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2 ––– Corporate Information

3 ––– The Board of Directors

4 ––– Profile of the Directors

7 ––– Statement on Corporate Governance

11 ––– Audit Committee Report

14 ––– Internal Control Statement

15 ––– Statement of the Directors’ Responsibilities

16 ––– Chairman’s Statement

19 ––– Five-year Financial Highlights

20 ––– Group Structure

21 ––– Financial Statements

56 ––– List of Properties

57 ––– Analysis of Shareholdings

59 ––– Analysis of ICULS Holdings

61 ––– Analysis of Warrant Holdings

63 ––– Notice of Annual General Meeting

65 ––– Statement Accompanying Notice of AGM

Proxy Form

Contents

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BOARD OF DIRECTORS

Tan Sri Samshuri bin Arshad(Independent Non-Executive Chairman)

Mr Gooi Hoe Soon(Non-Executive Deputy Chairman)

Datuk Siti Maslamah binti Osman(Non-Executive Director)

Encik Mohd Ariffin bin Marzuki(Non-Executive Director)

Dato’ Lim Tong Yong @ Lim Tong Yaim(Non-Executive Director)

Datuk Dr. Baharun Azhar bin Raffiai(Independent Non-Executive Director)

Mr Ooi Giap Ch’ng(Independent Non-Executive Director)

Tengku Zafrul bin Tengku Abdul Aziz(Group Managing Director)

REGISTERED OFFICE

Level 12 Menara Asia Life189 Jalan Tun Razak50400 Kuala Lumpur, MalaysiaTel: 603 - 2166 2828Fax: 603 - 2166 2826Website: www.avenue-capital.com

REGISTRAR

PFA Registration Services Sdn Bhd1301, Level 13 Uptown 1No. 1, Jalan SS21/58Damansara Uptown 47400 Petaling JayaTel: 603 - 7725 4888Fax: 603 - 7722 2311

COMPANY SECRETARIES

Miss Wong Wei Fong (MAICSA 7006751)

Miss Kuan Hui Fang (MIA 16876)

PRINCIPAL BANKERS

Malayan Banking BerhadSouthern Bank BerhadRHB Bank Berhad

SOLICITORS

Mazlan & AssociatesA. Zahari & Rakan-rakanHo, Loke & KohLee Hishammuddin

STOCK EXCHANGE LISTING

Main BoardBursa Malaysia Securities Berhad

Corporate Information

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Datuk Dr. Baharun Azharbin Raffiai

(Independent Non-ExecutiveDirector)

Tan Sri Samshuri bin Arshad(Independent Non-Executive Chairman)

Datuk Siti Maslamahbinti Osman(Non-Executive Director)

Tengku Zafrul bin Tengku Abdul Aziz

(Group Managing Director)

Mr Gooi Hoe Soon(Non-Executive Deputy Chairman)

Board of Directors

Mr Ooi Giap Ch’ng(Independent Non-Executive Director)

Dato’ Lim Tong Yong @Lim Tong Yaim

(Non-Executive Director)

Encik Mohd Ariffinbin Marzuki

(Non-Executive Director)

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Profile of the Directors

Tan Sri Samshuri bin Arshad

Tan Sri Samshuri bin Arshad, aged 62, a Malaysian, was appointed to the Board on 20th October,1999 as an Independent Non-Executive Director and as the Chairman of the Board on 19thNovember, 2001. He is also the Chairman of the Nominating Committee and a member of the AuditCommittee.

Tan Sri Samshuri was attached to the Royal Malaysian Police Force where he served for more than34 years before retiring in 1997 upon reaching the compulsory retirement age of 55 years. His lastappointment with the Royal Malaysian Police Force prior to his retirement was as the DeputyInspector General of Police, a position which he held for 31/2 years. He had considerable experiencein police operations and also served as Chief Police Officer in various states in Malaysia includingSelangor Darul Ehsan, Sabah and Perak Darul Ridzuan. He had wide regional and internationalexposures and networking, serving as Head of Missions for the International Police Association,Association of Asean Police Forces and United Nations Crime Prevention Commission (Vienna). Hewas also exposed to the International Police Training programme in Japan, Australia, UnitedKingdom, United States of America and Korea. Tan Sri Samshuri is also the Chairman of AokamPerdana Bhd and a director of Unisem (M) Bhd.

Tan Sri Samshuri does not have any family relationship with any Directors and/or substantialshareholders of the Company or any personal interest in any business arrangement involving theCompany. He has had no convictions for any offences within the past 10 years.

Tan Sri Samshuri attended all the six Board Meetings held during the financial year.

Mr Gooi Hoe Soon

Mr Gooi Hoe Soon, aged 44, a Malaysian, was appointed to the Board as a Non-Executive Directoron 20th October, 1999 and as the Group Managing Director on 18th March, 2001. He is now theNon-Executive Deputy Chairman of the Board and a member of the Audit Committee.

Mr Gooi is a member of the Malaysian Institute of Certified Public Accountants and the MalaysianInstitute of Accountants. He has more than 20 years of experience in the fields of accounting andcorporate finance and was a finance director of several private and public listed companies onBursa Malaysia Securities Berhad (“Bursa Malaysia”). He has been instrumental in the successfulimplementation of several corporate exercises, which include the merger and acquisition andcorporate debt restructuring exercises undertaken by public listed companies.

Mr Gooi is the Executive Director (Dealing) of Avenue Securities Sdn Bhd, a participatingorganisation of Bursa Malaysia. He also sits on the boards of Hup Seng Industries Bhd, Pos Malaysia& Services Holdings Berhad and Paos Holdings Berhad.

Mr Gooi does not have any family relationship with any Directors and/or substantial shareholdersof the Company or any personal interest in any business arrangement involving the Company. Hehas had no convictions for any offences within the past 10 years.

Mr Gooi attended all the six Board Meetings held during the financial year.

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Datuk Siti Maslamah binti Osman

Datuk Siti Maslamah binti Osman, aged 57, a Malaysian, was appointed to the Board on 12thOctober, 2001 as a Non-Executive Director. She is also the Chairperson of the RemunerationCommittee.

Datuk Siti is a Fellow of the Chartered Institute of Management Accountants, United Kingdom. Shewas the Accountant General of Malaysia, a position she held since October 2000, before herretirement in October 2003. She has more than 31 years of experience in the field of accounting invarious Government Agencies, holding various appointments including as Treasury Accountant inTelecommunication Department, Finance Manager in Bank Simpanan Nasional and SeniorAccountant in various divisions of the Accountant General’s Department. She also sits on the boardsof Malaysia Airports Holdings Berhad, BIMB Holding Berhad and Bank Islam Malaysia Berhad.

Datuk Siti does not have any family relationship with any Directors and/or substantial shareholdersof the Company or any personal interest in any business arrangement involving the Company. Shehas had no convictions for any offences within the past 10 years.

Datuk Siti attended four out of the six Board Meetings held during the financial year.

Encik Mohd Ariffin bin Marzuki

Encik Mohd Ariffin bin Marzuki, aged 54, a Malaysian, was appointed to the Board on 12thOctober, 2001 as a Non-Executive Director. He is also a member of the Remuneration Committee.

Encik Mohd Ariffin is a Fellow Member of the Association of Chartered Certified Accountants,United Kingdom. He began his career with Bank Pembangunan dan Infrastruktur (M) Bhd as anAssistant Finance Manager. He subsequently joined Bank Simpanan Nasional in 1986 as GiroManager and was promoted to Director of Risk Management in 2001. Currently he is the Directorof Finance Department. He is also a director of Permodalan BSN Berhad.

Encik Mohd Ariffin does not have any family relationship with any Directors and/or substantialshareholders of the Company or any personal interest in any business arrangement involving theCompany. He has had no convictions for any offences within the past 10 years.

Encik Mohd Ariffin attended all the six Board Meetings held during the financial year.

Dato’ Lim Tong Yong @ Lim Tong Yaim

Dato’ Lim Tong Yong, aged 54, a Malaysian, was appointed to the Board on 26th April, 2001 as aNon-Executive Director. He is also a member of the Nominating Committee.

Dato’ Lim obtained his Bachelors Degree in Malay Studies from Nanyang University, Singapore in1971. Thereafter, he worked as a lecturer in Taylor’s College from 1972 to 1973, Nanyang Universityfrom 1973 to 1974 and Culin College in Singapore from 1974 to 1978. From 1979 to 1984, he servedas the Marketing Manager of Maran Edible Oil Sdn Bhd, a company involved in palm kernelcrushing. Later in 1987, he established Paos Industries Sdn Bhd, a company producing value addedproducts from oil palm, such as finished soap, animal feed, cocoa butter substitute and soap chips.

Dato’ Lim is the founder and a director of Paos Holdings Berhad and the Group Chief ExecutiveOfficer of Pantai Holdings Berhad.

Dato’ Lim does not have any family relationship with any Directors and/or substantial shareholdersof the Company or any personal interest in any business arrangement involving the Company otherthan his direct interest in Pantai Holdings Berhad, a substantial shareholder of the Company. Hehas had no convictions for any offences within the past 10 years.

Dato’ Lim attended all the six Board Meetings held during the financial year.

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Profile of the Directors (cont’d)

Datuk Dr. Baharun Azhar bin Raffiai

Datuk Dr. Baharun Azhar bin Raffiai, aged 65, a Malaysian, was appointed to the Board on 12thOctober, 2001 as an Independent Non-Executive Director. He is also the Chairman of the AuditCommittee and a member of the Nominating and Remuneration Committees.

Datuk Dr. Baharun holds a Ph.D from King’s College, University of Cambridge, United Kingdom anda BA(Hons) from King’s College, University of Durham, United Kingdom. He was attached toMalaysian Government for more than 34 years before retiring in 1998. His last appointment priorto his retirement was as the Director General, Research Division of the Prime Minister’sDepartment, a position which he held for 6 years. During his career, he has been assigned tovarious government services including Commissioner for Orang Asli Affairs, Secretary of NationalSecurity Council and Prime Minister’s Department. He is also a Director of Chase Perdana Berhad.

Datuk Dr. Baharun does not have any family relationship with any Directors and/or substantialshareholders of the Company or any personal interest in any business arrangement involving theCompany. He has had no convictions for any offences within the past 10 years.

Datuk Dr. Baharun attended all the six Board Meetings held during the financial year.

Mr Ooi Giap Ch’ng

Mr Ooi Giap Ch’ng, aged 45, a Malaysian, was appointed to the Board on 30th November, 2000 asan Independent Non-Executive Director.

Mr Ooi graduated with a Bachelor of Law degree and a Bachelor of Economics degree from theAustralian National University and was called to the Malaysian Bar in 1987. He has more than 16years experience in law practice, mainly in the area of commercial and corporate law. He iscurrently a partner of a legal firm in Kuala Lumpur. He is also a director of Mulpha InternationalBhd and Meda Inc. Berhad.

Mr Ooi does not have any family relationship with any Directors and/or substantial shareholders ofthe Company or any personal interest in any business arrangement involving the Company. He hashad no convictions for any offences within the past 10 years.

Mr Ooi attended five out of the six Board Meetings held during the financial year.

Tengku Zafrul bin Tengku Abdul Aziz

Tengku Zafrul bin Tengku Abdul Aziz, aged 31, a Malaysian, was appointed to the Board on 7thApril, 2003 as an Executive Director and was subsequently appointed as the Group ManagingDirector on 5th April, 2004. He is also presently the Chief Executive Officer and ExecutiveDirector (Dealing) of Avenue Securities Sdn Bhd, a wholly-owned subsidiary of the Company.

Tengku Zafrul graduated from University of Bristol, United Kingdom with a Bachelor of Science(Hons) in Economics and Accounting and later completed his Master of Art in Finance andInvestment from University of Exeter, United Kingdom. He began his career as a corporatefinance executive in a merchant bank and subsequently left to join an international researchhouse as an investment analyst and rose to be the director. He then became the advisor to thePresident of Tenaga Nasional Berhad prior to joining the investment banking department of aleading merchant bank. He is also the treasurer of Young Professionals Chamber of Malaysia(PROMUDA), Deputy President of University of Bristol Alumni Association and the executivesecretary of the Kuala Lumpur Business Club.

Tengku Zafrul does not have any family relationship with any Directors and/or substantialshareholders of the Company or any personal interest in any business arrangement involving theCompany. He has had no convictions for any offences within the past 10 years.

Tengku Zafrul attended all the four Board Meetings held since his appointment during thefinancial year.

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Statement on Corporate Governance

The Board is responsible for ensuring high standards of corporate governance are maintained in all activities undertakenby the Group, which are essential to protect and enhance the shareholders’ value and is committed to apply the principlesand best practices set out in the Malaysian Code on Corporate Governance.

1. THE BOARD OF DIRECTORS

The Group operates under the overall control of the Board, which is ultimately accountable for the strategic directionsof the Group activities and competent management of the Group’s business operations and performance, as well asenhancing its risk management processes and structures.

The Board of Directors meets once every quarter, therefore at least four times a year with additional meetingsconvened, when the need arises, to consider corporate proposals or other matters that require the Board’s immediateattention. The Board will have a formal schedule of matters specifically reserved for its attention to ensure that itexercises full control over significant strategic, financial, operational and compliance matters, including the reviewand approval of quarterly financial results. The Board of Directors have met six times during the financial year underreview. Details of the attendance of the Directors at the Board Meetings are disclosed in their respective profile.

1.1 Board Balance

The current Board is made up of eight members, which consists of the Chairman, who is independent, the GroupManaging Director, four non-independent non-executive directors and two other independent non-executivedirectors. Together, the Directors possess a mix of skills and experiences ranging from business and finance,corporate and legal to general disciplines. Their diverse backgrounds and experience add value and provideinvaluable inputs from different perspectives. A profile of each Director is presented on pages 4 to 6.

The Board members have separate roles. The day-to-day management of the Group’s business falls under theresponsibility of Group Managing Director who is also responsible to implement the strategies and policiesapproved by the Board.

The presence of majority of non-executive Directors and the independent non-executive Directors who areinfluential in the Board’s decision making process ensures the balance of power in the exercise of objective andindependent judgement on corporate issues dealt with at the Board. This ensures that the interests of the majorstakeholders and the minority shareholders are effectively promoted and represented through the Board.

1.2 Supply of Information

To discharge their duties and responsibilities, the Directors are provided with timely and relevant information,which may include quarterly and annual financial statements, board papers recommending business andoperational decisions, corporate and business development plans, status reports, minutes of meetings and reportsfrom independent advisors to facilitate informed decision making.

All Directors have access to the Group’s senior management and the advice and services of the CompanySecretaries and legal advisors. If required, the Directors, whether as a full Board or in their individual capacity maytake independent professional advice in the furtherance of their duties at the Company’s expense.

1.3 Appointments to the Board

The Nomination Committee established by the Board will oversee the selection process and to consider theappointment of new directors, before seeking the final approval of the Board. It will also carry out a review andassessment on the effectiveness of the Board as a whole and on the contribution of individual Directors.

1.4 Retirement and Re-election

In accordance with the Company’s Articles of Association (“Articles”), all Directors who are appointed by the Boardshall retire and are subject to re-election by the shareholders at the first Annual General Meeting (“AGM”) aftertheir appointment. The Articles also provide that one-third of the Directors for the time being, shall retire fromoffice by rotation at each AGM and be eligible for re-election.

1.5 Directors’ Training

All directors have attended the Mandatory Accreditation Programme pursuant to the Listing Requirements ofBursa Malaysia. Subsequent to the issuance of Practice Note 15 on Continuing Education Programme, all Directorshave attended and will continue to attend various training courses as may be prescribed by Bursa Malaysia fromtime to time which are relevant in assisting the Directors in fulfilling their duties.

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Statement on Corporate Governance (cont’d)

1.6 Directors’ Remuneration

The Directors’ fees are approved by the shareholders at the Annual General Meeting, based on therecommendation of the Board.

The remuneration package of executive Directors is structured to link rewards to corporate and individualperformances and subjected to the evaluation and recommendation by the Remuneration Committee to theBoard. In the case of non-executive Directors, the level of remuneration reflects the level of responsibilitiesundertaken by the non-executive Directors concerned. The non-executive Directors are also reimbursedattendance allowances for each meeting they attend.

The Company has proposed to include the non-executive Directors in the Company’s Employees’ Share OptionScheme, which is allowed under the amendments made to the Listing Requirements. The proposal is subject to theapproval to be obtained from the shareholders of the Company.

