Ladang Perbadanan-fima Berhad Annual Report 2006

2006 annual report

02

LADANG PERBADANAN-FIMA BERHAD

Notice Of Annual Gener al M e e t i n g

NOTICE IS HEREBY GIVEN THAT the Twenty-Seventh Annual General Meeting of the Company will be held at Crystal 1 Ballroom, Impiana Casuarina Hotel, 18 Jalan Raja Dr. Nazrin Shah, 30250 Ipoh, Perak, Malaysia on Friday, 22 June 2007 at 10:30 a.m. for the following purposes: 1.

To receive and consider the Audited Financial Statements for the financial year ended 31 December 2006 and the Reports of the Directors and Auditors thereon.

Resolution 1

2.

To sanction the payment of a final dividend of 8 sen less 27% tax for the financial year ended 31 December 2006 as recommended by the Board.

Resolution 2

3.

To re-elect the following Directors who shall retire in accordance with Article 66 of the Company’s Articles of Association: (i) Encik Kamisan bin Suja’ (ii) Mr. Yeoh Hock Thong

Resolution 3 Resolution 4

4.

To approve the payment of Directors’ fees for the financial year ended 31 December 2006.

Resolution 5

5.

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

Resolution 6

6.

To transact any other ordinary business of the Company of which due notice shall have been given.

NOTICE OF BOOK CLOSURE NOTICE IS HEREBY GIVEN THAT the Register of Members of the Company will be closed on 28 June 2007 for the purpose of determining members’ entitlement to the dividend payment. The dividend, if so approved at the Twenty-Seventh Annual General Meeting, will be paid on 12 July 2007 to depositors registered in the Register of Depositors at the close of business at 5:00 p.m. on 27 June 2007. FURTHER NOTICE IS HEREBY GIVEN THAT a depositor shall qualify for entitlement to the dividend only in respect of: (i) Shares transferred into the Depositor’s Securities Account before 4:00 p.m. on 27 June 2007 in respect of transfers; (ii) Shares deposited into the Depositor’s Securities Account before 12:30 p.m. on 25 June 2007 in respect of shares exempted from mandatory deposit; (iii) Shares bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the rules of Bursa Malaysia Securities Berhad. BY ORDER OF THE BOARD Gowrie Navaratnam Secretary Ipoh 23 May 2007 NOTES:

(i) A member of the Company entitled to attend and vote at this meeting is also entitled to appoint one or more proxies to attend and vote in his/her stead. Where a member appoints two proxies or more, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy. (ii) A proxy need not be a member of the Company. (iii) The Proxy Form must be signed by the appointer or his/her attorney duly authorised in writing or in the case of a corporation, executed under its common seal or under the hand of an officer or attorney duly authorised. (iv) The Proxy Form should be completed and deposited at the Registered Office of the Company at No. 10, Persiaran Gopeng Satu, 31350 Ipoh, Perak, Malaysia not less than 48 hours before the time fixed for the Meeting.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Statement A c c o m p a ny i n g Notice Of Annu a l G e n e r a l M e e t i n g

TH

1. DIRECTORS STANDING FOR RE-ELECTION AT THE 27

03

ANNUAL GENERAL MEETING

The Directors retiring by rotation pursuant to Article 66 of the Company’s Articles of Association and seeking re-election are: (i)

Encik Kamisan bin Suja’

(ii) Mr. Yeoh Hock Thong The details of Directors standing for re-election and their shareholdings are set out in the Directors’ Profile and Shareholding Statistics respectively appearing in the Annual Report. 2. ATTENDANCE OF DIRECTORS AT BOARD MEETINGS A total of six (6) Board Meetings were held during the financial year ended 31 December 2006. The details of the attendance of Directors at Board Meetings held in the financial year ended 31 December 2006 were as disclosed in the Corporate Governance Statement contained in the Annual Report. TH

3. DATE, TIME AND VENUE OF THE 27

ANNUAL GENERAL MEETING

Date

:

Friday, 22 June 2007

Time

:

10:30 a.m.

Venue

:

Crystal 1 Ballroom Impiana Casuarina Hotel 18 Jalan Raja Dr. Nazrin Shah 30250 Ipoh Perak, Malaysia

2006 annual report

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LADANG PERBADANAN-FIMA BERHAD

Five-Yea r Financial Highlights

Income Statements (RM'000) Revenue Profit before tax Taxation Profit after tax Balance Sheets (RM'000)

2002

2003

2004

2005

2006

35,812 13,860 -3,835 10,025

40,464 14,685 -4,087 10,598

44,574 17,803 -9 17,794

40,616 11,609 -3,323 8,286

49,679 16,782 -4,100 12,682

2002

2003

2004

2005

2006

Property, plant & equipment Prepaid lease payments Biological assets Investments Current assets Total assets

43,224 9,702 98,439 120 37,397 188,882

42,283 9,578 98,439 120 40,030 190,450

41,718 9,454 98,439 120 43,293 193,024

40,814 9,330 98,439 120 32,730 181,433

40,237 11,229 98,439 120 40,082 190,107

Share capital Reserves Shareholders' funds Non-current liabilities Current liabilities Total equity and liabilities

114,300 51,291 165,591 20,046 3,245 188,882

114,300 52,013 166,313 19,931 4,206 190,450

114,300 57,462 171,762 14,880 6,382 193,024

114,300 49,288 163,588 14,575 3,270 181,433

114,300 56,209 170,509 13,644 5,954 190,107

2002

2003

2004

2005

2006

8.77 12.00 1.45

9.27 15.00 1.46

15.57 20.00 1.50

7.25 10.00 1.43

11.10 10.00 1.49

Financial Ratios Basic earnings per share Gross dividend per share Net assets per share

(sen) (sen) (RM)

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

F i ve - Ye a r Financial Highlights

Revenue (RM'000)

05

Profit before tax (RM'000)

50,000

20,000 18,000

40,000

16,000 14,000

30,000

12,000 10,000

20,000

8,000 6,000 4,000

10,000

2,000 0

2002

2003

2004

2005

0

2006

2002

2003

2004

2005

2006

Gross dividend per share (sen)

Shareholders' funds (RM'000) 200,000

25

180,000 160,000

20

140,000 120,000

15

100,000 80,000

10

60,000 40,000

5

20,000 0

2002

2003

2004

2005

2006

0

2002

2003

2004

2005

2006

Net assets per share (RM)

Basic earnings per share (sen) 18

1.52

16 1.50 14 12

1.48

10 1.46 8 1.44

6 4

1.42 2 0

2002

2003

2004

2005

2006

1.40

2002

2003

2004

2005

2006

2006 annual report

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LADANG PERBADANAN-FIMA BERHAD

Q uart e rl y Pe rf o rmance 2006

Financial Performance

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year 2006

7,479 1,142 840 0.73 0.00

10,756 3,709 2,664 2.33 2.00

13,186 5,640 3,994 3.50 0.00

18,258 6,291 5,184 4.54 8.00

49,679 16,782 12,682 11.10 10.00

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year 2006

6,076 1,613

6,952 1,737

8,220 2,150

7,474 1,824

28,722 7,324

Revenue (RM'000) Profit before tax (RM'000) Net profit after tax (RM'000) Basic earnings per share (sen) Gross dividend per share (sen) Plantation Production Crude palm oil Palm kernel

(m/tonnes) (m/tonnes)

Revenue (RM'000)

Basic earnings per share (sen)

Profit before tax (RM'000) 7,000

20,000

5.00

18,000

4.50 6,000

16,000

4.00 5,000

14,000 12,000

3.50 3.00

4,000

10,000

2.50 3,000

8,000 6,000

2.00 1.50

2,000

4,000

1.00 1,000

2,000 0

0.50 1st Quarter

2nd Quarter

3rd Quarter

0

4th Quarter

1st Quarter

2nd Quarter

3rd Quarter

CPO production (m/tonnes)

0.00

4th Quarter

1st Quarter

PK production (m/tonnes)

9,000

2,500

8,000 2,000

7,000 6,000

1,500 5,000 4,000 1,000 3,000 2,000

500

1,000 0

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

0

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

2nd Quarter

3rd Quarter

4th Quarter

passion for excellence 07

Financial Calendar 29 April 2006

26th Annual General Meeting of the Company.

25 May 2006

Announcement of the unaudited results for the 1st quarter and 3 months ended 31 March 2006.

29 May 2006 Book Closure for determining entitlement of the final dividend of 5 sen less 28% tax for the financial year ended 31 December 2005.

12 June 2006 Payment of final dividend for financial year ended 31 December 2005.

25 August 2006

Announcement of the unaudited results for the 2nd quarter and 6 months ended 30 June 2006.

28 August 2006 Notice of Book Closure for the payment of interim dividend of 2 sen less 28% tax for the financial year ended 31 December 2006.

19 September 2006 Book Closure for determining entitlement of the interim dividend for the financial year ended 31 December 2006.

3 October 2006 Payment of interim dividend for the financial year ended 31 December 2006.

29 November 2006

Announcement of the unaudited results for the 3rd quarter and 9 months ended 30 September 2006.

26 February 2007

Announcement of the unaudited results for the 4th quarter and 12 months ended 31 December 2006.

23 May 2007

Notice of 27th Annual General Meeting, Notice of Book Closure for payment of final dividend * of 8 sen less 27% tax for the financial year ended 31 December 2006 and issue of Annual Report 2006.

22 June 2007

27th Annual General Meeting of the Company.

28 June 2007 Book Closure for determining entitlement of the final dividend* for the financial year ended 31 December 2006.

12 July 2007 Payment of final dividend* for the financial year ended 31 December 2006. * Subject to shareholders’ approval at the Company’s 27th Annual General Meeting.

2006 annual report

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LADANG PERBADANAN-FIMA BERHAD

Directors ’ ProfileDirectors’

Profile

DATO’ SHAMSUL BAHARI BIN SALLEH KHIR DPMP, PCM, AMP, PPT Independent, Non-Executive Chairman, 60 years of age, Malaysian A First Director of the Company, he was re-designated Chairman on 10 August 2005. He previously served as Chairman of the Company from 29 November 1979 and as Executive Chairman from 1994 until November 2000. He also serves as Chairman of the Management Committee and as a member of the Tender, Audit, Risk Management and Nominating Committees. He obtained his Bachelor of Arts in Economics from University Malaya in 1969 and his Master in Rural Development from Institute of Social Studies, The Hague, Netherlands in 1977. He worked with the Perak State Government from 1970 to 1982. In 1978, he was seconded to the Perak State Agricultural Development Corporation and was appointed its General Manager and Chief Executive in 1982 until 1994. He does not hold any directorship in any other public listed companies. DATO’ HAJI AHMAD ZAKIUDDIN BIN HARUN DSDK, AMK Independent, Non-Executive Director, 65 years of age, Malaysian A lawyer by profession, he was appointed to the Board on 4 August 1994 and serves as a member of the Audit and Risk Management Committees since their formation in 1994 and 2001 respectively. On 10 August 2005, he was re-designated Chairman of both Committees. He qualified as a Barrister at Law (Inner Temple), London, United Kingdom in 1976 and currently runs his own legal practice, Messrs. Hoe and Ahmad Zaki, since 1980. He does not hold any directorship in any other public listed companies.

