Guthrie Annual Report 2006 by Ah Meng Ang

ANNUAL REPORT

KUMPULAN GUTHRIE BERHAD (4001-P)

(4001-P)

2006

Wisma Guthrie, 21 Jalan Gelenggang, Damansara Heights, 50490 Kuala Lumpur, Malaysia. Tel: 603-2094 1644 Fax: 603-2095 7934

ANNUAL REPORT

KUMPULAN GUTHRIE BERHAD

KUMPULAN GUTHRIE BERHAD (4001-P)

2006

date : 7 June 2007 venue : Ballroom, Mezzanine Floor Hotel Equatorial Jalan Sultan Ismail 50250 Kuala Lumpur time : 10.30 a.m.

Contents

46th

Annual General Meeting

Financial Calendar

Notice of Annual General Meeting

Group Performance Highlights

Group Quarterly Performance

Group Quarterly Performance Highlights

Group Five Year Financial Review

Group Five Year Financial Highlights

Group Five Year Plantation Review

Group Five Year Plantation Highlights

Group Five Year Property Highlights

Employees and Productivity

Statement of Value Added

Distribution of Value Added

Group Structure

Corporate Information

our vision

FINANCIAL YEAR END ......................31 December 2006

To be a leading global producer of palm oil and a reputable poperty developer.

ANNOUNCEMENT OF RESULTS First Quarter....................................................30 May Second Quarter..........................................29 August Third Quarter.........................................29 November Fourth Quarter.........................................28 February

2006 2006 2006 2007

PUBLISHED ANNUAL REPORT AND FINANCIAL STATEMENTS Despatch Date................................................15 May 2007 ANNUAL GENERAL MEETING .......................7 June 2007

our values • Ethical • Efficient & Effective • Quality

• Caring • Trust & Cooperation

our mission We are committed to:

DIVIDENDS Interim Declaration..................................................29 August 2006 Record Date.........................................18 September 2006 Payment Date ......................................29 September 2006 Final Recommendation ....................................28 February 2007 Record Date...................................................14 June 2007 Payment Date ................................................21 June 2007

•

Exceeding CUSTOMERS’ expectations through innovative and high quality products and services.

•

Providing career development opportunities for EMPLOYEES to realise their potential.

•

Continuously enhancing SHAREHOLDERS value.

•

Being a responsible corporate citizen towards the environment and contributing to the socio-economic development of the COUNTRIES in which we operate.

Profile of Directors

Research & Development

Management Team

Total Quality & Environmental Management

Audit Committee

Information & Communications Technology

Statement on Corporate Governance

Organisational Capabilities & Human Capital

Statement on Internal Control

Corporate Social Responsibility

Enterprise-Wide Risk Management

Corporate Highlights

Chairman’s Statement

Group Chief Executive’s Review

History

Financial Statements

Economic Review • Malaysia • Indonesia

52 53

Operations Review

Properties of the Group

220

Group Area Statement

236

Analysis of Shareholdings

237 241 242

• Plantation Malaysia

Share Price and Volume Traded

• Plantation Indonesia

Group Directory

• Property

Proxy Form

Cover Rationale Guthrie is home to one of the world’s most advanced new planting material R&D centres. It is also at the forefront in the production of bi-clonal seeds, the Group’s new planting material, to strengthen the next threshold of excellence in the Plantation Industry.

Production of Guthrie’s Bi-Clonal Seeds CLONAL Dura

CLONAL Pisifera

On the cover, the blue circle encapsulates a symbolic depiction of a critical stage in bi-clonal oil palm fertilisation: Pollen from the clonal PISIFERA onto the clonal DURA fusing Guthrie’s new plant breeding technology. The symbolic depiction on the cover signifies the fertilisation of new ideas within the Guthrie work environment that will bring forth new thoughts, processes and innovations that will form the thrust in the Group’s Next Threshold of Excellence. The next level of Guthrie’s excellence will be characterised by stronger R&D programmes, new strategic management approach in its Value Chain and a new competency development model. The Group has completed the turnaround phase of its transformation programme in 2006, a challenging period during which it has productively consolidated its position, changed processes and systems, and raised its level for higher achievement in line with the G-Excellence programme, and through a performance-driven work culture. The Group is now poised to take on the next threshold of excellence, a level that will create new opportunities in a vast and dynamic operating environment. Akin to creating new heights in R&D, the Group will flourish to deliver new standards of services and products to create new levels of KPI and value to its stakeholders.

Fertilisation

BI-CLONAL Seeds

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Forty-Sixth Annual General Meeting of Kumpulan Guthrie Berhad will be held at the Ballroom, Mezzanine Floor, Hotel Equatorial, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia on Thursday, 7 June 2007 at 10.30 a.m. for the following purposes:

ORDINARY BUSINESS:

To receive and adopt the Report of the Directors and the Audited Financial Statements for the financial year ended 31 December 2006 and the Auditors’ Report thereon.

To approve the payment of a final dividend of 10% (10 sen per RM1.00 share) comprising: • 6 sen per RM1.00 share (Tax Exempt) • 4 sen per RM1.00 share less 27% Malaysian income tax

To approve the Directors’ fees and remuneration as disclosed in the Audited Financial Statements for the financial year ended 31 December 2006.

To re-elect the following Directors who retire by rotation in accordance with Article 102 of the Company’s Articles of Association: – Datuk Mohamed Adnan Ali – Dato’ Muhammad Nawawi Arshad

To consider and if thought fit, to pass the following Resolution: “That pursuant to Section 129(6) of the Companies Act, 1965, Raja Tan Sri Muhammad Alias Raja Muhammad Ali be reappointed as Director of the Company to hold office until the next Annual General Meeting.”

Kumpulan Guthrie Berhad

To reappoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESS: To consider and, if thought fit, to pass the following Ordinary Resolutions:(a) AUTHORITY TO ISSUE AND ALLOT SHARES “That, subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby authorised pursuant to Section 132D of the Companies Act, 1965 to issue and allot shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed ten percent (10%) of the issued share capital of the Company for the time being.”

Notice

(b) PROPOSED ALLOCATION OF OPTIONS TO DATO’ ABD WAHAB MASKAN PURSUANT TO THE KUMPULAN GUTHRIE BERHAD (“KGB”) SECOND EMPLOYEES’ SHARE OPTION SCHEME (“the Scheme”) “THAT, subject to the approvals of the relevant authorities, the Company and the Board of Directors be and are hereby authorised at any time, and from time to time, to offer and to grant Dato’ Abd Wahab Maskan, being an Executive Director and Group Chief Executive Officer of the Company, options to subscribe for up to a maximum allotment of 240,000 new KGB shares, subject always to such terms and conditions and/or adjustments which may be made in accordance with the provisions of the Bye-Laws of the Scheme.” 8.

To consider any other ordinary business of the Company of which due notice shall have been received.

NOTICE OF DIVIDEND ENTITLEMENT NOTICE IS ALSO HEREBY GIVEN that the final dividend of 10% comprising 6 sen per RM1.00 share (Tax Exempt) and 4 sen per RM1.00 share less Malaysian income tax of 27%, if approved by the shareholders at the forthcoming Annual General Meeting, will be paid on 21 June 2007 to shareholders whose names appear in the Register of Members (for those exempted from mandatory deposit) and the Record of Depositors on 14 June 2007.

FURTHER NOTICE IS HEREBY GIVEN that a Depositor shall qualify for dividend entitlement only in respect of: • Shares deposited into the Depositor’s Securities Account before 12.30 p.m. on 12 June 2007 in respect of shares which are exempted from mandatory deposit; • Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 14 June 2007 in respect of ordinary transfers; and • Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By Order of the Board

MORIAMI MOHD (MAICSA 7031470) Company Secretary 15 May 2007 Kuala Lumpur, Malaysia

Annual

General

Meeting

Explanatory Notes on Special Business: (a) The Ordinary Resolution proposed under item 7 of the Agenda, if passed, will empower the Directors to issue shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company, subject to compliance with regulatory requirements. The approval is sought to avoid any delay and cost in convening a general meeting for such issuance of shares. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next Annual General Meeting. (b) The Scheme which was approved by the shareholders at the EGM of the Company held on 18 June 2003, came into effect on 30 July 2003 and will be in force for a period of five years. Dato’ Abd Wahab Maskan, the Group Chief Executive of the Company, became eligible to participate in the Scheme as at 2 January 2007 upon completion of his three (3) years service with the Company as required by the Bye-Laws of the Scheme. He has no family relationship with and is not related to any director and/or major shareholder of the Company. Resolution No. 7 (b), if passed, will enable the Company to offer and grant Dato’ Abd Wahab Maskan up to a maximum of 240,000 options under the Scheme, subject to the terms and conditions of the Bye-Laws of the Scheme. Note on Appointment of Proxy: A member entitled to attend and vote at the Annual General Meeting may appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company. The instrument appointing the proxy must be deposited with the Company’s Share Registrar, Symphony Share Registrars Sendirian Berhad, Level 26, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. The lodging of the proxy form will not preclude shareholders from attending and voting in person at the meeting should they subsequently wish to do so.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING A total of twelve (12) Board of Directors’ Meetings of Kumpulan Guthrie Berhad were held during the financial year ended 31 December 2006. The Directors who are standing for re-election and reappointment and details of their attendance at the Board Meetings are as follows: i. Datuk Mohamed Adnan Ali, who is standing for re-election, attended all the twelve (12) Board Meetings held in 2006. ii Dato’ Muhammad Nawawi Arshad, who is standing for re-election, attended eleven (11) out of twelve (12) Board Meetings held in 2006. iii. Raja Tan Sri Muhammad Alias Raja Muhammad Ali, who is standing for reappointment, attended all the twelve (12) Board Meetings held in 2006. Further details of Directors who are standing for re-election and reappoinment, are set out on pages 18, 21 and 22 of this Annual Report. Annual Report 2006

GROUP PERFORMANCE HIGHLIGHTS

2006

2005

% +/(-)

FINANCIAL PERFORMANCE Continuing Operations: Revenue (RM’000) Operating profit (RM’000) Profit before taxation (RM’000) Profit after taxation (RM’000) Loss from discontinued operations (RM’000) Profit attributable to equity holders (RM’000)

2,406,513 766,140 605,463 446,618 (12,908) 284,194

1,980,769 419,480 263,008 152,452 (10,053) 48,844

21.5 82.6 130.2 193.0 28.4 481.8

Total borrowings (RM’000) Average equity attributable to equity holders (RM’000) Equity attributable to equity holders (RM’000)

2,759,374 2,993,290 3,127,546

3,062,692 2,904,291 2,859,033

(9.9) 3.1 9.4

Operating profit on revenue (%) Pre-tax profit on average equity attributable to equity holders (%) Return on equity (%)

31.8 20.2 9.1

21.2 9.1 1.7

50.0 122.0 435.3

Basic earnings per share (sen) Dividend per share – gross (sen) Dividend cover (number of times) Debt to equity ratio (number of times) Net tangible assets per share (RM)

28.1 16.0 2.1 0.9 2.81

4.9 10.0 0.7 1.1 2.58

473.5 60.0 200.0 (18.2) 8.9

5.3 2.8

5.4 2.3

(1.9) 21.7

1,847,629 429,147

1,521,735 484,610

21.4 (11.4)

Yield per mature hectare (tonnes FFB)

20.7

17.3

19.7

Extraction rates (%) – palm oil – palm kernel

20.2 5.3

20.4 5.7

(1.0) (7.0)

Average selling prices (RM per tonne ex-mill) – palm oil – palm kernel

1,460 884

1,377 1,025

6.0 (13.8)

Profit per mature hectare (RM)

2,771

1,887

46.8

2,633,490 294,257

2,436,829 232,711

8.1 26.4

Yield per mature hectare (tonnes FFB)

16.5

15.5

6.5

Extraction rates (%) – palm oil – palm kernel

22.9 4.4

22.9 4.0

– 10.0

Average selling prices (RM per tonne ex-mill) – palm oil – palm kernel

1,392 618

1,276 753

9.1 (17.9)

Profit per mature hectare (RM)

1,906

1,576

20.9

Revenue per RM of employment cost (RM) Value added per RM of employment cost (RM) PLANTATION PERFORMANCE – OIL PALM Malaysia Crop – FFB (tonnes) – own – outside

Indonesia Crop – FFB (tonnes) – own – outside

Kumpulan Guthrie Berhad

GROUP QUARTERLY PERFORMANCE

FINANCIAL PERFORMANCE Continuing Operations: Revenue (RM’000) Operating profit (RM’000) Profit before taxation (RM’000) Profit attributable to equity holders (RM’000) Basic earnings per share (sen) Dividend per share – gross (sen) PLANTATION PRODUCTION – OIL PALM Malaysia Crop – FFB (tonnes) – own – outside Mill production (tonnes) – palm oil – palm kernel Indonesia Crop – FFB (tonnes) – own – outside Mill production (tonnes) – palm oil – palm kernel

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Year 2006

398,328 198,992 156,558 97,066 9.7 -

634,175 148,538 106,933 32,901 3.2 6.0

583,526 162,959 123,631 59,920 5.9 -

790,484 255,651 218,341 94,307 9.3 10.0

2,406,513 766,140 605,463 284,194 28.1 16.0

372,260 95,945

518,489 107,026

539,575 131,036

417,305 95,140

1,847,629 429,147

89,094 24,878

116,432 31,077

128,124 32,305

97,502 25,485

431,152 113,745

623,071 91,378

767,486 77,824

717,121 59,687

525,812 65,368

2,633,490 294,257

156,140 28,365

180,410 34,450

172,291 32,395

132,514 26,380

641,355 121,590

Note: Certain figures for the respective quarters have been restated to conform with the presentation for the year.

GROUP QUARTERLY PERFORMANCE HIGHLIGHTS

Profit Before Taxation

100

5.9

0 Q1

(Sen)

9.3

9.7

0 Q2

8 6

3.2

123.6

106.9

156.6

320

150

(RM Million)

200

218.3

640 (RM Million)

583.5

250

160

Basic Earnings Per Share

800

480

398.3

634.2

790.5

Revenue

0 Q1

Annual Report 2006

GROUP FIVE YEAR FINANCIAL REVIEW 2006 RM'000

2005 RM'000

2004 RM'000

2003 RM'000

2002 RM'000

1,782,727 22,821 567,828 33,137

1,542,527 21,476 395,132 950 1,014 19,670

1,547,298 22,143 563,550 7,809 122,095 33,531

1,324,112 17,696 393,200 269,128 29,522 722,049 56,017

1,033,008 14,832 348,507 534,307 18,913 839,593 49,367

2,406,513

1,980,769

2,296,426

2,811,724

2,838,527

RESULTS Plantation Agricultural services Property development Land held for property development Manufacturing General trading Investment and Others

526,556 12,104 168,048 (1,822) (961) 62,215

261,163 15,286 176,198 218 (3,679) (29,706)

273,530 14,098 179,392 (3,208) 5,782 (1,096)

300,920 9,018 93,739 221,739 (8,286) (26,162) 21,087

229,643 8,005 74,423 432,168 (9,928) (805) (13,064)

Operating Profit Profit before taxation Profit from continuing operations (Loss)/profit from discontinued operations Profit attributable to equity holders

766,140 605,463 446,618 (12,908) 284,194

419,480 263,008 152,452 (10,053) 48,844

468,498 350,749 285,682 4,045 160,442

612,055 490,193 322,761 (20,633) 138,834

720,442 553,213 369,281 (2,247) 302,488

2,530,776 2,434,846 342,357 266,200 254,558 16,700 1,962 1,773 68,347 18,018 15,106 152,050 1,964,910 678,900

2,535,812 2,480,611 347,202 399,074 585,742 261,510 13,795 2,550 17,550 23,873 195,777 1,837,326 -

2,547,809 2,679,207 356,131 343,790 657,193 276,696 14,141 2,550 61,968 18,552 16,659 219,616 2,040,084 -

2,515,704 2,991,896 366,998 321,859 451,276 296,149 11,261 2,550 123,936 23,679 14,045 180,882 1,811,313 -

2,573,982 2,558,262 413,311 382,348 157,349 325,586 9,628 4,550 50,166 23,070 10,562 219,816 1,827,729 -

8,746,503

8,700,822

9,234,396

9,111,548

8,556,359

REVENUE FROM CONTINUING OPERATIONS Plantation Agricultural services Property development Land held for property development Manufacturing General trading Investment and Others

ASSETS Property, plant and equipment Plantation development expenditure Prepaid lease payments Land held for property development Concession asset Goodwill on consolidation Associated companies Jointly controlled entity Other investments Long-term trade receivables Advances for Plasma PIR-Trans projects Advances for KKPA projects Deferred tax assets Current assets Assets of disposal group classified as held for sale

Kumpulan Guthrie Berhad

GROUP FIVE YEAR FINANCIAL REVIEW (cont’d.) 2006 RM'000

2005 RM'000

2004 RM'000

2003 RM'000

2002 RM'000

EQUITY AND LIABILITIES Share capital Reserves

1,021,449 2,106,097

1,006,939 1,852,094

1,005,419 1,944,130

1,001,207 2,071,010

1,001,125 1,801,497

Equity attributable to equity holders Minority interests

3,127,546 1,568,042

2,859,033 1,536,534

2,949,549 1,541,987

3,072,217 1,610,683

2,802,622 1,524,765

Total Equity

4,695,588

4,395,567

4,491,536

4,682,900

4,327,387

2,450,435 675,435 8,123 24,946 882,870

2,620,673 708,170 1,785 15,384 959,243

2,502,855 750,797 9,922 9,938 1,469,348

2,061,729 287,392 711,189 15,748 9,733 1,342,857

1,977,972 127,263 615,415 1,498 8,132 1,498,692

9,106

8,746,503

8,700,822

9,234,396

9,111,548

8,556,359

Liabilities: Long-term borrowings Long-term payable Deferred tax liabilities Deferred income Retirement benefits Current liabilities Liabilities directly asociated with assets of disposal group classified as held for sale

Note: Certain comparative figures have been restated to conform with current year’s presentation.

GROUP FIVE YEAR FINANCIAL HIGHLIGHTS

7 0

’04

’03

’02

’05

’04

’03

1.2

0.6

(RM)

2.77

2.66

2.58

2.47

1.8

0 ’06

2.4

8.0

10.0

2.81

3.0

(Sen)

28 16.0

14 13.9

16.0 ’05

Net Tangible Assets Per Share

4.9 ’06

Gross Dividend Per Share

(Sen)

28.1

30.2

Basic Earnings Per Share

’02

0.0 ’06

’05

’04

’03

’02

Annual Report 2006

GROUP FIVE YEAR PLANTATION REVIEW 2006

2005

2004

2003

2002

1,847,629 429,147

1,521,735 484,610

1,428,825 460,760

1,434,211 343,297

1,243,344 230,017

89,302 9,758 99,060

87,918 12,180 100,098

80,717 19,346 100,063

73,214 27,237 100,451

69,313 30,937 100,250

20.7

17.3

17.7

19.6

17.9

431,152 113,745

406,274 112,712

380,929 105,317

348,210 100,561

303,683 84,868

20.2 5.3

20.4 5.7

20.5 5.7

20.1 5.8

20.7 5.8

Average selling prices (RM per tonne ex-mill) – palm oil – palm kernel

1,460 884

1,377 1,025

1,595 1,013

1,526 711

1,238 652

Profit per mature hectare (RM)

2,771

1,887

2,757

2,673

1,226

2,633,490 294,257

2,436,829 232,711

2,076,703 191,859

1,667,888 190,036

1,502,899 144,811

159,290 11,221 170,511

157,384 9,147 166,531

156,983 4,677 161,660

151,024 11,728 162,752

145,168 17,372 162,540

16.5

15.5

13.2

11.0

10.4

641,355 121,590

584,510 103,170

473,472 81,321

374,987 68,569

329,524 60,465

22.9 4.4

22.9 4.0

23.2 4.0

23.0 4.2

22.7 4.2

Average selling prices (RM per tonne ex-mill) – palm oil – palm kernel

1,392 618

1,276 753

1,473 824

1,460 568

1,273 576

Profit per mature hectare (RM)

1,906

1,576

1,555

1,037

778

OIL PALM – MALAYSIA Crop – FFB (tonnes) – own – outside Mature hectares Immature hectares Total planted hectares Yield per mature hectare (tonnes FFB) Mill production (tonnes) – palm oil – palm kernel Extraction rates (%) – palm oil – palm kernel

OIL PALM – INDONESIA Crop – FFB (tonnes) – own – outside Mature hectares Immature hectares Total planted hectares Yield per mature hectare (tonnes FFB) Mill production (tonnes) – palm oil – palm kernel Extraction rates (%) – palm oil – palm kernel

Kumpulan Guthrie Berhad

GROUP FIVE YEAR PLANTATION HIGHLIGHTS MALAYSIA

INDONESIA

Oil Palm Planted Area/ FFB Production

Production (’000) Tonnes

Yield Per Mature Hectare/ Extraction Rates (Tonnes FFB/%)

1,502.9

1,667.9 17.4

Mature Area (’000) Hectares

Production (’000) Tonnes

Yield Per Mature Hectare/ Extraction Rates (Tonnes FFB/%)

22.7

23.0

23.2

22.9

15.5

16.5

10.4

11.0

13.2

15 10 5 4.2

4.0

4.2

5 4.4

5.8

5.7

(Tonnes/%)

5.3

20.7

17.9

19.6 20.1

20.5

20.4

17.3

20.2

17.7

20.7

0 ’04

’03

Yield Per Mature Extraction Rates (%) Hectare (Tonnes FFB) - Palm Oil

’02

’06

Extraction Rates (%) - Palm Kernel

Average Selling Prices Realised (Ex-Mill) For Palm Oil And Palm Kernel (RM)

’04

’03

Yield Per Mature Extraction Rates (%) Hectare (Tonnes FFB) - Palm Oil

’02

Extraction Rates (%) - Palm Kernel

Average Selling Prices Realised (Ex-Mill) For Palm Oil And Palm Kernel (RM) 1,800 1,440

1,273

1,238

1,440

1,460

1,392

1,526

1,595

1,800

1,377

1,460

’05

1,473

’05

1,276

’06

576

824

753

720 568

360

618

652

884

711

720

1,080 (RM)

1,013

1,025

1,080

0 ’06

Palm Oil (RM Per Tonne)

’05

’04

’03

Palm Kernel (RM Per Tonne)

(’000 Tonnes)

145.2

151.0

157.0

2,076.7 11.7

9.1

Immature Area (’000) Hectares

600

’02

(Tonnes/%)

Mature Area (’000) Hectares

1,200

’02

’03

’04

’05

’06

1,800

(RM)

Immature Area (’000) Hectares

’02

’03

’04

’05

157.4

400

0 ’06

4.7

800

120

2,400

2,436.8

1,200

2,633.5

160

3,000

159.3

69.3

1,243.3

1,600 (’000 Hectares)

27.2

19.3

200

11.2

9.8

12.2

30.9

2,000

(’000 Tonnes)

73.2 1,434.2

80.7

1,428.8

1,521.7

87.9

89.3

80 (’000 Hectares)

1,847.6

100

360 0

’06

Palm Oil (RM Per Tonne)

’05

’04

’03

’02

Palm Kernel (RM Per Tonne)

Annual Report 2006

GROUP FIVE YEAR PROPERTY HIGHLIGHTS Operating Profit

Operating Profit Margin

31.8

21.3

23.8

74.4

29.6

40 0

’02

’03

’04

’05

(RM Million)

120

130

’06

44.6

179.4

176.2

168.0

160

93.7

260

(RM Million)

348.5

393.2

395.1

390

200

520

563.6

567.8

650

’04

’05

’06

’02

’03

’04

’05

’06

EMPLOYEES AND PRODUCTIVITY Employees by Classification

Employees by Ethnic Composition

Workers

Bumiputra

3,077

3,495

205

’05

’06

Chinese

Indian

Others

Productivity - Value Added 3.0

2.4

1.8

30 27.0

1.2

0 ’06

’05

Per RM Employment Cost (RM)

Kumpulan Guthrie Berhad

’06

Per Employee (RM’000)

’05

1.2 0.6

12 6

0 ’06

’05

Per RM Employment Cost (RM)

’06

Per Employee (RM’000)

’05

(RM’000)

18 15.2

2.4

(RM)

36.0

(RM)

3.6

(RM’000)

2.3

50.6

5.4

2,840

3,443

11,000

168

3,095

821

11,000 0

6.0 5.3

33,000 22,000

Productivity - Revenue

4.8

44,000

22,000

’05

Non-Executive Staff

48,282

41,108

44,000

2.8

Executive Staff

55,000

33,000

2,967

831

43,761

51,143

55,000

’06

10 0

’02

’03

(%)

Revenue

STATEMENT OF VALUE ADDED 2006 RM'000

2005 RM'000

VALUE ADDED Revenue Purchase of goods and services

2,406,513 (962,964)

1,980,769 (985,371)

Value added by the Group Finance expense Share of results in associated companies Share of results in a jointly controlled entity

1,443,549 (163,387) 2,748 (38)

995,398 (157,347) 875 -

Value added available for distribution

1,282,872

838,926

458,186

366,534

158,845

110,556

135,005 149,516

72,495 93,555

232,131

219,437

149,189

(23,651)

1,282,872

838,926

DISTRIBUTION To Employees Employment cost To Government Taxation To Shareholders Dividends Minority interest Retained for re-investment Depreciation / Amortisation Retained for future growth Retained profit / (loss)

DISTRIBUTION OF VALUE ADDED (RMâ&#x20AC;&#x2122;000)

2006

2005

458,186

To Employees - Employment Cost

366,534

158,845

To Government - Taxation

110,556

135,005

149,516

To Shareholders - Dividends - Minority Interest

232,131

72,495

93,555 219,437

Retained for Re-investment - Depreciation / Amortisation

149,189

Retained for Future Growth - Retained Profit / (Loss)

(23,651)

Annual Report 2006

GROUP STRUCTURE KUMPULAN GUTHRIE BERHAD (Listed on Bursa Malaysia)

54.53%

54.77%

HIGHLANDS & LOWLANDS BERHAD (Listed on Bursa Malaysia)

45.23%

100%

Kumpulan Tebong Sdn. Berhad

100%

Kumpulan Sua Betong Sdn. Berhad

57.85%

GUTHRIE PROPERTY DEVELOPMENT HOLDING BERHAD

100%

GUTHRIE ROPEL BERHAD (Listed on Bursa Malaysia)

Syarikat Pembangunan Hartanah Guthrie Sdn. Berhad

100%

Kumpulan Temiang Sdn. Berhad

100% Augsburg (M) Sdn. Berhad

100%

Guthrie Ropel Development Sdn. Berhad

100% Paralimni Sdn. Berhad 100% Vicworld (M) Sdn. Berhad

100%

Syarikat Jeleta Bumi Sdn. Berhad

100%

HRU Sdn. Berhad

100%

Sanguine (Malaysia) Sdn. Berhad

24%

Boustead Bulking Sdn. Berhad

100%

Guthrie Property Management Sdn. Berhad

Note: Companies listed above are in respect of those in active operations as at 15 May 2007. The list of the companies in the Group is available in Note 7 to the Financial Statements on pages 129 to 138.

Kumpulan Guthrie Berhad

Group

100%

Kumpulan Linggi Sdn. Berhad

100%

Kumpulan Jerai Sdn. Berhad

100%

Kumpulan Kamuning Sdn. Berhad

100%

Harvard Jerai Development Sdn. Berhad 99% Harvard Golf Resort (Jerai) Berhad

100%

Guthrie International Investments (L) Ltd. – Labuan

100%

Kumpulan Jelei Sdn. Berhad 100% Mulligan International BV – Netherlands

Harvard Hotel (Jerai) Sdn. Berhad

99.999% 100%

Guthrie Export Sdn. Berhad 50.7%

100%

Guthrie Plantation & Agricultural Services Sdn. Berhad

100%

Guthrie Biotech Laboratory Sdn. Berhad

100%

Guthrie Wood Industry Sdn. Berhad

Malaysia Land Development Company Berhad

100%

Guthrie Landscaping Sdn. Berhad

100%

The Eden Bungalow Association Sdn. Berhad

PT MINAMAS GEMILANG

0.001%

(Indonesia)

PT Minamas Gemilang and PT Anugerah Sumbermakmur have direct interest of between 50% and 100% in 24 companies in Indonesia.

100% Genting View Resort Management Sdn. Berhad 60% Genting View Resort Development Sdn. Berhad

Structure

99.999%

PT ANUGERAH SUMBERMAKMUR

0.001%

(Indonesia)

100%

Guthrie Tapis Sdn. Berhad 95% PT Guthrie Pecconina Indonesia – Indonesia

100%

Guthrie Technologies Sdn. Berhad

100%

The Whittington Hill Bungalow Association

100%

Guthrie Harta (Damansara) Sdn. Berhad

100%

Guthrie Siam Sdn. Berhad 49% Muang Mai Guthrie Public Company Limited – Thailand

Annual Report 2006

CORPORATE INFORMATION

Board Committees Audit Committee Datuk Khoo Eng Choo (Chairman) Datuk Mohamed Adnan Ali Dato’ Muhammad Nawawi Arshad

Board of Directors

Remuneration Committee

CHAIRMAN Tan Sri Dato’ Dr. Wan Mohd. Zahid Mohd. Noordin

Datuk Mohamed Adnan Ali

(appointed as Chairman on 18.7.2006)

Raja Tan Sri Muhammad Alias Raja Muhammad Ali (Chairman)

Datuk Khoo Eng Choo

Nomination Committee

Directors

Tan Sri Dato’ Dr. Wan Mohd. Zahid Mohd. Noordin (Chairman) Datuk Khoo Eng Choo

Dato’ Abd Wahab Maskan (Group Chief Executive)

Datuk Alladin Hashim

Raja Tan Sri Muhammad Alias Raja Muhammad Ali

ESOS* Committee

Datuk Nik Mohamed Affandi Nik Yusoff **

Datuk Nik Mohamed Affandi Nik Yusoff (Chairman)

Datuk Mohamed Adnan Ali

Datuk Alladin Hashim *(Employees’ Share Option Scheme)

Datuk Alladin Hashim Datuk Khoo Eng Choo * Dato’ Muhammad Nawawi Arshad * *

Independent Directors

** redesignated as Independent Director on 12.1.2007

Kumpulan Guthrie Berhad

Note: The Executive Committee and Finance & Tender Committee were abolished on 29.8.2006

Corporate

Company Secretary Registered Office

Share Registrar

Auditors

Information

Moriami Mohd (MAICSA 7031470) Wisma Guthrie No. 21, Jalan Gelenggang Damansara Heights 50490 Kuala Lumpur, Malaysia Telephone : 603-2094 1644 Facsimile : 603-2095 7934 Website : www.guthrie.com.my Symphony Share Registrars Sendirian Berhad Level 26, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia Telephone : 603-2721 2222 Facsimile : 603-2721 2530 / 603-2721 2531 Ernst & Young Level 23A, Menara Milenium Jalan Damanlela Pusat Bandar Damansara 50490 Kuala Lumpur, Malaysia Telephone : 603-7495 8000 Facsimile : 603-2095 9078

Principal Bankers Malayan Banking Berhad Bumiputra-Commerce Bank Berhad RHB Bank Berhad HSBC Bank Malaysia Berhad

Place of Incorporation and Domicile Malaysia

Stock Exchange Listing Form of Legal Entity Incorporated on 25 November 1960 as a private limited company under the Companies Act, 1965. Converted to a public company on 2 December 1987.

Listed on the Main Board of Bursa Malaysia Securities Berhad on 25 August 1989.

Annual Report 2006

TAN SRI DATO’ DR. WAN MOHD. ZAHID

DATO’ ABD WAHAB MASKAN

MOHD. NOORDIN

Chairman

Kumpulan Guthrie Berhad

Group Chief Executive

PROFILE OF DIRECTORS TAN SRI DATO’ DR. WAN MOHD. ZAHID MOHD. NOORDIN

DATO’ ABD WAHAB MASKAN

Tan Sri Dato’ Dr. Wan Mohd. Zahid Mohd. Noordin, aged 67, Malaysian, has been a Non-Independent Non-Executive Director since 20 May 2002. He was appointed as Chairman of Kumpulan Guthrie Berhad on 18 July 2006. He is also Chairman of the Nomination Committee of the Board of Kumpulan Guthrie Berhad. He attended all the twelve (12) Board Meetings held in the financial year under review.

Dato’ Abd Wahab Maskan, aged 56, Malaysian, was appointed as a Non-Independent Executive Director of Kumpulan Guthrie Berhad ("KGB") on 30 June 2004. He attended all the twelve (12) Board Meetings held during the financial year under review.

He is the Non-Executive Chairman of Guthrie Property Development Holding Berhad, a subsidiary company of Kumpulan Guthrie Berhad. He is also Chairman of Paradigm Systems Berhad, Universiti Teknologi MARA (UiTM), Federal Power Sdn. Berhad, Furukawa Sdn. Berhad and Kolej Universiti Teknologi dan Pengurusan Malaysia, and Director of Permodalan Nasional Berhad, Yayasan Felcra Berhad, Perbadanan Usahawan Nasional Berhad, Amanah Saham Nasional Berhad and Universiti Teknologi Tun Abdul Razak. Tan Sri Dato’ Dr. Wan Mohd. Zahid obtained his Bachelor of Arts (Honours) in Sociology and Anthropology from University of Malaya, Masters in Development Education from Stanford University, California, USA and Doctorate (Ph.D) in Sociology of Education from University of California, Berkeley, California, USA. He also attended the Advanced Management Program at Harvard Business School, Boston, USA. He had served as a teacher, School Principal and held various positions with the Ministry of Education, including as Planning Officer and Deputy Director, Educational Planning & Research Division, Chief Inspectorate of Schools, Director of Curriculum and Deputy Director-General. He had also served as Director of Education of Negeri Sembilan and Kelantan. His last post prior to retirement in December 1997 was as Director-General of Education of Malaysia. Tan Sri Dato’ Dr. Wan Mohd. Zahid has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad, except by virtue of being a nominee Director of Permodalan Nasional Berhad, and does not have any conflict of interest with Kumpulan Guthrie Berhad.

He became the Group Chief Executive of KGB on 1 January 2004 and, subsequently, was appointed a Director of its subsidiaries, Highlands & Lowlands Berhad, Guthrie Ropel Berhad, Guthrie Property Development Holding Berhad and Harvard Golf Resort (Jerai) Berhad. Dato’ Abd Wahab also holds directorship in Pelaburan Hartanah Nasional Berhad and Merdeka Ventures Sdn Bhd. He is also a member of the Financial Reporting Foundation of Ministry of Finance and was a Director of Danaharta Bhd. Dato’ Abd Wahab was the Group Chief Executive Director and Group Chief Executive of Golden Hope Plantations Berhad prior to joining KGB. He has held executive and non-executive directorships in companies in Malaysia, Europe and Asia, both listed and nonlisted, covering estate and plantation management, refinery and oleochemicals, trading and marketing, property development and investment, engineering and construction, manufacturing and retailing, as well as resort. Dato’ Abd Wahab holds a Bachelor of Science in Estate Management from England. He is a Fellow of the Institution of Surveyors (Malaysia) and a Fellow of the Royal Institution of Chartered Surveyors (England and UK). He is also a member of Malaysian Institute of Directors. Dato’ Abd Wahab has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad and does not have any conflict of interest with Kumpulan Guthrie Berhad, except by virtue of being the Group Chief Executive of Kumpulan Guthrie Berhad. He does not hold any share in Kumpulan Guthrie Berhad, Guthrie Ropel Berhad and Highlands & Lowlands Berhad.

Annual Report 2006

Profile

Directors

RAJA TAN SRI MUHAMMAD ALIAS RAJA MUHAMMAD ALI

DATUK NIK MOHAMED AFFANDI NIK YUSOFF

Raja Tan Sri Muhammad Alias Raja Muhammad Ali, aged 74, Malaysian, has been a Non-Independent Non-Executive Director since 20 May 2002. He is Chairman of the Remuneration Committee of the Board of Kumpulan Guthrie Berhad. He attended all the twelve (12) Board Meetings held in the financial year under review.

Datuk Nik Mohamed Affandi Nik Yusoff, aged 63, Malaysian, has been a Non-Independent Non-Executive Director since 20 May 2002 and was redesignated as an Independent Non-Executive Director since 12 January 2007. He is Chairman of the Employeesâ&#x20AC;&#x2122; Share Option Scheme (ESOS) Committee of the Board of Kumpulan Guthrie Berhad. He attended all twelve (12) Board Meetings held in the financial year under review.

He is Chairman of Highlands & Lowlands Berhad, a subsidiary company of Kumpulan Guthrie Berhad. Other public companies in which he is a director are Malayan Banking Berhad, Kuala Lumpur Kepong Berhad, Batu Kawan Berhad, Sime Darby Berhad and Mayban Fortis Holdings Berhad. He is also Chairman of Felda-Johore Bulkers Sdn. Berhad. Raja Tan Sri Muhammad Alias obtained his Bachelor of Arts (Honours) degree from the University of Malaya, Singapore and Certificate of Public Administration from the Royal Institute of Public Administration, London. He also attended the Advanced Management Program at Harvard Business School, Boston, USA. Raja Tan Sri Muhammad Alias has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad, except by virtue of being a nominee Director of Permodalan Nasional Berhad, and does not have any conflict of interest with Kumpulan Guthrie Berhad.

He is also a director of Malaysia Land Development Company Berhad and Goodyear Malaysia Berhad Group. Datuk Nik Mohamed Affandi obtained his Bachelor of Arts (Honours) degree in History (International Relations) from University of Malaya, Diploma in Public Administration from University of Malaya and a Masters in Public Policy and Administration from University of Wisconsin, USA. He held various posts while in the Malaysian Government Service, among which, were as Director of State Economic Planning Unit, Pahang State Government, Deputy Director of Supply and Contracts Division, Ministry of Finance, Secretary, Foreign Investment Committee in the Prime Ministerâ&#x20AC;&#x2122;s Department, Secretary, Capital Issues Committee and Director, Government Sector Companies Monitoring Division in the Ministry of Finance. He was also Deputy Managing Director of Khazanah Nasional Berhad. His last post prior to retirement in February 1999 was as Director-General of Majlis Amanah Rakyat (MARA). Datuk Nik Mohamed Affandi has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad and does not have any conflict of interest with Kumpulan Guthrie Berhad.

Kumpulan Guthrie Berhad

RAJA TAN SRI MUHAMMAD ALIAS

DATUK NIK MOHAMED AFFANDI

RAJA MUHAMMAD ALI

NIK YUSOFF

Annual Report 2006

DATUK MOHAMED ADNAN ALI

Kumpulan Guthrie Berhad

DATUK ALLADIN HASHIM

Profile

Directors

DATUK MOHAMED ADNAN ALI

DATUK ALLADIN HASHIM

Datuk Mohamed Adnan Ali, aged 64, Malaysian, has been a Non-Independent Non-Executive Director since 31 May 2002. He is a member of the Audit Committee and Remuneration Committee of the Board of Kumpulan Guthrie Berhad. He attended all the twelve (12) Board Meetings held in the financial year under review.

Datuk Alladin Hashim, aged 68, Malaysian, has been a Non-Independent Non-Executive Director since 25 November 2002. He is a member of the Nomination Committee and Employeesâ&#x20AC;&#x2122; Share Option Scheme Committee of the Board of Kumpulan Guthrie Berhad. He attended eleven (11) out of twelve (12) Board Meetings held in the financial year under review.

He is also a Director of Highlands & Lowlands Berhad, a subsidiary company of Kumpulan Guthrie Berhad. He is also a director of Amanah Raya-JMF Assets Management Sdn Berhad.

He is the Non-Executive Chairman of Guthrie Ropel Berhad, a subsidiary company of Kumpulan Guthrie Berhad. Other public companies in which he is a Director are PK Resources Berhad, UAC Berhad and Timberwell Berhad.

Datuk Mohamed Adnan is a Fellow, Chartered Institute of Management Accountants, U.K.. He was formerly Accountant-General, Malaysia. He had served as Accountant with various ministries in Government Department such as Ministry of Trade and Industry, and Ministry of Energy and Public Works. He was also a Senior Manager, Investment with Employees Provident Fund, Malaysia; Treasurer, Universiti Islam Antarabangsa Malaysia and Bursar, Universiti Teknologi Malaysia. Datuk Mohamed Adnan has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad, except by virtue of being a nominee Director of Permodalan Nasional Berhad, and does not have any conflict of interest with Kumpulan Guthrie Berhad.

Datuk Alladin obtained his Bachelor of Agricultural Science from the University of Malaya and Master of Science in Agricultural Economics from the University of Massachusetts, USA. He attended the executive development programme of the Harvard Business School. He is a Fellow of the Academy of Sciences Malaysia. He had served the Federal Land Development Authority (FELDA) from 1964 in various capacities, and was the Director-General from 1979 to 1989. He had also served as the Chairman of the Malaysian Rubber Board. Datuk Alladin Hashim has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad, except by virtue of being a nominee Director of Permodalan Nasional Berhad, and does not have any conflict of interest with Kumpulan Guthrie Berhad.

Annual Report 2006

Profile

Directors

DATUK KHOO ENG CHOO

DATO’ MUHAMMAD NAWAWI ARSHAD

Datuk Khoo Eng Choo, aged 64, Malaysian, has been an Independent Non-Executive Director since 4 June 2002. He is Chairman of the Audit Committee and a member of the Nomination Committee and Remuneration Committee of the Board of Kumpulan Guthrie Berhad. He attended all the twelve (12) Board Meetings held in the financial year under review.

Dato’ Muhammad Nawawi Arshad, aged 67, Malaysian, is an Independent Non-Executive Director. He was appointed to the Board on 31 May 2002. He is a member of the Audit Committee of the Board of Kumpulan Guthrie Berhad. He attended eleven (11) of the twelve (12) Board Meetings held in the financial year under review.

He is also an Independent Non-Executive Director of Highlands & Lowlands Berhad and Guthrie Property Development Holding Berhad, subsidiary companies of Kumpulan Guthrie Berhad.

He is a Non-Executive Director of Guthrie Ropel Berhad and Guthrie Property Development Holding Berhad.

Datuk Khoo is also an independent non-executive director of Kontena Nasional Berhad. He was formerly the Chairman of Tanjong Public Limited Company and a director of Powertek Berhad. He was the Chairman of Malaysian Institute of Management and the Chairman of the Asian Association of Management Organisations. He is the Chairman of eckhoo Associates Sdn. Berhad. Datuk Khoo is a Chartered Accountant. For over a decade prior to 2002, Datuk Khoo had served in key leadership positions in Pricewaterhouse and PricewaterhouseCoopers in Malaysia, Asia and its world’s firm. He also held significant appointments that were made by the Malaysian Government. He served in senior capacities in councils of professional and management bodies in Malaysia and Asia. Datuk Khoo has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad, and does not have any conflict of interest with Kumpulan Guthrie Berhad.

Kumpulan Guthrie Berhad

Dato’ Muhammad Nawawi is the Chairman of DTZ Debenham Tie Leung (Malaysia) Sdn. Berhad, DTZ Nawawi Tie Leung Property Consultant Sdn. Berhad and DTZ Nawawi Tie Leung Estate Agents Sdn. Berhad. He had served as a Committee Member of International Assets Valuation Standards Committee and Committee Member and President of Institution of Surveyors Malaysia, President of International Real Estate Federation (FIABCI) Malaysia, and Deputy World President of FIABCI. He had also served as Vice President of the Asean Valuers Association. Dato’ Muhammad Nawawi is a Chartered Surveyor from College of Estate Management, London and Fellow, Institution of Surveyors, Malaysia. He was formerly the Director-General, Valuation and Property Services Department, Ministry of Finance Malaysia and Director of CH Williams, Talhar & Wong Sdn. Berhad. Dato’ Muhammad Nawawi has no family relationship with and is not related to any director and/or major shareholder of Kumpulan Guthrie Berhad. He does not have any conflict of interest with Kumpulan Guthrie Berhad.

DATUK KHOO ENG CHOO

DATO’ MUHAMMAD NAWAWI ARSHAD

Annual Report 2006

MANAGEMENT TEAM DATO’ ABD WAHAB MASKAN Group Chief Executive Dato’ Abd Wahab Maskan, aged 56, has been the Group Chief Executive of Kumpulan Guthrie Berhad since 1 January 2004 and subsequently was appointed as a NonIndependent Executive Director of Kumpulan Guthrie Berhad on 30 June 2004. He is a member of the Executive Committee of the Board of Kumpulan Guthrie Berhad. Dato’ Abd Wahab is also a Director of Highlands & Lowlands Berhad, Guthrie Ropel Berhad, Guthrie Property Development Holding Berhad and other subsidiaries of KGB. He also holds directorship in Pelaburan Hartanah Nasional Berhad and is a member of the Financial Reporting Foundation of Ministry of Finance. Dato’ Abd Wahab’s immediate previous positions were the Group Chief Executive Director and Group Chief Executive Officer of Golden Hope Plantations Berhad. He has held executive and non-executive directorships in companies in Malaysia, Europe and Asia, both listed and non-listed, covering estate plantation management, refinery and oleochemicals, trading and marketing, property development and investment, engineering and construction, manufacturing and retailing, resort, both in public and private sectors. Dato’ Abd Wahab holds a Bachelor of Science in Estate Management from University of Reading, England. He is a Fellow of the Institution of Surveyors (Malaysia) and a Fellow of the Royal Institution of Chartered Surveyors (England and UK). He is also a member of the Malaysian Institute of Directors.

Kumpulan Guthrie Berhad

Management

Te a m

RUSLI UJANG Head, Plantation Indonesia Encik Rusli Ujang, aged 51, was appointed as Head, Plantation Indonesia on 7 March 2006. Prior to this, he was the Head of Plantation Malaysia from 1 February 2005 to 6 March 2006. A graduate of Universiti Pertanian Malaysia, Serdang (UPM) (now known as Universiti Putra Malaysia) in Agriculture Science, he joined the Group on 16 April 1978 as an Assistant Estate Manager and subsequently served as Estate Manager in several estates within the Group. Encik Rusli was a member of the Task Force Management of Minamas Plantation in 2001 before being promoted to General Manager, Estates in Kalimantan, Indonesia in 2002.

HELMY OTHMAN BASHA Head, Plantation Malaysia Encik Helmy Othman Basha, aged 40, was appointed as Head, Plantation Malaysia on 1 August 2006. Prior to this, he was the Head, Planning & Development. He is a Fellow of the Association of Chartered Certified Accountants, UK (FCCA) and a member of the Malaysian Institute of Accountants. He joined the Group in 1997 as Finance & Administration Manager, Property Division and was subsequently appointed as General Manager, Guthrie Landscaping Sdn. Berhad and General Manager, Finance, Property Division. Encik Helmy was promoted to Group General Manager, Finance in 2001 in charge of Group Treasury and Minamas Plantation, Indonesia (Finance). He was promoted to Head, Marketing, Plantation Division in 2003 and in 2004 was appointed as Head, Planning & Development.

Annual Report 2006

Management

Te a m

TENGKU AB. AZIZ TENGKU MAHMUD Head, Property Y.M. Tengku Ab. Aziz Tengku Mahmud, aged 49, joined Kumpulan Guthrie Berhad as Head, Property on 1 April 2005. He is also the Chief Executive Officer, Guthrie Property Development Holding Berhad. He graduated from Loughborough University of Technology, UK with a Bachelor of Science (Hons) in Civil Engineering in 1980. He obtained his Masters in Business Administration from Cranfield Institute of Technology, UK in 1991. Y.M. Tengku Ab. Aziz Tengku Mahmud is a registered member of the Institution of Engineers Malaysia (MIEM), the American Society of Civil Engineers (MASCE) and the Malaysian Institute of Management (MIM). Prior to joining the Group, he served in various organisations in a senior management capacity.

TONG POH KEOW Head, Group Finance & Administration and Chief Finance Officer Madam Tong Poh Keow, aged 53, is Head, Group Finance & Administration and Chief Finance Officer since 1 January 2006. She is a member of the Malaysian Institute of Accountants, a Fellow of the Association of Chartered Certified Accountants, UK (FCCA) and a member of the Institute of Chartered Secretaries & Administrators, UK. She joined the Group in 1983 as the Accountant-cum-Assistant Company Secretary for Highlands & Lowlands Berhad, and was subsequently promoted to General Manager, Accounting & Financial Reporting in 1997 and Group General Manager, Finance (Group Accounting & Financial Reporting) in 2001. She has been the Chief Finance Officer since April 2003.

Kumpulan Guthrie Berhad

Management

Te a m

ABU SAMAH HAJI SAMSURI Head, Group Marketing Encik Abu Samah Haji Samsuri, aged 47, has been Head, Group Marketing since 15 October 2004. He holds a Bachelor of Science (Honours) with a major in Chemistry and a minor in Management from Universiti Sains Malaysia, Penang. He began his career as Executive at Eastern Plantation Agency (J) Sdn. Bhd. and was subsequently appointed as Marketing Manager at Plantation Agency Sdn. Berhad, Penang. He joined East Asiatic Company Bhd (now known as Hap Seng Consolidated Bhd) as its Manager, Commodities Trading in 1991 and was promoted to General Manager, Commodities Trading in 2000.

SAADIAH HAJI HUSSIN Head, Group Human Resource Puan Saadiah Haji Hussin, aged 54, was Head, Group Human Resource for the period under review until her retirement on 31 March 2007. She joined the Group in 1998 as Group General Manager, Human Resource. A graduate of Universiti Malaya in Economics, she served with Rothmans of Pall Mall (M) Berhad (now known as British American Tobacco) as Manager, Compensation/Benefits, Human Resource Department. Prior to that, she worked for Perbadanan Kemajuan Negeri Selangor in the areas of investment, supply and procurement, and training and development.

NORZILAH MEGAWATI DATO’ ABDUL RAHMAN Head, Group Legal & Compliance Puan Norzilah Megawati Dato’ Abdul Rahman, aged 47, has been Head, Group Legal & Compliance since 1 March 2004. She joined the Group in 1994 as Manager, Group Chief Executive’s Office. She was subsequently promoted to Controller, Corporate Business Development & Monitoring in 1996 and Director, Corporate Business Development & Human Resource in 2001. She obtained her degree in Law (Honours) from Universiti Malaya and served as Executive in the areas of investment analysis, money market trading, corporate secretarial and legal work with Permodalan Nasional Berhad (PNB) and as Manager, Group Chief Executive’s Office at PNB.

Annual Report 2006

AUDIT COMMITTEE

DATUK KHOO ENG CHOO Chairman

DATUK MOHAMED ADNAN ALI

DATO’ MUHAMMAD NAWAWI ARSHAD

Independent Non-Executive Director

Non-Independent Non-Executive Director

Independent Non-Executive Director

* En. Sreesanthan s/o Eliathamby resigned with effect 23 November 2006.

COMPOSITION

PRIMARY PURPOSES

The Audit Committee of Kumpulan Guthrie Berhad ("Audit Committee") comprises four (4) Directors of the Board of Kumpulan Guthrie Berhad ("Board"), the majority of whom, including the Chairman, are Independent NonExecutive Directors.

The Audit Committee shall:

With effect from 23 November 2006, En. Sreesanthan s/o Eliathamby had resigned from becoming a member of the Audit Committee.

Kumpulan Guthrie Berhad

•

Provide assistance to the Board in fulfilling its fiduciary responsibilities relating to the corporate accounting, reporting practices and risk management of Kumpulan Guthrie Berhad and its subsidiary companies ("Group"). Maintain, through regularly scheduled meetings, a direct line of communication between the Board and the Internal Auditors as well as the External Auditors.

•

Avail to the Internal Auditors and Exter nal Auditors a private confidential audience at any time they desire and request through the Chairman, with or without the prior knowledge of Management.

•

Act upon the Board's request to investigate and report on any issues or concer ns with regard to the Group.

Audit

FUNCTIONS

•

Material issues arising from the reports of the Internal Auditors and External Auditors and whether appropriate action is being or has been taken based on the recommendations of the Internal Auditors and External Auditors.

•

Any significant difficulties encountered or material discoveries and findings made by the Internal Auditors or External Auditors.

•

Any related party transaction and conflict of interest situation that may arise including any transaction, procedure or course of conduct that raises questions of management integrity.

•

The firm of External Auditors retained by the Group and the fees payable to the External Auditors and any change in their fees, and recommendation, if any, to retain or replace such firm in the ensuing year.

The functions of the Audit Committee include the functions set out below and such other functions as may be determined by the Board from time to time. The Audit Committee shall review, appraise, report and make appropriate recommendations to the Board on: •

The quality and effectiveness of the entire accounting and internal control system of the Group.

•

The adequacy of the annual audit programme by both the Internal Auditors and the External Auditors and the reports of the Internal Auditors and External Auditors relating thereto.

•

The adequacy of the scope, functions and resources of the Internal Auditors and whether they have the necessary authority to carry out their work.

•

The adequacy of the scope, functions and resources of the Enterprise Risk Management unit in ensuring the Group has in place an ongoing process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives.

•

The assistance given by the employees of the Group to the External Auditors.

•

The propriety of accounting policies adopted by Management and accepted by the External Auditors, where alternatives are also acceptable.

•

The effects of any change in accounting principles or of any development emanating from the accounting profession or any statutory authority.

•

The adequacy of the disclosure of information essential for a fair and full presentation of the financial affairs of the Group. The quarterly results and year-end financial statements, prior to the approval by the Board, focusing particularly on: – changes in or implementation of major accounting policy changes; – significant and unusual events; and – compliance with accounting standards and other legal requirements.

Committee

MEETINGS The Audit Committee held seventeen (17) meetings during the financial year ended 31 December 2006. The Chief Finance Officer and the Group Controller, Internal Audit, Kumpulan Guthrie Berhad, together with the Company Secretary were in attendance at the seventeen (17) meetings. Datuk Khoo Eng Choo and Dato' Muhammad Nawawi Arshad attended all the meetings whilst Datuk Mohamed Adnan Ali attended sixteen (16) and Encik Sreesanthan s/o Eliathamby attended twelve (12) meetings prior to his resignation on 23 November 2006. Representatives of the External Auditors and other officers of the Company were also invited to brief the Audit Committee on specific issues. At the conclusion of each meeting, recommendations were made for the Management to improve the internal controls, procedures and systems of the Group, wherever appropriate.

