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146 Malaysian Airline System Berhad Annual Report 04/05(10601-W)

147Malaysian Airline System Berhad Annual Report 04/05(10601-W)

financial reportPerformance Highlights - 148

Expenditure - 149

Analysis of Airline Operations - 150

Revenue Composition - 151

Group Financial Highlights - 152

Corporate Charts - 154

Directors’ Report - 158

Statement by Directors - 162

Statutory Declaration - 163

Report of the Auditors - 164

Income Statements - 165

Balance Sheet - 166

Statements of Changes in Equity - 167

Cash Flow Statements - 168

Notes to the Financial Statements - 170

Statistics on Shareholdings - 219

List of Company Properties - 222

Glossary - 228

Form of Proxy

Request Form


2004 2003 CHANGEGROUP 2005 2004 %

Financial

Total Revenue RM Million 11,364.3 8,780.8 29.4Total Expenditure RM Million 11,046.8 8,591.2 28.6Profit after Tax RM Million 326.1 461.1 (29.3)Shareholders’ Funds RM Million 3,318.7 3,024.0 9.7Earnings Per Share Sen 26.0 36.8 (29.3)Dividend Per Share Sen 2.5 - -Cash Flow Per Share RM 0.47 0.94 (50.0)

Operating Statistics

Available Tonne Kilometres Million 10,299.9 8,413.1 22.4Load Tonne Kilometres Million 6,728.5 5,628.6 19.5Overall Load Factor % 65.3 66.9 (2.4) pointsAvailable Seat Kilometres Million 64,115.2 55,692.4 15.1Passenger Kilometres Flown Million 44,226.1 37,659.0 17.4Passenger Load Factor % 69.0 67.6 2.1 points

Staff and Productivity

Employee Strength 22,513 20,789 8.3Available Tonne Kilometres Per Employee 457,509 404,690 13.1Load Tonne Kilometres Per Employee 298,872 270,748 10.4

COMPANY

Operating Statistics

Available Tonne Kilometres Million 8,127.9 6,986.2 16.3Load Tonne Kilometres Million 5,442.0 4,705.4 15.7Overall Load Factor % 67.0 67.6 (0.9) pointsAvailable Seat Kilometres Million 64,115.2 55,692.4 15.1Passenger Kilometres Flown Million 44,226.1 37,659.0 17.4Passenger Load Factor % 69.0 67.6 2.1 pointsAircraft Utilisation (Average) Hours Per Day 10.6 9.6 10.4

Staff and Productivity

Employee Strength 20,087 18,712 7.3Available Tonne Kilometres Per Employee 404,635 373,354 8.4Load Tonne Kilometres Per Employee 270,921 251,464 7.7

performance highlights

148


2004 2003 CHANGE2005 2004

GROUP RM MIL RM MIL %

Staff costs 1,904.8 1,607.0 18.5Depreciation 245.3 214.3 14.5Fuel and oil 3,779.2 2,299.8 64.3Handling and landing costs 2,113.1 1,875.0 12.7Hire of aircraft and equipment 1,856.2 1,544.0 20.2Finance charges 0.1 5.9 (98.3)Commission and incentives 658.4 591.1 11.4Others 2,201.1 1,942.9 13.3

12,758.2 10,080.0 26.6Less : Allocation of costs of domestic operations to PMB (1,711.4) (1,488.8) 15.0

11,046.8 8,591.2 28.6

COMPANY

Staff costs 1,784.3 1,503.1 18.7Depreciation 210.1 160.6 30.8Fuel and oil 3,253.7 2,035.4 59.9Handling and landing costs 1,781.0 1,566.5 13.7Hire of aircraft and equipment 1,478.6 1,312.3 12.7Finance charges 0.1 5.9 (98.3)Commission and incentives 556.3 517.8 7.4Others 1,950.8 1,738.3 12.2

11,014.9 8,839.9 24.6Less : Allocation of costs of domestic operations to PMB (1,711.4) (1,488.8) 15.0

9,303.5 7,351.1 26.6

Staff Costs Depreciation Fuel & Oil Handling & Hire of Aircraft Finance Commission & OthersLanding Costs & Equipment Charges Incentives