DATO’ JAAFAR BIN LAJIS DMSM, DSM, PJK Non-Independent, Non-Executive Director, 54 years of age, Malaysian He was appointed a Director on 11 December 2004 and Chairman of the Tender Committee on 4 January 2005. On 10 August 2005, he was appointed Chairman of the Nominating Committee. He graduated from Universiti Kebangsaan Malaysia with Bachelor of Economics. After graduation, he served in the civil service for more than 16 years where he was responsible for socio economic matters for rural residents and infrastructure in Malacca. Between 1980 and 1986, he was the State Development Officer of Malacca, attached to the Prime Minister’s Department. In 1986, he was a State Assemblyman where he was appointed an Executive Councilor and the Malacca State Assembly Speaker for two terms from 1986 to 1994. He is still active in politics and business. Currently, he is a Director of DPS Resources Berhad, Chairman for Penasihat Panel Kesihatan Melaka, Director of Malacca Farmer Association and Board member of Malacca Smallholder Cooperative.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

D i re c t o rs ’ P r o fi l e

KAMISAN BIN SUJA’ Non-Independent, Non-Executive Director, 47 years of age, Malaysian He was appointed a Director on 11 December 2004 and served as a member of the Audit Committee and Risk Management Committee from 4 January 2005 to 10 August 2005. On 10 August 2005, he was appointed a member of the Management Committee. He holds a Bachelor of Art Architecture from Hull School of Architecture, United Kingdom and practiced architecture after graduating until 1994 when he became involved in businesses of various activities such as contracting, project management, turnaround management, project financing and property development. Currently, he is the Group Senior Vice President of Pubel Berhad, a property development based company and sits on the Board of its subsidiary companies, PuBel U-Home Everight Sdn. Bhd. and PuBel Project Management Sdn. Bhd. He is also a Director of Musfa & Co. Sdn. Bhd., a PKK Class “A” contractor. He does not hold any directorship in any public listed company. YEOH HOCK THONG Non-Independent, Non-Executive Director, 51 years of age, Malaysian He was appointed a Director on 11 December 2004 and a member of the Nominating Committee on 26 February 2005. He served on the Management Committee from 4 January 2005 to 10 August 2005 when he was appointed a member of the Audit and Risk Management Committees respectively. He is a Chartered Member of the Institute of Internal Auditors and a Professional Member of the National Institute of Accountants, Australia. He is at present President of Bintai Integrated Engineering and Construction Sdn. Bhd. (a wholly owned subsidiary of Bintai Kindenko Corporation Bhd) and Director of Kamni Corporation Sdn. Bhd. Previous to that, he was the Group Chief Financial Officer/Executive Director of Siah Brothers Corporation Berhad from 1997 to 2001. Between 1994 to 1997, he was the General Manager – Finance, Business Planning and Business Development of Land and General Berhad. Prior to 1994, he held various positions in the banking and finance industry. He does not hold any directorship in any public listed company. HAJJAH SHARIFAH NOR HASHIMAH BINTI SYED KAMARUDDIN Independent, Non-Executive Director, 46 years of age, Malaysian A BSc in Agriculture degree holder from Universiti Putra Malaysia, she was appointed to the Board on 12 August 2005 and as a member of the Audit and Risk Management Committees on 25 February 2006. On 1 February 2007, she was appointed a member of the Management Committee. She ser ved in the Ministr y of Agriculture from 1986 to 1990. She was then transferred to the Perak State Government where she served until 1997 after which she joined Perak Corporation Berhad. She currently holds the position of Assistant General Manager, Land & Property Division and Director of PCB Development Sdn. Bhd., a subsidiary of Perak Corporation Berhad. She does not hold any directorship in any public listed company.

11

passion for excellence 13

Chairman’s Statement OPERATIONAL PERFORMANCE

I am proud to announce that on 13 April 2006, the Company was accorded recognition by the Malaysian Palm Oil Board for the achievement of OER above the Peninsular Average 2005 (Northern Region) and Highest Increase in OER Northern Region 2005 (Private Sector). For and on behalf of the Board of Directors, I would like to congratulate the staff at all levels in the organisation for their dedication and commitment in making this achievement possible. Following the encouraging performance in 2005, I am happy to report that the Company maintained its OER by recording 20.0% for the year under review. The current OER surpassed the Peninsular Average of 19.2% and the home state, Perak Average of 19.1%. During 2006, the Company’s three estates with a combined planted hectarage of 7,660 hectares, produced a total of 130,230 metric tonnes of FFB, an increase of 13% from the previous year. The average FFB yield per mature hectare was 21.3 metric tonnes compared to 19.1 metric tonnes in the previous year. With regard to the on-going replanting exercise, a total of 714.30 hectares of oil palms were felled and replanted in 2006. As of end 2006, 23% of the Company’s total planted hectarage comprised of immature palms whilst the remaining 77% comprised of mature palms of various age groups as depicted in the chart. Another 827.29 hectares of oil palms had been identified for replanting in 2007. In order to ensure high oil yields from the next generation of plantings, the Company purchased superior progenies for its nurseries from reputable plantation companies.

0 - 2 years

27 %

23 %

3 - 10 years 11 - 15 years

9% 6%

35 %

16 - 20 years Above 20 years

Our efforts towards environmental conservation are an on-going process. The Company is committed to safeguard and enhance the quality of the environment. Zero-burning policy is adopted in the replanting exercise whereby all felled palms were chipped and pulverised mechanically. Huts for barn owl occupancy were built to increase the population of barn owls in the estates. Planting of beneficial plants and maintaining the growth of ground-cover vegetation to encourage insect and animal biodiversity, besides enhancing soil fertility, also contributed to the reduction of chemical pesticide and herbicide usage. In addition, controlled grazing in selected fields by cattle from neighbouring areas had also proven to be effective in reducing weeding and manuring requirements. Organic materials from the mill such as empty fruit bunches were returned to the fields and left to decompose under the palms, reducing the need for inorganic fertilisers. DIVIDENDS Our dividend policy addresses the need to provide shareholders with satisfactory cash returns as reward for their continued support and confidence in the Group whilst also conserving adequate funds for reinvestment to enhance the Group’s future profitability and shareholders’ value. The Board is pleased to recommend a final dividend of 8 sen less 27% tax, subject to shareholders’ approval at the forthcoming Annual General Meeting. Together with the interim dividend of 2 sen less 28% tax paid on 3 October 2006, the total dividends declared for the financial year ended 31 December 2006 is 10 sen less tax totalling RM8.32 million.

passion for excellence 14

Chairman’s Statement

CORPORATE GOVERNANCE We have included Statements on Corporate Governance and Internal Control in our Annual Report, which affirms the Board’s commitment in ensuring that the highest standards of corporate governance are practiced throughout the Group. PROSPECTS The future outlook for palm oil appears promising primarily on the strength of increasing global demand. The Board believes that the Company will perform favourably under the prevailing market conditions. The Company will continue to leverage on its human capital strengths, efficiency and productivity whilst initiatives to increase mechanisation to reduce reliance on foreign labour will be intensified. BEREAVEMENT It is with profound sadness that we record the passing of our former Chairman, Allahyarham Tan Sri Dato’ Seri Haji Basir bin Ismail whose wise council and support during his tenure as Chairman, contributed to the success of the Company. ACKNOWLEDGEMENT On behalf of the Board, I would like to extend my appreciation to the Management team and employees for delivering the commendable results for the year and their untiring efforts at striving to achieve the Company’s vision and mission. I would also like to record my gratitude for the contribution and wisdom of my fellow directors on the Board. Last but not least, to our valued shareholders, business associates and relevant Government authorities. I thank you for your continued trust, confidence and support.

DATO’ SHAMSUL BAHARI BIN SALLEH KHIR CHAIRMAN

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Audit Committee Repor t

15

The Board of Directors is pleased to present the Audit Committee Report for the year ended 31 December 2006. The Audit Committee was established on 22 August 1994 by the Board of Directors, to assist them to carry out their responsibilities. The Audit Committee is guided by their Terms of Reference which are set out in this report.

COMPOSITION The Audit Committee comprises the following members: Chairman Dato’ Haji Ahmad Zakiuddin bin Harun

(Independent, Non-Executive Director)

Members Dato’ Shamsul Bahari bin Salleh Khir Yeoh Hock Thong Hajjah Sharifah Nor Hashimah binti Syed Kamaruddin

(Independent, Non-Executive Director) (Non-Independent, Non-Executive Director) (Independent, Non-Executive Director)

Secretary Gowrie Navaratnam MEETINGS During the year under review, the Audit Committee met 3 times and the attendance of each member was as follows: Audit Committee Members

No. of Meetings Attended

Dato’ Haji Ahmad Zakiuddin bin Harun Dato’ Shamsul Bahari bin Salleh Khir Yeoh Hock Thong Hajjah Sharifah Nor Hashimah binti Syed Kamaruddin

2/3 3/3 3/3 3/3

Due to insufficient quorum, the Chairman being on medical leave for a period of 9 months, matters to be reviewed by the Audit Committee at the Meeting scheduled for 25 February 2006 were tabled and deliberated upon by the Board as a whole at the Meeting of the Board of Directors convened on the same. At the same Board Meeting, Hajjah Sharifah Nor Hashimah binti Syed Kamaruddin was appointed a member of the Audit Committee, thus increasing the number of Audit Committee members from 3 members to 4 members.

SUMMARY OF ACTIVITIES During the year, the main activities undertaken by the Audit Committee were as follows: External Audit •

Reviewed the annual audit plan with the External Auditors focusing on reporting deadlines, audit strategy and significant risks areas and the impact of changes in the accounting standards and regulatory requirements.

•

Reviewed with the External Auditors the audit report and results of their audit and assessed the assistance and cooperation given by the Management and other employees of the Company to the External Auditors during the course of the audit.

•

Considered and recommended to the Board the re-appointment of the External Auditors and the audit fees to be received by them.

2006 annual report

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LADANG PERBADANAN-FIMA BERHAD

A udit Committee Repor t

Internal Audit •

Reviewed the Internal Audit Department’s annual audit programme to ensure adequacy of coverage on principal risk areas.

•

Received and considered reports from the Internal Audit Department on its activities and findings together with recommendations and reported the same to the Board. Recommended to the Board steps to strengthen the internal controls in the Company.

•

Assessed and considered the Internal Audit Department’s performance and its authority and independence in carrying out its function.

•

Reviewed whether Management had taken appropriate action on the recommendations of the Internal Audit Department and assessed whether Management and other employees of the Company had given the required assistance and cooperation to the Internal Audit Department in carrying out its function.

Financial Reporting •

Considered and reviewed the Interim and Annual Financial Statements of the Group and the Company and recommended the same to the Board for approval.

Annual Reporting •

Reviewed and recommend to the Board for approval the Statements on Corporate Governance and Internal Control, Audit Committee Report and other disclosures contained in the Annual Report.

INTERNAL AUDIT FUNCTION The Audit Committee is assisted by the Internal Audit Department in discharging its duties and responsibilities. The Internal Audit Department adopts a risk-based approach, focusing its work mainly on key processes and principal risk areas of the operating units and provides the Audit Committee with independent reports on the state of internal controls of the operating units and the extent of compliance of the operating units with established policies and procedures. The Audit Committee reports the same to the Board after reviewing and deliberating on the internal audit reports. During the financial year, the Internal Audit Department carried out and completed audits of the key processes and principal risk areas and reports were issued to the process owners incorporating its findings and recommendations. The audits focused on key controls to mitigate risks, safeguard assets, ensure compliance with policies and procedures and promote effectiveness of management and efficiency of operations. The Internal Audit Department also followed up on implementation and disposition of previous significant findings and recommendations.

EMPLOYEES’ SHARE OPTION SCHEME (“ESOS’) The Company has not at the moment subscribed to any share scheme for its employees.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Audit Committee Repor t

17

TERMS OF REFERENCE 1.0 Composition 1.1 The Board of Directors shall appoint an Audit Committee from amongst themselves and shall: (i) Comprise of no fewer than 3 members; (ii) A majority of the members must be independent directors; and (iii) At least one member must be a member of the Malaysian Institute of Accountants or if he is not, then he must be a person who complies with Paragraph 15.10 of the Listing Requirements of Bursa Malaysia Securities Berhad. 1.2 The Chairman, who shall be elected by the members of the Committee, shall be an independent non-executive director. 1.3 No alternate director may be appointed as a member of the Committee. 1.4 In the event of any vacancy in the Audit Committee resulting in non-compliance with subparagraph 1.1, the Company must fill the vacancy within 3 months. 2.0 Objectives 2.1 The primary objectives of the Audit Committee are to: (i)

Provide assistance to the Board in fulfilling its fiduciary responsibilities, particularly in the areas relating to the Company’s accounting, operation and management controls, financial reporting and business ethics and policies. (ii) Provide greater emphasis on the audit function by increasing the objectivity and independence of the External and Internal Auditors and providing a forum for discussion that is independent of the Management. (iii) Maintain through regularly scheduled meetings a direct line of communication between the Board and the External Auditors, Internal Auditors and Financial Management. 3.0 Authority 3.1 The Audit Committee is authorised by the Board to undertake the following: (i) (ii) (iii) (iv)

Investigate any matters within its term of reference. Have the necessary resources to perform its duties. Have full and unrestricted access to any information and documents relevant to its activities. Have direct communication channels with External Auditors, Internal Auditors, members of the Management and other employees of the Company and Group. (v) Convene meetings with or request the attendance of the External Auditors, Internal Auditors, members of the Management and/or other employees of the Company during the Committee’s meetings whenever deemed necessary. (vi) Obtain external legal and other independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers necessary. (vii) Promptly report to Bursa Malaysia Securities Berhad matters, which result in breach in the listing requirements.