Annual Report 2006

Audit

Committee

ACTIVITIES

INTERNAL AUDITORS

A summary of the activities of the Audit Committee in the discharge of its functions and duties during the year under review was as follows:

In the discharge of its duties, the Audit Committee is strongly supported by the Internal Auditors. The Internal Auditors' role is to independently and objectively evaluate and report on the adequacy, integrity and effectiveness of the Group's overall system of internal control and risk management activities for assurance purposes.

•

Reviewed the quarterly financial statements of the Group and ensured compliance with approved accounting standards and adherence to other legal and regulatory requirements.

•

Evaluated the audit planning strategy of the Internal Auditors and External Auditors to confirm the groundwork for the annual audit of the Group.

•

Reviewed and assessed the progress of risk management activities and significant risk issues of the Group.

•

Reviewed significant issues and audit findings arising from the annual audit of the Group by the External Auditors.

•

Reviewed and appraised the audit reports tabled by the Internal Auditors.

•

Reviewed the allocation of option shares pursuant to the Employees' Share Option Scheme of the Company.

•

Reviewed the various internal control systems of the Group.

•

Reviewed the Internal Audit Planning Memorandum and Budget for year 2007.

REPORTS/MINUTES Detailed audit reports by the Internal Auditors, together with responses by Management, were circulated to the Group Chief Executive and Heads of the respective Business Units, Divisions/ Departments of the Company upon completion of the audit fieldwork and prior to the Audit Committee meetings. Minutes of meetings of the Audit Committee were circulated to all members of the Board, and significant issues were discussed at the Board Meetings.

Kumpulan Guthrie Berhad

The Internal Auditors also carried out audit programmes which focused on the management of the Group's significant corporate risks and executed audit plans approved by the Audit Committee. In conducting their independent audit, the Internal Auditors placed emphasis on a risk-based auditing approach which forms an integral part of the audit plans. The audit findings and recommendations, which also highlighted areas of non-compliance with the Group's policies, procedures and guidelines, were periodically tabled to the Audit Committee for review. Due to the nature of their functions, the Internal Auditors are well placed to undertake investigations on any suspicion of fraud or operational failures reported to them within the Group, on behalf of the Audit Committee. Such regular monitoring is essential to ensure the integrity and effectiveness of the Group's system of internal control.

STATEMENT ON EMPLOYEES’ SHARE OPTION SCHEME (ESOS) The Audit Committee hereby verifies that during the financial year under review, the actual allocation of option shares pursuant to the Second ESOS of Kumpulan Guthrie Berhad ("Scheme") to eligible employees had been made in accordance with the criteria of allocation of option shares as set out in the Bye-Laws governing the Scheme and the guidelines of the Scheme.

STATEMENT ON CORPORATE GOVERNANCE The Board of Directors of Kumpulan Guthrie Berhad (“Guthrie” or “the Company”) confirms that throughout the financial year ended 31 December 2006, it has continued to integrate good and effective corporate governance practices into the overall business direction and management of the Company and its subsidiary companies (“Kumpulan Guthrie Group” or “the Group”), in compliance with the Best Practices of the Malaysian Code of Corporate Governance (“the Code”).

Annual Report 2006

Statement

Corporate

Governance

The Board is determined and committed towards ensuring maximum shareholders’ value and enhancing investors’ interest in line with the application of the principles of the Code.

A. BOARD OF DIRECTORS Board Composition The composition of the Board is continuously reviewed. During the year, the Board continued to be well balanced, with its effective mix of Executive Director as well as Independent and Non-Independent Non-Executive Directors. The diverse professional background and expertise of the Directors, spanning various fields including finance, human resource development, accounting, legal, public services, plantation management and property development, provide the Board with the requisite depth and quality in its deliberation and decision-making. The Board is equipped with sufficient breadth of knowledge and skills to competently control the direction of the Company and Group.

Board Meetings The agenda and Board papers for deliberation by the Board are dispatched to the Directors in advance of Board meetings to facilitate informed discussion and decision-making. At each regularly scheduled Board meeting, the Board deliberates and approves various key matters specifically presented for the Board’s decision. These matters include, among others, formulation of the Group’s strategic business plans and policies, review of annual and interim financial results, including those of operating subsidiaries, evaluation of actual and projected performance against targets and budgets, and other corporate initiatives requiring the Board’s due attention. At appropriate times, presentations on business developments/proposals are also made to the Board by Management and/or consultants/advisers. Reports by Board Committees are also presented and discussed at the Board Meetings. All matters arising, deliberations and conclusions of the meetings of the Board are accurately recorded in minutes of meetings by the Group Company Secretary. The minutes are thereafter confirmed by the Board and signed as a correct record by the Chairman. During the year ended 31 December 2006, five (5) Board Meetings and seven (7) Special Board Meetings were held. The following are the details of attendance of each Director in respect of meetings held.

Chairman and Group Chief Executive In accordance with good corporate gover nance, the roles and responsibilities of the Chairman, who is a Non-Independent Non-Executive Director, and the Group Chief Executive, are separate and clearly distinguished. Hence, an effective balance of power and authority in the Board is ensured.

Members

The Chairman seeks to ensure the effective conduct and contribution of the Directors, collectively. The Group Chief Executive, supported by his team of management, is responsible for the implementation of Board policies and strategies, including execution and management of the day-to-day decisions and monitoring operations of the Company and Group’s business. *

No. of meetings attended

Percentage

Tan Sri Dato’ Dr. Wan Mohd. Zahid Mohd. Noordin (Chairman)

12 out of 12

100%

Dato’ Abd Wahab Maskan

12 out of 12

100%

Raja Tan Sri Muhammad Alias Raja Muhammad Ali

12 out of 12

100%

Datuk Nik Mohamed Affandi Nik Yusoff

12 out of 12

100%

Datuk Mohamed Adnan Ali

12 out of 12

100%

Datuk Khoo Eng Choo

12 out of 12

100%

Datuk Alladin Hashim

11 out of 12

92%

Dato’ Muhammad Nawawi Haji Mohd Arshad

11 out of 12

92%

Sreesanthan s/o Eliathamby *

7 out of 10

70%

Tun Musa Hitam **

5 out of 5

100%

resigned w.e.f 23.11.06

** retired w.e.f 22.6.06

Kumpulan Guthrie Berhad

Statement

Board Balance The Board, as at the date of this statement, consists of eight (8) members. Seven (7) are Non-Executive Directors (including the Chairman) and one (1) is an Executive Director. Three (3) of the eight (8) Directors are Independent as defined under the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia Listing Requirements”). The Independent Directors are: (i) Datuk Khoo Eng Choo (ii) Dato’ Muhammad Nawawi Haji Mohd Arshad (iii) Datuk Nik Mohamed Affandi Nik Yusoff (redesignated as Independent Director w.e.f 12 January 2007) (During the financial year under review, Encik Sreesanthan s/o Eliathamby had resigned as an Independent Director on 23 November 2006.) The appointment of Independent Non-Executive Directors facilitates the unbiased exercise of independent evaluation in Board deliberations and decision-making, taking into account the interest of all stakeholders. The presence of independent Non-Executive Directors fulfils a central role in corporate accountability and serves to provide the ‘check and balance’ in the Board. A brief profile of each Director is presented on pages 16 to 23. Supply of Information The Board and its Committees are empowered with full and unrestricted access to all information pertaining to the Company/Group’s business and affairs. By the same token, all Directors have direct access to the advice and services of the Group Company Secretary, both in their individual capacity of a Director as well as a Board collectively. The Group Company Secretary also serves in the same capacity for the various Board Committees. The Directors are regularly updated by the Group Company Secretary on new statutory and regulatory requirements relating to the duties and responsibilities of Directors. All the Directors may obtain independent professional advice in the furtherance of their duties, at the Company’s expense. All decisions by the Board in respect of proposals and recommendations by the Management are arrived at via comprehensive examination and discussion undertaken by the Board.

Corporate

Governance

Board Committees Certain responsibilities are delegated to Board Committees established to assist the Board in discharging its duties. The functions and terms of references of the Board Committees are clearly defined. In furtherance of the principles of the Malaysian Code of Corporate Gover nance and guidelines of the Government–Linked Companies’ (“GLCs”) Transformation Manual, including the “Green Book – Enhancing Board Effectiveness” issued by Putrajaya Committee on GLC High Performance (“PCG”), the Executive Committee and the Finance & Tender Committee of the Company were abolished on 29 August 2006. The said two (2) committees were abolished with the objective of increasing the frequency of Board meetings from a quarterly basis to once in every six (6) weeks. This change is introduced to facilitate an improvement in the quality and timing of discussion as well as enhance the participation of Directors in the decision–making of matters requiring the Board’s attention. During the financial year under review, the Board had also undertaken an assessment on its own efficiency and the performance of the individual Directors. As a result, the Board was able to identify relevant aspects and areas of concern for further improvement. a.

Audit Committee The Audit Committee of Kumpulan Guthrie Berhad (“Audit Committee”) presently comprises three (3) Directors of the Board, the majority of whom, including the Chairman, are Independent Non-Executive Directors. In line with good corporate governance practice, the Executive Director is not a member of the Audit Committee. The Audit Committee’s principal function is to assist the Board in maintaining a sound system of internal control. The Committee has full access to the auditors both internal and external who, in turn, have access at all times to the Chairman of the Committee. During the year ended 31 December 2006, eighteen (18) meetings of the Committee were held. The functions of the Audit Committee are laid down on page 29 of this Annual Report.

Annual Report 2006

Statement

Corporate

Governance

Remuneration Committee The Remuneration Committee is responsible for developing the Group’s remuneration policy and recommending to the Board the appropriate remuneration packages of Non-Executive Directors and executive employees of the Group. As the Executive Director is not a member of the Committee, he plays no part in the decisions of his own remuneration. Nonetheless, remuneration of both the Non-Executive and Executive Director is the ultimate responsibility of the entire Board. The Remuneration Committee may seek independent professional advice, where appropriate, to review the salaries and benefits of staff of the Group. The Remuneration Committee, whose members comprise non-executive Directors, meets on a need basis. During the year ended 31 December 2006, eight (8) meetings of the Committee were held.

Nomination Committee The Nomination Committee provides a transparent procedure for identifying and recommending new nominees to the Board, as well as committees of the Board and its public listed/major subsidiaries. In any case, all decisions on appointments shall be made by the respective Boards after considering the recommendations of the Committee. The Committee would also recommend suitable training programmes to equip the Directors on new laws and regulations which are particularly relevant to the operations of the KGB Group. The Nomination Committee, the members of whom are non-executive Directors, meets as and when required but shall hold at least one (1) meeting a year. During the year ended 31 December 2006, five (5) meetings were held.

Employees’ Share Option Sheme ("ESOS") Committee The ESOS Committee of the Company was established by resolutions of the Board on 16 December 1996 and 26 March 1997, to administer the KGB ESOS in accordance with the Bye-Laws approved by the shareholders of the Company. The current Second ESOS Scheme (ESOS 2003/2008) ("the Scheme") was implemented on 30 July 2003 and is governed by the Bye-Laws approved by the shareholders on 18 June 2003.

Kumpulan Guthrie Berhad

The ESOS Committee is primarily responsible for the proper administration of the Scheme in accordance with the Bye-Laws of the Scheme. It is also responsible to review and recommend to the Board any relevant amendments to the provisions of the Bye-Laws Scheme. However, any such amendments proposed should not be prejudicial to the eligible employees of the Group and are subject to prior approval of the Company’s shareholders. The ESOS Committee, currently comprising two (2) members of the Board both of whom are non-executive directors, meets at least every quarter during the relevant financial year. During the year ended 31 December 2006, four (4) meetings were held.

B. DIRECTORS Appointments to the Board The Company has established a transparent procedure for the appointment of new Board member(s), as well as the proposed re-appointment or re-election of Directors at the Annual General Meeting. Such appointment or reappointments would be at the recommendation of the Nomination Committee for approval of the Board. The Group Company Secretary ensures all appointments are properly effected and necessary information is duly obtained from the Directors, both for the Company’s records and in compliance with relevant regulatory and statutory obligations. The Board undertakes to periodically examine the effectiveness of its present size in discharging its duties, from time to time. Re-election of Directors Article 102 of the Company’s Articles of Association provides that at least one-third of the Directors (including the Group Chief Executive) for the time being, is required to retire at every Annual General Meeting (“AGM”) and be subject to re-election by rotation at least once in every three years. Directors who are over seventy (70) years of age are required to submit themselves for reappointment annually, in accordance with Section 129(6) of the Companies Act, 1965. Presently, there is one (1) Director of the Company who is subject to such reappointment.

Statement

Directors’ Remuneration The main objective of the Company’s policy on Directors’ remuneration is to attract and retain Directors of requisite calibre to steer and propel the Group towards improved prospects and growth. The fee allocated to each Non-Executive Director, approved by the shareholders of the Company at its Annual General Meeting (“AGM”) held on 18 June 2003, is RM40,000 per annum. For the Non-Executive Chairman, the fee is RM60,000 per annum. The Chairman and the members (who are Non-Executive Directors) of each Committee of the Board are also entitled to a fee of RM10,000 and RM8,000 per annum (for each member) respectively. The fee of each Non-Executive Director is determined by the Board as a whole. The Company reimburses reasonable expenses incurred by the Non-Executive Directors in the course of their duties as Directors. At the same aforementioned AGM, each Non-Executive Director was also approved a meeting allowance of RM500 for his attendance at each meeting of the Board and the respective Committees of the Board. In addition, the provision of medical benefits for each of the Non-Executive Directors is similar to that provided to executives of the Company. The aggregate remuneration of the Directors categorised into the appropriate components are as follows:

Executive Director Salary and other remuneration Benefits-in-kind Total Non-Executive Directors Fees Other remuneration Benefits-in-kind Total

Group (RM’000)

Company (RM’000)

1,269

149

1,418

958 196 34

516 141 34

1,188

691

Corporate

Governance

The aggregate remuneration of Directors for the financial year ended 31 December 2006, in respective bands of RM50,000 are as follows:

Range of Remuneration

Number of Directors

Non-Executive Directors RM50,001 to RM100,000 RM100,001 to RM150,000 RM150,001 to RM200,000 RM200,000 to RM250,000

2 4 2 1

Executive Director RM1,150,001 to RM1,200,000 RM1,300,001 to RM1,350,000

Directors’ Training All the Directors, having completed the Mandatory Accreditation Programme prescribed by Bursa Malaysia Securities Berhad, continue to benefit from attending programmes and seminars accreditated under Bursa Malaysia Securities Berhad’s Continuing Education Programme. Directors are also encouraged to attend various professional programmes deemed beneficial to the discharge of their duties and keep abreast with current issues arising from the ever-changing business environment within which the Company and Group operate. During the financial year under review, the Directors had attended a seminar on “Improving Directors’ Performance, Leadership and Governance” by Mr. James Crown of Knowledge Group Consulting on 27 September 2006 and a talk on “Innovation and Knowledge Management” by Mr. S.V. Lingam of Paradigm Systems Berhad held on 11 December 2006. As the Board of a Government-linked company (“GLC”), the Directors had also during the financial year under review, adopted the principles/guidelines of the “Green Book – Enhancing Board Effectiveness” issued by the Putrajaya Committee on GLC High Performance (“PCG”) in accordance with the framework for the GLC Transformation Manual. The Green Book is consistent with and complements the principles/guidelines of the Malaysian Code of Corporate Governance, placing particular emphasis on the performance aspects of the GLC Boards in order to raise their effectiveness levels to best practice levels.

Annual Report 2006

Statement

Corporate

Governance

As prescribed by the Green Book, the Board had conducted an assessment of its effectiveness from September to October 2006. Subsequently, actionable improvement actions/plans to resolve gaps identified in the Board’s effectiveness were identified in November 2006, ie. a schedule/programme for sharing enhanced communication between Board and Management, for implementation in December 2006 and formulation of strategic innovation for recommendation to the Board in June 2007. Indeed, the Board strives to pursue the objectives of enhancing its effectiveness as a continuous process.

In addition to the publication of summarised quarterly financial results of the Group in the newspapers, copies of the full announcement are also supplied to shareholders and members of the public upon request. The Annual General Meeting The Annual General Meeting (“AGM”) is the principal forum at which the Board reports on its stewardship to shareholders and account for the performance of the Company/Group. The AGM provides the opportunity for constructive communication among shareholders, Directors and the Management, in respect of pertinent issues such as the interim/quarterly financial reports and any other matters which merit due clarification.

C. SHAREHOLDERS Investor Relations and Shareholder Communication The Board acknowledges the crucial need for shareholders to be duly informed of material information affecting the Company as an on-going business concern, particularly, its status of financial performance. Towards this end, the Company undertakes to comply with adequate disclosure requirements in furtherance of good corporate governance as well as part of the effort to ensure market credibility and investors’ confidence in the Company. In discharging the obligations imposed by the Listing Requirements of Bursa Malaysia on public listed companies, material information with regard to the Company are disclosed in a timely and accurate manner. In this way, shareholders and investors benefit from a transparent evaluation of the Company’s securities and would be able to make well-informed decisions on the same.

The AGM also provides the opportunity for the Directors to gather the views of the minority shareholders. In any case, adequate time is provided for the shareholders’ questionand-answer session, as the Board believes that proper and efficient proceedings of the AGM is paramount. Turnout at the Company’s Annual General Meetings has been good and in 2006, about 1,000 shareholders had attended the meeting.

The various announcements made by the Company during the year, including the quarterly release of financial results, provide shareholders with an overview of the Group’s performance and operations.

In addition, shareholders may obtain up-to-date information relating to the various activities of the Company and the KGB Group by accessing its website at www.guthrie.com.my. Press releases and the latest quarterly results announcement of the Company can also be found on this site.

The Annual Report The Annual Report, which incorporates the Financial Statements sections, is printed for distribution to shareholders in English and Bahasa Malaysia, and serves as a useful tool to reach a wider audience of potential investors.

Senior Independent Non-Executive Director Other than through the Chairman of the Board, shareholders may convey their concerns on issues affecting the Company and the Group, to Dato’ Muhammad Nawawi Arshad, the senior independent Non-Executive Director of the Board.

Briefing to Analysts and Shareholders The Management of KGB conducts annual dialogues and briefings with financial analysts and investors on the Group’s financial performance, including its potential for new developments/business. This exercise provides the investing community the opportunity to obtain a balanced view of the Group’s performance within the context of prevailing regional/global economic climate and the challenges arising therefrom.

The presence of Board members, representatives of the external auditors and the Management at each AGM ensures immediate and ready response to queries on the business operations of the Group. This also demonstrates a high level of accountability and transparency with regard to the Group’s business operations, strategies and goals.

Kumpulan Guthrie Berhad

D. ACCOUNTABILITY AND AUDIT Financial Reporting The Directors aim to present the Group’s financial position and prospects to its stakeholders with quality financial reporting which is balanced and clearly assessed. The relevant financial reporting made available by the Company in a timely manner further attest to the Company’s adherence to the immediate disclosure policy.

Statement

The quarterly financial results and annual financial statements are duly reviewed by the Audit Committee, prior to submission for approval of the Board. Appropriate accounting policies are consistently applied in the financial reporting, supported by reasonable and prudent judgements and estimates. In addition, any explanation for material departures are disclosed in the notes to the financial statements. Such information is released to the public only upon approval of the Board. The Chairman’s Statement and the Operations Review of the Group, contained in this Annual Report, also provide an insight into the performance of the Group throughout the financial year and on the Group’s future prospects. Statement on Going Concern The Board, having reviewed the budgets and long-term business plans of the Company and of the Group, has a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. Accordingly, the financial statements of the Company and the Group have been prepared on a going concern basis. Relationship of the Board with Management - Internal Control Whilst the Board retains overall responsibility for and control of the Group, it also effectively monitors Management. Management of the Group’s businesses is conducted by the Group Chief Executive and Senior Management of the various divisions and departments which implement the policies and strategies adopted by the Board within the limits of authority laid down by the Board. The Board also ensures the smooth running of the Company and the Group operations through the establishment of a succession plan for top Management. The Management’s performance is measured against the Group’s objectives, ensuring any implementation of policies and strategies are in the best interests of the shareholders of the Company. Relationship with the Auditors The Board has established and maintains an active, transparent and professional relationship with the Group’s auditors, both external and internal, through the Audit Committee.

Corporate

Governance

The Audit Committee meets with the external auditors without the presence of any executive, except for the Group Company Secretary, at least once a year. The audit conducted by the external auditors on the Company and its subsidiary companies during the financial year provide reasonable assurance that the financial statements present a true and fair view of the Group’s performance. Following completion of the audit, any significant issues arising from the audit of the KGB Group would be highlighted to the Board by the external auditors through a Management Letter. The Board, through the Audit Committee, also seeks the external auditors’ professional advice in ensuring compliance with the appropriate accounting standards in Malaysia and the provisions of the Companies Act, 1965. The functions of the Audit Committee and its relations with the Auditors are set out on pages 29 to 30 of this Annual Report. The activities of the internal auditors relating to the operation of the Group during the financial year are set out on page 30 of this Annual Report.

E. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE The Kumpulan Guthrie Group was substantially in compliance with the principles of corporate governance and best practices in corporate governance throughout the financial year ended 31 December 2006.

F. OTHER INFORMATION Material Contracts Other than as set out below, the Company and/or its subsidiary companies had not entered into any material contract which involved Directors’ and/or major 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. The Company and its subsidiaries, namely Highlands & Lowlands Berhad (“H&L”) and Guthrie Ropel Berhad (“Ropel”) were each served with the Offer to Acquire the Entire Business and Undertaking including All their Assets and Liabilities from Synergy Drive Sdn. Berhad (“Synergy Drive”) on 27 November 2006 (“Proposed Merger”). At its meeting held on 21 December 2006, the Company’s Directors had agreed to accept the offer made by Synergy Drive for the Proposed Merger.

Annual Report 2006

Statement

Corporate

Governance

Subsequently, the Board of the Company, as well as that of H&L and Ropel, respectively, had on 24 January 2007, agreed to accept the terms and conditions of the Sale and Business Agreement with the Synergy Drive in relation to the Proposed Merger.

As this centralised treasury system entails the provision of financial assistance between the Kumpulan Guthrie Group, H&L Group and Ropel Group, the Board, thus, proposes to seek renewal of the Financial Assistance Mandate at the forthcoming EGM of the Company.

The final decision on the Proposed Merger will therefore be made by the respective shareholders of the Company, H&L and Ropel via voting on the relevant resolutions at their extraordinary general meetings scheduled to be convened before the end of year 2007, accordingly.

Share Buy-Back During the financial year under review, the Company has not exercised any share buy-back permitted by Section 67A of the Companies Act, 1965 of which mandate was given by the shareholders at the last EGM of the Company held on 22 June 2006.

Material Contracts Related to Loan During the financial year under review, there were no material contracts related to loans, entered into by the Company and/or its subsidiary companies which involved Directors’ and/or major shareholders’ interests.

Non-Audit Fee During the financial year ended 31 December 2006, the Group had paid non-audit fees to the External Auditors, apart from the annual audit fees, amounting to RM589,000 for other services undertaken by the Auditors for and on behalf of the Group, during the financial year.

Options, Warrants or Convertible Securities As at 31 December 2006, a total of 21,762,800 option shares were exercised under the Second ESOS. The Directors had obtained a relief under Section 169A (1) of the Companies Act, 1965 exempting the Company from having to disclose the names of option holders granted less than 50,000 option shares each during the year in the Annual Report. This exemption is subject to a yearly renewal. All information regarding the allocation and exercise of the said option shares are registered in the Company’s Register of Options. The names of option holders who were granted with 50,000 or more option shares under the Second ESOS as at 31 December 2006 are as set out in the Directors’ Report – Second Employees’ Share Option Scheme, on page 195 of this Annual Report. Proposed Provision of Financial Assistance Mandate At the last Extraordinary General Meeting (EGM) held on 22 June 2006, the Company had obtained the Financial Assistance Mandate from its shareholders to enable the financial assistance transactions to be effected between the Kumpulan Guthrie Group and Highlands & Lowlands Berhad Group (H&L Group) and Guthrie Ropel Berhad Group (Ropel Group), via a centralised treasury management system for an estimated net amount of RM40 million and RM10 million respectively, subject to it not exceeding the 5% benchmark under the Bursa Malaysia Listing Requirements. Pursuant to the Management Agreements entered into by the Company with H&L Group and Ropel Group, the treasury functions for all the plantation companies within the Guthrie Group, are centralised and the services include remittances to the estates, mills, centralised receipt and payments, and placement of funds with financial institutions.

Kumpulan Guthrie Berhad

Profit Estimation, Forecast or Projection The Company had, on 22 March 2006, announced its headline Key Performance Indicators (“KPIs”), for financial year 2006 and its three (3) year headline KPIs. These headline KPIs had been set and agreed by the Board and Management of the Company as part of the broader KPI framework that the Company has in place, as prescribed under the GLC Transformation Programme. The Company had also announced on 28 March 2007, its headline KPIs for financial year 2007 and its three (3) year headline KPIs which focused mainly on the following: 1. Infrastructure and capacity enhancement in strengthening value chain in Plantation; 2. Revamp Landbank Management and developing new master-plans in dedicated area to enhance value; and 3. Strengthening Capital Management. Profit Guarantee There was no profit guarantee given by the Company during the financial year under review. Revaluation Policy of Landed Properties The revaluation policy of the Group in relation to its landed properties is set out in Note 3(e) to the Financial Statements on page 103 of this Annual Report. Imposition of Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company and/or its arising from any significant breach of rules/guidelines/legislation by the relevant regulatory bodies.

STATEMENT ON INTERNAL CONTROL INTRODUCTION The Malaysian Code on Corporate Governance places the onus for Internal Control on the Board. It states: “The Board should maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets”.

The Board of Directors of Kumpulan Guthrie Berhad (“the Board”) is committed to maintaining a sound system of internal control in the Group and is pleased to provide hereinafter the annual update and disclosure statement in respect of the state of internal control in Kumpulan Guthrie Berhad as a Group.

Acknowledgement of Responsibilities The Board affirms its responsibility for maintaining a sound system of internal control. It recognises that reviewing the Group system of internal control is a concerted and continuing process. However, it should be noted that these systems are designed to manage rather than eliminate the risks of failure to achieve business objectives and as such, could only provide reasonable but not absolute assurance against material misstatement or loss. The Board has reviewed and confirmed that the system of internal control within the internal control framework was in place during the financial year under review and continues to take measures to strengthen the internal control framework. The Board also confirms that there were no material losses incurred during the financial year as a result of weaknesses in internal control.

Annual Report 2006

Statement

Internal

Control

Key Elements of Internal Control Framework The current system of internal control in the Group has the following key elements:Standard of Business Ethics All employees are required to sign and adhere to the Standard of Business Ethics, which emphasises corporate values and ethical code of conduct. The Standard of Business Ethics represents the employees’ undertaking to the Group’s minimum standard of behaviour and ethical conduct. Enterprise-wide Risk Management The Board views Structured Enterprises Risk Management (ERM) as the logical step in the pursuit of its corporate governance agenda and the fulfillment of its long-term corporate objectives towards protecting shareholders’ investment and safeguarding organisational assets. The ERM programme provides sufficient documentation and groundwork for the implementation of a risk based audit approach. The internal auditors, besides performing audit on the adequacy and integrity of internal controls also provide assurance on how effective the risks are being managed through the risk based audit approach. The risk based audit approach is currently being implemented on certain units in Malaysia and will be expanded to include other subsidiaries including overseas subsidiary companies. Human Resource Management A systematic Performance Management and Development (PMD) system, which is linked to and guided by established Key Performance Indicators (KPI’s) and Key Result Areas (KRA’s) parameters, has been implemented. The PMD system is now being driven by the Balanced Scorecard System (BSC) to support its delivery. The BSC provides a framework to translate strategy into operational terms and is being used as a performance measurement tool. The PMD system has been implemented on personnel at the executive and managerial levels and will be expanded to include the clerical level. Training and Development Emphasis is placed on enhancing the quality and ability of employees through continuous training and development. Through the PMD system, employees’ competencies are being properly addressed and suitable training programmes or schemes will be identified to expand on the competencies.

Policies, Procedures and Financial Authority Limits Delegation of authority including authorisation limits at various levels of Management and matters requiring the Board’s approval are clearly defined and set out in written policies and procedures to ensure accountability and proper segregation of duties. Operations Review & Monitoring Group Management Committee meetings are conducted to review and monitor matters pertaining to the business operations based on performance reports which provide comprehensive information on financial performance and other key non-financial indicators. Tender Award System A policy on awarding of tenders has been revised to enhance coordination and control on purchase of goods and services. The policy serves to increase efficiency and places assurance on the effectiveness of the system of internal control embedded in the process of awarding tenders. Insurance and Physical Safeguards Adequate insurance of major assets i.e buildings and machineries in major operating subsidiary companies is in place to ensure that assets of Kumpulan Guthrie Berhad are sufficiently covered against any mishap that will result in material losses to the Group and/or its subsidiary companies. Strategic Business Planning, Budgeting and Reporting The annual budget is linked to the Group Strategic Business Planning. The Group Strategic Business Plan for financial year ended 2006 was approved in December 2005. The Group Strategic Business Plan is the basis upon which the budget will be reviewed and tracked periodically during the budget year. Management Information System Critical information of the Group such as financial data, human resources data, land ownership records and debtors’ records are captured within the various information systems that have been developed to keep track of the Group operations. Group Internal Audit The Internal Audit function, which reports directly to the Audit Committee provides assurance on the effectiveness of the system of internal control within the Group. Independent reviews based on the annual inter nal audit plan are conducted to identify and report risks in units under the Group’s major core activities.

Monitoring and Review of the Effectiveness of the System of Internal Control The processes adopted to monitor and review the effectiveness of the system include:• Issues highlighted by the Group Internal Auditors and the corrective action taken by management are required to be discussed and monitored by the respective operating units in its monthly meetings. • Quarterly reports to the Audit Committee are formatted such that all corrective actions taken on issues highlighted by the Group Internal Auditors are tracked according to the progress of completion. 40

Kumpulan Guthrie Berhad

Statement

Internal

Control

Internal Control Framework & Environment of Kumpulan Guthrie Berhad

SHAREHOLDERS

Board of Directors

ESOS Committee

Remuneration Committee

Nomination Committee

Group Chief Executive

Executive Committee*

Finance & Tender Committee*

Audit Committee

Risk Management Unit Standard of Business Ethics

Human Resource Management

Internal Auditors

Strategic Business Planning & Budgeting

Group Management Committee

Enterprise-wide Risk Management

Support Divisions / Departments

External Auditors

Management Property Plantation Credit ICT Tender Development Development Committee Committee Committee Committee Committee

Training & Development

Written Policies & Procedures

Financial Authority Limit

Regular Monthly Reporting

Human Management ERM Resource Finance Committee Committee Committee

Group Tender Award System

Insurance & Physical Safeguard

Business Divisions / Units

Management Information Systems

The Groupâ&#x20AC;&#x2122;s internal control framework shown above signifies the accountability and reporting relationship between the Shareholders, Board, Audit Committee, Auditors and Management

Management Committee

Organisational Structure Key Internal Control Element

Discontinued with effect from 29 August 2006

Annual Report 2006

ENTERPRISE-WIDE RISK MANAGEMENT A Journey In Transformation Of Prospects & Performance Over the years, the Group has evolved a sustainable Enterprise-wide Risk Management (ERM) Blueprint and Framework that shape and mould its long-term risk governance strategy with the objective of minimising risks and maximising opportunities. The Group ERM Framework is now benchmarked at the matured stage of the ERM Maturity Model, a plan of attack that is positioned as a strategic tool to enhance future Group performance and prospects, and to deliver maximum value to all Stakeholders.

INHERENT BUSINESS RISKS Consistent with good corporate governance and international best practice, described below are the macro components of the Group risk profile.

As Guthrie Group continues its

jour ney

along

the

Risk Management Maturity Continuum, the Board is increasingly conscious of its regulatory and shareholders obligations and is committed to systematically manage its enterprise risks profile in a proactive, ongoing and assured manner.

Kumpulan Guthrie Berhad

•

Industry Specific Risks Plantation Business Risks Production yield of fresh palm fruit bunches (“FFB”) are dependent upon climatic conditions, quality of estate soil, timely harvesting and processing of FFB, outbreaks of pests and diseases, constraints in labour supply and escalating production costs. The Group seeks to limit these through efficient CPO pricing strategies and plantation management practices with emphasis on continuous improvements in FFB yields, high crop quality and cost efficiencies. Property Development Risks In this sector, the Group is exposed to the economic conditions of the Malaysian economy, impact of competition from other property developers, consumer market demand, timely completion of projects, changes in regulatory environment, constraint in project financing costs and possible shortage of resources such as labour supply and building materials. The Group has achieved international standards in its property development processes through the attainment of inter national accreditations in Quality Management and Environmental Management Systems.

Enterprise-wide

Financial Risks The Group financial risk management policy and its objective to manage financial and market exposures are set out and discussed in detail in the Notes to the Financial Statements under “Financial Instruments” caption.

•

Other Risks Other key aspects of external and internal risks inherent in the business operating environments include noncompliance to legal and regulatory requirements, risks associated to environmental and social responsibilities and retention of key personnel. The Group assessed the risk of an adverse effect on its business operations arising from the above set of risks as highly unlikely at the moment.

As an evolving process, the Group ERM Framework is progressively benchmarked against the components of best-practices ERM Maturity Model (a benchmarking framework that is designed to facilitate thorough planning and communication in effective risk management), and has the following key attributes:

Leading Strategic

Integrated Risk Management

Risk Metrics and Performance Monitoring – the use of key performance and risk indicators to track and monitor performance of each operating unit. The Group is

Next Level

& Matured

Improved Controls &

Basic

Remain in Compliance Below Target

Process Transformation

Improved Processes

Met Target

Above Target

Business Performance

•

ERM FRAMEWORK Compliance and Performance Objectives The Group risk management philosophy is to balance risk awareness and control with the need to create and exploit opportunities. The Group practices a holistic and integrated ERM because it offers a consolidated view of all types of risks and opportunities across the organisation, management processes and business activities.

•

2006 ERM Dashboard Matrix

RISK CONSIDERATION Notwithstanding the proposed merger exercise with Synergy Drive Sdn. Bhd., no immediate risks have been identified that could jeopardise the Group’s current business outlook. However, no absolute assurance can be given of any tangible adverse effect that may arise from a political or regulatory nature. The Group has taken the appropriate precautions against identified business risks that could negatively affect its financial standing and business profitability through implementation of a sound system of internal control and effective ERM Framework, explained below.

Management

nature and characteristics, identified risks are broadly categorised into major risk types such as strategic, operational, financial, legal and compliance, human capital, reputation and environmental. Risks are further classified, measured and prioritised using a uniform “5 x 5” risk matrix methodology.

For the period under review, the Group has in place an ongoing process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives.

Risk Management Maturity Levels

•

Risk

•

Risk Governance & Strategy – established within the Corporate ERM Policy & Procedural Manual, with three levels of defense structures: (i) day to day risk management residing at the business units and divisions, (ii) Group ERM Taskforce comprising the Group Chief Executive, Senior Management team and anchored by a Group Risk Officer (iii) Board & Audit Committee which retains the overall risk governance responsibility and risk oversight for the Group and its subsidiaries. Risk Management Portfolio and Optimisation – risk appetite management, uncovering of risks and root cause discipline are managed within this attribute. Based on its

currently piloting an in-house risk software, G-RiPS (Guthrie Riskintelligent Performance System) to link identified risks to key performance indicators and risk control measures. •

Risk Control Assurance – driven by the Audit Committee and Internal Audit Department.

For Guthrie Group, the practice of risk management is not designed to stop employees from taking risks but rather to create value by enhancing the chances of achieving corporate success and enabling managers and shareholders to understand the level of risks undertaken and to manage the risk-reward profile accordingly.

Annual Report 2006

CHAIRMAN’S STATEMENT Dear Shareholders, On behalf of the Board of Directors, it is my pleasure to present the Annual Report of Kumpulan Guthrie Berhad for the financial year ended 31 December 2006.

BUSINESS ENVIRONMENT During the year under review, the Malaysian economy continued to remain resilient, underpinned by strong consumer sentiment and sustained business confidence. The combination of strong domestic demand, primarily from private sector activities, the strong expansion in the services and agricultural sectors, the continued upturn in global electronics cycle and stronger external demand for key export products resulted in an overall growth in real gross domestic product (GDP) of 5.9%. The broad based expansion of the economy was buttressed by the continued monetary policy stance supportive of growth and pro-business and investor friendly macroeconomic policies. The global palm oil market in 2006 saw record high production amidst a buoyant palm oil market environment. Based on Oil World, global palm oil production was at 36.7 million tonnes in 2006, an increase of 8.9% from 33.5 million tonnes in 2005. Malaysia remained the largest producer in 2006, with annual production

Kumpulan Guthrie Berhad

expanded by 6.1% while Indonesia’s production grew further by 11.5%. Exports of crude palm oil (CPO) from Malaysia and Indonesia rose by 46.7% and 10.8% respectively in 2006. For processed palm oil, Malaysia’s exports grew by 7.1% while Indonesia’s exports expanded at an estimated annual growth of 13.0%. Palm oil prices in Rotterdam surged to an annual average of USD478 per tonne compared to USD422 per tonne in the previous year. Against this backdrop, the Malaysian palm oil industry recorded an impressive performance in 2006. Export earnings of oil palm products rose to a record RM31.8 billion, while palm oil stocks declined and prices firmed up sharply especially during the last quarter of the year. The industry also saw exciting developments shaping up in the local and global landscape with the structural changes in the industry arising from biofuel initiatives. The initiatives had fuelled the demand for palm oil in the EU and catalysed the growth of exports to the region. Meanwhile, enhanced market

access for palm oil resulting from the progressive trade liberalisation involving the removal of both tariff and non-tariff barriers by member economies facilitated the industry development. The abolishment of the Tariff Rate Quota for vegetable oils effective from I January 2006 by China coupled with the increased price competitiveness of palm oil had provided further impetus for increased Malaysian palm oil exports to the country. Meanwhile, the new trans-fat labelling law which came into effect on 1 January 2006 saw an escalation in CPO import volume into the US market. Closer to home, the lower import duty on processed palm oil in line with the commitment under the ASEAN Free Trade Agreement (AFTA) contributed to increased exports to Vietnam. Palm oil stocks closed at 1.51 million tonnes, lower by 6.1% compared with 1.6 million tonnes in 2005 due to the lower monthly CPO production by 26.3% or 407,605 tonnes in December arising from the floods that disrupted harvesting in some major oil palm plantations.

C h a i r m a n â&#x20AC;&#x2122;s

Statement

The CPO production expanded further reaching 15.9 million tonnes in 2006 from 15 million tonnes in 2005. Meanwhile, the average CPO prices recovered and strengthened in 2006. Positive market sentiments arising from the anticipated demand from the biodiesel industry coupled with higher soyabean oil prices were the contributing factors for the upward trend in palm oil prices. In addition, the rise in world crude oil prices also spurred local palm oil market sentiments. According to the Malaysian Palm Oil Board data, the average CPO prices improved by 8.4% to RM1,511 per tonne (on delivered basis) during the year under review compared with RM1,394 per tonne in 2005. CPO prices traded in a narrow range during the first nine months of the year and subsequently traded higher in the last quarter of 2006. The highest monthly average price was recorded in December at RM1,865 per tonne whilst the lowest monthly average price was recorded in June at RM1,397 per tonne. During the year under review, the property market remained cautious and vigilant of the movement of the crude petroleum prices and the risks of higher inflation and possible interest rate hikes arising from the fluctuations. However, the fundamentals of the Malaysian property market remained positive throughout the year. Strong banking support for end financing through attractive interest rates, and sustained demand particularly in the medium to high end residential units and commercial properties in prime and strategic locations continued to provide support to the development of the property sector.

Annual Report 2006

C h a i r m a n ’s

Statement

CORPORATE DEVELOPMENTS The year 2006 was a significant one for the Group. The Group has achieved significant milestones in the consolidation and divestment of its non-core assets and businesses. On 27 November 2006, the Company entered into a Share Sale Agreement with Projek Lintasan Kota Holdings Sdn. Berhad (Prolintas) for the proposed divestment of Guthrie Corridor Expressway Sdn. Berhad (GCESB), a wholly-owned subsidiary of the Group which is principally involved in the toll concession operations i.e. the Guthrie Corridor Expressway. The proposed divestment involves the disposal of the entire equity interest in GCESB comprising 5,000,000 ordinary shares for a disposal consideration of RM5 million, and the settlement of inter-company balance owing by GCESB to another wholly-owned subsidiary through cash payment of RM431 million and issuance of RM500 million nominal value of Redeemable Loan Stocks of GCESB. On another significant divestment, the Group on 22 February 2007, entered into a Share Sale and Purchase Agreement with Dongwha GH International Sdn Bhd for the disposal of the entire equity interest in Guthrie MDF Sdn Bhd for a total cash consideration of RM145 million. Concurrent with the signing of the Share Sale and Purchase Agreement, the Group’s 54.53% subsidiary, Highlands & Lowlands Berhad, also signed a Land Sale and Purchase Agreement for the disposal of land where Guthrie MDF operations is sited for a consideration of RM30 million to Dongwha Fibreboard Sdn Bhd, a wholly-owned subsidiary of Dongwha GH International Sdn Bhd. The divestments of GCESB and Guthrie MDF are consistent with the Group’s strategic objective to strengthen its business and structure. With these divestments, Guthrie can devote its

Kumpulan Guthrie Berhad

In 2006, the Group plantations registered improvements in production of FFB and palm products.

resources on its core businesses of plantation and property development. A significant portion of the cash proceeds from the proposed divestments will be used to pare down the borrowings and strengthen the Group’s financial position. The divestments are expected to be completed by the first half of 2007. The Group turnaround and transformation programme encompassing the Guthrie Excellence initiatives has yielded positive results. The turnaround stage has been completed. On 27 November 2006, the Company received a proposal from Synergy Drive Sdn Bhd to acquire Kumpulan Guthrie Berhad’s entire business and undertakings including all assets and liabilities as part of the proposal for the merger of Kumpulan Guthrie Berhad, Golden Hope Plantations Berhad and Sime Darby Berhad. On the same date, Synergy Drive had made similar offers to the two listed subsidiaries of the Group, namely Highlands & Lowlands Berhad and Guthrie Ropel Berhad. The Board on 21 December 2006, after considering the expert opinion of the advisers, has accepted the offer from Synergy Drive.

On 24 January 2007, the Company and its subsidiaries, Highlands & Lowlands Berhad and Guthrie Ropel Berhad entered into the Sale of Business Agreement with Synergy Drive in relation to the proposed merger. Subject to the necessary regulatory and shareholders’ approvals, the proposed merger is targeted to be completed with the listing of the new merged entity by the fourth quarter of 2007.

PERFORMANCE During the year under review, the Group chalked up a 21.5% increase in revenues to RM2,406.5 million from RM1,980.8 million recorded in 2005. The Group’s core businesses, plantations and property development contributed RM1,782.7 million and RM567.8 million respectively to the total revenues in 2006. This compares with the revenue contributions of RM1,542.5 million from plantation operations and RM395.1 million from property development in the preceding year. Meanwhile, the consolidation exercise on the divestments of the noncore businesses resulted in the absence of revenue contribution from manufacturing and general trading in 2006.

C h a i r m a n â&#x20AC;&#x2122;s

Group operating profit from continuing operations surged by 82.6% to RM766.1 million in 2006 from RM419.5 million registered in the previous year. Group profit before tax from continuing operations rose by RM342.5 million or 130.2% to RM605.5 million, excluding loss of RM12.9 million from discontinued operations in the year under review from RM263.0 million recorded in the previous year. Earnings of the Group increased substantially to RM284.2 million from RM48.8 million in 2005, an increase of RM235.35 million. Consequently, earnings per share rose to 28.1 sen compared to 4.85 sen for 2005. The improved performance of the Group for the year was driven by stronger results from plantations amidst the buoyant palm oil market environment and supported by sustained earnings from the property business segment. A net gain from foreign exchange of RM148.6 million as a result of the strengthening of Ringgit and Rupiah against US Dollar bolstered the Group performance further as against a loss of RM46.7 million for the previous year.

Group revenue from plantation operations rose by 15.6% to RM1,782.7 million for the year under review from RM1,542.5 million in 2005. Plantation Malaysia contributed 43.4% or RM774.3 million of the Group revenue from plantation operations compared with 44.7% or RM690.3 million in the previous year. Revenue contribution from Plantation Indonesia continued its upward trend, breaching the RM1 billion level in 2006. During the year, Plantation Indonesia recorded revenue of RM1,008.5 million against RM852.3 million in 2005. In terms of revenue contribution, Plantation Indonesia constituted 56.6% of the Group revenue from plantation operations in 2006 against 55.3% in the preceding year. The Group gross profit from plantation operations was RM609.4 million in 2006, higher by 20.6% compared with RM505.4 million in the previous year. Group operating profit increased by more than two folds to RM526.6 million from RM261.2 million in 2005 on account of higher FFB yield and productivity, higher realised palm oil prices and a gain on the

Statement

sale of Ladang Bertam of RM68.5 million. It is important to note Plantation Indonesiaâ&#x20AC;&#x2122;s growing significance and substantial earnings contribution to the Group. Significant progress was also achieved in unlocking the growth potential and accelerating the contribution of Plantation Indonesia. During the year under review, Plantation Indonesia has completed the planting of an additional 6,045 hectares of the remaining 36,278 hectares suitable for planting. With the on-going implementation of performance enhancement initiatives, Plantation Indonesia is in position to show better prospects in the years to come. Meanwhile, Plantation Malaysia experienced the impact of a larger young mature area resulting from accelerated replanting during the period between 2000 and 2002. The improving Group plantation profile saw the reduction in the young mature area of oil palms in 3-5 years age category to 21,904 hectares in 2006 from 27,344 hectares in the previous year and increased area for 6-10 years age category to 26,212 hectares in 2006 from 22,994 hectares in 2005.

The implementation of Guthrie Excellence Transformation initiatives which has now entered the second phase, in tandem with the initiatives identified by Putrajaya Committee on GLC High Performance also resulted in quantum enhancements in the yield and productivity of the core businesses of plantation and property which subsequently contributed to the stronger performance of the Group. The higher performance is in line with the Groupâ&#x20AC;&#x2122;s projection for the year as stated in the Quarterly Reports to Bursa Malaysia. Plantation The Group is one of the largest oil palm plantation players in the world with a total plantation landbank of about 320,000 hectares and planted area of approximately 275,000 hectares. During the year under review, the Group plantations registered improvements in FFB and palm product production in both its Malaysian and Indonesian operations.

The Multi Bin Silo Fertiliser Application System is a strategy to achieve man-to-land ratio of one worker to 12 hectares.

Annual Report 2006

C h a i r m a n ’s

Statement

Jelutong and Denai Alam, which offer good value proposition to both purchasers and investors, will remain the driver of Group property revenue and earnings growth for the years ahead.

DIVIDENDS The Board of Directors has recommended final dividends comprising a tax exempt dividend of 6 sen per share and a dividend of 4 sen per share, less 27% tax, be paid on 21 June 2007, subject to shareholders’ approval. An interim dividend of 6 sen per share, less 28% tax, has been paid on 29 September 2006. The total annual gross dividend for 2006 will amount to 16 sen per share, higher than the rate of 10 sen per share distributed in the previous year. The total annual dividend to be paid out for the financial year ended 31 December 2006 net of tax is RM135 million compared with RM72.6 million paid out for the previous financial year.

De Galleria, a signature product in Bukit Jelutong.

Agricultural services continued to contribute positively to the Group. During the year under review, this business segment contributed RM22.8 million in revenue and RM12.1 million in operating profit. The demand for oil palm planting materials and plantation advisory services continued to support the Group agricultural services operations. Property The property business development continued to contribute positively to the Group revenues and profits. In 2006, revenue contribution from Group property increased by 43.7% to RM567.8 million from RM395.1 million recorded in the previous year. In terms of segment contribution, Group property constituted 23.6% of the total Group revenues in 2006 compared with 19.9% in the preceding year. At the operating level, the prudent and strategic approach to landbank management and development, enhanced project development and delivery, quality assurance and cost management resulted in sustained earnings contribution to the 48

Kumpulan Guthrie Berhad

Group. Amidst the consolidation in the general property market, Group property achieved profit before tax of RM183.3 million, including RM168.1 million from property development in 2006 against RM176.2 million in the previous year. Group property operations, undertaken by Guthrie Properties continued to focus on the development of Bukit Jelutong, the Group’s established residential enclave and township and Denai Alam, another innovative and unique development launched in 2005. Located approximately five kilometres north of Bukit Jelutong, off the Guthrie Corridor Expressway, Denai Alam has performed well in terms of sales performance, product quality, and project management, development and delivery. Denai Alam is set to replicate the success of Bukit Jelutong as another branded development and township. With a total of 1,002 acres planned for mixed development, Denai Alam will be the home for about 35,000 residents when the whole development project is completed in the next six years. Bukit

PROSPECTS Plantation The prospects for CPO and palm kernel, our principal produce, look positive, primarily on the strength of global demand for oils and fats. The depleting stocks in the EU-25 and American edible oil market as a result of bio-diesel operations and the increasing demand for CPO for palm based bio-diesel operations, the anticipated El-Nino effects on global grains and oilseeds supply, the implementation of trans-fatty acid labelling requirements and the enhanced market access for palm oil to China’s market are expected to provide continued support for the price of CPO. The improving palm age profile of the Group plantations together with proven results of the Guthrie Excellence Transformation initiatives emphasising on the performance driven culture is expected to result in a higher next level of performance excellence. The initiatives will be continued and further strengthened in 2007.

C h a i r m a n ’s

The implementation of the Five Strategic Thrusts, focused enhancement on key areas of operations or the 5Es namely, yield maximisation, cost optimisation, enhancement of quality and sustainability practices, enhancement of agricultural and milling practices, and the strengthening of human capital will continue to be emphasised in the Group plantation operations. Significantly, the Group expansion programme for its next 36,298 hectares of plantable area over the next few years in Indonesia will be further accelerated. Following the completion of the planting of 6,046 hectares in 2006, another 7,000 to 8,000 hectares will be planted in 2007.

Statement

ringgit and rising consumer sentiment as well as the easing of foreign ownership of property in the country are expected to uplift demand for property. Property development in prime locations is expected to continue to perform favourably. The Group properties will continue to leverage on the strategic location of its landbank, its innovative projects and brand. Besides the residential property development projects, further development of commercial and investment properties especially in the prime areas will be undertaken. Guthrie Properties will also introduce higher margin products including commercial properties. Guthrie Properties, like its Plantation counterpart, is driven by Guthrie Excellence initiatives and the various enhancement of yields, product mix and quality system. The Group property’s growth strategies will hinge upon large and visionary development projects, development of niche and unique high-end products, and other developments outside the vicinity of the Guthrie Corridor Expressway. The next level of Guthrie Excellence supports the GLC Transformation Stage 3. With the enhanced Group structure and operations, the Group under the phase II implementation of Guthrie Excellence Transformation is prepared to progress further in the years ahead.

The Group is on course with its capacity expansion to reach a critical level of efficiency by 2008. The expansion of milling and logistics capacity in Sumatera and Kalimantan with the construction of an additional four 30-tonnes per hour mills and five jetties and bulking stations complete with storage facilities in Kalimantan over the period 2006-2008 will enable the Group to achieve greater operational efficiency, higher oil quality and improved cost efficiency.

All in all, the performance of the Group plantations in 2007 is expected to be better than that of 2006 on account of the projected higher production of FFB and the expected higher palm oil prices. Meanwhile, the Group expects its locational advantage and unique property products would sustain the performance of property development operations.

Meanwhile, further strengthening of the Minamas Research Centre (MRC) and TQEM capacity and capability will significantly contribute to the improvement in productivity and product quality to the Group through R&D, innovations and plantation science and technology advisory services. Managed by a dedicated Value Chain Management System, all these developments will augur well for the plantation operations performance.

I would like to record the vote of thanks and appreciation from the Board to YABhg. Tun Musa Hitam who retired from the Board in June 2006 for his able leadership and prominent roles particularly in facilitating the integration of Plantation Indonesia into the Group during his four-year tenure of Chairmanship. I also thank Mr. Sreesanthan s/o Eliathamby who resigned from the Board in November 2006 for his constructive contribution to the Group. Mr. Sreesanthan had served with the Board as Independent Non-Executive Director since 31 May 2002.

Property The general property market outlook is expected to be positive in 2007. The notion of the stable interest rate environment, the expected multiplier effects from the implementation of the Ninth Malaysia Plan projects, a stronger

ACKNOWLEDGEMENT On behalf of the Board, I extend my appreciation to the Group Chief Executive, management and staff for their contribution to the Group during the year. I wish to also acknowledge the sense of collective responsibility, professionalism and the wisdom of my fellow directors on the Board.

Last but not least, I also thank our valued shareholders, business associates, customers, friends and the authorities for their continued trust, partnership, support and guidance.

TAN SRI DATO’ DR. WAN MOHD. ZAHID MOHD. NOORDIN Chairman 15 May 2007

Annual Report 2006

GROUP CHIEF EXECUTIVEâ&#x20AC;&#x2122;S REVIEW

The year 2006 was significant to Kumpulan Guthrie Berhad. The Group achievements in 2006 underscored the results of the series of Guthrie Excellence Transformation programmes that were introduced in 2004 and 2005 and the stronger management of the Group operations and performance achieved through systematic and structured implementation of the Group-wide Guthrie Excellence Transformation programmes. Group earnings for the year under review surged to RM433.7 million. Net earnings of the Group attributable to equity holders of the Company jumped significantly to RM284.2 million. Earnings per share rose to 28.10 sen from 4.9 sen in the previous year. The Group achieved a 9.1% return on equity (ROE) for the year exceeding its target KPI of 8% ROE. At the same time, Guthrie recorded a positive economic profit. In terms of operational performance, the Group had reached a new level of threshold, and hence, is ready to move into the next level of performance excellence. The completion of the Group consolidation and divestment of its non-core assets during the year has positioned Guthrie to be a stronger and more focused global plantation and property player.