14.916.2

1.9 1.9

29.6 29.5

16.6 16.214.5

13.4

5.2 5.1

17.3 17.7

GROUP

COMPANY

%

expenditure

Expenditure

0.0 0.0

149


2004/2005

2003/2004

analysis of airline operations (incl. freighters)

by geographical route region2004 2003 CHANGE2005 2004

RM MIL RM MIL %

ROUTE REVENUE

Malaysia - - 0.0Asia 1,656.4 1,356.2 22.1Europe and Middle East 3,899.1 2,919.6 33.5Australia and New Zealand 1,740.1 1,402.6 24.1Africa and South America 275.8 223.6 23.3Orient and North America 2,628.8 1,845.6 42.4

10,200.2 7,747.6 31.7

PASSENGER LOAD FACTOR POINTS

Malaysia - - 0.0Asia 63.8 66.1 (3.5)Europe and Middle East 71.9 68.4 5.1Australia and New Zealand 67.5 70.9 (4.8)Africa and South America 77.8 66.8 16.5Orient and North America 66.2 62.4 6.1

69.0 67.6 2.1

OVERALL LOAD FACTOR POINTS

Malaysia - - 0.0Asia 63.5 69.1 (8.1)Europe and Middle East 67.8 67.5 0.4Australia and New Zealand 59.4 65.3 (9.0)Africa and South America 71.2 64.3 10.7Orient and North America 65.4 66.4 (1.5)

65.3 66.9 (2.4)

Malaysia Asia Europe and Australia and Africa and Orient andMiddle East New Zealand South America North America

17.516.2

38.2 37.7

17.1 18.1

2.7 2.9

25.823.8

%

route revenue

0.0 0.0

150


2004 2003 CHANGE2005 2004

RM MIL RM MIL %

GROUP

Passenger and Excess Baggage 9,097.7 7,407.6 22.8Cargo and Mail 2,061.3 1,672.2 23.3Airport Services 147.4 89.5 64.7Charters 138.6 84.0 65.0Others 1,349.5 859.6 57.0

12,794.5 10,112.9 26.5Less: Traffic revenue of domestic operations to PMB (1,430.2) (1,332.1) 7.4

11,364.3 8,780.8 29.4

COMPANY

Passenger and Excess Baggage 8,994.8 7,407.6 21.4Cargo and Mail 813.3 748.7 8.6Airport Services 147.4 89.5 64.7Charters 115.4 62.6 84.3Others 893.7 499.8 78.8

10,964.6 8,808.2 24.5Less: Traffic revenue of domestic operations to PMB (1,430.2) (1,332.1) 7.4

9,534.4 7,476.1 27.5

Passenger & Cargo & Mail Airport Services Charters OthersExcess Beggage

71.1

82.0

16.1

7.41.2 1.3 1.1 1.1

10.5 8.2

GROUP

COMPANY

%

revenue composition

by category

revenue composition by category

151


group financial highlights

Cash Flow per Share (RM)

Earnings/(Loss) per Share(sen)

95/96 2.296/97 1.597/98 2.298/99 1.399/00 0.600/01 0.001/02 1.502/03 1.103/04 0.904/05 0.5

95/96 33.396/97 43.897/98 (33.7)98/99 (90.9)99/00 (33.6)00/01 (173.2)01/02 (108.5)02/03 38.703/04 36.804/05 26.0

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

RM

sen

152


Net Tangible Assets per Share (RM)

Dividends per Share (sen)

95/96 6.2396/97 6.7697/98 2.8198/99 1.6899/00 1.7400/01 0.8901/02 1.9802/03 2.0403/04 2.4104/05 2.65

95/96 7.596/97 10.097/98 2.098/99 2.099/00 2.000/01 -01/02 -02/03 -03/04 -04/05 2.5

RM

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

sen

GROUP FINANCIAL HIGHLIGHTS


Overall Capacity and Demand

corporate charts

Overall Load Factor

Revenue Tonne Kilometres Available Tonne Kilometres Overall Load FactorMillion Million %