2006 annual report

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LADANG PERBADANAN-FIMA BERHAD

A udit Committee Repor t

4.0 Functions In fulfilling its primary objectives, the Audit Committee shall, amongst others, discharge the following functions and report to the Board of Directors: 4.1 External and Internal Audit The Audit Committee shall oversee all matters relating to the External and Internal Audit as outlined in Paragraphs 4.1(i) to (iii) below. (i) External Auditors (a) Review the annual audit plan with the External Auditors prior to the commencement of the annual audit and discuss: • • • • •

The general outline of the scope and timing of the auditors’ proposed coverage and reporting deadlines. The nature of the audit procedures to be performed. The extent of any planned reliance on the work of Internal Auditors and the anticipated effect of this reliance on the examination. Any significant accounting and auditing problems that the auditors may foresee. The impact on the financial statements of any new or proposed changes in the accounting standards or legal or regulatory requirements.

The Audit Committee may also request the External Auditors to perform additional audit work directed at specific areas of concern. (b) Recommend to the Board the re-appointment of External Auditors on expiry of their tenure. In considering the re-appointment, the Audit Committee shall consider whether there are any reasons (supported by grounds) to believe that the External Auditor is not suitable for re-appointment and if justified, to recommend to the Board for termination. (c) Receive any letter of resignation from the External Auditors of the Company. (d) Recommend to the Board the nomination of a person or persons for appointment as External Auditors. (e) Recommend to the Board the audit fees to be received by the External Auditors. (ii) Internal Audit (a) Review the audit programme, processes and the results of the internal audit programme, processes or investigation undertaken. (b) Assess the adequacy of the scope, functions and resources of the internal audit function and whether it has the necessary authority and independence to carry out its work. (c) Review whether or not Management has taken appropriate actions on the recommendations of the Internal Auditors. (d) Review any appraisal or assessment of the performance of the members of the internal audit function. (e) Approve any appointment or termination of senior staff members of the internal audit function. (f) Be informed of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Audit Committee Repor t

19

(iii) Others (a) Review the assistance and cooperation given by the Management and other employees of the Company to the External and Internal Auditors. (b) Upon request of the External and/or Internal Auditors, the Chairman of the Audit Committee shall convene a meeting of the Committee, excluding the attendance of the executive members of the Committee, whenever deemed necessary to hear and consider any matters the auditors believed should be brought to the attention of the Committee. 4.2 Internal Controls and Financial Reporting (i)

Appraise with Management: (a) The adequacy, integrity and effectiveness of the Company’s internal controls in safeguarding shareholders’ investment and the Company’s assets. The internal controls cover financial, operational and compliance controls and risk management. (b) The adequacy of compliance with applicable laws, regulations, rules, directives and guidelines. (c) The adequacy of established policies, procedures and guidelines on the Company’s accounting, financial and operational activities.

(ii) Meet and discuss with the External and Internal Auditors on their evaluation of the Company’s system of internal control. (iii) Consider the nature and disposition of the relevant comments appearing in the reports prepared by the Internal Auditors and in the External Auditors’ management letter and Management’s response. 4.3 Interim and Annual Financial Statements (i) Review the interim financial statements of the Group and Company with Management before recommending approval to the Board for announcement to Bursa Malaysia Securities Berhad. (ii) Meet with the Management and External Auditors to discuss and review the annual financial statements of the Group and the Company and the audit report of the External Auditors at the conclusion of the annual audit before recommending to the Board for approval. (iii) Review the nature and resolution of any significant accounting and auditing problems encountered during the annual audit. (iv) Review the nature of any significant adjustments, reclassifications or additional disclosures proposed by the External Auditors that are currently significant or may become significant in the future. (v) Review compliance with accounting standards and other legal and regulatory requirements. (vi) Review any implementation or changes in major accounting policies, accounting standards, significant and unusual events and/or legal and regulatory requirements during the year and the adequacy of disclosure in the financial statements. (vii) Review the reasons for major fluctuations in balances in the financial statements for the current year compared to the previous year. (viii) Review the nature of any significant and unusual events, commitments, contingent liabilities and post balance sheet events. (ix) Review the going concern assumption.

2006 annual report

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LADANG PERBADANAN-FIMA BERHAD

A udit Committee Repor t

4.4 Related Party Transactions The Audit Committee shall from time to time consider and review the nature of any related party transactions or conflict of interest situation that may arise within the Group or the Company including any transaction, procedure or course of conduct that raises questions of Management’s integrity. 4.5 Other Duties and Responsibilities The Audit Committee shall undertake any other additional duties and responsibilities as may be decided by the Board from time to time. 5.0 Meetings 5.1 The Audit Committee shall hold a minimum of four (4) meetings a year, although additional meetings may be called at any time at the Chairman of the Audit Committee’s discretion. 5.2 Notice of meetings shall be sent at least seven (7) days before the time set for the meeting to all members of the Committee and any persons that may be required to attend. 6.0 Attendance 6.1 A quorum shall comprise of at least three (3) members consisting of a majority of independent directors. 6.2 The other directors, members of the Management, the Head of Internal Audit and representatives of the External Auditors may be invited to be present in the meeting for the duration where their presence is considered relevant, as determined by the Chairman of the Audit Committee. 7.0 Minutes 7.1 The Company Secretary shall be the Secretary to the Audit Committee and shall be present at all meetings to record minutes of the meeting. 7.2 Minutes of each meeting shall be kept and distributed to each member of the Audit Committee. 7.3 The Chairman shall report on each meeting to the Board. 8.0 Performance Evaluation The Board shall review the terms of office and the performance of the Audit Committee and each of its members at least once every 3 years to determine whether the Audit Committee and members have carried out their duties in accordance with their terms of reference. This report is made in accordance with a resolution of the Board of Directors dated 18 April 2007.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

C o rp o ra t e G ove r n a n c e Statement

21

The Board of Directors fully appreciates the importance of adopting high standards of corporate governance within the Group. The Board views corporate governance as synonymous with three key concepts; namely transparency, accountability as well as corporate performance. As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely the form. The Board is thus fully committed to the maintenance of high standards of corporate governance by supporting and implementing the prescriptions of the principles and best practices set out in Parts 1 and 2 of the Malaysian Code on Corporate Governance (“the Code”), respectively. The Board is pleased to present the following statement, which outlines the main corporate governance practices that were in place throughout the financial year, unless otherwise stated.

PRINCIPLES STATEMENT The following statement sets out how the Company has applied the principles in Part 1 of the Code. The principles are dealt with under the following headings: Board of Directors, Directors’ Remuneration, Shareholders and Accountability and Audit. 1.0 BOARD OF DIRECTORS 1.1 Board Balance and Responsibilities The Group acknowledges the pivotal role played by the Board of Directors in the stewardship of its direction and operations, and ultimately the enhancement of long-term shareholder value. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals. As at the date of this statement, the Board consists of six (6) members; comprising three (3) Independent Non-Executive Directors and three (3) Non-Independent Non-Executive Directors. The concept of independence adopted by the Board is in tandem with the definition of an Independent Director in Section 1.01 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). The key elements for fulfilling the criteria are the appointment of an Independent Director who is not a member of management (a non-executive Director) and who is free of any relationship which could interfere with the exercise of independent judgement or the ability to act in the best interests of the Company. The Board complied with paragraph 15.02 of the Listing Requirements, which requires that at least two (2) Directors or one-third of the Board of the Company, whichever is the higher, be Independent Directors. The Directors, with their different backgrounds and specialisation, collectively bring with them a wide range of experience and expertise in areas such as operations, corporate affairs, finance and administration. The profile of each Director is presented in Directors’ Profile in the Annual Report. There is a clear division of responsibilities at the head of the Company to ensure a balance of authority and power. The Board is led by a non-executive Chairman and the day-to-day operations of the Company are overseen by the Management Committee, on behalf of the Board. The Board is satisfied that the current Board composition fairly reflects the investment of minority shareholders in the Company.

2006 annual report

22

LADANG PERBADANAN-FIMA BERHAD

Corporat e Gover nanc e Statement

1.2 Board Committees The Board of Directors delegates certain responsibilities to the Board Committees, namely the Management Committee, the Audit Committee, the Risk Management Committee, the Nominating Committee and the Tender Committee in order to enhance business and operational efficiency as well as efficacy.

Shareholders

Nominating Committee

Tender Committee

Board of Directors

Company Secretary

Management Committee

Audit Committee

Management

Internal Audit

Risk Management Committee

All Committees have written terms of reference. The Chairman of the various Committees briefs the Board on the outcome of the Committee meetings and minutes of these meetings are circulated to the full Board. The members of the Board Committees are listed in the Corporate Information appearing in the Annual Report. •

Management Committee The Management Committee was established on 9 November 2000, which functions as a subsidiary of the Board of Directors, to focus on Corporate Governance, the operational performance of the estates and mill and the compliance of internal controls established by the Company. The Management Committee examines in depth the monthly performance of the business and recommendations made to enhance and improve operational matters affecting the Group. The Management Committee also reviews the Annual Budget of the Company in detail and makes recommendation to the Board for their approval. In addition, the Management Committee will explore and recommend to the Board of Directors new business ventures, expansion and diversification opportunities with the aim to enhance the growth and performance of the Group.

•

Audit Committee The Audit Committee, established on 22 August 1994 assists the Board in discharging its duty in maintaining a sound system of internal control to safeguard the shareholders’ investments and the Company’s assets. The terms of reference and activities of the Audit Committee are provided in the Audit Committee Report appearing in the Annual Report.

•

Risk Management Committee The Risk Management Committee was established on 8 October 2001 and is entrusted to formalise the identification, measurement and control of risks that threaten the assets or earnings of the Group. For further details on the Company’s risk management, please refer to the Internal Control Statement presented in the Annual Report.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

C o rp o ra t e G ove r n a n c e Statement

23

•

Tender Committee The Tender Committee was established on 28 April 1982 and is entrusted to facilitate a fair and transparent tender submission and review process and award of contract procedure. The Committee is responsible to ensure that the most advantageous tenders are accepted taking into account the price and the quality of the service or product. The Tender Committee, therefore, ensures transparency in the award of contracts.

•

Nominating Committee The Nominating Committee was established on 8 October 2001 and is entrusted with the specific task of identifying and recommending new nominees to the Board. As such, the Company has in place through the Nominating Committee a formal and transparent process for the appointment of new Directors. The process ensures that all nominees to the Board are first considered by the Nominating Committee taking into account the required mix of skills and experience and other qualities, before making a recommendation to the Board. The actual decision as to who shall be appointed should be the responsibility of the Board as a whole after considering the recommendations of the Committee. The Nominating Committee also assesses the effectiveness of the Board as a whole and the respective Board Committees and contribution of each individual Director.

1.3 Meetings The Board ordinarily meets at least four times a year at quarterly intervals with additional meetings convened when urgent and important decisions need to be taken between the scheduled meetings. For the year under review, the Board had 6 meetings and the number of meetings attended by each Director was as follows: Name of Directors Dato’ Shamsul Bahari bin Salleh Khir Dato’ Haji Ahmad Zakiuddin bin Harun Dato’ Jaafar bin Lajis Kamisan bin Suja’ Yeoh Hock Thong Hajjah Sharifah Nor Hashimah binti Syed Kamaruddin

Attendance 6/6 3/6 * 6/6 6/6 6/6 6/6

* Dato’ Haji Ahmad Zakiuddin bin Harun was on medical leave for a period of 9 months.

The Board receives documents on matters requiring its consideration prior to and in advance of each meeting. All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting. In addition, the Directors meet, review and approve all corporate announcements, including the announcement of the unaudited interim financial statements, prior to releasing them to Bursa Malaysia. 1.4 Supply of Information The Chairman ensures that all Directors have full and timely access to information with Board papers distributed in advance of meetings. Every Director has also unhindered access to the advice and services of the Company Secretary. The Board believes that the Company Secretary is capable of carrying out her duties to ensure the effective functioning of the Board. The Articles of Association specify that the removal of the Company Secretary is a matter for the Board as a whole. Prior to the meetings of the Board and the Board Committees, Board papers which include the agenda and information relevant to the issues of the meetings covering the areas of strategic, financial, operational and regulatory compliance matters, are circulated in advance to all the Directors for their information, in order to be properly briefed before the meeting.