Kumpulan Guthrie Berhad

Over the last three years, the Management, in collaboration with the Board, and with the support from dedicated employees, has successfully transformed Guthrie into a strong performing plantation and property company. We have completed Stage One of the Guthrie Excellence Transformation Programme. We have gone through a challenging period of integration process in Indonesia, making bold decisions and introducing new processes, systems and work culture. We have completed the divestment of non-core assets and businesses and this will enable Guthrie to devote its resources on its core businesses.

Group

This transformation is reflected in the turnaround of and improvement in the Group performance. The stronger governance, innovative systems, best practices, technology, R&D and human capital development have been put in place to drive the Group performance. All these have culminated in quantum enhancements in Group operations, reflected by higher productivity and stronger results in Guthrie’s plantations, both in Malaysia and Indonesia as well as strong and sustained earnings contribution from the property business. Our 5Es or Enhancement Initiatives focusing on Governance, Revenue, Cost, Total Quality Process, and Human Capital have produced substantial improvement in yield, productivity and operating margin. Similarly, operational efficiency, both in plantation and property operations, has also shown a positive trend of improvement.

FFB Yield Per Mature Hectare (Malaysia)

20 15 10

(Tonnes)

20.7

17.3

17.7

23.3

25 12.6%

Chief

E x e c u t i v e ’s

Review

Similarly, for the property business, Guthrie Property will continue to leverage on its strategic landbank within the vicinity of Guthrie Corridor Expressway as well as other Group landbank outside the corridor. A new approach to margin and product development will be a key feature in the property development strategy. Guthrie Property has established a new level of excellence over the last three years. It is amongst the leading property players in the country; having three internationally recognised ISO certifications, Guthrie Property is set to implement an Integrated Management System for all its projects. It has also positioned a new level of profitability which is nearly three-fold higher than its earlier profits. Guthrie Property is adopting a new R&D approach to property development and a differentiation strategy to place itself at the next threshold of excellence. Towards this end, it has prepared a new strategic master-plan. With the reorganisation of structure and talent redistribution as well as the leadership mapping and competency development that have been undertaken, we are happy to note that alignment and clarity are in place and that the business sectors are managed competently. These will augur well as we embark on the next threshold of excellence where we target to deliver a double digit ROE supported by a higher benchmark of operational KPIs.

0 ’04

’05

’06

’09 (Target)

Return on Equity 15

5.4

3 1.7

(Tonnes)

’04

(%)

9.1

20 15

17.1

15.8

13.4

21.6

26.3%

12.8

40.7%

FFB Yield Per Mature Hectare (Minamas Plantation)

’05

0 ’06

’09 (Target)

0 ’04

’05

’06

’09 (Target)

There are two unique Guthrie features that need to be recapitulated. The Group’s Minamas Plantation in Indonesia has demonstrated enormous capacity for growth and profitability. Minamas Plantation poses a unique plantation challenge to the Group. We are happy to record that our human capital has acquired valuable skills and expertise in managing a vast and diverse territory spanning across the entire Indonesian archipelago. Their management talent has placed them in good stead resulting in the successful implementation of best practice estate management.

The Group recognises its human capital as a critical and invaluable asset. Sufficiently equipped both in in-depth expertise and experience, the Group’s workforce is poised to take on further challenges and create new opportunities as it moves into Stage Two of the Guthrie Transformation Programme.

DATO’ ABD WAHAB MASKAN

Annual Report 2006

Economic

Review

MALAYSIA The Malaysian economy remained resilient in 2006. During the year, real gross domestic product (GDP) expanded by 5.9% against 5.2% in 2005. The economic expansion was principally driven by increased domestic activity, particularly in the private sector amidst high external demand for electronics and primary commodities. The aggregate domestic demand grew by 7.4% during the year, with the private sector continuing to be the driver of growth while the public sector continued to provide a supportive enabling environment for private sector activities. Private investment increased by 9.7% during the year, catalysed by significant capital outlays in the major sectors namely manufacturing, services and oil and gas sectors. Private consumption expanded by 7.0%, uplifted by higher incomes arising from higher commodities prices, strong export earnings and stable labour market conditions.

for resource based industries and improvement in the domestic oriented industries. Similarly, the broad-based expansion in the agriculture sector reflected higher yields and productivity in both industrial (namely palm oil, rubber and cocoa) and food crops amidst the buoyant market environment. On the contrary, the mining sector experienced a mild contraction of 0.2% as a result of lower production of crude petroleum and natural gas following the shutdown of a number of oil fields and plants for maintenance and capacity upgrading. Meanwhile, the construction sector showed signs of recovery with the moderating pace of contraction of 0.5%. The improved performance of the sector was driven by the recovery in the civil engineering segment following the commencement of several 9MP infrastructure projects, increased construction activity in the oil and gas industry and higher activity in the nonresidential segment.

Public investment was also higher in 2006, expanding by 6.5% compared with 1.9% in the preceding year. The roll out of several Ninth Malaysia Plan (9MP) projects following the release of the Plan in March 2006 contributed to the increased public investment. Similarly, public consumption increased by 7.9%, higher compared with 5.4% in 2005, due to higher expenditure for the maintenance and improvement of the delivery system.

Notwithstanding the higher petroleum prices and tariff hikes, inflation remained at a manageable level during the year. The headline inflation rate, as measured by the Consumer Price Index (CPI), edged up to 3.6% from 3% in 2005. While other key categories also registered some price increases, the rising cost of transport was the main contributor to the higher inflation in 2006.

On the sectoral front, the economic expansion was supported by the robust growth in the services, manufacturing and agriculture sectors. The services sector sustained its growth pace of 6.5% on account of higher trade related activities, finance, tourism and increased contribution from new sources of growth. Meanwhile, both manufacturing and agriculture sectors grew at accelerated paces of 7.0% and 6.4% respectively. The expansion in the manufacturing sector was underpinned by the continued upturn in the global electronics cycle, strong external demand

On the financial developments, the monetary policy in 2006 focused on attaining an appropriate balance between maintaining price stability and achieving the maximum sustainable level of economic growth. The continued strong macroeconomic fundamentals had enabled Bank Negara Malaysia to align monetary conditions to the prevailing environment of heightened inflation risks. The central bank raised the Overnight Policy Rate (OPR) twice, in February and April, by 25 basis points each time. With inflationary pressures easing off in the second half of

Kumpulan Guthrie Berhad

the year, coupled with emerging signs of a moderation in the global economic outlook, the OPR was left unchanged from May onwards. At 3.50%, the OPR remained supportive of economic activity. A significant development during the year was the gradual strengthening of ringgit against major currencies. To date, the appreciation of ringgit has been broadly in line with the currencies of Malaysiaâ&#x20AC;&#x2122;s major trading partners and is reflective of the nationâ&#x20AC;&#x2122;s sound macroeconomic fundamentals. Equally important, the equity markets have improved markedly during the year. After the relatively weak performance in 2005, the Kuala Lumpur Composite Index (KLCI) ended 2006 on a positive note to close at 1,096.24 points, higher by 21.8% compared to that of 2005. Renewed investorsâ&#x20AC;&#x2122; confidence, stronger corporate earnings, corporate mergers and acquisitions and the expectation of the 9MP to propel further economic growth contributed to the better performance of the equity markets. Looking ahead, the world economy is projected to grow at 4.5% in 2007 (2006: 5%), with expectations of lower inflation risks and moderation in growth of world trade. The US economy is expected to grow at 2.7% in 2007 (2006: 3.3%). Recovery in Japan would continue, albeit at a more gradual pace. Prospects for the Euro area are positive following signs of a broad-based recovery in major member countries. Notwithstanding the expectation of some moderation in the global trade, the outlook for the Asian region remains positive, supported increasingly by domestic demand, particularly in China and India. Against this backdrop, the Government has forecast the Malaysian economy to expand by 6% in 2007. With the global electronics industry expected to pick up in the second half of the year, the Malaysian economy is projected to expand more rapidly during that period. Growth would also be supported by

Economic

domestic developments including, among others, the intensive implementation of 9MP projects, the commencement of the Kikeh oil field operations in Sabah and the expected higher tourist arrivals following intensive promotion of Visit Malaysia Year 2007.

Domestic demand would continue to drive economic growth. While the private sector, particularly private investment, continues to provide the impetus to growth, the public sector is expected to play a more significant role in facilitating growth in 2007.

Review

The monetary policy is expected to remain accommodative. The conduct of monetary policy in 2007 will continue to balance between the need to ensure that interest rates remain at a level that would enable the central bank to respond to any risks of rising inflation, while remaining conducive to sustaining growth in domestic demand.

INDONESIA 2006 was another challenging year for the Indonesian economy. During the year, the economy grew by 5.5%. While the economy registered positive growth in the first half of 2006, the growth was mainly propelled and accelerated by higher export ear nings, increased private consumption and government spending in the second half of the year. The economy moved cautiously into 2006 with concerns over the possibility of further external shocks arising from the prevailingly high inflation risk environment. While the economy was vigilant of the risks of external shocks, the inflationary pressures, heightened by the volatile and higher crude petroleum prices particularly in the first half of the year had adversely affected corporate ear nings and household incomes. Consumer spending, which constituted more than 60% of gross domestic product (GDP), was stunted due to reduced disposable incomes and lower consumption propensity. Motorcycle and car sales, proxies of consumer confidence and consumer spending fell significantly by 11% and 40% respectively in the first half of the year. The total loan growth in the banking sector stalled at 3.7% during that period. During the first two quarters of 2006, economic growth slowed down to 4.98% and 4.96% respectively. However, the economy started to regain momentum in the second half of the year, expanding by 5.9% and 6.1% respectively in the third and fourth quarters of 2006. The inflation rate started to slow down in March 2006 and stabilised at 6.6% at the end of the year as against 17.1% at the end of 2005. The average inflation rate for 2006

was 13.3%. The Government’s role in maintaining the electricity tariff against an earlier plan to raise it played a significant role in taming the inflation. The regained macroeconomic stability provided opportunity for a broad-based economic growth. The economic expansion was principally driven by both exter nal demand and private consumption. The relatively stable petroleum prices and the higher palm oil and other commodity prices in the second half of 2006 resulted in a marked improvement in the country’s current account and trade balance position. Crude palm oil prices (CPO) strengthened amidst the lower production resulting from the El-Nino phenomenon and the increasing demand for CPO for biofuel production. The CPO prices breached RM1,500 per tonne in August 2006 and stayed above the level to close the year at an average price of RM1,865 per tonne for December 2006. The higher CPO prices benefited Indonesia, the world’s second largest producer of palm oil. Indonesia registered a record high monthly trade surplus of USD4.2 billion in October 2006. The trade surplus for the whole year was USD32.1 billion. By the same token, Indonesia’s foreign exchange reserves also strengthened during the year. As at the end of 2006, net international reserves stood at USD42.6 billion. Similarly, the Rupiah strengthened by 8% from 9,835 to the USD at the end of 2005 to 9,034 at the end of 2006, following the country’s stronger current account and international reserves.

Significantly, with the stable macroeconomic conditions, the Indonesian Government settled its outstanding obligations to IMF of USD7.8 billion. The second half of 2006 also saw the upswing in credit growth, which was followed by acceleration in government spending thus, helping to boost economic growth. Amidst the lower inflation risks and stable exchange rate environment in the second half of the year, the BI rate which is the benchmark interest rate for Indonesia was revised seven times in 2006. The first revision was in May 2006 which saw a reduction of 25 basis points from 12.75% per annum to 12.50% per annum. In December, the BI rate was 9.75% per annum. This BI rate revision has effectively induced growth in consumer spending and catalysed loan growth to spur the economy. Loan growth had effectively picked up by 14.1% in the fourth quarter of the year. Looking ahead, with indicators pointing to further improvement in economic growth, Bank Indonesia has forecast the economy to grow by 6.0% for 2007 and 5.7%-6.7% for 2008. The major sources of economic growth will be exports and rising domestic demand, particularly from sustained investment growth in line with improving business sentiments. Government actions for improvement of the investment climate and the ongoing programme for accelerated construction of needed infrastructure mainly for electrical power and transportation projects are expected to foster higher levels of investment growth. Meanwhile, exports are expected to maintain a high level of growth, supported by agricultural production and manufacturing. The planned deficit spending by the Government will also contribute to the targeted economic growth.

Annual Report 2006

Operations

Review

PLANTATION MALAYSIA In 2006, the Groupâ&#x20AC;&#x2122;s fresh fruit bunches (FFB) production increased by 21% to 1,847,629 tonnes compared to 1,521,735 tonnes in 2005. The year also saw an improvement of FFB yield to 20.7 tonnes per hectare compared to 17.3 tonnes per hectare achieved in 2005. The higher yield achievement is attributable to the improvement in palm prime age profile and the increase in mature area from 87,918 hectares to 89,302 hectares. The FFB yield has been on an upward trend and is expected to move up further in tandem with the yield enhancement programmes. The trend of yield increase will continue due to the improving age profile. This was already evident in 2006, with more estates moving beyond the 25 tonnes per hectare category in comparison to 2005. The prime age profile is expected to be at its peak in 2009. The total crude palm oil (CPO) produced in 2006 was 431,152 tonnes against 406,274 tonnes produced in 2005, an increase of 6% on the back of higher Group crop processed.

In 2006, the initiative undertaken within the PNB Group to optimise operational efficiency resulted in the sales and purchase of FFB between the Group and Golden Hope Plantations Berhad. This arrangement benefited both parties in reducing transportation and mill processing costs. Oil yield was 4.2 tonnes per hectare in 2006 compared with only 3.6 tonnes in 2005 with a total of seven estates achieving more than 5.0 tonnes of oil per hectare. Jeleta Bumi Estate in Sabah achieved the highest oil yield in the Group with 6.3 tonnes per hectare.

The oil extraction rate (OER) declined slightly to 20.2% from 20.4% achieved in 2005. Sg. Dingin Mill in Kedah recorded the Groupâ&#x20AC;&#x2122;s highest OER of 21.4% in 2006. Focus On Five Strategic Thrusts The continued strengthening of the implementation of the five strategic thrusts, which focused on the enhancement of key areas of operations, had resulted in higher operational performance. The five strategic thrusts implemented for operational excellence are Yield Maximisation, Cost Optimisation, Quality and Sustainable Practices Enhancement, Agricultural and Milling Practices Enhancement, and the Strengthening of Human Capital Development. The first strategic thrust, Yield Maximisation is driven by several components namely accelerated planting of clonal material, maintaining prime age profile in the 40%-50% range through structured replanting of 4%-5% of the total area annually, joint culling of seedlings with Guthrie Research Chemara to optimise productive stand, water management initiatives, proactive pests and diseases management, and improving crop recovery, quality and work standards. The second thrust, Cost Optimisation strategy entails focus areas such as outsourcing of transport, preventive maintenance of vehicles, monitoring of contract rates and spares procurement, planned plant maintenance and latest mill technology. The third strategic thrust, Quality and Sustainable Practices enhancement comprises crop evacuation management, mill process control, tracking of quality performance and SOPs to shorten worker lear ning curve, and improvement of worker performance.

The Groupâ&#x20AC;&#x2122;s Sg. Dingin Mill in Kedah achieved the highest OER in Peninsular Malaysia.

Kumpulan Guthrie Berhad

As for the Agricultural and Milling Practices enhancement, the areas of focus are improved nursery practices, better planting material, optimisation of mill utilisation, and the strengthening of engineering practices.

Operations

Review

Finally, in Strengthening of Human Capital development, building a pool of talented and skilled people driven by high performance is a key focus of the Group through Competency Based Training and Education (CBTE), technical training and leadership development. Retention of these talented and skilled workers will be the key drivers for long term sustainability of the Group operations. The performance targets are aligned to the balanced scorecard and performance management development reward system for all levels of employees. The initiatives undertaken that had contributed to the 2006 performance are outlined below: 1. Canopy Management Introduced in 2005, the Canopy Management initiative which emphasises on maintaining the right number of fronds has resulted in improved yield from young mature palm areas.

Guthrie Research Chemara staff tracking progress of the Groupâ&#x20AC;&#x2122;s planting materials.

4. Replanting Policy All Group replanting activities in 2006 have complied with the zero-burning policy. All biomass from the replanting is left in-situ to be recycled as organic mulch which assists in improving soil organic matter content.

The MBS is a strategy to improve labour productivity and entails a sharing of application equipment between neighbouring estates, thus reducing capital expenditure.

PROSPECTS 2. MAIC (Mechanically Assisted InField Collection) MAIC continues to be a mainstay of the Group policy to ensure worker productivity can be enhanced and dependency on foreign workers is optimised. The introduction of MAIC has over the years contributed significantly to improving the coverage per harvester from 1 harvester to 11-12 hectares to 1 harvester to 18-20 hectares. This is in line with the Group pursuit to improve productivity of workers which is the key component in achieving and sustaining a higher cost efficiency in the long term. 3. Strategic Operations Unit Model The Strategic Operations Unit (SOU) model provides a strong linkage in the relationship between estates and mills and is the reference point to address issues pertaining to the critical factors of yield, crop quality and operational cost.

The Group focus is to maintain prime age profile in the 40% â&#x20AC;&#x201C; 50% range at all times to ensure consistency of yields. A structured replanting policy will also contribute to enhanced planting standards and optimum yields. 5. Structured Block Supervision (SBS) This is a systematic and well-planned approach designed to enhance effectiveness of Block Supervision through a structured tracking of performance for continuous improvement and cost effectiveness. The main areas of focus for SBS are in harvesting, manuring and maintenance operations. 6. Multi Bin Silo Fertiliser (MBS) Application This is an integrated system of fertiliser management, involving transportation and application of fertiliser, which provides an opportunity to maximise all resources including vehicles, labour and supervisory input.

With the improving age profile of Group plantations and strengthening of operational efficiency firmly in place, Plantation Malaysia expects to achieve higher performance through higher yield and FFB production in 2007 and in the years ahead. Higher palm oil prices which so far have averaged more than RM1900 per tonne will further contribute to positive results for the Group. Realising that technology and innovation will play a crucial role in maximising yield, the Group has taken the initiative to accelerate the planting of clonal oil palms in the Group annual replanting programme. More Group estates will be planted with the AAB1 clonal oil palms in 2007. The first batch of clonal oil palms planted in Bukit Cheraka Estate, Selangor in 2006 is making significant progress. The Groupâ&#x20AC;&#x2122;s integrated ICT project, GEMAS was successfully completed at its pilot project site in Labu Mill, Negeri Sembilan. Group-wide implementation is scheduled to be completed within the first half of 2007 to further enhance efficiency in operations. Annual Report 2006

Operations

Review

PLANTATION INDONESIA Plantation Indonesia operations is carried out through subsidiaries, PT. Minamas Gemilang and PT. Anugerah Sumbermakmur (together known as Minamas Plantation), and PT. Guthrie Pecconina Indonesia (GPI). The Group titled area is 220,428 hectares spread over 56 estates. The planted area increased to 174,564 hectares in 2006 compared to 169,111 hectares in 2005. The Group operates 17 mills with a total milling capacity of 775 tonnes per hour.

In 2006, the Group fresh fruit bunches (FFB) production increased by 8% to 2.63 million tonnes compared to 2.44 million tonnes in 2005. The year also saw an improvement of FFB yield to 16.5 tonnes per hectare compared to 15.5 tonnes per hectare achieved in 2005.

The FFB yield has been on an upward trend in 2006 despite being affected by adverse weather conditions of six months prolonged wet season and five months of distinct dry condition. The total crude palm oil (CPO) produced in 2006 was 641,355 tonnes against 584,510 tonnes produced in 2005, an increase of 10% on the back of higher Group FFB production. Outside crop processed also increased 26% to 294,257 tonnes in 2006 compared to 232,711 tonnes in 2005. The oil extraction rate (OER) is about 22.9% in 2006, similar to the rate achieved in 2005. A total of eight mills achieved OER level of more than 23% with Ungkaya mill in Sulawesi recording the highest OER of 23.9%. The kernel extraction ratio (KER) in 2006 was 4.3% in 2006 against 4.0% in 2005. Oil yield achieved in 2006 was higher at 3.78 tonnes per hectare compared to 3.55 tonnes per hectare in 2005. Implementation of Plantation Operations Blueprint The 2006-2010 Operations Blueprint provides the roadmap and the action plans to maximise yields, improve work efficiency, improve quality of palm products, and reduce costs of production with emphasis on strengthening human capital capability. Yield enhancement initiatives such as soil and water conservation, better management of manuring, pests and diseases control, canopy management and other agro-techno practices have improved FFB yield and increased FFB production in the estates. In mature areas, fronds, empty fruit bunch and palm oil waste are applied in the inter-rows to provide a good source of nutrients to the palm. Through water conservation methods such as conservation pits, terraces in inland soils, a system of water-gates and flood pumps

Yield enhancement initiatives undertaken have resulted in increased FFB production.

Kumpulan Guthrie Berhad

Operations

Review

PROSPECTS Capacity/Infrastructure Building Development of the support services and infrastructure including new mills, jetties, bulking facilities and roads to further enhance the performance of the Indonesian operations will continue in 2007.

The newly completed Angsana Mill, Pamukan area in South Kalimantan.

in the peat areas, optimal water levels are maintained supplying the water requirement for the palms. Biological controls such as barn owls, beneficial plants and judicious spraying have minimised damage to the palms caused by pests and diseases. The focus on mill cleanliness and preventive maintenance have enhanced mill processing efficiency. Potential sources of contamination and losses are eliminated by implementing good management practices throughout the processing stages. Good housekeeping practices are advocated in all the mills to ensure mill sanitation and workersâ&#x20AC;&#x2122; safety. In 2006, the construction of a jetty with bulking and storage facilities at Pamukan, South Kalimantan was completed and is now in operation. The building of the jetty will not only enhance the dispatch process and quality of CPO and kernel but also expedite the delivery of fertilisers and road work materials to the surrounding estates.

The establishment of the Minamas Research Centre (MRC) in Teluk Siak, Sumatera in 2006 strengthened research and development works to support the Groupâ&#x20AC;&#x2122;s key strategic goals of maximising yields, improving quality and reducing costs through new innovations and sustainable practices. The MRC will also play an integral role in advocating new technologies, better agro-techno practices and site-specific management systems for the Group to excel and be recognised as a leading plantation company in the region. With the increasing awareness on food safety and environment and to maintain the highest standards of social and environmental responsibility, Good Agricultural Practices (GAP) and Hazard Analysis and Critical Control Point (HACCP) management principles have also been introduced to estates and mills. The Plantation Advisory Department team continued to conduct baseline audits in estates and mills, engaging external estate and mill advisors as part of the independent assessment on compliance to Group practices and standards.

In 2006, two new mills in Kalimantan and one new mill in Sumatera have commenced construction and are expected to be in operation by mid-2007. The construction of another new mill in Sumatera will start in 2007 and to be completed in 2008. On completion, the milling capacity in Indonesia will reach 920 tonnes per hour. The additional capacity is to meet the expected surge in crop production when most of the young matured palms move into the prime age group in the next few years. The construction of a jetty at Sungai Durian, South Kalimantan commenced in 2006 and will be completed in 2007. Three more jetties are expected to be built in 2007. Various projects to upgrade field roads to all-weather roads and bridges will improve crop quality and reduce the cost of transport for both the estates and mills. Operational Efficiency The Group will further maximise yields, improve quality and reduce costs through new initiatives adopted from its Malaysian operations such as Structured Block Supervision (SBS) and Huka-bin mechanisation system for FFB transport. The SBS advocates a systematic check for all levels of management to enhance control and supervision of key field operations such as manuring, spraying and harvesting. With the on-going implementation of performance enhancement initiatives, Plantation Indonesia is in position to show better prospects in the years to come.

Annual Report 2006

Operations

Review

PROPERTY In year 2006, Group property operations remained focused on the development of Bukit Jelutong and Denai Alam. In a move to strengthen its position as the premium property brand, GPDH unveiled the new brand name ‘Guthrie Properties’ in January 2006. This rebranding exercise coupled with an aggressive promotion and marketing drive are aimed at expanding the Group property business and market base, and essentially, to reposition Guthrie Properties as a leading and visionary property player. Bukit Jelutong, a unique and innovativelyplanned self-contained 2,205-acre residential and commercial development continued to attract the attention of potential property buyers and investors. This low-density township, with an average of four units per acre, is targeted towards affluent, discerning individuals and families who value privacy, security and community living. A branded development and township, Bukit Jelutong’s strategic and prime location within the Klang Valley with easy accessibility offers good value proposition to its owners.

Guthrie Properties’ other main development project, Denai Alam is strategically located at Bukit Subang Interchange, about 5 km North of Bukit Jelutong via Guthrie Corridor Expressway. It is the recipient of the Malaysian Institute of Planners’ Planning Innovation award in 2003. The “Denai” concept refers to the development of residential community with design aimed at promoting intra and inter-neighbourhood interaction. “Denai” is an extensive network of a 30-metre wide path, developed as an exclusive

passageway for pedestrians and nonmotorised traffic, offering a fresh dimension to the concept of open space and superior community safety. Denai Alam offers essential amenities such as shops and schools, as well as adequate facilities for wholesome recreation including shaded walkways, jogging and cycling paths, playgrounds, water features and parklands. Another factor luring people to Denai Alam is its low density nature of an average of eight units per acre compared with the industry average of 12 units per acre.

PERFORMANCE The performance of the Group property business generally mirrored the modest economic conditions during the period under review. Amidst the moderation of the general property market coupled with the expectation of increase in interest rates, fluctuations in crude petroleum prices and the hike in power tariff, the property development of the Group’s associated company, GPDH continued to contribute significantly to the Group in 2006. At the operating level, Guthrie Properties registered an operating profit of RM168.05 million (2005: RM176.2 million) on a back of a turnover of RM567.8 million (2005: RM395.1 million). The sale of developed areas at Sungai Kapar Indah and Bukit Jelutong Parcel J Commercial Centre valued at RM152.8 million and RM30.6 million respectively, boosted the earnings from the property development segment of the Group.

OPERATIONS

Tropika Collection, Guthrie Properties’ ‘build-then-sell’ product.

Kumpulan Guthrie Berhad

Bukit Jelutong The year 2006 saw another successful launching of Bukit Jelutong’s commercial units in Parcel J neighbourhood. The commercial units, with a price tag ranging from RM314,600 to RM3.19 million, were fully sold out within hours of the launch, and generated a total gross sales revenue of RM30.6 million.

Operations

In November 2006, Guthrie Properties launched its first ‘build-then-sell’ (BTS) project, Tropika 2 Double Storey Super Link houses. A total of six phases of property projects comprising 511 units of landed properties were completed and handed over to the buyers of Bukit Jelutong in 2006. Guthrie Properties also completed the construction of another commercial property development, the D’ Pangkin Double Storey Shop Offices ahead of schedule which were handed over to the purchasers in January 2007. Bukit Jelutong development is nearing full completion with 80% of the 2,205-acre land having been opened for development. Denai Alam The development of Denai Alam saw the successful launching and sales of 296 units of double storey terrace houses in mid 2006. In addition, Guthrie Properties launched another 48 units of high-end double storey terrace Alstonia homes in September 2006. With a price tag ranging from RM383,000 to RM701,000, the Alstonia homes are expected to generate a total gross sales revenue of RM21.2 million.

As for development progress at project sites in Denai Alam, building works are ahead of schedules. Major infrastructure works, key to the successful development of townships, are nearing completion and expected to be ready for handover of the first batch of houses to purchasers in June 2007. Performance Excellence and Total Quality Improvement During the year, Guthrie Properties achieved another major milestone in its mission to further strengthen the quality culture in its operations. Guthrie Properties was awarded the Environmental Management System, EMS 14001 certification and Occupational Health & Safety Accreditation System, OHSAS 18001 certification by SIRIM Berhad for its commitment and compliance to total quality management pertaining to environmental management, occupational health and safety requirements.

PROSPECTS

Review

perform favourably. The township and community development in Bukit Jelutong and Denai Alam will continue to be a major source of revenue and earnings for Group Property. With the positive market outlook, Guthrie Properties is preparing for a series of new property launches in 2007 which includes high-end bungalows and Semi-Ds in Bukit Jelutong and highend products in Denai Alam. Moving forward, Guthrie Properties’ immediate to medium term growth strategies will hinge upon large and visionary development projects, development of niche and unique highend products, and other developments outside the vicinity of Guthrie Corridor Expressway. With the achievement of the three Quality certifications from SIRIM, Guthrie Properties targets to implement the Integrated Management System (IMS) by mid 2007 that will integrate the ISO 9001, EMS 14001 and OSHAS 18001 into a single system and enable projects to be implemented more effectively.

The general property market outlook is expected to be positive in 2007 with property development in strategic and prime locations expected to continue to

To further spur the sale of these mediumend homes, a special end-financing package was offered exclusively to purchasers of Guthrie Properties’ residential products made possible by Malaysia Building Society Berhad (MBSB). Known as the ‘Easy Ownership Scheme’ (EOS), the MBSB 100% financing facility will help many first-time house buyers. To further establish its presence as well as provide buyers with enhanced and excellent customer service, Guthrie Properties has opened Denai Alam Show Village and Sales Gallery at its Denai Alam Township. D’Pangkin, Guthrie Properties’ Commerical Development in Bukit Jelutong.

Annual Report 2006

RESEARCH & DEVELOPMENT Plantation Science & Technology In line with the Guthrie vision to be a global centre of excellence in agribusiness, the Research and Development Division (R&D) is continuously innovating and exploiting strategic driven technologies to support and advance the Group’s core businesses. The R&D strategic focus has always been on addressing issues in an effort to increase and sustain yield.

Guthrie Research Chemara Guided by its primary objective to narrow the gap between actual and potential yield, Guthrie Research Chemara (GRC) in Seremban, Negeri Sembilan is actively pursuing areas that can best resolve issues. The continuing increase in cost of production coupled with a persistent labour constraint, challenging field conditions, persistent threat from pests and diseases (P&D), and the demands for sustainable agriculture from consumers and society are significant challenges that confront R&D. The main thrust of R&D activities is to increase oil yield per hectare. Towards this end, Precision Agriculture has helped identify areas of concern such as marginal soils, difficult terrain, uneven rainfall pattern, and P&D. This exercise has enabled efforts to effectively mitigate such concerns. A precision approach has enabled development in various critical aspects and opens up new opportunities for yield improvement. On this score, GRC continuously provides technical training to estate personnel in its effort to disseminate knowledge and to expand usage of new technologies. Through these activities, GRC prepares the foundation for the planting of new improved planting materials vigorously selected so as to exhibit their genetic potential.

Kumpulan Guthrie Berhad

Plant Breeding Research Improving the potential oil yields of planting material has always been the strategic thrust of the oil palm Plant Breeding Department of the Group R&D. Research focuses on the selection of high bunch productivity and superior oil yield capacity. Over the years, significant progress has been achieved in improving the parental lines that gave rise to improved hybrid DxP oil palm planting materials. This is achieved through dedicated breeding and selection for improvement in the already advanced female (Dura) and male (Pisifera) parental lines in the Group’s breeding collection. A stringent progeny testing programme carried out over the years, has also ensured the production of continuously improved DxP planting materials with superior oil yield potential, not only for the Group’s plantations but also for the industry. In 2006, a complete re-evaluation of the Group stock parental lines was made to enhance the production of superior DxP materials in anticipation of the new SIRIM MS 157:2005 standards for oil palm that will take effect in 2007. A structured parental palms replacement programme is already in place to meet future demands for improved material and production capacity. In the long term, Guthrie’s relatively wide collection of available oil palm germplasm works to its advantage as exploitation of these materials through conventional and molecular or marker assisted breeding techniques will further hasten the improvement progress and superiority of the Group’s planting material in the future. Oil palm agronomy and fertiliser research With an advanced Information and Communications Technology (ICT) system, yield from every field in our Group estates are matched against their potentials. The system utilises the extensive database holding data spreading over 30 years, and is the foundation in formulating the Site Yield Potential (SYP) for each field.

Research

Analysis of the characteristics from each site enables estates to identify and focus efforts on areas of significant concern such as soil conditions, types of terrain, yearly and monthly rainfall pattern, all of which directly impact the production system. Based on these SYP, an effective strategy is formulated to enable estates to overcome such concerns. A research programme to ensure effective nutrient uptake was vigorously pursued over the past two years. It is focused on the development of oil palm roots in relation to the application of empty fruit bunches (EFB) and inorganic fertilisers. The interaction between organic matter (EFB) and inorganic fertilisers influences the development of oil palm roots which directly impact nutrient uptake. With suitable amounts of organic material and inorganic fertilisers, oil palm roots are better maintained which leads to enhanced nutrient uptake. This development is now a part of the foundation for a more efficient crop production system. Crop Protection Research Research undertaken continues to focus on preventive and control measures to minimise crop loss due to pests and diseases in order to maximise palm oil production. Consideration is given to the increasing concern on issues related to environment and sustainable agricultural practices. The continued emphasis on Integrated Pest Management approach ensures a continuous concern and care for the environment and for the society that lives within and around the estates. Over the past two years, the concept of proactive crop protection has been introduced and put into practice. An active pest surveillance programme is now implemented in all estates against the leaf defoliators such as bagworms and nettle caterpillars. Beneficial plants are progressively planted in all estates to promote beneficial insects which are parasites and predators of the common insect pests. This has helped to prevent serious pest outbreaks. The barn owl

population is maintained and constantly monitored to assist in rat control through biological means. Sanitation and cultural measures were incorporated into the replanting programme to reduce basal stem rot due to Ganoderma. Active research continues to focus on common pest and disease problems in oil palm, namely, Ganoderma basal stem rot, Oryctes beetles, rats and various species of leaf eaters, to further refine and improve control technologies. Research on the use of baculovirus against rhinoceros beetle and application of Trichoderma to suppress the infection of Ganoderma are efforts to exploit the use of natural enemies for biological control. This clearly signifies a dedicated commitment to an efficient, safe and sustainable production system pursued by the Group.

Guthrie Biotech Laboratory Sdn. Bhd. Biotechnology represents an interface of basic and applied sciences, where gradual and subtle transformation of science into technology can be witnessed. The Government has identified biotechnology as the key driver for Malaysia as the country heads towards becoming a developed knowledge

Development

economy by the year 2020. Agricultural biotechnology is vital in enhancing Malaysia’s oil palm industry to play a key role in bringing wealth and well-being to the nation. During the last decade, tremendous progress has been made in the area of plant cell and tissue culture. In-vitro techniques constitute an important component of biotechnology to improve existing oil palm planting materials by cloning high-yielding palms to optimise the genetic yield potential. Realising the potential of biotechnology, the Group’s main focus includes the production of clonal oil palms at Guthrie Biotech Laboratory Sdn Bhd (GBLSB) using a proven, safe and reproducible Guthrie Tissue Culture (GTC) technology. The main task of GBLSB is to produce clonal oil palm through tissue culture, to increase productivity. At present, GBLSB has been in semi-commercial production and has the capacity to produce 350,000 clonal palms annually. Besides producing clonal oil palms, GBLSB has also started to tissue culture parental palms (Dura and Pisifera) for Guthrie Plantation & Agricultural Services (GPAS). The cloning of Dura and Pisifera parents are aimed at exploiting the specific combining ability of selected parental palms to produce semiclonal and bi-clonal seeds.

The Group’s new pesticide and microbiology laboratory is equipped with the latest high end analytical equipment to analyse the Group’s palm oil.

Annual Report 2006

Research

Guthrieâ&#x20AC;&#x2122;s clonal oil palm AAB1 The AAB1 clonal palm production programme introduced by GBLSB in 2005 has shown significant progress. During the year, 90% of the ortets in culture turned embryogenic and somatic embryogenesis rate also increased significantly by almost 100% compared to the previous year. To date 3,000 AAB1 ramets have been planted in the field and another 70,000 ramets are in the nurseries waiting to be field planted in 2007. Field observation showed that the clones can adapt well to the environment, uniform in the vegetative growth and that the flowering was normal. Newly selected ortets show potential for >40 tonnes FFB with oil to bunch (O/B) of >30% (lab figures). The landmark achievement of 2006 was the first commercial planting of the AAB1 clonal oil palm on 20 April 2006 during the 7th Minggu Saham Amanah Malaysia (MSAM) in Kuala Terengganu by Datoâ&#x20AC;&#x2122; Seri Abdullah Hj. Ahmad Badawi, Prime Minister of Malaysia. The first batch of AAB1 ramets were planted simultaneously in Bukit Cheraka Estate, Selangor. Research & Development at GBLSB GBLSB is committed to the exploiting of innovative technologies and advanced research to develop an efficient clonal palm production system and ultimately

Kumpulan Guthrie Berhad

Development

commercially reliable clonal planting materials. GBLSB has entered into strategic research alliances with other centres of excellence, namely Universiti Putra Malaysia (UPM) and Universiti Kebangsaan Malaysia (UKM). Through these partnerships, GBLSB has invested RM3.6 million on state-of-the-art facilities to carry out high-throughput research. In the collaboration with UPM, a novel approach, known as Surface Enhanced Laser Desorption/Ionisation (SELDI)Protein chip Array technology is adopted for its proteomic (protein research) programme, which primarily aims to increase frequency and culture quality, as well as to accelerate the in-vitro process. Proteins, a final product of gene expression play an important role in almost any biochemical pathway involved in plant development and reproduction, including tissue culture. Conventional methods for identifying and validating proteins are normally difficult, laborious and time consuming. This new approach has been discovered to be a rapid way to capture and identify plant proteins, hastening the companyâ&#x20AC;&#x2122;s protein research programme. Methods that previously require days and even weeks can be accomplished in a day. This rapid technology is being utilised to profile changes in protein expression patterns in

EFB application using giltrap. GRC conducts research focused on the development of oil palm roots in relation to the application of EFB.

the oil palm tissue culture processes and to uncover specific proteins through a highly sensitive device that only requires a small amount of bio-molecules in the sample to be perfectly detected. GBLSB-UKM research collaboration is targeted at answering some of the setbacks that have been limiting the economical gains of the oil palm tissue culture activity, by monitoring endogenous levels of plant hormones at the various stages of the oil palm tissue culture process. Levels of hormones in oil palm cultures are determined using a highly sensitive and efficient device known as the High Pressure Liquid Chromatography (HPLC). The information obtained is then used to determine the role of hormones whether beneficial or detrimental in tissue differentiation and development. This study will optimise tissue culture processes and operation in terms of its hormonal regulation of callus and somatic embryo production.

Research

Development

The first batch of AAB1 ramets were planted in Bukit Cheraka Estate, Selangor.

Chemara Laboratory Sdn. Bhd. Food Safety Recognising the importance of food safety as a competitive advantage, the Group has established a new pesticide and microbiology laboratory, equipped with the latest high end analytical instrument, to undertake analysis on the Group palm oil to ensure that the oil the Group sells for consumption, either directly or indirectly, is safe and free from contaminants. In addition, the new pesticide and microbiology laboratory also plays an important role in research and development activities, particularly the impact of organic and chemical fertilisers on soil fertility and diseases management through microbiological means.

Minamas Research Centre (MRC) MRC was set up to carry out R&D activities in Group Plantation Indonesia to provide strategic driven technical expertise to enhance yield and productivity. Among others, it functions to evaluate agronomic issues in estates especially in relation to fertiliser application and other site specific technical requirements. It also provides technical recommendations for yield enhancement, conducts research to mitigate yield losses due to P&D and to fully exploit the use of biological control in integrated pest management. The laboratories at MRC are equipped with the latest equipment to provide analytical services on foliar, fertiliser, palm oil, effluents, soil and water analyses.

Annual Report 2006

Total Quality Management (TQM)

TOTAL QUALITY & ENVIRONMENTAL MANAGEMENT In 2006, the Total Quality & Environmental Management Department (TQEM) continued to focus on providing education and enhancing good agricultural practices in the Group operations.

Plantations TQEM is strategically positioned to address the growing challenges and stringent market requirements including product quality, certification, traceability and best practice, and sustainable development. It supports the Group strategic operations by providing independent compliance assessment, laboratory technical services, process improvements and standard compliance for the Group businesses. To achieve these objectives, the Group has implemented policies that will contribute positively to employees’ growth, welfare and productivity, the interest of the community, the care and enhancement of the environment, socio-economic development, and our business success. In conducting business in an ethical manner, the Group has and will continue to undertake the following measures: • Introduce new processes that are safe, clean, cost effective and sustainable. • Improve existing activities for compliance with all relevant laws, regulations and standards. • Conduct regular monitoring and audits of all possible sources of pollution that may deteriorate the environment. During the year under review, TQEM continued to further strengthen the Group efforts towards capacity and capability building in Sustainable Agriculture Practices, Food Safety and Quality Improvement Projects. 64

Kumpulan Guthrie Berhad

To boost the Group effort in promoting innovation and best developed practice, TQEM has taken a step forward by introducing the Quality and Productivity Improvement Project (QPIP) as part of its TQM initiatives. The QPIP is a strategic programme in TQEM and is becoming a part of Guthrie Group best practices in problem solving and performance improvement. In 2006, TQEM conducted a road show in educating and providing the basic structure to facilitate the adoption of QPIP among the Group estates and mills. A total of seven improvement projects involving six of the Group estates, namely, Bukit Asahan in Melaka, Pengkalan Bukit and Sembrong in Johor, Bukit Selarong in Kedah, Bukit Talang in Selangor and Changkat Salak in Perak and the Bukit Talang Mill, Selangor were carried out in 2006.

Good Agricultural Practices (GAP) Sustainable Agricultural Practices is significant in the Group plantation operations to keep up with stringent requirements from customers, NonGovernment Organisations (NGOs) and regulatory requirements. The Group continues to focus on efforts to promote GAP including food safety, social responsibility, production efficiency and environmental conservation for the Group plantation business. The Group has developed an in-house certification scheme based on EN45011 accredited certification under the European Retailers and Producers Good Agricultural Practices (EUREPGAP) protocol. This protocol incorporates most of the principles in the Roundtable on Sustainable Palm Oil (RSPO).

To t a l Q u a l i t y & E n v i r o n m e n t a l M a n a g e m e n t

Further to the Group’s initiatives and commitment towards GAP, the following 15 estates have implemented GAP protocols:

production to customers. HACCP gives the reassurance that the Group crude palm oil (CPO) or palm kernel will not present a danger to consumers.

Melaka – Serkam – Kemuning

Selangor – Sabak Bernam – Bukit Talang

Negeri Sembilan – Siliau – Bukit Pelandok – Tampin Linggi – Sua Betong – Sengkang

Johor – Pekan – Lambak – Sembrong – Tun Dr. Ismail – Ulu Remis – Simpang Rengam

During the year, Tanah Merah Mill, Negeri Sembilan has passed the recertification audit and Ulu Remis in Johor, Rantau in Negeri Sembilan and Bukit Talang in Selangor Mills have been actively implementing the HACCP system. These mills have also undergone the SIRIM assessment audit and are awaiting certification.

Food Safety With the food safety issues taking centre stage today, the Group has committed to implementing the Hazard Analysis and Critical Control Point (HACCP) programme for all its palm oil mills. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical and physical hazards throughout the product value chain from raw material

Johor, Tanah Merah in Negeri Sembilan, Jabor in Terengganu, Kemuning in Melaka and Bukit Cheraka in Selangor. As for the mills, occupational safety and health audits were conducted in six mills namely Kerayong and Bukit Talang in Selangor, Ulu Remis and Yong Peng in Johor, Jabor in Terengganu and Tanah Merah in Negeri Sembilan. A new process, the Hazard Identification Risk Assesment Control (HIRAC), used to identify any potential unsafe operations, has been established in all estates and mills.

Safety & Health Management Employee Safety & Health is a priority in the Group agenda. To meet the occupational safety and health requirements for the Plantation Division and to further enhance safety awareness among the employees, the Group appointed a Safety Manager in June 2006. During the year, TQEM conducted occupational safety and health audits at 10 estates, namely Yong Peng, Simpang Renggam, Sembrong, Tun Dr. Ismail, Temiang Renchong and Ulu Remis in

The Department also organised a safety awareness campaign for the Group. To minimise occupational incidents, TQEM has established the Safety and Health Training Material for the Group. The training material covers the scope of OSHA 1994 requirements, occupational hazards, accidents, personal protective equipment, importance and method of application, safety signages, fire hazard, accident emergency response and healthy lifestyle.

Tanah Merah Mill, Port Dickson, Negeri Sembilan is implementing HACCP system.

Annual Report 2006

To t a l Q u a l i t y & E n v i r o n m e n t a l M a n a g e m e n t

During the year, TQEM carried out training for employees on safety awareness. TQEM has put in place a series of preventive and corrective actions to raise safety and health standards. These include: • Establishing clear roles, responsibilities and authority for personnel who manage, perform and verify activities having an effect on the OSH risks of the Group’s activities, facilities and processes. • Continuously identifying hazards, assessing risks and implementing the necessary risk control measures. • Ensuring that personnel are competent to perform tasks that may impact OSH in the work place. • Ensuring that OSH information is communicated to and from employees and other interested parties effectively. • Ensuring the necessary measures and specified conditions are in place to control identified risks and establishing Health Identification Risk and Control (HIRAC) • Improving plans and procedures and response time to emergency situations.

The effluent treatment plant at Sg. Dingin Mill is part of the Group’s best practices in waste management.

•

Monitoring and measuring OSH performance on a regular basis and tying performance to the reward system.

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In general, the number of accidents in the estates and mills have been reduced.

Biodiversity The concept of biodiversity conservation is important for the Group’s oil palm plantations. The concept involves creating the right environment for communities to prosper. It emphasises the following: •

A wild bird found at Guthrie estates.

Kumpulan Guthrie Berhad

Protection and conservation of existing natural areas within the following estates: – Anak Kulim Estate, Kedah – 232 hectares to be planted with forest species trees – Andrassy Estate, Sabah – 28 hectares to be planted with forest species trees – Jeleta Bumi Estate, Sabah – 25 hectares of water catchment area

• •

• • •

Kalumpong Estate, Perak – 13.6 hectares of Bakau and mangrove area – Kemuning Estate, Melaka – 5.3 hectares to be planted with forest trees – Tanah Merah Estate, Negeri Sembilan – 212 hectares of forest reserve – Tanah Merah Estate, Negeri Sembilan – 43 hectares of wetland – Cenas Estate, Johor – 14.7 hectares of hilly areas & 4.2 hectares of swampy area – Cha’ah Estate, Johor – 2 hectares of water catchment area Creation of a greenbelt corridor to the adjacent natural areas. Rehabilitation of rivers namely, Sungai Sayong, Cha’ah Estate in Johor; Sungai Janging and Sungai Keroh, in Tanah Merah Estate, Negeri Sembilan. Strict adherence to the zero-burning policy in Group Plantation operations. Soil and water conservation. Recycling of palm oil mill effluent (POME) and empty fruit bunches (EFB) back to the field.

To t a l Q u a l i t y & E n v i r o n m e n t a l M a n a g e m e n t

Property EMS 14001 and OHSAS 18001 Quality Certifications Guthrie Property achieved a major milestone in 2006 with the attainment of two international accreditations for its quality systems in place – the EMS 14001 for Environmental Management System and the OHSAS 18001 for Occupational Health and Safety Management from the Standard & Industrial Research Institute of Malaysia (SIRIM). The attainment of the two international certifications defines Guthrie Property’s stringent operational initiatives in delivering the best to its stakeholders and further enhancing its Total Quality Environmental Management systems. The awards achieved are also in line with the Company’s objective of achieving system certification that covers the entire spectrum of the Group operations. The successful implementation and tracking of these best practices throughout the year 2006 has enabled the Property Division to deliver all its products with due care taken for the environment and safety and health to the workers and to the public.

Contractors and consultants engaged by Property Division for its projects have similarly demonstrated positive response to the new total quality environment management system being implemented by the Company.

positive movement in line with the Division’s objective of progressive reduction and delay and achieving zero delay by 2007.

Management Inspection System (MIS) ISO 9001 Quality Certification The Property Division has also maintained in 2006 its excellent performance in the implementation of ISO 9001 quality system in its operational processes. This has produced positive results in the form of further improvements achieved in Quality Assurance, Timely Delivery and Cost effectiveness. For Quality Assurance, the number of purchasers’ complaints has dropped from that of 2005, thereby reflecting improved customer satisfaction. Construction cost has also been maintained in the first half of 2006 and has only increased slightly in the second half despite increase in fuel, labour and material cost in the industry. The resultant effect is that profit margins to the development have been maintained. Similarly, the delay incurred in projects has dropped in 2006. This is a

In meeting customer needs and expectations, the Division has implemented process improvements such as pre-qualification and quality-rating of contractors and consultants, customer survey feedback and third party workmanship quality inspection. For 2006, the Division has advanced this further in the form of the Management playing a bigger role in the field to inspect and ensure that quality of workmanship meets the customer expectation. This periodic inspection has produced results in the form of finer quality workmanship detailing as well as improved design criteria for future products.

Integrated Management System (IMS) With the attainment of the three Quality certifications from SIRIM, the Division targets to implement the Integrated Management System (IMS) by early 2007, that will eventually integrate the ISO 9001, EMS 14001 and OHSAS 18001 into a single system and enable the projects to be implemented more effectively. The Integrated Management System is the first of its kind to be implemented in 2007 by a property developer in the country in ensuring total quality commitment throughout the company.

Guthrie Property preserves rivers within its project development some of which are developed into recreational areas for residents.

Annual Report 2006

INFORMATION & COMMUNICATIONS TECHNOLOGY It has been a challenging and productive year for the Information and Communications Technology Department (ICT). A number of key initiatives have been put in place to enhance the Group’s business ICT landscape to achieve the strategic objective of the organisation. The move is in line with the Group’s vision to transform Kumpulan Guthrie Berhad into a high performance entity.

The ICT focus is on establishing a framework covering ICT infrastructure, business application and Group integration. On the infrastructure landscape, WAN (Wide Area Network) and LAN (Local Area Network) have been upgraded using satellite and wireless technology to provide higher bandwidth connectivity between remote operating units and the Group headquarters. The enablement of high speed transmission via WAN and LAN would provide the means to access up-to-date critical information for strategic decision making and also facilitate remote troubleshooting and maintenance to enhance productivity and efficiency. To further maximise the usage of the existing infrastructure, ICT is currently undertaking Proof-Of-Concept (POC) to test the viability of introducing VoIP (Voice over Internet Protocol) for the Group. POC is currently being undertaken at a number of sites within the Group and is expected to be completed by the first quarter of 2007. Upon completion, Group-wide deployment will commence with completion targeted by end of 2007. On the application front, ICT has embarked on a number of key initiatives to enhance operational and management effectiveness. The “G-EMAS” (Guthrie Estates and Mills Application System) project, an integrated business solution for the Group’s Plantation arm, has been earmarked to pave the way towards Precision Agriculture. During the year, ICT provided an integrated solution to improve plantation yield by using ICT to process data and make informed decisions based on collaboration between research

Kumpulan Guthrie Berhad

and plantation operations. The Mill system is undergoing testing at the pilot site in Labu, Negeri Sembilan and is expected to be completed in January 2007. Testing for the Estate system will commence in January 2007 and is expected to be completed in February 2007. Group-wide deployment and commissioning of the system for the Mill and Estate is expected to be completed by the first quarter and second quarter respectively. ICT has embarked on the second phase of the Group’s integrated human resource management system, the e-GHRM implemented in 2005. The Employee Self Service (ESS) programme, comprising the eStaff and eLeave modules, was introduced at the Group’s headquarters in 2006. The eStaff module empowers users to update and access selected personnel information. The e-Leave module, on the other hand, allows electronic submission of leave application. The ESS aims to assist the Group Human Resource Division to develop and maintain up-todate information for effective decision making. The ESS will be implemented Group-wide by mid 2007. The “e-library” system which supports the Group’s culture of knowledge building and sharing to enhance operational and decision making efficiency has been commissioned for use Group-wide. The e-library, a repository of information and knowledge comprising a collection of documents that are updated daily in a centralised and easy-to-use environment, provides access to the latest information that can be easily shared within the Group. As part of good corporate governance and our long-term pursuit of creating shareholder value, the managing of risks becomes critical. A system has been designed for the Enterprise Risk Management (ERM) division to inculcate a systematic and disciplined Risk

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network from anywhere and at anytime. With this intranet system, users are now able to securely access the Group’s internal email, e-Leave, G-e2R and other Web applications from any place through Internet connection.

The Group capitalises on the ‘e-library’ for knowledge building and sharing.

Management culture across the Group to achieve Group KPIs through regular application of risk management techniques. It provides an effective method of risk treatments in mitigating risk impact based on assessments of historical records and past performance. The system is currently being tested at a pilot site pending Group-wide deployment. The timely reporting of our financial results is a very challenging task considering the vast number of subsidiaries and associate companies within the Group. To ensure accurate and timely reporting, we are set to implement the Group Financial Consolidation system to improve the turnaround time of the Group Financial Consolidation process by automating the entire process.

Another key area of computerisation involves the automation of the Procurement process. A system to manage central purchases has been commissioned for use in the Group headquarters. The system has the capability to handle requisition from operating units and automate the processing of purchase orders and payments. The Administration Department handling procurement will be able to track, monitor and improve the turn-around time to meet the targeted datelines. The system is in operation at the Group headquarters and is targeted to be rolled out to the operating units in the coming year. To further enhance information sharing, the G-VANS (Guthrie Virtual Access Network System) has been introduced. The system enables mobile users to seamlessly access Guthrie’s internal

A number of initiatives have also been undertaken for Guthrie Property Development Holding Berhad (GPDH) which includes Land Title Management and Project, Contract and Cost Management. The land title management system will provide GPDH with the means to manage and monitor areas pertaining to land matters such as acquisition, sales, lease, conversion and encumbrances management effectively and efficiently. For effective management, the system provides a visual map of the properties through the Geographical Information System (GIS) to assist in strategic decision making. The project, contract and property management will assist in managing and monitoring the project progress, contracts, procurement and cost management. It is envisaged that with the implementation of the system, project cost variation will be reduced due to timely reporting thereby resulting in better performance. Plantation Indonesia has also embarked on a number of ICT projects to enhance operational efficiency. As part of the G-EMAS initiative, Plantantion Indonesia will be implementing a number of key application systems covering operational and management needs for its estates and mills to be linked to the Group headquarters. The project is expected to be completed in year 2007 and is currently being tested at a pilot site. The infrastructure is also being upgraded to support the above initiatives by enhancing the network performance. To ensure shared resources are fully leveraged on, ICT has identified common application platforms to be implemented Group-wide thus reducing total cost of ownership. The application includes e-GHR, e-Library,

Annual Report 2006

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Marketing, Financial Consolidation and Procurement System for central purchases. The integration of information between KGB and Plantation Indonesia will be undertaken at the business intelligence level. To safeguard the Group ICT infrastructure against threats and risks, ICT has reviewed and upgraded the security features of the Groupâ&#x20AC;&#x2122;s network and infrastructure. The upgraded system will provide adequate and reliable network services to all business applications in a more effective manner.

