1 101 GROUP 1

101 Corporation Berhad

(9027-W)

Our Vision
. . ..is to be a pre-eminent corporation in our core businesses by providing products and services of superior values and by sustaining consistent long-term growth in volume and profitability. We shall strive to achieve responsible and balanced commercial success by satisfying our customers needs, giving superior performance to our shareholders, providing rewarding careers to our people, having mutually beneficial relationship with our business associates, participating and contributing effectively towards nation building and the welfare and advancement of the society in which we operate.

As we enter the new millennium with its promises of more glittering technological wonders, we do well to remember that the priceless wonders of nature are irreplaceable. What nature has given us is not for us alone, but is priceless heritage to be passed on to our future generations. We also believe that our customers, shareholders, employees, suppliers and other business associates are all members of the same team. As a team, we have learnt a lot from yesterday. We would like to welcome the new millennium with the desire to continue with the team effort. Only by working together and for each other, can we be confident of a brighter, healthier, cleaner and safer futureSfor all the team members.

101 CORPORATION BERHAD (9027-W) INCORPORATED IN FiALAYSli

m I

003

Chairmans Statement

Operating Background
The Malaysian Economy experienced its sharpest deceleration in 1998 when the GDP registered a negative growth of 7.5%. The decline was most pronounced during the third and fourth quarter of 1998 (which coincided with the first half of your Companys fiscal year 1999) when the GDP retractions was -10.9% and -10.3% respectively. However, remedial measures taken by the Government to reflate the economy after the imposition of capital controls on 1 September 1998, notably the easing of liquidity and significant reductions in interest rates, gradually resuscitated the economy. The broad base recovery of the regional economies and reversal in investment sentiments and return of confidence to the region, also provided the much needed stable backdrop. The GDP growth numbers for the first and second quarters of 1999 (coinciding with the second half of your Companys fiscal year 1999) reflected a turnaround with first quarter 1999 GDP improving to -1.3% and second quarter breaking into positive growth of 4.1%. Whilst it was a challenging time for everyone under the circumstances, we were fortunate that our core business bucked the general trend and, as forecasted in my last report, our Groups profit registered significant improvement for the fiscal year under review. growth in profits for fiscal year 1999.

I am

indeed most delighted to report that the 101 Group achieved its tenth consecutive year of

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

004

462
1200 900 3 s L s 5' z

649

600 300

1995

1996

1997

1998

1999

1995

1996

1997

1998

I 1999

Turnover

Profit Before Taxation

Basic Earnings Per Share

Financial Results
Group turnover recorded an increase of 51% to RM1.412 billion and earnings before interest and tax (operating profit) for fiscal year 1999 was RM519.5 million, an increase of 44% over fiscal year 1998. After deducting net interest expense of RM65.1 million (1998 - RM38.5 million) and inclusion of an exceptional gain of RM7.8 million (1998 - loss of RM6.5 million), the Group registered a pretax profit of RM462.2 million as compared to RM316.8 million for 1998, an increase of 46%. The net profit attributable to shareholders of the Company, after deducting taxes and minority interests, was RM379.7 million for fiscal year 1999 as compared to RM199.2 million for fiscal year 1998, an increase of 91% because of the much higher pretax profits and which is also tax exempt for fiscal year 1999. The fully diluted EPS for fiscal year 1999 was 39.61 sen, a 75% improvement over 1998.

Review Of Results
The Group achieved an outstanding performance for the year under review, anchored by strong performances from its core plantation and property divisions. The better performance from plantation division, boosted by exceptional high palm oil prices brought on by the tight world vegetable stock and the depreciation of the Ringgit, was generally to be expected. However, what was pleasantly surprising and very commendable was the sterling performance of the property division which managed to achieve higher profits even though the overall property market was down. Plantation operating profit was up by 68010 to RM388.5 million because Bandar Puchong Jaya
(Parcel A 8 8) Comprehensive Township

of higher palm product prices realised as well as a 35% increase in crop production of FFB in line with a 33010 increase in average hectares under harvest for the year. On the property front, the residential sector rebounded strongly in the second half of fiscal year 1999, benefiting from improved sentiments and
\\

the positive measures taken by the government such as lowering of interest rates, easy housing loan access and the Home Ownership Campaign. Apart from the rebound in the residential property market, the Group also benefited from a much higher level of demand because of the superior locations of its projects as well as the ability to offer the appropriate product mix. Operating profit from development activities increased by 33010 to RM119.4 million for the year, on the back of a 26010 increase in turnover to RM353.8 million.