2006 annual report

24

LADANG PERBADANAN-FIMA BERHAD

Corporat e Gover nanc e Statement

Further, there is a schedule of matters reserved specifically for the Board’s decision, including the approvals of annual budgets, acquisitions and disposals of undertakings and properties of substantial value, major investments and financial decisions and changes to management including key policies and delegated authority limits. The Board as a whole determines whether, as a full Board, as a full Board Committee or in their individual capacity, to take independent professional advice, where necessary and in appropriate circumstances, in furtherance of their duties, at the Group’s expense. 1.5 Directors’ Training All Directors had attended the Mandatory Accreditation Programme and the Directors were also informed and encouraged to attend professional programmes organised by various professional organisers to keep abreast with relevant new regulatory developments on a continuous basis. Director’s attendance at external programmes was based on the training needs of individual Directors. Amongst the topics covered by the programmes attended in the year under review were the introduction of new financial reporting standards, taxation, legal matters pertaining to employment of foreign workers and the issues and challenges arising from the Malaysian Code on Takeover and Mergers. In addition, the members of the Board also benefited from briefings by the Management and Advisers on the progress and development in the plantation and milling operations. 1.6 Re-election The Articles of Association provide that at the first Annual General Meeting (“AGM”) of the Company, all the Directors shall retire from office and at least one-third of the Board, are subject to retirement by rotation at each subsequent AGM. The Directors to retire in each year are the Directors who have been longest in office since their appointment or re-appointment. The Articles of Association also provide that all the Board members shall also retire once at least in each three years and shall be eligible for re-election. These provide an opportunity for the shareholders to renew their mandates. The election of each Director is voted on separately. To assist shareholders in their decision, sufficient information such as personal profile, meeting attendance and the shareholdings in the Group of each Director standing for election are furnished in the Annual Report, which also includes the Notice of the AGM. 2.0 DIRECTORS’ REMUNERATION The Company pays its Directors annual fees, which are approved annually by the shareholders. The Directors are also given emoluments as determined by the Board as a whole, to reflect the expertise, experience and level of responsibilities undertaken which include meeting allowances for each meeting they attend. The nature and amount of each major element of the remuneration of the Directors of the Company for the financial year under review were as follows: (a) Aggregate remuneration of Directors categorised into the appropriate components:

Non-Executive Directors

Fees RM’000 230

Other emoluments RM’000 204

Total RM’000 434

(b) The number of Directors of the Company whose total remuneration falls within the respective bands of RM50,000: Range of remuneration Less than RM50,000 Between RM50,000 and RM100,000

Number of Non-Executive Directors 6

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

C o rp o ra t e G ove r n a n c e Statement

25

3.0 SHAREHOLDERS The policy of the Company is to maintain an active dialogue with its shareholders with the intention of giving shareholders as clear and complete a picture of the Company’s performance and position as possible. The Annual General Meeting provides the platform for two-way communication between the Company and shareholders. Shareholders who are unable to attend are allowed to appoint proxies to attend and vote on their behalf. At the AGM, the shareholders are encouraged to ask questions both about the resolutions being proposed or about the Group’s operations in general. Members of the Board as well as the External Auditors of the Company are present to answer questions raised by the shareholders. Besides the various announcements made to Bursa Malaysia, the timely release of the unaudited interim financial statements provides shareholders with an overview of the Group’s performance and operations. Members of the public are also able to access the Company’s announcements and Annual Reports from Bursa Malaysia’s website. In addition, nominees of the Company’s major shareholders sit on the Board. This provides a forum for interaction and direct communication between the Board, Management and major shareholders. All queries from shareholders, whether by mail or telephone call, are communicated to the Company Secretary. 4.0 ACCOUNTABILITY AND AUDIT 4.1 Financial Reporting The Board aims to provide and present a balanced and meaningful assessment of the Group’s financial performance and prospects at the end of the financial year, primarily through the annual financial statements and unaudited interim financial statements to shareholders as well as the Chairman’s Statement in the Annual Report. The Board is assisted by the Audit Committee to oversee the Group’s financial reporting processes and the quality of its financial reporting. 4.2 Internal Control The information on the Group’s internal control is detailed in the Internal Control Statement appearing in the Annual Report. 4.3 Relationship with the Auditors Key features underlying the relationship of the Audit Committee with the External and Internal Auditors including a summary of the activities of the Audit Committee during the year and evaluation of the independent audit process are included in the Audit Committee Report appearing in the Annual Report. 5.0 DIRECTORS’ RESPONSIBILITY STATEMENT The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year and of their results and cash flows for the financial year then ended. In preparing the financial statements for the financial year ended 31 December 2006, the Directors have: •

complied with the applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board, accounting principles generally accepted in Malaysia and the provisions of the Companies Act, 1965

2006 annual report

26 • •

LADANG PERBADANAN-FIMA BERHAD

Corporat e Gover nanc e Statement

adopted and consistently applied appropriate accounting policies made judgements and estimates that are prudent and reasonable

The Directors have responsibility for ensuring that the Group and the Company keep accounting records, which disclosed with reasonable accuracy the financial position of the Group and the Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965. The Directors are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company and to prevent and detect fraud and other irregularities. The Directors considered that they have pursued the actions necessary to meet their responsibilities as set out in this Statement. 6.0 OTHER DISCLOSURES 6.1 Non-Audit Fees Non-audit fees paid and payable to the Company’s External Auditors in the financial year ended 31 December 2006 were as follows: Name of Auditors KPMG Desa Megat & Co. KPMG Tax Services Sdn. Bhd.

Nature of Engagement Review of Internal Control Statement Taxation Services

RM 6,000 5,500

6.2 Recurrent Related Party Transactions of Revenue Nature Recurrent related party transactions of a revenue nature of the Company for the financial year ended 31 December 2006 were as follows: Related Party Perak Meat Industries Sdn. Bhd.

Relationship A company which Dato’ Shamsul Bahari bin Salleh Khir has an interest.

Nature of Transaction Lease rental received

RM 3,000

6.3 Revaluation Policy on Landed Properties The revaluation policy of the Group in relation to landed properties is set out in the Notes to the Financial Statements appearing in the Annual Report. 6.4 Sanctions and/or Penalties During the financial year, there were no sanctions and/or penalties imposed on the Company or its subsidiary company, Directors or Management arising from any significant breach of rules/guidelines/legislations by the relevant regulatory authorities. 6.5 Profit Estimate, Forecast or Projection The Group had not provided any profit estimate, forecast or projection in the financial year ended 31 December 2006. 6.6 Variation in Results There was no major variation in results (of 10% or more) from the unaudited results announced. 6.7 Profit Guarantee The Group had not provided any profit guarantee in the financial year ended 31 December 2006. 6.8 Material Contracts There were no material contracts entered into by the Company and its subsidiary company which involved Directors’ and substantial shareholders’ interests, either still subsisting at the end of the financial year or, which were entered into since the end of the previous financial year.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

C o rp o ra t e G ove r n a n c e Statement

27

6.9 Share Buyback During the financial year under review, the Company did not exercise any share buy backs permitted by Section 67A, Companies Act, 1965. 6.10 Utilisation of Proceeds Raised from Corporate Proposals There were no corporate proposals conducted in the financial year under review. 6.11 Options, Warrants and Convertible Securities There were no options, warrants or convertible securities in issue in the financial year under review. 6.12 American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme The Company did not sponsor any ADR or GDR programme during the financial year. 6.13 Directors’ Family Relationships None of the Directors have any family relationship with any Director and/or substantial shareholders of the Company. 6.14 Directors’ Conflict of Interest None of the Directors have any conflict of interest with the Company. 6.15 Directors’ Conviction for Offences None of the Directors have been convicted of any offence.

COMPLIANCE STATEMENT Save as disclosed below, the Group has complied with the Principles and Best Practices of the Code throughout the year: (a)

appointment of a Senior Independent Non-Executive Director to whom concerns may be conveyed has not been made as the Board believes to be not necessary since the Chairman encourages full participation during discussion and deliberation of issues affecting the Group by all the Board members;

(b)

establishment of a Remuneration Committee has not been undertaken as none of the Board members are Executive Directors. In addition, the Board as a whole recommends the Directors’ fees to be approved at the AGM and determines the other emoluments of the Directors with the individual Director abstaining from decisions in respect of their individual remuneration;

(c)

remuneration of each member of the Board of Directors is not detailed as the Directors after due consideration, are of the opinion that the transparency and accountability aspects of Corporate Governance as applicable to Directors’ remuneration are appropriately served by the band disclosure made in this Statement; and

(d)

there is informal succession planning within the organisation whereby middle Management is constantly being appraised to assess their capability of taking over the Senior Management’s positions.

This statement is made in accordance with a resolution of the Board of Directors dated 18 April 2007.

2006 annual report

28

LADANG PERBADANAN-FIMA BERHAD

Internal Control Statement

In accordance with the principles of good corporate governance, the Board of Directors of Ladang Perbadanan-Fima Berhad (“the Board”) is pleased to provide the disclosure statement on the state of internal control of the Group for the year under review.

RESPONSIBILITY The Board affirms its overall responsibility for maintaining a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. The internal control system, by its nature, is designed to manage the Group’s risks rather than to eliminate the risk of failure to achieve business objectives of the Group. Accordingly, the system can only provide reasonable and not absolute assurance against material misstatement, fraud or loss.

KEY ELEMENTS OF INTERNAL CONTROL FRAMEWORK The key elements of the Group’s system of internal control are summarised as follows: 1. Risk Management The Board regards risk management as an integral part of the business operations and has adopted a risk management framework for the Group to identify, evaluate and manage significant risks faced by the Group. The Management of each operating units is responsible for the identification and evaluation of significant risks applicable to their respective areas of operations and to formulate suitable internal controls to manage the risks. This process is reviewed by the Board through its Risk Management Committee. The Board confirms that the risk management process is in place for the financial year under review. 2. Code of Business Conduct and Ethics All employees are required to adhere to the Code of Business Conduct and Ethics, which defines the minimum standard of behaviour and ethical conduct for all employees of the Group. 3. Internal Audit Function The Internal Audit function provides the Board via the Audit Committee with the independent assurance on the adequacy and effectiveness of the internal control system within the Group. Details of the activities undertaken by the Audit Committee and Internal Audit function are set out in the Audit Committee Report. 4. Other Key Elements of Internal Control These include the following: •

Delegation of responsibilities to Board Committees through defined terms of reference including authorisation levels for various aspect of the business.

•

The Board receives and reviews the Group’s financial statements including quarterly reports to Bursa Malaysia Securities Berhad on a regular basis. The financial results are monitored against the year’s budget and previous year’s results and major variances are deliberated by the Board.

•

Regular meetings of the Board Management Committee are conducted to review and monitor matters pertaining to the business operations based on reports, which provide information on financial and non-financial matters.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Internal Control Statement

29

•

Comprehensive annual budgeting process requiring all operating units to submit budgets which are reviewed by the Board Management Committee and approved by the Board.

•

Critical information of the Group such as financial data and human resource data are captured within the various information systems in place to keep track of the Group’s operations. Relevant information is also obtained from external sources to monitor and benchmark the Group’s performance.

•

Segregation of duties is in place to reduce scope for error and fraud.

•

Major purchases of goods and contract works are referred to the Board Tender Committee or Board of Directors for consideration and approval.

•

Services of a Visiting Adviser and Mill Consultant are engaged to review and advise the Board Management Committee on the estate and mill operations.

•

Adequate insurance coverage on major assets is in place to ensure that the Group’s assets are sufficiently protected against any mishap that will result in losses to the Group.

•

Visits by members of the Board, Board Management Committee and Management to the operating units.

•

Emphasis is placed on improving the quality and ability of employees with continuing education, training and development.

•

Investment proposals covering the acquisition of properties and long term investments are thoroughly appraised by the Board.

CONCLUSION The Board is of the view that there was no significant breakdown or weakness in the Group’s system of internal control that may result in material losses being incurred by the Group for the financial year under review. The External Auditors have reviewed the Internal Control Statement in accordance with the Auditing Technical Release 5, Guidance for Auditors on the Review of Directors’ Statement on Internal Control, for inclusion in the Annual Report 2006. Based on their review, the External Auditors have reported that nothing had come to their attention that caused them to believe that the said Statement was inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of the internal controls of the Group. This Statement is made in accordance with a resolution of the Board of Directors dated 18 April 2007.