To further enhance the use of ICT, training to educate users on the effective use of technology and tools that are available and essential to their job was provided. This leads to an effective, efficient and knowledge-driven workforce, not only capable of contributing productively to Group performance but also helping individuals fulfil their development potential.

Head, Plantation Malaysia, Helmy Othman Basha officiating the deployment of the G-EMAS project in Labu Mill.

Kumpulan Guthrie Berhad

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Existing guidelines and procedures (disaster recovery plan) to ensure business continuity, should a disaster happens, have been further strengthened. Trial runs are continuously being undertaken to ensure the smooth execution of the Group’s disaster recovery plan. The ICT challenge is to ensure departmental systems are interoperable and that there is a seamless flow of information to promote knowledge sharing, boost productivity, collaboration, and operational efficiency across the user community. By integrating the Group information systems and enterprise applications, critical information can be delivered on a timely basis for strategic decision making and to gain competitive advantage. The ICT goal is to deliver solutions and services to meet Group business objectives and maximise return on investment. Several projects have been indentified for implementation in the coming year to realise ICT objectives including Portal deployment, Network & ICT Inventory Management and adopting the most widely accepted ICT service management model best practices, and the Information Technology Infrastructure Library (ITIL). The Group ICT aims to reinforce its G-Excellence Motto, ICT Empowerment for Excellence and drive the Group’s G-Excellence initiatives. It will continuously strive to identify future growth areas to enhance Group efficiency. Advanced ICT applications undertaken at Group Mills allow for the processing of data for decision making.

G-VANS (Guthrie Virtual Access Network System) enables mobile users to access Guthrie’s internal network from anywhere and at anytime.

Annual Report 2006

ORGANISATIONAL CAPABILITIES & HUMAN CAPITAL

The Group Human Resource Management Division (GHRM) is a strategic business partner to businesses/divisions to build organisational, team and individual capabilities to realise the Group objectives. The two overarching strategies adopted in the management and development of the Group’s human capital are firstly, to be an Employer of Choice and secondly, to build organisational capabilities. Driven by these strategies, GHRM has implemented and monitored

various

human

capital

programmes

encompassing four strategic thrusts namely, organisational development, human capital development, human resource systems development and operational efficiency of human resource services.

Kumpulan Guthrie Berhad

Driving Performance Excellence In 2006, the Performance Management Office (PMO) continued to closely monitor the implementation and performance of the G-Excellence initiatives undertaken by the respective Divisions. Efforts in the Guthrie Transformation journey are aligned to the need to synergistically build a high performance culture through best market practice, corporate governance and business conduct. Programmes under the Guthrie Excellence Transformation initiative are in tandem with the Government-Linked Investment Companies (GLIC) transformation initiatives which have seen the formation of project champions and task forces going forward. Performance Management System The foundation for the establishment of the Group performance management system has been set with the implementation of the Balanced Scorecard (BSC). The Corporate scorecard is already established and Headline Key Performance Indicators (KPIs) communicated. Corporate KPIs have been cascaded to core businesses and structured training on BSC organised for all managers in the business and corporate divisions. Systematic monitoring of performance continued to be undertaken by heads of businesses and the Group Performance Monitoring Task force. Similarly, there is continued support and follow up of the Performance Management & Development (PMD) appraisal system which has been established to achieve individual performance excellence in alignment with Group goals and objectives. The performance-linked bonus scheme was enhanced as an integral part of the system. Human Capital Development Several programmes were undertaken as part of the Group human capital development and talent management plans with the aim of building a culture of excellence. At senior management level, phase 1 of the ‘Top Leadership Team Programme’ was organised which included a two-day residential workshop entitled ‘Visionary Business Leadership’.

Organisational

Apart from participation in conferences and seminars for global and industry updates, management forums on innovation, knowledge management and corporate governance were also held for the Board of Directors and Senior Management. In 2006, the Group provided training in Project Management, a key organisational capability. Two management appreciation workshops and project management training were organised for managers and supervisors to improve operational efficiency. Similarly, Group managers and executives attended training in-house and through public courses to enhance both their technical and management skills. Consistent with the policy of continuous improvement, various courses were organised in compliance with the requirements of the Quality Management System and Occupational Safety and Health Act (OSHA). In Plantation Indonesia, a series of workshops on leadership, management, problem solving and decision making were organised for management.

Capabilities

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Management staff in estates, mills, research and development as well as other operations in the Group Plantation business in Malaysia and Indonesia participated in relevant national conferences and seminars including those organised by the Malaysian Oil Scientists’ and Technologists’ Association. Guthrie Lear ning Centre, Malaysia and the Minamas Training Centre, Indonesia organised the six-month Basic Estate Management Training Programme for Cadet Planters as well as the threemonth Field Conductor Training Programme for new Field Conductors. In the Property Division, management staff attended technical conferences and seminars relevant to the property industry to enhance knowledge and networking.

The then Head of GHRM, Saadiah Hussin (left) presenting food supplies to a representative of PDK, Bedong in Kedah.

Competency Standards Training and Education In 2006, the Competency Based Training and Education (CBTE) systems continued to be maintained through various projects including the development of assessment tools for Management Standards. CBTE assessments on technical CBTE modules such as oil palm harvesting, oil palm

replanting, and oil palm mill operations are regularly reviewed at all levels to keep track of the competency levels of the workforce. Technical and operational training conducted are guided by the competency standards and tools established. Supervisors have available the CBTE Pictorial Work Instruction tool to support training of new estate/mill workers. For estate and mill staff, competency standards and assessment tools are also developed for the management of human resource activities such as training and development and succession planning to fully realise the Group’s human capital potential. The Property Division has successfully completed the Technical Competency Framework and Standards in the Group’s project department covering maintenance and property management. The competency standards and assessment tools are also being developed for the management of human resources activities such as training and development and succession planning.

Senior Management undergoing project management training, a key organisational capability.

Annual Report 2006

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GHRM staff and the children at PDK as well as instill awareness on how GHRM can contribute to such welfare organisations. Sports & Recreation Sports activities were organised throughout 2006 to encourage a healthy community spirit among the staff of Guthrie Group. Employees participated in various competitions and local sports tournaments including golf, football, lawn tennis and futsal.

Group employees and their families at the Family Day.

Employee Relations The Group continued to ensure that industrial harmony is maintained at the workplace through the effective enforcement of the Group policies and procedures relating to industrial relations as well as providing timely advice and support to line managers. Training of management and supervisory staff on labour laws, industrial relations and domestic inquiry are also organised to ensure managers are competent and effective when handling disputes and disciplinary actions.

Employee Welfare The Group’s commitment to the welfare of its employees is reflected in the regular activities and programmes undertaken at Group centres. In 2006, there was active participation in medical camps organised for eye and dental care. Seminars were organised in collaboration with Government bodies on legal literacy, health education, leadership and social issues. Support services such as family counselling and other forms of assistance such as EPF/SOCSO/Will documentation were also provided.

Enhancement of Operational Efficiency Focus was given to reviewing existing business processes and standard operating procedures as required. Progress was also made in the Group human resource systems development with the successful mobilisation of the Group pilot Performance Management Development (PMD) on-line module which will be implemented in the Group in 2007.

The Retirees Recognition and Long Service Awards Dinner continue to be an important event in the Group’s calendar of events. This bears testimony to the value the Group places on the loyalty shown by long-serving employees.

An innovative sales commission incentive scheme was successfully introduced in the Sales & Marketing department of the Property Division.

Kumpulan Guthrie Berhad

A ‘gotong royong’ community project to spruce up the premises of a “Pusat Dalam Komuniti” (PDK) in Bedong, Kedah, was undertaken by GHRM and HR Heads from business units as part of the quarterly Group HRM meeting activities in August 2006. The project fostered closer relationship between

2006 culminated with the successful organisation of the Group Family Day on 9 December 2006 at A’Famosa Resort, Melaka. It was attended by about 3,000 participants comprising employees and their family members from all Group centres. The landmark event achieved its objective of promoting integration amongst Group employees at all levels and strengthening the Group identity thereby boosting employee morale and motivation. As at December 2006, the Group employee strength is 47,591 comprising 836 executives, 2,989 non-executives and 43,766 workers.

Estate staff undergoing training on ‘Calibration of spraying equipment’ in accordance with OSHA requirements.

CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility (CSR) is a part of the Guthrie Group’s committed mission. As a leading player in the oil palm plantation and property industries with a presence of 186 years, Guthrie recognises its obligation to lead by example. This encompasses its commitment to deliver profits to enhance shareholder value and at the same time, make a positive social contribution to the immediate communities where it operates as well as to the wider business community of which it belongs.

The Guthrie Group’s philosophy in CSR is to share its resources with the community, add significant value to lives and create a quality lifestyle. In undertaking CSR, the Group also recognises the benefits that have accrued to its business including the strengthening of reputation and branding as well as enhancing employee motivation which in turn, contribute to the long-term profitability, growth and sustainability of the business. The Group’s CSR involvement is with the direct community, its immediate neighbours, and at the national level where it operates. CSR is undertaken at many levels including Group corporate office, the plantation division both in Malaysia and Indonesia, Guthrie Property, as well as through the Yayasan Guthrie. The latter administers funds for education, scientific research, charity and public welfare. In 2006, more CSR initiatives were undertaken that reflect the Group’s role as a caring corporate citizen.

CSR in the Workplace Guthrie Plantation allocates resources to provide a quality environment and facilities within its estates, some of which have won awards.

Guthrie contingent with the management of Ulu Remis Estate at the National Labour Day Celebration.

Guthrie Plantation won National Award Ulu Remis Estate, Johor won the ‘Ladang Bahagia Harapan Award 2006’ at the National Workers Day 2006 on 13 May 2006 for its commitment towards the welfare of estate staff. The award was presented in recognition of the estate’s integrated concept, to provide a quality environment and facilities, which takes into consideration the provision of work, housing, recreational and spiritual facilities and infrastructure. Ulu Remis Estate was specially lauded for its kindergarten and its clean and well-organised crèche which is well-equipped with toys and a reading corner, the estate hospital which caters for the estate and mill workers, and the availability of four schools, i.e. Tamil, Chinese, Religious and National schools, located within the estate.

Annual Report 2006

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This award is the second consecutive win for the Guthrie Group. Last year, the Bukit Selarong and Padang Buluh Estates in Kedah had bagged the same award. Other CSR programmes instituted by Guthrie Plantation include the following: Safe and efficient work environment In order to provide a safe and effective work environment in estates and mills, the Group launched its Pictorial Work Instruction Manual and a Safety Awareness campaign on 19 May and 12 November 2006 respectively. Drug awareness Concerned with the rising number of drug cases in Malaysia, Rantau Mill, Negeri Sembilan organised a Drug Awareness campaign on 9 April 2006 to educate the employees on the dangers of drug abuse. The campaign was held in association with PEMADAM, Seremban. Education for children of employees The Group encourages its operating units to focus on educational programmes such as those conducted at its estates. Elmina Estate, Selangor conducts weekly computer classes covering lessons on basic computer skills such as Microsoft Office application. The classes conducted in a former workshop at the estate, facilitate early adoption of ICT among school-going children of the employees. The management of Rantau Mill initiated reward to motivate students to excel in examinations by organising a prize presentation ceremony for academic excellence in PMR (Penilaian Menengah Rendah) for children of employees on 2 January 2006.

CSR for the Community Education Guthrie believes in human capital development and education. It is committed to developing a learning community by motivating the young towards a strong basic education and continuous learning. Some of Guthrieâ&#x20AC;&#x2122;s educational programmes are undertaken by Yayasan Guthrie.

KGB Chairman (right) sharing a light moment with Guthrie scholarship recipients.

Yayasan Guthrie Yayasan Guthrie grants scholarship to students in various fields of study with priority given to disciplines in Agricultural Science, Scientific Research, Property Management, Social Sciences, and Economics. The value of the scholarships awarded to each student depends on the choice of academic discipline, programme and its duration. Scholarship recipients in a Masters, Degree, Diploma, and Vocational Training programme receive RM15,000, RM7,000, RM6,000 and RM5,000 a year respectively. In 2006, Guthrie awarded scholarships to 37 students from local universities and other institutions of higher learning pursuing tertiary education at undergraduate and postgraduate levels. The total value of the scholarship awarded was RM600,000.

Kumpulan Guthrie Berhad

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Yayasan Guthrie also extends assistance through its Educational Financial Assistance Scheme (EFAS) for children of deceased employees. The value of the financial aid ranges from RM900 to RM1,500 a year for each child based on expenses incurred in school fees, books, uniforms, examination fees and pocket money. In 2006, Yayasan Guthrie presented Special Goodwill Financial Assistance amounting to RM13,200 to 10 children (aged 9-19 years old) of three deceased Kumpulan Guthrie Berhad employees who died while in service. An education fund for vocational training has also been set up for eligible students who require financial assistance to pursue education at Government approved vocational schools or institutions. In 2006, Yayasan Guthrie funded 14 students seIected to further their studies in agriculture (at certificate level) at the Institut Pertanian Ayer Hitam, Johor and Institut Pertanian Titi Gantung, Perak. Under this programme, Guthrie sponsors the fees and cost of meals and accommodation for a period of two years amounting to RM84,000. Yayasan Guthrie also organises education learning programmes to enhance learning skills. A ‘Learn How To Learn’ workshop was held on 20-22 November 2006 involving 30 Form Four students studying in three schools in remote locations in Segamat, Johor; Durian Tunggal, Melaka; and Port Dickson, Negeri Sembilan. During this highly interactive programme, students and teachers were exposed to a customised methodology aimed at overcoming barriers in learning. The programme, a licensed model developed by L. Ron Hubbard, a scientific researcher in the United States of America was conducted by a team of trainers from the Professional Advancement Centre (PAC) of Kolej Universiti Teknologi dan Pengurusan Malaysia. The programme equips students with life long learning skills. PAC will track the performance of the students until they sit for the Sijil Peperiksaan Malaysia (SPM) examination.

KGB Chairman handing over food supplies to staff of Cha’ah Estate.

Contribution to National disaster relief programme Another focus area of the Group is its CSR role in National disaster relief programmes. In 2006, the Group’s Malaysian operations was affected by the major flood which severely affected the southern region of Peninsular Malaysia particularly Johor. The first incident of floods which occurred on 19-31 December 2006 followed by the second wave on 11 January 2007 caused loss of lives, immense difficulties to the community and severe damage to property and infrastructure. Efforts undertaken by the Group included providing cash contributions and food supplies to residents at affected estates in Cha’ah and Sg Tawing in Johor, neighbouring villagers in Kampung Haji Kamisan and flood victims at the Yong Peng Relief Centre. In Kampung Haji Kamisan, the Group also contributed towards the rehabilitation of its mosque which had served as a shelter for flood victims. Participation in National Day Guthrie together with nine other plantation companies organised and participated in a float parade at the 49th National Day celebrations in Kuching, Sarawak. Guthrie Property also participated in a float parade organised by the property sector.

The plantation sector float at the National Day celebrations in Kuching, Sarawak.

More than 500 workers and their families at Bukit Talang Estate participated in a Merdeka Sports Day organised to commemorate the National Day. Activities for the celebration included a parade, games and the singing of patriotic songs.

Annual Report 2006

Corporate

Relief Effort for Earthquake Victims in Jogjakarta, Indonesia In Indonesia, Group staff at Minamas Plantation raised Rp146,297,673 for victims of the earthquake in Jogjakarta in May 2006. On 7 July 2006, Minamas Plantation represented Guthrie in providing contributions in the form of food and medical supplies to affected victims through the Universitas Gadjah Mada (UGM) Peduli Jogja programme and to the Sardjito hospital in Jogjakarta. The Management of Minamas Plantation also presented donations to staff whose families were affected by the earthquake. Sports Development Guthrie continues to support sports development in the country. This covers Golf, Cricket and Lawn Bowl. An annual event organised and hosted by Guthrie, in collaboration with the Malaysian Professional Golf Association and the Group’s Harvard Golf & Country Club is the Guthrie Classic. The Guthrie Classic, a significant highlight in the local golf calendar, has earned a distinction in promoting the development of golf and golfing competitions. The 2006 tournament, held on 11-15 July 2006 in Jerai, Kedah, attracted the participation of more than 80 local and international professional golfers. Guthrie also introduced its Guthrie Cup Challenge in golf for employees.

Social

Responsibility

Minamas Plantation staff delivering food and medical supplies to flood victims in Jogjakarta.

KGB Group Chief Executive presenting the Guthrie Classic trophy to fourth time winner, P. Gunasagaran (right).

Community Centres for Residents of Bukit Subang, Shah Alam In July 2006, GPDH completed and handed over two community centres valued at RM2.5 million to the Majlis Bandaraya Shah Alam (MBSA). The community centres will enable the residents to organise activities for social interaction to further a culture of social engagement and a quality lifestyle. Community Rehabilitation Centre Plantation Malaysia, through the management of Kamuning Estate, Perak provides and maintains the building housing the Sg Siput Community Rehabilitation Centre located on a 1-acre plot within the estate. Operating since 1994, the centre currently runs rehabilitation programmes for both the physically and mentally disabled, early intervention counselling, and social and recreational activities.

KGB Chairman presenting school supplies to orphans at the Guthrie Hari Raya Open House 2006.

Assisting the under-privileged Kumpulan Guthrie Berhad hosted 40 orphans from the Rumah Anak-Anak Yatim Ulu Gadong, Rembau at a Hari Raya Open House on 4 November 2006 at Guthrie Pavilion in Bukit Jelutong. Besides sharing in the festivities, the children also received ‘duit raya’ and school supplies. Guthrie once again contributed school supplies to 22 orphans in the Alor Gajah district, Melaka during the Group Family Day on 9 December 2006. In conjunction with ‘Ramadhan’ and ‘Malam Nuzul Quran’, Guthrie Properties together with the committee of the Bukit Jelutong mosque, hosted a special breaking-of-fast for orphans from the ‘Rumah Anak Yatim Limpahan Kasih’, Puchong at the Bukit Jelutong mosque on 9 October 2006.

Kumpulan Guthrie Berhad

Corporate

Social

Responsibility

Maintenance Culture and Values The Group encourages a maintenance culture in the surrounding communites located in its areas of operations. Estates including Tanah Merah in Negeri Sembilan, Ulu Remis and Cha’ah in Johor and Bukit Asahan in Melaka contribute to the landscape maintenance of the surau, police station and schools’ compounds located in their vicinity. Health Services and Blood Donation Programme Bukit Asahan Estate, Melaka organised its annual CSR event, a blood donation drive aptly themed ‘The Gift of Hope’ on 1 April 2006. This marked the 17th consecutive year that an event of this nature had been organised by the estate. A total of 700 pints of blood was donated to the Melaka Hospital Blood Bank.

Caring employees contributing to the blood bank.

Medical Services for residents of neighbouring villages Bukit Cheraka Estate, Selangor subsidises the medical treatment provided by the Jeram District Hospital for the residents of Kampong Ijok, Bukit Cheraka and Simpang Tiga. The hospital is funded by a group of estates, including Bukit Cheraka, operating in the Jeram district. Medical Camp at Pengkalan Bukit estate On 19 November 2006, the Pengkalan Bukit Estate, Johor organised a medical camp to promote healthy living for estate staff and residents of the surrounding community. A total of 1,500 people including residents of five villages attended the medical camp to take advantage of the various treatments and medical check-ups that were provided by the medical team from various organisations including Tun Hussein Onn National Eye Hospital and Sultanah Fathima Specialist Hospital, Muar.

A resident of the community surrounding Pengkalan Bukit Estate undergoing an eye examination conducted by Tun Hussein Onn Eye hospital.

CSR for the Environment The Group places special emphasis on environmental conservation in its oil palm plantations and property business. Toward this objective, the Group practices zero-burning, biodiversity conservation and greening of the urban community.

Annual Report 2006

CORPORATE HIGHLIGHTS Annual Long Service Awards Kumpulan Guthrie Berhad (KGB) honoured employees who had served for a period of 15, 20, 25 and 30 years through an appreciation dinner held on 4 March 2006. Retirees who had served for more than 10 years were also recognised at the event. A total of 125 staff received their long service awards from Tun Musa Hitam, the then Chairman.

Retirees with Board of Directors and Senior Management of KGB.

First Commercial Planting of Guthrie’s Clonal Oil Palm, AAB1 In April 2006, the Prime Minister officiated the first commercial planting of the AAB1 clonal oil palm, at the Minggu Saham Amanah Malaysia in Kuala Terengganu. Simultaneous planting of the clonal oil palm was done in Bukit Cheraka, Selangor. The AAB1 is produced by Guthrie Biotech Laboratory.

Prime Minister of Malaysia, Dato’ Seri Abdullah Haji Ahmad Badawi officiating the commercial planting of Guthrie’s AAB1.

Launch of 2006 CBTE WI and PWI in Plantation Management The Group Chief Executive of KGB, Dato’ Abd Wahab Maskan launched the Competency Based Training and Education and Work Instruction (CBTE WI), and Pictorial Work Instruction (PWI) at the Guthrie Learning Centre on 19 May 2006. The effort initiated by Group Plantation Malaysia will further enhance efficiency in estate operations and promote the culture of high performance.

Plantation executives sharing thoughts on the PWI Manual.

Kumpulan Guthrie Berhad

Corporate

Highlights

Guthrie Board Members visit Group Estates Guthrie Board Members visited the Group’s estates in the South including Sembrong Estate, Johor on 9 June 2006 and got a close look at the performance of the estate. The delegation comprised Tan Sri Dato’ Dr. Wan Mohd Zahid Mohd Noordin, Datuk Alladin Hashim, Dato’ Abd Wahab Maskan, Dato’ Muhammad Nawawi Arshad and Haji Adam Abdullah.

Guthrie updates Analysts and the Media KGB conducted its annual briefing on 15 June and 16 June 2006 respectively. Both sessions led by Dato’ Abd Wahab Maskan, the Group Chief Executive were devoted to ensuring that investment analysts and the media received a comprehensive reporting of the Group’s strategies, business focus and future direction.

The Group Chief Executive (centre) responding to queries posed by investment analysts and fund managers.

Meeting the Shareholders KGB held its 45th Annual General Meeting (AGM) on 22 June 2006 with over 800 shareholders in attendance. The AGM was chaired by Tun Musa Hitam who announced that he was not seeking reappointment as a Director of the company. KGB board member, Tan Sri Dato’ Dr. Wan Mohd Zahid Mohd Noordin delivered a tribute to Tun Musa thanking the latter for his steadfast commitment and sterling contributions to the Group. Shareholders at the meeting were also briefed by the Group Chief Executive, Dato’ Abd Wahab Maskan on the latest development within the Group.

The 45th AGM being chaired by the then Chairman, Tun Musa Hitam (centre).

Course on Estate Management Practices for Stakeholders A two-day oil palm nursery course (OPNC) was organised by Guthrie Plantation & Agricultural Services Sdn Bhd (GPAS) on 1214 July 2006 at Sri Bayu, Port Dickson, Negeri Sembilan. The OPNC is a significant service provided by GPAS to customers to further enhance their knowledge on nursery management. Participants included those from Government agencies, private estates, and commercial nursery operators.

Participants of the OPNC being briefed on nursery management at Guthrie’s Tanah Merah Estate.

Annual Report 2006

Corporate

Highlights

KGB welcomes new Chairman Tan Sri Dato’ Dr. Wan Mohd Zahid Mohd Noordin assumed Chairmanship of KGB with effect from 18 July 2006. Tan Sri Dato’ Dr. Wan Mohd Zahid has been on the Board of Directors of KGB since May 2002. Also a Director of Permodalan Nasional Berhad, he is a very distinguished, qualified and respected figure in the country with an illustrious and expansive background as an educationist and corporate figure.

Investment Analysts visit Guthrie Operations Tanah Merah Estate and Mill in Port Dickson, Negeri Sembilan hosted a group of Malaysian plantation analysts and fund managers on 27 July 2006. The visit was organised with the purpose of giving the analysts a better understanding and insight into Guthrie estate and mill operations in Malaysia.

Review of AAB1 Clonal Oil Palm Planting KGB Group Chief Executive, Dato’ Wahab Maskan reviewed progress of the first batch of AAB1 clonal oil palm planted on 20 April 2006 at Bukit Cheraka Estate, Selangor on 5 August 2006.

The Group Chief Executive (right) evaluating growth of the AAB1 clonal oil palm.

Participation in PNB Quality Symposium The KGB exhibition booth at the Symposium Q organised by PNB on 8 – 9 October 2006 staged quality initiatives undertaken by the Group’s Plantation Malaysia, Indonesia and Property operations as well as their achievements. The event, officiated by Tan Sri Dato’ Seri Dr. Ahmad Sarji Abdul Hamid, is a forum for all PNB subsidiaries to showcase their programmes/initiatives to achieve high quality products and services.

Kumpulan Guthrie Berhad

Corporate

Highlights

Guthrie briefs EPF KGB received officials from the Employees Provident Fund (EPF) at Guthrie Pavilion, Shah Alam on 9 October 2006. The EPF delegation was led by Datuk Azlan Zainol, the Group Chief Executive. The briefing led by Guthrie Group Chief Executive, Dato’ Wahab Maskan was a constructive platform to share information on the Group’s business and operational performance as well as its future objectives.

EPF delegates, led by its Group Chief Executive, take a closer look at Guthrie Property development projects.

GPDH achieves another two international certifications Guthrie Property Development Holding Berhad (GPDH) achieved a major milestone on 16 November 2006 with the attainment of another two international accreditation for its quality systems in place, the ISO 14001:2004 for Environmental Management System and the OHSAS 18001:1999 for Health and Safety Management from SIRIM Berhad (Standard & Industrial Research Institute of Malaysia Berhad). The certification defines the GPDH stringent operational initiatives to deliver the best to its stakeholders and further enhances its Total Quality & Environmental Management System. GPDH now has in its possession three certifications for its quality systems including the ISO 9001:2000 certification received in 2005. Guthrie Board members together with SIRIM President (centre) at the presentation of the EMS 14001 and OHSAS 18001 certification awards.

Guthrie Property develops ‘Build-thenSell’ Property Guthrie Property introduced its ‘build-then-sell’ (BTS) concept, the luxurious Tropika Collection superlink homes in Bukit Jelutong. The Tropika Collection comprises 160 units of superlink houses with eight designs on a 24’x 90’ plot with prices ranging from RM577,000 to RM1,125,000 per unit. These homes have a large built-up area and innovative design set in lush greenery.

The Tropika Collection was a hit among potential buyers.

Annual Report 2006

Corporate

Highlights

Plantation Indonesia Annual SOU Award Plantation Indonesia organised the annual Strategic Operating Unit (SOU) Award 2005 in Balikpapan, East Kalimantan on 25 November 2006. The SOU award is presented to excellent performing strategic operating units. SOU Sekunyir and SOU Teluk Bakau bagged the Best Performing SOU and the Most Improved SOU respectively.

SOU Teluk Bakau team accepting their award from the Chairman of Board of Commissioners, Tan Sri Dato’ Dr. Wan Mohd Zahid Mohd Noordin.

Divestment of Guthrie Corridor Expressway KGB entered into a Share Sale Agreement with Projek Lintasan Kota Holdings Sdn Berhad (Prolintas) for the proposed divestment of the Guthrie Corridor Expressway Sdn Bhd (GCESB) on 27 November 2006. The proposed divestment involves the disposal of the entire equity interest in GCESB comprising 5,000,000 ordinary shares.

Exchange of documents between KGB Director, Datuk Khoo Eng Choo (second from left) and Chairman of Prolintas, Tan Sri Dato’ Hamad Kama Piah Che Othman (second from right) withnessed by KGB Chairman and Group Chief Executive.

Health & Safety Policy penned The Group estate and mill managers put pen to paper to signify their acceptance of the Group Health and Safety Policy to place safety first in estate and mill operations. The agreement was part of the Group Safety Campaign and road show held at the Sg. Dingin, Tanah Merah and Ulu Remis estates in November 2006 to implement a safe working environment.

Guthrie wins four NACRA Awards KGB bagged four awards at the National Annual Corporate Report Award (NACRA) 2006. The awards signify the Company’s high quality of reporting standards reflecting good corporate governance and transparency. The four awards received were the Industry Excellence Award for Main Board Companies Listed on Bursa Malaysia for the Plantation & Mining Sector; Best Annual Report in Bahasa Malaysia (Gold Prize); Environmental Reporting (Silver Prize); and Most Outstanding Annual Report 2005 (Silver Prize). The NACRA awards were presented by Datuk Mohd. Shafie bin Haji Apdal, Minister of Domestic Trade and Consumer Affairs. Datuk Mohd. Shafie bin Haji Apdal (centre) with KGB Senior Management present at the NACRA 2006.

Kumpulan Guthrie Berhad

Corporate

Highlights

Highest OER Achievement Guthrieâ&#x20AC;&#x2122;s Sungai Dingin Mill in Kedah was awarded the 2005 Oil Palm Industry Award by the Malaysian Palm Oil Board (MPOB) in December 2006. The mill was recognised as having achieved the highest oil extraction rate (OER) in Peninsular Malaysia. Prior to this, the mill had been proclaimed by MPOB to have achieved the highest OER in the northern region of 22.23% for 2005.

Mohd Ghozali Yahaya, Senior General Manager of Plantation Operations (second from right) receiving the MPOB award from Senator Datuk Dr. Vijayaratnam from the Ministry of Plantation Industry & Commodities.

Analysts visited Plantation Indonesia KGB organised a four-day analyst visit to the Sungai Cengal and Pamukan areas in South Kalimantan. The analysts had a better understanding and insight into the Groupâ&#x20AC;&#x2122;s Plantation Indonesia operations. While there, the analysts witnessed and were briefed on estate and yield enhancement initiatives, mill improvement programmes and infrastructure upgrading.

Analysts at Bebunga Mill, South Kalimantan.

Proposal by Synergy Drive In December 2006, the Board of KGB accepted the offer from Synergy Drive Sdn. Bhd. to acquire the business of the Company. Following the acceptance of the offer, a Sale of Business Agreement was signed on 24 January 2007.

Annual Report 2006

HISTORY 1821 – Alexander Guthrie established the Guthrie agency house in Singapore. 1896 – Guthrie began to take firm root in the Malay Peninsular by laying the foundation for Malaya to be a major rubber producer. 1924 – Guthrie introduced oil palm to the Malay Peninsular. 1960 – Kumpulan Guthrie Sdn. Berhad (KGSB) was incorporated on 25 November 1960. It was initially formed to serve as the local agent for Guthrie Estates Agency Limited (GEAL), a company incorporated in the United Kingdom (UK). – GEAL was the agent for UK-incorporated plantation companies that owned plantations in Malaya. 1965 – The abovementioned plantation companies merged to form Guthrie Corporation Limited (GCL) which was listed on the London Stock Exchange in 1965. 1977 – GCL transferred its plantation interests from 10 of its UK-incorporated subsidiaries to six Malaysian-incorporated subsidiary companies. GCL further expanded its plantation interests to the Philippines, China and Africa. 1981 – On 7 September 1981, Permodalan Nasional Berhad (PNB) acquired the entire ordinary share capital of GCL. 1982 – GCL’s plantation interests came home to Malaysia. On 18 November 1982, GCL’s plantation assets situated both in Malaysia and overseas (Philippines, China and Africa), together with the marketing and distribution network companies situated in the UK and United States of America (USA) were transferred to KGSB. A new UK company, Guthrie Holdings Limited, a wholly-owned subsidiary of PNB, was formed to hold the share capital of GCL. – Guthrie Ropel Berhad, which officially commenced business in 1970, became a subsidiary of KGSB. 1984 – KGSB acquired the entire issued share capital of Uniroyal Malaysian Plantations Sdn. Berhad from Uniroyal Incorporated, a company incorporated in the USA. 1985 – In January 1985, KGSB, through its whollyowned subsidiary, Kumpulan Jelei Sdn. Berhad, entered into an agreement with Kuala Lumpur Kepong Berhad (KLK) to purchase KLK’s 26.23% holding in Highlands & Lowlands Berhad (H&L). The acquisition gave KGSB, together with PNB’s 19.36% interest in H&L, 45.59%

Kumpulan Guthrie Berhad

control of H&L. KGSB subsequently made a cash offer to acquire all the shares of H&L not already controlled by itself or PNB. This resulted in KGSB acquiring a further 5.41% interest in H&L. Following this cash offer, PNB rationalised its interest in H&L by transferring its interest in H&L to KGSB. With the completion of this exercise, H&L became a subsidiary of KGSB. 1987 – KGSB was converted to a public company, known as Kumpulan Guthrie Berhad (Guthrie). 1989 – Guthrie was listed on the Kuala Lumpur Stock Exchange (now renamed Bursa Malaysia Securities Berhad) on 25 August 1989. 1990 – Guthrie Property Development Holding Sdn. Berhad [now known as Guthrie Property Development Holding Berhad (GPDH)] was established. GPDH would undertake property development activities of Guthrie Group. 1994 – The Guthrie Group strategically diversified its core businesses into plantations, property development, manufacturing and services. The Group commenced its property development activity in Bukit Jelutong. 1995 – Guthrie, through its wholly-owned subsidiary, Guthrie Tapis Sdn. Berhad, entered into a joint-venture agreement with PT Pecconina Baru to form a jointventure company, PT Guthrie Pecconina Indonesia, to develop an oil palm plantation in Palembang, South Sumatera, Indonesia. 1997 – Bukit Jelutong project won the Best Planned Township Award from the Institute of Town Planners. 1998 – The Guthrie Pavilion which houses the office of GPDH was completed. 2000 – Guthrie Corridor Expressway Sdn. Berhad (GCESB) was awarded the Guthrie Corridor Expressway, a 33-year concession highway project. – Guthrie won a bid to acquire interests in companies which are substantially involved in oil palm cultivation covering approximately 265,000 hectares in seven Indonesian provinces. 2001 – Guthrie signed an agreement to issue USD395 million (RM1.5 billion) worth of Islamic bonds, the first US dollar denominated international Islamic bonds traded on the Labuan Financial Exchange, to refinance its Indonesian acquisition and operations.

2002 – Jeleta Bumi Mill registered the highest oil palm extraction rate (OER) of 24.53% in the Malaysian palm oil industry in March 2002. The achievement was endorsed by the Malaysian Palm Oil Board (MPOB). 2003 – GPDH’s Denai Alam won the coveted Malaysian Institute of Planners’ Planning Innovation Award. 2004 – GPDH acquired 1,609 acres of its landbank from the Group. – Guthrie is the first plantation company in the world to be granted EUREPGAP (European Retailers and Producers Good Agricultural Practices) certification for plantation management. Tanah Merah SOU comprising the Tanah Merah, Sua Betong and Bukit Pelandok estates was awarded the EUREPGAP certification, a quality standard recognised by the Food and Agricultural Organisation (FAO). – Guthrie launched its Performance-driven system for G-Excellence in October 2004. 2005 – Guthrie launched the EUREPGAP programme group-wide to its plantation estates for global recognition on sustainable agricultural practices. – Guthrie launched its clonal oil palm, the AAB1 in April 2005. – Guthrie launched its G-Emas, the integrated IT estate and mill management system. – GPDH was awarded ISO 9001:2000 certification from SIRIM QAS International Sdn. Berhad. The achievement paves the way for recognition of a quality builder status. – Guthrie Group implemented Phase I of the Performance Transformation Programme and Balanced Scorecarddriven (BSC) Key Performance Indicators (KPIs). 2006 – First Commercial planting of the Group’s clonal oil palm, AAB1, at Bukit Cheraka Estate in Selangor. – Guthrie signed an agreement with Projek Lintasan Kota Holdings Sdn Bhd for the proposed divestment of the entire equity interest in GCESB. – GPDH achieved ISO 14001:2004 for Environmental Management System and OHSAS 18001:1999 for Health and Safety Management from SIRIM Bhd. – In December 2006, the Board of KGB accepted the offer from Synergy Drive Sdn. Bhd. to acquire the business and undertakings of the Company.

Financial Statements 88

Directorsâ&#x20AC;&#x2122; Report

Income Statements

Balance Sheets

Statements of Changes in Equity

Cash Flow Statements

101

Notes to the Financial Statements

218

Statement by Directors

218

Statutory Declaration

219

Report of the Auditors

Directors’ Report

for the year ended 31 December 2006

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2006.

PRINCIPAL ACTIVITIES The Company is an investment holding company and it also provides research, agricultural and advisory services. The principal activities of its subsidiary and associated companies are respectively described in Notes 7 and 26 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year other than as disclosed in Note 15 to the financial statements.

RESULTS GROUP RM’000

COMPANY RM’000

Profit after tax from continuing operations Loss for the year from discontinued operations

446,618 (12,908)

272,955 (24,575)

Profit for the year

433,710

248,380

Attributable to: Equity holders of the Company Minority interests

284,194 149,516

248,380 –

433,710

248,380

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statements of changes in equity. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than the following: (a) The effects arising from the changes in accounting policies due to the adoption of the new and revised Financial Reporting Standards (“FRS”) which have resulted in a decrease in the Group’s and the Company’s profit for the year by RM9,858,000 and RM1,245,000 respectively, as disclosed in Note 4(i)(ii) to the financial statements; (b) The disposal of Ladang Bertam by Guthrie Ropel Berhad (“Ropel”), a subsidiary of the Company and Guthrie Ropel Development Sdn. Berhad, a wholly-owned subsidiary of Ropel resulting in a gain on disposal of RM68,515,000 to the Group as disclosed in Note 11 to the financial statements; (c) The disposal of Integrated Brickworks Sdn. Berhad, a wholly-owned subsidiary of the Group resulting in a loss on disposal of RM23,008,000 and RM24,575,000 to the Group and the Company respectively as disclosed in Notes 15(e) and 15(f) to the financial statements; and (d) The surplus on liquidation of subsidiary companies resulting in an increase in the Company’s profit for the year by RM17,756,000 as disclosed in Note 11 to the financial statements.

Kumpulan Guthrie Berhad

DIVIDENDS During the financial year, the following dividends were paid by the Company: (a) A final dividend of 6 sen per share, less 28% tax, amounting to RM43,579,000, in respect of the previous financial year as proposed in the Directors’ Report of that year; and (b) An interim dividend of 6 sen per share, less 28% tax, amounting to RM43,892,000, in respect of the current financial year. The directors have proposed a final tax-exempt dividend of 6 sen per share, and a gross dividend of 4 sen per share, less 27% tax, amounting to RM91,113,000 which, subject to shareholders’ approval at the forthcoming Annual General Meeting of the Company, will be paid on 21 June 2007. The financial statements for the current financial year do not reflect these proposed dividends. Such dividends, if approved by the shareholders, will be accounted for in equity as an appropriation of revenue reserve in the financial year ending 31 December 2007.

DIRECTORS The names of the directors of the Company in office since the date of the last report and at the date of this report are: Tan Sri Dato’ Dr. Wan Mohd. Zahid Mohd. Noordin Dato’ Abd Wahab Maskan Raja Tan Sri Muhammad Alias Raja Muhammad Ali Datuk Nik Mohamed Affandi Nik Yusoff Datuk Mohamed Adnan Ali Datuk Alladin Mohd. Hashim Datuk Khoo Eng Choo Dato’ Muhammad Nawawi Haji Mohd. Arshad Tun Musa Hitam Sreesanthan s/o Eliathamby

(Appointed Chairman on 18 July 2006)

(Resigned on 22 June 2006) (Resigned on 23 November 2006)

In accordance with Article 102 of the Company’s Articles of Association, YBhg. Datuk Mohamed Adnan Ali and YBhg. Dato’ Muhammad Nawawi Haji Mohd. Arshad retire from the Board of Directors by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. In compliance with Section 129(2) of the Companies Act, 1965, YM. Raja Tan Sri Muhammad Alias Raja Muhammad Ali, being over the age of seventy, retires from the Board of Directors. The Board recommends that he be reappointed as director pursuant to Section 129(6) of the Companies Act, 1965.

DIRECTORS’ BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 13(b) to the financial statements) by reason of a contract made by the Company or a related corporation with any 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 required to be disclosed by Section 169(8) of the Companies Act, 1965, except as disclosed in Note 48 to the financial statements.

Annual Report 2006

DIRECTORS’ INTERESTS The following directors who held office at the end of the financial year had, according to the register of directors’ shareholdings required to be kept under Section 134 of the Companies Act, 1965, interests in shares of the Company and its subsidiary companies, as stated below:

Name of director of this Company

Name of company in which interest is held

Direct Interest: Datuk Khoo Eng Choo Datuk Nik Mohamed Affandi Nik Yusof Dato’ Muhammad Nawawi Haji Mohd. Arshad

Kumpulan Guthrie Berhad Malaysia Land Development Company Berhad Malaysia Land Development Company Berhad

As at 1.1.2006

Number of Ordinary Shares Bought Sold As at During the year 31.12.2006

2,000 1,000

– –

2,000 –

– 1,000*

1,000

–

1,000*

* Held in trust for the Company None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

ISSUE OF SHARES During the financial year, the issued and paid-up share capital of the Company was increased from 1,006,939,300 ordinary shares of RM1 each to 1,021,449,400 ordinary shares of RM1 each following the issue of 14,510,100 ordinary shares of RM1 each pursuant to the Second Employees’ Share Option Scheme (“Second ESOS”) of the Company. These new ordinary shares were issued and credited as fully paid and rank pari passu in all respects with the existing ordinary shares of the Company. The share premium arising from this issue amounted to RM18,019,000.

OTHER STATUTORY INFORMATION (a) Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps: (i)

to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii)

to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

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

the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii)

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

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

Kumpulan Guthrie Berhad

OTHER STATUTORY INFORMATION (cont’d.) (e) At the date of this report, there does not exist:

(f)

(i)

any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii)

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

In the opinion of the directors: (i)

no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii)

no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR The significant events during the financial year are disclosed in Note 53 to the financial statements.

SUBSEQUENT EVENT Details of the subsequent event are disclosed in Note 54 to the financial statements.

AUDITORS The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 28 March 2007.

TAN SRI DATO’ DR. WAN MOHD. ZAHID MOHD. NOORDIN Chairman

DATO’ ABD WAHAB MASKAN Director

Annual Report 2006

Income Statements

for the year ended 31 December 2006

Note

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

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

Continuing Operations Revenue Cost of sales

2,406,513 (1,583,312)

1,980,769 (1,260,470)

478,858 –

280,352 –

823,201 328,822 (8,319) (122,193) (255,371)

720,299 88,384 (7,081) (120,707) (261,415)

478,858 173,761 – (50,358) (105,143)

280,352 50,077 – (48,531) (44,004)

766,140 (163,387)

419,480 (157,347)

497,118 (149,130)

237,894 (137,730)

2,748

875

–

(38)

–

605,463 (158,845)

263,008 (110,556)

347,988 (75,033)

100,164 (31,353)

446,618

152,452

272,955

68,811

(12,908)

(10,053)

(24,575)

(1,817)

Profit for the year

433,710

142,399

248,380

66,994

Attributable to: Equity holders of the Company Minority interests

284,194 149,516

48,844 93,555

248,380 –

66,994 –

433,710

142,399

248,380

66,994

Gross profit Other income Distribution costs Administration expenses Other expenses Operating profit Finance expense Share of results after tax of associated companies Share of results after tax of a jointly controlled entity Profit before taxation Taxation

9 10

13 14

Profit for the year from continuing operations Discontinued Operations Loss for the year from discontinued operations

Kumpulan Guthrie Berhad

Note Basic earnings per share attributable to equity holders of the Company (sen): Profit from continuing operations Loss from discontinued operations

Profit for the year

Diluted earnings per share attributable to equity holders of the Company (sen): Profit from continuing operations Loss from discontinued operations Profit for the year

GROUP 2006 2005 (restated)

29.38 (1.28)

5.85 (1.00)

28.10

4.85

29.27 (1.27)

5.80 (0.99)

28.00

4.81

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

Annual Report 2006

Balance Sheets

as at 31 December 2006

Note

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

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

ASSETS Non-Current Assets Property, plant and equipment Plantation development expenditure Prepaid lease payments Land held for property development Investment property Concession asset Goodwill on consolidation Investments in subsidiary companies Investments in associated companies Investment in a jointly controlled entity Other investments Loans to subsidiary companies Long-term trade receivables Advances for Plasma PIR-Trans projects Advances for KKPA projects Deferred tax assets

Current Assets Property development costs Inventories Amounts due from customers on contracts Trade receivables Other receivables Income tax recoverable Amounts due from subsidiary companies Marketable securities Deposits, bank balances and cash

Assets of disposal groups classified as held for sale

TOTAL ASSETS

Kumpulan Guthrie Berhad

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

2,530,776 2,434,846 342,357 266,200 – – 254,558 – 16,700 1,962 1,773 – 68,347 18,018 15,106 152,050

2,535,812 2,480,611 347,202 399,074 – 585,742 261,510 – 13,795 – 2,550 – – 17,550 23,873 195,777

17,193 – 615 – – – – 2,636,526 – 2,000 459 379,548 – – – –

18,507 – 645 – 21,524 – – 2,823,585 – – 959 390,472 – – – 346

6,102,693

6,863,496

3,036,341

3,256,038

38 39 40

413,444 189,265 – 280,087 137,261 97,514 – 37,403 809,936

392,092 191,066 7,640 287,720 107,678 119,197 – 22,866 709,067

– – – – 28,183 74,779 795,636 – 29,030

– – – – 31,799 103,927 1,025,828 – 56,394

1,964,910 678,900

1,837,326 –

927,628 104,800

1,217,948 –

2,643,810

1,837,326

1,032,428

1,217,948

8,746,503

8,700,822

4,068,769

4,473,986

34 35 36 30 37

Note

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

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

EQUITY AND LIABILITIES Equity Attributable to Equity Holders of the Company Share capital Share premium Revaluation reserve Capital reserve Exchange reserve Share option reserve Revenue reserve

1,021,449 28,584 691,403 58,725 17,805 1,101 1,308,479

1,006,939 8,178 699,257 53,860 (4,881) – 1,095,680

1,021,449 28,584 10,122 – – 1,101 261,829

1,006,939 8,178 10,136 – – – 100,898

Minority interests

3,127,546 1,568,042

2,859,033 1,536,534

1,323,085 –

1,126,151 –

Total Equity

4,695,588

4,395,567

1,323,085

1,126,151

2,450,435 – 8,123 675,435 24,946

2,620,673 – 1,785 708,170 15,384

239,657 1,664,395 – 1,394 73

679,633 1,522,640

3,158,939

3,346,012

1,905,519

2,202,336

326,919 200,321 2,280 – 298,170 55,180

301,213 197,495 8,330 – 426,570 25,635

9,426 25,482 – 503,297 279,437 –

4,600 17,347 – 800,751 322,801 –

882,870

959,243

817,642

1,145,499

9,106

–

22,523

–

891,976

959,243

840,165

1,145,499

Total Liabilities

4,050,915

4,305,255

2,745,684

3,347,835

TOTAL EQUITY AND LIABILITIES

8,746,503

8,700,822

4,068,769

4,473,986

Non-Current Liabilities Borrowings Loans from subsidiary companies Deferred income Deferred tax liabilities Retirement benefits

Current Liabilities Trade payables Other payables Deferred income Amounts due to subsidiary companies Borrowings Taxation

Liabilities directly associated with assets of disposal groups classified as held for sale

42 43 43 43 43 43 43

44 29 45 33 46

47 45 38 44

– 63

The accompanying notes form an integral part of the financial statements. Annual Report 2006

Statements of Changes in Equity

for the year ended 31 December 2006

GROUP

<----------------------------------------------------------------------------------Share Capital RM’000

Share Premium RM’000

Revaluation Reserve RM’000

Capital Reserve RM’000

1,006,939

8,178

699,257

53,860

– – – –

– – 2,387 –

– – (14,675) 6,821

– – 4,865 –

– –

2,387 –

(7,854) –

4,865 –

– 14,510 – –

2,387 18,019 – –

(7,854) – – –

4,865 – – –

At 31 December 2006

1,021,449

28,584

691,403

58,725

At 1 January 2005 Foreign currency translation Group Associated company Transfers (from)/to reserves

1,005,419

6,472

715,555

54,305

– – –

– – (16,298)

– – (445)

Net (expense)/income recognised directly in equity Profit for the year

– –

(16,298) –

(445) –

Total recognised income and expense for the year Issue of shares pursuant to Second ESOS Dividends paid (Note 17)

– 1,520 –

– 1,706 –

(16,298) – –

(445) – –

1,006,939

8,178

699,257

53,860

At 1 January 2006 Foreign currency translation Group Associated company Transfers (from)/to reserves Effects of changes in tax rates Net income/(expense) recognised directly in equity Profit for the year Total recognised income and expense for the year Issue of shares pursuant to Second ESOS Cost of share options granted under Second ESOS Dividends paid (Note 17)

At 31 December 2005

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

Kumpulan Guthrie Berhad

----------------Attributable to Equity Holders of the Company ---------> Share Exchange Option Revenue Reserve Reserve Reserve Total RM’000 RM’000 RM’000 RM’000

Minority Interests RM’000

Total Equity RM’000

(4,881)

–

1,095,680

2,859,033

1,536,534

4,395,567

23,088 810 (1,212) –

– – (2,387) –

– – 16,076 –

23,088 810 5,054 6,821

1,508 – – –

24,596 810 5,054 6,821

22,686 –

(2,387) –

16,076 284,194

35,773 284,194

1,508 149,516

37,281 433,710

22,686 – – –

(2,387) – 3,488 –

300,270 – – (87,471)

319,967 32,529 3,488 (87,471)

151,024 – – (119,516)

470,991 32,529 3,488 (206,987)

17,805

1,101

1,308,479

3,127,546

1,568,042

4,695,588

72,476

–

1,095,322

2,949,549

1,541,987

4,491,536

(76,507) (850) –

– – –

– – 16,743

(76,507) (850) –

(11,142) – –

(87,649) (850) –

(77,357) –

– –

16,743 48,844

(77,357) 48,844

(11,142) 93,555

(88,499) 142,399

(77,357) – –

– – –

65,587 – (65,229)

(28,513) 3,226 (65,229)

82,413 – (87,866)

53,900 3,226 (153,095)

(4,881)

–

1,095,680

2,859,033

1,536,534

4,395,567

Annual Report 2006

Statements of Changes in Equity

for the year ended 31 December 2006 (cont’d.)

COMPANY Share Capital RM’000

Share Premium RM’000

Revaluation Reserve RM’000

Share Option Reserve RM’000

Revenue Reserve RM’000

Total RM’000

1,006,939 –

8,178 –

165,626 (155,490)

– –

100,898 –

1,281,641 (155,490)

1,006,939

8,178

10,136

–

100,898

1,126,151

Transfer to/(from) reserves Effects of changes in tax rates

– –

2,387 –

(22) 8

(2,387) –

22 –

– 8

Net income/(expense) recognised directly in equity Profit for the year

– –

2,387 –

(14) –

(2,387) –

22 248,380

8 248,380

– 14,510

2,387 18,019

(14) –

(2,387) –

248,402 –

248,388 32,529

– –

3,488 –

– (87,471)

3,488 (87,471)

At 31 December 2006

1,021,449

28,584

10,122

1,101

261,829

1,323,085

At 1 January 2005 As previously stated Effects of adopting FRS 127 [Note 4(g)]

1,005,419 –

6,472 –

165,645 (155,490)

– –

99,114 –

1,276,650 (155,490)

1,005,419

6,472

10,155

–

99,114

1,121,160

– –

(19) –

– –

19 66,994

– 66,994

– 1,520 –

– 1,706 –

(19) – –

– – –

67,013 – (65,229)

66,994 3,226 (65,229)

1,006,939

8,178

10,136

–

100,898

1,126,151

At 1 January 2006 As previously stated Effects of adopting FRS 127 [Note 4(g)] As restated

Total recognised income and expense for the year Issue of shares pursuant to Second ESOS Cost of share options granted under Second ESOS Dividends paid (Note 17)

As restated Transfer (from)/to reserves, representing net (expense)/income recognised directly in equity Profit for the year Total recognised income and expense for the year Issue of shares pursuant to Second ESOS Dividends paid (Note 17) At 31 December 2005

The accompanying notes form an integral part of the financial statements. 98

Kumpulan Guthrie Berhad

Cash Flow Statements

for the year ended 31 December 2006

GROUP 2006 2005 RM’000 RM’000 Cash Flows from Operating Activities Cash receipts from customers Cash paid to suppliers and employees

COMPANY 2006 2005 RM’000 RM’000

2,580,521 (1,758,978)

2,303,451 (1,615,208)

51,426 (54,160)

53,259 (68,164)

Cash from/(used in) operations Tax paid Tax refunded Interest paid Proceeds from compulsory land acquisitions Proceeds from disposal of land held for property development Proceeds from disposal of land

821,543 (150,647) 64,618 (78,207) 9,480 61,968 83,698

688,243 (171,413) 55,896 (83,509) 18,001 61,968 4,275

(2,734) – 60,515 (80,169) – – –

(14,905) – 37,027 (80,955) – – –

Net cash from/(used in) operating activities

812,453

573,461

(22,388)

(58,833)

(209,115) (1,405) (65,181) (20,812) (14,224) (39,496) (2,000) (7,721) 1,176 1,308 27,793 – – 3,495 38,215 (64,883) – – – – –

(86,381) (1,909) (59,142) (93,211) (56,205) (16,334) – (3,047) 4,985 9,951 26,706 – – 1,192 25,991 (49,610) – – – – –

(974) – – – – – (2,000) – 164 545 – 10,000 323,400 1,682 26,975 (64,883) 18,782 (15,362) 323,407 157,030 (268,536)

(3,250) – – – – – – – 677 15,040 – – 161,634 407 37,926 (49,610) – (77,799) 1,435,640 (34,312) 23,569

(352,850)

(297,014)

510,230

1,509,922

Cash Flows from Investing Activities Purchase of property, plant and equipment Prepayment of land lease Replanting expenditure Property development activities Construction of concession asset Purchase of other investments Subscription of shares in a jointly controlled entity Purchase of shares from minority shareholders Proceeds from disposal of property, plant and equipment Proceeds from disposal of subsidiary companies (Note 15) Proceeds from disposal of other investments Proceeds from disposal of investment property Net dividends received from subsidiary companies Net dividends received from investments Interest received Interest paid Distribution in specie from subsidiary companies Loans to subsidiary companies Loans from subsidiary companies Net change in amounts due from subsidiary companies Net change in amounts due to subsidiary companies Net cash (used in)/from investing activities

Annual Report 2006

Cash Flow Statements

for the year ended 31 December 2006 (cont’d.)