Details of the Directors’ remuneration for the financial year ended 31st January, 2004 are as follows:

Salaries & OtherEmoluments Fees Total

RM’000 RM’000 RM’000

Executive Directors 1,023 – 1,023

Non-executive Directors – 153 153

The number of Directors whose total remuneration for the financial year which fall within the respective band isas follows:

Executive Non-executive

RM50,000 and below – 7RM250,001 - RM300,000 1 –RM700,001 - RM750,000 1 –

2. COMMITTEES OF THE BOARD

The Board has delegated specific task of monitoring executive actions and determining the rewards of executivedirectors to the following committees, which have all been established with formal terms of reference:

2.1 Audit Committee

The Committee members are:

• Datuk Dr. Baharun Azhar bin Raffiai - Chairman• Tan Sri Samshuri bin Arshad• Mr Gooi Hoe Soon

The Audit Committee assists the Board to meet its responsibilities regarding financial reporting and strengthenthe independence of external auditors through the ability to communicate with non-executive Directors. It alsomonitors the work of the internal audit functions and assess the effectiveness of the Group’s system of internalcontrol.

The Audit Committee meets the external auditors annually to discuss the annual financial statements and theiraudit findings, including where necessary, the audit plan and any other matters arising on the annual reporting.

The report of the Audit Committee is set out on pages 11 to 13.

2.2 Remuneration Committee

The Committee members are:

• Datuk Siti Maslamah binti Osman - Chairperson• Encik Mohd Ariffin bin Marzuki• Datuk Dr. Baharun Azhar bin Raffiai

The Committee shall recommend to the Board the remuneration packages of managing director, executivedirectors and senior management of the Company in all its forms, drawing outside advice as necessary. Thedetermination of remuneration packages of non-executive directors is a matter for the Board as a whole.

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2.3 Nominating Committee

The Committee members are:

• Tan Sri Samshuri bin Arshad - Chairman• Datuk Dr. Baharun Azhar bin Raffiai• Dato’ Lim Tong Yong

The Committee shall recommend to the Board on the following:

• Candidates for all directorships to be filled by the shareholders or the Board; and• Directors to fill the seats on Board Committees

The Committee shall assess annually the effectiveness of the Board as a whole, the Board Committees andcontribution of each individual Director. The Committee will also review the required mix of skills, experience andother qualities including core competencies, which non-executive Directors should bring to the Board.

2.4 Options Committee

The Committee members are:

• Datuk Siti Maslamah binti Osman - Chairperson• Encik Mohd Ariffin bin Marzuki• Datuk Dr. Baharun Azhar bin Raffiai• Mr Gooi Hoe Soon• Ms Lim Swee Gim

The Options Committee was established by the Board to administer the Company’s Employees’ Share OptionScheme (“ESOS”), which was implemented on 10th June, 2003. The Options Committee ensures that the Scheme isadministered in accordance with the ESOS bye-laws which has been approved by shareholders of the Company.

3. ACCOUNTABILITY AND AUDIT

3.1 Financial Reporting

It is the commitment of the Board to provide a balanced, clear and meaningful assessment of the Group’s financialperformance and prospects. As such, the Board ensures that the quarterly result announcements are made on atimely basis and that the annual financial statements of the Group are made out in accordance with the applicableapproved accounting standards and the provisions of the Companies Act, 1965.

The statement of Directors’ Responsibilities is set out on page 15.

3.2 Internal Control

The Board has overall responsibility for maintaining a sound system of internal control to provide reasonableassurance of the effectiveness of the Group’s business operations and risk management. The Board is assisted bythe Audit Committee and the internal audit function.

The Internal Control Statement is set out on page 14.

3.3 Relations with the Auditors

The Audit Committee meets with the external and internal auditors at least twice a year to discuss on audit plans,findings and the financial statements. This is further described in the Audit Committee Report as set out on pages11 to 13.

The audit fees paid or payable to the external auditors, Messrs Deloitte KassimChan, by the Group during thefinancial year are disclosed in the financial statements. There were no non-audit fees paid or payable to theexternal auditors during the financial year.

4. SHAREHOLDERS’ COMMUNICATION AND INVESTOR RELATION

The Board acknowledges the need of its shareholders and potential investors to be informed of the Group’sperformance and major developments. As such, the Company ensures that the quarterly announcements of theGroup’s financial are made on a timely basis to provide its shareholders with an overview of the Group’s performanceand operations. In addition, numerous general announcements and press releases were made to update theshareholders on the status of all the Group’s restructuring exercise and other significant developments.

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Statement on Corporate Governance (cont’d)

General meetings convened by the Company remain the principal avenue for shareholders’ communication andprovide forums for discussion between the Directors and its shareholders. Shareholders are encouraged to participate,seek clarification and make suggestions during the questions and answers sessions of the Annual General Meeting.The Company also convenes other general meetings to seek the shareholders’ approvals on all the significantcorporate exercises proposed by the Company, where advisers to the Company and independent advisers if any, actingfor the minority shareholders are present to answer and clarify the shareholders’ queries.

Information on the Company and the Group’s products and services is also available at the Company’s website atwww.avenue-capital.com

5. ADDITIONAL COMPLIANCE INFORMATION

5.1 Material Contracts

There were no material contracts (not being contracts entered into in the ordinary course of business) entered intoby the Company and its subsidiary companies involving Directors and major shareholders, either still subsisting atthe end of the financial year ended 31st January, 2004 or entered since the end of the previous financial year.

5.2 Recurrent Related Party Transactions

At the Extraordinary General Meeting held on 3rd November, 2003, the Company has obtained a mandate fromits shareholders for the Group to enter into recurrent related party transactions involving the interest of Ministerof Finance, Incorporated (“MOF”) and/or persons connected with MOF.

Details of the recurrent related party transactions which amounted to a total of RM3,576,000 in gross incomeduring the financial year ended 31st January, 2004 pursuant to the said shareholders’ mandate are as follows:

Contracting Nature of Name of Nature of InterestedParty of the Group Transaction Related Party Relationship Related Party

Avenue Asset Fund Management Pos Malaysia & MOF, being a major MOFManagement Services Holdings shareholder ofServices Sdn Bhd Berhad (“PSH”) Avenue, has 29%

indirect interestsin PSH

Avenue Securities Placement of shares Tenaga Nasional MOF, being a major MOFSdn Bhd Berhad (“TNB”) shareholder of

Avenue, has 17%shareholdings in TNB

Avenue Securities Fee based income Khazanah Khazanah, being MOFSdn Bhd Nasional Berhad a Government

(“Khazanah”) controlled entityis deemedconnected to MOF,a major shareholderof Avenue

5.3 Share Buy Back

At the Annual General Meeting held on 23rd July, 2003, the Directors have obtained the shareholders’ approvalfor the Company to purchase its own shares up to 10% of its issued and paid-up share capital.

Details of the Company’s purchase of its own shares during the financial year were as follows:

Date No. of Avenue TotalShares Bought Back Considerationand Held as Treasury Shares

4th July, 2003 100 RM66.5315th December, 2003 100 RM86.03

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Audit Committee Report

The Audit Committee was established to assist the Board in ensuring the effectiveness of the Group’s system of internalcontrol.

MEMBER AND ATTENDANCE

The members of the Audit Committee, appointed by the Board, are as follows:

• Datuk Dr. Baharun Azhar bin Raffiai(Chairman/Independent Non-Executive Director)

• Tan Sri Samshuri bin Arshad (Independent Non-Executive Director)

• Mr Gooi Hoe Soon(Non-Executive Director)

The Committee had four meetings during the financial year, which were attended by all members of the Committee. Thehead of finance, head of internal audit and representatives of the external auditors attended some of the meetings byinvitation to brief the Committee on specific issues.

TERMS OF REFERENCE

1. Membership

The Committee shall be appointed by the Board and shall consist of not less than three members, the majority ofwhom shall be independent non-executive directors and at least one member shall be a member of the MalaysianInstitute of Accountants or one of the associations of accountants specified in Part II of the 1st Schedule of theAccountants Act, 1967. The Committee shall not consist of any alternate directors of the Company.

In the event of any vacancy in the Committee resulting in the non-compliance of the above, the Board must fill thevacancy within 3 months.

The Chairman shall be elected by the Committee from among their members and who shall be an independent non-executive director.

2. Meetings

The Committee must ensure that other directors and senior management attend any particular meeting only at theCommittee’s invitation, specific to the relevant meeting. The Company Secretary shall act as the secretary of theCommittee.

Meetings shall be held at least four times a year. The quorum for any meeting shall be two members who shall beindependent non-executive directors.

3. Authority

The Committee is authorised by the Board and shall:

a) have authority to investigate any matter within its terms of reference;

b) have the resources which are required to perform its duties;

c) have full and unrestricted access to any information pertaining to the Group;

d) have direct communication channels with the external auditors and the internal auditors;

e) be able to obtain independent professional or other advice as necessary; and

f) be able to convene meetings with the external auditors, excluding the attendance of the executive members ofthe Committee, whenever deemed necessary.

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Audit Committee Report (cont’d)

4. Duties of the Committee

The duties of Committee are:

a) to review with the external auditors the audit plan, their evaluation of the system of internal controls and their auditreports;

b) to review the assistance given by the employees of the Company to the external auditors;

c) to review the adequacy of the scope, functions and resources of the internal audit department and that it has thenecessary authority to carry out its work;

d) to review the internal audit programme and processes, the results of the internal audit programme, processes orinvestigation undertaken and whether or not appropriate actions are taken on the recommendations of the internalaudit function;

e) to review reports prepared by the officers of a subsidiary company relating to compliance with statutory andregulatory requirements and the necessary remedial actions to be taken, if any;

f) to review the quarterly results and year end financial statements, prior to the approval by the Board, focussingparticularly on:

• any changes in accounting policies and practices;• significant adjustments arising from the audit;• the going concern assumption; and• compliance with accounting standards and other legal requirements.

g) to monitor any related party transaction and conflict of interest situation that may arise within the Company or Groupincluding any transaction, procedure or course of conduct that raises questions of management integrity;

h) to consider and recommend the nomination and appointment of external auditors, the audit fees and any questionsof resignation, dismissal or re-appointment; and

i) to report promptly to the Bursa Malaysia where the Committee is of the view that a matter reported by it to the Boardhas not been satisfactorily resolved resulting in a breach of the Bursa Malaysia Listing Requirements.

SUMMARY OF ACTIVITIES

During the financial year under review, the Committee carried out the following activities:

• reviewed the quarterly and annual financial statements and ensured that the financial reporting and disclosurerequirements had been complied with before recommending them for the approval of the Board;

• reviewed the adequacy of the scope and the audit plans for the Group prepared by both the internal and externalauditors;

• reviewed and discussed the audit reports for the Group prepared by the external auditors, their findings andmanagement responses thereto;

• reviewed and discussed the internal audit reports prepared by the internal audit function and compliance reports of asubsidiary company, the findings, management responses and audit recommendations; and

• reviewed and approved the minutes of the Committee meetings.

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INTERNAL AUDIT FUNCTION

The internal audit function was established to independently conduct regular and systematic reviews of the Group’ssystem of internal control so as to provide assurance that such systems continue to operate satisfactorily and effectivelyand as such, assist the Committee in discharging its duties and responsibilities. The internal audit function of the Groupis carried out by the internal audit division of Avenue Securities Sdn Bhd, a wholly-owned subsidiary of the Company.

The main roles of the function are as follows:

a) ascertaining the adequacy of its internal controls and procedures that are specifically designed to detect and/orprevent violations;

b) ascertaining the efficiency and effectiveness of policies and procedures in relation to credit control and riskmanagement;

c) reviewing the relevance, reliability and integrity of financial and operational information generated and the meansused to identify, measure, classify and report such information;

d) ascertaining that the financial and accounting records and reports contain accurate, reliable, timely, complete andrelevant information and are prepared in compliance with applicable approved accounting standards;

e) ascertaining maintenance of clearly presented and comprehensive written policies and procedures that appropriatelyallocate responsibilities and duties and clear lines of reporting;

f) coordinating with the external auditors in planning of audit activities, developing common auditing techniques,exchanging work papers and participating in onsite reviews;

g) performing special reviews and/or investigations as requested by management or the Committee;

h) ascertaining the extent to which the Group’s assets are accounted for and safeguard from losses of all kinds; and

i) identifying opportunities to improve the operations of and processes in the Company and the Group.

During the financial year it has carried out 17 assignments and reviews. The audit findings were discussed with seniormanagement before they were tabled to the audit committees with recommendations made to the respectivemanagement.

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Internal Control Statement

INTERNAL CONTROL STATEMENT

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal controlto safeguard shareholders’ investment and the Group’s assets. The Board is pleased to present below the Internal ControlStatement, which has been prepared in accordance with the Statement on Internal Control: Guidance for Directors ofPublic Listed Companies.

RESPONSIBILITY

The Board of Directors acknowledges its responsibility for the Group’s system of internal control, which is designed toidentify and manage the risks facing the business in pursuit of its objectives and for reviewing the adequacy and integrityof this system. The system of internal control covers risk management and financial, operational and compliance controlsto safeguard shareholders’ investments and the Group’s assets. This system is designed to manage, rather than toeliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assuranceagainst material misstatement or loss.

RISK MANAGEMENT FRAMEWORK

The Board reviews the financial statements and status reports of the Group on a quarterly basis, assessing the risk strategyand the overall management of principal areas of risk. The operations of the Group are subject to a variety of financialrisks, including credit risk, liquidity risk and cash flow risk. Management committees have been established at eachbusiness units and at the Group to monitor and manage such risks, including the control over capital expenditure andcash flow management.

The credit control of each business unit is entrusted with the responsibility of managing credit risk and monitoring creditratings. It is primarily involved in managing and enhancing asset quality, formulating and reviewing credit policies as wellas documentation of credit policies and procedures for adherence by the business unit.

To assist the business units and support departments in managing operational risk in their respective functional areas ona more effective and efficient basis, the internal audit department has identified inherent risks of the various activitiesundertaken by the Group by developing a template for each business function in the Group. This risk-based approachaddresses the probability of an event occurring and to identify those activities, which have the highest level of inherentrisk to manage operational risk.

The process of reviewing the adequacy and the integrity of internal control is a continuous process and the Board willfrom time to time reviews the monitoring and reporting process to ensure their effectiveness on the whole.

INTERNAL CONTROL

The following are the key elements of the Group’s system of internal control:

• policies and procedures manuals clearly documented the policies, procedures and practices adopted by the Group toensure clear accountabilities and control procedures as well as proper segregation of tasks among departments andstaff are in place for all business units;

• the compliance function, which includes the Audit Committee and Internal Audit Function, assists the Board to overseethe management of risks and review the efficiency and effectiveness of the internal controls of the Group;

• regular internal audits are carried out to review the adequacy and integrity of the internal control systems of thebusiness units. It acts as a service to the business by assisting with the continuous improvement of controls andprocedures. The reports are submitted to the Audit Committee, which reviews the findings with management at theCommittee meetings. These, together with the external auditors’ reports, provide reasonable assurance that controlprocedures are in place and being followed;

• regular and comprehensive information covering financial and cash flow performance, operational status reports areprovided to the Board and senior management to facilitate the monitoring control process in ensuring that the businessoperates smoothly; and

• detailed budgeting process where each business units prepare budgets, business plans and other expenditurerequirements which are approved by the management committees of the respective business units and at the Group.The actual results against these budgets are reviewed monthly by the management committees, with major variancesbeing followed up and management actions taken, where necessary.

This statement was made in accordance with the resolution of the Board dated 19th May, 2004.

15

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Statement of the Directors’ Responsibilities

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which givea true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and ofthe results and cash flows of the Group and of the Company for the financial year then ended.

The Directors consider that, in preparing the financial statements of the Group and the Company for the financial yearended 31st January, 2004, the Group and the Company have used appropriate accounting policies, consistently appliedand supported by reasonable and prudent judgements and estimates. The Directors also consider that all applicableapproved accounting standards in Malaysia have been followed and confirmed that the financial statements have beenprepared on a going concern basis.

The Directors are responsible for ensuring that the Group and the Company maintain adequate accounting records whichdisclose with reasonable accuracy the financial position of the Group and the Company which enable them to ensure thatthe financial statements comply with the requirements of the Companies Act, 1965.

The Directors have also general responsibilities for taking such steps as are reasonably open to them to safeguard theassets of the Group and the Company to prevent and detect fraud and other irregularities.

16

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Chairman’s Statement

FINANCIAL REVIEW

The Group’s turnover rose by 82% to RM70 million and profits from operations before taxation

were up 20%. The results were, however, significantly weighed down by the net impairment loss

on goodwill, which amounted to RM251 million.

The demutualisation of the Kuala Lumpur Stock Exchange occurred in January 2004, and the

exchange was subsequently renamed Bursa Malaysia. Our stockbroking subsidiary, Avenue

Securities Sdn Bhd, which is a universal broker from the merger of four broking licences acquired

in 2002, was allotted shares in the demutualised exchange. Consequently, the Board was of the

opinion that the goodwill arising from the acquisition of these stockbroking companies was

impaired. As such, the Board has written off the entire related remaining goodwill of

approximately RM251 million.

The write-off has resulted in the Group registering a net loss of RM253 million for the financial

year ended 31st January, 2004. However, it did not affect the net tangible assets per share of the

Group, which improved to 84 sen per share from 78 sen per share in 2003.

OPERATIONAL REVIEW

Despite a lacklustre first half, the equity markets rallied towards the second half of the year and

this helped to generate good returns to our investing clients, thus increasing our revenue. Our

stockbroking business continues to be our core business, contributing over 70% of the Group’s

revenue. We have not expanded further in terms of setting up more branches or electronic access

facilities as we have yet to capitalise fully in the areas where we presently operate. We believe

there is still tremendous opportunity for growth.

DEAR SHAREHOLDERS,

Avenue has had a mixed performance in the

financial year ended 31st January, 2004

delivering strong revenue growth and returns.

However, profitability was significantly

affected by the Board’s decision to write off

goodwill during the year. We have continued

to invest in our people, improve our

customer services and focused on

performance. Though we have commenced

new activities and launched new products, greater effort is still

required to increase our competitiveness and core competencies.

17

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We commenced our Corporate Finance and Advisory business in May 2003 and the results for the

past ten months have been extremely encouraging. We have been appointed advisers to various

corporate exercises, ranging from initial public offerings, capital and debt restructuring and fund

raising. However, revenue contribution is still relatively small during the financial year 2004.

Our Asset Management and Unit Trust Management divisions had a very commendable year. Total

assets under management increased 30% to a record of almost RM3 billion. One of the most

important factors critical to building this business is the ability to generate attractive yet consistent

investment performance. The other important factor lies in our dedicated distribution strength,

which are our people. The growth in the assets under management during the year is evidence

that our strong investment performance combined with proven risk controlled asset allocation

processes is attractive to our clients.

Our Futures and Options division extended its services when it included the trading of crude palm

oil and palm kernel futures as part of its services. This proved to be a right direction as the revenue

and returns from this new service have been encouraging.

Research has become one of the key focus areas for us this year. We believe a strong differentiated

research output is closely aligned to the interests of investing clients and will be an important part

in our equity business in the years to come. During the year, we have seen numerous of our

research reports and analysis being published in the financial sections of the national dailies.

Brand recognition has improved significantly during the year with continuous marketing efforts

and promotion activities. Avenue Unit Trust became the main sponsor for the annual children’s

educational fair, Smartkids, which was held from 4th - 6th May, 2003. The event, with the main

objective of promoting the crucial bonding between parents and their children to facilitate the

nurturing of young productive citizens, was a success. Avenue Unit Trust had stepped forward to

help to educate parents that right investment decisions could ensure that their children obtain

quality education.

OUTLOOK FOR 2004

There are signs of vibrant economic growth in major markets and increased business confidence

during the first couple of months of 2004. However, in recent months, indications of volatility with

a tone of caution have dampened the sentiments in local and foreign stock markets.

The financial services industry has always been a highly competitive industry, where we face

competitions from larger and more established organisations. This will not be a deterrent to us,

neither is our size a constraint to us. We are determined to meet the challenges to strengthen our

culture, foster greater teamwork and promote excellence, as we believe the quality of our people

are our most important competitive strength.

We believe our Corporate Finance and Advisory Services represents one of our best opportunities

for substantial growth and fee-based activities will give higher rates of return to our capital

employed. We are committed to ensure that we maintain our attractive and consistent investment

performance, as this will determine our ability to increase the size of fund portfolios in our Unit

Trust and Asset Management divisions.

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Chairman’s Statement (cont’d)

It is our intention to extend the geographical coverage of our stockbroking services where there

are appropriate opportunities. We will need to evaluate carefully each opportunity to ensure that

capital employed is efficient and that risks are managed appropriately. We will work on improving

our research so that the qualities that our clients value most - industry expertise, independence and

forefront thinking are part of our service to them.

We will continue to maintain a tight control over our cost structure to ensure better profitability

and returns to shareholders, without sacrificing the quality of our work and services. It is also our

priority to enhance our reputation for integrity in everything that we do.

ACKNOWLEDGEMENT

There were several changes to the Board since my last message to the shareholders. In April 2004,

Mr Gooi Hoe Soon stepped down as the group managing director and was appointed the deputy

chairman. The Board is immensely grateful to Mr Gooi for his invaluable contributions over this

time and for his continuous dedication and contribution to the success of the Avenue Group.

Tengku Zafrul Aziz, who succeeded Mr Gooi, has a combination of capital market and corporate

finance expertise and knowledge. He will continue the efforts to lead Avenue Group to greater

heights.

YB Datuk Dr. Awang Adek bin Hussin stepped down from the Board following his appointment as

the deputy minister of the Rural and Regional Development Ministry. We express our greatest

appreciation to him and we wish him well in his new undertaking.

APPRECIATION

We thank our people in the Avenue Group who have continued to work hard in ensuring a

successful organisation and who are loyal and dedicated to our vision and missions.

Lastly, we wish to thank all our stakeholders, especially the shareholders and our clients, for their

continued faith and belief in us.

Respectfully,

TAN SRI SAMSHURI BIN ARSHAD

Chairman

19th May, 2004

19

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Five - Year Financial Highlights

Turnover (RM’ million)

00 200200 400400 600600 800800 1,0001,000

20042004

20032003

20022002

20012001

20002000

649.48649.48

902.31902.31

248.68248.68

122.88122.88

254.62254.62

Shareholders’ fund (RM’ million)

00(240)(240) (200)(200) (160)(160) (120)(120) (80)(80)

20042004

20032003

20022002

20012001

20002000

8.258.25

(19.15)(19.15)

(113.04)(113.04)

(245.89)(245.89)

(96.96)(96.96)

(40)(40) 4040

Profit/(loss) before taxation (RM’ million)

00(120)(120) (80)(80) (60)(60) (40)(40)

20042004

20032003

20022002

20012001

20002000

0.260.26

(15.9)(15.9)

(32.74)(32.74)

(87.8)(87.8)

(64.1)(64.1)

(20)(20) 2020

Basic earnings/(loss) per share (sen)

00 200200 400400 600600 800800 1,0001,000 1,2001,200

20042004

20032003

20022002

20012001

20002000

887.82 887.82

1,080.331,080.33

587.87587.87

658.35658.35

1,052.421,052.42

Total assets (RM’ million)

00 0.50.5 1.01.0 1.51.5 2.02.0

20042004

20032003

20022002

20012001

20002000

0.840.84

0.780.78

1.301.30

0.670.67

1.701.70

Net tangible assets per share (RM)

20

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Avenue Securities Sdn Bhd

A.A.Assets Nominees(Tempatan) Sdn Bhd

Avenue Options &Futures Services Sdn Bhd

Avenue AssetManagement Services Sdn Bhd

Avenue UnitTrust ManagementBerhad

PentavilleInvestments Ltd

Ultimate AcresSdn Bhd

DCA (M) PemajuCorp. Sdn Bhd

FlyingvestSdn Bhd

Piuco EntertainmentVenture (M) Sdn Bhd

Lucky Matrix Sdn Bhd

Wholly-Owned Subsidiary

Associated Company

AAB DamansaraSdn Bhd

PLB PropertyManagement Sdn Bhd

Affinity LandSdn Bhd

Banjaran UntungSdn Bhd(In member’s voluntary liquidation)

Affluent AcresSdn Bhd

AAB Avenue ISdn Bhd

Gombak EquipmentSdn Bhd

AAB Avenue IISdn Bhd

Gain SynergySdn Bhd

Affluent DevelopmentSdn Bhd

50%

Medan RiaSdn Bhd(In member’s voluntaryliquidation)

Group Structureas at 31st January, 2004

SST Nominees(Asing) Sdn Bhd

A.A.Assets Nominees(Asing) Sdn Bhd

Soon Theam SecuritiesSdn Bhd

Kestrel SecuritiesSdn Bhd

SST Nominees(Tempatan) Sdn Bhd

Kestrel SecuritiesNominees (Tempatan)Sdn Bhd

Pos Malaysia & Services Holdings Berhad

20%

Avenue AssetManagementServices (Labuan) Ltd

21

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22 ––– Directors’ Report

26 ––– Report of the Auditors

27 ––– Income Statements

28 ––– Balance Sheets

29 ––– Statements of Changes in Equity

30 ––– Cash Flow Statements

32 ––– Notes to the Financial Statements

55 ––– Statement by Directors

55 ––– Statutory Declaration

Financial Statements

22

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Directors’ Report

DIRECTORS’ REPORT

The directors of AVENUE CAPITAL RESOURCES BERHAD (formerly known as Avenue Assets Berhad) hereby submit theirreport and the audited financial statements of the Group and of the Company for the financial year ended 31st January,2004.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services. The principalactivities of the subsidiary companies are set out in Note 12 to the financial statements.

During the financial year, certain subsidiary companies are also involved in the provision of corporate finance and otheradvisory services and the provision of crude palm oil and palm kernel options broking.

Other than as stated above, there have been no significant changes in the nature of the activities of the Group and ofthe Company during the financial year.

CHANGE OF NAME

On 7th November, 2003, the Company changed its name from Avenue Assets Berhad to Avenue Capital Resources Berhad.

FINANCIAL RESULTS

Group CompanyRM’000 RM’000

Loss before tax (245,889) (273,632)Income tax expense (6,942) (1,623)

Loss for the year (252,831) (275,255)

In the opinion of the directors, the results of operations of the Group and of the Company during the financial year havenot been substantially affected by any item, transaction or event of a material and unusual nature other than theimpairment of goodwill and impairment loss on investments as disclosed in the financial statements.

DIVIDENDS

No dividend has been paid, declared or proposed by the Company since the end of the previous financial year. Thedirectors also do not recommend any dividend payment in respect of the current financial year.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than those disclosed inthe financial statements.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the issued capital of the Company was increased from RM772,217,732 to RM772,243,732 by theissuance of 26,000 new ordinary shares of RM1 each arising from the conversion of RM26,000 nominal value IrredeemableConvertible Unsecured Loan Stocks 2002/2007 (“ICULS”) of the Company at the conversion price of RM1 nominal value ofICULS for each ordinary share of RM1 each in the Company.

The new shares issued rank pari passu with the then existing ordinary shares of the Company.

The Company has not issued any debentures during the financial year.

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EMPLOYEES’ SHARE OPTION SCHEME

The Company had on 10th June, 2003 implemented an Employees’ Share Option Scheme (“ESOS”) which shall be in forcefor a period of 10 years. Details of the ESOS are set out in Note 25 to the financial statements.

On 29th September, 2003, 50,440,000 share options were granted at a subscription price of RM1 each to eligibleemployees. None of the options was exercised during the year.

Exemption has been granted by the Companies Commission of Malaysia from having to disclose in this report the namesof eligible employees who have been granted less than 1,500,000 options and details of their holdings. The names ofeligible employees who have been granted 1,500,000 options and above at the end of the financial year are as follows:

Name of Option Holders No. of Options

Wee Hoe Soon @ Gooi Hoe Soon 3,300,000Abdul Rauf bin Ramli 3,000,000Law Chee Keong 3,000,000Ooi Hun Pin 3,000,000Hoo See Kheng 1,500,000Lim Geok Nah 1,500,000Sundararajah a/l Ramasamy 1,500,000Tan Hong Peng 1,500,000Tong Kooi Keong 1,500,000Wong Teck Meng 1,500,000

OTHER FINANCIAL INFORMATION

Before the income statements and the balance sheets of the Group and of the Company were made out, the directorstook reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad receivables and the making ofallowance for doubtful receivables and have satisfied themselves that all known bad receivables had been written offand that adequate allowance had been made for doubtful receivables; and

(b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of businesshave been written down to their estimated realisable values.

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

(a) which would render the amount written off for bad receivables or the amount of the allowance for doubtfulreceivables in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and of theCompany misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group andof the Company misleading or inappropriate; or

(d) not otherwise dealt with in this report or financial statements which would render any amount stated in the financialstatements of the Group and of the Company misleading.

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

(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year whichsecures the liabilities of any other person; or

(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelvemonths after the end of the financial year which, in the opinion of the directors, will or may substantially affect the abilityof the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the intervalbetween the end of the financial year and the date of this report which is likely to affect substantially the results ofoperations of the Group and of the Company for the succeeding financial year.

24

Directors’ Report (cont’d)

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DIRECTORS

The following directors served on the Board of the Company since the date of the last report:

Tan Sri Samshuri bin Arshad Wee Hoe Soon @ Gooi Hoe SoonDatuk Siti Maslamah binti Osman Mohd Ariffin bin MarzukiDato’ Lim Tong Yong @ Lim Tong YaimDatuk Dr. Baharun Azhar bin RaffiaiOoi Giap Ch’ngTengku Zafrul bin Tengku Abdul Aziz YB Datuk Dr. Awang Adek bin Hussin (resigned on 31.3.2004)

In accordance with Article 102 of the Company’s Articles of Association, Tan Sri Samshuri bin Arshad, Datuk Siti Maslamahbinti Osman and Mr Wee Hoe Soon @ Gooi Hoe Soon retire by rotation at the forthcoming Annual General Meeting and,being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTS

The shareholdings in the Company of those who were directors at the end of the financial year as recorded in the Registerof Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows:

Number of Ordinary Shares/Warrants of RM1 eachBalance at Balance at

1.2.2003 Bought Sold 31.1.2004

Shares/Warrants in the Company

Direct Interest Dato’ Lim Tong Yong @ Lim Tong Yaim - shares 30,000 – – 30,000

Deemed Interest Dato’ Lim Tong Yong @ Lim Tong Yaim*- shares 130,238,287 – – 130,238,287- warrants 53,006,715 – – 53,006,715Wee Hoe Soon @ Gooi Hoe Soon #- shares 7,500,000 – – 7,500,000

* Deemed interested by virtue of shares held by companies in which he has substantial interest.

# Deemed interested by virtue of share options given by a substantial shareholder of the Company to Sentiasa ImpresifSdn Bhd, a company in which the director has substantial interests.

Number of Options Pursuant to the Company’s ESOSBalance at Balance at

1.2.2003 Granted Exercised 31.1.2004

Wee Hoe Soon @ Gooi Hoe Soon – 3,300,000 – 3,300,000

The other directors did not have any interest in the shares of the Company or its related companies during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the directors of the Company has received or become entitled toreceive any benefit (other than those disclosed as directors’ remuneration in the financial statements) by reason of acontract made by the Company or a related corporation with the director or with a firm of which he is a member, or witha company in which he has a substantial financial interest.

During and at the end of the financial year, no arrangement subsisted to which the Company was a party wherebydirectors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Companyor any other body corporate, other than the options granted and to be granted to the directors pursuant to theCompany’s ESOS as disclosed above.

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AUDITORS

The auditors, Messrs Deloitte KassimChan, have indicated their willingness to continue in office.

Signed on behalf of the Board in accordancewith a resolution of the Directors,

WEE HOE SOON @ GOOI HOE SOON

TENGKU ZAFRUL BIN TENGKU ABDUL AZIZ

Kuala Lumpur19th May, 2004

26

Report of the Auditorsto the Members of Avenue Capital Resources Berhad (Formerly known as Avenue Assets Berhad)

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We have audited the accompanying balance sheets as of 31st January, 2004 and the related statements of income, cashflows and changes in equity for the year ended on that date. These financial statements are the responsibility of theCompany’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bythe directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides areasonable basis for our opinion.

In our opinion:

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

(i) the state of affairs of the Group and of the Company as of 31st January, 2004 and of the results and the cash flowsof the Group and of the Company for the year ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial statements and consolidatedfinancial statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by thesubsidiary companies have been properly kept in accordance with the provisions of the Act.

We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the financialstatements of the Company are in form and content appropriate and proper for the purposes of the preparation of theconsolidated financial statements, and we have received satisfactory information and explanations as required by us forthese purposes.

The auditors’ reports on the financial statements of the subsidiary companies were not subject to any qualification anddid not include any comment made under sub-section (3) of Section 174 of the Act.

DELOITTE KASSIMCHAN AF 0080Chartered Accountants

ROSITA TAN1874/9/04 (J)Partner

Petaling Jaya19th May, 2004

27

Income Statements for the year ended 31st January, 2004

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Group CompanyNote 2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Revenue 4 70,395 38,629 26,675 3,923

Direct costs (14,756) (13,317) (45) (100)

Gross profit 55,639 25,312 26,630 3,823

Other operating income 6,771 5,974 48 8Administrative expenses (4,790) (1,948) (115) (141)Other operating expenses (43,962) (17,921) (23,041) (2,986)

Profit from operations 13,658 11,417 3,522 704

Impairment of goodwill 16 (251,269) – – –Impairment loss on investments 6 (14,862) (11,399) (280,127) –Amortisation of goodwill 16 (15,372) (8,982) – –Finance costs 5 (23) (329) (16) (324)Gain on disposal of investments 7 4,129 2,387 2,989 485Share in results of associated companies 17,850 15,153 – –

(Loss)/Profit Before Tax 8 (245,889) 8,247 (273,632) 865

Income tax expense 9 (6,942) (7,130) (1,623) (516)

(Loss)/Profit For The Year (252,831) 1,117 (275,255) 349

(Loss)/Earnings Per Ordinary Share (sen)

- Basic 10 (32.74) 0.26

- Fully diluted 10 N/A 0.25

The accompanying Notes form an integral part of the Financial Statements.

28

Balance Sheetsas of 31st January, 2004

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The accompanying Notes form an integral part of the Financial Statements.

Group CompanyNote 2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

AssetsProperty, plant and equipment 11 19,591 20,024 462 561Investment in subsidiary companies 12 – – 374,928 534,336Investment in associated companies 13 314,125 314,125 295,951 295,951Investment properties 14 1,669 4,390 1,608 2,862Other investments 15 124,973 53,817 47,025 46,293Goodwill on consolidation 16 – 296,641 – –

Current AssetsInventories 3,326 3,851 – –Trade receivables 17 198,574 137,724 – –Other receivables, deposits and prepayments 18 6,590 13,641 2,459 2,445Amount owing by subsidiary companies 12 – – 29,509 59,255Marketable securities 19 – 8,293 – –Deposits with licensed financial institutions 20 184,076 205,395 85,349 69,546Cash and bank balances 21 34,899 22,434 249 4,102

427,465 391,338 117,566 135,348

Current LiabilitiesTrade payables 185,483 133,787 – –Other payables and accrued expenses 22 52,182 43,904 6,125 7,939Amount owing to subsidiary companies 12 – – 235,067 135,749Tax liabilities 560 146 – –

238,225 177,837 241,192 143,688

Net Current Assets/(Liabilities) 189,240 213,501 (123,626) (8,340)

Long Term And Deferred LiabilitiesHire-purchase payables 23 – 69 – 60Deferred tax liabilities 24 117 117 – –

(117) (186) – (60)

Net Assets 649,481 902,312 596,348 871,603

Represented By:

Issued capital 25 772,244 772,218 772,244 772,218Loan stocks 26 59,474 59,500 59,474 59,500Reserves 27 (182,236) 70,595 (235,369) 39,886

649,482 902,313 596,349 871,604Less: Treasury shares 25 (1) (1) (1) (1)

Shareholders’ Funds 649,481 902,312 596,348 871,603

29

Statements of Changes in Equityfor the year ended 31st January, 2004

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Non-distributable Distributable

Issued Loan Share Merger Capital General Accumulated

Capital Stocks Premium Deficit Reserve Reserve Loss Total

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance at 1.2.2002 174,104 – 157,118 (79,140) 1,000 159 (4,563) 248,678

Profit for the year – – – – – – 1,117 1,117

Issuance of loan stocks – 179,500 – – – – – 179,500

Issuance of ordinary shares:

- Acquisition of subsidiary

companies 164,726 – – – – – – 164,726

- Rights issue 313,388 – – – – – – 313,388

- Conversion of loan stocks 120,000 (120,000) – – – – – –

Share issue expenses – – (5,096) – – – – (5,096)

Balance at 31.1.2003 772,218 59,500 152,022 (79,140) 1,000 159 (3,446) 902,313

Loss for the year – – – – – – (252,831) (252,831)

Conversion of loan stocks 26 (26) – – – – – –

Balance at 31.1.2004 772,244 59,474 152,022 (79,140) 1,000 159 (256,277) 649,482

Non-

distributable Distributable

Issued Loan Share General Accumulated

Capital Stocks Premium Reserve Loss Total

Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance at 1.2.2002 174,104 – 157,118 159 (112,644) 218,737

Profit for the year – – – – 349 349

Issuance of loan stocks – 179,500 – – – 179,500

Issuance of ordinary shares:

- Acquisition of subsidiary

companies 164,726 – – – – 164,726

- Rights issue 313,388 – – – – 313,388

- Conversion of loan stocks 120,000 (120,000) – – – –

Share issue expenses – – (5,096) – – (5,096)

Balance at 31.1.2003 772,218 59,500 152,022 159 (112,295) 871,604

Loss for the year – – – – (275,255) (275,255)

Conversion of loan stocks 26 (26) – – – –

Balance at 31.1.2004 772,244 59,474 152,022 159 (387,550) 596,349

The accompanying Notes form an integral part of the Financial Statements.

30

Cash Flow Statementsfor the year ended 31st January, 2004

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Group Company2004 2003 2004 2003

Note RM’000 RM’000 RM’000 RM’000

Cash Flows From Operating Activities(Loss)/Profit before tax (245,889) 8,247 (273,632) 865Adjustments for:

Impairment of goodwill 251,269 – – –Amortisation of goodwill 15,372 8,982 – –Impairment loss on investments 14,862 11,399 280,127 –Allowance for doubtful receivables/

(no longer required) 3,072 (51) 20,119 –Depreciation of property, plant and

equipment 2,873 2,203 259 323Interest expense 23 329 16 324Property, plant and equipment written off 16 143 14 31Share in results of associated companies (17,850) (15,153) – –Gain on disposal of investments (4,129) (2,387) (2,989) (485)Interest income (3,359) (3,657) (1,621) (1,690)Dividend income (1,064) (513) (24,326) (1,844)(Gain)/Loss on disposal of property,

plant and equipment (63) 19 (48) (3)

Operating Profit/(Loss) Before Working Capital Changes 15,133 9,561 (2,081) (2,479)

(Increase)/Decrease in:Inventories 525 1,742 – –Trade receivables (63,922) (49,604) – –Deposits and money held in trust/pledged (15,926) (36,079) – 696Other receivables, deposits and

prepayments (114) 14,324 101 8,729Increase/(Decrease) in:

Trade payables 51,696 71,658 – –Other payables and accrued expenses 12,525 (24,055) (1,774) 8,378Amount owing by/to subsidiary companies – – 108,945 (4,142)

Cash (Used In)/From Operations (83) (12,453) 105,191 11,182Tax refunded/(paid) 1,941 (3,061) (120) (120)

Net Cash From/(Used In) Operating Activities 1,858 (15,514) 105,071 11,062

Cash Flows From Investing ActivitiesProceeds from disposal of

investment properties 4,067 4,653 1,279 –Interest received 3,359 3,657 1,621 1,690Dividend received 3,326 1,568 22,708 1,328Proceeds from disposal of property,

plant and equipment 107 128 48 98(Additions to)/Proceeds from disposal of

other investments (34,799) 11,249 (2,487) (956)Additions to property, plant and equipment (2,500) (4,314) (174) (277)Additions to investment in associated

companies (50) (115) – –Proceeds from disposal of property

development project – 5,000 – –Addition to investment in subsidiary

companies 12 – (180,053) (116,000) (235,764)

Net Cash Used In Investing Activities (26,490) (158,227) (93,005) (233,881)

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The accompanying Notes form an integral part of the Financial Statements.

Group Company2004 2003 2004 2003

Note RM’000 RM’000 RM’000 RM’000

Cash Flows From Financing ActivitiesRepayment of hire-purchase (148) (72) (116) (51)Proceeds from issuance of share capital,

net of issuance costs – 308,292 – 308,292Repayment of bank borrowings – (53,610) – (53,610)Interest paid – (313) – (313)Purchase of treasury shares – (1) – (1)

Net Cash (Used In)/From Financing Activities (148) 254,296 (116) 254,317

Net (Decrease)/Increase In Cash And Cash Equivalents (24,780) 80,555 11,950 31,498

Cash And Cash Equivalents At Beginning Of Year 183,454 102,899 73,648 42,150

Cash And Cash Equivalents AtEnd Of Year 30 158,674 183,454 85,598 73,648

32

Notes to the Financial Statements

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1. GENERAL INFORMATION

The principal activities of the Company are investment holding and provision of management services. The principalactivities of the subsidiary companies are set out in Note 12.

During the financial year, certain subsidiary companies are also involved in the provision of corporate finance andother advisory services and crude palm oil and palm kernel options broking.

Other than as stated above, there have been no significant changes in the nature of the activities of the Group andof the Company during the financial year.

On 7th November, 2003, the Company changed its name from Avenue Assets Berhad to Avenue Capital Resources Berhad.

The total number of employees of the Group and of the Company as at 31st January, 2004 were 383 and 7 (336 and5 as at 31st January, 2003) respectively.

The principal place of business and registered office of the Company is located at Level 12, Menara Asia Life, 189, JalanTun Razak, 50400 Kuala Lumpur.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements of the Company have been approved by the Board of Directors for issuance on 19th May, 2004.

The financial statements of the Group and of the Company have been prepared in accordance with the provisions ofthe Companies Act, 1965 and the applicable approved accounting standards of the Malaysian Accounting StandardsBoard (“MASB”).

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of the Group and of the Company have been prepared under the historical cost convention,unless otherwise indicated in the accounting policies below.

Basis of Consolidation

The consolidated financial statements include the audited financial statements of the Company and its subsidiarycompanies made up to the end of the financial year. All significant intercompany transactions and balances areeliminated on consolidation. The Company adopts both the acquisition and merger methods of consolidation.

(i) When the acquisition method is adopted, the excess of the purchase consideration over the fair value of the netassets of the subsidiary companies at the date of acquisition is included in the consolidated financial statementsas goodwill on consolidation. The results of the subsidiary companies acquired or disposed of during the year areincluded from the date of acquisition or up to the date of disposal.

Goodwill is stated at cost less accumulated amortisation and impairment losses (if any) and is accounted for as anintangible asset and is amortised on a straight line basis over a period of 20 years.

Where an indication of impairment exists, the carrying amount of goodwill is assessed and written downimmediately to its recoverable amount.

(ii) Acquisition of subsidiary companies which meets the criteria for merger accounting under the Companies Act, 1965and Malaysian Accounting Standard No. 2, Accounting for Acquisitions and Mergers, are accounted for usingmerger accounting principles. When the merger method is used, the cost of investment in the Company’s books isrecorded at the nominal value of shares issued and the difference between the carrying value of the investmentand the nominal value of shares transferred is treated as merger reserves/deficits in the Group financial statementsin accordance with the merger relief provisions under Section 60(4) of the Companies Act, 1965. The results of thesubsidiary companies being merged are presented as if the merger had been effected throughout the financial year.

The financial statements of all subsidiary companies are consolidated under the acquisition method except for thefinancial statements of Flyingvest Sdn. Bhd. which are consolidated under the merger method.

Revenue and Income Recognition

Revenue of the Company represents management fees, rental income from investment properties, interest incomeand dividends received.

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Revenue of the Group includes:

(i) gross brokerage fee, margin income and underwriting and placement income;

(ii) fund management and advisory fees;

(iii) unit trust management fee;

(iv) gross brokerage fee from futures and options broking; and

(v) sale value of completed properties held for sale

Management fee, rental income and interest income are recognised on accrual basis by reference to the agreements entered.

Dividend income represents gross dividends from quoted and unquoted investments and is recognised when theshareholder’s right to receive payment is established.

Brokerage fee is charged on the clients at rates prescribed by Bursa Malaysia Securities Berhad (“Bursa Malaysia”)(formerly known as Malaysia Securities Exchange Berhad) and is recognised on the day when the shares are traded.Margin income and underwriting and placement income are recognised on accruals basis except where such marginaccount is classified as non-performing, recognition of interest income is suspended until all arrears have been paid.

Income Tax

In the previous financial years, the tax effects of transactions were recognised using the “liability” method, in the yearsuch transactions enter into the determination of net income, regardless of when they are recognised for taxpurposes. However, where timing differences would give rise to net deferred tax assets, the tax effects are generallyrecognised only when there is a reasonable expectation of their realisation.

During the current financial year, the Group and the Company adopted MASB Standard No. 25, Income Taxes. Uponadoption of MASB 25, the tax effects of transactions are recognised using the “balance sheet” method and all taxabletemporary differences are recognised. Where such temporary differences would give rise to net deferred tax asset,the tax effects are recognised to the extent that it is probable that taxable profits will be available against which thedeferred tax asset can be utilised.

There is, however, no significant effect on the financial statements of the Group and of the Company for the currentand previous financial years arising from the adoption of MASB 25.

Foreign Currency Conversion

Transactions in foreign currencies are converted into Ringgit Malaysia at the exchange rates prevailing at thetransaction dates or, where settlement has not yet been made at the end of the financial year, at the approximateexchange rates prevailing at that date. All foreign exchange gains or losses are taken up in the income statements.

For the purpose of consolidation, the financial statements of the foreign incorporated subsidiary company have beentranslated into Ringgit Malaysia as follows:

Assets and liabilities - at closing rateIssued capital - at historical rate Revenue and expenses - at average rate

The closing rate of United States Dollar per unit of Ringgit Malaysia used in the translation of foreign incorporatedsubsidiary company’s financial statements is 0.2632 (0.2632 in 2003).

All translation gains or losses are taken up and reflected in the foreign exchange fluctuation reserve account undershareholders’ equity. Such transaction gains or losses are recognised as income or expenses in the income statements,in the period in which the operations are disposed of.

Difference in exchange arising from the translation of the opening net investments in foreign subsidiary company andfrom the translation of the results of this company at the average exchange rate, are taken to foreign exchangefluctuation reserve account.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.

Gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposalproceeds and the carrying amount of the asset and is recognised in the income statements.

34

Notes to the Financial Statements (cont’d)

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The carrying amounts of property, plant and equipment are reviewed at each balance sheet date to determinewhether there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of anitem of property, plant and equipment exceeds its recoverable amount. The impairment loss is charged to the incomestatements unless it reverses a previous revaluation in which it is treated as a revaluation decrease.

Depreciation of property, plant and equipment, is computed on the straight-line method at rates calculated to writeoff the cost of the assets over their estimated useful lives. The annual rates used are as follows:

Land and building 2%Furniture and fittings and renovations 10% - 331/3%Office equipment and computers 10% - 331/3%Motor vehicles 20%

Subsidiary Companies

The Company treats as subsidiary companies those companies in which the Company controls the composition of theirboard of directors or holds more than half of their voting power, or holds more than half of their issued and paid-upshare capital.

Investment in subsidiary companies, which is eliminated on consolidation, is stated in the Company’s financialstatements at cost under the acquisition method or at the nominal value of the shares issued in exchange for sharesin the subsidiary companies acquired under the merger method, as applicable.

Where there is an indication of impairment in the value of the investment, the carrying amount of the investment isassessed and an allowance is made for impairment loss.

Associated Companies

An associated company is a non-subsidiary company in which the Group holds not less than 20% of the equity votingrights as long-term investment and in which the Group is in a position to exercise significant influence but no controlover the financial and operating policies.

The Group’s investment in associated companies is accounted for under the equity method of accounting based onthe latest management financial statements of the associated companies made up to the financial year end. Underthis method of accounting, the Group’s interest in the post-acquisition profit and reserve of the associated companiesis included in the consolidated results while dividend received is reflected as a reduction of the investment in theconsolidated balance sheet. The Group’s interest in associated companies is stated at cost plus the Group’s share ofpost-acquisition profits and reserves, less allowance for impairment loss.

Investment in associated companies is stated at cost in the Company’s financial statements, less allowance forimpairment loss. Where there is an indication of impairment in the value of the investment, the carrying amount ofthe investment is assessed and an allowance is made for impairment loss.

Investment Properties

Investment properties represent the cost for the construction and acquisition of shop offices that are not occupiedsubstantially for use by, or in the operations of the Group which are held for their investment potential and rentalincome and are not depreciated.

Where an indication of impairment exists, the carrying amount of investment properties is assessed and written downimmediately to its recoverable amount.

Other Investments

Other investments consist of long term investments in quoted, unquoted shares and unit trusts.

Other investments are stated at cost less allowance for impairment loss to recognise any decline, other than atemporary decline, in the value of the investments.

Inventories

Inventories, which are stated at the lower of cost (determined on the specific identification method) and net realisablevalue, consist of properties held for sale. Net realisable value represents the estimated selling price in the ordinarycourse of business less selling and distribution costs. Net realisable value is arrived at after considering the allowancefor obsolete and slow moving inventories.

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Receivables

Trade and other receivables are stated at nominal value as reduced by the appropriate allowances for estimatedirrecoverable amounts. Bad receivables are written off while allowance for doubtful receivables is made based onestimates of possible losses which may arise from non-collection of certain receivable accounts.

Receivables for certain subsidiary companies are classified as performing or non-performing in accordance with theRules of Bursa Malaysia.

(i) Specific Allowance

Specific allowance is made for doubtful receivables which has been individually reviewed and specificallyidentified as bad or doubtful, after deducting the amount of interest-in-suspense, the value of collateral held andthe deposit of and all amounts due to the dealer’s representatives; and

(ii) General Allowance

General allowances are made to cover possible lossess which have not been specifically identified based on acertain percentage of its total trade receivables, after deducting specific allowances and interest-in-suspense.

The policy on identification of accounts for specific allowances and maintenance of a general allowance account is inaccordance with the Rules of Bursa Malaysia.

Interest is suspended and credited to the interest-in-suspense account when an account is classified as non-performingin accordance with the Rules of Bursa Malaysia.

Provisions

Provisions are made when the Group has a present legal or constructive obligation as a result of past events, when itis probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of theamount can be made.

Employee Benefits

(i) Short Term Employee Benefits

Wages, salaries, bonuses and non-monetary benefits are accrued in the period in which the associated services arerendered by employees of the Group.

(ii) Defined Contribution Plan

The Group makes contributions to the Employees’ Provident Fund (“EPF”). The contributions to the EPF arecharged to the income statements in the period to which they relate. Once the contributions have been paid, theGroup has no further payment obligations.

(iii) Equity Compensation Benefits

The share options granted to directors and employees are disclosed in Note 25. The Group does not make a chargeto the income statements in connection with the share options granted. When the share options are exercised,the proceeds received, net of any transaction costs, are credited to share capital and share premium.

Financial Assets

The Group’s principal financial assets are cash and bank balances, deposits with licensed financial institutions,marketable securities and trade and other receivables.

Financial Liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangementsentered into. The Group’s principal financial liabilities include trade and other payables and hire-purchase payableswhich are stated at their nominal value.

Equity instruments are recorded at the proceeds received, net of direct issue costs.

Cash Flow Statements

The Group and Company adopt the indirect method in the preparation of the cash flow statements.

Cash equivalents include short term, highly liquid investments with maturities of three months or less from the dateof acquisition and are readily convertible to cash without significant risk of change in value.

36

Notes to the Financial Statements (cont’d)

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4. REVENUE

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Brokerage income 44,263 16,339 – –Asset and unit trusts management fees 17,247 10,092 – –Margin and other fees income 6,387 1,427 – –Sale of inventories 1,069 8,861 – –Interest income

- deposits 1,058 1,330 1,058 1,330- others – – 563 360

Dividend income from - subsidiary company – – 20,911 –- associated company – – 3,142 1,571- other investments 273 273 273 273

Rental income 98 89 98 89Management fees from subsidiary companies – – 630 300Property management and car park services – 218 – –

70,395 38,629 26,675 3,923

5. FINANCE COSTS

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Finance costs consist ofinterest expense on:- hire-purchase 23 16 16 11- term loans – 313 – 313

23 329 16 324

6. IMPAIRMENT LOSS ON INVESTMENTS

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Impairment loss on:- investment in subsidiary companies

(Note 12) – – 275,408 –- investment in associated companies 10,143 11,372 – –- other investments 4,719 27 4,719 –

14,862 11,399 280,127 –

7. GAIN ON DISPOSAL OF INVESTMENTS

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Gain on disposal of: - investment properties 1,346 1,801 25 –- other investments 2,783 586 2,964 485

4,129 2,387 2,989 485

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8. (LOSS)/PROFIT BEFORE TAX

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

After charging:Directors’ remuneration* 3,608 2,226 1,176 694Allowance for doubtful receivables

- trade 3,072 – – –- amount owing by subsidiary companies – – 20,119 –

Depreciation of property, plant and equipment 2,873 2,203 259 323Rental of premises 1,652 1,662 194 222Rental of equipment 597 338 6 6Auditors’ remuneration

- statutory 145 150 24 22- special – 6 – –- underprovision in prior year 2 – 3 –

Property, plant and equipment written off 16 143 14 31Loss on disposal of property, plant and

equipment – 19 – –

And crediting:Interest income

- deposits 1,886 1,641 – –- others 415 686 – –

Dividend income from other investments 791 240 – –Rental income from investment properties 343 1,898 – –Bad receivables recovered 129 123 – –Gain on disposal of property, plant and

equipment 63 – 48 3Allowance for doubtful receivables no longer

required – 51 – –

Employee information:Staff costs 22,656 8,480 530 231Contributions to EPF 1,521 939 58 36

Staff costs include salaries, bonuses and all other staff related expenses but excluding directors’ remuneration.

* Directors’ remuneration consists of the following:

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Directors of the Company:Fees 153 78 153 78Other emoluments 1,023 616 1,023 616

Directors of subsidiary companies: Other emoluments 2,432 1,532 – –

3,608 2,226 1,176 694

Estimated monetary value of benefits-in-kindreceived by subsidiary company’s directors 9 27 – –

38

Notes to the Financial Statements (cont’d)

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9. INCOME TAX EXPENSE

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Estimated tax payable 1,942 1,770 1,617 516Share in taxation of associated company

(Note 13) 5,495 5,617 – –Transfer from deferred tax (Note 24) – (57) – –

7,437 7,330 1,617 516(Over)/Under provision of tax payable in

prior years (495) (200) 6 –

6,942 7,130 1,623 516

The income tax expense for the year can be reconciled to the profit before tax per income statements as follows:

Group Company2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

(Loss)/Profit before tax (245,889) 8,247 (273,132) 865

Tax at the rate of 28% (68,849) 2,309 (76,477) 242Tax effects of:

Non allowable expenses 81,426 6,034 84,097 411Non taxable income (1,174) (668) (6,044) (137)

Utilisation of deferred tax assets previously not recognised (3,966) (345) – –

Deferred tax assets not recognised – – 41 –

7,437 7,330 1,617 516

As of 31st January, 2004, the Company has tax exempt income, which arose from tax-exempt dividend income receivedand from the income waived in 1999 in accordance with the Income Tax (Amendment) Act, 1999 amounting toapproximately RM16,132,000. Subject to approval by the Inland Revenue Board, the tax exempt income is availablefor the distribution of tax-exempt dividends to its shareholders.

10. LOSS/(EARNINGS) PER ORDINARY SHARE

Basic

The basic (loss)/earnings per ordinary share is calculated by dividing the Group’s loss after tax of RM252,831,492 (profitof RM1,117,019 in 2003) by the weighted average number of ordinary shares in issue during the year of 772,229,644(431,905,472 in 2003).

Fully Diluted

The fully diluted loss per ordinary share for 2004 is not presented as the ICULS, warrants and share options, ifconverted, would be anti-dilutive to the basic loss per share.

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The fully diluted earnings per share for 2003 has been calculated by dividing the Group’s net profit attributable toshareholders by the weighted average number of ordinary shares in the Company that would have been in issue atthe end of the financial year had all the ICULS been converted at the issue date.

2003

Net profit attributable to shareholders (RM’000) 1,117

Weighted average number of ordinary shares in issue (’000) 431,905Adjustment for conversion of ICULS (’000) 11,574

443,479

Diluted earnings per share (sen) 0.25

The Company’s warrants which are convertible to ordinary shares have potential dilutive effects on the earnings pershare for 2003. However, as the exercise price of the warrants is higher than the current market price of the ordinaryshares, there will be no impact of dilution on the earnings per share.

11. PROPERTY, PLANT AND EQUIPMENT

Furnitureand Office

Freehold Fittings EquipmentLand and and and MotorBuilding Renovations Computers Vehicles Total

Group RM’000 RM’000 RM’000 RM’000 RM’000

CostAt 1.2.2003 9,727 8,258 13,132 2,861 33,978Additions – 1,110 1,037 353 2,500Disposals/Write offs – (87) (89) (331) (507)

At 31.1.2004 9,727 9,281 14,080 2,883 35,971

Accumulated DepreciationAt 1.2.2003 708 3,702 8,045 1,499 13,954Charge during the year 160 986 1,300 427 2,873Disposals/Write offs – (79) (71) (297) (447)

At 31.1.2004 868 4,609 9,274 1,629 16,380

Net Book ValueAt 31.1.2004 8,859 4,672 4,806 1,254 19,591

At 31.1.2003 9,019 4,556 5,087 1,362 20,024

Depreciation charge - 2003 80 702 1,145 276 2,203

40

Notes to the Financial Statements (cont’d)

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Furnitureand Office

Fittings Equipmentand and Motor

Renovations Computers Vehicles TotalCompany RM’000 RM’000 RM’000 RM’000

CostAt 1.2.2003 1,195 199 739 2,133Additions – 20 154 174Disposals/Write offs (29) – (220) (249)

At 31.1.2004 1,166 219 673 2,058

Accumulated DepreciationAt 1.2.2003 986 187 399 1,572Charge during the year 124 8 127 259Disposals/Write offs (15) – (220) (235)

At 31.1.2004 1,095 195 306 1,596

Net Book ValueAt 31.1.2004 71 24 367 462

At 31.1.2003 209 12 340 561

Depreciation charge - 2003 214 21 88 323

Included under property, plant and equipment of the Group and the Company are certain assets acquired underhire-purchase arrangements with net book values totalling RM Nil (RM170,224 in 2003) and RM Nil (RM139,108 in2003) respectively.

12. INVESTMENT IN SUBSIDIARY COMPANIES

2004 2003RM’000 RM’000

Unquoted sharesAt cost- local corporations 591,296 475,196At nominal value of shares issued- local corporations 91,140 91,140

682,436 566,336Impairment loss (307,508) (32,000)

Net 374,928 534,336

Amount owing by subsidiary companies 49,628 59,255Allowance for doubtful receivables (20,119) –

Net 29,509 59,255

Amount owing to subsidiary companies 235,067 135,749

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In January 2004, the Kuala Lumpur Stock Exchange undertook a demutualisation exercise and has vested andtransferred its stock exchange licence to Bursa Malaysia. As a result of the demutualisation exercise, a subsidiarycompany was allocated 9,090,909 shares in Bursa Malaysia which was assigned a fair value of RM30,000,000. Theamount has been taken up as other investments in the financial statements of the Group for the current financial year(Note 15).

Consequent to the demutualisation exercise mentioned above, the Company has provided for an impairment loss inthe stockbroking subsidiary amounting to RM274,908,000 out of the total impairment loss in subsidiary companies ofRM275,408,000 (Note 6) which has been taken up in the income statement for the current financial year.

Amount owing by subsidiary companies mainly consists of payments made on behalf and unsecured advances whichare interest free with no fixed terms of repayment, except for a subordinated term loan of RM1,500,000 (RM1,000,000in 2003) made to a subsidiary company, which is repayable upon its maturity three years from the date of drawndownwhich falls on 13th June, 2005.

Amount owing to subsidiary companies mainly represents payments made on behalf and unsecured advances whichare interest free with no fixed terms of repayment.

The subsidiary companies, all incorporated in Malaysia, except as otherwise indicated, are as follows:

Name of Companies Issued and Effective Percentage Principal ActivitiesPaid-Up Share of Ownership

Capital 2004 2003RM % %

(Direct Subsidiary Companies)

Avenue Securities Sdn. Bhd. 340,000,000 100 100 Stockbroking and provisionof advisory services

Avenue Asset Management Services Sdn. Bhd. 4,600,000 100 100 Provision of assetmanagement services

Avenue Options & Futures Services Sdn. Bhd. 10,000,000 100 100 Provision of options andfutures services

Avenue Unit Trust Management Berhad 6,500,000 100 100 Provision of unit trustmanagement services

Flyingvest Sdn. Bhd. 455,700,000 100 100 Investment holdingDCA (M) Pemaju Corp. Sdn. Bhd. 2,000,000 100 100 Property developmentUltimate Acres Sdn. Bhd. 2 100 100 Property investmentLucky Matrix Sdn. Bhd. 100,000 100 100 Investment holdingPiuco Entertainment Venture (M) Sdn. Bhd. 500,000 100 100 DormantPentaville Investments Ltd.

(Incorporated in British Virgin Islands) USD1 100 100 Investment holding

(Indirect Subsidiary Companies)

Kestrel Securities Sdn. Bhd. 39,000,000 100 100 Ceased operations as stockbroker

Soon Theam Securities Sdn. Bhd. 30,000,000 100 100 Ceased operations as stockbroker

Avenue Asset Management Services (Labuan) Ltd. USD79,000 100 – Provision of portfoliomanagement services

AAB Avenue I Sdn. Bhd. 12,000,000 100 100 Investment holding,property investment,property development and property management

AAB Damansara Sdn. Bhd. 7,000,000 100 100 Property investment,property developmentand property management

AAB Avenue II Sdn. Bhd. 4,000,000 100 100 Property investment,property developmentand property management

Affinity Land Sdn. Bhd. 4,000,000 100 100 Property investment,property developmentand property management

Affluent Acres Sdn. Bhd. 1,500,000 100 100 Property investment,property developmentand property management

42

Notes to the Financial Statements (cont’d)

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Name of Companies Issued and Effective Percentage Principal ActivitiesPaid-Up Share of Ownership

Capital 2004 2003RM % %

(Indirect Subsidiary Companies)

PLB Property Management Sdn. Bhd. 400,000 100 100 Property managementGombak Equipment Sdn. Bhd. 100,000 100 100 Property investment

and property managementGain Synergy Sdn. Bhd. 100,000 100 100 Property investmentA. A. Assets Nominees (Tempatan) Sdn. Bhd. 50 100 100 Provision of nominee servicesA. A. Assets Nominees (Asing) Sdn. Bhd. 2 100 100 Provision of nominee servicesKestrel Securities Nominees (Tempatan) Sdn. Bhd. 2 100 100 DormantSST Nominees (Tempatan) Sdn. Bhd. 2 100 100 DormantSST Nominees (Asing) Sdn. Bhd. 2 100 100 DormantBanjaran Untung Sdn. Bhd. 1,000,000 100 100 Dormant

(In member’s voluntary liquidation)Medan Ria Sdn. Bhd. 7,829,941 100 100 Dormant

(In member’s voluntary liquidation)

During the financial year, the Company subscribed for an additional 20,000,000 new ordinary shares of RM1.00 eachin Avenue Securities Sdn. Bhd..

Dissolution of Subsidiary CompaniesDuring the financial year, Kestrel Securities Nominees (Asing) Sdn. Bhd., a wholly-owned subsidiary company of theGroup was dissolved on 15th December, 2003.

Subsequent to the financial year end, SST Nominees (Asing) Sdn. Bhd. and SST Nominees (Tempatan) Sdn. Bhd. weredissolved on 6th April, 2004.

In 2003, the Group deregistered 3 of its subsidiary companies, KLTD Trading Sdn. Bhd., Global Merge Sdn. Bhd. andPrisma Mewah Sdn. Bhd..

As these subsidiary companies were dormant, the dissolution/deregistration did not have any significant effect on thefinancial position and results of the Group in 2004 and 2003.

Disposal of Subsidiary CompanyIn 2003, the Group disposed of its subsidiary company, Mega Palm Sdn. Bhd. (“MPSB”). As the financial statements ofMPSB were not consolidated in 2002, the disposal did not have any significant effect on the financial position andresults of the Group in 2003.

Acquisition of Subsidiary CompaniesIn 2003, the Company acquired 100% equity interest in Avenue Asset Management Services Sdn. Bhd., AvenueOptions & Futures Services Sdn. Bhd., Avenue Unit Trust Management Bhd., Soon Theam Securities Sdn. Bhd., SSTNominees (Tempatan) Sdn. Bhd., SST Nominees (Asing) Sdn. Bhd., Kestrel Securities Sdn. Bhd., Kestrel SecuritiesNominees (Tempatan) Sdn. Bhd. and Kestrel Securities Nominees (Asing) Sdn. Bhd. The Company also acquired theentire debt instrument of a wholly-owned subsidiary company which were issued to the subsidiary company’sunsecured creditors pursuant to a debt restructuring exercise.

The effect of these acquisitions on the financial results of the Group for the financial year ended 31st January, 2003was as follows:

Audited2003

RM’000

Revenue 15,828Operating costs (13,940)

Profit before tax 1,888Income tax expense (888)

Increase in Group profit attributable to shareholders 1,000

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The effect of these acquisitions on the financial position of the Group in 2003 was as follows:

At Date of Acquisition

RM’000

Property, plant and equipment 13,485Other investments 19,593Receivables and other current assets 50,965Deposits, cash and bank balances 52,327Payables (23,001)Goodwill on consolidation 283,737

Total purchase consideration 397,106Purchase consideration satisfied via issuance of ordinary shares of the Company (164,726)

Purchase consideration discharged by cash 232,380Cash and cash equivalents of subsidiary companies acquired (52,327)

Net cash flow on acquisition 180,053

13. INVESTMENT IN ASSOCIATED COMPANIES

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Quoted shares - at carrying value/cost 315,325 315,325 295,951 295,951Unquoted shares - at cost 23,943 23,893 – –

339,268 339,218 295,951 295,951Share in post acquisition results 15,713 5,620 – –

354,981 344,838 295,951 295,951Less: Impairment loss (40,856) (30,713) – –

Net 314,125 314,125 295,951 295,951

Quoted shares in Malaysia:At market value 125,672 102,894 125,672 102,894At fair value* 314,180 314,180 314,180 314,180

* Based on valuation carried out by the directors.

As of 31st January, 2004, the carrying value of the Group’s and the Company’s investment in associated company hasexceeded the market value by approximately RM189,653,000 (RM212,431,000 in 2003) and RM170,279,000 (RM193,057,000in 2003) respectively. During the financial year, the directors carried out a review to determine the said investment’sestimated recoverable amount. Based on the directors’ valuation, the carrying value of the Group’s investment in associatedcompany is supported by its recoverable amount. Consequently, the directors are of the opinion that the allowance fordiminution in value is adequately made in the financial statements of the Group for the current financial year.

The associated companies, all incorporated in Malaysia, are as follows:

Effective PercentageName of Company Principal Activities of Ownership

2004 2003

Pos Malaysia & Services Holdings Investment holding and provision 20% 20%Berhad of management services

Affluent Development Sdn. Bhd. Property development, property 50% 50%management and property investment

44

Notes to the Financial Statements (cont’d)

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The following amounts represent the Group’s share of assets, liabilities, revenue and expenses of the associatedcompanies:

Group2004 2003

RM'000 RM'000

Property, plant and equipment 123,228 126,241Goodwill 102,902 102,902Investments 90,659 45,925Current assets 165,016 181,423Current liabilities (86,526) (71,058)Long term liabilities (40,298) (40,595)

Share in net assets 354,981 344,838Impairment loss (40,856) (30,713)

314,125 314,125

Group2004 2003

RM'000 RM'000

Revenue 128,346 128,991Expenses (110,496) (113,838)

Profit before tax 17,850 15,153Income tax expense (5,495) (5,617)

Profit after tax 12,355 9,536

14. INVESTMENT PROPERTIES

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Located in Malaysia:Shop offices and apartments 1,838 4,559 1,874 3,128

Less: Impairment loss (169) (169) (266) (266)

Net 1,669 4,390 1,608 2,862

The impairment loss on investment properties was made by the directors based on their existing market value.

45

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15. OTHER INVESTMENTS

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Shares in quoted local corporations, at carrying value/cost 28,774 36,774 28,774 36,774

Shares in unquoted local corporations, at cost 4,519 4,519 4,519 4,519Unit trusts 46,950 9,524 2,202 5,000Other investments* 49,449 3,000 16,249 –

129,692 53,817 51,744 46,293Less: Impairment loss (4,719) – (4,719) –

124,973 53,817 47,025 46,293Market value of: Shares in quoted local corporations 29,674 17,419 29,674 17,419Unit trusts 47,106 9,677 2,287 5,043

As of 31st January, 2003, the carrying values of quoted investments of the Group and the Company are in excess oftheir market values by approximately RM19,202,000 and RM19,312,000 respectively. No allowance for diminution invalue of quoted investments was made in the financial statements in 2003 as the directors are of the opinion that thedecline in value of investments was temporary in nature.

* Included in other investments of the Group in 2004 are unquoted shares of Bursa Malaysia allocated to a subsidiarycompany arising from the demutualisation exercise as mentioned in Note 12 amounting to RM30,000,000.

16. GOODWILL ON CONSOLIDATION

Group2004 2003

RM'000 RM'000

At beginning of year 306,637 22,900Addition during the year – 283,737

At end of year 306,637 306,637

Accumulated amortisation at beginning of year 9,996 1,014Amortisation during the year 15,372 8,982

Accumulated amortisation at end of year (25,368) (9,996)Impairment of goodwill (281,269) –

Net – 296,641

Consequent to the demutualisation exercise undertaken by Bursa Malaysia as mentioned in Note 12, the Group hasprovided for an impairment loss on goodwill of RM281,269,000. After allocating RM30,000,000 as fair value of sharesin Bursa Malaysia received, the net amount of RM251,269,000 has been taken up in the income statement for thecurrent financial year.

46

Notes to the Financial Statements (cont’d)

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17. TRADE RECEIVABLES

Group2004 2003

RM'000 RM'000

Trade receivables 202,192 138,258

Less: Allowance for doubtful receivables - specific allowance [Note (a)] (859) (268)- general allowance [Note (b)] (2,616) (135)Interest-in-suspense [Note (c)] (143) (131)

Net 198,574 137,724

Movements in the allowance for bad and doubtful receivables and interest-in-suspense accounts are as follows:

2004 2003RM'000 RM'000

(a) Specific Allowance:Balance at beginning of year 268 265Allowance made during the year 951 1,839Allowance no longer required (360) (2,016)Acquired from subsidiary companies – 325Amount written off – (145)

Balance at end of year 859 268

(b) General Allowance:Balance at beginning of year 135 9Allowance made during the year 2,699 255Allowance no longer required (218) (129)

Balance at end of year 2,616 135

(c) Interest-in-suspense:Balance at beginning of year 131 5Allowance made during the year 337 140Amount written back (325) (14)

Balance at end of year 143 131

18. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Tax recoverable 2,981 10,146 2,074 1,959Deposits and prepayments 2,030 1,475 271 271Other receivables 1,579 2,020 114 215

6,590 13,641 2,459 2,445

47

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19. MARKETABLE SECURITIES

Group2004 2003

RM'000 RM'000

Shares quoted in Malaysia At carrying value – 8,319Allowance for diminution in value – (26)

Net – 8,293Market value of:

Quoted shares – 6,035

20. DEPOSITS WITH LICENSED FINANCIAL INSTITUTIONS

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Deposits with:Licensed banks 101,894 143,528 48,655 37,843Other licensed corporation 82,182 61,867 36,694 31,703

184,076 205,395 85,349 69,546

Included under deposits with licensed financial institutions of the Group are:

(a) deposits amounting to RM1,600,000 (RM1,600,000 in 2003) pledged to the banks for credit facilities granted tosubsidiary companies; and

(b) short term deposits of RM42,649,849 (RM33,866,797 in 2003) held on behalf of the subsidiary companies' remisiersand clients.

The effective interest rates on deposits with licensed financial institutions range from 2.00% to 4.00% (2.60% to4.00% in 2003) per annum.

21. CASH AND BANK BALANCES

Included under cash and bank balances of the Group are:

(a) an amount of RM52,198 (RM63,644 in 2003) deposited by certain subsidiary companies into Housing DevelopmentAccounts in accordance with Section 7(A) of the Housing Developers (Control and Licensing) Act, 1966; and

(b) an amount of RM16,050,859 (RM8,907,901 in 2003) in respect of money held in trust accounts for remisiers andclients of subsidiary companies.

22. OTHER PAYABLES AND ACCRUED EXPENSES

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Other payables and accrued expenses 37,961 36,749 5,359 6,930Remisiers and dealers trust accounts 10,265 4,859 – –Deposits received 1,956 2,240 766 969Hire-purchase payables (Note 23) – 56 – 40

52,182 43,904 6,125 7,939

48

Notes to the Financial Statements (cont’d)

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23. HIRE-PURCHASE PAYABLES

Group Company2003 2003

RM'000 RM'000

Total outstanding 161 127Interest in suspense (36) (27)

125 100Portion repayable within twelve months, included

under other payables and accrued expenses (Note 22) (56) (40)

Non-current portion 69 60

The interest rates implicit in these hire-purchase of the Group and of the Company ranged from 10.83% to 13.80%per annum in 2003.

24. DEFERRED TAX LIABILITIES

Group2004 2003

RM'000 RM'000

Balance at beginning of year 117 –Acquisition of a subsidiary company – 174Transfer to income statement (Note 9) – (57)

Balance at end of year 117 117

The deferred taxation is in respect of tax effects of temporary differences arising from the excess of tax capitalallowances over book depreciation of property, plant and equipment.

As mentioned in Note 3, the tax effects of temporary differences which would give rise to net future tax benefits arerecognised only where it is probable that taxable profits will be available against which the deferred tax asset can beutilised. As of 31st January, 2004, the estimated amount of deferred asset calculated at applicable tax rate which isnot recognised in the financial statements, is as follows:

Deferred Asset/(Liability)Group Company

2004 2003 2004 2003RM'000 RM'000 RM'000 RM'000

Tax effects of temporary differences in respect of the excess book depreciation of property, plant and equipment over tax capital allowances (927) (722) (3) –

Tax effects of unabsorbed capital allowances and unutilised tax losses 92,158 96,623 199 155

Other temporary differences 880 176 – –

Net deferred asset 92,111 96,077 196 155

The unutilised tax losses and unabsorbed capital allowances are subject to the agreement of Inland Revenue Board.

49

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25. SHARE CAPITAL

Group and Company2004 2003

RM'000 RM'000

Authorised:Ordinary shares of RM1 each:At beginning of year 1,500,000 1,000,000Created during the year – 500,000

At end of year 1,500,000 1,500,000

Issued and fully paid-up:Ordinary shares of RM1 each At beginning of year 772,218 174,104Issued during the year- Conversion of ICULS (Note 26) 26 120,000- Acquisition of subsidiary companies – 164,726- Rights issue – 313,388

At end of year 772,244 772,218

During the financial year, the issued capital of the Company was increased from RM772,217,732 to RM772,243,732 bythe issuance of 26,000 new ordinary shares of RM1 each arising from the conversion of RM26,000 nominal value ICULSof the Company at the conversion price of RM1 nominal value of ICULS for each ordinary share of RM1 each in theCompany.

Employees' Share Option Scheme

The Company had on 10th June, 2003 implemented an Employees' Share Option Scheme ("ESOS") and 50,440,000share options were granted at an option price of RM1 each to eligible employees during the year.

The salient features of the ESOS are as follows:

(i) the total number of shares which may be made available shall not exceed 10% of the total issued and paid-upshare capital of the Company at any point of time during the existence of the ESOS;

(ii) eligible persons are employees of the Group, including executive directors, who have been in employment of theGroup for at least one year prior to the date of offer;

(iii) the subscription price for each ordinary share may be at a discount of not more than 10% from the 5 daysweighted average market price of the ordinary shares of the Company at the offer date or at par value of theordinary shares of the Company, whichever is higher;

(iv) the options granted are exercisable within a period of 10 years from the date of offer of the option or such shorterperiod as may be specifically stated in the offer; and

(v) the employees to whom the options are granted have no right to participate by virtue of the options in any shareissue of any other company.

Treasury Shares

At the Company's Annual General Meeting held on 23rd July, 2003, the directors have obtained the shareholders'approval for the Company to purchase its own shares up to 10% of its issued and paid-up share capital. The directorsare committed to enhance the value of the Company and believe that the share buy-back is in the best interests ofthe Company and its shareholders.

During the financial year, the Company bought back 200 ordinary shares of RM1 each for a total cash considerationof RM153 using internally generated funds.

These treasury shares have been presented as a deduction from equity following the application of the treasury stockmethod. The amount of outstanding issued and paid-up share capital after the set-off amounted to 772,242,532shares.

50

Notes to the Financial Statements (cont’d)

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26. LOAN STOCKS

Group and Company2004 2003

RM'000 RM'000

Balance at beginning of year 59,500 –Issue during the year – 179,500Converted during the year (Note 25) (26) (120,000)

Balance at end of year 59,474 59,500

In accordance with MASB Standard No. 24 - Financial Instruments: Disclosure and Presentation, the Company shouldclassify as equity when a financial instrument does not give rise to a contractual obligation to the Company to delivercash or another financial asset. In this instance, the possibility of the Company to redeem the ICULS appears remote,and consequently, the ICULS has been classified as an equity instrument.

The salient features of the ICULS are as follows:

(i) carry a zero coupon rate;

(ii) convertible into new ordinary shares on any market day during the tenure of five years from the date of issuanceat the conversion rate of RM1 nominal value of ICULS for each ordinary shares of RM1 each in the Company; and

(iii) on maturity date which falls on 21st November, 2007, all outstanding ICULS will be converted mandatorily at theconversion rate of RM1 nominal value of ICULS for each ordinary share of RM1 each in the Company.

During the financial year, RM26,000 nominal value of ICULS were converted at the conversion rate of RM1 nominalvalue of ICULS for each ordinary share of RM1 each in the Company.

27. RESERVES

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Non-distributable:Share premium 152,022 152,022 152,022 152,022Merger deficit (79,140) (79,140) – –Capital reserve 1,000 1,000 – –

Distributable:Accumulated loss (256,277) (3,446) (387,550) (112,295)General reserve 159 159 159 159

(182,236) 70,595 (235,369) 39,886

Merger Deficit Merger deficit arose from the acquisition of a subsidiary company accounted for using the merger method ofaccounting, as describe in the accounting policies.

Capital ReserveCapital reserve arose from redemption of redeemable non-convertible preference shares in a subsidiary company.

51

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28. SIGNIFICANT RELATED PARTY TRANSACTIONS

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are othersignificant related party transactions:

Group2004 2003

RM'000 RM'000

Transactions with Major Shareholders of the Company:Brokerage income 145 –Rental of premises – 783

Transactions with Associated Company:Asset management fee 138 –

The directors of the Company are of the opinion that the above transactions have been entered into in the normalcourse of business and have been established under terms that are no less favourable than those arranged withindependent third parties.

29. FINANCIAL INSTRUMENTS

Financial Risk Management Objectives and PoliciesThe operations of the Group are subject to a variety of financial risks, including interest rate risk, credit risk, liquidityrisk and cash flow risk. The Group has formulated a financial risk management framework whose principal objectiveis to minimise the Group's exposure to risks and/or costs associated with the financing, investing and operatingactivities of the Group.

Interest Rate Risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing fixed deposits. Theinterest rate of fixed deposits are disclosed in Note 20.

Credit Risk The Group has no major concentration of credit risk and manage these risks by monitoring credit ratings and limitingthe aggregate financial exposure to any individual counterparty.

The Group extends credit to its customers based upon careful evaluation of the customer's financial condition andcredit history.

Liquidity Risk The Group practices prudent liquidity risk management to minimise the mismatch of financial assets and liabilities andto maintain sufficient credit facilities for contingent funding requirement of working capital.

Cash Flow Risk The Group reviews its cash flow position regularly to manage its exposure to fluctuations in future cash flowsassociated with its monetary financial instruments.

Fair Value of Financial Assets and Financial LiabilitiesThe carrying amounts approximate their fair value because of the short maturity of these instruments, except for thefollowing financial assets:

Group CompanyCarrying Fair Carrying FairAmount Value Amount Value

2004 Note RM'000 RM'000 RM'000 RM'000

Financial AssetsInvestment in associated companies 13 314,125 314,180 295,951 314,180Investment properties 14 1,669 1,788 1,608 1,688Other investments- quoted 15 75,524 76,780 30,776 31,961- unquoted 15 49,449 * 16,249 *

52

Notes to the Financial Statements (cont’d)

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Group CompanyCarrying Fair Carrying FairAmount Value Amount Value

2003 Note RM'000 RM'000 RM'000 RM'000

Financial AssetsInvestment in associated companies 13 314,125 314,180 295,951 314,180Investment properties 14 4,390 5,905 2,862 2,932Other investments- quoted 15 46,298 49,886 41,774 45,252- unquoted 15 7,519 * 4,519 *

Investment properties and quoted investmentThe fair value of investment properties and quoted investment approximate the estimated selling price/realisablevalue.

* Unquoted investmentIt is not practical to estimate the fair value of unquoted investments other than the shares in Bursa Malaysia whichwas assigned a fair value of RM30,000,000 in 2004.

30. CASH AND CASH EQUIVALENTS

Group Company2004 2003 2004 2003

RM'000 RM'000 RM'000 RM'000

Cash and bank balances 34,899 22,434 249 4,102Deposits with licensed financial institutions 184,076 205,395 85,349 69,546

218,975 227,829 85,598 73,648Less:Short term deposits held in trust (Note 20) 42,650 33,867 – –Cash and bank balances

-Trust account (Note 21) 16,051 8,908 – –Deposits pledged with financial institutions

(Note 20) 1,600 1,600 – –

(60,301) (44,375) – –

158,674 183,454 85,598 73,648

31. CONTINGENT LIABILITIES

(a) As at 31st January, 2004, the Company is contingently liable in respect of an indemnity of RM20,000,000(RM20,000,000 in 2003) given to Securities Clearing Automated Network Sdn Bhd for facility granted to asubsidiary company.

(b) A wholly-owned subsidiary company of the Group had jointly with another 50% shareholder of the associatedcompany, entered into agreements giving undertakings, but not corporate guarantees, to certain financialinstitutions that both shareholders will ensure that the associated company remains solvent and able to meet allits financial liabilities as and when they fall due. The associated company has since defaulted in principalrepayment and interests payments of its financing facilities. The total principal amount outstanding as at 31stJanuary, 2004 is RM44.935 million (RM44.935 million in 2003).

32. COMMITMENTS

Group2004 2003

RM'000 RM'000

Capital expenditure - approved but not contracted for – 682Underwriting commitments 16,910 –

53

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33. SEGMENTAL REPORTING

Business Segments

The Group is organised into the following operating divisions:

Financial services includes stockbroking activities, financial futures and options broking, asset management and unittrusts management.

Investment holdings includes provision of management services, investment in associated companies and otherinvestments.

Others includes property investment, sale of property stocks, property management and other inactive operations.

No geographical segmental information is provided as the Group operates principally in Malaysia.

Group

Financial InvestmentServices Holdings Others Consolidated

2004 RM'000 RM'000 RM'000 RM'000

Revenue 67,897 1,429 1,069 70,395

ResultsSegment result 13,916 (412) 154 13,658

Impairment of goodwill (251,269)Amortisation of goodwill (15,372) – – (15,372)Impairment loss on investments (14,862)Finance costs (23)Gain on disposal of investments 4,129Share in results of associated companies – 17,850 – 17,850

Loss before tax (245,889)Income tax expense (6,942)

Loss after tax (252,831)

AssetsSegment assets 429,595 135,078 6,043 570,716Investment in associated companies – 314,125 – 314,125Unallocated corporate assets 2,982

Consolidated total assets 887,823

LiabilitiesSegment liabilities 220,643 1,642 15,497 237,782Unallocated corporate liabilities 560

Consolidated total liabilities 238,342

Other InformationCapital additions 2,309 174 17 2,500Depreciation and amortisation 17,705 259 281 18,245

54

Notes to the Financial Statements (cont’d)

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Group

Financial InvestmentServices Holdings Others Consolidated

2003 RM'000 RM'000 RM'000 RM'000

Revenue 27,858 1,692 9,079 38,629

ResultsSegment result 3,714 1,860 5,843 11,417

Amortisation of goodwill (8,982) – – (8,982)Impairment loss on investments (11,399)Finance costs (329)Gain on disposal of investments 2,387Share in results of associated companies – 15,153 – 15,153

Profit before tax 8,247Income tax expense (7,130)

Profit after tax 1,117

AssetsSegment assets 579,347 167,707 9,010 756,064Investment in associated companies – 314,125 – 314,125Unallocated corporate assets 10,146

Consolidated total assets 1,080,335

LiabilitiesSegment liabilities 160,105 3,275 14,290 177,670Unallocated corporate liabilities 353

Consolidated total liabilities 178,023

Other InformationCapital additions 3,920 277 117 4,314Depreciation and amortisation 10,562 322 301 11,185

55

Statement by Directors

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The directors of AVENUE CAPITAL RESOURCES BERHAD (formerly known as Avenue Assets Berhad), state that, in theiropinion, the accompanying balance sheets and statements of income, cash flows and changes in equity are drawn up inaccordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysiaso as to give a true and fair view of the state of affairs of the Group and of the Company as of 31st January, 2004 and ofthe results and the cash flows of the Group and of the Company for the year ended on that date.

Signed in accordance with a resolution of the Directors,

WEE HOE SOON @ GOOI HOE SOON

TENGKU ZAFRUL BIN TENGKU ABDUL AZIZ

Kuala Lumpur19th May, 2004

Statutory Declaration

DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENTOF THE COMPANY

I, WEE HOE SOON @ GOOI HOE SOON, the director primarily responsible for the financial management of AVENUECAPITAL RESOURCES BERHAD (formerly known as Avenue Assets Berhad), do solemnly and sincerely declare that theaccompanying balance sheets and statements of income, cash flows and changes in equity are, in my opinion, correct andI make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of theStatutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed WEE HOE SOON @ GOOI HOE SOONat KUALA LUMPUR this 19th day of May, 2004

WEE HOE SOON @ GOOI HOE SOON

Before me,

WONG AH YING (W334)

COMMISSIONER FOR OATHS

56

List of Propertiesas at 31st January, 2004

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Location & Description Existing Use Tenure Built up Age of Book ValueArea Property (Group)

Sq. ft. Year(s) RM’000

1) Megan Avenue I and

Menara Promenade

189, Jalan Tun Razak,

50400 Kuala Lumpur Investment

- 1 unit office property/

- 3 units apartment Inventory Freehold 9,050 7 2,118

2) Pusat Dagangan Phileo

Damansara II

15 Jalan 1/11

Off Jalan Damansara

46300 Petaling Jaya

- 1 unit office Inventory Freehold 2,506 5 307

3) Megan Avenue II

12, Jalan Yap Kwan Seng Investment

50450 Kuala Lumpur properties/

- 7 units shops/offices Inventories Freehold 14,788 5 1,899

4) Taman Sg Besi Indah Leasehold

43300 Seri Kembangan 99 years

Selangor Darul Ehsan expiring

- 1 unit shop/office Inventory 12/11/2088 6,996 5 571

5) C01.1.01

Silverpark Apartment Leasehold

Jalan Lady Maxwell 99 years

27600 Bukit Fraser Investment expiring

Pahang Darul Makmur property 22/08/2090 1,415 8 100

57

Analysis of Shareholdingsas at 3rd June, 2004

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Class of Shares : Ordinary shares of RM1 each.No. of Shareholders : 21,430Voting Rights : Every member of the Company present in person or by proxy shall have one vote on a

show of hand and in the case of a poll, shall have one vote for every ordinary share held.

DISTRIBUTIONS OF SHAREHOLDINGS

Holdings No. of No. ofHolders % Shares %

1 - 99 307 1.43 12,277 0.00100 - 1,000 6,331 29.54 4,138,488 0.541,001 - 10,000 11,566 53.97 51,929,130 6.7210,001 - 100,000 2,882 13.45 86,847,067 11.25100,001 - 38,612,185* 342 1.60 303,736,683 39.3338,612,186 and above** 2 0.01 325,580,087 42.16

Total 21,430 100.00 772,243,732 100.00

Remark : * - Less than 5% of Issued Shares: ** - 5% and above of Issued Shares

SUBSTANTIAL SHAREHOLDERS

Direct No. of Indirect No. ofShareholders Shares Held % Shares Held %

Aroma Teraju Sdn Bhd 230,168,000 29.81 – –Seraya Sensa Sdn Bhd 95,412,087 12.36 – –BH Builders Sdn Bhd (formerly known as

Kin Khoon & Co Sdn Bhd) 55,048,000 7.13 – –Dato’ Lim Tong Yong @ Lim Tong Yaim 30,000 <0.01 (1) 130,238,287 16.87Pantai Holdings Berhad – – (2) 130,238,287 16.87Pantai Group Resources Sdn Bhd – – (3) 130,238,287 16.87Piramid Pertama Sdn Bhd – – (4) 230,168,000 29.81Seleksi Arif Sdn Bhd – – (4) 230,168,000 29.81Minister of Finance (Incorporated) – – (5) 230,168,000 29.81Bank Simpanan Nasional – – (6) 230,168,000 29.81

Notes:(1) Deemed interested by virtue of his substantial shareholdings in Pantai Holdings Berhad.(2) Deemed interested by virtue of its substantial shareholdings in Pantai Group Resources Sdn Bhd.(3) Deemed interested by virtue of its substantial shareholdings in Seraya Sensa Sdn Bhd and Cyberwide Finance Limited (“Cyberwide”), of which Cyberwide

holds 34,826,200 Avenue Shares (4.51%).(4) Deemed interested by virtue of their substantial shareholdings in Aroma Teraju Sdn Bhd.(5) Deemed interested by virtue of its substantial shareholdings in Piramid Pertama Sdn Bhd.(6) Deemed interested by virtue of its substantial shareholdings in Seleksi Arif Sdn Bhd.

LIST OF TOP 30 SHAREHOLDERS

Name No. of Shares Held %

1. Aroma Teraju Sdn Bhd 230,168,000 29.81

2. Seraya Sensa Sdn Bhd 95,412,087 12.36

3. Glossmere Investments Limited 34,826,200 4.51

4. BH Builders Sdn Bhd (formerly known as Kin Khoon & Co Sdn Bhd) 30,048,000 3.89

5. Public Nominees (Temptan) Sdn Bhd 28,908,477 3.74* Tongkah Holdings Berhad

6. Universal Trustee (Malaysia) Berhad 25,000,000 3.24* Asian Pac Holdings Berhad

7. Pos Malaysia & Services Holdings Berhad 23,025,000 2.98

8. Yeo Khee Bee 8,676,773 1.12

58

Analysis of Shareholdings (cont’d)

as at 3rd June, 2004

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Name No. of Shares Held %

9. HSBC Nominees (Tempatan) Sdn Bhd 7,919,800 1.03* HSBC (M) Trustee Bhd for Prudential Dynamic Fund

10. Amanah Merchant Holding Sdn Bhd 5,472,000 0.71

11. HSBC Nominees (Asing) Sdn Bhd 5,188,000 0.67* Chase Manhattan Bank (Ireland) PLC for Invesco GT Asean Fund

12. Yeo Khee Aik 4,648,014 0.60

13. HDM Nominees (Tempatan) Sdn Bhd 3,912,000 0.51* HDM Capital Sdn Bhd for AKN Capital Sdn Bhd

14. Yeo Khee Nam 3,134,662 0.41

15. Cartaban Nominees (Asing) Sdn Bhd 3,000,000 0.39* Credit Suisse Singapore for Gold Rush Management Ltd

16. EB Nominees (Tempatan) Sendirian Berhad 2,745,000 0.36* Malaysian International Merchant Bankers Berhad

17. Amanah Raya Nominees (Tempatan) Sdn Bhd 2,648,600 0.34* Public Smallcap Fund

18. Citicorp Nominees (Asing) Sdn Bhd 2,401,600 0.31* CBNY for DFA Emerging Markets Fund

19. United Overseas Nominees (Tempatan) Sdn Bhd 2,290,000 0.30* Pledged Securities Account for Koo Kow Kiang @ Ko Keck Ting (MPG)

20. DB (Malaysia) Nominee (Asing) Sdn Bhd 2,249,800 0.29* Deutsche Bank AG London for Diversified Asian Strategies Fund

21. DB (Malaysia) Nominee (Asing) Sdn Bhd 2,211,400 0.29* Deutsche Bank AG London for PMA Prospect Fund

22. MBF Leasing Sdn Bhd 2,169,000 0.28

23. Wong Choon Aik 2,072,186 0.27

24. Cartaban Nominees (Asing) Sdn Bhd 2,000,000 0.26* Credit Suisse Singapore for First Spring Developments Limited

25. HSBC Nominees (Asing) Sdn Bhd 2,000,000 0.26* TNTC for Jupiter Far Eastern Fund

26. Norizan binti Abdullah 1,920,000 0.25

27. Amanah Raya Nominees (Tempatan) Sdn Bhd 1,800,000 0.23* Public Equity Fund

28. HDM Nominees (Tempatan) Sdn Bhd 1,750,000 0.23* Pledged Securities Account for Lau Kwai

29. Al Wakalah Nominees (Tempatan) Sdn Bhd 1,746,134 0.23* Bank Islam Malaysia Berhad

30. Citicorp Nominees (Asing) Sdn Bhd 1,500,000 0.19* American International Assurance Company Limited (P Trading)

* Account Qualifier

SHAREHOLDINGS OF DIRECTORS

Direct No. of Indirect No. ofShares Held % Shares Held %

Dato’ Lim Tong Yong @ Lim Tong Yaim 30,000 <0.01 130,238,287 16.87

Gooi Hoe Soon – – 7,500,000 0.97

59

Analysis of Irredeemable Convertible Unsecured LoanStocks (“ICULS”) Holdingsas at 3rd June, 2004

annualreport2 0 0 4

No. of outstanding ICULS : 59,474,000No. of ICULS Holder : 65

DISTRIBUTION OF ICULS HOLDINGS

Holdings No. of Holders % No. of ICULS %

1 - 99 0 0.00 0 0.00100 - 1,000 58 89.23 58,000 0.101,001 - 10,000 3 4.61 12,000 0.0210,001 - 100,000 0 0.00 0 0.00100,001 to 2,973,699* 1 1.54 1,323,510 2.222,973,700 and above** 3 4.62 58,080,490 97.66

Total 65 100.00 59,474,000 100.00

Remark : * - Less than 5% of Issued ICULS: ** - 5% and above of Issued ICULS

LIST OF TOP 30 ICULS HOLDERS

Name No. of ICULS Held %

1. Aroma Teraju Sdn Bhd 44,904,000 75.50

2. PAB Nominee (Tempatan) Sdn Bhd) 7,250,000 12.19* Affin Bank Berhad (Loan Recovery)

3. Country Heights Holdings Berhad 5,926,490 9.96

4. Affin-ACF Finance Berhad 1,323,510 2.23

5. Loh Sai Eng 5,000 0.01

6. Toh Hock Chooi 4,000 0.01

7. Ngoi Chew Wang @ Ngooi Chiu Wong 3,000 0.01

8. Aida Shaiza binti Ismail Zakri 1,000 0.00

9. Andreana Ng Swee Chin 1,000 0.00

10. Avtar Singh A/L Hazura Singh 1,000 0.00

11. Bede Louis Jock @ Benedict 1,000 0.00

12. Chan Fook Wung 1,000 0.00

13. Cheah Swee Im 1,000 0.00

14. Chew Cheng Cheng 1,000 0.00

15. Chia Wah Ling 1,000 0.00

16. Chong Cheng Chye 1,000 0.00

17. Chow Yoke Mei 1,000 0.00

60

Analysis of Irredeemable Convertible Unsecured LoanStocks (“ICULS”) Holdings (cont’d)

as at 3rd June, 2004

annualreport2 0 0 4

Name No. of ICULS Held %

18. Chua Lee Choo 1,000 0.00

19. Deborah Choong Sook Lee 1,000 0.00

20. Edward Iskandar Toh bin Abdullah 1,000 0.00

21. Foo Guek Lang @ Patricia Foo 1,000 0.00

22. Foong Mun Kit 1,000 0.00

23. Goh Soo Chay 1,000 0.00

24. Haslinda binti Abd Rahman 1,000 0.00

25. Khapipah Nor binti Osman 1,000 0.00

26. Kong Wah @ Kong Seng Hoi 1,000 0.00

27. Ku Lan Jok @ Khoo Chui 1,000 0.00

28. Kythryn Han Yew Lan 1,000 0.00

29. Lam Ah Yoke @ Lam Foong Yoke 1,000 0.00

30. Lee Kok Wan 1,000 0.00

* Account Qualifier

ICULS HOLDINGS OF DIRECTORS

None of the directors have any interest in the ICULS of the Company as at 3rd June, 2004.

61

Analysis of Warrant Holdingsas at 3rd June, 2004

annualreport2 0 0 4

No. of outstanding Warrant : 174,104,394No. of Warrants Holder : 1,982

DISTRIBUTION OF WARRANT HOLDINGS

Holdings No. of Holders % No. of Warrants %

1 - 99 27 1.36 1,015 0.00100 - 1,000 132 6.66 86,211 0.051,001 - 10,000 1,054 53.18 6,579,656 3.7810,001 - 100,000 651 32.85 23,405,132 13.44100,001 - 8,705,218* 116 5.85 46,881,221 26.938,705,219 and above** 2 0.10 97,151,159 55.80

Total 1,982 100.00 174,104,394 100.00

Remark : * - Less than 5% of Issued Warrants: ** - 5% and above of Issued Warrants

LIST OF TOP 30 WARRANT HOLDERS

Name No. of Warrants Held %

1. Seraya Sensa Sdn Bhd 52,706,715 30.27

2. Aroma Teraju Sdn Bhd 44,444,444 25.53

3. Amanah Merchant Holding Sdn Bhd 3,040,000 1.75

4. PAB Nominee (Tempatan) Sdn Bhd 2,570,000 1.48* Affin Bank Berhad (Loan Recovery)

5. Yeo Khee Bee 2,013,873 1.16

6. EB Nominees (Tempatan) Sendirian Berhad 1,625,000 0.93* EON Bank Berhad

7. Mayban Nominees (Tempatan) Sdn Bhd 1,527,200 0.88* Pledged Securities Account for Yeap Gek @ Yeap Poh Chim

8. EB Nominees (Tempatan) Sendirian Berhad 1,525,000 0.88* Malaysian International Merchant Bankers Berhad

9. HDM Nominees (Tempatan) Sdn Bhd 1,437,222 0.83* HDM Capital Sdn Bhd for AKN Capital Sdn Bhd

10. Eng Nominees (Asing) Sdn Bhd 1,406,000 0.81* Kim Eng Securities Pte Ltd for Ramesh S/O Pritamdas Chandiramani

11. MBF Leasing Sdn Bhd 1,205,000 0.69

12. Yeo Khee Nam 1,067,556 0.61

13. CIMB Nominees (Tempatan) Sdn Bhd 1,012,777 0.58* Commerce International Merchant Bankers Berhad

14. Mohd Haniff bin Abd Aziz 1,000,000 0.57

15. Al Wakalah Nominess (Tempatan) Sdn Bhd 970,074 0.56* Bank Islam Malaysia Berhad

62

Analysis of Warrant Holdings (cont’d)

as at 3rd June, 2004

annualreport2 0 0 4

Name No. of Warrants Held %

16. Kong Khim Foon 800,000 0.46

17. AllianceGroup Nominees (Tempatan) Sdn Bhd 706,000 0.41* Pledged Securities Account for Ng Gheok Kang

18. AllianceGroup Nominees (Tempatan) Sdn Bhd 684,200 0.39* Pledged Securities Account for Ng Gheok Kian

19. Yeo Khee Aik 654,285 0.38

20. Ahmad bin Md Mydin 654,015 0.37

21. PB Securities Nominees (Tempatan) Sdn Bhd 650,000 0.37* Pledged Securities Account for Yoong Fui Kien (C)

22. Ong Kheng Hoe 600,000 0.34

23. Cimsec Nominees (Tempatan) Sdn Bhd 600,000 0.34* CIMB for Ng Choo Hock @ Ng Choo Huat (PB-IU)

24. United Overseas Nominees (Tempatan) Sdn Bhd 557,000 0.32* Pledged Securities Account for Saw Kok Leng (MPG)

25. Chan Cheu Leong 500,000 0.29

26. Ong Lea Yong 479,000 0.28

27. Andrea Ruth Boult 476,900 0.27

28. Citicorp Nominees (Tempatan) Sdn Bhd 465,000 0.27* Pledged Securities Account for Leong Chin Chye

29. Yeo Eng Hai 456,520 0.26

30. Leong Yew Keong 442,000 0.25

* Account Qualifier

WARRANT HOLDINGS OF DIRECTORS

Direct No. of Indirect No. ofWarrants Held % Warrants Held %

Dato’ Lim Tong Yong @ Lim Tong Yaim – – 53,006,715 30.45

63

Notice of Annual General Meeting

annualreport2 0 0 4

NOTICE IS HEREBY GIVEN THAT the Seventy Sixth Annual General Meeting of Avenue Capital Resources Berhad (formerlyknown as Avenue Assets Berhad) (“Avenue” or “Company”) will be held at the Conference Room, THB Satu (West Wing),Level 2, No. 8, Jalan Damansara Endah, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 21st July, 2004 at 10.30a.m., to transact the following business:

1. To receive the audited financial statements of the Company and of the Group for the financial (Resolution 1)year ended 31st January, 2004 and the Reports of Directors and Auditors thereon.

2. To approve Directors’ Fees for the year ended 31st January, 2004. (Resolution 2)

3. To re-elect the following Directors retiring pursuant to Article 102 of the Company’s Articles ofAssociation:

i. Tan Sri Samshuri bin Arshad (Resolution 3)ii. Mr Wee Hoe Soon @ Gooi Hoe Soon (Resolution 4)iii. Datuk Siti Maslamah binti Osman (Resolution 5)

4. To re-appoint Messrs Deloitte KassimChan as auditors of the Company and to authorise the (Resolution 6)Directors to fix their remuneration.

5. As special business, to consider and if thought fit, to pass the following Ordinary Resolution,with or without modifications:

AUTHORITY TO ISSUE SHARES “THAT subject always to the Companies Act, 1965, Articles of Association of the Company and (Resolution 7)approvals from the Stock Exchange and any other governmental/regulatory bodies, where suchapproval is necessary, full authority be and is hereby given to the Directors pursuant to Section132D of the Companies Act, 1965 to issue and allot not more than ten percent (10%) of the issuedcapital of the Company at any time upon any such terms and conditions and for such purposes asthe Directors may in their absolute discretion deem fit or in pursuance of offers, agreements oroptions to be made or granted by the Directors while this approval is in force and that theDirectors be and are hereby further authorised to make or grant offers, agreements or optionswhich would or might require shares to be issued after the expiration of the approval hereof.”

6. As special business, to consider and if thought fit, to pass the following Ordinary Resolution,with or without modifications:

PROPOSED GRANT OF NEW OPTIONS TO TENGKU ZAFRUL BIN TENGKU ABDUL AZIZ “THAT the committee appointed by the Directors to administer Avenue’s Employees’ Share (Resolution 8) Option Scheme (“ESOS”) be and is hereby authorised to offer and grant to Tengku Zafrul binTengku Abdul Aziz, being the new Group Managing Director of the Company, an additional300,000 options to subscribe up to a specified maximum allocation of 3,300,000 new ordinaryshares of Avenue to be issued under the ESOS of Avenue, subject always to such terms andconditions of, and/or any adjustments which may be made in accordance with, the provisions ofthe Bye-Laws governing and constituting the ESOS of Avenue.”

7. To transact any other business of which due notice shall have been given in accordance withthe Companies Act, 1965.

BY ORDER OF THE BOARD

WONG WEI FONG (MAICSA 7006751)

KUAN HUI FANG (MIA 16876)

Company Secretaries

Kuala Lumpur29th June, 2004

64

annualreport2 0 0 4

Notice of Annual General Meeting (cont’d)

NOTES

i. A member entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend and vote

in his stead and the holder shall specify the proportion of his shareholding to be represented by each proxy; a proxy

need not be a member and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

ii. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its

common seal or under the hand of an officer or its attorney duly authorised.

iii. The instrument appointing a proxy must be deposited at the registered office of the Company at Level 12, Menara

Asia Life, 189 Jalan Tun Razak, 50400 Kuala Lumpur not less than 48 hours before the time appointed for holding the

meeting, i.e. on or before 10.30 a.m., Monday, 19th July, 2004.

Explanatory Notes on Special Business:

1. Resolution 7

The proposed ordinary resolution, if passed, will authorise the Directors of the Company to allot and issue not more

than 10% of the issued share capital of the Company subject to the approvals of all the relevant

governmental/regulatory bodies. This authorisation will empower the Directors of the Company to issue shares

notwithstanding that the authorisation has ceased to be in force if the shares are issued in pursuance of an offer,

agreement or option made or granted by the Directors while the authorisation was in force. This authorisation will

expire at the conclusion of the next Annual General Meeting of the Company.

2. Resolution 8

The proposed ordinary resolution, if passed, will empower the Directors of the Company to offer an additional

300,000 options to subscribe up to a specified maximum allocation of 3,300,000 new ordinary shares of Avenue to the

new Group Managing Director, Tengku Zafrul bin Tengku Abdul Aziz pursuant to the Employees’ Share Option

Scheme of the Company.

65

annualreport2 0 0 4

Statement Accompanying Notice of AGM

Age

Nationality

Qualification

Position in the Company

Working experience

Other directorships inpublic companies

Securities holdings in theCompany and itssubsidiaries

Family relationship withany Director and/orSubstantialshareholder of theCompany

Any conflict of interestwith the Company

List of convictions withinthe past 10 years otherthan traffic offences, if any.

TAN SRI SAMSHURI BIN ARSHAD

62

Malaysian

• Police Officers Training College,Malaysia

• Police Officers Training College,Australia

• Royal College Defence Studies, UK• AMP Harvard Business School• United Nations Far East Institute, Japan• Senior Government Officers Training

Programme, South Korea

Independent Non-Executive Chairman

Tan Sri Samshuri was appointed to theBoard on 20th October, 1999 and as theChairman on 19th November, 2001. He wasattached to the Royal Malaysian PoliceForce where he served for more than 34years before retiring in 1997 upon reachingthe compulsory retirement age of 55 years.His last appointment with the RoyalMalaysian Police Force prior to hisretirement was as the Deputy InspectorGeneral of Police, a position which he heldfor 31/2 years. He had considerableexperience in police operations and alsoserved as Chief Police Officer in variousstates in Malaysia including Selangor DarulEhsan, Sabah and Perak Darul Ridzuan. Hehad wide regional and internationalexposures and networking, serving as Headof Missions for the International PoliceAssociation, Association of Asean PoliceForces, United Nations Crime PreventionCommission (Vienna). He was also exposedto the International Police Trainingprogramme in Japan, Australia, U.K., U.S.Aand Korea.

Aokam Perdana Bhd.Unisem (M) Bhd.

None

None

None

None

GOOI HOE SOON

44

Malaysian

• Member of the Malaysian Institute ofCertified Public Accountants

• Member of the Malaysian Institute ofAccountants

Non-Executive Deputy Chairman

Mr Gooi was appointed to the Board as aNon-Executive Director on 20th October,1999 and as the Group Managing Directoron 18th March, 2001. He is now the Non-Executive Deputy Chairman of theCompany. He has more than 20 years ofexperience in the fields of accounting andcorporate finance and was a director ofseveral private and public limitedcompanies. He has been instrumental inthe successful implementation of severalcorporate exercises which include themerger and acquisition and corporaterestructuring exercises undertaken bypublic listed companies.

Hup Seng Industries BerhadPos Malaysia & Services Holdings BerhadPaos Holdings Berhad

Indirect holdings of less than 1% in theCompany

None

None

None

A) The Directors who are standing for re-election and their details

66

annualreport2 0 0 4

DATUK SITI MASLAMAH BINTI OSMAN

57

Malaysian

• Fellow of the Chartered Institute ofManagement Accountants, UnitedKingdom.

Non-Executive Director

Datuk Siti was appointed to the Board on12th October, 2001. She has more than 31years of experience in the field ofaccounting in various GovernmentAgencies, holding various appointmentsincluding as Treasury Accountant inTelecommunication Department, FinanceManager in Bank Simpanan Nasional andSenior Accountant in various divisions of theAccountant General’s Department. Her lastappointment prior to her retirement inOctober 2003 was as the AccountantGeneral of Malaysia, a position she heldsince October 2000.

Malaysia Airports Holdings BerhadBIMB Holding BerhadBank Islam Malaysia Berhad

None

None

None

None

Age

Nationality

Qualification

Position in the Company

Working experience

Other directorships inpublic companies

Securities holdings in theCompany and itssubsidiaries

Family relationship withany Director and/orSubstantialshareholder of theCompany

Any conflict of interestwith the Company

List of convictions withinthe past 10 years otherthan traffic offences, if any.

B) Details of meeting

The Seventy Sixth Annual General Meeting of the Company will be held at the Conference Room, THB Satu (West Wing),Level 2, No. 8, Jalan Damansara Endah, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 21st July, 2004 at 10.30a.m..

Statement Accompanying Notice of AGM (cont’d)

I/We ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– NRIC No. –––––––––––––––––––––––––––––––

of –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

being a member(s) of AVENUE CAPITAL RESOURCES BERHAD (formerly known as Avenue Assets Berhad) hereby appoint

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

of –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

or failing him/her ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

of –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––as my/our proxy to vote for me/us and on my/our behalf at the Seventy Sixth Annual General Meeting of the Company to be heldat the Conference Room, THB Satu (West Wing) Level 2, No. 8, Jalan Damansara Endah, Damansara Heights, 50490 Kuala Lumpuron Wednesday, 21st July, 2004 at 10.30 a.m. and at any adjournment thereof.

No. Resolutions For Against

1. To receive the Audited Accounts for the financial year ended 31st January, 2004 and the Reports of Directors and Auditors thereon

2. To approve Directors’ fees

3. To re-elect Tan Sri Samshuri bin Arshad

4. To re-elect Mr Wee Hoe Soon @ Gooi Hoe Soon

5. To re-elect Datuk Siti Maslamah binti Osman

6. To re-appoint Messrs Deloitte KassimChan as auditors of the Company and to authorise the Directors to fix their remuneration

7. To empower the Directors to allot shares under Section 132D of the Companies Act

8. Proposed grant of new options to Tengku Zafrul bin Tengku Abdul Aziz

The proxy is to vote in the manner indicated above, with an “X” in the appropriate spaces. If no specific direction as to voting isgiven, the proxy will vote or abstain from voting at his/her discretion.

Signed this ––––––––––– day of –––––––––––––––––– 2004.

––––––––––––––––––––––––––––––––––––––––Signature

Notes:i. A member entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend and vote in his stead and the holder

shall specify the proportion of his shareholding to be represented by each proxy; a proxy need not be a member and the provision of Section149(1)(b) of the Companies Act, 1965 shall not apply.

ii. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the handof an officer or its attorney duly authorised.

iii. The instrument appointing a proxy must be deposited at the registered office of the Company at Level 12, Menara Asia Life, 189 Jalan TunRazak, 50400 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting, i.e. on or before 10.30 a.m., Monday,19th July, 2004.

Form Of Proxy

No. of Shares Held

Seal

AVENUE CAPITAL RESOURCES BERHAD (478-A)(Formerly known as Avenue Assets Berhad)

(Incorporated in Malaysia)

To: The Company SecretaryAvenue Capital Resources Berhad (478-A)

Level 12, Menara Asia Life189 Jalan Tun Razak50400 Kuala LumpurMalaysia

Stamp

Fold along this line (1)

Fold along this line (2)