2006 annual report

30

LADANG PERBADANAN-FIMA BERHAD

Ar e a S tate m e n t As At 31 D ecem ber 2006

Oil Palms Estate

Mature Hectare

Immature Hectare

Others

Total

Hectare

Hectare

Total Hectare

Ladang Lekir

3,672.84

209.50

3,882.34

257.89

4,140.23

Ladang Changkat Chermin

1,515.03

850.60

2,365.63

175.76

2,541.39

729.40

682.80

1,412.20

77.45

1,489.65

5,917.27

1,742.90

7,660.17

511.10

8,171.27

Ladang Raja Hitam Total

Ladang Raja Hitam PERAK

Ipoh Lumut

Ladang Changkat Cermin

Sitiawan

Ladang Lekir

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

P ro p e rt i e s As At 31 December 2006

Location

Description & Tenure Year of Existing Use Expiry

Area

31

Approximate Date of Last Net Age of Acquisition/ Book Buildings Revaluation Value RM’000

Freehold Lot 3916, Mukim Ladang Lekir Lekir, Daerah - Oil palm and Manjung, Perak and mango plantation Lot 67 & 68, Mukim Jaya Baru, Daerah Perak Tengah, Perak, Malaysia.

-

4,140.23 hectares

22 – 25 years

Revalued on 29 July 1993

26,201

Lot 65 & 66, Mukim Ladang Changkat Leasehold Jaya Baru, Daerah Chermin Perak Tengah, Perak, - Oil palm Lot 10944, Mukim plantation & palm Bota, Daerah Perak oil mill Tengah, Perak, P.T. 365 & 366, Mukim Sitiawan, Daerah Manjung, Perak and Lot 20079, 20402 – 20406 & 20409 – 20412, Mukim Sitiawan, Daerah Manjung, Perak, Malaysia.

2080

2,541.39 hectares

22 – 25 years

Revalued on 27 July 1993

10,409

P.T. 344, 345 & 371, Ladang Raja Hitam Freehold Mukim Sitiawan, - Oil palm Daerah Manjung, plantation Perak and P.T. 86 & Lot 7761, Mukim Beruas, Daerah Manjung, Perak, Malaysia.

-

1,489.65 hectares

25 years

Revalued on 26 July 1993

9,384

Lot 11730S, Bandar Ipoh, Daerah Kinta, Perak. No. 10, Persiaran Gopeng Satu, 31350 Ipoh, Perak, Malaysia.

Office building - Head Office

Freehold

-

1,843.10 sq. metres

32 years

Acquired on 30 September 1993

H.S. (D) 134493, P.T. 198731, Bandar Ipoh, Daerah Kinta, Perak. Jalan Caldwell, 30350 Ipoh, Perak, Malaysia.

Vacant Land

Leasehold

2103

6,070 sq. metres

-

Acquired on 27 July 2006

118

2,075

2006 annual report

32

LADANG PERBADANAN-FIMA BERHAD

Sha reho l d i n g S t a t i s t i c s As At 25 Apr il 2007

1. SHARE CAPITAL Authorised share capital Issued and fully paid Class of shares Voting right

: : : :

150,000,000 ordinary shares of RM1.00 each 114,300,000 ordinary shares of RM1.00 each Ordinary share of RM1.00 each One vote per ordinary share

2. ANALYSIS BY SIZE OF SHAREHOLDINGS Size of shareholdings

No. of shareholders

% of Total shareholders shareholdings

% of issued share capital

Less than 100 100 to 1,000 1,001 to 10,000 10,001 to 100,000 100,001 to less than 5% of issued shares 5% and above of issued shares

5 1,017 394 67 29 4

0.33 67.09 25.99 4.42 1.91 0.26

234 1,000,666 1,438,600 1,551,300 26,868,200 83,441,000

0.00 0.87 1.26 1.36 23.51 73.00

Total

1,516

100.00

114,300,000

100.00

3. SUBSTANTIAL SHAREHOLDERS No.

Name of shareholders

No. of shares held

% of issued share capital

1. 2. 3. 4.

Glamour Green Sdn Bhd Taipan Heritage Sdn Bhd Ablington Holdings Sdn Bhd BHR Enterprise Sdn Bhd

36,524,000 27,520,000 17,600,000 5,717,000

31.95 24.08 15.40 5.00

4. DIRECTORS' SHAREHOLDINGS No.

Name of Directors

1. 2. 3. 4. 5. 6.

Dato' Shamsul Bahari bin Salleh Khir Dato' Haji Ahmad Zakiuddin bin Harun Dato' Jaafar bin Lajis Kamisan bin Suja' Yeoh Hock Thong Hajjah Sharifah Nor Hashimah binti Syed Kamaruddin

Direct Interest

Deemed interest

Total % of issued Shareholdings share capital

10,000 -

1,499,800 36,524,000 36,524,000 -

1,499,800 10,000 36,524,000 36,524,000 -

1.31 0.01 31.95 31.95 -

-

-

-

-

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Sha reh o l d i n g S t a t i s t i c s As At 25 A p r i l 2007

33

5. THIRTY (30) LARGEST SHAREHOLDERS AS IN THE REGISTER OF MEMBERS No. 1.

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

Name of shareholders Amsec Nominees (Tempatan) Sdn Bhd (Ambank (M) Berhad for Glamour Green Sdn Bhd) HDM Nominees (Tempatan) Sdn Bhd (Malaysian Assurance Alliance Berhad for Taipan Heritage Sdn Bhd) Ablington Holdings Sdn Bhd BHR Enterprise Sdn Bhd HDM Nominees (Tempatan) Sdn Bhd (Leong Tuck Onn for Taipan Heritage Sdn Bhd) Ng Song Choon Enterprises Sdn Berhad United Plantations Berhad HDM Nominees (Asing) Sdn Bhd (DBS Vickers Secs (S) Pte Ltd for Ong Beng Huat) Malaysian Assurance Alliance Berhad S.B.S.K. Plantations Sdn Bhd Malaysian Assurance Alliance Berhad Mayban Securities Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Poh Gaik Lye) Malaysian Assurance Alliance Berhad Ong Teng Kek Malaysian Assurance Alliance Berhad TA Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Ronald Leong Vui Khiong) EB Nominees (Tempatan) Sendirian Berhad (Pledged Securities Account for Ho Soon Mei) EB Nominees (Tempatan) Sendirian Berhad (Pledged Securities Account for Ong Teng Kek) EB Nominees (Tempatan) Sendirian Berhad (Pledged Securities Account for Azian bin Osman) RHB Capital Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Leong Wei Kong) M & A Nominee (Tempatan) Sdn Bhd (Jendarata Bernam Provident Fund) Sinny United Sdn Bhd RHB Capital Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Abd Aziz bin Jantan) SK Capital Sdn Bhd M & A Nominee (Tempatan) Sdn Bhd (United Plantations Workers Benevolent Retirement Scheme) Alliancegroup Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Tan Sew Ching) Citigroup Nominees (Asing) Sdn Bhd (UBS AG Hong Kong for Seven-Heaven Investments Limited) Citigroup Nominees (Asing) Sdn Bhd (UBS AG Hong Kong for Pink Tourmaline Corp) Kenanga Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Mohamed Yusoff bin Ismail) EB Nominess (Tempatan) Sendirian Berhad (Pledged Securities Account for Mohamed Yusoff bin Ismail)

No. of shares held

% of issued share capital

36,524,000

31.95

23,600,000

20.65

17,600,000 5,717,000 3,920,000

15.40 5.00 3.43

2,445,000 2,115,000 2,000,000

2.14 1.85 1.75

1,567,000 1,488,800 1,477,000 1,460,800

1.37 1.30 1.29 1.28

1,435,000 1,353,000 1,022,000 800,000

1.26 1.18 0.89 0.70

750,000

0.66

670,000

0.59

500,000

0.44

435,000

0.38

432,500

0.38

428,800 381,000

0.38 0.33

370,000 320,000

0.32 0.28

263,000

0.23

248,000

0.22

248,000

0.22

182,000

0.16

150,000

0.13

2006 annual report

36

LADANG PERBADANAN-FIMA BERHAD

Directors ' Re p o rt For The Year Ende d 3 1 D e c e m b e r 2 0 0 6

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2006. PRINCIPAL ACTIVITIES The Company is principally engaged in oil palm cultivation and production and sale of crude palm oil and palm kernel, whilst the principal activity of the subsidiary is set out in note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year. RESULTS

Profit for the year

GROUP RM’000

COMPANY RM’000

12,682

12,683

RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the year. DIVIDENDS Since the end of the previous financial year, the Company paid: (i) a final dividend of 5 sen less 28% tax for the year ended 31 December 2005 amounting to RM4,114,800 on 12 June 2006; and (ii) an interim dividend of 2 sen less 28% tax totalling RM1,645,920 in respect of the financial year ended 31 December 2006 on 3 October 2006. The Directors recommend a final dividend of 8 sen less 27% tax in respect of the financial year ended 31 December 2006 amounting to RM6,675,120 subject to approval of the shareholders at the forthcoming Annual General Meeting. DIRECTORS OF THE COMPANY Directors who served since the date of the last report are: Dato' Shamsul Bahari bin Salleh Khir Dato' Haji Ahmad Zakiuddin bin Harun Dato’ Jaafar bin Lajis Kamisan bin Suja’ Yeoh Hock Thong Hajjah Sharifah Nor Hashimah binti Syed Kamaruddin In accordance with Article 66 of the Company’s Articles of Association, Kamisan bin Suja’ and Yeoh Hock Thong retire by rotation from the Board at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

D i re c t o rs ' Re p o rt For The Year Ended 3 1 D e c e m b e r 2 0 0 6

37

DIRECTORS' SHAREHOLDINGS The holdings and deemed holdings in the ordinary shares of the Company of those who were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows: <----------- Number of ordinary shares ------------> of RM 1 each Balance at Balance at 1.1.2006 Bought Sold 31.12.2006 Dato' Shamsul Bahari bin Salleh Khir - held directly - deemed interest

2,000,000

-

500,200

1,499,800

10,000 -

-

-

10,000 -

Dato' Jaafar bin Lajis - held directly - deemed interest

36,524,000

-

-

36,524,000

Kamisan bin Suja’ - held directly - deemed interest

36,524,000

-

-

36,524,000

Dato’ Haji Ahmad Zakiuddin bin Harun - held directly - deemed interest

None of the other Directors holding office at 31 December 2006 had any interest in the ordinary shares of the Company and of its related corporations during the financial year. DIRECTORS' BENEFITS Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, other than any deemed benefits that may accrue to certain Directors by virtue of normal trading transactions by the Group and the Company with related parties as disclosed in note 22 to the financial statements. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in the Company or any other body corporate. ISSUE OF SHARES There were no changes in the authorised issued and paid-up capital of the Company during the financial year. OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued shares of the Company during the year.

2006 annual report

38

LADANG PERBADANAN-FIMA BERHAD

Directors ' Re p o rt For The Year Ende d 3 1 D e c e m b e r 2 0 0 6

OTHER STATUTORY INFORMATION Before the financial statements of the Group and the Company were made out, the Directors took reasonable steps to ascertain that: (i) there are no bad debts to be written off and no provision need to be made for doubtful debts, and (ii) all current assets have been stated at the lower of cost and net realisable value. At the date of this report, the Directors are not aware of any circumstances: (i) that would render it necessary to write off any bad debts or provide for any doubtful debts, or (ii) that would render the value attributed to the current assets in the Group and in the Company financial statements misleading, or (iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or (iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or (ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year. No contingent liability or other liabilities of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the Directors, except for the effect arising from the change in accounting policies as disclosed in the financial statements, the results of the operations of the Group and of the Company for the financial year ended 31 December 2006 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. AUDITORS The auditors, Messrs. KPMG Desa Megat & Co., have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Dato’ Shamsul Bahari bin Salleh Khir Director Yeoh Hock Thong Director IPOH Date: 18 April 2007

LADANG PERBADANAN-FIMA BERHAD

Statem e n t B y D i re c t o rs P u r s u a n t To Section 169(15) Of The C o m p a n i e s A c t , 1 9 6 5

2006 annual report

39

In the opinion of the Directors, the financial statements set out on pages 42 to 62 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 December 2006 and of the results of their operations and cash flows for the year ended on that date.

Signed in accordance with a resolution of the Directors:

Dato’ Shamsul Bahari bin Salleh Khir Director

Yeoh Hock Thong Director

IPOH Date: 18 April 2007

2006 annual report

40

LADANG PERBADANAN-FIMA BERHAD

Statutor y D e c l a ra t i o n Pur suant To Section 16 9 ( 1 6 ) O f T h e C o m p a n i e s A c t , 1 9 6 5

I, Gowrie Navaratnam, the officer primarily responsible for the financial management of Ladang Perbadanan-Fima Berhad, do solemnly and sincerely declare that the financial statements set out on pages 42 to 62 are, to the best of my knowledge and belief, 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 at Ipoh in the State of Perak Darul Ridzuan on 18 April 2007.