GROUP 2006 2005 RM’000 RM’000 Cash Flows from Financing Activities Drawdown of borrowings Repayment of borrowings Repayment of Islamic Lease SUKUK Net repayment of hire purchase and lease financing Release of fixed deposits pledged Dividends paid to shareholders of the Company Dividends paid to minority shareholders of subsidiary companies Proceeds from issuance of ordinary shares of the Company pursuant to the Second ESOS

COMPANY 2006 2005 RM’000 RM’000

358,066 (184,778) (353,433) – 11,446 (87,471) (119,516)

1,776,415 (2,014,484) – (1,000) 21,850 (65,229) (87,866)

– (106,831) (353,433) – – (87,471) –

167,913 (1,622,756) – – – (65,229) –

32,529

3,226

32,529

3,226

(343,157)

(367,088)

(515,206)

(1,516,846)

Net change in cash and cash equivalents Cash and cash equivalents at 1 January Effects of changes in foreign exchange rates

116,446 697,621 (1,259)

(90,641) 795,426 (7,164)

(27,364) 56,394 –

(65,757) 122,151 –

Cash and cash equivalents at 31 December

812,808

697,621

29,030

56,394

809,936 2,872

709,067 –

29,030 –

56,394 –

–

(11,446)

–

812,808

697,621

29,030

56,394

Net cash used in financing activities

Cash and cash equivalents at 31 December comprise: Deposits, bank balances and cash (Note 40) Cash and bank balances classified as held for sale (Note 41) Less: Fixed deposits with licensed banks pledged for banking facilities (Note 40)

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

100 Kumpulan Guthrie Berhad

Notes to the Financial Statements

– 31 December 2006

1. CORPORATE INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of Bursa Malaysia Securities. The registered office of the Company is located at Wisma Guthrie, 21 Jalan Gelenggang, Damansara Heights, 50490 Kuala Lumpur. The principal activities of the Company are investment holding and the provision of research, agricultural and advisory services. The principal activities of the subsidiary and associated companies, which are also described in Notes 7 and 26, are as follows: – – – – –

cultivation, processing and sale of palm oil, palm kernel and fresh fruit bunches; property development; road concession operation; manufacture and sale of medium–density fibreboard and concrete blocks and bricks; and hotel and resort management.

There have been no significant changes in the nature of these activities during the financial year except as disclosed in Note 15. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 28 March 2007.

2. BASIS OF PREPARATION The financial statements comply with the applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and the provisions of the Companies Act, 1965. As at 1 January 2006, the Group and the Company had adopted new and revised FRS which are mandatory for financial periods beginning on or after 1 January 2006 as disclosed in Note 4. The financial statements of the Group and of the Company have been prepared under the historical cost convention except for the following, which are stated at valuation: (a) Landed properties comprising freehold land and buildings, as disclosed in Note 3(e); (b) Plantation development expenditure, as disclosed in Note 3(f); and (c) Land held for property development, as disclosed in Note 3(i). The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

Annual Report 2006 101

3. SIGNIFICANT ACCOUNTING POLICIES (a) Subsidiary Companies Subsidiary companies are those enterprises in which the Group has a long-term equity interest and which are controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Investments in subsidiary companies in the financial statements of the Company are stated at cost less impairment losses. The gain or loss on disposal of a subsidiary company is the difference between the net disposal proceeds and the Group’s share of its net assets together with any balance of goodwill and exchange differences which were not previously recognised in the consolidated income statement. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n). (b) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and all its subsidiary companies, after the elimination of all material intercompany transactions and unrealised gains and losses. The financial statements of subsidiary companies are included in the consolidated financial statements from the date that control effectively commences until the date such control effectively ceases. The financial statements of subsidiary companies are prepared for the same reporting period as the Company. In the preparation of the consolidated financial statements, the financial statements of subsidiary companies are adjusted for the effects of any material dissimilar accounting policies. Subsidiary companies are consolidated using the acquisition method of accounting. This method involves allocating the cost of acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued plus any costs directly attributable to the acquisition. The difference between the cost of acquisition of subsidiary companies and the Group’s interest in the fair value ascribed to the net assets of these acquired subsidiary companies at dates of acquisition represents goodwill. Any excess of the Group’s interest in net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in income statement. Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and minorities’ share of change in the subsidiaries’ equity since then. (c) Associated Companies Associated companies are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies. The Group equity accounts for its share of post-acquisition results and reserves of associated companies based on the latest audited financial statements. The Group’s share of results and reserves of the associated companies are included in the consolidated financial statements from the date the Group obtains significant influence until the date the Group cease to have significant influence over the associate. Where there has been a change recognised directly in equity of the associate, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. 102 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (c) Associated Companies (cont’d.) Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired. The financial statements of the associated companies are prepared for the same reporting period as the Group. Investments in associated companies are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n). On disposal of such investments, the difference between the net disposal proceeds and their carrying amounts is recognised in the income statement. (d) Jointly Controlled Entity The Group has an interest in a joint venture which is a jointly controlled entity. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest. Investment in a jointly controlled entity is accounted for in the consolidated financial statements using the equity method of accounting as described in Note 3(c). In the Company’s financial statements, investment in a jointly controlled entity is stated at cost less impairment losses. On disposal of such investment, the difference between the net disposal proceeds and its carrying amount is recognised in the income statement. (e) Property, Plant and Equipment All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance cost are charged to the income statement during the financial period in which they are incurred. Subsequent to recognition, property, plant and equipment except for freehold land and buildings are stated at cost less accumulated depreciation and any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n). The Group has adopted the policy to state its landed properties comprising freehold land and buildings, at valuation less accumulated depreciation and impairment losses. These assets are revalued by independent professionally qualified valuers once every five years based on open market value basis. Revaluations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from that which would be determined using fair values at the balance sheet date. The treatment of surplus or deficit from revaluation is as described in Note 3(q). Freehold land has an unlimited useful life and is therefore not depreciated. Capital work-in-progress is not depreciated as these assets are not available for use.

Annual Report 2006 103

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (e) Property, Plant and Equipment (cont’d.) Golf course development expenditure are amortised over the period of the lease. All other property, plant and equipment are depreciated to their residual values over their estimated economic useful lives based upon the original cost or subsequent valuation. The principal annual rates of depreciation used are: Golf course development expenditure Buildings Machinery, equipment and vehicles

58 years 2 – 5% 10 – 33 1/3%

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in the income statement and the outstanding portion of the revaluation surplus on that item is taken directly to revenue reserve. (f)

Plantation Development Expenditure Plantation development expenditure, consisting of land clearing and upkeep of trees to maturity, are initially recorded at cost and upon maturity of the crops, the plantation development expenditure is amortised over 20 to 24 years, representing the economic useful lives of the crops. Subsequent to recognition, the Group has adopted the policy to state the plantation development expenditure at valuation less accumulated amortisation and any accumulated impairment losses. These assets are revalued by independent professionally qualified valuers once every five years based on open market value basis. Revaluations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from that which would be determined using fair values at the balance sheet date. The treatment of surplus or deficit from revaluation is as described in Note 3(q).

(g) Leases (i)

Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.

104 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (g) Leases (cont’d.) (ii)

Finance Leases Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minumum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 3(e).

(iii) Operating Leases Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. In the case of the lease of lands, the minimum lease payments or the up-front payments representing the prepaid lease payments are amortised on a straight-line basis over the lease term. The Group and the Company had previously revalued its leasehold land and have retained the unamortised revalued amount as the surrogate cost of prepaid lease payments in accordance with the transitional provisions in FRS 117. Prepaid lease payments on leasehold land are stated at surrogate cost less accumulated amortisation and any impairment loss. The policy for the recognition and measurement of impairment losses are in accordance with Note 3(n). In respect of the subsidiary companies in Indonesia, prepaid lease payments include deferred land rights which represent the costs associated with the legal transfer or renewal of land titles, including legal fees, area survey and land remeasurement fees, notarial fees, taxes and other expenses. These costs are deferred and amortised using the straightline method over the legal terms of the related land rights. The principal annual rates of amortisation used are: Short-term leasehold land Long-term leasehold land Deferred land rights

1 – 49 years 50 – 99 years 21 – 35 years

Annual Report 2006 105

3. SIGNIFICANT ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) (h) Land Acquisition Gains arising from the acquisition of land by the Government are recognised in the income statement upon the physical handing over of land, receipt of compensation or notice in Form K under the Land Acquisition Act, 1960, whichever is the earlier. Interest receivable in respect of any compensation awarded, of 8% per annum as provided under Section 32(l) of the Land Acquisition Act, 1960, is recognised in the income statement upon receipt. (i)

Land Held for Property Development and Property Development Costs (i)

Land Held for Property Development Land held for property development consists of land where no development activities have been undertaken or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at cost to the Group less any accumulated impairment losses, with the exception of the freehold land held for property development which were revalued by the directors in 1989. According to the transitional provisions of FRS 201, the Group has continued to retain the revalued amount of the land (and subsequently, its carrying costs) as its surrogate cost. Costs include cost of land, professional fees and other direct development expenditure and related overheads. Land held for property development is reclassified as property development costs at the point when development works have been undertaken and where it can be demonstrated that the development activities are expected to be completed within the normal operating cycle. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n).

(ii)

Property Development Costs Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. Costs include cost of land, development expenditure and allocation of overhead expense, including interest expense incurred during the period of active development. When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs. Where the financial outcome of a development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred. Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately. Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value. The excess of revenue recognised in the income statement over billings to purchasers is classified as accrued billings and the excess of billings to purchasers over revenue recognised in the income statement is classified as progress billings.

106 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (j)

Investment Property Investment property is a property which is held either to earn rental income or for capital appreciation or for both. The Group has adopted a policy to measure its investment property at cost, including transaction costs. The depreciation policy for investment property is in accordance with that for depreciable property, plant and equipment as described in Note 3(e). A property interest under an operating lease is classified and accounted for as an investment property on a property-byproperty basis when the Group holds it to earn rental or for capital appreciation or both. Any such property interest under an operating lease, classified as an investment property, is carried at cost. Investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefits is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property is recognised in income statement in the year in which they arise.

(k) Concession Asset Concession asset represents development costs incurred to design, construct, manage and maintain the Guthrie Corridor Expressway (“Expressway”), a 25km expressway which links Shah Alam and Kuang, Selangor Darul Ehsan. Items classified within Concession Asset comprise Expressway Development Expenditure (“EDE’’) and Other Concession Assets. (i)

Expressway Development Expenditure (“EDE’’) EDE comprises development and upgrading expenditure including interest charges relating to financing of the development incurred in connection with the Expressway. EDE is stated at cost less accumulated amortisation and any impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n). The cumulative actual EDE incurred up to the completion of the Expressway and any additions incurred thereafter is to be amortised to the income statement over the concession period (“Concession Period”) upon completion of construction works of the Expressway and the commencement of toll collection, based on the following formula: Cumulative Toll Revenue to date Projected Total Toll Revenue for the Concession Period

Cumulative Actual Expressway Development Expenditure

The Concession Period is defined as a period of thirty three (33) years commencing from the Effective Date (being the date of fulfillment of the conditions precedent stipulated in the Concession Agreement), which is 1 August 2001. The Concession Period, by way of letter from the Works Minister dated 23 March 2005, has been extended for a further period of twenty two (22) months expiring 30 June 2036 as remedy to meet any loss and cost of expenses incurred as a consequence of the delay on the part of the Government in handing over third party land. The projected total toll revenue for the Concession Period is based on the best estimate traffic volumes projected by an independent professional firm of traffic consultants in the projection study commissioned by Guthrie Corridor Expressway Sdn. Berhad, a wholly-owned subsidiary of the Company, taking into account the agreed toll rates stipulated in the Concession Agreement.

Annual Report 2006 107

3. SIGNIFICANT ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) (k) Concession Asset (contâ&#x20AC;&#x2122;d.) (ii)

Other Concession Assets Other Concession Assets comprise toll equipment, video surveillance equipment, telecommunication network, and toll operation computer hardware and software, are stated at cost less accumulated amortisation and any impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(n). The annual amortisation in respect of these assets is computed on a straight line basis over their estimated useful lives at the following rates: Software and computers Others

(l)

10% 10%

Intangible Assets (i)

Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Groupâ&#x20AC;&#x2122;s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(ii)

Research and Development Costs All research costs are recognised in the income statement as incurred. Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, the ability of the asset to generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditures which do not meet these criterias are expensed when incurred. Development costs, considered to have finite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least at each balance sheet date.

108 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (m) Advances for Plasma PIR-Trans Projects and KKPA Projects Advances for Plasma PIR-Trans Projects, in respect of the subsidiary companies in Indonesia, represent the accumulated costs (including borrowing costs and indirect overhead costs) to develop plasma plantations. When a plasma plantation project is substantially completed and ready to be transferred or turned-over to the plasma farmers, the corresponding investment credit from the bank is also transferred to the Plasma Farmers. Any gain or loss resulting from the difference between the carrying value of the Plasma PIR-Trans projects and the corresponding investment credit transferred to the plasma farmers is reflected in the income statement. Advances for KKPA (“Kredit Koperasi Primer untuk Anggotanya”) projects represent the accumulated costs to develop plasma plantations which are currently being financed by creditor banks and self-financed by a subsidiary company in Indonesia totalling 16,000 hectares of land. Upon the cooperative obtaining KKPA financing from the creditor bank, the said advances will be recovered from the cooperative. An estimate is made at each balance sheet date for losses on recovery of Plasma PIR-Trans projects and KKPA projects based on a review of the recoverable development costs, and anticipated losses are provided for in full. (n) Impairment of Assets Inventories, assets arising from construction contracts, investment property, deferred tax assets and assets arising from employee benefits are reviewed in accordance with the relevant accounting policies stated. In addition, the carrying amounts of the assets of the Group and the Company are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated to determine the amount of impairment loss. For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. 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 assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of any unutilised previously recognised revaluation surplus for the same asset.

Annual Report 2006 109

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (n) Impairment of Assets (cont’d.) Impairment loss on goodwill is not reversed in a subsequent period. Reversal of an impairment loss for an asset other than goodwill on consolidation, recognised in prior years is recorded if and only if there is a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying value that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the assets in prior years. A reversal of an impairment loss for an asset other than goodwill is recognised in income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. (o) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value represents the estimated selling price in the ordinary course of business, less the estimated cost to completion and the estimated costs to be incurred in marketing, selling and distribution. Costs incurred in bringing each product to its present location and condition are accounted for as follows: Produce stocks

– weighted average ex-estate cost and includes manufacturing and transport charges, where applicable.

Raw materials

– purchase cost on a first-in, first-out basis.

Work-in-progress

– cost of direct materials and labour and overheads, where appropriate, determined on a specific identification basis.

Completed houses

– relevant costs of land, development expenditure, overheads and related interest costs allocated based on specific identification basis.

Finished goods

– cost of direct materials and labour and manufacturing overheads, where appropriate, determined on a first-in first-out basis.

Stores

– weighted average cost.

(p) Construction Contracts Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion of the contract activity at the balance sheet date. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract cannot be reliably estimated, contract costs are recognised as expenses in the period in which they are incurred and contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the total costs incurred on construction contracts plus recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

110 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) (q) Revaluation Reserve A surplus arising from revaluation is credited to revaluation reserve while a deficit is recognised as an expense in the income statement. However, a deficit relating to previous revaluations is charged directly against revaluation reserve to the extent that the decrease does not exceed the amount held in the revaluation reserve for the same asset. Each year an amount equal to the depreciation/amortisation charge for the year on the surplus on revaluation of relevant assets is transferred from revaluation reserve to revenue reserve. Upon the disposal of a revalued asset, the attributable revaluation surplus (net of depreciation/amortisation, where applicable) is transferred from revaluation reserve to revenue reserve. (r)

Provisions for Liabilities Provisions for liabilities are recognised when the Group has a present obligation, legal or constructive, as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost. Provisions for restructuring costs are recognised when the Groupâ&#x20AC;&#x2122;s detailed formal plan for the restructuring has been approved, and the restructuring has either commenced or has been announced publicly. Costs relating to ongoing activities are not provided for.

(s) Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.

Annual Report 2006 111

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (s) Income Tax (cont’d.) Where there is a change in the carrying amount of asset arising from revaluation, the tax effects of the asset revaluation are credited or charged to equity. Where an amount equal to depreciation or amortisation of the revalued asset is transferred from revaluation surplus to revenue reserve, the related deferred tax is also transferred. Upon the disposal of the related asset, the attributable portion of the tax effect arising from revaluation is credited or charged to the income statement.

(t)

Employee Benefits (i)

Short-Term Benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii)

Defined Benefit Plans Malaysia The Group’s plantation subsidiary companies in Malaysia operate an unfunded, defined retirement benefit scheme (“the Scheme”) for its eligible employees. The Group’s obligations under the Scheme are determined based on triennial actuarial valuation where the amount of benefits that employees have earned in return for their service in the current and prior years is estimated. The amount of those benefits is discounted using the Projected Unit Credit Method in order to determine its present value. Actuarial gains and losses are recognised as income or expense over the expected average remaining working lives of the participating employees when the cumulative unrecognised actuarial gains and losses for the Scheme exceed 10% of the higher of the present value of the defined benefit obligation and the fair value of plan assets. Past service cost are recognised immediately to the extent that the benefits are already vested, and otherwise are amortised on a straight-line basis over the average period until the amended benefits become vested. The amount recognised in the balance sheet represents the present value of the defined benefit obligations adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduced by the fair value of plan assets. Any asset resulting from the calculation is limited to the net total of any unrecognised actuarial losses and past service cost, and the present value of any economic benefits in the form of refunds or reductions in future contributions to the plan. Indonesia Effective 1 January 2003, the Group’s subsidiary companies in Indonesia provide for employee benefit liabilities in accordance with the Labour Law No. 13 Year 2003 (“Law No. 13/2003”) which was enacted on 25 March 2003. The arising transitional liability, if higher than the liability that was recognised under the subsidiary companies’ previous policy (Ministry of Manpower No. Kep.150/Men/2000 on - The Settlement of Work Dismissal and Determination of Termination, Appreciation and Compensation Payments in Companies) is being recognised as an expense on a straight-line basis over five years starting 2003.

112 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (t)

Employee Benefits (cont’d.) (iii) Defined Contribution Plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. As required by law, companies in Malaysia make contributions to the Employees Provident Fund (“EPF’’). Such contributions are recognised as an expense in the income statement as incurred. The Group’s subsidiary companies in Indonesia have established defined contribution retirement plans covering substantially all of the qualified permanent employees. The pension plans’ assets are managed by approved pension funds. The retirement plans were approved by the Ministry of Finance of Indonesia in February 1999. Past service costs, which are also being contributed by the subsidiary companies, were computed based on a formula as stated in the Employment Policy already existing before the establishment of the retirement plans. Past service costs are amortised on a systematic basis over the remaining service years of the related employees. (iv) Share-Based Compensation The Second ESOS of the Company, an equity-settled, share-based compensation plan, allows the Group’s employees to acquire ordinary shares of the Company. As the share options granted to the employees by the Company vests immediately, the total fair value of share options granted to employees is recognised immediately on grant date as an employee cost or charged to related companies with a corresponding increase in the share option reserve within equity. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to revenue reserve. The proceeds received net of any directly attributable transaction costs are credited to equity when the options are exercised. (v) Termination Benefits Termination benefits are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits as a liability and an expense when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits is based on the number of employees expected to accept the offer. Benefits falling due more than twelve months after balance sheet date are discounted to present value.

Annual Report 2006 113

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (u) Deferred Income Deferred income comprises the following: (i)

the surplus of sales proceeds over the present value of future receivables arising from the sale of land held for property development, which is deferred and amortised to the income statement over the period of instalment payments at a rate representing a constant return on the balance of capital repayment outstanding; and

(ii)

net time share income, which is deferred and amortised to the income statement on a straight-line basis over the term of the time share agreement.

(v) Foreign Currencies (i)

Functional and Presentation Currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency’’). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(ii)

Foreign Currency Transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, where that monetary item is denominated in either the functional currency of the reporting entity or the foreign operation, are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, where that monetary item is denominated in a currency other than the functional currency of either the reporting entity or the foreign operations, are recognised in income statement for the period. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operation, regardless of the currency of the monetary item, are recognised in income statement in the Company’s financial statements or the individual financial statements of the foreign operation, as appropriate.

114 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d.) (v) Foreign Currencies (cont’d.) (iii) Foreign Operations The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated into RM as follows: – Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheet date; – Income and expenses for each income statement are translated at each monthly average exchange rate, which approximate the exchange rates at the dates of the transactions; and – All resulting exchange differences are taken to the foreign currency translation reserve within equity. Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date. Goodwill and fair value adjustments which arose on the acquisition of foreign subsidiaries before 1 January 2006 are deemed to be assets and liabilities of the parent company and are recorded in RM at the rates prevailing at the date of acquisition. (w) Revenue Recognition Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group/Company and the amount of the revenue can be measured reliably. The following specific recognition criteria must also be met before revenue is recognised: (i)

Sale of Goods/Services Revenue from the sale of goods is recognised when significant risks and rewards of ownership of goods have been transferred to the buyer. Revenue for services rendered is recognised upon performance of services. Rental income is recognised on an accrual basis.

(ii)

Sale of Properties Revenue from sale of properties is recognised based on the “stage of completion” method as described in Note 3(i).

(iii) Construction Contracts Revenue from work done on construction contracts is recognised based on the “stage of completion” method as described in Note 3(p). (iv) Toll Collection Toll revenue is accounted for as and when toll is chargeable for the usage of the expressway. (v) Interest Income Interest income is recognised as interest accrues (taking into account the effective yield on the asset) unless collectibility is in doubt. (vi) Investment Income Investment income is accounted for when the right to receive is established and no significant uncertainty exists as regards receipt. Annual Report 2006 115

3. SIGNIFICANT ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) (x) Financial Instruments Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, and gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously. (i)

Cash and Cash Equivalents For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposit at call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts.

(ii)

Other Non-Current Investments Non-current investments, other than investments in subsidiaries and associated companies, and investment in a jointly controlled entity are stated at cost less impairment losses. On disposal of an investment, the difference between the net disposal proceeds and its net carrying amount is recognised in the income statement.

(iii) Marketable Securities Marketable securities comprise corporate bonds, quoted shares and quoted warrants/loan stocks. Marketable securities held as current assets are stated at the lower of cost and market value determined on an aggregate basis. Cost is the purchase price of the securities while market value is determined based on quoted market values. Any reduction to market value or any reversal of such reduction is recognised in the income statement. Gains and losses arising from the disposal of these investments are dealt with through the income statement. (iv) Trade and Other Receivables Trade and other receivables are recognised and stated at original invoiced amounts and carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date. (v) Trade and Other Payables Trade and other payables are stated at cost which approximates the fair value of the consideration to be paid in the future for goods and services rendered.

116 Kumpulan Guthrie Berhad

3. SIGNIFICANT ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) (x) Financial Instruments (contâ&#x20AC;&#x2122;d.) (vi) Interest-Bearing Borrowings Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs. After initial recognition, interest-bearing bank loans are subsequently measured at amortised cost using the effective interest method. Borrowing costs directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to the income statement as an expense in the period in which they are incurred. (vii) Islamic Lease SUKUK Islamic Lease SUKUK issued by the Company are stated at net proceeds received on issue. SUKUK issuance expenses which represent the difference between the net proceeds and the total amount of the payment of the SUKUK are allocated to periods over the terms of the SUKUK at a constant rate on the carrying amounts, and charged to the income statement. (viii) Equity Instruments Ordinary shares are classified as equity. Dividends on ordinary shares will be accounted for as liabilities only when the obligation to pay is established. The transaction costs of an equity transaction, other than in the context of a business combination, are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. Costs of issuing equity securities in connection with a business combination are included in the cost of acquisition. When the issued share capital of the Company is repurchased and is not cancelled, the consideration paid, including any attributable transaction costs are classified as treasury shares and presented as a deduction from equity. No gain or loss is recognised in the income statement on the sale, re-issuance or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity. (ix) Derivative Financial Instruments The Group uses derivative financial instruments in the form of forward foreign exchange contracts and interest rate swap contracts to hedge its exposure to foreign exchange arising from operating, financing and investing activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are not recognised in the financial statements.

Annual Report 2006 117

3. SIGNIFICANT ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) (x) Financial Instruments (contâ&#x20AC;&#x2122;d.) (ix) Derivative Financial Instruments (contâ&#x20AC;&#x2122;d.) Forward Foreign Exchange Contracts The underlying foreign currency assets or liabilities are translated at their respective hedged exchange rates and all exchange gains or losses are recognised as income or expense in the income statement in the same period as the exchange differences on the underlying hedged items. Exchange gains and losses arising on contracts entered into as hedges of anticipated future transactions are deferred until the date of such transaction, at which time they are included in the measurement of such transactions. Interest Rate Swap Contracts Net differentials in interest receipts and payments arising from interest rate swap contracts are recognised as interest income or expense over the period of the contract. (y) Non-Current Assets (or Disposal Groups) Held for Sale and Discontinued Operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary. Immediately before classification as held for sale, the measurement of the non-current assets (or all the assets and liabilities in a disposal group) is brought up-to-date in accordance with applicable FRSs. Then, on initial classification as held for sale, non-current assets or disposal groups (other that investment properties, deferred tax assets, employee benefits assets, financial assets and inventories) are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in income statement. A component of the Group is classified as a discontinued operation when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations, is part of a single co-ordinated major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.

118 Kumpulan Guthrie Berhad

4. CHANGES IN ACCOUNTING POLICIES On 1 January 2006, the Group and the Company adopted the following new and revised FRS mandatory for financial periods beginning on or after 1 January 2006: FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS FRS

2: Share-based Payment 3: Business Combinations 5: Non-Current Assets Held for Sale and Discontinued Operations 101: Presentation of Financial Statements 102: Inventories 108: Accounting Policies, Changes in Accounting Estimates and Errors 110: Events After the Balance Sheet Date 116: Property, Plant and Equipment 121: The Effects of Changes in Foreign Exchange Rates 127: Consolidated and Separate Financial Statements 128: Investments in Associates 131: Interests in Joint Ventures 132: Financial Instruments: Disclosure and Presentation 133: Earnings Per Share 136: Impairment of Assets 138: Intangible Assets 140: Investment Property

In addition to the above, the Group has early adopted the following new and revised FRS for the financial period beginning 1 January 2006: FRS 117: Leases FRS 124: Related Party Disclosures The Group has not early adopted the following FRS and amendment that are mandatory for financial periods beginning on or after 1 January 2007 as they are not applicable to the Group’s operations: FRS 6: Exploration for and Evaluation of Mineral Resources Amendment to FRS 1192004 : Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures The Group has also not early adopted the “Amendments to FRS 121: The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operation” that are mandatory for financial periods beginning on or after 1 July 2007. This amendment requires the exchange differences arising from monetary items that forms part of its net investment in a foreign operation to be recognised in equity in the consolidated financial statements and should not be dependent on the currency of the monetary item. Prior to this amendment, exchange differences arising on a monetary item that forms part of the Group’s net investment in a foreign operation are recognised in equity in the consolidated financial statements only when the monetary item is denominated in a currency other than the functional currency of either the reporting entity or the foreign operation. The Group will early adopt this amendment for the financial period beginning 1 January 2007.

Annual Report 2006 119

4. CHANGES IN ACCOUNTING POLICIES (contâ&#x20AC;&#x2122;d.) The adoption of the above FRS does not have financial impact on the Group other than the FRS listed below. The principal effects of the changes in accounting policies resulting from the adoption of FRS are as follows: (a) FRS 2: Share-based Payment The Company operates an equity-settled, share-based compensation plan for eligible employees of the Group, the Second Employeesâ&#x20AC;&#x2122; Share Option Scheme (Second ESOS). Prior to 1 January 2006, no compensation expense was recognised in the income statement for share options granted. The Group and the Company recognised an increase in share capital and share premium when the options were exercised. Upon the adoption of FRS 2, as the options vest on grant date, the total fair value of share options granted to eligible employees of the Group is recognised immediately in the income statement as employee costs with a corresponding increase in the share option reserve within equity. For the year ended 31 December 2006, the impact to the Group and to the Company arising from the adoption of this standard is a decrease in profit for the year of RM3,488,000 and RM1,245,000 respectively as disclosed in Notes 4(i)(i) and 4(i)(ii). (b) FRS 3: Business Combinations, FRS 136: Impairment of Assets and FRS 138: Intangible Assets The new FRS 3 has resulted in consequential amendments to two other accounting standards, FRS 136 and FRS 138. Prior to 1 January 2006, goodwill was amortised on a straight-line basis over its estimated useful life of 20 years. The adoption of FRS 3 and the consequential changes to FRS 136 and FRS 138 have resulted in the Group ceasing annual amortisation of goodwill. Goodwill is carried at cost less accumulated impairment losses and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired. Any impairment loss is recognised in the income statement and subsequent reversal is not allowed. In accordance with the transitional provisions of FRS 3, the Group has applied the revised accounting policy for goodwill prospectively from 1 January 2006. The transitional provisions of FRS 3 also require the Group to eliminate the carrying amount of the accumulated amortisation at 1 January 2006 amounting to RM85,887,000 against the carrying amount of goodwill. The net carrying amount of RM261,510,000 ceased to be amortised thereafter. The effect of this is a reduction in amortisation charge of RM17,163,000 for the year ended 31 December 2006. Consequent to the adoption of FRS 136, impairment losses of RM14,688,000 and RM10,667,000 on goodwill and carrying amount of assets respectively were charged to the income statement for the year ended 31 December 2006, which are set out in Notes 4(i)(i) and 4(i)(ii). (c) FRS 5: Non-Current Assets Held for Sale and Discontinued Operations Prior to 1 January 2006, non-current assets (or disposal groups) held for sale were neither classified nor presented as current assets or liabilities. There were no differences in the measurement of non-current assets (or disposal groups) held for sale and those for continuing use. Upon the adoption of FRS 5, non-current assets (or disposal groups) held for sale are classified as current assets (and current liabilities, in the case of non-current liabilities included within disposal groups) and are stated at the lower of carrying amount and fair value less costs to sell.

120 Kumpulan Guthrie Berhad

4. CHANGES IN ACCOUNTING POLICIES (cont’d.) (c) FRS 5: Non-Current Assets Held for Sale and Discontinued Operations (cont’d.) Prior to 1 January 2006, the Group would have recognised a discontinued operation at the earlier of the date the Group enters into a binding sale agreement and the date the Board of Directors have approved and announced a formal disposal plan. FRS 5 requires a component of an entity to be classified as a discontinued operation when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations, is part of a single co-ordinated major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. The Group has applied FRS 5 prospectively in accordance with the transitional provisions. However, as required by FRS 5, certain comparatives have been re-presented due to the current financial year’s discontinued operations. The effects on the balance sheets and income statements of the Group and of the Company are set out in Notes 4(i)(i) and 4(i)(ii). (d) FRS 101: Presentation of Financial Statements Prior to 1 January 2006, minority interests at the balance sheet date were presented in the consolidated balance sheet separately from liabilities and equity. Upon the adoption of the revised FRS 101, minority interests are now presented within total equity. In the consolidated income statement, minority interests are presented as an allocation of the total profit or loss for the year. A similar requirement is also applicable to the statement of changes in equity. The revised FRS 101 also requires disclosure, on the face of the statement of changes in equity, total recognised income and expenses for the year, showing separately the amounts attributable to equity holders of the Company and to minority interests. Prior to 1 January 2006, the Group’s share of taxation of associates and jointly controlled entity accounted for using the equity method was included as part of the Group’s income tax expense in the consolidated income statement. Upon the adoption of the revised FRS 101, the share of taxation of associates and jointly controlled entity accounted for using the equity method are now included in the respective share of profit or loss reported in the consolidated income statement before arriving at the Group’s profit or loss before tax. These changes in presentation have been applied retrospectively and as disclosed in Note 5, certain comparatives have been restated. These changes in presentation have no impact on the financial statements of the Group and of the Company. (e) FRS 116: Property, Plant and Equipment Prior to 1 January 2006, plantation development expenditure was included as part of property, plant and equipment. Upon the adoption of the revised FRS 116, plantation development expenditure is now presented in the consolidated balance sheet separately from property, plant and equipment. The changes have been applied retrospectively and comparatives have been restated as disclosed in Note 5. There were no effects on the income statements of the Group and of the Company for the year ended 31 December 2006. Consequent to the adoption of FRS 116, the Group has reviewed the residual value and the remaining useful life of property, plant and equipment and had revised the estimated useful lives of certain buildings from 25 years to a maximum of 50 years. The revisions were accounted for prospectively as a change in accounting estimates resulting in a reduction to the depreciation charge for the Group for the current financial year amounting to RM1,822,000. The effects on the income statement of the Group are set out in Note 4(i)(ii).

Annual Report 2006 121

4. CHANGES IN ACCOUNTING POLICIES (cont’d.) (f)

FRS 117: Leases Prior to 1 January 2006, leasehold land held for own use was classified as property, plant and equipment and was stated at valuation less accumulated amortisation and impairment losses. The leasehold land was last revalued in 2003. The adoption of the revised FRS 117 has resulted in a change in the accounting policy relating to the reclassification of leases of land. Leasehold land for own use is now classified as operating lease and the upfront payments representing prepaid lease payments are amortised on a straight line basis over the lease term. The Group has applied the change in accounting policy in respect of leasehold land in accordance with the transitional provisions of FRS 117. At 1 January 2006, the unamortised amount of leasehold land is retained as the surrogate cost of prepaid lease payments as allowed by the transitional provisions. The reclassification of leasehold land as prepaid lease payments has been accounted for retrospectively and certain comparatives have been restated as disclosed in Notes 4(i)(i) and 5. There were no effects on the income statements of the Group and the Company for the year ended 31 December 2006.

(g) FRS 127: Consolidated and Separate Financial Statements Prior to 1 January 2006, investments in subsidiary companies were stated at cost and at directors’ valuation, less any impairment losses. The investments were last revalued in 1982. The adoption of the revised FRS 127 has resulted in a change in accounting policy relating to investments previously carried at directors’ valuation. The Company has applied the change in accounting policy retrospectively and these investments are henceforth restated at cost. Certain comparatives have been restated. There were no effects to the income statement of the Company. The effects on the balance sheet of the Company are disclosed in Note 5. There were no effects to the financial statements of the Group arising from the adoption of FRS 127. (h) FRS 140: Investment Property Prior to 1 January 2006, investment property were included within property, plant and equipment. Upon the adoption of FRS 140, investment property are now classified as a separate category on the balance sheet and stated at cost less accumulated depreciation. The reclassification of land and building as investment property has been accounted for retrospectively and certain comparatives have been restated as disclosed in Note 5. This change in accounting policy has no impact on the income statements of the Group and of the Company for the year ended 31 December 2006.

122 Kumpulan Guthrie Berhad

4. CHANGES IN ACCOUNTING POLICIES (cont’d.) (i)

Summary of Effects of Adopting New and Revised FRS on the Current Year’s Financial Statements The following tables provide estimates of the extent to which each of the line items in the balance sheets and income statements for the year ended 31 December 2006 is higher or lower than it would have been had the previous policies been applied in the current year. (i)

Effects on balance sheets <----------------------------Increase/(Decrease)--------------------------------> FRS 2 FRS 3 FRS 5 FRS 116 FRS 117 FRS 136 Note 4(a) Note 4(b) Note 4(c) Note 4(e) Note 4(f) Note 4(b) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 GROUP Property, plant and equipment Plantation development expenditure Prepaid lease payments Goodwill on consolidation Concession asset Deferred tax assets Inventories Trade receivables Other receivables Deposits, bank balances and cash Assets of disposal groups classified as held for sale Trade payables Other payables Liabilities directly associated with assets of disposal groups classified as held for sale Share option reserve

Total RM’000

–

(73,871)

(2,434,846)

(342,357)

(5,357)

(2,856,431)

– – – – – – – –

– – 17,163 – – – – –

– – – (582,366) (2,589) (9,664) (6,990) (548)

2,434,846 – – – – – – –

– 342,357 – – – – – –

(4,923) (387) (14,688) – – – – –

2,429,923 341,970 2,475 (582,366) (2,589) (9,664) (6,990) (548)

–

(2,872)

–

(2,872)

– – –

678,900 (2,780) (6,326)

– – –

678,900 (2,780) (6,326)

– 3,488

– –

9,106 –

– –

9,106 3,488

Annual Report 2006 123

4. CHANGES IN ACCOUNTING POLICIES (cont’d.) (i)

Summary of Effects of Adopting New and Revised FRS on the Current Year’s Financial Statements (cont’d.) (i)

Effects on balance sheets (cont’d.)

<----------------------------Increase/(Decrease)--------------------------------> FRS 2 FRS 3 FRS 5 FRS 116 FRS 117 FRS 136 Note 4(a) Note 4(b) Note 4(c) Note 4(e) Note 4(f) Note 4(b) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 COMPANY Property, plant and equipment Investment in subsidiary companies Prepaid lease payments Assets of disposal groups classified as held for sale Amounts due to subsidiary companies Liabilities directly associated with assets of disposal groups classified as held for sale Share option reserve

124 Kumpulan Guthrie Berhad

Total RM’000

–

(615)

–

(615)

– –

(104,800) –

– –

– 615

– –

(104,800) 615

–

104,800

–

104,800

–

(22,523)

–

(22,523)

– 3,488

– –

22,523 –

– –

22,523 3,488

4. CHANGES IN ACCOUNTING POLICIES (cont’d.) (i)

Summary of Effects of Adopting New and Revised FRS on the Current Year’s Financial Statements (cont’d.) (ii)

Effects on income statements

<----------------------------Increase/(Decrease)--------------------------------> FRS 2 FRS 3 FRS 5 FRS 116 FRS 136 FRS 136 Note 4(a) Note 4(b) Note 4(c) Note 4(e) Note 4(b) Note 4(b) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 GROUP Revenue Cost of sales Other income Distribution costs Administration expenses Other expenses Operating profit Profit before taxation Taxation Profit for the year from continuing operations Loss for the year from discontinued operations Profit for the year Earnings per share (sen): Basic Diluted COMPANY Administration expenses Other expenses Operating profit Loss for the year from discontinued operations Profit for the year

Total RM’000

– 1,139 – – 2,349 – (3,488) (3,488) –

– – – – – (17,163) 17,163 17,163 –

(106,860) (77,672) (660) (9,152) (5,759) (30,434) 15,497 15,497 2,589

– – – – – (1,822) 1,822 1,822 –

– – – – – 10,667 (10,667) (10,667) –

– – – – – 14,688 (14,688) (14,688) –

(106,860) (76,533) (660) (9,152) (3,410) (24,064) 5,639 5,639 2,589

(3,488)

17,163

12,908

1,822

(10,667)

(14,688)

3,050

– (3,488)

– 17,163

(12,908) –

– 1,822

– (10,667)

– (14,688)

(12,908) (9,858)

(0.34) (0.34)

1.70 1.69

– –

0.18 0.18

(1.05) (1.05)

(1.45) (1.45)

(0.97) (0.97)

1,245 – (1,245)

– – –

– 24,575 24,575

– – –

1,245 24,575 23,330

– (1,245)

– –

(24,575) –

– –

(24,575) (1,245)

Annual Report 2006 125

5. COMPARATIVES The following comparative amounts have been restated as a result of adopting the new and revised FRSs: (a) Balance Sheets Increase/(Decrease) Previously Stated RM’000

FRS 116 RM’000

FRS 117 RM’000

FRS 127 RM’000

FRS 140 RM’000

Restated RM’000

5,583,147 – –

(2,679,207) 2,679,207 –

(356,132) 356,132

– – –

2,547,808 2,679,207 356,132

40,251 – –

– – –

(675) 675 –

– – –

(21,762) – 21,762

17,814 675 21,762

2,987,639 165,645 6,951

– – –

(162,050) (155,490) (6,560)

– – –

2,825,589 10,155 391

5,363,625 – –

(2,480,611) 2,480,611 –

(347,202) – 347,202

– – –

2,535,812 2,480,611 347,202

40,676 – –

– – –

(645) 645 –

– – –

(21,524) – 21,524

18,507 645 21,524

2,985,635 – 165,626 6,214

– – – –

(162,050) 346 (155,490) (6,214)

– – – –

2,823,585 346 10,136 –

At 1 January 2005 GROUP Property, plant and equipment Plantation development expenditure Prepaid lease payments COMPANY Property, plant and equipment Prepaid lease payments Investment property Investments in subsidiary companies Revaluation reserve Deferred tax liabilities At 31 December 2005 GROUP Property, plant and equipment Plantation development expenditure Prepaid lease payments COMPANY Property, plant and equipment Prepaid lease payments Investment property Investments in subsidiary companies Deferred tax assets Revaluation reserve Deferred tax liabilities

126 Kumpulan Guthrie Berhad

5. COMPARATIVES (cont’d.) (b) Income Statements Increase/(Decrease) Previously Stated RM’000

FRS 5 RM’000

FRS 101 RM’000

Restated RM’000

2,132,274 1,374,941 48,674 31,295 129,224 214,232 54,108 4,243 157,944 30,198 1,601 859 113,706

(151,505) (114,471) 1,137 (24,214) (8,517) (15,973) – (4,243) (597) (110) – – (3,166)

– – 38,573 – – 63,156 (54,108) – – (30,088) (1,601) 16 16

1,980,769 1,260,470 88,384 7,081 120,707 261,415 – – 157,347 – – 875 110,556

15,410

(5,357)

–

10,053

53,259 1,208 34,954 1,128 1,817 38,225 227,559

– – – – (1,817) – –

227,093 48,869 9,050 (1,128) – (38,225) (227,559)

280,352 50,077 44,004 – – – –

–

1,817

–

1,817

For the year ended 31 December 2005 GROUP Continuing Operations Revenue Cost of sales Other income Distribution costs Administration expenses Other expenses Net unrealised exchange loss Gain on disposal of subsidiary companies Finance expense Finance income Investment income Share of results after tax of associated companies Taxation Discontinued Operations Loss for the year from discontinued operations COMPANY Continuing Operations Revenue Other income Other expenses Net unrealised exchange gain/(loss) Loss on disposal of subsidiary companies Finance income Investment income Discontinued Operations Loss for the year from discontinued operations

Annual Report 2006 127

6. ACCOUNTING ESTIMATES (a) Significant Accounting Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i)

Impairment of goodwill During the financial year, the Group had recognised impairment losses in respect of goodwill. The Group carries out impairment tests on goodwill annually. This requires an estimation of the value-in-use of the cash generating unit (“CGU”) to which goodwill is allocated. Estimating the value-in-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to select a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill of the Group as at 31 December 2006 were RM254,558,000 (2005: RM261,510,000). Further details of the impairment losses recognised are disclosed in Note 24.

(ii)

Amortisation of Concession Asset The costs of the Concession Asset which represent the cost to design, construct, manage and maintain the Guthrie Corridor Expressway (“Expressway”) is amortised to income statement over the concession period based on the following formula: Cumulative Toll Revenue to date Projected Total Toll Revenue for the Concession Period

Cumulative Actual Expressway Development Expenditure

The Concession Period is defined as a period of thirty three (33) years, expiring on 30 June 2036. The projected total toll revenue for the Concession Period is based on the best estimate total traffic volumes projected by independent professional firm of traffic consultants in the projection study commissioned by Guthrie Corridor Expressway Sdn Bhd, taking into account the agreed toll rate stipulated in the Concession Agreement. The traffic consultants have derived future traffic volume based on the following information and assumptions: – Anticipated level of development that would occur during the concession period based on published information on large-scale land use and the transportation development in the Klang Valley and Selangor that were collated from the respective District Structure Plans and other relevant studies. – Future population and economic growth based on government published economic reports, review of Eighth Malaysian Plan, Third Outline Perspective Plan, Population Census 2000 and previous transportation studies. – Socio-economic and demographic trends in Klang Valley to establish new forecast for variables such as growth in population, gross domestic product, employment, car ownership and value of time. – Qualitative judgments to determine the targeted progress of the land use development and their potential impact on the road network in the Klang Valley. The carrying amount of the Concession Asset as at 31 December 2006 were RM582,366,000 (2005: RM585,742,000).

128 Kumpulan Guthrie Berhad

6. ACCOUNTING ESTIMATES (cont’d.) (a) Significant Accounting Estimates (cont’d.) (iii) Property development The Group recognises property development revenue and expenses in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs. Significant judgments are required in determining the stage of completion, the extent of the property development costs incurred, the estimated total property development revenue and costs, as well as the recoverability of the development projects. In making the judgments, the Group evaluates based on past experience and by relying on the work of specialists. (b) Changes in Accounting Estimates Property, Plant and Equipment The revised FRS 116: Property, Plant and Equipment requires the review of the residual value and remaining useful life of an item of property, plant and equipment at least at each financial year end. The Group had revised the estimated useful lives of certain buildings from 25 years to a maximum of 50 years with effect from 1 January 2006. The revisions were accounted for prospectively as a change in accounting estimates and as a result, the depreciation charges for the Group for the current financial year have been reduced by RM1,822,000.

7. GROUP STRUCTURE The Company’s holding company is Permodalan Nasional Berhad, a company incorporated in Malaysia. The Company’s ultimate holding company is Yayasan Pelaburan Bumiputra, a company incorporated in Malaysia, limited by guarantee. The subsidiary companies are as follows:

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

Principal activities

PLANTATION Kumpulan Jerai Sdn. Bhd.

Malaysia

100

RM51,200,000

Kumpulan Kamuning Sdn. Bhd.

Malaysia

100

RM30,383,002

Kumpulan Linggi Sdn. Bhd.

Malaysia

100

RM35,443,002

Guthrie Ropel Berhad

Malaysia

RM127,036,071

Kumpulan Temiang Sdn. Bhd.

Malaysia

RM29,652,002

) ) ) ) ) ) ) ) )

Production and/or processing of palm oil and palm kernel

Annual Report 2006 129

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

Principal activities

PLANTATION (cont’d.) * Highlands & Lowlands Berhad

Malaysia

RM302,167,829

) ) ) ) )

* Kumpulan Sua Betong Sdn. Bhd.

Malaysia

RM36,831,002

Production and/or processing of palm oil and palm kernel

* Kumpulan Tebong Sdn. Bhd.

Malaysia

RM32,678,002

* Syarikat Jeleta Bumi Sdn. Bhd.

Malaysia

RM9,000,000

) ) ) ) )

Production and processing of palm oil and palm kernel and property development

** PT Ladangrumpun Suburabadi

Indonesia

100

Rp29,435,000,000

100

Rp14,965,000,000

Indonesia

100

Rp28,401,000,000

** PT Kridatama Lancar

Indonesia

100

Rp28,192,000,000

** PT Sajang Heulang

Indonesia

100

Rp28,153,000,000

** PT Aneka Intipersada

Indonesia

100

Rp26,000,000,000

** PT Langgeng Muaramakmur

Indonesia

100

Rp35,901,000,000

** PT Bhumireksa Nusasejati

Indonesia

100

Rp41,366,000,000

** PT Swadaya Andika

Indonesia

100

Rp28,026,000,000

** PT Bina Sains Cemerlang

Indonesia

100

Rp55,263,000,000

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

** PT Perkasa Subur Sakti

Indonesia

** PT Teguh Sempurna

130 Kumpulan Guthrie Berhad

Production and/or processing of palm oil and palm kernel

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

Principal activities

PLANTATION (cont’d.) ** PT Lahan Tani Sakti

Indonesia

100

Rp32,981,000,000

) )

Oil palm and rubber cultivation

** PT Bahari Gembira Ria

Indonesia

Rp15,000,000,000

** PT Guthrie Pecconina Indonesia

Indonesia

USD20,000,000

** PT Paripurna Swakarsa

Indonesia

Rp68,897,000,000

** PT Bersama Sejahtera Sakti

Indonesia

Rp74,453,000,000

** PT Tamaco Graha Krida

Indonesia

Rp17,400,000,000

** PT Laguna Mandiri

Indonesia

Rp47,727,000,000

** PT Perusahaan Perkebunan Industri dan Niaga Sri Kuala

Indonesia

Rp500,000,000

Production and/or processing of palm oil and palm kernel

** PT Padang Palma Permai

Indonesia

Rp16,307,000,000

** PT Tunggal Mitra Plantations

Indonesia

Rp23,750,000,000

** PT Indotruba Tengah

Indonesia

Rp12,400,000,000

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Malaysia

100

RM200

) ) )

Palm oil storage installation

Malaysia

100

RM2,000,000

) ) ) ) ) ) ) )

Provision of plantation consultancy services and production and sale of oil palm seeds, seedlings and rat baits

Guthrie Export Sdn. Bhd.

** Guthrie Plantation & Agricultural Services Sdn. Bhd.

Annual Report 2006 131

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

Principal activities

PLANTATION (cont’d.) Chemara Laboratories Sdn. Bhd.

Malaysia

100

RM2

) ) ) )

Provision of laboratory and technical services

* Guthrie Biotech Laboratory Sdn. Bhd.

Malaysia

100

RM200,000

) ) )

Research and cloning of oil palm for sale

* HRU Sdn. Bhd.

Malaysia

RM205,000

) ) ) )

Production and sale of oil palm seeds, seedlings and rat baits

Guthrie Harta (Damansara) Sdn. Bhd.

Malaysia

100

RM2,000,000

) )

Property investment

Harvard Jerai Development Sdn. Bhd.

Malaysia

100

RM5,000,000

) ) ) )

Property development

) ) ) ) ) ) ) )

Property development and investment holding

PROPERTY

* Guthrie Chemara Sdn. Bhd.

Malaysia

100

RM2

Malaysia

RM243,334,888

* Syarikat Perumahan Guthrie Sdn. Bhd.

Malaysia

RM37,423,985

* Syarikat Pembangunan Hartanah Guthrie Sdn. Bhd.

Malaysia

RM448,560,002

Guthrie Property Development Holding Berhad

132 Kumpulan Guthrie Berhad

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

Principal activities

PROPERTY (cont’d.) Guthrie Lukut Development Sdn. Bhd.

Malaysia

RM9,450,002

) ) ) ) ) ) ) ) )

Accord Shipping & Forwarding Sdn. Bhd.

Malaysia

RM27,725,000

* Augsburg (M) Sdn. Bhd.

Malaysia

RM210,360,002

* Paralimni Sdn. Bhd.

Malaysia

RM2

Guthrie Property Management Sdn. Bhd.

Malaysia

RM22,836,589

) ) )

Real estate and property management

Guthrie Ropel Development Sdn. Bhd.

Malaysia

RM2

* Vicworld (M) Sdn. Bhd.

Malaysia

RM2

) ) ) )

Property development and cultivation of oil palm

* Malaysia Land Development Company Berhad

Malaysia

RM9,993,470

) )

Property investment

* Genting View Resort Development Sdn. Bhd.

Malaysia

RM1,000,000

) )

Property development

Annual Report 2006 133

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

Principal activities

MANUFACTURING Guthrie MDF Sdn. Bhd.

Malaysia

100

RM53,000,000

) ) ) )

Manufacture of mediumdensity fibreboard

** PT Guthrie Abdinusa Industri

Indonesia

USD500,000

) )

Construction of palm oil mills

# Integrated Brickworks Sdn. Bhd.

Malaysia

–

100

RM14,450,000

) ) ) ) )

Manufacture and trading of concrete blocks and bricks and ready-mix concrete

The Eden Bungalow Association Sdn. Bhd.

Malaysia

100

RM273,470

The Whittington Hill Bungalow Association

Malaysia

100

RM133,050

) ) ) ) )

Operation of holiday bungalows

Guthrie Landscaping Sdn. Bhd.

Malaysia

100

RM2,000,000

) ) ) ) ) )

Horticultural supplies, landscape and design consultants and civil works

Guthrie Corridor Expressway Sdn. Bhd.

Malaysia

100

RM5,000,000

) )

Road concession operation

Harvard Hotel (Jerai) Sdn. Bhd.

Malaysia

100

RM7,500,000

)

Hotel operation

* Guthrie Technologies Sdn. Bhd.

Malaysia

100

RM7,466,667

) )

Provision of computer services

OTHER ACTIVITIES

134 Kumpulan Guthrie Berhad

7. GROUP STRUCTURE (cont’d.)

Name of company

Group’s effective interest 2006 2005 % %

Country of incorporation

Issued and paid-up capital at 31.12.2006

Principal activities

OTHER ACTIVITIES (cont’d.) Harvard Golf Resort (Jerai) Bhd.

Malaysia

RM5,210,100

) )

Operation of golf club

* Sanguine (Malaysia) Sdn. Bhd.

Malaysia

RM2

) )

Investment dealing

* Genting View Resort Management Sdn. Bhd.

Malaysia

RM1,000,000

) )

Resort management

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

INVESTMENT HOLDING Kumpulan Jelei Sdn. Bhd.

Malaysia

100

RM31,036,072

Right Class Sdn. Bhd.

Malaysia

100

RM12,000,000

Guthrie International Investments (L) Limited

Malaysia

100

USD1

* Guthrie Siam Sdn. Bhd.

Malaysia

100

RM2

* Guthrie Tapis Sdn. Bhd.

Malaysia

100

RM2

* Guthrie Wood Industry Sdn. Bhd.

Malaysia

100

RM18,000,000

* Laverton Holdings Limited

Mauritius

100

USD2

* Guthrie Overseas Limited

U.K.

100

GBP13,200,000

* Guthrie Symington Overseas Investments Inc.

U.S.A.

100

USD2,000,000

* Guthrie Symington Investments (USA) Inc.

U.S.A.

100

USD6,000,000

* Mulligan International BV

Netherlands

100

Euro18,000

** PT Minamas Gemilang

Indonesia

100

Rp391,088,000,000

Annual Report 2006 135

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

INVESTMENT HOLDING (cont’d.) ** PT Anugerah Sumbermakmur

Indonesia

100

Rp337,774,000,000

** PT Muda Perkasa Sakti

Indonesia

100

Rp100,000,000

** PT Asricipta Indah

Indonesia

Rp120,000,000

** PT Kartika Inti Perkasa

Indonesia

Rp23,750,000,000

** PT Sritijaya Abaditama

Indonesia

Rp120,000,000

Haron Estate Development Sdn. Bhd.

Malaysia

100

RM600,000

* Guthrie Dimensional Stones Sdn. Bhd.

Malaysia

100

RM25,000,000

* Guthrie Bina Sdn. Bhd.

Malaysia

100

RM2

* Kamuning Marble Sdn. Bhd.

Malaysia

100

RM2

* Guthrie Wood Products Sdn. Bhd.

Malaysia

100

RM30,000,000

Guthrie Industries Malaysia Sdn. Bhd.

Malaysia

100

RM5,000,100

Guthrie Furniture Sdn. Bhd.

Malaysia

100

RM2,000,000

Guthrie Rubber Processing Sdn. Bhd.

Malaysia

RM5,747,170

Ladang Cenas Sdn. Bhd.

Malaysia

RM7,512,000

* Sepang Nilai Estate Sdn. Bhd.

Malaysia

RM10,000,000

* Pekan Plantations Sdn. Bhd.

Malaysia

RM9,400,000

* GVR Construction Sdn. Bhd.

Malaysia

RM500,000

* Guthrie Plantations Liberia Inc.

Liberia

100

L$4,649,048

* Guthrie Symington Limited

U.K.

100

GBP8,350,000

* Guthrie Furniture Products Limited

U.K.

100

GBP100,000

INACTIVE COMPANIES

136 Kumpulan Guthrie Berhad

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

COMPANIES UNDER MEMBERS’ VOLUNTARY LIQUIDATION Guthrie Land Sdn. Bhd.

Malaysia

–

100

RM2,200,000

Guthrie Livestock Corporation Sdn. Bhd.

Malaysia

–

100

RM1,000,000

Guthrie Medicare Products (Holdings) Sdn. Bhd.

Malaysia

–

100

RM5,500,000

* Guthrie Industries (Indonesia) Sdn. Bhd.

Malaysia

–

100

RM2

* Guthrie Pharmaceuticals Sdn. Bhd.

Malaysia

–

100

RM2

* Guthrie KD Sdn. Bhd.

Malaysia

–

100

RM3,000,000

* Guthrie Training Centre Sdn. Bhd.

Malaysia

–

100

RM2

* Guthrie Polymer Sdn. Bhd.

Malaysia

–

100

RM2

* Guthrie Solutions Sdn. Bhd.

Malaysia

–

100

RM100,000

Guthrie Palm Products Sdn. Bhd.

Malaysia

–

RM9,996

Guthrie Assets Management Sdn. Bhd.

Malaysia

–

RM2,100,000

Guthrie Distributors Sdn. Bhd.

Malaysia

–

RM500,000

Hock Guan Seng Plantations Sdn. Bhd.

Malaysia

–

RM1,150,000

* Syarikat Yew Lian Plantations Sendirian Berhad

Malaysia

–

RM620,008

* K & K Plantations Sdn. Bhd.

Malaysia

–

RM440,000

* Hatawa Plantation Sdn. Bhd.

Malaysia

–

RM8,875,646

* Highlands Estates Sdn. Bhd.

Malaysia

–

RM7

* Highlands Assets Management Sdn. Bhd.

Malaysia

–

RM1,000,002

Annual Report 2006 137

7. GROUP STRUCTURE (cont’d.)

Name of company

Country of incorporation

Group’s effective interest 2006 2005 % %

Issued and paid-up capital at 31.12.2006

COMPANIES STRUCK OFF (@) Layang Layang Golf & Country Club Sdn. Bhd.

Malaysia

–

100

RM2

Harvard Country Resorts Sdn. Bhd.

Malaysia

–

100

RM2

Ampar Tenang Development Sdn. Bhd.

Malaysia

–

100

RM2

* Guthrie Nominees Sdn. Bhd.

Malaysia

–

100

RM2

* Guthrie Taylor Woodrow Sdn. Bhd

Malaysia

–

100

RM2

* Medang Mekar Sdn. Bhd.

Malaysia

–

RM3

* Beringin Permai Sdn. Bhd.

Malaysia

–

RM2

* Damar Cahaya Sdn. Bhd.

Malaysia

–

RM2

* Keruntum Murni Sdn. Bhd.

Malaysia

–

RM2

* Lagong Indah Sdn. Bhd.

Malaysia

–

RM2

* Serentang Segar Sdn. Bhd.

Malaysia

–

RM2

* Serinai Teguh Sdn. Bhd.

Malaysia

–

RM2

* Genting View Resort Recreation Sdn. Bhd.

Malaysia

–

RM2

* Resort Exchange Sdn. Bhd.

Malaysia

–

RM2

* Guthrie (B) Sdn. Bhd.

Brunei

–

100

B$2

Subsidiary companies audited by firms of auditors other than Ernst & Young.

** Subsidiary companies audited by affiliate of Ernst & Young. #

This subsidiary company was disposed of during the year as disclosed in Note 15.

@ During the year, the Companies Commission of Malaysia (“CCM”) had approved the strike off of these subsidiary companies from the Register of the CCM under Section 308 of the Companies Act 1965. Similarly, the Registrar of Companies, Brunei Darussalam had approved the strike off of Guthrie (B) Sdn. Bhd. from its Register.

138 Kumpulan Guthrie Berhad

8. SEGMENT INFORMATION – GROUP The primary segment reporting format is determined to be the business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services provided. The secondary information is reported geographically. The Group’s operating businesses are organised and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Revenue of plantation companies comprises the aggregate sales proceeds of palm products and rubber sold during the year. Revenue of property development companies represents revenue recognised based on the stage of completion method of the development properties and sale of plots of development land. Revenue of the Company and other subsidiary companies comprises the invoiced value of goods sold and services rendered. (a) Information on Business Segments The main business segments of the Group comprise the following: Plantation and agricultural services

Cultivation, processing and sale of palm oil, palm kernel and fresh fruit bunches and the provision of plantation consultancy services, production and sale of oil palm seeds and seedlings and rat baits.

Property development

Development and construction of residential, commercial and industrial property and sale of plots of development land.

Manufacturing

Manufacturing and sale of medium-density fibreboard and concrete blocks and bricks.

Investment & Others

Investment holding, provision of computer services, hotel and resort management, golf club operation, general contracting and toll collection.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, liabilities and expenses. Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.

Annual Report 2006 139

8. SEGMENT INFORMATION – GROUP (cont’d.) (a) Information on business segments (cont’d.) Continuing Operations Plantation & Agricultural Services 2006 2005 RM’000 RM’000

Property Development 2006 2005 RM’000 RM’000

Manufacturing 2006 2005 RM’000 RM’000

REVENUE External sales Inter-segment sales

1,805,549 11,085

1,564,005 12,903

567,828 537

395,132 308

– 9,300

949 5,224

Total revenue

1,816,634

1,576,908

568,365

395,440

9,300

6,173

579,806 (47,265)

381,897 (50,745)

170,826 (35,375)

155,451 (33,177)

20,722 (7)

3,720 (268)

–

25,407

55,317

–

532,541

331,152

160,858

177,591

20,715

3,452

ASSETS Segment assets Investments in associated companies Investment in a jointly controlled entity Unallocated corporate assets

6,827,274 744 – –

6,721,794 8,716 – –

1,694,811 212,375 – –

1,649,846 187,768 – –

33,907 – – –

160,616 – – –

Total assets

6,828,018

6,730,510

1,907,186

1,837,614

33,907

160,616

LIABILITIES Segment liabilities Unallocated corporate liabilities

1,006,370 –

946,116 –

917,253 –

901,538 –

51,641 –

89,455 –

Total liabilities

1,006,370

946,116

917,253

901,538

51,641

89,455

RESULTS Operating Profit/(Loss) Finance expense (Loss)/Gain on disposal of discontinued operations Share of results after tax of associated companies Share of results after tax of a jointly controlled entity Profit/(Loss) before taxation Taxation Profit/(Loss) for the year

140 Kumpulan Guthrie Berhad

Discontinued Operations Investment & Others 2006 2005 RM’000 RM’000

Eliminations 2006 2005 RM’000 RM’000

Consolidated 2006 2005 RM’000 RM’000

2006 RM’000

2005 RM’000

Consolidated 2006 2005 RM’000 RM’000

33,136 65,493

20,683 56,257

– (86,415)

– (74,692)

2,406,513 –

1,980,769 –

106,860 –

151,505 –

2,513,373 –

2,132,274 –

98,629

76,940

(86,415)

(74,692)

2,406,513

1,980,769

106,860

151,505

2,513,373

2,132,274

559,690 (298,065)

376,702 (222,639)

(564,904) 217,325

(498,290) 149,482

766,140 (163,387)

419,480 (157,347)

7,616 (105)

(10,533) (597)

773,756 (163,492)

408,947 (157,944)

–

(23,008)

4,243

(23,008)

4,243

–

(22,659)

(54,442)

2,748

875

–

2,748

875

–

(38)

–

(38)

–

(38)

–

261,625

154,063

(370,276)

(403,250)

605,463

263,008

(15,497)

(6,887)

589,966

256,121

(158,845)

(110,556)

2,589

(3,166)

(156,256)

(113,722)

446,618

152,452

(12,908)

(10,053)

433,710

142,399

5,316,483 12,225 1,962 –

5,874,585 12,225 – –

(6,327,656) (208,644) – –

(6,296,298) (194,914) – –

7,544,819 16,700 1,962 504,122

8,110,543 13,795 – 576,484

676,311 – – 2,589

– – – –

8,221,130 16,700 1,962 506,711

8,110,543 13,795 – 576,484

5,330,670

5,886,810

(6,536,300)

(6,491,212)

8,067,603

8,700,822

678,900

–

8,746,503

8,700,822

7,404,053 –

7,575,053 –

(6,068,123) –

(5,940,712) –

3,311,194 730,615

3,571,450 733,805

9,106 –

– –

3,320,300 730,615

3,571,450 733,805

7,404,053

7,575,053

(6,068,123)

(5,940,712)

4,041,809

4,305,255

9,106

–

4,050,915

4,305,255

Annual Report 2006 141

8. SEGMENT INFORMATION – GROUP (cont’d.) (a) Information on business segments (cont’d.) Continuing Operations Plantation & Agricultural Services 2006 2005 RM’000 RM’000 CAPITAL EXPENDITURE NON–CASH EXPENSES Depreciation/Amortisation: – Property, plant and equipment – Plantation development expenditure – Prepaid lease payments – Concession asset Amortisation of goodwill Amortisation of deferred and SUKUK financing expenses Property, plant and equipment written off Plantation development expenditure written off Impairment of: – Property, plant and equipment – Plantation development expenditure – Prepaid lease payments – Goodwill – Other investments Write down of inventories Write down in value of marketable securities Loss on strike off of subsidiary companies Provisions for: – retirement benefits – doubtful debts – loss on conversion of plasma projects Unrealised loss on foreign exchange differences NON–CASH INCOME Write back of: – provision for doubtful debts – provision for loss on conversion of plasma project Write back in value of marketable securities Unrealised gain on foreign exchange differences

142 Kumpulan Guthrie Berhad

Property Development 2006 2005 RM’000 RM’000

Manufacturing 2006 2005 RM’000 RM’000

271,220

142,973

5,746

1,483

–

91,722 127,513 6,353 – –

79,368 125,233 6,112 – 17,163

1,005 – – – –

1,040 – – – –

605 – – – –

3 – – – –

– 3,761

– 1,169

– 86

– 37

– 1,162

– –

15,528

4,121

–

5,356 4,923 388 14,688 – – – –

– – – – – – – –

– – – – – 8 – –

10,922 – 2,675

12,303 – 5,329

– 422 –

– 156 –

– – –

– 26 –

1,841

43,514

–

211

2,496

–

– –

6,834 –

– –

63,777

–

Discontinued Operations Investment & Others 2006 2005 RM’000 RM’000

Eliminations 2006 2005 RM’000 RM’000

Consolidated 2006 2005 RM’000 RM’000

2006 RM’000

2005 RM’000

Consolidated 2006 2005 RM’000 RM’000

976

3,916

–

277,942

148,372

3,150

1,115

281,092

149,487

4,849 – 84 – –

7,597 – 84 – –

– – – – –

98,180 127,513 6,437 – –

88,008 125,233 6,196 – 17,163

11,751 – – 4,682 –

14,847 – – 661 –

109,932 127,513 6,437 4,682 –

102,855 125,233 6,196 661 17,163

3,794 164

11,128 535

– –

3,794 5,173

11,128 1,741

– –

3,794 5,173

11,128 1,741

–

15,528

4,121

–

15,528

4,121

– – – – 500 121 – –

– – – – – 129 1,337 2,031

– – – – – – – –

5,356 4,923 388 14,688 500 121 – –

– – – – – 137 1,337 2,031

– – – – – 64 – –

9,347 – – – – 304 – –

5,356 4,923 388 14,688 500 185 – –

9,347 – – – – 441 1,337 2,031

10 1,507 –

10 12,964 –

– – –

10,932 1,929 2,675

12,313 13,146 5,329

– 962 –

– 1,472 –

10,932 2,891 2,675

12,313 14,618 5,329

37,651

14,725

–

39,492

58,239

–

39,492

58,239

985

126

–

1,196

2,641

220

380

1,416

3,021

– 4,247

– –

– 4,247

6,834 –

– –

– 4,247

6,834 –

98,089

11,838

–

161,866

11,866

–

161,866

11,866

Annual Report 2006 143

8. SEGMENT INFORMATION – GROUP (cont’d.) (b) Geographical segments The Group’s geographical segments are based on the location of the Group’s assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers. The Group’s four business segments operate in two main geographical areas as follows: Malaysia

–

Plantation and agricultural services, property development, manufacturing and investment and others

Indonesia

–

Plantation

The following is an analysis of the carrying amount of segment assets and capital expenditure, analysed by the Group’s geographical segments: Capital Expenditure 2006 2005 RM’000 RM’000 Malaysia Indonesia Others

Segment Assets 2006 2005 RM’000 RM’000

68,016 213,076 –

57,597 91,878 12

6,019,904 2,726,078 521

5,724,815 2,975,868 139

281,092

149,487

8,746,503

8,700,822

The following is an analysis of the Group’s revenue analysed by the geographical location of customers:

Continuing Operations 2006 2005 RM’000 RM’000 Malaysia South East Asia Asia United Kingdom Others

144 Kumpulan Guthrie Berhad

Discontinued Operations 2006 2005 RM’000 RM’000

Total 2006 RM’000

2005 RM’000

1,396,176 1,009,339 175 – 823

1,126,652 853,260 183 – 674

50,354 19,762 35,517 – 1,227

41,850 25,215 42,603 20,870 20,967

1,446,530 1,029,101 35,692 – 2,050

1,168,502 878,475 42,786 20,870 21,641

2,406,513

1,980,769

106,860

151,505

2,513,373

2,132,274

9. REVENUE GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

Plantation and Agricultural Services: Palm products Rubber Oil palm seeds and seedlings Consultancy services

1,777,228 5,499 20,769 2,052

1,534,959 7,568 19,632 1,844

– – – –

Property development Sale of goods Services rendered Construction contracts (Note 36) Dividend income from subsidiary companies Management fees from subsidiary companies Rental income from investment property

1,805,548 567,828 4,806 21,834 6,497 – – –

1,564,003 395,132 540 14,748 6,346 – – –

– – – – – 427,398 50,448 1,012

– – – – – 226,994 52,346 1,012

2,406,513

1,980,769

478,858

280,352

10. COST OF SALES GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

Plantation and Agricultural Services: Palm products Rubber Oil palm seeds and seedlings Consultancy services

1,167,638 5,697 4,609 1,131

1,032,274 4,845 3,981 1,040

– – – –

Property development Goods sold Services rendered Construction contracts (Note 36)

1,179,075 372,575 2,656 11,201 17,805

1,042,140 198,119 4,428 7,281 8,502

– – – – –

1,583,312

1,260,470

–

Annual Report 2006 145

11. OTHER INCOME GROUP 2006 2005 RM’000 RM’000 Interest income received/receivable on: – Intragroup borrowings – Fixed deposits with licensed banks and financial institutions – Others Dividend income from investments: – Unquoted in Malaysia – Quoted in Malaysia Accretion of deferred income (Note 45) Gain on compulsory land acquisitions Gain on sale of land Gain on sale of property, plant and equipment Gain on sale of investment property Gain on foreign exchange differences: – Realised – Unrealised Gain on disposal of marketable securities Surplus on liquidation of subsidiary companies Write back in value of marketable securities Write back of provision for doubtful debts Write back of provision for loss on conversion of plasma projects Others

146 Kumpulan Guthrie Berhad

COMPANY 2006 2005 RM’000 RM’000

–

23,762

35,583

23,714 5,865

19,723 4,678

2,813 400

2,224 418

4,138 672 8,330 5,980 68,515 803 –

1,001 600 5,687 14,262 4,167 661 –

2,336 – – – – 56 4,576

565 – – – – – –

30,204 161,866 1,503 945 4,247 1,196

701 11,866 472 – – 2,641

25,876 94,705 – 17,756 – –

82 9,996 – – – –

– 10,844

6,834 15,091

– 1,481

– 1,209

328,822

88,384

173,761

50,077

12. FINANCE EXPENSE GROUP 2006 2005 RM’000 RM’000 Interest paid/payable on: – Intragroup borrowings – Hire purchase and finance lease liabilities – Short-term borrowings – Bankers acceptances and export credit refinancing loans – Long-term borrowings – Long-term payable

Less: Interest capitalised in qualifying assets: – Capital work-in-progress (Note 18) – Plantation development expenditure (Note 19) – Concession asset (Note 23)

Amortisation of: – Deferred financing expenses (Note 44) – SUKUK issuance expenses (Note 44)

COMPANY 2006 2005 RM’000 RM’000

– 25,607 9,989 3,974 120,939 –

– 20,084 20,303 6,055 101,453 95

97,910 25,564 6,274 3,974 14,366 –

48,098 20,020 15,725 5,873 38,078 –

160,509

147,990

148,088

127,794

(115) (801) –

(992) (684) (95)

– – –

159,593

146,219

148,088

127,794

2,752 1,042

10,068 1,060

– 1,042

8,876 1,060

163,387

157,347

149,130

137,730

13. PROFIT BEFORE TAXATION Profit before taxation from continuing operations has been arrived at after charging: GROUP 2006 2005 RM’000 RM’000 Auditors’ remuneration [Note (a)] Directors’ remuneration [Note (b)] Employees’ benefits expense [Note (c)] Depreciation of property, plant and equipment (Note 18) Amortisation of plantation development expenditure (Note 19) Amortisation of prepaid lease payments (Note 20) Depreciation of investment property (Note 22) Amortisation of goodwill included in other expenses (Note 24) Property, plant and equipment written off (Note 18)

2,151 2,783 447,254 98,181 127,513 6,437 – – 5,173

1,960 2,543 366,534 88,008 125,233 6,196 – 17,163 1,741

COMPANY 2006 2005 RM’000 RM’000 510 2,109 39,820 2,053 – 30 – – 4

522 1,895 24,430 1,715 – 30 238 – –

Annual Report 2006 147

13. PROFIT BEFORE TAXATION (cont’d.) Profit before taxation from continuing operations has been arrived at after charging: (cont’d.) GROUP 2006 2005 RM’000 RM’000 Plantation development expenditure written off (Note 19) Impairment of assets included in other expenses: – Property, plant and equipment (Note 18) – Plantation development expenditure (Note 19) – Prepaid lease payments (Note 20) – Goodwill (Note 24) – Investments in subsidiary companies (Note 25) – Other investments (Note 28) Loss on disposal of property, plant and equipment Loss on disposal of marketable securities Loss on strike off of subsidiary companies Rent of land and buildings Research and development costs Write down of inventories Write down in value of marketable securities Provisions for: – loss on conversion of plasma projects – doubtful debts – amounts due from subsidiary companies (Note 38) Loss on foreign exchange differences: – Realised – Unrealised

148 Kumpulan Guthrie Berhad

COMPANY 2006 2005 RM’000 RM’000

15,528

4,121

–

5,356 4,923 388 14,688 – 500 13 262 – 602 10,657 121 –

– – – – – – 3,986 – 2,031 1,636 10,965 137 1,337

– – – – 53,673 500 – – 218 1,780 10,657 – –

– – – – 2,003 – 314 – – 1,675 10,166 69 –

2,675 1,929 –

5,329 13,146 –

– – 19,200

– – 26,974

3,996 39,492

1,025 58,239

3,031 17,796

20 1,134

13. PROFIT BEFORE TAXATION (cont’d.) GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

(a) Auditors’ Remuneration Auditors of the Company – statutory audit – other services

Other Auditors in Malaysia – statutory audit – other services

Other Auditors outside Malaysia – statutory audit – other services

369 36

342 306

95 31

72 199

405

648

126

271

274 306

270 236

– 215

– 126

580

506

215

126

919 247

681 125

– 169

– 125

1,166

806

169

125

2,151

1,960

510

522

1,093 176 149

793 293 79

1,093 176 149

793 293 79

1,418

1,165

1,418

1,165

958 196 34

945 186 28

516 141 34

568 134 28

1,188

1,159

691

730

(b) Directors’ Remuneration Directors of the Company Executive Director: – salaries and other emoluments – bonus – benefits-in-kind

Non-Executive Directors: – fees – allowances – benefits-in-kind

Annual Report 2006 149

13. PROFIT BEFORE TAXATION (cont’d.) GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

(b) Directors’ Remuneration (cont’d.) Directors of subsidiary companies Non-Executive Directors – fees – allowances

146 31

190 29

– –

177

219

–

2,783

2,543

2,109

1,895

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

Executive Director 2006 2005 No. No. Executive Director RM1,150,001 – RM1,200,000 RM1,400,001 – RM1,450,000 Non-Executive Directors RM50,001 – RM100,000 RM100,001 – RM150,000 RM150,001 – RM200,000 RM200,001 – RM250,000

150 Kumpulan Guthrie Berhad

Non-Executive Directors 2006 2005 No. No.

– 1

1 –

– –

– – – –

2 4 2 1

– 7 2 –

13. PROFIT BEFORE TAXATION (cont’d.) GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

(c) Employees’ Benefits Expense Wages and salaries Social security contribution Pension costs: – defined contribution plans – retirement benefits (Note 46) Termination benefits Cost of share options

428,695 359

340,078 313

35,665 128

21,891 59

14,018 10,932 694 3,488

13,285 12,313 545 –

2,772 10 – 1,245

2,470 10 – –

458,186

366,534

39,820

24,430

The remuneration of the executive director amounting to RM1,418,000 (2005: RM1,165,000) is disclosed in Note 13(b).

14. TAXATION GROUP 2006 2005 RM’000 RM’000 Continuing Operations Current income tax: Malaysian income tax Foreign income tax

Under/(Over) provision in prior years: Malaysian income tax Foreign income tax

Deferred tax Relating to origination and reversal of temporary differences Relating to changes in tax rates (Over)/Under provision in prior years

COMPANY 2006 2005 RM’000 RM’000

70,152 83,989

66,678 52,844

71,232 –

40,468 –

154,141

119,522

71,232

40,468

2,894 (8,431)

(7,092) (3,485)

2,053 –

(8,378) –

148,604

108,945

73,285

32,090

11,213 (202) (770)

8,760 – (7,149)

1,778 (53) 23

(412) – (325)

10,241

1,611

1,748

(737)

Annual Report 2006 151

14. TAXATION (cont’d.) GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

Total income tax expense from continuing operations Discontinued Operations Deferred tax (Note 15): Relating to origination and reversal of temporary differences

158,845

110,556

75,033

31,353

(2,589)

3,166

–

Total income tax expense

156,256

113,722

75,033

31,353

Domestic current income tax is calculated at the statutory tax rate of 28% (2005: 28%) of the estimated assessable profit for the year. The domestic statutory tax rate of 28% will be reduced to 27% effective year of assessment 2007 and to 26% effective year of assessment 2008. The computation of deferred tax as at 31 December 2006 has reflected these changes. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows: GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

605,463 (15,497)

263,008 (6,887)

347,988 (24,575)

100,164 (1,817)

589,966

256,121

323,413

98,347

Taxation at Malaysia statutory tax rate of 28% (2005: 28%) Effects of: Income subject to tax rate of 20% Different tax rates in other countries Income not subject to tax Changes in tax rate on deferred tax Expenses not deductible for tax purposes Utilisation of previously unrecognised tax losses and unabsorbed capital allowances Share of results of associated companies Expenses subject to double deduction (Over)/Under provision of deferred tax in prior years (Over)/Under provision of income tax in prior years Deferred tax assets not recognised in respect of current year’s tax losses and unabsorbed capital allowances Deferred tax liability on intragroup assets transfer

165,190

71,714

90,556

27,537

(215) (3,034) (80,563) (202) 69,187

(215) (5,603) (11,865) – 48,656

– – (49,689) (53) 32,018

– – (507) – 15,180

(5,516) (793) (1,577) (770) (4,916)

(740) (251) (2,154) (7,149) (10,577)

– – (1,577) 23 2,053

– – (2,154) (325) (8,378)

20,019 (554)

31,906 –

1,702 –

– –

Tax expense for the year

156,256

113,722

75,033

31,353

Profit/(Loss) before taxation – Continuing operations – Discontinued operations

152 Kumpulan Guthrie Berhad

14. TAXATION (cont’d.) Tax savings during the financial year arose from: GROUP 2006 2005 RM’000 RM’000 Utilisation of current year tax losses Utilisation of previously unrecognised tax losses Utilisation of previously unrecognised capital allowances

128 491 2,171

COMPANY 2006 2005 RM’000 RM’000

1,419 172 262

– – –

954 – –

15. DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE In line with the Group’s objective to focus on its core businesses of plantation and property development, the Group had disposed/propose to dispose the following subsidiary companies: (a) Disposal of Subsidiary Company during the Current Financial Year On 12 October 2006, the Company entered into a Sale and Purchase Agreement for the disposal of the entire equity interest of Integrated Brickworks Sdn. Berhad (“IBSB”), a wholly-owned subsidiary company involved in the manufacture and trading of concrete blocks and bricks which has been under-performing over the past several years. The disposal was completed on 10 January 2007 and a loss on disposal of RM23,008,000 and RM24,575,000 was recognised in the income statements of the Group and of the Company respectively for the financial year ended 31 December 2006. The financial results of IBSB is presented separately on the consolidated income statement as discontinued operations.

(b) Proposed Disposals of Subsidiary Companies (i)

On 27 November 2006, the Company entered into a Sale and Purchase of Shares Agreement for the proposed disposal of the entire equity interest of Guthrie Corridor Expressway Sdn. Berhad (“GCESB”), a wholly-owned subsidiary involved in road concession operations. As at 31 December 2006, the proposed disposal is pending shareholders’ and regulatory approvals. The disposal is expected to be completed by 30 June 2007.

(ii)

On 22 February 2007, the Company and Guthrie Wood Industries Sdn. Berhad, a wholly-owned subsidiary, entered into a Share Sale and Purchase Agreement for the disposal of the entire equity interests in Guthrie MDF Sdn. Berhad (“GMDF”). The disposal is expected to be completed by 30 June 2007 upon completion of the conditions precedent, including approval of regulatory authorities.

Accordingly, the assets and liabilities of GCESB and GMDF have been presented on the consolidated balance sheet as disposal groups held for sale and the financial results of GCESB and GMDF are presented separately on the consolidated income statement as discontinued operations. The carrying amounts of the investments in GCESB and GMDF have also been presented as non-current assets held for sale on the Company’s balance sheet as at 31 December 2006. In the financial year ended 31 December 2005, the Group completed the disposal of the rubber gloves manufacturing and healthcare products trading operations undertaken by Guthrie Medicare Products (NS) Sdn. Berhad and Healthline Products Ltd. respectively.

Annual Report 2006 153

15. DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (cont’d.) (c) The results of the discontinued operations are as follows: 2006 Manufacturing RM’000

Investment & Others RM’000

Total RM’000

Revenue Cost of sales

87,645 (72,639)

19,215 (5,033)

106,860 (77,672)

Gross profit Expenses

15,006 (14,640)

14,182 (6,932)

29,188 (21,572)

Operating profit Finance expense

366 (105)

7,250 –

7,616 (105)

Profit before taxation Taxation (Note 14)

261 –

7,250 2,589

7,511 2,589

Profit for the year from discontinued operations Loss on disposal of discontinued operations

261 (23,008)

9,839 –

10,100 (23,008)

(Loss)/Profit for the year from discontinued operations

(22,747)

9,839

(12,908)

The following amounts have been included in arriving at the profit before taxation of discontinued operations:

Auditors’ remuneration: – statutory audit Directors’ remuneration: Non-Executive Directors – fees and allowances Depreciation/Amortisation: – property, plant and equipment – concession asset Provision for doubtful debts Write down of inventories Write back of provision for doubtful debts

154 Kumpulan Guthrie Berhad

Manufacturing RM’000

Investment & Others RM’000

Total RM’000

11,457 – 962 64 (220)

294 4,682 – – –

11,751 4,682 962 64 (220)

15. DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (cont’d.) (c) The results of the discontinued operations are as follows: (cont’d.) 2005

Manufacturing RM’000

Investment & Others RM’000

Total RM’000

Revenue Cost of sales

105,553 (84,573)

45,952 (29,898)

151,505 (114,471)

Gross profit Expenses

20,980 (32,995)

16,054 (14,572)

37,034 (47,567)

Operating (loss)/profit Finance expense

(12,015) (176)

1,482 (421)

(10,533) (597)

(Loss)/Profit before taxation Taxation (Note 14)

(12,191) (2,722)

1,061 (444)

(11,130) (3,166)

(Loss)/Profit for the year from discontinued operations (Loss)/Profit on disposal of discontinued operations

(14,913) (2,968)

617 7,211

(14,296) 4,243

(Loss)/Profit for the year from discontinued operations

(17,881)

7,828

(10,053)

The following amounts have been included in arriving at the profit/(loss) before taxation of discontinued operations:

Auditors’ remuneration: – statutory audit Directors’ remuneration: Non-Executive Directors – fees and allowances Depreciation/Amortisation: – property, plant and equipment – concession asset Impairment of property, plant and equipment Hire of plant and machinery Provision for doubtful debts Write down of inventories Write back of provision for doubtful debts

Manufacturing RM’000

Investment & Others RM’000

Total RM’000

14,326 – 9,347 260 1,472 304 (380)

521 661 – 340 – – –

14,847 661 9,347 600 1,472 304 (380)

Annual Report 2006 155

15. DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (cont’d.) (d) The cash flows attributable to the discontinued operations are as follows:

2006 Cash flows from operating activities Cash flows from investing activities Net cash flows

2005 Cash flows from operating activities Cash flows from investing activities Net cash flows

Manufacturing RM’000

Investment & Others RM’000

Total RM’000

10,898 (11,393)

10,234 (10,252)

21,132 (21,645)

(495)

(18)

(513)

9,062 5,602

(17,201) (56,866)

(8,139) (51,264)

14,664

(74,067)

(59,403)

(e) The assets and liabilities of the subsidiary companies disposed of at the effective date are as follows: As at 30.9.2006 RM’000

As at 30.6.2005 RM’000

Property, plant and equipment Inventories Receivables Deposit, bank balances and cash Advances from affiliates Bank borrowings Payables

12,838 2,020 3,925 284 – – (18,273)

13,582 11,016 16,728 6,849 (5,706) (18,583) (9,319)

Net assets disposed of Proceeds from disposal of subsidiary companies Reversal of goodwill on disposal Provision for warranty and incidental expenses Effect of changes in exchange rates Provisions written off

794 (1,592) – – – 23,806

14,567 (16,800) 4,005 2,548 (8,563) –

Loss/(Gain) on disposal of subsidiary companies

23,008

(4,243)

Proceeds from disposal of subsidiary companies Cash and cash equivalents of subsidiary companies disposed of

1,592 (284)

16,800 (6,849)

Net cash inflow

1,308

9,951

There were no tax charge or credit arising from the disposals.

156 Kumpulan Guthrie Berhad

15. DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (cont’d.) (f)

The disposal of subsidiary companies had the following effects on the financial results of the Company: 2006 RM’000

2005 RM’000

992 (968)

16,720 (4,940)

Net proceeds from disposal of subsidiary companies Less: Cost of investment in subsidiary companies Amounts due from subsidiary companies Loans to subsidiary companies Add: Reversal of provisions for: Impairment of investment in subsidiary companies (Note 25) Loans to subsidiary companies (Note 29) Amounts due from subsidiary companies (Note 38) Net assets of subsidiary companies taken over

24 (9,000) (15,599) –

11,780 (35,076) (22,506) (75,000)

– – – –

35,076 74,460 3,000 6,449

Loss on disposal of subsidiary companies

(24,575)

(1,817)

Total disposal proceeds Less: Incidental expenses incurred

16. EARNINGS PER SHARE (a) Basic Basic earnings per share are calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year. GROUP 2006 Profit from continuing operations attributable to ordinary equity holders of the Company (RM’000) Loss from discontinued operations attributable to ordinary equity holders of the Company (RM’000)

2005

297,102

58,897

(12,908)

(10,053)

284,194

48,844

1,011,222

1,006,590

Basic earnings per share (sen) for: Profit from continuing operations Loss from discontinued operations

29.38 (1.28)

5.85 (1.00)

Profit attributable to ordinary equity holders of the Company

28.10

4.85

Profit attributable to ordinary equity holders of the Company (RM’000) Weighted average number of ordinary shares in issue (‘000)

Annual Report 2006 157

16. EARNINGS PER SHARE (cont’d.) (b) Diluted Diluted earnings per share are calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year which have been adjusted for the dilutive effects of all share options granted to employees. GROUP 2006 Profit from continuing operations attributable to ordinary equity holders of the Company (RM’000) Loss from discontinued operations attributable to ordinary equity holders of the Company (RM’000)

2005

297,102

58,897

(12,908)

(10,053)

284,194

48,844

Weighted average number of ordinary shares in issue (‘000) Effects of dilution of share options (‘000)

1,011,222 3,721

1,006,590 8,849

Adjusted weighted average number of ordinary shares in issue and issuable (‘000)

1,014,943

1,015,439

Diluted earnings per share (sen) for: Profit from continuing operations Loss from discontinued operations

29.27 (1.27)

5.80 (0.99)

Profit attributable to ordinary equity holders of the Company

28.00

4.81

Profit attributable to ordinary equity holders of the Company (RM’000)

158 Kumpulan Guthrie Berhad

17. DIVIDENDS GROUP/COMPANY 2006 2005 RM’000 RM’000 (a) Dividends Paid Final dividend of 6 sen per share, less 28% tax for the financial year 2005 (2005: 5 sen per share, less 28% tax for the financial year 2004) Adjustment for underprovision of prior year’s final dividend due to increase in share capital arising from the Second ESOS

Interim dividend of 6 sen per share, less 28% tax for the current financial year (2005: 4 sen per share, less 28% tax)

(b) Dividend Proposed Final tax exempt dividend of 6 sen per share (2005: Nil) Final dividend of 4 sen per share, less 27% tax for the current financial year (2005: 6 sen per share, less 28% tax)

43,500

36,195

43,579

36,234

43,892

28,995

87,471

65,229

61,287

–

29,826

43,500

91,113

43,500

The final dividends proposed in respect of the financial year ended 31 December 2006 are subject to shareholders’ approval at the forthcoming Annual General Meeting of the Company to be held on 7 June 2007. The financial statements for the current financial year do not reflect these proposed dividends. Such dividends, if approved by the shareholders, will be accounted for in equity as an appropriation of revenue reserve in the financial year ending 31 December 2007.

Annual Report 2006 159

18. PROPERTY, PLANT AND EQUIPMENT GROUP Golf course Freehold development land expenditure RM’000 RM’000 Cost or Valuation At 1 January 2006 Cost Valuation – 2003

Buildings RM’000

Machinery, equipment & vehicles RM’000

Capital work-inprogress RM’000

Total RM’000

357 1,670,463

– 23,637

169,626 284,636

916,653 –

18,398 –

1,105,034 1,978,736

1,670,820 – – (14,723) – –

23,637 71 – – – (137)

454,262 18,832 17,281 (867) (6,009) (4,030)

916,653 42,091 24,157 (3,426) (21,247) (10,951)

18,398 148,121 (41,914) – – (6)

3,083,770 209,115 (476) (19,016) (27,256) (15,124)

– –

(33,389) 3,811

(144,628) 8,001

(3,150) 195

(181,167) 12,007

At 31 December 2006

1,656,097

23,571

449,891

810,650

121,644

3,061,853

Representing: Cost Valuation – 2003

357 1,655,740

– 23,571

191,646 258,245

810,650 –

121,644 –

1,124,297 1,937,556

At 31 December 2006

1,656,097

23,571

449,891

810,650

121,644

3,061,853

Additions Reclassification Disposals Disposal of a subsidiary company Write off Transfer to assets of disposal groups classified as held for sale Exchange differences

160 Kumpulan Guthrie Berhad

18. PROPERTY, PLANT AND EQUIPMENT (cont’d.) GROUP (cont’d.) Golf course Freehold development land expenditure RM’000 RM’000 Accumulated Depreciation and Impairment Losses At 1 January 2006 Depreciation charge for the year Recognised in income statement: – Continuing operations – Discontinued operations

Buildings RM’000

Machinery, equipment & vehicles RM’000

Capital work-inprogress RM’000

Total RM’000

– –

3,486 834

35,023 25,107

509,449 83,991

– –

547,958 109,932

– –

834 –

23,985 1,122

73,362 10,629

– –

98,181 11,751

Reclassification Disposals Disposal of a subsidiary company Impairment losses recognised in income statement (Note 13) Write off Transfer to assets of disposal groups classified as held for sale Exchange differences

– – –

(470) (120) (359)

(6) (3,311) (14,059)

– – –

(476) (3,431) (14,418)

– –

570 (1,152)

941 (8,799)

3,845 –

5,356 (9,951)

– –

(8,219) 106

(99,077) 3,297

– –

(107,296) 3,403

At 31 December 2006

–

4,320

50,486

472,426

3,845

531,077

Net Carrying Amount Cost Valuation – 2003

357 1,655,740

– 19,251

188,284 211,121

338,224 –

117,799 –

644,664 1,886,112

At 31 December 2006

1,656,097

19,251

399,405

338,224

117,799

2,530,776

Annual Report 2006 161

18. PROPERTY, PLANT AND EQUIPMENT (cont’d.) GROUP (cont’d.) Golf course Freehold development land expenditure RM’000 RM’000

Buildings RM’000

Machinery, equipment & vehicles RM’000

Capital work-inprogress RM’000

Total RM’000

Cost or Valuation At 1 January 2005 Cost Valuation – 2003

– 1,669,899

– 23,357

69,123 318,556

924,807 –

57,083 –

1,051,013 2,011,812

Additions Reclassification Disposals Disposal of subsidiary companies Write off Transfer from concession asset Transfer from completed properties Exchange differences

1,669,899 – 2,934 (2,355) – (15) – 357 –

23,357 280 – – – – – – –

387,679 11,836 24,526 (966) (19,713) (132) 60,000 974 (9,942)

924,807 35,289 47,759 (21,364) (40,542) (8,333) – – (20,963)

57,083 40,249 (75,219) – – – – – (3,715)

3,062,825 87,654 – (24,685) (60,255) (8,480) 60,000 1,331 (34,620)

At 31 December 2005

1,670,820

23,637

454,262

916,653

18,398

3,083,770

Representing: Cost Valuation – 2003

357 1,670,463

– 23,637

169,626 284,636

916,653 –

18,398 –

1,105,034 1,978,736

At 31 December 2005

1,670,820

23,637

454,262

916,653

18,398

3,083,770

162 Kumpulan Guthrie Berhad

18. PROPERTY, PLANT AND EQUIPMENT (cont’d.) GROUP (cont’d.) Golf course Freehold development land expenditure RM’000 RM’000 Accumulated Depreciation and Impairment Losses At 1 January 2005 Depreciation for the year Recognised in income statement: – Continuing operations – Discontinued operations Capitalised in concession asset (Note 23)

Buildings RM’000

Machinery, equipment & vehicles RM’000

Capital work-inprogress RM’000

Total RM’000

– –

1,093 2,393

17,239 22,688

496,685 77,784

– –

515,017 102,865

– –

2,393 –

20,895 1,793

64,720 13,054

– –

88,008 14,847

–

Disposals Disposal of subsidiary companies Impairment losses recognised in income statement (Note 15) Write off Exchange differences

– –

(137) (3,920)

(15,538) (42,512)

– –

(15,675) (46,432)

– – –

– (12) (835)

9,347 (6,727) (9,590)

– – –

9,347 (6,739) (10,425)

At 31 December 2005

–

3,486

35,023

509,449

–

547,958

Net Carrying Amount Cost Valuation – 2003

357 1,670,463

– 20,151

157,514 261,725

407,204 –

18,398 –

583,473 1,952,339

At 31 December 2005

1,670,820

20,151

419,239

407,204

18,398

2,535,812

At 31 December 2006

443,685

19,251

399,405

338,224

117,799

1,318,364

At 31 December 2005

446,886

20,151

419,081

407,204

18,398

1,311,720

The net carrying amount of property, plant and equipment had the assets been carried under the cost model, would have been:

Interest expense capitalised during the financial year under capital work-in-progress of the Group amounted to RM115,000 (2005: RM992,000) as disclosed in Note 12.

Annual Report 2006 163

18. PROPERTY, PLANT AND EQUIPMENT (cont’d.) COMPANY

Buildings RM’000

Machinery, equipment & vehicles RM’000

Total RM’000

– 10,411

– 1,398

22,139 –

22,139 11,809

Additions Disposals Write off Transfer to subsidiary companies

10,411 – – – –

1,398 – – (3) –

22,139 974 (675) (127) (319)

33,948 974 (675) (130) (319)

At 31 December 2006

10,411

1,395

21,992

33,798

Representing: Cost Valuation – 2003

– 10,411

– 1,395

21,992 –

21,992 11,806

At 31 December 2006

10,411

1,395

21,992

33,798

– – – – –

176 79 – (2) –

15,265 1,974 (567) (124) (196)

15,441 2,053 (567) (126) (196)

–

253

16,352

16,605

Net Carrying Amount Cost Valuation – 2003

– 10,411

– 1,142

5,640 –

5,640 11,553

At 31 December 2006

10,411

1,142

5,640

17,193

Freehold land RM’000 Cost or Valuation At 1 January 2006 Cost Valuation – 2003

Accumulated Depreciation At 1 January 2006 Depreciation recognised in income statement (Note 13) Disposals Write off Transfer to subsidiary companies At 31 December 2006

164 Kumpulan Guthrie Berhad

18. PROPERTY, PLANT AND EQUIPMENT (cont’d.) COMPANY (cont’d.)

Buildings RM’000

Machinery, equipment & vehicles RM’000

Total RM’000

– 10,411

– 1,391

20,551 –

20,551 11,802

Additions Disposals Transfer from subsidiary companies Transfer to subsidiary companies

10,411 – – – –

1,391 7 – – –

20,551 3,243 (2,026) 565 (194)

32,353 3,250 (2,026) 565 (194)

At 31 December 2005

10,411

1,398

22,139

33,948

Representing: Cost Valuation – 2003

– 10,411

– 1,398

22,139 –

22,139 11,809

At 31 December 2005

10,411

1,398

22,139

33,948

Accumulated Depreciation At 1 January 2005 Depreciation recognised in income statement (Note 13) Disposals Transfer from subsidiary companies Transfer to subsidiary companies

– – – – –

88 88 – – –

14,451 1,627 (1,035) 363 (141)

14,539 1,715 (1,035) 363 (141)

At 31 December 2005

–

176

15,265

15,441

Net Carrying Amount Cost Valuation – 2003

– 10,411

– 1,222

6,874 –

6,874 11,633

At 31 December 2005

10,411

1,222

6,874

18,507

Freehold land RM’000 Cost or Valuation At 1 January 2005 Cost Valuation – 2003

Annual Report 2006 165

18. PROPERTY, PLANT AND EQUIPMENT (cont’d.) COMPANY (cont’d.)

Buildings RM’000

Machinery, equipment & vehicles RM’000

Total RM’000

600

1,142

5,640

7,382

600

1,222

6,874

8,696

Freehold land RM’000

At 31 December 2006

At 31 December 2005

The net carrying amount of property, plant and equipment had the assets been carried under the cost model, would have been:

The landed properties of the Group and of the Company included within property, plant and equipment were revalued by the directors in 2003 based on open market values on existing use basis carried out by independent professional valuers, CH Williams Talhar & Wong Sdn. Berhad. The net carrying amounts of property, plant and equipment of the Group amounting to RM271,067,000 (2005: RM418,047,000) have been pledged as securities to financial institutions for banking facilities as referred to in Note 44.

19. PLANTATION DEVELOPMENT EXPENDITURE GROUP 2006 2005 RM’000 RM’000 Cost or Valuation At 1 January Cost Valuation – 2003

116,513 2,608,108

57,075 2,748,813

Additions Disposal Write off Exchange differences

2,724,621 64,257 (4,806) (16,722) 44,653

2,805,888 59,825 – (4,734) (136,358)

At 31 December

2,812,003

2,724,621

Representing: Cost Valuation – 2003

186,131 2,625,872

116,513 2,608,108

At 31 December

2,812,003

2,724,621

166 Kumpulan Guthrie Berhad

19. PLANTATION DEVELOPMENT EXPENDITURE (cont’d.) GROUP 2006 2005 RM’000 RM’000 Accumulated Amortisation and Impairment Losses At 1 January Amortisation recognised in income statement (Note 13) Disposal Impairment losses recognised in income statement (Note 13) Write off Exchange differences

244,010 127,513 (383) 4,923 (1,194) 2,288

126,681 125,233 – – (613) (7,291)

At 31 December

377,157

244,010

Net Carrying Amount Cost Valuation – 2003

183,389 2,251,457

115,303 2,365,308

At 31 December

2,434,846

2,480,611

The net book value of plantation development expenditure comprises: Oil Palm Rubber

2,433,344 1,502

2,478,258 2,353

2,434,846

2,480,611

801

684

2,095,240

2,117,863

Interest expense capitalised during the financial year (Note 12)

The net carrying amounts of plantation development expenditure had it been carried under the cost model, would have been:

The plantation development expenditure of the Group were revalued by the directors in 2003 based on valuations carried out by independent professional valuers, CH Williams Talhar & Wong Sdn. Berhad, to reflect the market values on existing use basis. The net carrying amounts of plantation development expenditure of the Group amounting to RM447,699,000 (2005: 458,077,000) have been pledged as securities to financial institutions for banking facilities as referred to in Note 44.

Annual Report 2006 167

20. PREPAID LEASE PAYMENTS GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

At 1 January Additions Amortisation recognised in income statement (Note 13) Disposal Impairment losses recognised in income statement (Note 13) Exchange differences

347,202 1,402 (6,437) (358) (388) 936

356,132 1,630 (6,196) (1,555) – (2,809)

645 – (30) – – –

675 – (30) – – –

At 31 December

342,357

347,202

615

645

Analysed as: Long-term leasehold land Short-term leasehold land

285,480 56,877

289,616 57,586

– 615

– 645

342,357

347,202

615

645

Short-term leasehold land amounting to RM14,920,000 (2005: RM15,031,000) of certain subsidiary companies in Indonesia have been pledged as securities to financial institutions for banking facilities as referred to in Note 44. The leasehold interest in land were revalued in 2003 by independent professional valuers, CH Williams Talhar & Wong Sdn. Berhad to reflect the market value on existing use basis. As allowed by the transitional provisions of FRS 117, where the leasehold land had been previously revalued, the unamortised revalued amount of leasehold land is retained as the surrogate cost of prepaid lease payments and is amortised over the remaining lease term of the leasehold land.

21. LAND HELD FOR PROPERTY DEVELOPMENT GROUP Freehold Land RM’000

Development Costs RM’000

Total RM’000

At 1 January 2006 Additions Disposals Transfer from/(to) property development costs

78,625 405 (5,585) 11,516

320,449 20,407 (22,967) (136,650)

399,074 20,812 (28,552) (125,134)

At 31 December 2006

84,961

181,239

266,200

At 1 January 2005 Additions Disposals Transfer from concession asset Transfer to property development costs

86,654 – (554) – (7,475)

257,136 93,211 (2,515) 15,400 (42,783)

343,790 93,211 (3,069) 15,400 (50,258)

At 31 December 2005

78,625

320,449

399,074

Land held for property development comprises land banks which are being held for future development. The land banks are not expected to be developed within the normal operating cycle. 168 Kumpulan Guthrie Berhad

22. INVESTMENT PROPERTY COMPANY Freehold Land RM’000

Building RM’000

Total RM’000

17,000 (17,000)

5,000 (5,000)

22,000 (22,000)

At 31 December 2006

–

Accumulated Depreciation At 1 January 2006 Disposal to a subsidiary company

– –

476 (476)

At 31 December 2006

–

Net Carrying Amount At 31 December 2006

–

17,000

5,000

22,000

Accumulated Depreciation At 1 January 2005 Depreciation recognised in income statement (Note 13)

– –

238 238

At 31 December 2005

–

476

Net Carrying Amount At 31 December 2005

17,000

4,524

21,524

Cost At 1 January 2006 Disposal to a subsidiary company

Cost At 1 January 2005/31 December 2005

In the financial year ended 31 December 2006, the Company had disposed of the investment property to a subsidiary company. The carrying amount of the asset at the date of disposal was RM21,524,000. The disposal resulted in a gain of RM4,576,000 to the Company as disclosed in Note 11.

Annual Report 2006 169

23. CONCESSION ASSET On 18 July 2000, the Government of Malaysia (“the Government”) and Guthrie Corridor Expressway Sdn. Berhad (“GCESB”) entered into a concession agreement whereby the Government granted to GCESB, inter-alia, the exclusive right and authority to undertake the design, construction, maintenance, operation and management of the Guthrie Corridor Expressway (“the Expressway”). The Expressway is a 25km expressway which links Shah Alam to Kuang, Selangor Darul Ehsan. The “Sijil Kesempurnaan Pembinaan Lebuhraya” for the Expressway was issued by the Government on 14 April 2005 and the Expressway was fully opened for toll collection on 15 August 2005. The Concession Asset represents the development expenditure incurred to design, construct, manage and maintain the Expressway. The development expenditure incurred in respect of this Concession Agreement consists of the following: Expressway Development Expenditure RM’000

Other Concession Assets RM’000

Total RM’000

569,059 1,239 (570,298)

17,344 67 (17,411)

586,403 1,306 (587,709)

–

643 2,941 (3,584)

18 1,741 (1,759)

661 4,682 (5,343)

At 31 December 2006

–

Net Carrying Amount At 31 December 2006

–

Cost At 1 January 2005 Additions Transfer to property, plant and equipment Transfer to land held for property development Transfer to property development costs

651,082 66,577 (60,000) (15,400) (73,200)

6,111 11,233 – – –

657,193 77,810 (60,000) (15,400) (73,200)

At 31 December 2005

569,059

17,344

586,403

Cost At 1 January 2006 Additions Transfer to assets of disposal groups classified as held for sale At 31 December 2006

Accumulated Amortisation/Depreciation At 1 January 2006 Amortisation/Depreciation recognised in income statement (Note 15) Transfer to assets of disposal groups classified as held for sale

170 Kumpulan Guthrie Berhad

23. CONCESSION ASSET (cont’d.) Expressway Development Expenditure RM’000

Other Concession Assets RM’000

Total RM’000

Accumulated Amortisation/Depreciation At 1 January 2005 Amortisation/Depreciation recognised in income statement (Note 15)

– 643

– 18

– 661

At 31 December 2005

643

661

Net Carrying Amount At 31 December 2005

568,416

17,326

585,742

Included in expressway development expenditure in 2005 were interest capitalised amounting to RM95,000 and depreciation on property, plant and equipment amounting to RM10,000 as disclosed in Notes 12 and 18 respectively.

24. GOODWILL ON CONSOLIDATION GROUP 2006 2005 RM’000 RM’000 Cost At 1 January Effect of adopting FRS 3 [Note 4(b)] Acquisition of shares in subsidiary companies Exchange differences

347,397 (85,887) 7,720 16

345,461 – 2,008 (72)

At 31 December

269,246

347,397

Accumulated Amortisation and Impairment Losses At 1 January Effect of adopting FRS 3 [Note 4(b)] Amortisation for the year (Note 13) Impairment losses recognised in income statement (Note 13) Exchange differences

85,887 (85,887) – 14,688 –

68,765 – 17,163 – (41)

At 31 December

14,688

85,887

254,558

261,510

Net Carrying Amount

Annual Report 2006 171

24. GOODWILL ON CONSOLIDATION (cont’d.) (a) Impairment Losses Recognised In accordance with the revised FRS 136, the Group had carried out its first review of the recoverable amount of its investments in Indonesia in the fourth quarter of 2006. The review led to the recognition of an impairment loss of RM14,688,000 for certain subsidiary companies arising from net deficit in the present value of cash flow projections. The recoverable amount was based on value-in-use and was determined at each cash generating unit (“CGU”). In determining value-in-use for the CGU, the cash flows were discounted at a rate of 16% on a pre-tax basis. Following this impairment test, impairment losses on the carrying amounts of property, plant and equipment, plantation development expenditure and prepaid lease payments amounting to RM5,356,000, RM4,923,000 and RM388,000 respectively were recognised in the income statement as disclosed in Note 13. (b) Impairment Tests for Goodwill Allocation of Goodwill Goodwill has been allocated to nineteen CGUs which in this respect, comprise operating plantation subsidiary companies in Indonesia based on the net assets value as of the date of acquisition of 31 March 2001. Key Assumptions used in Value-in-use Calculations The principal activities of the subsidiary companies in Indonesia comprise the cultivation of oil palm on plantations. The recoverable amount of a CGU is determined based on value-in-use calculations using cash flow projections covering a tenyear period. The first three years cash flow projections are based on financial budgets approved by management. The cash flow projections beyond the three-year period are based on the long range expected crude palm oil (“CPO”) price and the anticipated palm productivity and cost of production. If the net present value of the respective CGU is less than the carrying amount, the cash flow projections will be extended further until the expiry date of the lease period. The key assumptions used for value-in-use calculations for the current year are as follows: Gross margin Growth rate Discount rate

27% 3% 16%

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill: (i)

Budgeted gross margin The basis used to determine the value assigned to the budgeted gross margin is the average gross margin achieved from the sale of palm products in the year before the budget year increased for expected efficiency improvements.

(ii)

Growth rate The basis used to determine the growth rate is based on the long range expected palm product price, anticipated productivity and cost of production which is comparable with the average productivity of the palms in the industry. Productivity refers to average yield of fresh fruit bunches per mature hectare and average oil and kernel extraction rates.

(iii) Discount rate The discount rates used are pre-tax and reflect specific risks relating to the industry. The rate applied have taken into account the Government Securities yield, inflation rate and lending rates as announced by Bank Indonesia. Sensitivity to Changes in Assumptions With regards to the assessment of value-in-use, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying values of the CGUs to materially exceed their recoverable amounts. 172 Kumpulan Guthrie Berhad

25. INVESTMENTS IN SUBSIDIARY COMPANIES COMPANY 2006 2005 RM’000 RM’000 Unquoted shares At Directors’ valuation – 1982 As previously stated Effects of adopting FRS 127 As restated At cost Reclassified as held for sale (Note 41)

Total unquoted shares Accumulated impairment losses

Quoted shares in Malaysia: At Directors’ valuation – 1982 As previously stated Effects of adopting FRS 127 As restated At cost Total quoted shares TOTAL

295,033 (120,282)

174,751

2,376,036 (104,800)

2,409,089 -

2,271,236

2,409,089

2,445,987 (204,277)

2,583,840 (155,071)

2,241,710

2,428,769

154,764 (41,768)

112,996 281,820

394,816

2,636,526

2,823,585

Movements in accumulated impairment losses during the financial year are as follows: COMPANY 2006 2005 RM’000 RM’000 At 1 January Impairment losses recognised in income statement (Note 13) Written off upon disposal of subsidiary companies (Note 15) Written off upon liquidation of subsidiary companies

155,071 53,673 – (4,467)

188,144 2,003 (35,076) –

At 31 December

204,277

155,071

1,264,584

992,720

Market value of quoted shares in Malaysia

Annual Report 2006 173

25. INVESTMENTS IN SUBSIDIARY COMPANIES (cont’d.) In determining the impairment losses, consideration has been given to the history of results and the carrying amounts of underlying assets of these investments and where such analysis has indicated the possibility of impairment, the future operating plans and cash flows have also been considered. The net carrying amounts reflect the extent to which the directors consider the investments are recoverable in light of current plans for future operations and anticipated cash flows. Certain shares held in quoted subsidiary companies at the book value of RM168,577,000 and at market value of RM427,646,000 in 2005 were pledged to financial institutions for credit facilities granted to certain overseas subsidiary companies. In July 2006, these shares were released by the financial institutions upon restructuring of the credit facilities. The unquoted shares of certain subsidiary companies in Indonesia are pledged to financial institutions for credit facilities granted to the subsidiary companies as disclosed in Note 44. Subsidiary Companies under Members’ Voluntary Liquidation During the financial year, the following subsidiary companies have been placed under members’ voluntary liquidation and have accordingly been deconsolidated effective from the dates the subsidiaries were placed under liquidation: Date Placed Under Liquidation Guthrie Assets Management Sdn. Berhad Guthrie KD Sdn. Berhad Guthrie Pharmaceuticals Sdn. Berhad Guthrie Distributors Sdn. Berhad Guthrie Polymer Sdn. Berhad Guthrie Land Sdn. Berhad Guthrie Medicare Products (Holdings) Sdn. Berhad Guthrie Livestock Corporation Sdn. Berhad Guthrie Solutions Sdn. Berhad Guthrie Palm Products Sdn. Berhad Guthrie Industries (Indonesia) Sdn. Berhad Highlands Assets Management Sdn. Berhad Highlands Estate Sdn. Berhad K & K Plantations Sdn. Berhad Hatawa Plantation Sdn. Berhad Syarikat Yew Lian Plantations Sdn. Berhad Hock Guan Seng Plantations Sdn. Berhad Guthrie Training Centre Sdn. Berhad

174 Kumpulan Guthrie Berhad

15 15 15 15 21

5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 5 June 2006 7 June 2006 November 2006 November 2006 November 2006 November 2006 December 2006

25. INVESTMENTS IN SUBSIDIARY COMPANIES (cont’d.) The effects of deconsolidation for subsidiaries placed under members’ voluntary liquidation during the year are as follows: GROUP 2006 2005 RM’000 RM’000 Total distribution in cash Less: Net assets deconsolidated

28,250

–

(27,305)

–

945

–

Net gain on liquidation of subsidiary companies (Note 11)

Subsequent to the financial year ended 31 December 2006, Kamuning Marble Sdn. Berhad, a wholly-owned subsidiary of the Company, was placed under member’s voluntary liquidation on 29 January 2007.

26. INVESTMENTS IN ASSOCIATED COMPANIES GROUP 2006 2005 RM’000 RM’000 Unquoted shares at cost Share of post-acquisition reserves Exchange differences

The Group’s interest in the associated companies are analysed as follows: Share of net tangible assets

COMPANY 2006 2005 RM’000 RM’000

12,465 6,409 (2,174)

12,465 4,314 (2,984)

– – –

16,700

13,795

–

16,700

13,795

Details of the associated companies, held by subsidiary companies, are as follows: Name of company

Country of incorporation

Effective interest 2006 2005 % %

Principal activities

Muang Mai Guthrie Co. Ltd.

Thailand

Processing and distribution of rubber

Boustead Bulking Sdn. Bhd.

Malaysia

Bulking and marketing services

The financial statements of the associated companies are coterminous with those of the Group.

Annual Report 2006 175

26. INVESTMENTS IN ASSOCIATED COMPANIES (cont’d.) The summarised financial information of the associated companies are as follows: GROUP 2006 2005 RM’000 RM’000 Assets and Liabilities Non-current assets Current assets

20,733 29,984

21,458 23,138

Total assets

50,717

44,596

Current liabilities

16,230

15,867

149,089 5,573

87,742 1,915

Results Revenue Profit for the year

27. INVESTMENT IN A JOINTLY CONTROLLED ENTITY GROUP 2006 2005 RM’000 RM’000 Unquoted shares at cost Share of post-acquisition reserves

COMPANY 2006 2005 RM’000 RM’000

2,000 (38)

– –

2,000 –

– –

1,962

–

2,000

–

Details of the jointly controlled entity are as follows: Name of Jointly Controlled Entity

Country of Incorporation

Effective Interest 2006 2005 % %

Principal Activity

PNB Enterprise Sdn. Berhad

Malaysia

Animal husbandry

176 Kumpulan Guthrie Berhad

–

27. INVESTMENT IN A JOINTLY CONTROLLED ENTITY (cont’d.) The Group’s aggregate share of the non-current assets, current assets, current liabilities, income and expenses of the jointly controlled entity are as follows: 2006 RM’000

2005 RM’000

Assets and Liabilities Non-current assets Current assets

44 1,944

– –

Total assets

1,988

–

Current liabilities

–

Results Revenue Expenses

7 45

– –

28. OTHER INVESTMENTS GROUP 2006 2005 RM’000 RM’000 At cost: Unquoted shares in Malaysia Less: Accumulated impairment losses

Quoted shares in Malaysia Malaysian Government Securities, net of accretion/premium

At market value: Quoted shares in Malaysia Malaysian Government Securities

COMPANY 2006 2005 RM’000 RM’000

3,314 (2,500)

3,314 (2,000)

2,959 (2,500)

2,959 (2,000)

814 – 959

1,314 277 959

459 – –

959 – –

1,773

2,550

459

959

– 1,071

1,554 1,084

– –

1,071

2,638

–

In the financial year ended 31 December 2006, the Group and the Company had recognised an impairment loss of RM500,000 (2005: Nil) for an investment in unquoted shares in Malaysia. Annual Report 2006 177

29. LOANS TO/FROM SUBSIDIARY COMPANIES COMPANY 2006 2005 RM’000 RM’000 Loans to subsidiary companies Provision for doubtful debts

Loans from subsidiary companies

404,548 (25,000)

415,472 (25,000)

379,548

390,472

1,664,395

1,522,640

Movements in provision for doubtful debts during the financial year are as follows: COMPANY 2006 2005 RM’000 RM’000 At 1 January Written off on disposal of subsidiary companies (Note 15)

25,000 –

99,460 (74,460)

At 31 December

25,000

The loans to subsidiary companies have been reviewed at balance sheet date for their recoverability. In assessing the extent of the provision required, due consideration has been given to all pertinent information relating to the ability of the subsidiary companies to repay the loans, such as the history of results, recoverability amounts of the underlying assets, the current plans for the future operations and anticipated cash flows. The loans to subsidiary companies include an amount of RM261,248,000 (2005: RM267,173,000) which bore interest at rates ranging from 3.5% to 6.9% (2005: 3.3% to 5.0%) per annum. The loans from subsidiary companies include an amount of RM1,664,395,000 (2005: RM1,435,640,000) which bore interest at rates ranging from 5.5% to 6.0% (2005: 4.6% to 4.9%) per annum. All other loans are non-interest bearing. All loans to/from subsidiary companies are unsecured and have no fixed terms of repayment and are not expected to be repaid within the next twelve months.

178 Kumpulan Guthrie Berhad

30. TRADE RECEIVABLES GROUP 2006 2005 RM’000 RM’000 Trade receivables Provision for doubtful debts

375,359 (26,925)

318,716 (30,996)

Less: Current portion

348,434 (280,087)

287,720 (287,720)

68,347

–

Long-term trade receivables

Long-term trade receivables and RM68,500,000 (2005: RM61,968,000) of the total current portion of trade receivables relate to proceeds from the sale of plots of development properties by certain subsidiary companies involved in property development activities. Included in the current portion of trade receivables is an amount of RM22,350,000 (2005: RM36,917,000) relating to subsidiary companies in Indonesia which are pledged as security for banking facilities granted to the subsidiary companies as disclosed in Note 44. Other information on financial risks of trade receivables are disclosed in Note 52.

31. ADVANCES FOR PLASMA PIR-TRANS PROJECTS GROUP 2006 2005 RM’000 RM’000 At 1 January Additions Write off Conversion Exchange differences

38,660 3,896 – – 813

46,946 2,582 (6,867) (1,092) (2,909)

At 31 December Accumulated allowance for losses on recovery

43,369 (25,351)

38,660 (21,110)

18,018

17,550

Annual Report 2006 179

31. ADVANCES FOR PLASMA PIR-TRANS PROJECTS (cont’d.) In accordance with the Indonesian government policy, oil palm plantation owners/operators (herein referred to as the “Nucleus”) are required to develop plantations for small holders (herein referred to as “Plasma Farmers”). This form of assistance to the Plasma Farmers is known as the “Perusahaan Inti Rakyat Transmigrasi (PIR-Trans)” program. Under the PIR-Trans program, the Nucleus is also required to train and develop the skills of the Plasma Farmers, and purchase the fresh fruit bunches harvested by Plasma Farmers at prices determined by the government. The PIR-Trans program is funded by state-owned banks. The investment credit is rendered to the Nucleus, which receives the funds through several drawdowns during the plantation development period (land preparation up to the end of the immature stage). When the plasma plantation projects are completed and ready for conversion, the investment credit is transferred to the Plasma Farmers who then operate the Plasma PIR-Trans projects under the supervision of the Nucleus. The allowance for losses on recovery of Plasma PIR-Trans projects was provided for to cover the possible non-recoverable investments under the PIR-Trans program. Three subsidiary companies in Indonesia have commitments to develop oil palm plantations for the Plasma Farmers under this program covering a total area of 16,500 hectares of which 8,024 have been converted.

32. ADVANCES FOR KKPA (“KREDIT KOPERASI PRIMER UNTUK ANGGOTANYA”) PROJECTS GROUP 2006 2005 RM’000 RM’000 At 1 January Additions Conversion Exchange differences

26,093 13,373 (22,648) 556

19,026 8,246 – (1,179)

At 31 December Accumulated allowances for losses on recovery

17,374 (2,268)

26,093 (2,220)

15,106

23,873

Under an existing government policy in Indonesia, oil palm plantation owners/operators (herein referred to as the “Nucleus”) are required to assist in the development of plantations for small holders (herein referred to as the “Plasma Farmers”) through a program called “Kredit Koperasi Primer untuk Anggotanya” or “KKPA”. Under the KKPA program, all participating Plasma Farmers are under the coordination of a cooperative, and any investment credit availed during the development of the plantations (land preparation up to the end of the immature stage) shall also be rendered to the cooperative. The Nucleus, on the other hand, serves as the contractor for developing the plantations. Advances for present and proposed KKPA projects represent the accumulated costs to develop plasma plantations, totalling 16,000 hectares which are currently being financed by creditor banks and self-financed by a subsidiary company. Upon the cooperative obtaining KKPA financing from the creditor bank, the said advances will be recovered from the cooperative. The allowance for losses on recovery of KKPA project is based on a periodic review of the recoverability of the development costs.

180 Kumpulan Guthrie Berhad

33. DEFERRED TAX GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

At 1 January As previously stated Effects of adopting FRS 127

512,393 –

531,181 –

6,214 (6,560)

6,951 (6,560)

As restated Recognised in income statement (Note 41) Effects of changes in tax rates recognised in equity Reclassified as held for sale (Note 41) Exchange differences

512,393 7,652 (6,821) 2,589 7,572

531,181 4,777 – – (23,565)

(346) 1,748 (8) – –

391 (737) – – –

At 31 December

523,385

512,393

1,394

(346)

(152,050)

(195,777)

–

(836)

618,682 56,753

649,766 58,404

904 490

– 490

523,385

512,393

1,394

(346)

Presented after appropriate offsetting as follows: Deferred tax assets Deferred tax liabilities – subject to income tax – subject to capital gains tax

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: GROUP DEFERRED TAX LIABILITIES Accelerated Capital Allowances RM’000

Revaluation of Properties RM’000

Others RM’000

Total RM’000

At 1 January 2006 Recognised in income statement Effects of changes in tax rates recognised in equity Reclassified as held for sale Exchange differences

174,718 29,293 – (38,826) 892

555,046 (26,223) (6,821) – 8,531

115 (115) – – –

729,879 2,955 (6,821) (38,826) 9,423

At 31 December 2006

166,077

530,533

–

696,610

At 1 January 2005 Recognised in income statement Exchange differences

161,340 14,906 (1,528)

613,134 (31,797) (26,291)

154 (29) (10)

774,628 (16,920) (27,829)

At 31 December 2005

174,718

555,046

115

729,879

Annual Report 2006 181

33. DEFERRED TAX (cont’d.) GROUP (cont’d.) DEFERRED TAX ASSETS Unabsorbed Tax Losses RM’000

Unutilised Capital Allowances RM’000

Unrealised Intragroup Profits RM’000

Others RM’000

Total RM’000

At 1 January 2006 Recognised in income statement Reclassified as held for sale Exchange differences

49,329 (8,952) (2,400) 1,262

2,736 36,408 (39,015) –

153,004 (34,410) – –

12,417 2,257 – 589

217,486 (4,697) (41,415) 1,851

At 31 December 2006

39,239

129

118,594

15,263

173,225

At 1 January 2005 Recognised in income statement Exchange differences

58,698 (5,921) (3,448)

9,490 (6,754) –

158,238 (5,234) –

17,021 (3,788) (816)

243,447 (21,697) (4,264)

At 31 December 2005

49,329

2,736

153,004

12,417

217,486

GROUP 2006 2005 RM’000 RM’000 Deferred tax liabilities Deferred tax assets

182 Kumpulan Guthrie Berhad

696,610 (173,225)

729,879 (217,486)

523,385

512,393

33. DEFERRED TAX (cont’d.) COMPANY DEFERRED TAX LIABILITIES Accelerated Capital Allowances RM’000

Revaluation of Properties RM’000

Others RM’000

Total RM’000

(947) –

7,179 (6,560)

(18) –

6,214 (6,560)

(947) 1,757 –

619 (8) (8)

(18) (1) –

(346) 1,748 (8)

At 31 December 2006

810

603

(19)

1,394

At 1 January 2005 As previously stated Effects of adopting FRS 127

(221) –

7,187 (6,560)

(15) –

6,951 (6,560)

As restated Recognised in income statement

(221) (726)

627 (8)

(15) (3)

391 (737)

At 31 December 2005

(947)

619

(18)

(346)

At 1 January 2006 As previously stated Effects of adopting FRS 127 As restated Recognised in income statement Effects of changes in tax rates recognised in equity

Deferred tax assets have not been recognised in respect of the following items: GROUP 2006 2005 RM’000 RM’000 Unused tax losses Unabsorbed capital allowances Reinvestment and investment tax allowances

200,510 7,188 115,305

202,015 197,614 115,319

The unused tax losses and unabsorbed capital allowances of the subsidiary companies in Malaysia amounting to RM19,519,000 and RM496,000 respectively are available indefinitely for offset against future taxable profits of the subsidiary companies in which those items arose. The availability for utilisation is subject to no substantial changes in shareholdings of the subsidiary companies under Section 44(5A) and (5B) of the Income Tax Act 1967. The unused tax losses of the subsidiary companies in Indonesia amounting to RM34,163,000 are available for offset against future taxable profits for a maximum period of five years.

Annual Report 2006 183

34. PROPERTY DEVELOPMENT COSTS GROUP 2006 2005 RMâ&#x20AC;&#x2122;000 RMâ&#x20AC;&#x2122;000 Property development costs at 1 January: Freehold land Development costs

80,977 1,308,206

22,202 1,651,772

1,389,183

1,673,974

(187) (1,471)

(3,146) (507,394)

(1,658)

(510,540)

278,746

171,983

(1,068,871) 1,658 (449,294)

(1,386,275) 510,540 (193,136)

(1,516,507)

(1,068,871)

172,225 (37,903)

46,517 (7,374)

134,322

39,143

Accrued billings

129,358

86,403

Property development costs at 31 December

413,444

392,092

Accumulated costs reversed during the year in respect of completed products: Freehold land Development costs

Costs incurred during the year: Development costs Costs charged to income statement: At 1 January Accumulated costs reversed during the year in respect of completed products Charge for the year At 31 December Transfers: From land held for property development To inventories

Included in the property development costs in 2005 was the apportionment of shared development cost in respect of the Concession Asset, amounting to RM73,200,000 as disclosed in Note 23.

184 Kumpulan Guthrie Berhad

35. INVENTORIES GROUP 2006 2005 RM’000 RM’000 At cost: Produce stocks Raw materials Work-in-progress Completed properties Finished goods Stores

At net realisable value: Finished goods

COMPANY 2006 2005 RM’000 RM’000

28,783 380 – 81,059 72 78,971

35,578 667 8,976 64,626 3,918 75,982

– – – – – –

189,265

189,747

–

1,319

–

189,265

191,066

–

Produce stocks at cost amounting to RM3,905,000 (2005: RM2,944,000) relating to certain subsidiary companies in Indonesia are pledged to financial institutions as securities for credit facilities granted to the subsidiary companies as disclosed in Note 44.

36. AMOUNTS DUE FROM CUSTOMERS ON CONTRACTS GROUP 2006 2005 RM’000 RM’000 Construction contract costs incurred to date Less: Attributable loss Provisions for foreseeable losses

91,818 (14,952) (1,777)

29,971 (768) –

Less: Progress billings

75,089 (75,089)

29,203 (21,563)

–

7,640

Contract Revenue: – Cumulative – Recognised during the year (Note 9)

75,089 6,497

20,970 6,346

Contract Costs: – Cumulative – Recognised during the year (Note 10)

91,818 17,805

21,780 8,502

–

791

Retention sums on contracts, included in trade receivables

Annual Report 2006 185

37. OTHER RECEIVABLES GROUP 2006 2005 RM’000 RM’000 Deposits Prepayments Staff loans Project cost Interest receivable Insurance claims recoverable Other taxes Sundry receivables

Amount due from an associated company

COMPANY 2006 2005 RM’000 RM’000

9,954 28,961 13,300 1,813 3,954 4,416 35,481 38,877

11,143 32,114 13,410 4,439 1,024 2,705 13,134 29,189

70 516 12,474 – 2,630 235 – 11,753

83 10,563 12,988 – 299 178 – 7,168

136,756 505

107,158 520

27,678 505

31,279 520

137,261

107,678

28,183

31,799

The amounts due from an associated company is unsecured, non-interest bearing and has no fixed term of repayment. Other information on financial risks of other receivables are disclosed in Note 52.

38. AMOUNTS DUE FROM/TO SUBSIDIARY COMPANIES COMPANY 2006 2005 RM’000 RM’000 Amounts due from subsidiary companies Provision for doubtful debts

Amounts due to subsidiary companies

186 Kumpulan Guthrie Berhad

972,129 (176,493)

1,193,525 (167,697)

795,636

1,025,828

503,297

800,751

38. AMOUNTS DUE FROM/TO SUBSIDIARY COMPANIES (cont’d.) Movements in provision for amounts due from subsidiary companies during the financial year are as follows: COMPANY 2006 2005 RM’000 RM’000 At 1 January Recognised in income statement (Note 13) Written off upon disposal of subsidiary companies (Note 15) Written off upon members’ voluntary liquidation

167,697 19,200 – (10,404)

143,723 26,974 (3,000) –

At 31 December

176,493

167,697

The amounts due from subsidiary companies include an amount of RM58,746,000 (2005: RM176,825,000) which bore interest at rates ranging from 4.04% to 5% (2005: 4% to 5%) per annum. The amounts due to subsidiary companies include an amount of RM496,602,000 (2005: RM651,689,000) which bore interest at rates ranging from 4.04% to 5% (2005: 4% to 5%) per annum. All other amounts due from/to subsidiary companies are non-interest bearing. All amounts due from/to subsidiary companies are unsecured and have no fixed terms of repayment.

39. MARKETABLE SECURITIES GROUP 2006 2005 RM’000 RM’000 At cost, net of accretion/premium: Shares quoted in Malaysia Warrants/Loan stocks quoted in Malaysia Corporate bonds

At market value: Shares quoted in Malaysia Warrants/Loan stocks quoted in Malaysia Corporate bonds

14,212 – 23,191

11,469 954 10,443

37,403

22,866

14,815 – 23,241

13,532 891 13,158

38,056

27,581

Annual Report 2006 187

40. DEPOSITS, BANK BALANCES AND CASH GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

Fixed deposits with: Licensed banks Licensed financial institutions Licensed banks pledged for banking facilities

380,196 271,510 –

282,981 245,472 11,446

2,549 18,110 –

32,022 23,200 –

Cash held under Housing Development Accounts Cash and bank balances

651,706 102,357 55,873

539,899 115,073 54,095

20,659 – 8,371

55,222 – 1,172

809,936

709,067

29,030

56,394

The fixed deposits with licensed banks pledged to financial institutions in 2005 were for credit facilities granted to certain subsidiary companies in Indonesia. The pledge was released in the current financial year. Cash held under the Housing Development Accounts represents receipts from purchasers of residential properties less payments or withdrawals provided under Section 7A of the Housing Development (Control and Licensing) Amendment Act, 2002. These accounts are available only to the subsidiary companies involved in the property development activities. The range of interest rates per annum for fixed deposits at the balance sheet date were as follows: GROUP 2006 % Licensed banks Licensed financial institutions

1.50 – 5.28 2.72 – 4.05

2005 %

1.50 – 4.35 2.60 – 3.90

COMPANY 2006 2005 % % 2.30 – 5.28 2.72 – 3.61

2.50 – 4.35 2.60 – 2.97

The range of maturities of fixed deposits at the end of the financial year were as follows: GROUP 2006 Days Licensed banks Licensed financial institutions

188 Kumpulan Guthrie Berhad

1 – 182 1 – 367

2005 Days

1 – 120 1 – 365

COMPANY 2006 2005 Days Days 1 – 44 1 – 58

1 – 92 1 – 45

41. ASSETS OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE The following classes of assets and liabilities of Guthrie Corridor Expressway Sdn. Berhad and Guthrie MDF Sdn. Berhad have been classified as held for sale as at 31 December 2006: GROUP COMPANY 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Assets Property, plant and equipment Concession asset Investments in subsidiary companies Deferred tax assets Inventories Trade receivables Other receivables Deposits, bank balances and cash

Liabilities Trade payables Other payables Amounts due to subsidiary companies

73,871 582,366 – 2,589 9,664 6,990 548 2,872

– – – – – – – –

– – 104,800 – – – – –

– – – – – – – –

678,900

–

104,800

–

2,780 6,326 –

– – –

– – 22,523

– – –

9,106

–

22,523

–

(a) Proposed Disposal of Guthrie Corridor Expressway Sdn. Berhad (“GCESB”) On 27 November 2006, the Company had entered into a Sale and Purchase of Shares Agreement with Projek Lintasan Kota Holdings Sdn. Berhad (“Prolintas”) for the proposed disposal of the entire equity interest in GCESB, a wholly-owned subsidiary of the Company, which involves the following: (i)

the disposal of the entire equity interest in GCESB comprising 5,000,000 ordinary shares for a disposal consideration of RM5 million; and

(ii)

the settlement of intercompany balance owing by GCESB to another wholly-owned subsidiary of the Company through cash payment of RM431 million and issuance of RM500 million nominal value of Redeemable Loan Stocks (“RLS”) of GCESB.

Annual Report 2006 189

42. SHARE CAPITAL GROUP/COMPANY Number of Ordinary Shares of RM1 each Amount 2006 2005 2006 2005 ’000 ’000 RM’000 RM’000 Authorised share capital At 1 January/31 December

1,500,000

Issued and fully paid share capital At 1 January Issued pursuant to the Second ESOS

1,006,939 14,510

1,005,419 1,520

1,006,939 14,510

1,005,419 1,520

1,021,449

1,006,939

1,021,449

1,006,939

At 31 December

Ordinary Shares Issued for Cash During the financial year, the issued and paid-up share capital of the Company was increased from 1,006,939,300 ordinary shares of RM1 each to 1,021,449,400 ordinary shares of RM1 each following the issue of 14,510,100 ordinary shares of RM1 each pursuant to the Second Employees’ Share Option Scheme (“Second ESOS”) of the Company. The new shares were issued and credited as fully paid and ranked pari passu in all respects with the existing shares of the Company. The share premium arising from this issue amounting to RM18,019,000 has been credited to the share premium account.

Second Employees’ Share Option Scheme The Second ESOS of the Company was approved by the shareholders at the Extraordinary General Meeting of the Company held on 18 June 2003. The Scheme came into effect on 30 July 2003 and will be in force for a period of five years and can be extended for another maximum period of five years, subject to approvals by the relevant authorities.

190 Kumpulan Guthrie Berhad

42. SHARE CAPITAL (cont’d.) Second Employees’ Share Option Scheme (cont’d.) The salient features of the Scheme are as follows: (a) The maximum number of new ordinary shares to be made available under the Scheme should not in aggregate, exceed five percent of the total issued and paid-up share capital of the Company, at any one time during the existence of the Scheme provided that: (i)

not more than fifty percent of the new shares available under the Scheme shall be allocated, in aggregate, to executive directors and senior management; and

(ii)

not more than ten percent of the new shares available under the Scheme shall be allocated to any individual or eligible employee who, individually or collectively through his associates, holds twenty percent or more of the issued and paidup share capital of the Company.

(b) Eligible employees comprise employees of the Company and its eligible subsidiary companies incorporated in Malaysia (“the Group”) including executive directors of the Company, who have attained the age of eighteen years and whose employment have been confirmed with at least one continuous year of service (inclusive of service during any probationary period) in the Group prior to the date of offer of options to subscribe for shares in the Company. An employee or executive director who is employed on a contract basis must have served the Group for a duration of at least three years (inclusive of service under any previous contract). (c) The total number of new shares for subscription and allotment to eligible employees under the Scheme shall not exceed twenty percent of the Maximum Allowable Allotment of the eligible employee in any year. (d) Eligible employees are allowed to participate in the Scheme currently in operation of only one member company of the Group. (e) The options to subscribe for new shares may be exercised at any time before the expiry of the Scheme and may be exercised either in full or in part or in lesser number of shares, provided that the number shall be in multiples of and not less than one hundred shares. (f)

The price at which the employees are entitled to exercise their options under the Scheme shall be at a discount of not more than ten percent on the simple weighted average market price of the Company’s shares, as shown in the daily official list issued by Bursa Malaysia Securities for five market days immediately preceding the respective dates of offer of the option shares or at par value of the Company’s shares, whichever is higher.

Annual Report 2006 191

42. SHARE CAPITAL (cont’d.) Second Employees’ Share Option Scheme (cont’d.) The terms of share options granted and outstanding as at the end of the financial year are as follows: Number of Share Options Grant Date

Expiry Date

2006 08.08.03 28.10.03 04.02.04 30.04.04 02.08.04 28.10.04 02.02.05 04.05.05 28.07.05 28.10.05 27.01.06 28.04.06 31.07.06 07.11.06

29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08

2005 08.08.03 28.10.03 04.02.04 30.04.04 02.08.04 28.10.04 02.02.05 04.05.05 28.07.05 28.10.05

29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08 29.07.08

192 Kumpulan Guthrie Berhad

Exercise Price RM

As at 1 January ‘000

Granted ‘000

Exercised ‘000

Lapsed ‘000

As at 31 December ‘000

2.16 2.31 2.32 2.26 2.12 2.41 2.02 1.94 2.16 2.17 2.16 2.32 2.65 3.33

1,631 192 146 84 3,706 447 352 246 3,635 355 – – – –

– – – – – – – – – – 614 341 3,725 1,143

(1,030) (159) (115) (53) (3,140) (349) (347) (193) (3,333) (307) (575) (322) (2,981) (320)

– – – – – – – – – (5) (16) (10) (7) –

601 33 31 31 566 98 5 53 302 43 23 9 737 823

10,794

5,823

(13,224)

(38)

3,355

2,659 219 228 137 5,832 498 – – – –

– – – – – – 651 463 5,075 577

(100) – (1) (3) (374) – (54) (38) (32) –

(928) (27) (81) (50) (1,752) (51) (245) (179) (1,408) (222)

1,631 192 146 84 3,706 447 352 246 3,635 355

9,573

6,766

(602)

(4,943)

10,794

2.16 2.31 2.32 2.26 2.12 2.41 2.02 1.94 2.16 2.17

42. SHARE CAPITAL (cont’d.) Second Employees’ Share Option Scheme (cont’d.) Details of shares allotted pursuant to exercise of the Second ESOS during the financial year and the fair value, at exercise date, of ordinary shares issued are as follows:

Exercise Date

Exercise Price RM

2006 January – March January – March April – June April – June April – June April – June April – June April – June April – June April – June July – September July – September July – September July – September July – September July – September July – September July – September July – September July – September October – December October – December October – December October – December October – December October – December October – December October – December October – December October – December October – December

Less: Par value of ordinary shares Share premium

2.12 2.16 1.94 2.02 2.12 2.16 2.17 2.26 2.31 2.41 1.94 2.02 2.12 2.16 2.17 2.26 2.31 2.32 2.41 2.65 1.94 2.02 2.12 2.16 2.17 2.26 2.31 2.32 2.41 2.65 3.33

Fair Value of Ordinary Shares RM

2.35 2.35 2.56 2.57 2.55 2.55 2.55

– – – – – – –

2.62 3.02 2.62 2.62 2.62 3.60 3.60 3.18 3.02 3.62 3.66 3.64 3.64 3.64 3.64 3.64 3.66 3.64 3.66 3.66 4.56

– – – – – – – – – – – – – – – – – – – – –

2.42 2.58 2.75 2.75 2.76 2.76 2.75 2.65 2.66 2.67 3.74 3.76 3.76 3.76 3.76 3.76 3.74 3.74 3.74 3.74 4.24 4.58 4.58 4.58 4.56 4.56 4.56 4.58 4.56 4.58 4.58

Number of Share Options ‘000

Consideration Received RM’000

8 29 138 102 495 976 71 1 5 15 51 761 2,143 2,981 156 102 570 229 171 172 29 147 857 1,523 71 27 55 131 133 2,321 40

16 63 268 206 1,049 2,108 154 2 12 36 99 1,537 4,543 6,439 339 231 1,317 531 412 456 56 297 1,817 3,290 154 61 127 304 321 6,151 133

14,510

32,529 (14,510) 18,019

Annual Report 2006 193

42. SHARE CAPITAL (cont’d.) Second Employees’ Share Option Scheme (cont’d.)

Exercise Date

Exercise Price RM

2005 January – March January – March January – March January – March January – March July – September July – September July – September July – September October – December October – December October – December

2.02 2.12 2.16 2.26 2.32 1.94 2.02 2.12 2.16 1.94 2.12 2.16

Fair Value of Ordinary Shares RM

2.29 2.29 2.29 2.29 2.29 2.17 2.17 2.17 2.17 2.30 2.30 2.30

– – – – – – – – – – – –

2.37 2.37 2.37 2.37 2.37 2.56 2.56 2.56 2.56 2.50 2.50 2.50

Number of Share Options ’000

Consideration Received RM’000

35 731 297 4 1 28 19 222 46 10 74 53

71 1,549 641 9 2 55 39 471 100 19 156 114

1,520

3,226

Less: Par value of ordinary shares

(1,520)

Share premium

1,706

Number of unexercised share options granted and vested as at the end of the financial year is as follows:

At 1 January At 31 December

2006 ’000

2005 ’000

10,794 3,355

9,573 10,794

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the names of options holders, other than directors, who have been granted options to subscribe for less than 50,000 ordinary shares of RM1 each.

194 Kumpulan Guthrie Berhad

42. SHARE CAPITAL (cont’d.) Second Employees’ Share Option Scheme (cont’d.) The names of employees who have been granted options to subscribe for 50,000 or more ordinary shares of RM1 each during the financial year are as follows: Number of Share Options Grant Date

Expiry Date

Moriami Mohd

27.01.06 07.11.06

Ahmad Ridzal Ahmad Liza Suryani Mustapha

Name of Option Holders

Exercise Price RM

Granted

Exercised

As at 31.12.2006

29.07.08 29.07.08

2.16 3.33

50,000 31,100

– –

07.11.06

29.07.08

3.33

50,000

–

50,000

07.11.06

29.07.08

3.33

50,000

–

50,000

Fair value of share options granted during the year The fair value of share options granted during the year was estimated by an external valuer, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured at grant date and the assumptions used are as follows:

27 January Number of options granted (‘000) Fair value of share options (RM’000) Weighted average share price (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (year) Risk free rate (%) Expected dividend yield (%)

614 256 2.39 2.16 25.1 2.5 3.45 5.02

GRANT DATE 28 April 31 July 341 157 2.58 2.32 25.1 2.3 3.82 4.65

3,725 2,166 3.02 2.65 25.1 2.0 3.99 3.74

7 November 1,143 909 3.84 3.33 25.1 1.7 3.56 2.00

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumptions that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the option grant were incorporated into the measurement of fair value.

Annual Report 2006 195

43. RESERVES GROUP 2006 2005 RM’000 RM’000 Distributable: Revenue reserve Capital reserve

Non-distributable: Share premium Revaluation reserve Capital reserves: Capital redemption reserve Legal reserve Exchange reserve Share option reserve

COMPANY 2006 2005 RM’000 RM’000

1,308,479 47,444

1,095,680 42,659

261,829 –

100,898 –

1,355,923

1,138,339

261,829

100,898

28,584 691,403

8,178 699,257

28,584 10,122

8,178 10,136

10,972 309 17,805 1,101

10,892 309 (4,881) –

– – – 1,101

– – – –

750,174

713,755

39,807

18,314

2,106,097

1,852,094

301,636

119,212

Movements in reserves are shown in the statement of changes in equity. The nature and purpose of each category of reserve are as follows: (a) Revenue Reserve Distributable reserves are those available for distribution by way of dividends. Based on estimated tax credits and tax exempt income balance available the entire distributable reserves of the Company is available for distribution by way of dividends without the Company having to incur additional tax liability. (b) Revaluation Reserve The revaluation reserve is used to record the increase in fair value, net of deferred tax liabilities, of freehold land, plantation development expenditure and prepaid lease payments and decrease to the extent such decrease relates to an increase on the same asset previously recognised in equity. The Group has applied FRS 117 in accordance with the transitional provisions which allows the Group to retain the unamortised revalued amount as the surrogate cost of prepaid lease payments and accordingly the Group has retained the outstanding revaluation reserve attributable to the prepaid lease payments. (c) Capital Redemption Reserve Capital redemption reserve represents a transfer from revenue reserve arising from the redemption of redeemable preference shares by certain subsidiary companies.

196 Kumpulan Guthrie Berhad

43. RESERVES (cont’d.) (d) Legal Reserve Legal reserve arises from the provisions of the Civil and Commercial Code in Thailand, where an associated company is required to set aside legal reserve of at least 5% of net income at each dividend declaration until the reserve reaches 10% of the said company’s authorised share capital. (e) Exchange Reserve Exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of overseas subsidiary companies whose functional currencies are different from that of the Group’s presentation currency. It also includes exchange differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operations. (f)

Share Option Reserve The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded on grant of share options.

44. BORROWINGS GROUP 2006 2005 RM’000 RM’000 Long-Term Borrowings Secured: Islamic Lease SUKUK Term loans

Unsecured: Al-Bai Bithaman Ajil Murabahah Medium Term Notes Term loans

Total long-term borrowings Less: Current portion of borrowings included under current liabilities – Secured – Unsecured

Unamortised deferred financing expenses Unamortised SUKUK issuance expenses

COMPANY 2006 2005 RM’000 RM’000

– 175,885

377,800 212,675

– –

377,800 –

175,885

590,475

–

377,800

113,465 400,000 1,854,395

129,000 400,000 1,625,640

113,465 – 190,000

129,000 – 190,000

2,367,860

2,154,640

303,465

319,000

2,543,745

2,745,115

303,465

696,800

(18,733) (63,808)

(92,868) (16,125)

– (63,808)

– (16,125)

2,461,204 (10,769) –

2,636,122 (14,407) (1,042)

239,657 – –

680,675 – (1,042)

2,450,435

2,620,673

239,657

679,633

Annual Report 2006 197

44. BORROWINGS (cont’d.) GROUP 2006 2005 RM’000 RM’000 Short-Term Borrowings Secured: Short-term loans Current portion of long-term borrowings

Unsecured: Bankers acceptances and export credit refinancing loans Murabahah Commercial Papers Current portion of long-term borrowings

TOTAL BORROWINGS

Unamortised deferred financing expenses: At 1 January Incurred during the year Amortisation for the year (Note 12) Exchange differences At 31 December

Unamortised SUKUK issuance expenses: At 1 January Amortisation for the year (Note 12) At 31 December

198 Kumpulan Guthrie Berhad

COMPANY 2006 2005 RM’000 RM’000

– 18,733

10,901 92,868

– –

18,733

103,769

–

66,556 149,073 63,808

157,852 148,824 16,125

66,556 149,073 63,808

157,852 148,824 16,125

279,437

322,801

279,437

322,801

298,170

426,570

279,437

322,801

2,748,605

3,047,243

519,094

1,002,434

14,407 – (2,752) (886)

10,238 14,237 (10,068) –

– – – –

8,876 – (8,876) –

10,769

14,407

–

1,042 (1,042)

2,102 (1,060)

1,042 (1,042)

2,102 (1,060)

–

1,042

–

1,042

44. BORROWINGS (cont’d.) The repayment schedule on total long-term borrowings are as follows:

Within one year Between one to two years Between two to five years More than five years

GROUP 2006 2005 RM’000 RM’000

COMPANY 2006 2005 RM’000 RM’000

82,541 696,809 932,198 832,197

108,993 1,051,564 866,738 717,820

63,808 239,657 – –

16,125 442,300 238,375 –

2,543,745

2,745,115

303,465

696,800

(a) Islamic Lease SUKUK (“SUKUK”) The SUKUK Issue was structured under the Syariah principle of Al-Ijarah Al-Muntahiyah Bit-Tamlik or sale and leaseback. The SUKUK which was denominated in US Dollar at an Al-Ijarah return of USD LIBOR plus 2.0% was fully repaid in December 2006. (b) Term Loans The term loans of the Group comprise the following: (i)

Secured term loans of RM175,885,000 in respect of the Indonesian subsidiary companies.

(ii)

An unsecured syndicated term loan facility of USD471.5 million with a yield of 0.55% above USD LIBOR and is repayable over eight equal semi-annual instalments commencing 42 months after the first drawdown date on 29 August 2005.

(iii) An unsecured three year term loan facility of RM190 million drawndown on 15 December 2005. (c) Al-Bai Bithaman Ajil (“BBA facility”) The BBA facility is based on the Syariah principle of deferred payment sale and is repayable over three years commencing December 2006. (d) Murabahah Medium Term Notes (“MMTN”) The MMTN totalling RM400 million, consists of RM300 million five-year tranche and RM100 million seven-year tranche, drawndown in March 2004 with average yield of 5.15% per annum and 5.82% per annum respectively. The MMTN was structured under the Syariah principle of Murabahah or deferred payment concept. (e) Murabahah Commercial Papers (“CP”) The Murabahah Commercial Papers was issued for RM150 million nominal value at a discount with maturity period of six months and at a profit rate of 3.80% - 4.22% per annum.

Annual Report 2006 199

44. BORROWINGS (cont’d.) The range of interest rates per annum for all borrrowings are as follows: GROUP 2006 % Floating Rates: Term loans: Malaysian subsidiary companies Overseas subsidiary companies Islamic Lease SUKUK Murabahah Medium-Term Notes Murabahah Commercial Papers Short-term loans: Overseas subsidiary companies Bankers acceptances and export credit refinancing loans

2005 %

COMPANY 2006 2005 % %

5.53 – 6.01 4.56 – 4.95 – 4.00 – 15.58 3.00 – 16.09 – 6.71 – 7.61 4.76 – 6.71 6.71 – 7.61 5.15 – 6.29 5.15 – 5.79 – 3.80 – 4.225 3.80 3.80 – 4.225

– – 4.76 – 6.71 – 3.80

15.33 3.25 – 4.37

14.28 2.65 – 3.42

– 3.25 – 4.37

– 2.92 – 3.40

4.70 4.25

Fixed Rates: Term loan Al-Bai Bithaman Ajil

Details of net book value of collaterals pledged against long–term borrowings of the Indonesian subsidiary companies as at 31 December 2006 are as follows:

Long-term Borrowings RM’000

Net Book Value of Collaterals RM’000

2,072

101,836

2008

Property, plant and equipment, trade receivables, inventories and shares of certain subsidiary companies in Indonesia

112,700

338,619

2010

Fixed and floating charge over assets of certain subsidiary companies and corporate guarantee of the Company

45,994

299,908

2009

Fixed and floating charge over assets of certain subsidiary companies and corporate guarantee of the Company

15,119

31,266

2009

Property, plant and equipment, trade receivables and inventories of certain subsidiary companies and corporate guarantee of the Company

175,885

771,629

200 Kumpulan Guthrie Berhad

Year of Maturity

Collaterals

45. DEFERRED INCOME GROUP 2006 2005 RM’000 RM’000 Surplus of sales proceeds over present value of future receivables Net time share income

47,286 1,518

38,401 1,785

48,804

40,186

30,071 8,330

24,384 5,687

38,401

30,071

10,403 (8,123)

10,115 (1,785)

2,280

8,330

Malaysia RM’000

Indonesia RM’000

Total RM’000

At 1 January 2006 Recognised in income statement [Note 13(c)] Contributions paid Exchange differences

5,943 795 (462) –

9,441 10,137 (855) (53)

15,384 10,932 (1,317) (53)

At 31 December 2006

6,276

18,670

24,946

At 1 January 2005 Recognised in income statement [Note 13(c)] Contributions paid Exchange differences

5,603 872 (532) –

4,335 11,441 (6,066) (269)

9,938 12,313 (6,598) (269)

At 31 December 2005

5,943

9,441

15,384

Accumulated Accretion At 1 January Accretion for the year (Note 11) At 31 December Net Less: Long-term portion

46. RETIREMENT BENEFITS GROUP Movements in net liability during the financial year are as follows:

Annual Report 2006 201

46. RETIREMENT BENEFITS (cont’d.) GROUP (cont’d.) The amounts recognised in the balance sheet are determined as follows:

At 31 December 2006: Present value of defined benefit obligations Unrecognised actuarial gains/(losses)

At 31 December 2005: Present value of defined benefit obligations Unrecognised net actuarial losses

Malaysia RM’000

Indonesia RM’000

Total RM’000

6,089 187

31,728 (13,058)

37,817 (12,871)

6,276

18,670

24,946

5,943 –

15,990 (6,549)

21,933 (6,549)

5,943

9,441

15,384

Malaysia RM’000

Indonesia RM’000

Total RM’000

667 128 – –

8,070 5,030 (3,525) 562

8,737 5,158 (3,525) 562

795

10,137

10,932

528 344 – –

9,100 5,669 (3,963) 635

9,628 6,013 (3,963) 635

872

11,441

12,313

The amounts recognised in the income statement are as follows:

At 31 December 2006: Current service cost Interest cost Expected return on plan assets Net transition liabilities

At 31 December 2005: Current service cost Interest cost Expected return on plan assets Net transition liabilities

202 Kumpulan Guthrie Berhad

46. RETIREMENT BENEFITS (cont’d.) GROUP (cont’d.) The amounts recognised in the income statement are as follows: (cont’d.) 2006 RM’000

2005 RM’000

10,742 190

12,170 143

10,932

12,313

2006 RM’000

2005 RM’000

At 1 January Recognised in income statement [Note 13(c)]

63 10

53 10

At 31 December

72 1

63 –

6 4

Recognised in income statement: Cost of sales Administration expenses

COMPANY Movements in net liability during the financial year are as follows:

The amount recognised in the balance sheet is determined as follows: At 31 December: Present value of defined benefit obligations Unrecognised net actuarial gain

The amount recognised in the income statement is as follows: At 31 December: Current service cost Interest cost

Recognised in income statement: Administration expenses

Annual Report 2006 203

46. RETIREMENT BENEFITS (cont’d.) The subsidiary companies of the Group in Malaysia, involved in plantation operations, operate an unfunded, defined retirement benefit scheme for plantation workers as provided under the agreement between the Malayan Agricultural Producers Association and the National Union of Plantation Workers. The benefits payable are determined based on the length of service at predetermined contractual rates. Certain subsidiary companies in Indonesia operate a funded defined benefit scheme for qualified permanent employees in accordance with Labour Law No. 13 Year 2003. The obligations under the schemes are calculated using the Projected Unit Credit Method carried out at least every three years based on actuarial computations by independent actuaries. The most recent review for the Company and subsidiary companies in Malaysia was performed in September 2006 whilst for subsidiary companies in Indonesia, the review was performed in December 2006. The principal actuarial assumptions used are as follows: Malaysia

Discount rate Expected return on plan assets Expected rate of salary increases

2006 %

2005 %

6.8 N/A 4

7 N/A 4

Indonesia 2006 2005 % % 10 9 8

10 9 8

47. OTHER PAYABLES GROUP 2006 2005 RM’000 RM’000 Staff costs Retrenchment benefits Advances from third parties Accruals Sundry payables

13,062 59 43,534 105,254 38,412

15,563 191 45,323 88,175 48,243

1,659 – – 11,984 11,839

1,808 – – 12,851 2,688

200,321

197,495

25,482

17,347

Other information on financial risk of other payables are disclosed in Note 52.

204 Kumpulan Guthrie Berhad

COMPANY 2006 2005 RM’000 RM’000

48. SIGNIFICANT RELATED PARTY TRANSACTIONS (a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year: GROUP 2006 2005 RM’000 RM’000 Trade transactions: Agency fees charged to subsidiary companies Marketing charges and other expenses charged to subsidiary companies Purchases from a company in which Datuk Alladin Mohd. Hashim, a director of the Company, is a director Sale of property to Dato’ Abd Wahab Maskan, a director of the Company

Non-trade transactions: Fees and benefits-in-kind paid to non-executive directors of the Company Remuneration and benefits-in-kind paid to an executive director of the Company Interest paid/payable to subsidiary companies Interest received/receivable from subsidiary companies Advances to subsidiary companies Advances from subsidiary companies Services rendered from a company in which Dato’ Muhammad Nawawi Haji Mohd. Arshad, a director of the Company, is a director

COMPANY 2006 2005 RM’000 RM’000

–

41,059

42,212

–

9,389

10,134

4,736

44,526

–

1,436

–

1,188

1,159

691

730

1,418 – – – –

1,165 – – – –

1,418 97,910 (23,762) 721,744 (646,440)

1,165 48,098 (35,583) 93,487 (325,988)

–

The above transactions have been entered into in the normal course of business at terms mutually agreed between the parties. All the transactions have been fully settled as at 31 December, except for the following amounts: GROUP 2006 2005 RM’000 RM’000 Trade transactions due from subsidiary companies Non-trade transactions due from subsidiary companies

– –

COMPANY 2006 2005 RM’000 RM’000 46,846 402,687

51,023 169,008

Annual Report 2006 205

48. SIGNIFICANT RELATED PARTY TRANSACTIONS (cont’d.) (b) Compensation of key management personnel Key management personnel includes personnel having authority and responsibility for planning, directing and controlling the activities of the entities, directly or indirectly, including any executive director of the Group and of the Company. The remunerations of the key management, excluding the executive director which is disclosed in Note 13(b), are as follows: GROUP 2006 2005 RM’000 RM’000 Short-term employee benefits Defined contribution plan Share-based payment

COMPANY 2006 2005 RM’000 RM’000

2,046 279 42

1,721 222 –

1,004 135 42

973 123 –

2,367

1,943

1,181

1,096

The members of key management have been granted the following number of options under the Second Employees Share Option Scheme (“Second ESOS”): GROUP/COMPANY 2006 2005 ’000 ’000 At 1 January Granted during the year Exercised during the year At 31 December

358 71 (429)

232 126 –

–

358

49. COMMITMENTS (a) Capital Expenditure GROUP 2006 2005 RM’000 RM’000 Property, plant and equipment: Approved and contracted for Approved but not contracted for Concession asset

206 Kumpulan Guthrie Berhad

COMPANY 2006 2005 RM’000 RM’000

61,373 480,316 111

10,119 298,687 30,444

– 5,721 –

– 3,399 –

541,800

339,250

5,721

3,399

49. COMMITMENTS (cont’d.) (b) Plasma PIR-Trans Projects Three subsidiary companies in Indonesia, PT Bahari Gembira Ria, PT Tamaco Graha Krida and PT Guthrie Pecconina Indonesia have commitments to develop 16,500 hectares of oil palm plantations for the plasma farmers under PIR-Trans program at Kabupaten Batanghari, Province of Jambi, Kabupaten Poso, Province of Central Sulawesi and Kabupaten Musi Banyuasin, Province of South Sumatera, respectively. A total of 12,091 hectares have been developed of which about 3,626 hectares are pending conversion. (c) KKPA (“Kredit Koperasi Primer untuk Anggotanya”) Projects A subsidiary company in Indonesia, PT Sajang Heulang has entered into Cooperation Agreements and Credit Agreements to develop 16,000 hectares of oil palm plantations for the plasma farmers under the KKPA program at Kabupaten Kotabaru and Kabupaten Tanah Bumbu, Province of South Kalimantan. A total of 15,846 hectares have been developed of which 5,466 hectares have been converted and 10,380 hectares are pending conversion.

50. CONTINGENT LIABILITIES (a) Material Litigations COMPANY (i)

Breach of contract On 3 May 2001, a legal suit was filed against the Company for an alleged breach of contract on the provision for consultancy services in connection with the acquisition of subsidiary companies in Indonesia. The amount claimed by the plaintiff was for a sum of USD25.76 million (equivalent to RM90.93 million), damages of 9% per annum and interest of 6% per annum, both calculated from the date of submission of the claim until the full settlement of the amount claimed. On 29 October 2001, the District Court dismissed the plaintiff’s civil suit with costs. The plaintiff appealed to the High Court of Jakarta. On 27 February 2003, the High Court of Jakarta rejected the appeal by the plaintiff. On 17 September 2003, the plaintiff filed a fresh legal suit against the Company and six of its Indonesian subsidiary companies on the same alleged breach of contract. On 28 October 2004, the District Court of South Jakarta rejected the plaintiff’s claim in its entirety and decided in favour of the Company and the six Indonesian subsidiary companies. On 20 January 2005, the plaintiff filed an appeal against the decision of the District Court. On 25 May 2005, the Court of Appeal of Jakarta rejected the appeal by the plaintiff and affirmed the decision of the District Court of South Jakarta. On 25 November 2005, the plaintiff filed a Notice of Appeal against the decision of the Court of Appeal of Jakarta rejecting the claims. The Company filed a Notice of Appeal on 30 November 2005 against the decision of the Court of Appeal in disallowing its counterclaim. The Company will oppose the appeal made by the plaintiff and seek that the Supreme Court of Jakarta upholds the decision of the Court of Appeal.

Annual Report 2006 207

50. CONTINGENT LIABILITIES (cont’d.) (a) Material Litigations (cont’d.) GROUP The following pending legal actions were instituted against certain subsidiary companies in Indonesia: (ii)

Damages/alleged losses suffered involving land disputes In 1999, a legal suit was filed against a subsidiary company for damages/losses suffered of approximately Rp22 billion (equivalent to RM8.6 million) for material loss and Rp50 billion (equivalent to RM19.6 million) for moral loss allegedly caused by clearing, occupying and planting of oil palm on the plaintiff’s land. At the District Court, the plaintiff’s claim was rejected. At the High Court, the plaintiff’s claim was partially accepted and the High Court ordered the subsidiary company to cease all activities on the disputed land and to surrender the said land to the plaintiff. The subsidiary company has subsequently filed an appeal to the Supreme Court of Jakarta. The case is presently pending decision of the Supreme Court.

(iii) Damages/alleged losses suffered involving land disputes In 2006, a legal suit was filed against a subsidiary company and three other external parties involving land disputes. The plaintiffs are claiming for the subsidiary to surrender the land or to pay the sum of Rp86 billion (equivalent to RM34 million). The plaintiffs are also claiming for the other three external parties, among others, to revoke the rights to use the land by the subsidiary company and for a conservatory order against moveable and immovable property of the subsidiary company. On 16 August 2006, the District Court rejected the plaintiffs’ claims. The plaintiffs have appealed to the High Court against the decision of the District Court. (iv) Alleged issuance of land certificate In 2006, a legal suit was filed in the Administrative Court against a subsidiary company and two other external parties alleging that the land certificate issued to the subsidiary company was issued on an illegal basis. The Administrative Court rejected the plaintiff’s claim. The plaintiff has appealed to the High Court. The High Court had decided in favour of the plaintiff. The subsidiary company intends to appeal to the Supreme Court against the decision of the High Court. Based on legal counsel’s advice, the directors are of the opinion that the outcome of the abovementioned cases are not determinable at the date of this report. (b) Guarantees (Unsecured) (i)

The Company has provided guarantees amounting to RM1,927,408,000 (2005: RM2,044,460,000) to financial institutions in respect of credit facilities granted to certain subsidiary companies.

(ii)

In prior years, certain subsidiary companies have given guarantees to the liquidators of certain other companies for which liquidation commenced in 1977, to indemnify them against any claims and damages which may be sustained in connection with the settlement or discharge of any liabilities arising out of the distribution of assets ‘in specie’ by the liquidators. The directors are of the opinion that there would not be any material liability arising from the guarantees given.

(iii) The Company has provided guarantees amounting to RM76,820,000 to third parties in respect of certain tenders awarded to a subsidiary company. (iv) Certain subsidiary companies in Indonesia have provided guarantees amounting to approximately Rp311 billion (equivalent to RM122 million) for the development of oil palm plantations for small holders through the KKPA program as disclosed in Note 49(c).

208 Kumpulan Guthrie Berhad

50. CONTINGENT LIABILITIES (cont’d.) (c) Others (i)

There are claims for interest on certain other payables of a subsidiary company in Indonesia amounting to Rp57.3 billion (equivalent to RM23 million). In the absence of any agreement between both parties, there is uncertainty of the amount of interest charges that should be accrued and recorded in the financial statements of the subsidiary company and the Group. The directors are of the opinion that such payables should be non-interest bearing and, accordingly, such interest claims are not accrued and recorded in the financial statements.

(ii)

In relation to the construction of the Guthrie Corridor Expressway, several former landowners have filed appeals under Form N of the Land Acquisition Act, 1960 claiming for higher land values than the compensations awarded to them. In the event the said landowners are successful in their appeals, the additional compensations payable by the Company is estimated to be approximately RM9.7 million. In addition, several former landowners have requested additional compensation for their remaining land area that has proved uneconomical for usage. In the event the said landowners are successful in their appeals, the additional compensations payable by the Company is estimated to be approximately RM9.9 million.

51. CONTINGENT ASSETS GROUP 2006 2005 RM’000 RM’000 Difference between the amount claimed and the amount awarded by the the Government in respect of land acquired or utilised by the Government

189,075

194,663

52. FINANCIAL INSTRUMENTS (a) Financial Risk Management Objectives and Policies The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its foreign exchange, interest rate, price fluctuation, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group’s policy is to not engaged in speculative transactions. (b) Foreign Exchange Risk The Group operates internationally and is exposed to various currencies, mainly Indonesian Rupiah and United States Dollar. Foreign currency denominated assets and liabilities together with expected cash flows from highly probable purchases and sales give rise to foreign exchange exposures. The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the property or investment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. Material foreign currency transaction exposures are hedged, mainly with derivative financial instruments such as forward foreign exchange contracts.

Annual Report 2006 209

52. FINANCIAL INSTRUMENTS (cont’d.) (b) Foreign Exchange Risk (cont’d.) The net unhedged financial assets and financial liabilities of the Group that are not denominated in their functional currencies are as follows: Net Current Assets/(Liabilities) Held in <-------------- Non-Functional Currency ---------------> Functional Currency of Group Companies

At 31 December 2006: Ringgit Malaysia Indonesian Rupiah

At 31 December 2005: Ringgit Malaysia Indonesian Rupiah United States Dollar

United States Dollar RM’000

Euro RM’000

Indonesian Rupiah RM’000

Total RM’000

2,427 (508,069)

(159) –

– (32,019)

2,268 (540,088)

(505,642)

(159)

(32,019)

(537,820)

(374,496) (166,270) –

1,846 – –

– – 50,398

(372,650) (166,270) 50,398

(540,766)

1,846

50,398

(488,522)

As at 31 December 2006, the Group has no outstanding forward foreign currency contracts. (c) Interest Rate Risk The Group’s primary interest rate risk relates to interest-bearing debt. The Group had no substantial long-term interest-bearing assets as at 31 December 2006. The investments in financial assets are mainly short-term in nature and have been mostly placed in fixed deposits or occasionally, in short-term commercial papers which yield better returns than cash at bank. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. The Group also uses hedging instruments such as interest rate swaps to minimise its exposure to interest rate volatility. The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their respective notes.

210 Kumpulan Guthrie Berhad

52. FINANCIAL INSTRUMENTS (cont’d.) (c) Interest Rate Risk (cont’d.) As at 31 December 2006, the Group has entered into interest rate swaps (“IRS”) to convert floating rate liabilities to fixed rate liabilities and vice versa to reduce the Group’s exposure from adverse fluctuations in interest rates on underlying debt instruments as follows:

Interest Rate Swap USD Term Loan

USD Term Loan

Ringgit 5-7 Year Islamic Bond

Notional Amount RM741.30 million (equivalent to USD210 million)

RM529.50 million (equivalent to USD150 million)

RM34.59 million (equivalent to USD9.8 million)

RM40 million

Effective Period

Weighted Average Rate p.a.

28/02/06 to 28/02/08

4.98% – 5.15% for the entire tenor of the liability

28/02/08 to 29/08/12

4.98% – 5.15% for the entire tenor of the liability, provided the spread is within the range

28/02/06 to 28/02/09

4.795% – 5.00% for the entire tenor of the liability

28/02/09 to 29/08/12

Floating but capped at 6.0% provided the 6 month LIBOR is within the specified ranges

27/07/06 to 26/07/10

6.425% for the entire tenor of the liability

27/07/06 to 26/07/07

5.6% for the entire tenor of the liability

27/07/07 to 26/07/10

5.6% for the entire tenor of the liability, provided the spread is within the range

19/03/04 to 18/03/11

6 month KLIBOR + 1.80%

All the above instruments were executed with creditworthy financial institutions and the directors are of the view that the possibility of non-performance by these financial institutions is unlikely on the basis of their respective financial strengths.

(d) Price Fluctuation Risk The Group is exposed to price fluctuation risk on commodities particularly of palm oil. The Group mitigates its risk to the price volatility through forward hedging contracts in futures and selling forward in the physical market.

Annual Report 2006 211

52. FINANCIAL INSTRUMENTS (cont’d.) (e) Liquidity Risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and prudently balances its portfolio with some short-term funding so as to achieve overall cost effectiveness. (f)

Credit Risk Credit risk, or the risk of counterparties defaulting, is controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised and monitored by limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoing basis through Group management reporting procedures. The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments. The Group’s normal trade credit terms granted to customers range from 30 to 90 days. Other credit terms are assessed and approved on a case-by-case basis. The normal trade credit terms granted to the Group by its creditors range from 14 to 90 days.

(g) Fair Values The aggregate net fair values of financial assets and financial liabilities which are not carried at fair value on the balance sheets of the Group and of the Company as at the end of the financial year are represented as follows:

Note

2006 Carrying Amount RM’000

Fair Value RM’000

2005 Carrying Amount RM’000

Fair Value RM’000

GROUP Financial Assets Other investments: – Quoted shares – Unquoted shares – Malaysian Government Securities Marketable Securities: – Quoted shares – Warrants/Loan stocks quoted in Malaysia – Corporate bonds

28 28 28

– 814 959

– # 1,071

277 1,314 959

1,554 # 1,084

39 39 39

14,212 – 23,191

14,815 – 23,241

11,469 954 10,443

13,532 891 13,158

Financial Liabilities Long-term borrowings

2,450,435

2,391,468

2,620,673

2,432,133

212 Kumpulan Guthrie Berhad

52. FINANCIAL INSTRUMENTS (cont’d.) (g) Fair Values (cont’d.)

Note

2006 Carrying Amount RM’000

Fair Value RM’000

2005 Carrying Amount RM’000

Fair Value RM’000

COMPANY Financial Assets Other investments – unquoted shares Loans to subsidiary companies Amounts due from subsidiary companies

28 29 38

459 379,548 795,636

# ## ##

959 390,472 1,025,828

# ## ##

Financial Liabilities Loans from subsidiary companies Amounts due to subsidiary companies Long-term borrowings

29 38 44

1,664,395 503,297 239,657

## ## 244,962

1,522,640 800,751 679,633

## ## 512,229

It is not practicable to estimate the fair value of the non-current investments in unquoted shares because of the lack of quoted market prices. However, the Group believes that the carrying amount represents the recoverable values.

## It is also not practicable to estimate the fair values of balances due to/from subsidiary companies due principally to a lack of fixed repayment terms entered into by the parties involved. However, the Group does not anticipate the carrying amounts recorded at the balance sheet date to be significantly different from the values that would eventually be received or settled. The nominal/notional amounts and net fair value of financial instruments not recognised in the balance sheets of the Group and of the Company as at 31 December 2006 are as follows:

Interest rate swap agreements

Nominal/ Notional Amount RM’000

Net Fair Value RM’000

1,345,394

(6,842)

Annual Report 2006 213

52. FINANCIAL INSTRUMENTS (contâ&#x20AC;&#x2122;d.) (g) Fair Values (contâ&#x20AC;&#x2122;d.) The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments: (i)

Cash and cash equivalents, trade and other receivables/payables and short-term borrowings The carrying amounts approximate fair values due to the relatively short-term maturity of these financial instruments.

(ii)

Investments in quoted shares The fair value of quoted shares is determined by reference to stock exchange quoted market bid prices at the close of business on the balance sheet date.

(iii) Borrowings The fair value of borrowings is estimated by using discounted cash flow analysis, based on current incremental lending rates for liabilities with similar risk profiles. (iv) Derivative Financial Instruments The fair value of a forward foreign currency contract is the estimated amount which the Group would expect to pay or receive on the termination of the outstanding position arising and is determined by reference to the difference between the contracted rate and the forward exchange rate as at the balance sheet date applied to a contract of similar quantum and maturity profile. The fair value of an interest rate swap is the amount that would be payable or receivable upon termination of the position at the balance sheet date, and is calculated as the difference between the present value of the estimated future cash flows at the contracted rate compared to that calculated at the market rate at the balance sheet date.

53. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (a) Disposal of Ladang Bertam On 5 May 2006, Guthrie Ropel Berhad, a subsidiary of the Company and its wholly-owned subsidiary, Guthrie Ropel Development Sdn. Berhad, entered into Sale and Purchase Agreements for the disposal of 2,285.5 acres of Ladang Bertam for a total cash consideration of RM91,348,000. The disposal was completed on 1 November 2006 upon all conditions precedent being met and a gain on disposal of RM68,515,000 was included in the income statement of the Group. (b) Disposal of Integrated Brickworks Sdn. Berhad On 12 October 2006, the Company and Right Class Sdn. Berhad, a wholly-owned subsidiary of the Group, entered into a Sale and Purchase Agreement with Mr. Wong Chong Leong for the disposal of the entire equity interests of Integrated Brickworks Sdn. Berhad, a wholly-owned subsidiary of the Group for a total cash consideration of RM1,592,283. The disposal was completed on 10 January 2007 upon all conditions precedent being met and a loss on disposal of RM23,008,000 and RM24,575,000 was recognised in the income statement of the Group and of the Company respectively for the financial year ended 31 December 2006.

214 Kumpulan Guthrie Berhad

53. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (cont’d.) (c) Proposed Disposal of Guthrie Corridor Expressway Sdn. Berhad On 27 November 2006, the Company entered into a Sale and Purchase of Shares Agreement with Projek Lintasan Kota Holdings Sdn. Berhad (“Prolintas”) for the proposed disposal of the entire equity interests in Guthrie Corridor Expressway Sdn. Berhad (“GCESB”), a wholly-owned subsidiary of the Group, which involves the following: (i)

the disposal of the entire equity interests in GCESB comprising 5,000,000 ordinary shares for a disposal consideration of RM5 million; and

(ii)

the settlement of intercompany balance owing by GCESB to another wholly-owned subsidiary through cash payment of RM431 million and issuance of RM500 million nominal value of Redeemable Loan Stocks (“RLS”) of GCESB.

In conjunction with the proposed divestment, the Company, Prolintas and GCESB have also entered into an agreement (“GCE Agreement”) to deal with, inter alia, future access roads, utility corridor and landscaping in relation to the Expressway and the agreed land banks along the Expressway. The proposed disposal is pending the shareholders’ and regulatory approvals. (d) Offer by Synergy Drive Sdn. Berhad The Company had on 27 November 2006, received an offer (“Offer”) from Synergy Drive Sdn Bhd (“Synergy Drive”) to acquire the entire business and undertaking of the Company as carried on by the Company as at the date of the Offer, including its assets and liabilities (“Proposed Disposal”). On the same date, Synergy Drive had made similar offers to the two listed subsidiaries of the Company, namely Highlands & Lowlands Berhad (“H&L”) and Guthrie Ropel Berhad (“GRopel”) and to five other listed entities namely Sime Darby Berhad (“Sime Darby”), Sime Engineering Services Berhad (“Sime Engineering”), Sime UEP Properties Berhad (“Sime UEP”), Golden Hope Plantations Berhad (“GHope”) and Mentakab Rubber Company (Malaya) Berhad (“Mentakab”), collectively referred to as the “Target Companies”. The proposed disposal by the Company and the Target Companies shall collectively be referred to as “Proposed Disposals”. On 27 December 2006, the Company, H&L and GRopel accepted the Offer, subject to, amongst others, shareholders’ and regulatory approvals. The Company and the Target Companies had on 24 January 2007 entered into separate Sale of Business Agreements (“SBA”) with Synergy Drive in relation to the Proposed Disposals.

Annual Report 2006 215

53. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (cont’d.) (d) Offer by Synergy Drive Sdn. Berhad (cont’d.) The Proposed Disposal of the Company involves the following: (i)

The disposal of the entire business and undertaking carried on by the date of the Offer), including its assets and liabilities as at completion, RM4.27 per ordinary share of RM1.00 each in the issued and paid-up outstanding shares as at completion. Based on the number of shares 2005, the Disposal Price is RM4,299.5 million.

Company as at 27 November 2006 (being the for a total disposal consideration equivalent to capital of the Company multiplied by the total in issue of 1,006.9 million as at 31 December

As at 31 December 2005, the Company had 10.8 million outstanding share options under its Employees’ Share Option Scheme (“ESOS”). Subsequent to 31 December 2005, the Company had granted a further 5.8 million ESOS options. Assuming the full exercise of these ESOS options and assuming that no further ESOS options are granted, the maximum possible Disposal Price is approximately RM4.4 billion. (ii)

The Disposal Price shall be satisfied in full on the date of completion of the SBA by Synergy Drive through the issuance of an equivalent value of Series A redeemable convertible preference shares of Synergy Drive (“RCPS A”) at RM5.25 for each RCPS A.

The RCPS A received by the Company are proposed to be distributed to the shareholders of the Company under the Proposed Capital Repayment via a Capital Reduction Exercise (“Proposed Capital Repayment”). For the avoidance of doubt, the Proposed Disposal is not conditional upon the Proposed Capital Repayment. Simultaneously with the Proposed Capital Repayment, the Company shall carry out the Proposed Share Issue of 2 new ordinary shares of RM1.00 each to Synergy Drive at a subscription price of RM1.00 each, which will result in the Company becoming a wholly-owned subsidiary of Synergy Drive (“Proposed Share Issue”). The proposed capital repayment and proposed share issue by the Company and the Target Companies shall collectively be referred to as “Proposed Capital Repayments” and “Proposed Share Issues”. In addition to the approval of the shareholders’ and the regulatory authorities, each of the Proposed Disposals, Proposed Capital Repayments and Proposed Share Issues are also conditional upon the following: (i)

Synergy Drive notifying the Target Companies in writing that the results of the due diligence inquiry carried out by it as set out in the SBA are satisfactory;

(ii)

The Proposed Disposals of the Company, Sime Darby and GHope are inter-conditional, and the completion of the Proposed Disposals of the Company, Sime Darby and GHope shall occur simultaneously;

(iii) The Proposed Disposal of Sime Engineering and Sime UEP are conditional on the confirmation of the Court for the Proposed Capital Repayment of Sime Darby; (iv) The Proposed Disposal of H&L and GRopel are conditional on the confirmation of the Court for the Proposed Capital Repayment of the Company;

216 Kumpulan Guthrie Berhad

53. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (cont’d.) (d) Offer by Synergy Drive Sdn. Berhad (cont’d.) (v) The Proposed Disposal of Mentakab is conditional on the confirmation of the Court for the Proposed Capital Repayment of GHope; (vi) The Proposed Capital Repayments of the Company, Sime Darby, Sime Engineering, Sime UEP, H&L, GRopel, GHope and Mentakab are conditional on each of their respective Proposed Disposals becoming unconditional; (vii) The Proposed Share Issues of the Company, Sime Darby, Sime Engineering, Sime UEP, H&L, GRopel, GHope and Mentakab are conditional on each of their respective Proposed Capital Repayments occurring; (viii) Permodalan Nasional Berhad (“PNB”) and the unit trust funds managed by companies related to PNB providing Synergy Drive with an undertaking in writing to convert any RCPS A received or receivable by each of them pursuant to the Proposed Capital Repayment of any Target Company or otherwise, into Synergy Drive Shares prior to the listing of Synergy Drive on Bursa Securities; and (ix) The approval of the respective lenders of the Target Companies (where applicable). Consequently, as at the end of the financial year, as the Proposed Disposal is still inter-conditional principally upon the completion of the Proposed Disposal of the Company, Sime Darby and GHope and the undertaking by PNB and the unit trust funds managed by PNB as stated in (viii) above, the assets and liabilities of the Group and of the Company have not been classified as Non-Current Assets Held for Sale/Disposal Group following the provisions of FRS 5.

54. SUBSEQUENT EVENT On 22 February 2007, the Company and Guthrie Wood Industries Sdn. Berhad, a wholly-owned subsidiary of the Company, entered into a Share Sale and Purchase Agreement with Dongwha GH International Sdn. Berhad for the disposal of the entire equity interests in Guthrie MDF Sdn. Berhad (“GMDF”), a wholly-owned subsidiary of the Group, for a disposal consideration of RM145 million. In conjunction with the proposed divestment, Highlands & Lowlands Berhad, a subsidiary of the Company had entered into a Land Sale and Purchase Agreement with Dongwha Fibreboard Sdn. Berhad for the disposal of 459,922 square meters of land for a total cash consideration of RM30 million. The proposed disposals are pending completion of certain conditions precedent.

Annual Report 2006 217

Statement By Directors PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

We, TAN SRI DATO’ DR. WAN MOHD. ZAHID MOHD. NOORDIN and DATO’ ABD WAHAB MASKAN, being two of the directors of KUMPULAN GUTHRIE BERHAD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 92 to 217 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2006 and of the results and the cash flows of the Group and of the Company for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 28 March 2007:

TAN SRI DATO’ DR. WAN MOHD. ZAHID MOHD. NOORDIN Chairman

DATO’ ABD WAHAB MASKAN Director

Statutory Declaration PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

I, TONG POH KEOW, being the officer primarily responsible for the financial management of KUMPULAN GUTHRIE BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 92 to 217 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 28 March 2007. Before me,

Maisharah binti Abu Hassan No. W181 Commissioner for Oaths 218 Kumpulan Guthrie Berhad

) ) )

TONG POH KEOW

Report Of The Auditors TO THE MEMBERS OF KUMPULAN GUTHRIE BERHAD (INCORPORATED IN MALAYSIA)

We have audited the financial statements set out on pages 92 to 217. These financial statements are the responsibility of the Companyâ&#x20AC;&#x2122;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 applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of: (i)

the financial position of the Group and of the Company as at 31 December 2006 and of the results and the cash flows of the Group and of the Company for the year then ended; and

(ii)

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

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditorsâ&#x20AC;&#x2122; reports thereon of the subsidiary companies of which we have not acted as auditors, as indicated in Note 7 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditorsâ&#x20AC;&#x2122; reports on the financial statements of the subsidiary companies were not subject to any qualification material to the consolidated financial statements and did not include any comment required to be made under Section 174(3) of the Companies Act, 1965.

ERNST & YOUNG AF: 0039 Chartered Accountants

Ahmad Zahirudin bin Abdul Rahim No. 2607/12/08(J) Partner

Kuala Lumpur, Malaysia 28 March 2007 Annual Report 2006 219

Properties

the

Group

December

2006

Estate Estate with Palm Oil Mill

Kedah 4 3

2 5

Pulau Pinang

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA Kedah Darul Aman 1

Ladang Anak Kulim Kulim

Freehold

—

1,512

Oil palm estate

—

30,438

Ladang Bukit Selarong Padang Serai

Freehold

—

1,718

Oil palm estate

—

43,425

Ladang Jerai Bedong

Freehold

—

1,240

Oil palm estate

—

21,009

Ladang Padang Buluh Sg. Petani

Freehold

—

1,986

Oil palm estate

—

47,462

Ladang Sungai Dingin Karangan

Freehold

—

4,264

Oil palm estate and palm oil mill

110,636

Freehold

—

378

Oil palm estate

—

10,008

Pulau Pinang 6

Ladang Byram Nibong Tebal, Seberang Prai

220 Kumpulan Guthrie Berhad

Estate Estate with Palm Oil Mill

Perak

7 10

11 16

15 13 14

Selangor

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA (Cont’d.) Perak Darul Ridzuan 7

Ladang Changkat Salak Salak North

Freehold

—

1,598

Oil palm estate

—

31,508

Ladang Kalumpong Bagan Serai

Freehold

—

1,399

Oil palm estate and palm oil mill

32,559

Ladang Kamiri Sungai Siput (North)

Freehold

—

951

Oil palm estate

—

21,689

10 Ladang Kamuning Sungai Siput

Freehold

—

2,197

Oil palm estate

—

44,514

11 Ladang Yew Lian Simpang Empat (Hilir Perak)

Leasehold

2035

406

Oil palm estate

—

7,746

Selangor Darul Ehsan 12 Ladang Ampar Tenang Dengkil

Freehold

—

879

Oil palm estate

—

21,411

13 Ladang Bukit Cheraka Jeram

Freehold

—

1,627

Oil palm estate

—

46,801

14 Ladang Bukit Kerayong Kapar

Freehold

—

1,317

Oil palm estate and palm oil mill

44,313

15 Ladang Bukit Lagong Rawang

Freehold

—

420

Oil palm estate

—

7,228

16 Ladang Bukit Talang Kuala Selangor

Freehold

—

2,079

Oil palm estate and palm oil mill

60,124

Annual Report 2006 221

Estate Estate with Palm Oil Mill

21 17

Selangor 20 24

22 23 26

Negeri Sembilan

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA (Cont’d.) Selangor Darul Ehsan (Cont’d.) 17 Ladang Bukit Tinggi Klang

Freehold

—

264

Oil palm estate

—

9,493

18 Ladang Elmina Sungai Buloh

Freehold

—

1,898

Oil palm estate

—

99,855

19 Ladang Sabak Bernam Sabak Bernam

Freehold

—

2,507

Oil palm estate

—

81,680

20 Ladang Subang Subang Village

Freehold

—

296

Oil palm estate

—

16,452

21 Ladang Sungai Kapar Kapar

Freehold

—

389

Oil palm estate

—

7,968

22 Ladang Sungai Rawang Sungai Pelek

Freehold

—

462

Oil palm estate

—

13,883

23 Ladang Bukit Pelandok Port Dickson

Freehold

—

1,709

Oil palm estate

—

44,551

24 Ladang Labu Labu

Freehold

—

2,664

Oil palm estate and palm oil mill

66,430

25 Ladang P.D. Lukut Port Dickson

Freehold

—

2,237

Oil palm estate

—

54,961

26 Ladang Sengkang Pasir Panjang

Freehold

—

2,884

Oil palm estate

—

72,733

Negeri Sembilan Darul Khusus

222 Kumpulan Guthrie Berhad

Estate Estate with Palm Oil Mill

30 27

Negeri Sembilan

29 28

32 31

Melaka

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA (Cont’d.) Negeri Sembilan Darul Khusus (Cont’d.) 27 Ladang Siliau Siliau

Freehold

—

2,067

Oil palm estate and palm oil mill

53,582

28 Ladang Sua Betong Port Dickson

Freehold

—

2,872

Oil palm estate

—

76,918

29 Ladang Tampin Linggi Rantau

Freehold

—

2,103

Oil palm estate

—

55,103

30 Ladang Tanah Merah Port Dickson

Freehold

—

4,271

Oil palm estate and palm oil mill

109,057

Melaka 31 Ladang Bukit Asahan Asahan

Freehold Leasehold

— 2047 2039 2038 2037 2032

2,903 55 2 80 1 33

Oil palm estate

—

59,418

32 Ladang Kemuning Tebong

Freehold Leasehold

— 2048

2,111 2

Oil palm estate

—

48,662

33 Ladang Serkam Jasin

Freehold

—

2,291

Oil palm estate

—

58,737

Annual Report 2006 223

Estate Estate with Palm Oil Mill

Johor 42 43

36 39 35 37 40 41 38 34

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA (Cont’d.) Johor Darul Takzim 34 Ladang Bukit Badak Layang Layang

Freehold

—

3,245

Oil palm estate

—

85,617

35 Ladang Cenas Layang Layang

Leasehold

2081 2079

1,797 81

Oil palm estate

—

41,314

36 Ladang Cha’ah Cha’ah

Leasehold

2077

2,795

Oil palm estate and palm oil mill

69,869

37 Ladang Lambak/Elaeis Kluang

Freehold

—

2,576

Oil palm estate

—

69,840

38 Ladang Pekan Layang Layang

Leasehold

2076 2068

405 2,827

Oil palm estate

—

71,760

39 Ladang Pengkalan Bukit Panchor

Freehold

—

1,560

Oil palm estate

—

42,694

40 Ladang Sembrong Layang Layang

Freehold Leasehold

— 2020

1,338 454

Oil palm estate

—

50,265

41 Ladang Simpang Rengam Rengam

Freehold

—

1,170

Oil palm estate

—

31,025

42 Ladang Sungai Gemas Gemas

Freehold

—

971

Oil palm estate

—

23,542

43 Ladang Sungai Labis Labis

Freehold

—

1,603

Oil palm estate

—

43,868

224 Kumpulan Guthrie Berhad

Estate Estate with Palm Oil Mill

Pahang

49 50

48 47

Johor

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA (Cont’d.) Johor Darul Takzim (Cont’d.) 44 Ladang Sungai Tawing Kluang

Leasehold

2079

2,226

Oil palm estate and palm oil mill

51,189

45 Ladang Temiang Renchong Pagoh

Freehold

—

1,596

Oil palm estate

—

45,349

46 Ladang Tun Dr. Ismail Simpang Rengam

Freehold

—

2,406

Oil palm estate

—

66,478

47 Ladang Ulu Remis Layang Layang

Freehold Leasehold

— 2081 2009

314 1,899 383

Oil palm estate and palm oil mill

53,224

48 Ladang Yong Peng Yong Peng

Freehold

—

3,363

Oil palm estate and palm oil mill

87,267

— 2076

1,393 606

Oil palm estate

—

58,140

827

Oil palm estate

—

23,243

Pahang Darul Makmur 49 Ladang Chenor Sungai Jerik

Freehold Leasehold

50 Ladang Sungai Tekal Mentakab

Freehold

—

Annual Report 2006 225

Estate Estate with Palm Oil Mill

54 53

Sabah 52

Location

Tenure

Year Lease Expiring

Title Area Hectares

Terengganu

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – MALAYSIA (Cont’d.) Terengganu Darul Iman 51 Ladang Jabor Kemaman

Freehold

—

2,399

Oil palm estate and palm oil mill

57,679

Oil palm estate

—

25,453

Oil palm estate and palm oil mill

63,804

Oil palm estate

—

45,895

Sabah 52 Ladang Andrassy Tawau

Leasehold

2077 2073 2070

161 23 810

53 Ladang Jeleta Bumi Tawau

Leasehold

2076

1,897

54 Ladang Tingkayu Tawau

Leasehold

2078 2077 2076

222 535 850 100,804

226 Kumpulan Guthrie Berhad

2,617,869

Estate Estate with Palm Oil Mill

2 3 1

Aceh

Riau

4 Jambi West Kalimantan

Central Sulawesi Central Kalimantan

South Sumatera

Jambi 7

South Kalimantan

6 5

Jakarta

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – INDONESIA Sumatera – East Aceh 1

Ladang Tamiang Karang Baru

Leasehold

2027

1,452

Oil palm estate and palm oil mill

12,183

Ladang Blang Simpo Karang Baru

Leasehold

2022

6,239

Oil palm estate and palm oil mill

44,637

Ladang Batang Ara Karang Baru

Leasehold

2037

1,129

Oil palm estate

—

9,943

Leasehold

2038

4,000

Oil palm estate and palm oil mill

55,618

Sumatera – Jambi 4

Ladang Air Merah Kumpeh Ulu, Muaro Jambi Sumatera – South Sumatera

Ladang GPI 1-5 Sekayu, Musi Banyuasin

Leasehold

2033

10,140 5,573*

Oil palm estate and palm oil mill

135,286

Ladang Sungai Pinang Muara Lakitan, Musi Rawas

Leasehold

2034

3,698

Oil palm estate and palm oil mill

56,031

Ladang Bukit Pinang Muara Lakitan, Musi Rawas

Leasehold

2034

3,354

Oil palm estate

—

48,950

Leasehold

2034

3,915

Oil palm estate and palm oil mill

52,633

Sumatera – Riau 8

Ladang Teluk Siak Tualang, Siak

* Pending issuance of title Annual Report 2006 227

Estate Estate with Palm Oil Mill 13 11

Riau 12

Aceh

14 19 18 Riau

9 15

Jambi West Kalimantan

Central Sulawesi Central Kalimantan

South Sumatera

South Kalimantan

Jakarta

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – INDONESIA (Cont’d.) Sumatera – Riau (Cont’d.) 9

Ladang Pinang Sebatang Bukit Raya, Pekan Baru

Leasehold

2034

3,562

Oil palm estate

—

38,698

10 Ladang Aneka Perkasa Bukit Raya, Pekan Baru

Leasehold

2034

4,136

Oil palm estate

—

45,979

11 Ladang Menggala – 1 Tanah Putih, Rokan Hilir

Leasehold

2034

4,920

Oil palm estate and palm oil mill

43,367

12 Ladang Menggala – 2 Tanah Putih, Rokan Hilir

Leasehold

2034

4,922

Oil palm estate

—

52,661

13 Ladang Menggala – 3 Tanah Putih, Rokan Hilir

Leasehold

2034

3,994

Oil palm estate

—

35,361

14 Ladang Alur Dumai Bagan Sinembah, Rokan Hilir

Leasehold

2036

3,759

Oil palm and rubber estate

—

25,159

15 Ladang Teluk Bakau Kateman, Indragiri Hilir

Leasehold

2031

4,025

Oil palm estate and palm oil mill

40,472

16 Ladang Rotan Semelur Kateman, Indragiri Hilir

Leasehold

2031

7,313

Oil palm estate

—

60,581

17 Ladang Mandah Kateman, Indragiri Hilir

Leasehold

2031

5,040

Oil palm estate

—

53,991

18 Ladang Nusa Lestari Kateman, Indragiri Hilir

Leasehold

2031

3,457

Oil palm estate

—

34,943

19 Ladang Nusa Perkasa Kateman, Indragiri Hilir

Leasehold

2031

5,836

Oil palm estate

—

41,797

228 Kumpulan Guthrie Berhad

Estate Estate with Palm Oil Mill

Aceh

South Kalimantan

26 29

23 27

Riau Jambi West Kalimantan

Central Sulawesi Central Kalimantan

South Sumatera

25 24

South Kalimantan

Jakarta

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – INDONESIA (Cont’d.) Kalimantan – South Kalimantan 20 Ladang Angsana Kusan Hulu, Kotabaru

Leasehold

2034

3,250

Oil palm estate and palm oil mill

49,896

21 Ladang Gunung Sari Kusan Hulu, Kotabaru

Leasehold

2034

2,832

Oil palm estate

—

29,264

22 Ladang Bakau Pamukan Utara, Kotabaru

Leasehold

2032

5,144

Oil palm estate

—

43,226

23 Ladang Bebunga Pamukan Utara, Kotabaru

Leasehold

2032

4,258

Oil palm estate and palm oil mill

40,252

24 Ladang Lanting Pamukan Utara, Kotabaru

Leasehold

2032

3,249

Oil palm estate

—

26,083

25 Ladang Sungai Cengal Pamukan Utara, Kotabaru

Leasehold

2032

4,926

Oil palm estate

—

50,514

26 Ladang Betung Pamukan Utara, Kotabaru

Leasehold

2032

3,314

Oil palm estate

—

31,903

27 Ladang Matalok Pamukan Utara, Kotabaru

Leasehold

2032

3,082

Oil palm estate

—

26,961

28 Ladang Rantau Pamukan Utara, Kotabaru

Leasehold

2032

4,638

Oil palm estate and palm oil mill

53,431

29 Ladang Sekayu Pamukan Utara, Kotabaru

Leasehold

2032

4,266

Oil palm estate

—

42,692

30 Ladang Gunung Aru Pulau Laut Timur, Kotabaru

Leasehold

2022

3,228

Oil palm estate and palm oil mill

12,254

Annual Report 2006 229

Estate Estate with Palm Oil Mill

South Kalimantan

Aceh

39 41 42

Riau

Jambi West Kalimantan

Central Sulawesi Central Kalimantan

South Kalimantan

South Sumatera

34 35

Jakarta

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – INDONESIA (Cont’d.) Kalimantan – South Kalimantan (Cont’d.) 31 Ladang Gunung Kemasan Pulau Laut Timur, Kotabaru

Leasehold

2022

3,726

Oil palm estate

—

50,295

32 Ladang Laut Timur Pulau Laut Timur, Kotabaru

Leasehold

2022

3,478

Oil palm estate

—

47,064

33 Ladang Pantai Timur Pulau Laut Timur, Kotabaru

Leasehold

2022

3,488

Oil palm estate

—

38,236

34 Ladang Mustika Satui, Kotabaru

Leasehold

2030

5,079

Oil palm estate and palm oil mill

42,177

35 Ladang Pantai Bonati Satui, Kotabaru

Leasehold

2030

2,715

Oil palm estate

—

33,099

36 Ladang Randi Pamukan Utara, Kotabaru

Leasehold

2032

3,150

Oil palm estate

—

34,360

37 Ladang Selabak Pamukan Utara, Kotabaru

Leasehold

2032

3,835

Oil palm estate

—

53,575

38 Ladang Sangkoh Pamukan Utara, Kotabaru

Leasehold

2032

3,443

Oil palm estate

—

37,950

39 Ladang Binturung Pamukan Utara, Kotabaru

Leasehold

2032

4,247

Oil palm estate

—

37,639

40 Ladang Pondok Labu Pamukan Utara/Selatan, Kotabaru

Leasehold

2032

3,964

Oil palm estate

—

43,138

41 Ladang Rampa Pamukan Utara/Selatan, Kotabaru

Leasehold

2032

3,476

Oil palm estate

—

29,429

42 Ladang Sesulung Pamukan Selatan, Kotabaru

Leasehold

2032

4,719

Oil palm estate and palm oil mill

52,861

230 Kumpulan Guthrie Berhad

Estate Estate with Palm Oil Mill

Central Kalimantan

Aceh

49 50 Riau

48 47

45 46 44 43

Jambi West Kalimantan

Central Sulawesi Central Kalimantan

South Kalimantan

South Sumatera

Central Sulawesi

Jakarta

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

PLANTATION PROPERTIES – INDONESIA (Cont’d.) Kalimantan – Central Kalimantan 43 Ladang Hantantiring Kuala Kuayan, Kotawaringin Timur

Leasehold

2034

3,197

Oil palm estate

—

19,041

44 Ladang Kawan Batu Kuala Kuayan, Kotawaringin Timur

Leasehold

2034

8,973

Oil palm estate

—

41,191

45 Ladang Pemantang Kuala Kuayan, Kotawaringin Timur

Leasehold

2034

4,432

Oil palm estate

—

28,518

46 Ladang Kuala Kuayan Kuala Kuayan, Kotawaringin Timur

Leasehold

2032

3,421

Oil palm estate

—

21,777

47 Ladang Baras Danum Kuala Kuayan, Kotawaringin Timur

Leasehold

2032

3,440

Oil palm estate

—

10,785

48 Ladang Sapiri Kuala Kuayan, Kotawaringin Timur

Leasehold

2032

2,966

Oil palm estate

—

18,883

49 Ladang Sukamandang Kuala Kuayan, Kotawaringin Timur

Leasehold

2032

4,953

Oil palm estate and palm oil mill

64,326

50 Ladang Sekunyir Kumai, Kotawaringin Barat

Leasehold

2033

3,553

Oil palm estate and palm oil mill

44,185

51 Ladang Seruyan Kumai, Kotawaringin Barat

Leasehold

2033

4,182

Oil palm estate

—

38,786

Leasehold

2024

4,597

Oil palm estate and palm oil mill

56,276

Sulawesi – Central Sulawesi 52 Ladang Ungkaya Bungku Utara, Poso

221,685

2,138,357 Annual Report 2006 231

LAND HELD FOR PROPERTY DEVELOPMENT

Lembah Beringin Kuala Selangor Rawang

4 5 6 7 North South Expressway (NSE) Guthrie Corridor Expressway Kangar

Klang

NSE Central Link (ELITE) Kota Bharu

1 2 3

Georgetown

Kuala Terengganu

No rt

Ipoh hS outh

way ress Exp Kuantan

16 Kuala Lumpur Shah Alam

10 9

11 Seremban 13 12

Melaka

14 15 Johor Bahru

232 Kumpulan Guthrie Berhad

Ampang

Petaling Subang Jaya Jaya Puchong Putrajaya

Carey Island

Federal Highway

Alor Setar

Shah Alam

Kuala Lumpur

Kajang

8 Salak Tinggi

Banting KLIA

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

LAND HELD FOR PROPERTY DEVELOPMENT Kedah Darul Aman 1

Jerai Bedong

Freehold

—

512

Mixed development

—

33,625

Ladang Bukit Selarong Padang Serai

Freehold

—

167

Oil palm estate

—

4,447

Taman Sungai Dingin Karangan

Freehold

—

Housing estate

—

226

Selangor Darul Ehsan 4

Ladang Bukit Lagong Rawang

Freehold

—

213

Oil palm estate

—

36,042

Ladang Elmina Sungai Buloh

Freehold

—

Oil palm estate

—

175

Bukit Subang Subang Village

Freehold

—

249

Mixed development

—

79,821

Bukit Jelutong Shah Alam

Freehold

—

121

Mixed development

—

72,246

Ladang Ampar Tenang Dengkil

Freehold

—

Oil palm estate

—

4,361

Freehold

—

170

Oil palm estate

—

4,384

10 Ladang Tanah Merah Port Dickson

Freehold

—

252

Oil palm estate

—

6,759

11 Guthrie Chemara Seremban

Freehold Leasehold

— 2066

32 2

Research centre

—

3,661

12 Ladang Sua Betong Port Dickson

Freehold

—

168

Oil palm estate

—

4,794

13 Taman Sengkang Port Dickson

Freehold

—

Oil palm estate

—

1,304

14 Ladang Pengkalan Bukit Panchor

Freehold

—

141

Oil palm estate

—

2,689

15 Ladang Lambak/Elaeis Kluang

Freehold

—

234

Oil palm estate

—

6,692

Freehold

—

Oil palm estate

—

4,801

Negeri Sembilan Darul Khusus 9

Ladang Bukit Pelandok Port Dickson

Johor Darul Takzim

Pahang Darul Makmur 16 Genting View Resort 10km Genting Highlands

2,378

266,027

Annual Report 2006 233

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

QUARRIES Kamuning, Sungai Siput Perak Darul Ridzuan

Freehold

—

Black marble

—

2,622

Tanah Merah, Port Dickson Negeri Sembilan Darul Khusus

Freehold

—

Granite

—

11,332

121

13,954

FACTORIES Lot 833 Mukim Padang Meha Padang Serai Kulim Kedah Darul Aman

Freehold

—

Medium-density fibreboard factory

25,170

Lot 370 Mukim Port Dickson Sendayan, Siliau Negeri Sembilan Darul Khusus

Freehold

—

Oil palm research and cloning centre

2,960

28,130

GENERAL PROPERTIES No. 2A, Biggs Road/ No. 5, Cantonment Road Penang

Freehold

—

No. 3, Western Avenue Penang

Freehold

—

Harvard Suasana Hotel Bedong, Kedah Darul Aman

Freehold

—

Harvard Golf Resort Bedong, Kedah Darul Aman

Leasehold

Guthrie Pavilion No. 2A, Persiaran B Section U8, Bukit Jelutong Shah Alam, Selangor Darul Ehsan

Freehold

—

No. 20 Jalan Astaka U8/82 Bukit Jelutong, Shah Alam Selangor Darul Ehsan

Freehold

—

Wisma Guthrie No. 21, Jalan Gelenggang Damansara Heights Kuala Lumpur

Freehold

—

234 Kumpulan Guthrie Berhad

2053

Holiday bungalows

9,500

Bungalow

7,400

Hotel

9,488

Golf course and club house

26,818

Office complex

22,364

—

Office

3,674

—

Office complex

17,978

132

Location

Tenure

Year Lease Expiring

Title Area Hectares

Description

Age of Buildings Years

Net Book Value 31.12.2006 RM’000

GENERAL PROPERTIES (Cont’d.) No. 19 & 19A, Jalan Uthant Kuala Lumpur

Freehold

No. 10, Jalan Kampung Pandan Kuala Lumpur Kayangan Bungalow Frasers Hill Pahang Darul Makmur Port Dickson Bungalows Negeri Sembilan Darul Khusus – Sri Fajar – Sri Bayu – Sri Menyinsing – Sinaran Selat

—

Vacant land

—

9,998

Leasehold

2026

—

Bungalow

849

Leasehold

2026

Holiday bungalow

867

Freehold Freehold Freehold Leasehold

— — — 2072

2 — — 1

Holiday bungalows

48 20 17 12

9,138

—

Hotel resort

22,616

Office complex

2,452

Warehouse

264

Genting View Resort 10km, Genting Highlands Pahang Darul Makmur

Freehold

Regional Office Jln. Ahmad Yani KM22.6 Landasan Ulin Utara Banjarbaru South Kalimantan

Leasehold

2033

Kawasan Industri Cikarang Block GG Kav. No 5H Bekasi, West Java

Leasehold

2027

—

TOTAL

166

143,406

325,191

5,207,743

Note: The latest revaluation of the Group’s plantation properties was performed in 2003 whilst the revaluation of land held for property development was performed in 1989.

Annual Report 2006 235

Group

Area

Statement

Malaysia Crop Oil Palm – Mature – Immature

Rubber – Mature Total Planted Area Area occupied by villages, factories, roads, plantable reserves and swamps Land held for property development Area occupied by factories, office complex, quarries and holiday bungalows TOTAL AREA

2006 Hectares Indonesia

Total

Percent

Malaysia

2005 Hectares Indonesia

Total

Percent

90,119 7,718

159,330 14,534

249,449 22,252

91.5 8.2

88,941 9,776

157,384 10,524

246,325 20,300

92.0 7.6

97,837

173,864

271,701

99.7

98,717

167,908

266,625

99.6

700

0.3

1,203

0.4

97,837

174,564

272,401

100.0

98,717

169,111

267,828

100.0

2,967

47,121

50,088

2,875

51,090

53,965

2,378

2,820

321

324

327

330

103,503

221,688

325,191

104,739

220,204

324,943

ANALYSIS OF PLANTED AREA

Malaysia

2006 Hectares Indonesia

Total

Percent

Malaysia

2005 Hectares Indonesia

Total

Percent

OIL PALM Mature Area Age In Years 4 – 8 9 – 18 19 – 25 Above 25

39,292 27,834 17,407 5,586

18,756 136,412 3,706 456

58,048 164,246 21,113 6,042

21.3 60.2 7.8 2.2

39,180 26,283 17,923 5,555

16,952 136,182 3,818 432

56,132 162,465 21,741 5,987

21.0 60.7 8.1 2.2

90,119

159,330

249,449

91.5

88,941

157,384

246,325

92.0

125 2,479 2,501 2,613

1,153 1,619 5,717 6,045

1,278 4,098 8,218 8,658

0.5 1.5 3.0 3.2

538 4,265 2,476 2,497 -

2,082 1,773 1,681 4,988 -

2,620 6,038 4,157 7,485 -

1.0 2.2 1.6 2.8 -

7,718

14,534

22,252

8.2

9,776

10,524

20,300

7.6

700

0.3

1,203

0.4

97,837

174,564

272,401

100.0

98,717

169,111

267,828

100.0

Immature Area Year of Planting 2002 2003 2004 2005 2006

Rubber 9 – 18 TOTAL PLANTED AREA

236 Kumpulan Guthrie Berhad

Analysis

Authorised share capital Paid-up share capital Type of share Voting right

: : : :

Shareholdings

April

2007

RM1,500,000,000 RM1,025,117,000 Ordinary share of RM1.00 each One vote per ordinary share

DIRECTORS’ SHAREHOLDINGS Name of Directors 1. 2. 3. 4. 5. 6. 7. 8.

Direct Shareholdings

Percentage of Issued Shares

Indirect Shareholdings

Percentage of Issued Shares

_ _ _ _ _ _ _ _

Tan Sri Dato' Dr. Wan Mohd. Zahid Mohd. Noordin Dato' Abd Wahab Maskan Raja Tan Sri Muhammad Alias Raja Muhammad Ali Datuk Nik Mohamed Affandi Nik Yusoff Datuk Mohamed Adnan Ali Datuk Alladin Mohd. Hashim Datuk Khoo Eng Choo Dato' Muhammad Nawawi Haji Mohd. Arshad

DIRECTORS’ SHAREHOLDINGS IN RELATED CORPORATION MALAYSIA LAND DEVELOPMENT COMPANY BERHAD Name of Directors Datuk Nik Mohamed Affandi Nik Yusoff Dato’ Muhammad Nawawi Arshad * **

Direct Shareholdings

Percentage of Issued Shares

Indirect Shareholdings

Percentage of Issued Shares

1,000** 2,000**

0.00* 0.00*

— —

Percentage is negligible Held in trust for Kumpulan Guthrie Berhad

Annual Report 2006 237

DISTRIBUTION OF SHAREHOLDINGS Number of Shareholders

Percentage of Shareholders

Number of Shares

Percentage of Issued Shares

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

49 3,227 2,231 316 169 3

0.82 53.83 37.21 5.27 2.82 0.05

1,019 3,134,539 8,064,748 10,202,200 270,520,994 733,193,500

0.00 0.31 0.78 1.00 26.39 71.52

Total

5,995

100.00

1,025,117,000

100.00

Number of Shareholders

Percentage of Shareholders

Number of Shares

Percentage of Issued Shares

654 336

10.91 5.60

2,178,600 881,629,022

0.22 86.00

990

16.51

883,807,622

86.22

Non-Bumiputra – Individual – Institutions/Corporate Bodies

4,447 324

74.18 5.40

11,590,662 31,614,456

1.13 3.08

Total for Non-Bumiputra

4,771

79.58

43,205,118

4.21

Total for Malaysians

5,761

96.09

927,012,740

90.43

73 161

1.22 2.69

487,400 97,616,860

0.05 9.52

234

3.91

98,104,260

9.57

5,995

100.00

1,025,117,000

100.00

Size of Shareholdings

CLASSIFICATION OF SHAREHOLDERS

Malaysians a. Bumiputra – Individual – Institutions/Corporate Bodies Total for Bumiputra b.

Foreigners – Individual – Institutions/Corporate Bodies Total for Foreigners GRAND TOTAL

238 Kumpulan Guthrie Berhad

SUBSTANTIAL SHAREHOLDERS Name of Shareholders Permodalan Nasional Berhad (PNB) Skim Amanah Saham Bumiputera (SASB) Employees Provident Fund Board

Number of Shares Direct Indirect 556,569,700 1 106,953,400 2 72,593,700

— —

Total Shares

Percentage of Issued Shares

556,569,700 106,953,400 72,593,700

54.29 10.43 7.08

Notes: 1. Held through Amanah Raya Nominees (Tempatan) Sdn. Bhd. 2. Includes 962,200 shares held through Cimsec Nominees (Tempatan) Sdn. Bhd. and 1,961,100 shares held through Am Nominees (Tempatan) Sdn. Bhd. • SASB is a unit trust scheme managed by PNB. • By virtue of the Gazette notification P.U.(B) 61 dated 7 February 2002 (which came into effect on 28 February 2002), PNB is not deemed to have indirect interest in the direct shareholding of SASB in the Company.

THIRTY (30) LARGEST SHAREHOLDERS

Name of Shareholders

Number of Shares Held

Percentage of Issued Shares

Permodalan Nasional Berhad

556,569,700

54.29

Amanah Raya Nominees (Tempatan) Sdn Bhd [Skim Amanah Saham Bumiputera]

106,953,400

10.43

Employees Provident Fund Board

69,670,400

6.80

Lembaga Kemajuan Tanah Persekutuan (FELDA)

18,778,224

1.83

Amanah Raya Nominees (Tempatan) Sdn Bhd [Amanah Saham Wawasan 2020]

16,716,200

1.63

Lembaga Kemajuan Tanah Persekutuan

15,000,000

1.46

Lembaga Kemajuan Tanah Persekutuan

15,000,000

1.46

AIBB Nominees (Tempatan) Sdn Bhd [Chua Ma Yu]

11,966,600

1.17

HSBC Nominees (Asing) Sdn Bhd [Exempt AN for JPMorgan Chase Bank, National Association (Netherlands)]

10,974,100

1.07

10.

Amanah Raya Nominees (Tempatan) Sdn Bhd [Amanah Saham Didik]

10,949,700

1.07

11.

Amanah Raya Nominees (Tempatan) Sdn Bhd [Sekim Amanah Saham Nasional]

9,588,800

0.94

Annual Report 2006 239

THIRTY (30) LARGEST SHAREHOLDERS (contâ&#x20AC;&#x2122;d.)

Name of Shareholders

Number of Shares Held

Percentage of Issued Shares

12.

HSBC Nominees (Asing) Sdn Bhd [Morgan Stanley And Co International London (FIRM A/C)]

9,257,400

0.90

13.

Amanah Raya Nominees (Tempatan) Sdn Bhd [Amanah Saham Malaysia]

8,614,200

0.84

14.

HSBC Nominees (Asing) Sdn Bhd [BNY Brussels for Queensland Investment Corporation]

7,744,500

0.76

15.

Mayban Nominees (Tempatan) Sdn Bhd [Mayban Trustees Berhad for Public Ittikal Fund (N14011970240)]

5,891,200

0.57

16.

HSBC Nominees (Asing) Sdn Bhd [Exempt AN for Morgan Stanley & Co. International Limited]

5,749,100

0.56

17.

AIBB Nominees (Tempatan) Sdn Bhd [Low Mei Loon]

5,313,000

0.52

18.

Citigroup Nominees (Asing) Sdn Bhd [Exempt AN for Mellon Bank (Mellon)]

5,285,701

0.52

19.

Lembaga Tabung Angkatan Tentera

4,882,000

0.48

20.

Cartaban Nominees (Asing) Sdn Bhd [Credit Suisse (Hong Kong) Limited]

4,325,800

0.42

21.

HSBC Nominees (Asing) Sdn Bhd [TNTC for Government of Singapore Investment Corporation Pte Ltd]

4,148,100

0.40

22.

Mayban Securities Nominees (Tempatan) Sdn Bhd [Pledged Securities Account for Chua Ma Yu (Dealer 072)]

4,033,200

0.39

23.

Citigroup Nominees (Asing) Sdn Bhd [Exempt AN for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign)]

3,595,400

0.35

24.

Affin Nominees (Asing) Sdn Bhd [Mandarin Asian Prosperity Fund (Class B)]

3,573,000

0.35

25.

Amanah Raya Nominees (Tempatan) Sdn Bhd [Public Growth Fund]

3,209,000

0.31

26.

BHLB Trustee Berhad [Public Regional Sector Fund]

3,119,900

0.30

27.

HSBC Nominees (Asing) Sdn Bhd [Exempt AN for JPMorgan Chase Bank, National Association (U.S.A)]

2,905,859

0.28

28.

Citigroup Nominees (Asing) Sdn Bhd [UBS AG Singapore for Alex Lee Lao]

2,697,000

0.26

29.

Mayban Nominees (Tempatan) Sdn Bhd [Mayban Trustees Berhad for Public Regular Savings Fund]

2,560,000

0.25

30.

HSBC Nominees (Asing) Sdn Bhd [HSBC-FS for Value Partners "A" Fund]

2,141,500

0.21

240 Kumpulan Guthrie Berhad

Price

and

Volume

Tr a d e d

BURSA MALAYSIA SECURITIES BERHAD – JANUARY 2005 TO MARCH 2007 Jan-Mar 2007

2006

2005

5.15 5.50 4.10

4.60 4.74 2.35

2.43 2.65 2.03

50,535 3.21 18.33

238,186 3.21 16.37

17,301 4.38 49.89

Share Prices (RM) – Closing – High – Low Volume traded (’000) Dividend yield (%) Price-earnings ratio (times)

Volume Traded (’000)

Share Price (RM)

60,000

6.0

48,000

4.8

36,000

3.6

24,000

2.4

12,000

1.2

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 05 05 05 05 05 05 05 05 05 05 05 05 06 06 06 06 06 06 06 06 06 06 06 06 07 07 07

High Price

Low Price

Volume Traded

Kuala Lumpur Composite Index

Closing Share Price (RM)

1,250

6.0

1,000

4.8

750

3.6

500

2.4

250

1.2

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 05 05 05 05 05 05 05 05 05 05 05 05 06 06 06 06 06 06 06 06 06 06 06 06 07 07 07

Kuala Lumpur Composite Index

Closing Share Price (RM)

Annual Report 2006 241

Group