1995/96 3,355 5,382 62.31996/97 3,707 6,149 60.31997/98 3,888 6,411 60.61998/99 4,030 6,649 60.61999/00 4,853 7,531 64.42000/01 5,379 8,055 66.82001/02 5,150 7,824 65.82002/03 5,497 7,978 68.92003/04 5,629 8,413 66.92004/05 6,729 10,300 65.3

95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05

Revenue Tonne Kilometres Available Tonne Kilometres

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

%

Million

12000

10000

8000

6000

4000

2000

0

154


Passenger Capacity and Demand

Passenger Load Factor

Revenue Passenger Kilometres Available Seat Kilometres Passenger Load FactorMillion Million %

1995/96 24,566 35,161 69.91996/97 27,904 40,097 69.61997/98 28,698 42,294 67.91998/99 30,593 45,442 67.31999/00 34,930 48,906 71.42000/01 38,313 51,238 74.82001/02 34,709 52,595 66.02002/03 37,653 54,266 69.42003/04 37,659 55,692 67.62004/05 44,226 64,115 69.0

Revenue Passenger Kilometres Available Seat Kilometres

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

%

CORPORATE CHARTS

95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05

Million

80000

70000

60000

50000

40000

30000

20000

10000

0


95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05

Passenger Revenue for National and International Route (excluding charters)

National Revenue International RevenueRM Million RM Million

1995/96 979 3,3221996/97 1,070 3,7121997/98 1,059 4,0801998/99 895 4,4341999/00 1,027 5,0272001/02 1,263 5,1252002/03 1,312 5,8142003/04 1,272 6,0982004/05 1,330 7,443

National Revenue International Revenue

CORPORATE CHARTS

RM Million

80000

70000

60000

50000

40000

30000

20000

10000

0


95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05

‘000

Passengers Carried for National and International Routes

Cargo Carried

National Passengers International Passengers‘000 ‘000

1995/96 7,986 6,3251996/97 8,648 6,7321997/98 8,481 6,6361998/99 7,454 6,2551999/00 7,993 7,3782000/01 8,854 7,8912001/02 8,645 7,0892002/03 8,677 7,6482003/04 8,351 7,0242004/05 8,840 8,696

1995/96 1,3281996/97 1,4201997/98 1,5321998/99 1,4771999/00 1,6652000/01 1,8372001/02 1,7592002/03 2,0712003/04 2,1872004/05 2,690

National Passengers International Passengers

04/05

03/04

02/03

01/02

00/01

99/00

98/99

97/98

96/97

95/96

Million

CORPORATE CHARTS

10000

8000

6000

4000

2000

0


The directors have pleasure in presenting their report together with the audited financial statements of theGroup and of the Company for the financial year ended 31 March 2005.

PRINCIPAL ACTIVITIES

The Company is principally engaged in the business of air transportation and the provision of related services.

The principal activities of the subsidiaries are described in Note 30 to the financial statements.

There have been no significant changes in the nature of these activities during the financial year.

RESULTSGROUP COMPANYRM’000 RM’000

Profit after taxation 328,746 254,103Minority interests (2,667) -

Net profit for the year 326,079 254,103

There were no material transfers to or from reserves or provision during the financial year other than asdisclosed in the statements of changes in equity.

In the opinion of the directors, the results of the Group and of the Company during the financial year werenot substantially affected by any item, transaction or event of a material or unusual nature, other than asdisclosed in the financial statements.

DIVIDENDS

The dividends paid by the Company since 31 March 2004 were as follows:

In respect of the financial year ended 31 March 2004, as shown in the Directors’ report of that financial year:

RM’000A final tax exempt dividend of 2.5% paid on 12 October 2004 31,331

At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the financial yearended 31 March 2005, of 2.5 sen net per share on 1,253,243,865 ordinary shares, amounting to a totaldividend payable of RM31,331,097 ( 2.5 sen net per share) will be proposed for shareholders’ approval. Thefinancial statements for the current financial year do not reflect this proposed dividend. Such dividend, ifapproved by the shareholders, will be accounted for in shareholders’ equity as an appropriation of retainedprofits in the financial period ending 31 December 2005.