Gowrie Navaratnam

Before me:

Clarence Joseph (No. A044) Commissioner for Oaths Ipoh

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Re port O f T h e A u d i t o rs To The Member s

41

We have audited the financial statements set out on pages 42 to 62. The preparation of the financial statements is the responsibility of the Company's Directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with approved Standards on Auditing in Malaysia. 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 financial statements presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board so as to give a true and fair view of: (i) the state of affairs of the Group and of the Company at 31 December 2006 and the results of their operations and cash flows for the year ended on that date; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company; and (b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and its subsidiary have been properly kept in accordance with the provisions of the said Act. We are satisfied that the financial statements of the subsidiary that have been consolidated with the Company’s financial statements 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 audit report on the financial statements of the subsidiary was not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.

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

IPOH Date: 18 April 2007

Peter Ho Kok Wai Partner Approval Number: 1745/12/07 (J)

2006 annual report

42

LADANG PERBADANAN-FIMA BERHAD

Bala nce S h e e t s As At 31 Decem b e r 2 0 0 6

Group

Company 2006 2005 RM’000 RM’000 (restated)

Note

2006 RM’000

2005 RM’000 (restated)

3 4 5 6 7 8

40,237 11,229 98,439 120

40,814 9,330 98,439 120

40,237 11,229 98,439 120

40,814 9,330 98,439 120

150,025

148,703

150,025

148,703

9

1,558 2,917

1,410 713

1,558 2,917

1,410 713

10

5,557 30,050

7,079 283 23,245

5,557 11 30,050

7,079 283 9 23,245

40,082

32,730

40,093

32,739

190,107

181,433

190,118

181,442

114,300 20,409 35,800

114,300 20,409 28,879

114,300 20,409 35,811

114,300 20,409 28,889

170,509

163,588

170,520

163,598

11,656 1,988

12,621 1,954

11,656 1,988

12,621 1,954

13,644

14,575

13,644

14,575

1,551 2,738 1,665

938 2,332 -

1,551 2,738 1,665

938 2,331 -

5,954

3,270

5,954

3,269

19,598

17,845

19,598

17,844

190,107

181,433

190,118

181,442

Assets Property, plant and equipment Prepaid lease payments Biological assets Investment in subsidiary Investment in associate Other investments Total non-current assets Inventories Trade receivables Other receivables, deposits and prepayments Tax recoverable Amount due from subsidiary Cash and cash equivalents

6 11

Total current assets Total assets Equity Share capital Revaluation reserve Retained earnings

12 13

Total equity attributable to shareholders of the Company Liabilities Deferred tax liabilities Retirement benefits Total non-current liabilities Trade payables Other payables and accruals Current taxation Total current liabilities Total liabilities Total equity and liabilities

14 15

The notes set out on pages 46 to 62 form an integral part of, and should be read in conjunction with, these financial statements.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Inc o m e S t a t e m e n t s Fo r T h e Year Ended 3 1 D e c e m b e r 2 0 0 6

Group

43

Note

2006 RM’000

2005 RM’000

Company 2006 2005 RM’000 RM’000

16

49,679

40,616

49,679

40,616

(17,669)

(15,286)

(17,669)

(15,286)

Gross profit

32,010

25,330

32.010

25,330

Other income

863

1,152

863

1,152

Selling and distribution expenses

(1,122)

(930)

(1,122)

(930)

Administrative expenses

(8,634)

(8,031)

(8,633)

(8,030)

Other expenses

(6,335)

(5,912)

(6,335)

(5,912)

Revenue Cost of sales

Profit before tax

17

16,782

11,609

16,783

11,610

Tax expense

18

(4,100)

(3,323)

(4,100)

(3,323)

12,682

8,286

12,683

8,287

12,682

8,286

12,683

8,287

11.1

7.2

Profit for the year Attributable to: Shareholders of the Company Basic earnings per share (sen)

19

The notes set out on pages 46 to 62 form an integral part of, and should be read in conjunction with, these financial statements.

2006 annual report

44

LADANG PERBADANAN-FIMA BERHAD

Stateme n t s O f Changes In E q u i t y For The Ye a r E n d e d 3 1 D e c e m b e r 2 0 0 6

<-------- Attributable to shareholders of the Company --------> <--- Non-distributable ---> Distributable Share Revaluation Retained capital reserve profits RM’000 RM’000 RM’000

Total reserves RM’000

Total RM’000

Group At 1 January 2005

114,300

20,409

37,053

57,462

171,762

Net profit for the year Dividends: - 2004 final (Note 20) - 2004 special (Note 20) - 2005 interim (Note 20)

-

-

8,286

8,286

8,286

-

-

(8,230) (4,115) (4,115)

(8,230) (4,115) (4,115)

(8,230) (4,115) (4,115)

At 31 December 2005

114,300

20,409

28,879

49,288

163,588

Net profit for the year Dividends: - 2005 final (Note 20) - 2006 interim (Note 20)

-

-

12,682

12,682

12,682

-

-

(4,115) (1,646)

(4,115) (1,646)

(4,115) (1,646)

At 31 December 2006

114,300

20,409

35,800

56,209

170,509

Note 12

Note 13

114,300

20,409

37,062

57,471

171,771

Net profit for the year Dividends: - 2004 final (Note 20) - 2004 special (Note 20) - 2005 interim (Note 20)

-

-

8,287

8,287

8,287

-

-

(8,230) (4,115) (4,115)

(8,230) (4,115) (4,115)

(8,230) (4,115) (4,115)

At 31 December 2005

114,300

20,409

28,889

49,298

163,598

Net profit for the year Dividends: - 2005 final (Note 20) - 2006 interim (Note 20)

-

-

12,683

12,683

12,683

-

-

(4,115) (1,646)

(4,115) (1,646)

(4,115) (1,646)

At 31 December 2006

114,300

20,409

35,811

56,220

Note 12

Note 13

Company At 1 January 2005

170,520

The notes set out on pages 46 to 62 form an integral part of, and should be read in conjunction with, these financial statements.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

Cash F low S t a t e m e n t s For The Year Ended 3 1 D e c e m b e r 2 0 0 6

Cash flows from operating activities Net profit before taxation Adjustments for: Amortisation of prepaid lease payments Depreciation of property, plant and equipment Dividend income from shares quoted in Malaysia Gain on disposal of plant and equipment Interest income from fixed deposits Interest income from vehicle loans Property, plant and equipment written off Provision for retirement benefits Operating profit before working capital changes Change in inventories Change in trade receivables Change in other receivables, deposits and prepayments Change in trade payables Change in other payables and accruals Change in amount due from subsidiary

2006 RM’000 16,782 137 2,113 (1) (20) (739) (1) 62 240

Group

45

2005 RM’000

Company 2006 2005 RM’000 RM’000

11,609

16,783

11,610

137 2,113 (1) (20) (739) (1) 62 240

124 2,041 (4) (32) (1,075) (2) 108 201

124 2,041 (4) (32) (1,075) (2) 108 201

18,573

12,970

18,574

12,971

(148) (2,204) 1,520 613 406 -

507 (35) (4,564) (833) (1,184) -

(148) (2,204) 1,520 613 407 (2)

507 (35) (4,564) (833) (1,184) (1)

187

(6,109)

186

(6,110)

18,760

6,861

18,760

6,861

(3,117) (206)

(5,117) (90)

(3,117) (206)

(5,117) (90)

15,437

1,654

15,437

1,654

Proceeds from disposal of equipment Purchase of plant and equipment Lease payments Dividend income from shares quoted in Malaysia Interest income from fixed deposits Interest income from vehicle loans Deposits pledged with licensed banks

20 (1,598) (2,036) 1 741 1 (1,000)

32 (1,245) 4 1,264 2 -

20 (1,598) (2,036) 1 741 1 (1,000)

32 (1,245) 4 1,264 2 -

Net cash (used in) / generated from investing activities

(3,871)

(3,871)

57

Cash generated from operations Income taxes paid Retirement benefits paid Net cash generated from operating activities Cash flows from investing activities

57

Cash flows from financing activities Dividends paid

(5,761)

(16,460)

(5,761)

(16,460)

5,805

(14,749)

5,805

(14,749)

Cash and cash equivalents at 1 January

22,745

37,494

22,745

37,494

Cash and cash equivalents at 31 December

28,550

22,745

28,550

22,745

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts: Deposits (excluding deposits pledged) Cash and bank balances

26,900 1,650

22,000 745

26,900 1,650

22,000 745

28,550

22,745

28,550

22,745

The notes set out on pages 46 to 62 form an integral part of, and should be read in conjunction with, these financial statements.

2006 annual report

46

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Decem b e r 2 0 0 6

Ladang Perbadanan-Fima Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Board of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business is as follows: Registered office and principal place of business No. 10, Persiaran Gopeng Satu 31350 Ipoh Perak, Malaysia The consolidated financial statements as at and for the year ended 31 December 2006 comprise the Company and its subsidiary (together referred to as the Group) and the Group’s interest in an associate. The financial statements of the Company as at and for the year ended 31 December 2006 do not include other entities. The Company is principally engaged in oil palm cultivation and production and sale of crude palm oil and palm kernel, whilst the principal activity of the subsidiary is set out in note 6 to the financial statements. 1. Basis of accounting (a) Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board (“MASB”), accounting principles generally accepted in Malaysia and the provisions of the Companies Act, 1965. These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad. The MASB has issued a number of new and revised Financial Reporting Standards (“FRS”) that are effective for accounting periods beginning after 1 January 2006 or available for early adoption. In this set of financial statements, the Group has chosen to early adopt FRS 117, Leases, which is effective for annual periods beginning on or after 1 October 2006. The MASB has also issued the following new and revised FRSs or interpretation that are effective for future periods that have not been applied in preparing these financial statements: (i) FRS 124, Related Party Disclosures – This FRS is effective for annual periods beginning on or after 1 October 2006. By virtue of the exemption in paragraph 22A of FRS 124, the impact of applying FRS 124 on the financial statements upon first adoption of this standard as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Error is not disclosed; (ii) FRS 139, Financial Instruments: Recognition and Measurement – This FRS has been issued by the MASB but the MASB has yet to announce the effective date of this standard. By virtue of the exemption in paragraph 103AB of FRS 139, the impact of applying FRS 139 on the financial statements upon first adoption of this standard as required by paragraph 30(b) of FRS 108 is not disclosed; (iii) Amendment to FRS 119 2004 , Employee Benefit – Actuarial Gains and Losses, Group Plans and Disclosures – Certain amendment made to FRS 1192004 are effective for annual periods beginning on or after 1 January 2007. The adoption of these amendments does not have any significant impact on the financial statements of the Group and of the Company in the period of initial application; and (iv) FRS 6, Exploration for and Evaluation of Mineral Resources – This FRS is effective for annual periods beginning on or after 1 January 2007. This Standard is not applicable to the Group and the Company. The MASB has also issued amendments and other interpretations that are effective for annual periods beginning on or after 1 July 2007. These amendments and interpretations are not applicable to the Group and the Company. The Group plans to apply FRS 124 initially for the annual period beginning 1 January 2007. The effects of adopting the new/revised FRSs in 2006 are set out in note 26. The financial statements were approved by the Board of Directors on 18 April 2007. (b) Basis of measurement The financial statements have been prepared on the historical cost basis.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

47

1. Basis of accounting (continued) (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All financial information presented in RM has been rounded to the nearest thousand, unless otherwise stated. (d) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 2. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities, unless otherwise stated. Certain comparative amounts have been reclassified to conform to the current year’s presentation (see note 26). (a) Basis of consolidation (i)

Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses, unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale). There were no minority interests at the balance sheet date as the sole subsidiary of the Company is wholly-owned by the Company.