Ladang Pu
(Parcel Mixed Devel

101 Palm Garden Resort

Resort Development Condominium 8 Bungalows

CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

007

Returns from property investment which is substantially in office, retail and commercial sectors were however lower than the previous year, reflecting the weak trend brought about by gross over supply in these property sectors. Turnover dropped 11% to RM36.9 million and operating profit dropped 38% to RM11.9 million. The manufacturing segment of the Groups operation comprising contributions from industrial gas, oleochemicals, palm oil refinery and steel piping, registered lower contribution collectively, down by 54% to RM10.6 million, generally reflecting the decline in the overall economy and the difficult trading environment in some of the sub-segments, with the exception of oleochemicals which continued to register further improvements, albeit marginally.

2000

1500 2 s L 1000 s 5 5 317 (-11) l1 500

. . .

0 Others

Plantation Operating Profit

Property Turnover

Manufacturing

# Assets Employed

Segmental Results

Dividends
The Board has declared an interim dividend of 7% less income tax in respect of the financial year ended 30 June 1999 which was paid on 5 October 1999. Your Board also recommends a final dividend of 5010 less income tax which, subject to shareholders approval at the forthcoming Annual General Meeting, will be paid to entitled shareholders on 16 November 1999. This, together with the interim dividend, will result in a total dividend payable for the year ended 30 June 1999 amounting to 12010 less income tax or RM36.5 million, as compared to the 6% less income tax paid for fiscal year 1998. Your Board has proposed a higher dividend payment in line with the good performance of the Company and the Group and after taking into account the cash requirement of the Group.

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Other Corporate Development

The year under review was a relatively quiet one for the Group in respect of corporate activities after several sizeable acquisitions over the previous two years. In October 1998, the Company acquired the balance 20% stake in Ladang Sabah Sdn Bhd as a follow up to the acquisition of the initial 80% stake reported in my Chairmans Statement in the last annual report. Also, as previously mentioned, the Company has decided not to proceed with a proposed private placement of new shares to refinance the acquisitions made in fiscal year 1998 as Management considers the current capital structure more cost effective and efficient having regard to prevailing low interest rates and the strong cash flow generated from operations. With the heavy capital investment spent over the last couple of years, Management also expects a reversal in trend whereby capital expenditure requirement declines whereas productivity and contribution continue to increase as more planted area come into maturity and continue to improve in yields, investment properties are completed and tenanted, and surplus production capacities are gradually utilised. Consequently, the Groups return on asset employed and return on equity, barring price factors, are expected to be on the up trend. Your Directors have also proposed a share buy-back scheme as detailed in a separate circula r to you for the EGM to approve the resolutions proposed therein. You will also notice that as mentioned earlier, the dividend payment rate has been doubled. Essentially, in view of the anticipated continued strong cash flow generated from operations and foreseeable trend in capital expenditure as mentioned above, your Board has decided to increase dividend payment and to utilise the proposed share buy-back scheme when appropriate, to enhance return on shareholders equity. These financial measures, together with operating strategies put in place to improve and sustain ROA at satisfactory levels over the longer term, are geared towards enhancing ROE and providing sustainable growth in value for shareholders.

25 17.26 15. 20
15 /I I/ 10 EL 3 15

2000 I,2 927

1500 3 3 1000 5 2

11.46 >f#

5
1996 1997 1998 1999

$4 t+; jj$ -. Y i' .*

11 **

IO 2 k

1995

-: 4 tc a:

5 q
1996 1997 1998 1999 0 1995 1996 1997 1998 1999

500
0

1995

Return on Equity

Return on Capital Employed

Shareholders Fund

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA 4

01 I +

In this challenging time, the commitment and dedication of our people to raise productivity and to cut wastage and their ability to respond with innovation and timeliness to rapidly changing market scenarios are essential for the continuous success of the Group. In this respect, I am pleased to note and report that our people have responded very well to the challenges and, in keeping with Vision 101, all our core businesses have achieved superior performances in their respective industries. In order to ensure that our people continue to be well equipped to be at the forefront, the Group has, despite the economic downturn, redoubled its training resources including planning for our own cadet planters training school.

On the social front, as with past years, the Group continues to contribute in various forms to various worthy social and charitable causes. For the year under review, a total of RM714,OOO in monetary form was donated, apart from other service contributions. Also, the Group is, through Yayasan Tan Sri Dato Lee Shin Cheng, providing scholarships and other forms of assistance to needy and deserving students who are children of employees within the Group as well as from the public.

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012

Environrnenl
The Group subscribes to an environment protection policy and strives to ensure that our Group operations and development are conducted without any detrimental effect to the environment. In this respect, continuous improvement on processes to make them cleaner and more efficient, upgrading effluent treatment facilities and eradication of open burning are some of the on-going projects the Group is currently undertaking. Additional emphases are also being placed to make lush landscaping and gardens as standard key features of all new development projects. The Group has also embarked on projects to recycle by-products and waste such as converting discarded bio-mass from oil palm into fibres for the furniture and pulp industries, besides continuing with existing practices of recycling waste products from the mills for fertiliser applications. The path towards achieving full sustainable development and environment conservation in all businesses is not one of overnight transformation but requires added cost, long term commitment and continuous improvement; it is nevertheless a path which we have committed ourselves to.

Y2K Issue
The implementation of the Groups plan to deal with the Y2K issue, which has been announced to the KLSE from time to time, progressed well and the Group is Y2K ready as of end August 1999. Even though the Y2K glitch is not expected to have a significant impact on the Groups business and operation, the Group has nonetheless prepared for contingencies with a high degree of seriousness.

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Prospects
All economic indicators confirm the worst is over for our economy and that we are firmly on the path of recovery. The consensus GDP growth rate forecast for 1999 is about 4%. Barring any major contagion effect from global events beyond our control, local business environment should remain conducive for sustained gradual recovery. The government must be congratulated for bringing us out of the recent economic turbulence that rocked Asia, in relatively non turbulent fashion. Specific to the Groups core business, in the case of palm oil, prices have slid from the high of about RM2,600 per MT to a low of just below RMl,OOO per MT before stabilising at current level of about RM 1,300 per MT. The effect of the much lower CPO prices on plantation earnings would naturally be substantial, however this will be mitigated by a 15% increase in FFB production for fiscal year 2000. It must also be highlighted that operating margins are still very attractive as our cost of production per MT CPO is less than RM650. The cyclical nature of commodity prices is unavoidable. Last years unusually high price levels (when vegetable oil prices were above USD650 per MT) brought on by reduced production induced by the El Nino effect, encouraged additional seasonal crop planting, in particular soybean and corn. This year, as oil palm yields recover and with soybean and corn having record harvests, overall supply went up, but on the demand side, consumption eased as a result of the economic crisis. However when prices overshot on its way down to USD 300 per MT, demand surged again, driven by increases in per capita consumption stimulated by the cheap prices. The price elasticity of demand on per capita consumption is quite pronounced for third world countries, where per capital consumption is very low relative to developed countries. Hence, we believe that current price level of about USD400 per MT is a comfortable support level for this period with strong potential up-swing towards USD500 by 2001. As the Groups FFB production is expected to continuously increase by between 10 to 15010 per annum over the next couple of years, even if prices remain at current levels, the Groups plantation earnings contribution should still exceed the record high of fiscal year 1999 by virtue of volume growth, within 2-l/2 years. On the property front, the Group is positive about further improvement to its performance. Although the commercial and retail segments are set to remain soft for a while yet, the residential segment has responded well to stimulating policies and should continue to recover in tandem with the overall economy. The Group also expects to increasingly benefit from the superior location of its projects, particularly the three located in the Puchong-Putrajaya corridor, namely Bandar Puchong Jaya, IO1 Resort Putrajaya and the soon to be launched Ladang Puchong.

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

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As for the manufacturing segment, with the overall economy firmly on the path of recovery and with growth in industrial output, improved contribution is expected from this segment as a whole. Various measures and new strategies put in place during the downturn are also expected to enhance the longer term competitiveness of these operations and should pay dividend in due course. Although short term fluctuations arising from market vagaries are beyond Managements control, it is important to remain alert, responsive and flexible to changing scenarios and not to be lulled into complacency. Management has focused and aligned its investment, financial and operation strategies to ensure consistent growth and enhancement of value for shareholders and other stakeholders. Your Board is confident that these efforts will consistently show through. Having emerged from the recession on a stronger footing, your Company is also poised to take on new opportunities that may arise and which meet our investment criteria.

Acknowledgement
As Chairman, it is once again my great pleasure on behalf of the Board, to congratulate and thank our CEO, Tan Sri Dato Lee Shin Cheng and the Management Team for yet another sterling performance which is even more commendable this time round. My gratitude and thanks also to my other fellow Directors for their invaluable contribution and support. Finally and most importantly, the Board and the Management Team extend our great appreciation for the dedication and commitment of all our Group employees at all levels, whose individual and team efforts have all contributed to the success of the Group, and also our sincere thanks and great appreciation to shareholders, associates and the authorities for their invaluable support and contributions to the IO1 Group.