158

directors’ reportMalaysian Airline System Berhad (10601-W) (Incorporated in Malaysia)


DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of thisreport are:

Dato’ Dr. Mohd Munir bin Abdul Majid (appointed on 1 June 2004)

Dato’ N. Sadasivan a/l N.N. Pillay

Dato’ Ahmad Fuaad bin Mohd Dahalan

Dato’ Izzuddin bin Dali (appointed on 13 September 2004)

Dato’ Mohd Annuar bin Zaini (appointed on 2 February 2005)

Dato’ Mohamed Azman bin Yahya

Datuk Amar Haji Abdul Aziz bin Haji Husain

Datuk Abdillah @ Abdullah bin Hassan @ S Hassan

Keong Choon Keat

Martin Gilbert Barrow

Tengku Azmil Zahruddin bin Raja Abdul Aziz (appointed on 23 August 2004

and ceased as alternate director to

Dato’ Gumuri bin Haji Hussain on

16 August 2004)

Datu Haji Salleh bin Haji Sulaiman (alternate to Datuk Amar Haji

Abdul Aziz bin Haji Husain)

Abdul Rahman bin Abdul Ghani (alternate to Datuk Haji S Abdillah

@ Abdullah bin Hassan @ S Hassan)

Tan Sri Dato’ Seri Azizan bin Zainul Abidin (passed away on 14 July 2004)

Tan Sri Dato’ Dr. Samsudin bin Hitam (resigned on 1 August 2004)

Dato’ Zaharaah binti Shaari (resigned on 2 November 2004)

Dato’ Gumuri bin Haji Hussain (resigned on 16 August 2004)

Jusof bin Ismail (alternate to Tan Sri Dato’

Dr. Samsudin bin Hitam)

(resigned on 1 August 2004)

In accordance with Article 137 of the Company’s Articles of Association, Dato’ Izzuddin bin Dali and Dato’Mohd Annuar bin Zaini, who were appointed during the year, retire at the forthcoming Annual GeneralMeeting and being eligible, offer themselves for election.

In accordance with Article 139 of the Company’s Articles of Association, Dato’ Mohamed Azman bin Yahya,Dato’ N. Sadasivan a/l N.N. Pillay and Datuk Abdillah @ Abdullah bin Hassan @ S Hassan retire by rotation atthe forthcoming Annual General Meeting and being eligible, offer themselves for re-election.

DIRECTORS’ REPORT


DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangementsto which the Company was a party, whereby the directors might acquire benefits by means of the acquisitionof shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit(other than a benefit included in the aggregate amount of emoluments received or due and receivable bythe directors as disclosed in Note 6 to the financial statements) by reason of a contract made by the Companyor a related corporation with any director or with a firm of which he is a member, or with a company inwhich he has a substantial financial interest.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, none of the directors in office at the end of the financialyear had any interests in shares in the Company and its related corporations during the financial year.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out,the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and themaking of provision for doubtful debts and satisfied themselves that there were no known baddebts and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in theaccounting records in the ordinary course of business had been written down to an amount whichthey might be expected so to realise.

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

(i) it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequateto any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of theCompany misleading.

(c) At the date of this report, the directors are not aware of any circumstances which have arisen whichwould render adherence to the existing method of valuation of assets or liabilities of the Group and ofthe Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with inthis report or financial statements of the Group and of the Company which would render any amountstated in the financial statements misleading.

(e) As at the date of this report, there does not exist:

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

(ii) any contingent liability of the Group or of the Company which has arisen since the end of thefinancial year.

DIRECTORS’ REPORT


(f) In the opinion of the directors:

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

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

SIGNIFICANT EVENT

The significant event is disclosed in Note 28 to the financial statements.

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors

Dato’ Dr. Mohd Munir bin Abdul Majid


Kuala Lumpur, Malaysia30 May 2005

DIRECTORS’ REPORT


We, Dato’ Dr. Mohd Munir bin Abdul Majid and Dato’ Ahmad Fuaad bin Mohd Dahalan, being two of thedirectors of Malaysian Airline System Berhad, do hereby state that, in the opinion of the directors, theaccompanying financial statements set out on pages 165 to 218 are drawn up in accordance with applicableMASB Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as togive a true and fair view of the financial position of the Group and of the Company as at 31 March 2005 andof the results and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors

Dato’ Dr. Mohd Munir bin Abdul Majid



162

statement by directorspursuant to section 169 (15) of the companies act, 1965


I, Low Chee Teng, being the officer primarily responsible for the financial management of Malaysian AirlineSystem Berhad, do solemnly and sincerely declare that the accompanying financial statements set out onpages 165 to 218 are in my opinion correct, and I make this solemn declaration conscientiously believing thesame to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared bythe abovenamed Low Chee Tengat Kuala Lumpur in the Federal Territoryon 30 May 2005

Low Chee Teng

Before me,

Dato’ Ng Mann CheongCommissioner for Oaths(No. W023)

163

statutory declarationpursuant to section 169 (16) of the companies act, 1965


We have audited the financial statements set out on pages 165 to 218. These financial statements are ther5esponsibility of the Company’s directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements andto report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and forno other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by the directors, as well as evaluating the overallpresentation of the financial statements. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion:

(a) the financial statements have been properly drawn up in accordance with the provisions of theCompanies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia so as togive a true and fair view of:

(i) the financial position of the Group and of the Company as at 31 March 2005 and of the resultsand the cash flows of the Group and of the Company for the year then ended; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financialstatements; and

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

We are satisfied that the financial statements of the subsidiaries that have been consolidated with theCompany’s financial statements are in form and content appropriate and proper for the purposes of thepreparation of the consolidated financial statements and we have received satisfactory information andexplanations required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualificationmaterial to the consolidated financial statements and did not include any comment required to be madeunder Section 174 (3) of the Act.

Ernst & Young Habibah bte AbdulAF: 0039 No. 1210/05/06(J)Chartered Accountants Partner


report of the auditorsto the members of Malaysian Airline System Berhad (Incorporated in Malaysia)

164


INCOME STATEMENTSfor the year ended 31 March 2005

INCOME STATEMENTSfor the year ended 31 March 2005

GROUP COMPANY2005 2004 2005 2004

Note RM’000 RM’000 RM’000 RM’000

Revenue 3 10,950,882 8,587,826 9,149,779 7,306,476Expenditure 4 (11,046,627) (8,585,241) (9,303,399) (7,345,172)Other income 7 413,427 192,994 384,594 169,573

Operating profit 317,682 195,579 230,974 130,877Interest expense (137) (5,916) (93) (5,916)

317,545 189,663 230,881 124,961

Gain on sale of aircraftand spare engines 8 25,752 56,751 25,752 56,751

Gain on partial disposal of asubsidiary (Note 13 (d)) - 91,476 - 125,598

Net writeback of provision fordoubtful debts on debts duefrom subsidiaries - - 5,546 280,000

Share of results ofassociated companies 21,156 7,275 - -

Profit before taxation 364,453 345,165 262,179 587,310Taxation:- Company and subsidiaries (33,705) 118,915 (8,076) (8,107)- Associated companies (2,002) (1,372) - -

9 (35,707) 117,543 (8,076) (8,107)

Profit after taxationbefore minority interests 328,746 462,708 254,103 579,203

Minority interests (2,667) (1,565) - -

Net profit for the year 326,079 461,143 254,103 579,203

Basic earnings per share (sen) 10 26.0 36.8

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


BALANCE SHEETSas at 31 March 2005

GROUP COMPANY2005 2004 2005 2004

Note RM’000 RM’000 RM’000 RM’000

NON-CURRENT ASSETS

Aircraft modifications/retrofits,property and equipment 12 2,054,455 1,661,974 1,556,479 1,269,636

Investments 13 194,676 161,625 271,670 253,803Due from subsidiaries 14 - - 264,946 259,693Due from fellow subsidiary 16(b) 395,819 441,888 395,819 441,888Deferred tax assets 22 103,219 126,232 - -

2,748,169 2,391,719 2,488,914 2,225,020

CURRENT ASSETS

Inventories 15 446,038 369,419 439,659 365,646Receivables 16 2,005,977 1,663,645 1,960,251 1,646,035Cash and bank balances 17 2,194,578 2,190,893 2,164,609 2,164,727