(ii) Associates Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies. Associates are accounted for in the consolidated financial statements using the equity method unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). The consolidated financial statements include the Group’s share of the income and expenses of the equity accounted associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. Investments in associates are stated in the Company’s balance sheet at cost less impairment losses, unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale). (iii) Changes in Group composition Where a subsidiary issues new equity shares to minority interest for cash consideration and the issue price has been established at fair value, the reduction in the Group’s interest in the subsidiary is accounted for as a disposal of equity interest with the corresponding gain or loss recognised in the income statement. When a group purchases a subsidiary’s equity shares from minority interest for cash consideration and the purchase price has been established at fair value, the accretion of the Group’s interests in the subsidiary is accounted for as a purchase of equity interest for which the acquisition accounting method of accounting is applied. The Group treats all other changes in group composition as equity transactions between the Group and its minority shareholders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

2006 annual report

48

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Decem b e r 2 0 0 6

2. Significant accounting policies (continued) (a) Basis of consolidation (continued) (iv) Transactions eliminated on consolidation Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Property, plant and equipment (i)

Recognition and measurement Items of property, plant and equipment are stated at cost/valuation less accumulated depreciation and impairment losses. The Group has availed itself to the transitional provision when the MASB first adopted IAS 16, Property, Plant and Equipment in 1998. Certain freehold land, was revalued in July 1993 and no later valuation has been recorded for these properties. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

(ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred. (iii) Depreciation Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use. The estimated useful lives for the current and comparative periods are as follows: • • • • •

buildings and installations plant and machinery motor vehicles furniture, fittings and office equipment agricultural implements and other equipment

5 - 20 years 7 years 5 years 5 - 10 years 5 - 7 years

The depreciable amount is determined after deducting the residual value. Depreciation methods, useful lives and residual values are reassessed at the reporting date. (c) Prepaid lease payments Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted as prepaid lease payments that are amortised over the lease term in accordance with the pattern of benefits provided except for leasehold land classified as investment property. The Group had previously classified a lease of land as finance lease and had recognised the amount of prepaid lease payments as property within its property, plant and equipment. On early adoption of FRS 117, Leases, the Group treats such a lease as an operating lease, with the unamortised carrying amount classified as prepaid lease payments in accordance with the transitional provisions in FRS 117.67A. The Group had previously revalued its leasehold land and has retained the unamortised revalued amount as the surrogate carrying amount of prepaid lease payments in accordance with the transitional provisions in FRS 117.67A. Such prepaid lease payments is amortised over the lease term.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

49

2. Significant accounting policies (continued) (d) Biological assets (i)

New planting expenditure New planting expenditure incurred on land clearing and upkeep of trees to maturity is capitalised under biological assets and is not amortised.

(ii) Replanting expenditure Replanting expenditure is charged to income statement in the financial year in which the expenditure is incurred. (e) Investments in equity securities Investments in equity securities are recognised initially at fair value plus attributable transaction costs. Subsequent to initial recognition: • Investments in non-current equity securities other than investments in subsidiaries and associates are stated at cost less allowance for diminution in value; and • All current investments are carried at the lower of cost and market value, determined on an aggregate portfolio basis by category of investments. Where in the opinion of the Directors, there is a decline other than temporary in the value of non-current equity securities other than investment in subsidiaries and associates, the allowance for diminution in value is recognised as an expense in the financial year in which the decline is identified. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement. All investments in debt securities are accounted for using settlement date accounting. Settlement date accounting refers to: (i) the recognition of an asset on the day it is received by the entity; and (ii) the derecognition on an asset and recognition of any gain or loss on disposal on the date it is delivered. (f ) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of inventories of produce, cost includes cost of raw materials, direct labour and an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (g) Receivables Receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts. Receivables are not held for the purpose of trading. (h) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cash equivalents are presented net of pledged deposits. (i) Impairment of assets The carrying amounts of assets except for financial assets and inventories are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

2006 annual report

50

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Dece m b e r 2 0 0 6

2. Significant accounting policies (continued) (i) Impairment of assets (continued) The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised, unless it reverses an impairment loss on a revalued asset, in which case it is credited directly to revaluation surplus. Where an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment loss is also recognised in the income statement. (j) Employee benefits (i)

Short term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus. If the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The Group’s contributions to the Employees Provident Fund are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

(ii) Retirement benefits The Group and the Company provides for retirement benefits for eligible employees on an unfunded defined benefit basis. Full provision has been made for retirement benefits payable to all eligible employees based on the last drawn salaries at the year end and the length of service rendered. The present value of the defined benefit obligations as required by FRS 1192004, Employee Benefits has not been used in arriving at the provision, as the amount involved is insignificant to the Group and the Company. Accordingly, no further disclosure as required by the standard is made. (k) Payables Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity. (l) Revenue (i)

Goods sold Revenue from the sale of goods is measured at fair value of the consideration received or receivable. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable and there is no continuing management involvement with the goods.

(ii) Dividend income Dividend income is recognised when the right to receive payment is established. (iii) Interest income Interest income is recognised as it accrues, using the effective interest method. (m) Tax expense Tax expense comprises current and deferred tax. Tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit (tax loss). Deferred tax is measured at the tax rates that

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

51

2. Significant accounting policies (continued) (m) Tax expense (continued) are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised. (n) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. 3. Property, plant and equipment Group/Company

Cost/Valuation At 1 January 2005 Additions Disposals Written off

Motor vehicles, furniture, Buildings Plant fittings Freehold and and and other land Installations machinery equipment Total RM’000 RM’000 RM’000 RM’000 RM’000 34,790 -

12,251 183 (55)

18,459 299 (1,628)

5,530 763 (127) (199)

71,030 1,245 (127) (1,882)

At 31 December 2005/1 January 2006 Additions Disposals Written off

34,790 -

12,379 215 (68)

17,130 924 (702)

5,967 459 (293) (54)

70,266 1,598 (293) (824)

At 31 December 2006

34,790

12,526

17,352

6,079

70,747

Representing items at: Cost Directors’ valuation

34,790

12,526 -

17,352 -

6,079 -

35,957 34,790

34,790

12,526

17,352

6,079

70,747

-

9,902 302 (52)

14,972 1,228 (1,531)

4,438 511 (127) (191)

29,312 2,041 (127) (1,774)

At 31 December 2005/1 January 2006 Charge for the year Disposals Written off

-

10,152 274 (68)

14,669 1,281 (643)

4,631 558 (293) (51)

29,452 2,113 (293) (762)

At 31 December 2006

-

10,358

15,307

4,845

30,510

Carrying amounts At 1 January 2005

34,790

2,349

3,487

1,092

41,718

At 31 December 2005/1 January 2006

34,790

2,227

2,461

1,336

40,814

At 31 December 2006

34,790

2,168

2,045

1,234

40,237

Depreciation At 1 January 2005 Charge for the year Disposals Written off

2006 annual report

52

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Dece m b e r 2 0 0 6

3. Property, plant and equipment (continued) The freehold land, prepaid lease payments (as disclosed in note 4) and biological assets (as disclosed in note 5) are stated at Directors’ valuation based on professional valuation made by a chartered surveyor on the open market basis conducted in July 1993. Subsequent additions thereafter are stated at cost. A piece of freehold land totalling 34.8 acres is leased to a company in which a Director has an interest, for 60 years from the year ended 31 December 1996. Had the freehold land been carried under the cost model, the carrying amount of the revalued freehold land would have been RM4,697,000 (2005: RM4,697,000). 4. Prepaid lease payments

Cost/Valuation

Group/Company 2006 RM’000

At 1 January 2005 Effect of adopting FRS 117

10,945

At 1 January 2005, restated and 31 December 2005/1 January 2006 Addition

10,945 2,036

At 31 December 2006

12,981

Representing items at: Cost Directors’ valuation Amortisation

2,036 10,945 12,981

At 1 January 2005 Effect of adopting FRS 117

1,491

At 1 January 2005, restated Amortisation for the year

1,491 124

At 31 December 2005/1 January 2006 Amortisation for the year

1,615 137

At 31 December 2006

1,752

Carrying amounts At 1 January 2005, restated

9,454

At 31 December 2005/1 January 2006

9,330

At 31 December 2006

11,229

The above stated prepaid lease payments (previously classified as long term leasehold land) comprise of leasehold land with unexpired lease period of more than 50 years. The basis of revaluation for prepaid lease payments is the same as disclosed in note 3. Had the prepaid lease been carried under the cost model, the carrying amount of the revalued prepaid lease would have been RM1,102,000 (2005: RM1,117,000).

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

5. Biological assets

53

Group/Company 2006 2005 RM’000 RM’000

Cost/Valuation At 1 January and 31 December

98,439

98,439

1,302 194

1,302 194

1,496

1,496

62,453 34,490

62,453 34,490

96,943

96,943

98,439

98,439

Representing items at: Cost located on: Freehold land Leasehold land Directors’ valuation of assets located on: Freehold land Leasehold land

The basis of revaluation for biological assets (previously classified as plantation development expenditure) is the same as disclosed in note 3. The carrying value of the biological assets located on freehold land and leasehold land had this asset been carried under the cost model would be as follows: Group/Company 2006 2005 RM’000 RM’000 Freehold land Leasehold land

43,240 21,429

43,240 21,429

64,669

64,669

6. Subsidiary company

Company 2006 2005 RM’000 RM’000 Unquoted shares at cost * Amount due from subsidiary company (non-trade)

-

-

11

9

The amount due from subsidiary company is unsecured, non-interest bearing and has no fixed terms of repayment. Details of the subsidiary company are as follows: Name of subsidiary

Country of incorporation

LPF Properties Sdn. Bhd.

Malaysia

*

The cost of investment in subsidiary is RM2 (2005: RM2).

Effective ownership interest 2006 2005 100%

100%

Principal activity Dormant

2006 annual report

54

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Dece m b e r 2 0 0 6

7. Associated company 2006 RM’000 Unquoted shares at cost Less: Allowance for diminution in value of investment

Group’s share of post acquisition losses

Amount due from associated company Less: Allowance for doubtful debt

Group

Company 2006 2005 RM’000 RM’000

2005 RM’000

400

400

400

400

-

-

(400)

(400)

400

400

-

-

(400)

(400)

-

-

-

-

-

-

1,380

1,380

1,380

1,380

(1,380)

(1,380)

(1,380)

(1,380)

-

-

-

-

The Group's share of the cumulative losses amounting to RM539,000 (2005: RM539,000) has not been recognised in the Group's income since commencement of consolidation in 1999 as the Group's share of losses had exceeded the carrying amount of its investment in the associated company. The losses not recognised were based on the last available audited financial statements of the associated company, which were for the financial year ended 31 December 2001. Subsequent to this, the associated company has not prepared its audited financial statements and is currently under creditors’ liquidation. The amount due from associated company is unsecured, interest free with no fixed repayment terms. Details of the associated company are as follows:

Name of company Milljet Sdn. Bhd.*

*

In creditors’ liquidation

Country of incorporation Malaysia

Effective ownership interest 2006 2005 40%

40%

Principal activity Development and marketing of new processes for crude palm oil clarification.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

55

8. Other investments Non-current In Malaysia Unquoted shares, at cost Less: Allowance for diminution in value Quoted shares, at cost

Group/Company 2006 2005 RM’000 RM’000 20 (20)

20 (20)

120

120

120

120

143

119

Market value at 31 December In Malaysia Quoted shares, at market value 9. Inventories Group/Company 2006 2005 RM’000 RM’000 At cost: Fresh fruit bunches Crude palm oil Palm kernel Seedlings Stores and materials

11 457 85 646 359

10 253 43 617 487

1,558

1,410

10. Other receivables, deposits and prepayments Included in other receivables, deposits and prepayments is a refundable earnest deposit of RM4.8 million (2005: RM4.8 million) paid as part of the terms of offer to indicate the Company’s interest for the purchase of 100% equity interest in two unquoted plantation based companies. The proposed purchase is being considered by the Board of Directors and the terms of the offer are still being negotiated by both parties. The Company has not to-date entered into any sale and purchase agreement with the offeror. 11. Cash and cash equivalents Group/Company 2006 2005 RM’000 RM’000 Deposits are placed with: Licensed banks Other financial institutions

22,400 6,000

20,000 2,500

Cash and bank balances

28,400 1,650

22,500 745

30,050

23,245

Fixed deposits amounting to RM1,500,000 (2005: RM500,000) are held under lien by one bank (2005: one bank) for banking facilities granted to the Company.

2006 annual report

56

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Decem b e r 2 0 0 6

12. Share capital Group/Company 2006 2005 RM’000 RM’000 Authorised: 150,000,000 ordinary shares of RM1 each

150,000

150,000

Issued and fully paid: 114,300,000 ordinary shares of RM1 each

114,300

114,300

13. Revaluation reserve – Group/Company The revaluation reserve is in relation to the revaluation of freehold land, prepaid lease payments (previously classified as long term leasehold land) and biological assets (previously classified as plantation development expenditure) and is stated at Directors’ valuation based on professional valuation made by a registered valuer on the open market basis conducted in July 1993. 14. Deferred tax liabilities Deferred tax liabilities are attributable to the following: Group/Company 2006 2005 RM’000 RM’000 Property, plant and equipment – Capital allowances – Revaluation Plantation development expenditure – Agricultural allowances claimed Provisions Other taxable temporary differences

282 7,968

562 8,422

3,845 (518) 79

4,101 (547) 83

11,656

12,621

15. Retirement benefits Group/Company 2006 2005 RM’000 RM’000 Balance at 1 January Provision for the year Paid during the year

1,954 240 (206)

1,843 201 (90)

Balance at 31 December

1,988

1,954

16. Revenue Revenue consists of invoiced value of crude palm oil and palm kernel sold.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

57

17. Profit before tax Group 2006 2005 RM’000 RM’000

Company 2006 2005 RM’000 RM’000

Profit before tax is arrived at after charging: Amortisation of prepaid lease payments Auditors’ remuneration: – Audit services – Other services Depreciation of property, plant and equipment Directors’ remuneration (Note 22.2): – Fees – Other emoluments Personnel expenses: – Contributions to Employees Provident Fund – Wages, salaries and others Provision for retirement benefits Property, plant and equipment written off Replanting expenditure

137

124

137

124

31 12 2,113

28 11 2,041

30 12 2,113

27 11 2,041

230 204

241 59

230 204

241 59

662 7,879 240 62 6,261

644 7,708 201 108 5,856

662 7,879 240 62 6,261

644 7,708 201 108 5,856

1 20 739 1 9

4 32 1,075 2 9

1 20 739 1 9

4 32 1,075 2 9

and after crediting: Dividend income from shares quoted in Malaysia Gain on disposal of plant and equipment Interest income from fixed deposits Interest income from vehicle loans Rental income 18. Tax expense 18.1 Components of tax expense Group/Company 2006 2005 RM’000 RM’000 Current tax expense – current year – prior year

5,071 (6)

3,728 11

5,065

3,739

(353) (612)

(416) -

(965)

(416)

4,100

3,323

Deferred taxation – reversal of temporary differences – effect of changes in tax rates

2006 annual report

58

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Decem b e r 2 0 0 6

18. Tax expense (continued) 18.2 Reconciliation of effective tax expense Group

Company 2006 2005 RM’000 RM’000

2006 RM’000

2005 RM’000

Profit for the year Total tax expense

12,682 4,100

8,286 3,323

12,683 4,100

8,287 3,323

Profit excluding tax

16,782

11,609

16,783

11,610

4,699 (612) 19 (6)

3,251 61 11

4,699 (612) 19 (6)

3,251 61 11

4,100

3,323

4,100

3,323

Tax calculated using Malaysian tax rate of 28% (2005: 28%) Effects of change in tax rate * Non-deductible expenses (Over)/Under provided in prior year

* In the Malaysian Budget 2007, it was announced that the corporate income tax rate will be reduced to 27% in Year of Assessment 2007 and to 26% in Year of Assessment 2008. Consequently, the Company’s deferred tax liabilities are measured using these tax rates. 18.3 Subject to agreement with the Inland Revenue Board, the Company has sufficient tax exempt income and Section 108 credit to frank all of its retained profits as at 31 December 2006, if paid out as dividends. 19. Earnings per share - Group The calculation of basic earnings per share at 31 December 2006 was based on the Group’s profit after tax of RM12,682,000 (2005: RM8,286,000) and 114,300,000 (2005: 114,300,000) ordinary shares in issue. Diluted earnings per share were not presented as there were no dilutive potential ordinary shares in issue. 20. Dividends – Group/Company Dividends recognised in the current year by the Company are: 2006

Interim 2006 ordinary Final 2005 ordinary

Sen per share

Total amount net of 28% tax RM’000

Date of payment

2.0 5.0

1,646 4,115

3 October 2006 12 June 2006

5,761 2005 Interim 2005 ordinary Final 2004 ordinary Special 2004 ordinary

5.0 10.0 5.0

4,115 8,230 4,115

15 September 2005 12 July 2005 12 July 2005

16,460 After the balance sheet date the following dividend was proposed by the Directors. This dividend will be recognised in subsequent financial reports upon approval by the shareholders. Sen per share Final 2006 ordinary

8

Total amount net of 27% tax RM’000 6,675

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

59

N o t e s To T h e Financial Statements - 31 December 2006

21.

Capital expenditure commitments Property, plant and equipment Contracted but not provided for and payable – Within one year Approved but not contracted for

22.

Group/Company 2006 2005 RM’000 RM’000 453

421

2,119

1,914

Related parties – Group/Company

22.1 Identity of related parties The Group has a related party relationship with its subsidiary (as disclosed in note 6), associate (as disclosed in note 7) and Directors. 22.2 Transactions with Directors (a) Directors’ remuneration Members of the Board of Directors were remunerated for their services rendered as Directors of the Company. Details of the Directors’ remuneration are as follows: Group/Company 2006 2005 RM’000 RM’000 Remuneration of Non-Executive Directors: – Fees – Other emoluments

230 204

241 59

Total

434

300

Range of remuneration

Less than RM50,000 Between RM50,000 and RM100,000 *

Number of Non-Executive Directors 2006 2005 6

7* 1

Includes Directors who resigned during the financial year.

(b) Lease of freehold land As disclosed in note 3, a piece of freehold land totalling 34.8 acres is leased to a company in which Director, Dato’ Shamsul Bahari bin Salleh Khir has an interest, for 60 years from the year ended 31 December 1996.

Perak Meat Industries Sdn. Bhd. Lease rental received

Transaction value 2006 2005 RM’000 RM’000 3

3

The transaction has been entered into in the normal course of business and has been established under negotiated terms.

2006 annual report

60 23.

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Decem b e r 2 0 0 6

Segmental reporting - Group The Group only engages in oil palm cultivation and production and sale of crude palm oil and palm kernel in Malaysia and accordingly, no segmental information is presented.

24.

Financial instruments

24.1 Financial risk management objectives and policies The main risks arising from the normal course of the Group’s and the Company’s business are interest rate risk, liquidity risk and credit risk. The Group’s and the Company’s normal practice for managing each of these risks is summarised below: Interest rate risk The Group and the Company places cash balances with reputable banks and financial institutions to generate interest income for the Group and the Company. The Group and the Company manages its interest rate risk by monitoring market rates and placing such balances on varying maturities and interest rate terms. Effective interest rates analysis: In respect of interest earning financial assets, the following table indicates their effective interest rates at the balance sheet date and the periods in which they mature or if earlier, reprice. Group/Company 2006 2005 Average effective interest rates Deposits (maturing within 1 year) (RM’000)

2.30% - 4.05%

2.25% - 3.80%

28,400

22,500

Liquidity risk In the management of liquidity risk, the Group and the Company monitor and maintain a level of cash and cash equivalents deemed adequate by the management to finance the Group’s and the Company’s operations and mitigate the effects of fluctuations in cash flows. Credit risk The Group’s and the Company’s primary exposure to credit risk arises through its trade receivables. The management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Appropriate credit evaluations are performed on all customers requiring credit from the Company. Concentration of credit risk on trade receivables of the Group and the Company is limited to a small number of customers as is common to the industry. At the balance sheet date, 3 (2005: 2) customers owed a majority of the Group’s and Company’s trade receivables, which had been received after the balance sheet date. Other than the concentration of credit risk described above, the Group and Company are not materially exposed to any individual customer. The maximum exposure to credit risk is represented by the carrying amount of each financial asset presented in the balance sheet.

2006 annual report

LADANG PERBADANAN-FIMA BERHAD

N o t e s To T h e Financial Statements - 31 December 2006

24.

61

Financial instruments (continued)

24.2 Fair value of recognised financial instruments In respect of cash and cash equivalents, trade and other receivables and trade and other payables, the carr ying amounts approximate fair value due to the relatively shor t term nature of these financial instruments. For the unquoted shares as disclosed in note 8 to the financial statements, it was not practicable to estimate the fair value of this unquoted investment as the information for the said fair value was not available. The carrying amount to this investment had been fully allowed for in previous years. 25.

Significant events As disclosed in the financial statements of the previous year, there was a material litigation in respect of the injunction obtained by Glamour Green Sdn. Bhd. (“GGSB”), a shareholder of the Company restraining Kuala Lumpur Kepong Berhad (“KLK”) and its wholly owned subsidiary, Ablington Holdings Sdn. Bhd. (“AHSB”) from implementing the Mandatory General Offer (“MGO”). On 3 April 2006, the High Court dismissed GGSB’s claims and KLK/AHSB’s counter-claim against the Company under the Suit was allowed. Inter-alia, the ruling lifted the injunction which restrained AHSB from making the MGO. GGSB applied for an injunction pending appeal, which was heard and dismissed by the High Court on 27 April 2006. GGSB appealed against the High Court’s decision and obtained an interim injunction/stay of proceedings in the Court of Appeal on 28 April 2006 pending the hearing and disposal of the Appeal. The Company also filed an Appeal on 28 April 2006 against the decision of the High Court. On 19 May 2006, the Court of Appeal declared that the sale of 35 million shares in the Company to AHSB was null and void and of no effect and consequently, AHSB/KLK cannot proceed with the MGO. The Court of Appeal also dismissed the counter-claim filed by KLK/AHSB against the Company. On 20 July 2006, the Board of Directors of the Company received a Notice of Conditional MGO from Commerce International Merchant Bankers Berhad given for and on behalf of AHSB and on 24 July 2006, GGSB managed to obtain an ex-parte interim injunction from the High Court to restrain the sale and the MGO. Pursuant to the Order, the Board of Directors will not be taking further steps on the Notice of Conditional MGO issued by AHSB until any further Order of the said High Court is received.

2006 annual report

62 26.

LADANG PERBADANAN-FIMA BERHAD

Notes To T h e Financial S t a t e m e n t s - 31 Dece m b e r 2 0 0 6

Comparative figures Certain comparative figures have been reclassified to conform to the presentation requirements of FRS 101, Presentation of Financial Statements including plantation development expenditure amounting to RM98,439,000 that has been reclassified as biological assets. Following the early adoption of FRS 117, Leases, long term leasehold land amounting to RM9,330,000 was reclassified from property, plant and equipment to prepaid lease payments. Group/Company As As previously restated stated 2005 2005 RM’000 RM’000 Balance sheets Property, plant and equipment Prepaid lease payments Biological assets Plantation development expenditure

40,814 9,330 98,439 -

50,144 98,439

LADANG PERBADANAN-FIMA BERHAD Company No. 52682-H Incorporated in Malaysia

P R OX Y F O R M 2 7 TH A N N UA L GENERAL MEETING

No. of shares held

I/We

of

being member of LADANG PERBADANAN-FIMA BERHAD, hereby appoint of or failing him

of as

my/our proxy to vote for me/us on my/our behalf at the 27th Annual General Meeting of the Company to be held at Crystal 1 Ballroom, Impiana Casuarina Hotel, 18 Jalan Raja Dr. Nazrin Shah, 30250 Ipoh, Perak, Malaysia on Friday, 22 June 2007 at 10:30 a.m. and at any adjournment thereof. My/our proxy is to vote as indicated below: No.

Ordinary Resolutions

For

1.

To receive and consider the Audited Financial Statements for the financial year ended 31 December 2006 and the Reports of the Directors and Auditors thereon.

2.

To sanction the payment of a final dividend of 8 sen less 27% tax for the financial year ended 31 December 2006 as recommended by the Board.

3.

To re-elect Encik Kamisan bin Suja’ as Director.

4.

To re-elect Mr. Yeoh Hock Thong as Director.

5.

To approve the payment of Directors’ fees for the financial year ended 31 December 2006.

6.

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

Against

(Please indicate with a “X” in the space provided as to how you wish your votes to be cast.)

Dated this

day of

2007

Signature / Company Seal

NOTES : (i)

A member of the Company entitled to attend and vote at this meeting is also entitled to appoint one or more proxies to attend and vote in his/her stead. Where a member appoints two proxies or more, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy.

(ii)

A proxy need not be a member of the Company.

(iii)

The Proxy Form must be signed by the appointer or his/her attorney duly authorised in writing or in the case of a corporation, executed under its common seal or under the hand of an officer or attorney duly authorised.

(iv)

The Proxy Form should be completed and deposited at the Registered Office of the Company at No. 10, Persiaran Gopeng Satu, 31350 Ipoh, Perak, Malaysia not less than 48 hours before the time fixed for the Meeting.

Fold this flap for sealing

STAMP

THE COMPANY SECRETARY

LADANG PERBADANAN-FIMA BERHAD NO. 10, PERSIARAN GOPENG SATU 31350 IPOH PERAK MALAYSIA

2nd fold here

1st fold here