Dato Haji lbrahim bin Abdul Rahman

DSPN, JMN Chairman 6 October 1999

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Five Year Financial Highlights

Year ended 30 June Results Turnover Profit before taxation Taxation Profit after taxation Minority interests Extraordinary items Profit attributable to shareholders Dividends Capitalisation for bonus issue Retained profit for the year Group Assets Fixed assets Associated companies Investment properties Other long term investments Land held for development Other assets Current assets Total assets Current liabilities

1999 RMOOO 1,411,917 462,190 216 462,406 (82,744) 379,662 (36,501) 343,161

1998

1997

1996

1995

RMOOO
935,127 316,823 (72,997) 243,826 (44,657) 199,169 (18,233) 180,936

RMOOO
851,051 285,992 (79,142) 206,850 (50,825) 156,025 (17,824) 138,201

RMOOO
675,434 261,141 (72,973) 188,168 (38,567) 55,640 205,241 (41,386) (315) 163,540

RMOOO

649,247 213,511 (57,656) 155,855 (35,954) 28,708 148,609 (14,165) 134,444

1,836,892 622,355 361,882 15,353 604,355 52,088 574,235 4,067,160 (837,130) 3,230,030

,814,295 590,527 308,589 30,255 572,025 51,291 554,633 3,921,615 (1,052,048)

1,484,148 273,075 254,533 237,796 552,491 47,734 629,144 3,478,921 (1,084,272)

,169,715 39,294 139,030 76,601 530,943 54,479 490,670 2,500,732 (460,002)

1,070,356
16,452 77,856 12,101 453,115 40,350 280,926 1,951,156 (573,223) 1,377,933

2,869,567

2,394,649

2,040,730

Financed By Share capital Reserves Shareholders fund Minority interests Deferred income Term loans Hire purchase and leasing creditors Amount due to State Government Loan stocks Retirement benefits Club membership deposits Deferred taxation

422,468 1,543,710 1,966,178 471,283 237,261 293,102 393 22 5,000 544 13,197 23,072 3,230,030

422,070
1,199,897 ,621,967 435,308 237,261 312,949 1,395 225,000 500 11,955 23,232 2,869,567

422,006
1009,479 1,431,485 414,271 168,467 4,836 64,032 275,514 494 10,052 25,498 2,394,649

419,506 861,529 ,281,035 305,335 132,748 1,348 275,514 388 8,648 35,714

337,270 589,410 926,680 245,334 114,831 790 55,394 349 6,452 28,103 1,377,933

2,040,730

Financial Statistics Basic earnings per share (sen) Gross dividend per share (sen) Net tangible assets per share (sen) Return on capital employed (o/o) Return on equity (O/o) Debt/Capital employed (o/o) Debt/Equity (o/o)

44.97 6.0 227

23.60 3.0 186 9.15 14.05 35.06 53.98

18.54 3.0 164 9.23 13.09 34.58 52.85

18.90 6.5 146 11.21 15.27 22.49 29.02

18.20 3.0 132 11.46 17.26 31.50 45.98

16.16
23.73 28.96 40.77

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

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Group Half Yearly Resirlts

1 st Half Year Ended 31 December 1998 RM'OOO Turnover Operating Profit Share of results of associated companies Profit before exceptional items and taxation Exceptional items Profit before taxation Taxation Profit after taxation Minority interest Profit attributable to shareholders Earnings Per Share (sen) Basic Fully Diluted Operating Profit On Segmental Basis Plantations Property development Property investment Manufacturing Others Profit before interest Net interest expense Profit before tax 214,545 38,279 55 32 23.12 51 20.77 52 703,460 o/o 50

2nd Half Year Ended 30 June 1999 RM'OOO 708,457

o/,

Year Ended 30 June 1999 RM'OOO %

50

1,411,917 100 431,457 100 22,916 100 454,373 100 7,817 100 462,190 100 216 462,406 -

210,501 49 14,857 65 225,358 50

220,956 51 8,059 35 229,015 50

2,669 34 228,027 830 49 -

5,148 66 234,163 51 (614) 233,549 51 (49,022) 59 184,527 49

2 2 8 , 8 5 7 49 (33,722) 41 195,135 51

(82,744) 100 379,662 100

21.85 49 18.84 48

44.97 100 39.61 100

173,944 45 81,183 68 3,723 31 4,530 43 (1,812) 261,568 17 50

388,489 100 119,462 100 11,915 100 10,604 100 (10,974) 100 519,496 100 (65,123) 100 454,373 100

8,192 69 6,074 57 (9,162) 257,928 83 50

(32,570) 50 225,358 50

(32,553) 50 229,015 50

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

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1999 RMOOO Financial Performance Turnover Earnings before interest and taxation (EBIT) Profit before taxttion Net operating profit after taxation (NOPAT) Profit attributable to shareholders Total assets Shareholders funds Operating profit on turnover (O/o) Profit before taxation on average shareholders fund (o/o) Return on assets (O/o) Return on equity (O/o) Return on capital employed (O/o) Earnings per shares (sen) Dividend per share - gross (sen) Net tangible assets per share (RM) Dividend cover (number of times) Interest cover (number of times) Plantation Performance Oil Palm FFB production (tonne) Yield per mature hectare (tonne) Mill production (tonne) Crude palm oil Palm kernel Oil extraction rate (O/o) Crude palm oil Palm kernel Average selling price (RM /tonne) Crude palm oil Palm kernel Operating profit (RM / mature hectare) K 11 b b I r Rubber production (OOOkg) Yield per mature hectare (kg) Average selling price (RM / kg) Operating profit (RM / mature hectare) Proprbrty krfortnancc Sales value Sale (unit) Average selling price (per unit) Turnover Operating profit Operating profit (per unit) Operating profit on turnover (O/o) Progress billings 303,526 2,227 136 353,785 119,462 54 34 357,871 1,279,149 19.10 281,656 74,666 19.49 5.17 2,029 1,082 5,758 4,278 1,622 3,18 1,108 1,411,917 519,496 462,190 533,276 379,662 4,067,160 1,966,178 36.79 25.76 13.11 23.73 16.16 44.97 6.0 227 10.40 5.36

1998 RMOOO

O/O

+I(-)
51 44 46 95 91 4 21 (5) 24 88 69 77 91 100 22 (5) 13

935,127 361,879 316,823 274,137 199,169 3,921,615 1,621,967 38.70 20.75 6.99 14.05 9.15 23.60 3.0 186 10.92 4.73

949,694 18.80 230,528 62,779 19.91 5.42 1,663 855 4,494 4,097 1,395 3.26 1,285

35 2 22 19 (2) (5) 22 27 28 4 16 (2) (14)

180,321 1,244 145 279,760 89,403 72 32 342,454

68 79 (6) 26 & 6 5

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

022

Review Of Core Business Operations

101 CORPORATION BERHAD (9027-W) INCORPORATED IN MALAYSIA

023

Anchor Business
Plantation was very much the growth driver for the 101 Group for fiscal year 1999, contributing 51% to Group turnover (vs. 51% for fiscal year 1998) and accounting for 75% of Group operating profit as compared to 64% for fiscal year 1998. The Group has, since its first foray into the plantation industry in June 1983, in pursuit of Vision 101, steadily and continuously steered a course towards the top of an industry that is very established and where Malaysia is the world leader. Following its last substantial acquisition in 1998, the Group has a total planted area of 88,374 hectares as at 30 June 1999 which makes it the fourth largest plantation company in terms of hectares. Though still at least 40,000 hectares or 30% smaller than the largest, the operating profit contribution from the Groups plantation operation is already a close second highest in absolute terms and its operating profit per hectare is one of the highest in the industry in the country. Ensuring sustainable growth in profitability and higher ROA is the key objective for the Plantation Division so as to continue to enhance value for shareholders.

Results
Plantations, or more specifically oil palm, which accounts for 97% of the
Rubber
2.7% 2,348 Ha

Groups planted area, enjoyed an outstanding year, boosted by very high

Other \-I. , ,/ k??Ha

palm product prices as well as a substantial increase in FFB production volume. Turnover for the year increased by 52% to RM726.5 million and operating profit increased by 68% to RM388.5 million. Average prices realised for crude palm oil (CPO) and palm kernel (PK) were RM2,029 per MT and RM1,082 per MT respectively, as compared to RM1,663 per MT and RM855 per MT for the previous year. Rubber however did not enjoy similar fortune, with average prices realised for the year falling to RM3.18 per kg as compared to RM3.26 per kg the year before, the lowest level in

Crop Mix
(total planted area = 88,374 Ha)

five years.