4,646,593 4,223,957 4,564,519 4,176,408

CURRENT LIABILITIES

Sales in advance of carriage 2(b)(i) 1,487,752 1,153,723 1,487,752 1,153,723Due to subsidiaries 18 - - 91,053 25,232Taxation 23,042 24,674 22,575 24,664Payables 19 2,553,574 2,399,935 2,180,743 2,149,271

4,064,368 3,578,332 3,782,123 3,352,890

NET CURRENT ASSETS 582,225 645,625 782,396 823,518

3,330,394 3,037,344 3,271,310 3,048,538

FINANCED BY:

Share capital 20 1,253,244 1,253,244 1,253,244 1,253,244Reserves 2,065,488 1,770,740 2,018,066 1,795,294

Shareholder's equity 3,318,732 3,023,984 3,271,310 3,048,538Minority interests 10,706 12,098 - -

3,329,438 3,036,082 3,271,310 3,048,538

Deferred tax liabilities 22 956 1,262 - -

3,330,394 3,037,344 3,271,310 3,048,538



STATEMENTS OF CHANGES IN EQUITYfor the year ended 31 March 2005

NON -DISTRIBUTABLE DISTRIBUTABLE

SHARE SHARE GENERAL ACCUMULATED TOTALCAPITAL PREMIUM RESERVES LOSSES RESERVES TOTALRM’000 RM’000 RM’000 RM’000 RM’000 RM’000

GROUP

At 1 April 2003 1,253,244 3,301,164 501,530 (2,493,097) 1,309,597 2,562,841Net profit for the year - - - 461,143 461,143 461,143

At 31 March 2004 1,253,244 3,301,164 501,530 (2,031,954) 1,770,740 3,023,984

At 1 April 2004 1,253,244 3,301,164 501,530 (2,031,954) 1,770,740 3,023,984Net profit for the year - - - 326,079 326,079 326,079Dividends paid

(Note 11) - - - (31,331) (31,331) (31,331)

At 31 March 2005 1,253,244 3,301,164 501,530 (1,737,206) 2,065,488 3,318,732

COMPANY

At 1 April 2003 1,253,244 3,301,164 500,000 (2,585,073) 1,216,091 2,469,335Net profit for the year - - - 579,203 579,203 579,203

At 31 March 2004 1,253,244 3,301,164 500,000 (2,005,870) 1,795,294 3,048,538

At 1 April 2004 1,253,244 3,301,164 500,000 (2,005,870) 1,795,294 3,048,538Net profit for the year - - - 254,103 254,103 254,103Dividends paid

(Note 11) - - - (31,331) (31,331) (31,331)

At 31 March 2005 1,253,244 3,301,164 500,000 (1,783,098) 2,018,066 3,271,310



CASH FLOW STATEMENTSfor the year ended 31 March 2005

GROUP COMPANY2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATINGACTIVITIES

Profit before taxation 364,453 345,165 262,179 587,310Adjustment for:

Share of results of associatedcompanies (21,156) (7,275) - -

Depreciation of property and equipment 245,273 214,258 210,078 160,603Gain on sale of aircraft, property and equipment (29,930) (58,472) (29,212) (58,041)(Gain)/loss on disposal of other investment, net (18) 684 - 684Gain from liquidation of investments - (25,358) - (25,358)Gain on partial disposal of subsidiary - (91,476) - (125,598)Provision for doubtful debts, net of reversals

- subsidiaries - - (5,546) (280,000)- others (17,680) 1,564 (33,549) 992

Unrealised foreign exchange losses 41 1,153 41 1,153Aircraft spares, property and

equipment written off 11,548 36,938 11,539 36,938Writeback of unavailed credits on sales

in advance of carriage (247,492) (236,746) (247,492) (236,746)Writeback of impairment losses

recognised on other investments, net (45,481) (3,200) (47,652) (4,445)Interest income (70,445) (58,874) (69,953) (58,489)Dividend income (1,450) (424) (11,863) (12,274)Interest expense 137 5,916 93 5,916

Operating profit/(loss) before workingcapital changes 187,800 123,853 38,663 (7,355)

(Increase)/decrease in receivables (95,836) 28,536 (59,257) 84,300(Increase)/decrease in due from

holding company (151,694) 327,898 (151,694) 327,898Increase in inventories (76,619) (9,743) (74,013) (8,593)Increase in payables 148,150 323,178 102,504 336,078Increase in sales in advance of carriage 581,521 379,667 581,521 379,667

Cash generated from operatingactivities 593,322 1,173,389 437,724 1,111,995

Interest paid (111) (3,078) (67) (3,078)Taxes paid (12,630) (18,856) (10,165) (9,062)

Net cash generated fromoperating activities 580,581 1,151,455 427,492 1,099,855


CASH FLOW STATEMENTSfor the year ended 31 March 2005 (Contd.)

GROUP COMPANY2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM INVESTINGACTIVITIES

Proceeds from liquidation of otherinvestments - 25,358 - 25,358

Proceeds from sale of other investments 29,891 20,303 29,785 20,303Proceeds from partial disposal

of subsidiary (Note 13(d)) - 140,662 - 140,662Proceeds from disposal of

associated company 79 - - -Purchase of aircraft, property and

equipment (678,788) (283,090) (537,944) (236,792)Purchase of other investments (4,000) - - -Proceeds on sale of aircraft, property

and equipment 33,664 145,348 32,944 144,916Interest received 67,565 55,008 67,073 54,606Dividend received 7,082 4,213 11,863 8,838

Net cash (used in)/generated frominvesting activities (544,507) 107,802 (396,279) 157,891

CASH FLOWS FROM FINANCINGACTIVITIES

Dividend paid to shareholders ofthe Company (31,331) - (31,331) -

Dividend paid to minority shareholdersin a subsidiary (1,058) (550) - -

Net cash used in financing activities (32,389) (550) (31,331) -

NET INCREASE/(DECREASE) INCASH AND CASH EQUIVALENTS 3,685 1,258,707 (118) 1,257,746

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 2,190,893 932,186 2,164,727 906,981

CASH AND CASH EQUIVALENTSAT END OF YEAR 2,194,578 2,190,893 2,164,609 2,164,727

CASH AND CASH EQUIVALENTS COMPRISE:Cash and bank balances 236,999 151,697 230,880 140,464Short term deposits 1,957,579 2,039,196 1,933,729 2,024,263

Cash and cash equivalents 2,194,578 2,190,893 2,164,609 2,164,727



NOTES TO THE FINANCIAL STATEMENTS 31 March 2005

1. CORPORATE INFORMATION

The Company is principally engaged in the business of air transportation and the provision of related services.The principal activities of the subsidiaries are described in Note 30. There have been no significant changesin the nature of these activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed onthe Main Board of Bursa Malaysia Securities Berhad. The registered office of the Company is located at 33rdFloor, Bangunan MAS, Jalan Sultan Ismail, 50250 Kuala Lumpur.

The holding and ultimate holding companies of the Company are Penerbangan Malaysia Berhad (“PMB”)and Khazanah Nasional Berhad, respectively, both of which are incorporated in Malaysia.

The number of employees in the Group and in the Company at the end of the financial year were 22,513(2004 : 20,789) and 20,087 (2004 : 18,712) respectively.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolutionof the directors on 30 May 2005.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historicalcost convention unless otherwise indicated in the accounting policies below and comply with applicableMASB Approved Accounting Standards in Malaysia.

(b) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transactionwill flow to the enterprise and the amount of the revenue can be measured reliably.

(i) Revenue from Services

Passenger ticket and cargo airwaybill sales are recognised as revenue, net of discount, in the incomestatement when the transportation services are rendered. The value of unutilised tickets andairwaybills is included in current liabilities as sales in advance of carriage. Tickets and airwaybillsthat remain unutilised after 18 months subsequent to their respective date of issue are recognisedin the income statement as unavailed credits on sales in advance of carriage.

The commission on passenger ticket and airwaybill sales is recognised in the income statementwhen the transportation services are rendered.

(ii) Engineering, Catering and Other Revenue

Engineering, catering and other revenue is recognised, net of discount, upon completion of servicesrendered.

(iii) Revenue from Hotel Operations

Revenue from room rental and other hotel services are recognised on accrual basis. Revenue fromsale of food and beverage are recognised based on their invoiced value of goods sold.

(iv) Interest and Dividend Income

Interest income is recognised on accrual basis whilst dividend income is recognised when theshareholders' right to receive payment is established.


NOTES TO THE FINANCIAL STATEMENTS Significant Accounting Policies (Contd.)

(c) Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all itssubsidiaries. Subsidiaries are those companies in which the Group has a long term equity interest andwhere it has power to exercise control over the financial and operating policies so as to obtain benefitstherefrom.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition methodof accounting, the results of subsidiaries acquired or disposed of during the period are included in theconsolidated income statement from the effective date of acquisition or up to the effective date ofdisposal, as appropriate. The assets and liabilities of a subsidiary are measured at their fair values at thedate of acquisition and these values are reflected in the consolidated balance sheet. The differencebetween the cost of an acquisition and the fair value of the Group's share of the net assets of theacquired subsidiary at the date of acquisition is included in the consolidated balance sheet as goodwillor negative goodwill arising on consolidation.

Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation andthe consolidated financial statements reflect external transactions only. Unrealised losses are eliminatedon consolidation unless costs cannot be recovered.

The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and theGroup's share of its net assets together with any unamortised balance of goodwill and exchangedifferences.

Minority interests in the consolidated balance sheet consist of the minorities' share of the fair value ofthe identifiable assets and liabilities of the acquiree as at the acquisition date and the minorities' shareof movements in the acquiree's equity since then.

(d) Associated Companies

The Group treats as associated companies those companies in which the Group has a long term equityinterest and is in a position to exercise significant influence. Significant influence is the power toparticipate in the financial and operating policy decisions of the associated companies but not controlover those policies.

Investments in associated companies are accounted for in the consolidated financial statements by theequity method of accounting based on the audited or management financial statements of the associatedcompanies.

Under the equity method of accounting, the Group's share of post acquisition profits less losses ofassociated companies is included in the consolidated income statements. The Group's interest inassociated companies is carried in the consolidated balance sheet at cost plus the Group's share of post-acquisition retained profits or accumulated losses and other reserves as well as goodwill on acquisition.

Unrealised gains on transactions between the Group and the associated companies are eliminated tothe extent of the Group's interest in the associated companies. Unrealised losses are eliminated unlesscost cannot be recovered.

The difference between the purchase consideration and the fair value of net assets acquired is reflectedas goodwill or reserve on acquisition and is not amortised. The carrying value of the goodwill is reviewedannually and is written down for impairment where it is considered necessary.



(e) Investments in Subsidiaries, Associated Companies and Other Non-Current Investments

The investments in subsidiaries, associated companies and other non-current investments are stated atcost less impairment losses. Where an indication of impairment exists, the carrying value of the investmentis reviewed, and if found to be in excess of recoverable amount, is written down immediately to itsrecoverable amount.

On disposal of such investments, the difference between net disposal proceeds and their carrying amountsis recognised in the income statement.

(f) Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair value ofthe identifiable assets and liabilities of a subsidiary, associates or jointly controlled entity at the date ofacquisition.

Goodwill is stated at cost less impairment losses. Goodwill is reviewed at each balance sheet date andwill be written down for impairment losses when it arises.

Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet whilegoodwill arising on the acquisition of associates and jointly controlled entities is included within therespective carrying amounts of these investments.

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiableassets and liabilities of a subsidiary, associates or jointly controlled entity at the date of acquisition overthe cost of acquisition.

To the extent that negative goodwill relates to expectation of future losses and expenses that areidentified in the plan of acquisition and can be measured reliably, but which are not identifiable liabilitiesat the date of acquisition, that portion of negative goodwill is recognised in the income statementwhen the future losses and expenses are recognised.

(g) Foreign Currencies

(i) Foreign Currency Transactions

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchangeruling at the transaction dates. At each balance sheet date, foreign currency monetary items aretranslated into Ringgit Malaysia at exchange rates ruling at that date unless hedged by forwardforeign exchange contracts, in which case the rates specified in such forward contracts are used.Non-monetary items initially denominated in foreign currencies, which are carried at historical costare translated using the historical rate as of the date of acquisition and non-monetary items whichare carried at fair value are translated using the exchange rate that existed when the values weredetermined. All exchange differences are taken to the income statement.



(g) