferred tax assets on reinvestment allowances recognised during the year (227) (518)
Tax rebate (25) (24)
Overprovision of income tax in prior years (350) -
Tax expense for the year (824) 375
Company
Profit before taxation 132 3,341
Taxation at Malaysian statutory tax rate of 28% (2002 : 28%) 37 935
Income not subject to tax - (1,063)
Expenses not deductible for tax purposes 5 128
Tax expense for the year 42 -
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 43
9. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of ordinary
shares in issue during the financial year.
Group2003 2002
RM’000 RM’000
Net profit for the year 2,605 16,214
Weighted average number of ordinary shares in issue 60,000 56,250
Basic earning per share (sen) 4.3 28.8
Diluted earnings per share has not been presented as there was no potential changes in paid up share capital.
10. DIVIDENDS
Amount Net Dividends per Share2003 2002 2003 2002
RM’000 RM’000 Sen Sen
In respect of financial year 2002
Final tax exempt dividend of 5%,
paid on 15 August, 2003 3,000 - 5 -
11. PROPERTY, PLANT AND EQUIPMENT
Plantmachinery,equipment
and CapitalLand and electrical Other Work-in-
buildings* installations assets** progress TotalRM’000 RM’000 RM’000 RM’000 RM’000
Group
Cost
At 1 January 2003 43,772 183,540 15,938 806 244,056
Additions 1,190 5,769 1,016 534 8,509
Disposals - (119) (892) - (1,011)
At 31 December 2003 44,962 189,190 16,062 1,340 251,554
Accumulated Depreciation
At 1 January 2003 3,473 58,124 8,141 - 69,738
Charge for the year 686 13,253 1,346 - 15,285
Disposals - (52) (631) - (683)
At 31 December 2003 4,159 71,325 8,856 - 84,340
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
44 BANENG HOLDINGS BHD (307139-W)
11. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Plantmachinery,equipment
and CapitalLand and electrical Other Work-in-
buildings* installations assets** progress TotalRM’000 RM’000 RM’000 RM’000 RM’000
Net Book Value
At 31 December 2003 40,803 117,865 7,206 1,340 167,214
At 31 December 2002 40,299 125,416 7,797 806 174,318
Depreciation charge for 2002 594 13,048 1,416 - 15,058
** Other assets comprise air conditioners, furniture and fittings, office equipment, motor vehicles and renovation.
* LAND AND BUILDINGS
Boilerhouse,
store room,roads,
Freehold Factory bridgeland buildings and fencing Total
RM’000 RM’000 RM’000 RM’000
Group
Cost
At 1 January 2003 8,317 34,920 535 43,772
Additions - 1,040 150 1,190
At 31 December 2003 8,317 35,960 685 44,962
Accumulated Depreciation
At 1 January 2003 - 3,147 326 3,473
Charge for the year - 669 17 686
At 31 December 2003 - 3,816 343 4,159
Net Book Value
At 31 December 2003 8,317 32,144 342 40,803
At 31 December 2002 8,317 31,773 209 40,299
Depreciation charge for 2002 - 580 14 594
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 45
(a) Net book value of property, plant and equipment held under hire purchase arrangements are as follows:
Group2003 2002
RM’000 RM’000
Plant, machinery and equipment 4,578 21,741
Office equipment and motor vehicles 543 923
5,121 22,664
(b) Property, plant and equipment acquired during the financial year were by means of:
Group2003 2002
RM’000 RM’000
Cash payment 4,657 27,697
Hire purchase financing 3,852 721
8,509 28,418
(c) All the property, plant and equipment of the Group have been pledged to financial institutions for banking facilities granted
to the subsidiaries.
12. INVESTMENT IN SUBSIDIARIES
Company2003 2002
RM’000 RM’000
Unquoted shares, at cost
- in Malaysia 55,123 55,123
- outside Malaysia 4,080 4,080
59,203 59,203
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
46 BANENG HOLDINGS BHD (307139-W)
Details of the subsidiaries are as follows:
Name of Country of Equity InterestSubsidiaries incorporation Held (%) Principal activities
2003 2002
Subsidiaries of the Company
Baneng Industries Malaysia 100 100 Manufacturing, knitting and
Sdn. Bhd. dyeing of all types of fabrics,
(“BISB”) garments and related products.
Chenille International Singapore 100 100 Trading of garments and
Pte Ltd * provision of agency services.
Seri Pertamas Brunei 55 55 Manufacturing of garments.
Garment Manufacturer
Sdn. Bhd. *
Subsidiaries of BISB
Maxlin Garments Malaysia 100 100 Manufacturing of garments.
Sdn. Bhd.
Baneng Trading Malaysia 100 100 Manufacturing and knitting
Sdn. Bhd. of fabrics. Temporary ceased
operation in current financial year.
* Audited by firms of auditors other than Ernst & Young.
13. DUE FROM A SUBSIDIARY
The amount due from a subsidiary is unsecured, interest free and not receivable within the next twelve months.
14. INVENTORIES
Group2003 2002
RM’000 RM’000
At cost:
Raw materials 21,382 22,309
Work-in-progress 21,700 23,355
Finished goods 22,782 25,718
Consumable supplies 1,950 1,619
67,814 73,001
At net realisable value:
Finished goods 6,281 -
74,095 73,001
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 47
15. TRADE RECEIVABLES
Group2003 2002
RM’000 RM’000
Trade receivables 111,880 125,438
Less : Provision for doubtful debts (4,251) (4,251)
107,629 121,187
The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of
debtors, except for amounts due from three debtors amounting to approximately RM41,780,000 (2002 : RM61,574,000).
16. OTHER RECEIVABLES
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Other receivables 24,768 14,707 306 592
Deposits and prepayments 4,220 1,628 2 2
Amount paid for acquisition on
2 pieces of freehold land 4,845 - - -
33,833 16,335 308 594
The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of
debtors, except for amounts due from three debtors amounting to approximately RM9,409,000 (2002 : RM12,610,000),
which represent advances for trade related purposes.
17. MARKETABLE SECURITIES
Group2003 2002
RM’000 RM’000
Quoted shares at cost 4 4
Market value of quoted shares 4 3
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
48 BANENG HOLDINGS BHD (307139-W)
18. CASH AND CASH EQUIVALENTS
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Cash on hand and at banks 5,645 2,627 17 59
Deposits with licensed banks 6,144 9,138 - -
Cash and bank balances 11,789 11,765 17 59
Marketable securities (Note 17) 4 4 - -
Less: Bank overdrafts (Note 19) (2,030) (572) (131) -
Cash and cash equivalents 9,763 11,197 (114) 59
The fixed deposits with licensed banks of the Group have been pledged to the banks for banking facilities obtained by the
subsidiaries.
The average interest rate of deposit at the balance sheet date was 3.00% (2002: 4.00%) per annum and the average
maturity of deposit as at the end of the financial year was 365 days (2002: 365 days).
Included in the fixed deposits is an amount of RM3,213,000 (2002 : RM1,828,000) which is registered in the names of a
director and a third party, who hold in trust on behalf of the Group.
19. BORROWINGS
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Short Term Borrowings
Secured:
Bank overdrafts 1,543 511 131 -
Bankers’ acceptances 75,225 72,100 - -
Export credit refinancing 11,217 5,499 - -
Trust receipts 2,556 5,066 - -
Term loans 2,111 3,185 - -
Hire purchase payables (Note 20) 2,076 3,298 - -
94,728 89,659 131 -
Unsecured:
Bank overdrafts 487 61 - -
Trust receipts 4,372 3,493 - -
Bankers’ acceptances 71,875 71,836 - -
Export credit refinancing 6,146 1,645 - -
Foreign export bills payable 163 - - -
Term loans 7,526 1,327 - -
90,569 78,362 - -
185,297 168,021 131 -
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 49
19. BORROWINGS (CONT’D)
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Long Term Borrowings
Secured:
Term loans 11,379 6,760 - -
Hire purchase payables (Note 20) 1,829 341 - -
13,208 7,101 - -
Unsecured:
Term loans 10,126 31,676 - -
23,334 38,777 - -
Total Borrowings
Bank overdrafts (Note 18) 2,030 572 131 -
Bankers’ acceptances 147,100 143,936 - -
Export credit refinancing 17,363 7,144 - -
Foreign export bills payable 163 - - -
Trust receipts 6,928 8,559 - -
Term loans 31,142 42,948 - -
Hire purchase payables (Note 20) 3,905 3,639 - -
208,631 206,798 131 -
Maturity of borrowings (excluding hire purchases)
Within one year 183,058 164,723 131 -
Between one and two years 9,903 14,581 - -
Between two and five years 11,765 23,855 - -
204,726 203,159 131 -
The weighted average effective interest rate during the financial year for borrowings, excluding hire purchase payables,
were as follows:
Group2003 2002
% %
Bank overdrafts 7.96 8.00
Bankers’ acceptances 4.27 4.55
Export credit refinancing 3.50 3.50
Foreign export bills payable 5.00 -
Trust receipts 7.92 7.90
Term loans 7.29 8.40
The above bank borrowings are secured by way of fixed and floating charges over all the assets of the subsidiaries.
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
50 BANENG HOLDINGS BHD (307139-W)
20. HIRE PURCHASE PAYABLES
Group2003 2002
RM’000 RM’000
Future minimum payments:
Payable within one year 2,385 3,863
Payables between one and five years 1,956 390
4,341 4,253
Less : Finance charges (436) (614)
3,905 3,639
Present value of hire purchase payables
Not later than 1 year 2,076 3,298
Later than 1 year and not later than 2 years 1,687 194
Later than 2 years and not later than 5 years 142 147
3,905 3,639
Analysed as:
Due within 12 months (Note 19) 2,076 3,298
Due after 12 months (Note 19) 1,829 341
3,905 3,639
The hire purchase payables bear interests of between 2.99% to 6.25% (2002 : 3.90% to 5.70%) per annum.
21. OTHER PAYABLES
Group Company2003 2002 2003 2002
RM’000 RM’000 RM’000 RM’000
Due to subsidiaries - - 3,038 -
Due to directors - 2,158 - -
Sundry payables and accruals 7,989 8,113 148 388
7,989 10,271 3,186 388
The amounts due to subsidiaries and directors are unsecured, interest free and with no fixed terms of repayment.
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 51
22. SHARE CAPITAL
Number of OrdinaryShares of RM1 Each Amount
2003 2002 2003 2002’000 ’000 RM’000 RM’000
Group and Company
Authorised 100,000 100,000 100,000 100,000
Issued and fully paid:
At 1 January 60,000 51,000 60,000 51,000
Public issue at RM2.10 per share - 9,000 - 9,000
At 31 December 60,000 60,000 60,000 60,000
23. DEFERRED TAXATION
Group2003 2002
RM’000 RM’000
At 1 January 2,809 2,844
Recognised in the income statements (Note 8) (1,050) (35)
At 31 December 1,759 2,809
Presented after appropriate offsetting as follows:
Deferred tax liabilties 30,806 16,620
Deferred tax assets (29,047) (13,811)
1,759 2,809
The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:
Deferred Tax Liabilities of the Group:
Acceleratedcapital
allowances Others TotalRM’000 RM’000 RM’000
At 1 January 2003 16,493 127 16,620
Recognised in the income statement 14,218 (32) 14,186
At 31 December 2003 30,711 95 30,806
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
52 BANENG HOLDINGS BHD (307139-W)
23. DEFERRED TAXATION (CONT’D)
Deferred Tax Assets of the Group:
UnutilisedReinvestment
AllowanceRM’000
At 1 January 2003 (13,811)
Recognised in the income statement (15,236)
At 31 December 2003 (29,047)
Deferred tax assets have not been recognised in respect of the following items:
2003 2002RM’000 RM’000
Unabsorbed reinvestment allowances 34,360 22,384
The unabsorbed reinvestment allowances are available for offset against future taxable profits of the subsidiaries in which
those items arose.
24. COMMITMENTS
Group2003 2002
RM’000 RM’000
Capital commitment in respect of expenditure contracted for 1,371 1,590
25. CONTINGENT LIABILITIES
Company2003 2002
RM’000 RM’000
Corporate guarantees given to banks for credit facilities
granted to subsidiaries - unsecured 12,277 16,481
26. SIGNIFICANT RELATED PARTY TRANSACTIONS
Company2003 2002
RM’000 RM’000
Dividends received/receivable from subsidiaries 300 4,052
Management fee charged to a subsidiary 90 90
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 53
27. SUBSEQUENT EVENTS
(i) On 5 January 2004, the Company has entered into a conditional sale and purchase agreement with its wholly owned
subsidiary, Baneng Industries Sdn Bhd (“BISB”), for the acquisition of BISB’s entire equity interest in Maxlin Garments
Sdn. Bhd. (“Maxlin”), representing 100% equity interest in Maxlin for a cash consideration of RM6,500,000.
(ii) On 17 November 2003, the Company through its wholly owned subsidiary, Maxlin entered into a conditional sale and
purchase agreement for the proposed acquisition of garment operation and manufacturing assets in Kingdom of
Lesotho for a total consideration of USD700,000 (approximately RM2.66 million) from Lekim Textiles (Lesotho) Pty. Ltd..
On the same day, board of directors of the Company has approved to acquire one thousand shares of one Loti (M1.00)
each, representing 100% equity interest in Baneng Lesotho (Proprietary) Limited (“BLesotho”), an entity incorporated
in Kingdom of Lesotho, for a cash consideration of One Thousand Maloti (M1,000) (approximately RM600).
The abovementioned proposed acquisitions were completed subsequent to the end of the financial year.
(iii) On 5 January 2004, the Company entered into a conditional sale and purchase agreement for the proposed acquisition
of 70% equity interest in Seri Azhimu Jaya Garments and Textiles (B) Sdn. Bhd., a company incorporated in Brunei,
comprising 1,400,000 ordinary shares of BND1.00 (approximately RM2.20) each for a total consideration of RM19.6 million.
The abovementioned proposed acquisition is subject to approval from the relevant authorities.
28. SEGMENTAL INFORMATION
(a) Primary reporting segment - Geographical segments
The Group operates in three principal geographical areas of the world and is principally involved in manufacturing of
fabrics and garments.
ConsolidationMalaysia Brunei Singapore adjustments GroupRM’000 RM’000 RM’000 RM’000 RM’000
2003Revenue
External sales 211,762 64,163 - - 275,925
Inter-segment sales 28,829 - 1,962 (30,791) -
Total revenue 240,591 64,163 1,962 (30,791) 275,925
Results
Profit from operations 10,554 3,458 21 541 14,574
Interest income 195 3 - 198
Interest expense (10,842) (1,070) (3) (11,915)
(Loss)/profit before taxation (93) 2,391 18 2,857
Taxation 869 - (45) 824
Profit/(loss) after taxation 776 2,391 (27) 3,681
Minority interests - - - (1,076)
Net profit/(loss) for the year 776 2,391 (27) 2,605
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
54 BANENG HOLDINGS BHD (307139-W)
28. SEGMENTAL INFORMATION (CONT’D)
(a) Primary reporting segment - Geographical segments (Cont’d)
ConsolidationMalaysia Brunei Singapore adjustments GroupRM’000 RM’000 RM’000 RM’000 RM’000
Assets and liabilitiesSegment assets 342,946 47,843 3,775 394,564
Segment liabilities 236,231 1,390 1,095 238,716
Other informationCapital expenditure 7,906 331 272 8,509
Depreciation 13,611 1,452 222 15,285
Other non-cash income (86) - - (86)
2002RevenueExternal sales 231,682 85,987 - - 317,669
Inter-segment sales 39,681 - 2,789 (42,470) -
Total revenue 271,363 85,987 2,789 (42,470) 317,669
ResultsProfit from operations 26,704 7,008 38 204 33,954
Interest income 305 5 - 310
Interest expense (13,880) (1,133) (16) (15,029)
Profit before taxation 13,129 5,880 22 19,235
Taxation (334) - (41) (375)
Profit/(loss) after taxation 12,795 5,880 (19) 18,860
Minority interests - - - (2,646)
Net profit/(loss) for the year 12,795 5,880 (19) 16,214
Assets and liabilitiesSegment assets 349,582 44,786 2,242 396,610
Segment liabilities 229,280 11,620 544 241,444
Other informationCapital expenditure 27,662 715 41 28,418
Depreciation 13,449 1,378 231 15,058
Other non-cash expenses 378 211 15 604
(b) Secondary reporting segment - Business segments
As the Group is principally involved in the manufacturing of fabrics and garments, segment reporting by business
segment is not prepared.
DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 55
29. FINANCIAL INSTRUMENTS
(a) Financial Risk Management Objectives and Policies
The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the
development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks.
(b) Interest Rate Risk
The Group’s primary interest rate risk relates to interest-bearing debt, as the Company had no substantial long-term
interest-bearing assets as at 31 December 2003.
The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The
Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets.
This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of
protection against rate hikes.
The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their
respective notes.
(c) Foreign Exchange Risk
The Group operates internationally and is exposed to various currencies, mainly United States Dollar, Brunei Dollar and
Singapore Dollar. Foreign currency denominated assets and liabilities together with expected cash flows from highly
probable purchases and sales give rise to foreign exchange exposures.
The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the
property or investment is located or by borrowing in currencies that match the future revenue stream to be generated
from its investments.
Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are
kept to an acceptable level. Material foreign currency transaction exposures are hedged, mainly with derivative financial
instruments such as forward foreign exchange contracts.
The net unhedged financial assets and financial liabilities of the Group companies that are not denominated in their
functional currencies are as follows:
At 31 December 2003:
Ringgit BruneiMalaysia Dollar Total
Functional Currency of Group Companies RM’000 RM’000 RM’000
Trade ReceivablesUnited States Dollar 25,731 13,904 39,635
Trade PayablesRinggit Malaysia - 483 483
Singapore Dollar 2,017 - 2,017
United States Dollar 915 598 598
2,932 1,081 3,098
BorrowingsUnited States Dollar 163 6,388 6,551
NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2003
56 BANENG HOLDINGS BHD (307139-W)
29. FINANCIAL INSTRUMENTS (CONT’D)
(c) Foreign Exchange Risk (Cont’d)
As at balance sheet date, the Company has entered into forward foreign exchange contracts with a bank to purchase
US Dollar used to hedge anticipated sales with maturity date within one year at total notional amount of RM3,935,000.
The net unrecognised gains as at 31 December 2003 on forward contracts used to hedge anticipated sales which are
expected to occur during January 2004 amounted to approximately RM5,000 and are deferred until the related sales
occur, at which time they will be included in the measurement of the sales.
All the financial assets and financial liabilities of the Group in prior year are unhedged.
(d) Liquidity Risk
The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure
that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the
Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In
addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As
far as possible, the Group raises committed funding financial institutions and prudently balances its portfolio with some
short term funding so as to achieve overall cost effectiveness.
(e) Credit Risk
Trade receivables are monitored on an ongoing basis via Group management reporting procedures.
The Group does not have any significant exposure to any individual customer or counterparty except for the amounts
due from certain debtors of the Group as disclosed in Note 15 and 16. The directors believe that this will not create
significant problems for the Group in view of the length of relationship and close contacts with the management of
these companies.
(f) Fair Values
The fair values of the financial assets, financial liabilities as at the balance sheet date approximate their carrying amount
as shown in the balance sheets.
DIRECTORS’ REPORTLIST OF PROPERTIESAS AT 31 DECEMBER 2003
BANENG HOLDINGS BHD (307139-W) 57
Land Area Age of Net BookDescription and (Built-up) Building Value
No. Location Existing Use Tenure (’000 sq.ft.) (Years) (’000)
Baneng Industries Sdn Bhd
1 Lot 3398 & 3399, 42 Lorong 5, Office and factory Freehold 158/(162) 3 to 6 8,429
3.5 Mile, Jalan Kluang, buildings
83007 Batu Pahat.
2 Lot 4979, 2.5 Mile Office and factory Freehold 642/(292) 2 to 11 24,135
Jalan Tanjong Laboh buildings
83000 Batu Pahat, Johor.
3 Lot 3890, EMR 2374 Vacant agricultural Freehold 174/(0) - 690
Mukim of Simpang Kanan V land
Batu Pahat, Johor.
4 Lot 3752, GM203 Vacant agricultural Freehold 6/(0) - 27
Mukim of Simpang Kanan V land
Batu Pahat, Johor.
5 Lot 3400, EMR 1285 Vacant development Freehold 89/(0) - 1,028
Mukim of Simpang Kanan V land
Batu Pahat, Johor.
Maxlin Garments Sdn Bhd
1 HS(D) 10527 PTD 9149 Shophouse/Storage Freehold 1.54/(3.08) 13 46
41, Jalan Bayur, Taman Nira
83000, Batu Pahat, Johor.
2 HS(D) 10525 PTD 9147 Shophouse/Storage Freehold 1.54/(3.08) 13 46
37, Jalan Bayur, Taman Nira
83000, Batu Pahat, Johor.
Seri Pertamas GarmentManufacturer Sdn Bhd
1 Blok Q39-41 Lambak Office and factory Leasehold 87/(50) 6 5,764
Kanan, West Industrial Estate buildings expiring
Bandar Seri Begawan, Brunei. 16 Feb 2023
ANALYSIS OF SHAREHOLDINGSAS AT 20 MAY 2004
58 BANENG HOLDINGS BHD (307139-W)
Authorised Capital : 60,000,000 shares
Issued and fully paid-up : 60,000,000 ordinary shares of RM1.00 each
Class of shares : RM1.00 Ordinary Share
Voting Rights : 1 vote per Ordinary Share
Number of Shareholders
as at 20 May, 2004 : 1,010
DISTRIBUTION OF SHAREHOLDINGS
Size of Holdings No. of Holders % No. of Shares %
1 - 99 3 0.30 101 0.00
100 – 1,000 501 49.60 357,099 0.60
1,001 – 10,000 402 39.80 1,708,500 2.85
10,001 – 100,000 78 7.72 2,486,700 4.14
100,001 – 2,999,999* 23 2.28 17,920,687 29.87
3,000,000 and above (**) 3 0.30 37,526,913 62.54
Total 1,010 100.00 60,000,000 100.00
Note :
(*) means less than 5% of issued and paid-up share capital
(**) means 5% and above of issued and paid-up share capital
SUBSTANTIAL SHAREHOLDERS AS AT 20 MAY 2004
The Substantial shareholders of Baneng Holdings Bhd (holding 5% or more of the capital) based on the Register of Substantial
shareholdings of the Company and their respective shareholdings are as follows:-
Direct Interest Indirect InterestSubstantial Shareholders No. of Shares % No. of Shares %
Upaya Mendaki Sdn Bhd 18,325,886 30.54 - -
Lim Choon Hiok 12,857,727 21.43 18,325,8861 30.54
Employees Provident Fund Board 6,343,300 10.57 - -
Lim Poh Choo 1,602,613 2.67 18,325,8861 30.54
Note :
(1) Deemed interest by virtue of her shareholdings of more than 15% in Upaya Mendaki Sdn Bhd pursuant to Section 6A of
the Companies Act, 1965.
DIRECTORS’ REPORTANALYSIS OF SHAREHOLDINGSAS AT 20 MAY 2004
BANENG HOLDINGS BHD (307139-W) 59
DIRECTORS’ INTERESTS IN RELATED CORPORATIONS
Ms. Lim Choon Hiok by virtue of her interest in shares of the Company is also deemed interested in shares of all the Company’s
subsidiaries to the extent the Company has an interest.
None of the other directors in office had any interest in shares in the Company’s related corporations as at 20 May, 2004.
DIRECTORS’ SHAREHOLDERS AS AT 20 MAY 2004
Direct Interest Indirect InterestDirectors No. of Shares % No. of Shares %
Y. Bhg. Tan Sri A Rahim Bin Tamby Chik 100,0000 0.17 - -
Lim Choon Hiok 12,857,727 21.43 18,325,8861 30.54
Lim Meng Hong 161,774 0.27 - -
Lim Meng Hee - - - -
Ng Soon Lim - - - -
Chai Koh Wah (Appointed wef 25.04.2004) - - - -
Keah Say Wan (Resigned wef 15.03.2004) - - - -
Note :
(º) Held through HLG Nominee (Tempatan) Sdn Bhd pledged securities account for Tan Sri A Rahim Bin Tamby Chik
(1) Deemed interest by virtue of her shareholdings of more than 15% in Upaya Mendaki Sdn Bhd pursuant to Section 6A of
the Companies Act, 1965.
ANALYSIS OF SHAREHOLDINGSAS AT 20 MAY 2004
60 BANENG HOLDINGS BHD (307139-W)
THIRTY LARGEST SHAREHOLDERS AS AT 20 MAY 2004
No Shareholders No. of Shares %
1 Upaya Mendaki Sdn Bhd 18,325,886 30.54
2 Lim Choon Hiok 12,857,727 21.43
3 Employees Provident Fund Board 6,343,300 10.57
4 Lim Cheng Chee 2,356,000 3.93
5 Boo Kee Tong 2,076,700 3.46
6 Ong Mui Eng 1,951,600 3.25
7 Lim Poh Choo 1,602,613 2.67
8 Hoe Koon Teck 1,292,000 2.15
9 TLC Nominees (Tempatan) Sdn Bhd 1,048,500 1.75pledged securities account for Khai Heng Industries Sdn Bhd
10 Malaysian Assurance Alliance Berhad 1,000,000 1.67
11 Perbadanan Nasional Berhad 989,000 1.65
12 Perbadanan Nasional Berhad 919,800 1.53
13 TLC Nominees (Tempatan) Sdn Bhd 870,000 1.45pledged securities account for Teo Chin Seng
14 Malaysian Assurance Alliance Berhadas Beneficial Owner (Growth Fund) 700,000 1.17
15 Amanah Raya Nominees (Tempatan) Sdn Bhd 562,000 0.94Dana Johor Pelaboran Johor Berhad
16 Amanah Raya Nominees (Tempatan) Sdn Bhd 528,000 0.88Amanah Saham Johor Pelaboran Johor Berhad
17 Amsec Nominees (Tempatan) Sdn Bhd 500,000 0.83pledged securities account for Lim Tian Chai
18 Malaysian Assurance Alliance Berhad 240,800 0.40as Beneficial Owner (Dana Al-Fayyadh)
19 Lee Yih Leang 239,400 0.40
20 Affin Nominees (Asing) Sdn Bhd 196,900 0.33Eassetmanagement Sdn Bhd for Pure Investor.com inc
21 Bumiputra-Commerce Trustee Berhad 179,100 0.30Amanah Saham Darul Iman
22 Lim Meng Hong 161,774 0.27
23 Yong Hing 148,000 0.25
24 Amsec Nominees (Tempatan) Sdn Bhd 131,100 0.22pledged securities account for Wee Lian Seng
25 Mayban Nominees (Tempatan) Sdn Bhd 117,400 0.20pledged securities account for Koh Choi @ Koh Tian Siew
26 Perbadanan Nasional Berhad 110,000 0.18
27 HLG Nominee (Tempatan) Sdn Bhd pledged securities account for A Rahim Bin Tamby Chik 100,000 0.17
28 Amfinance Berhad 84,900 0.14pledged securities account for Yap Beng Poh
29 Yap Shing @ Yap Sue Kim 84,000 0.14
30 Kenanga Nominees (Tempatan) Sdn Bhd 83,400 0.14pledged securities account for Teo Lai Huat
DIRECTORS’ REPORTPROXY FORM
I/We(Full Name In Capital Letters)
of (Full Address)
being a * Member/Members of BANENG HOLDINGS BHD, appoint (Full Name in Capital Letters)
of(Full Address)
or in his absence, (Full Name In Capital Letters)
of (Full Address)
or in his absence, the CHAIRMAN OF THE MEETING, as *my/our proxy to vote for *me/ us and on *my/our behalf at the NinthAnnual General Meeting to be held at Diamond Room, Level 2, Katerina Hotel, 8 Jalan Zabedah, 83000 Batu Pahat, Johor onSaturday, 26 June, 2004 at 2.30 p.m. and at any adjournment of that meeting.
Please indicate with an “X” in the space provided below how you wish your votes to be casted. If no specific direction as to votingis given, the Proxy will vote or abstain from voting as his discretion.
NO. RESOLUTIONS FOR AGAINST
1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December, 2003 together with the Directors’ and Auditors’ Reports thereon.
2. To approve the payment of Directors’ fee for the financial year ended 31 December, 2003.
3. To re-elect the following retiring Directors who retire by rotation and being eligible, offer themselves for re-election in accordance with the Article 101(a) of the Company’s Articles of Association:-i) Mr. Lim Meng Hee
4. ii) Dr. Ng Soon Lim
5. To re-elect the retiring Director, Mr. Chai Koh Wah who retires and being eligible, offer himself for re-election in accordance with the Article 102(c) of the Company’s Articles of Association.
6. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending 31 December, 2004 and to authorise the Directors to fix Auditors’ remuneration
7. As Special BusinessOrdinary Resolution - Authority to issue shares pursuant to Section 132D of the Companies Act, 1965.
8. Special Resolution – Proposed Amendments to Articles of Association
* Strike out whichever not applicable.
As witness my/our hand this day of , 2004
Signature of Member/Common SealNOTES:
1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint more than two proxies to attend and vote in his stead and heshall specify the proportion of his shareholdings to be represented by each proxy. A member may appoint any person to be his proxy without limitation and theprovision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
2. Where a member is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991, it may appoint more than (1) proxy inrespect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.
3. The instrument appointing a proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if such appointor is acorporation, either under its common seal or under the hand of an officer or attorney duly authorised.
4. The instrument appointing a proxy, together with the power of attorney (if any) or other authority (if any) under which the instrument is signed or a notariallycertified copy of that power or authority shall be deposited at the Registered Office of the Company at Lot 4979 21/2 Miles, Jalan Tanjung Laboh, 83000 BatuPahat, Johor not less than 48 hours before the time for holding the meeting or otherwise the instrument appointing the proxy will not be treated as valid.
Number of Shares Held
BANENG HOLDINGS BHD (307139-W)Incorporated in Malaysia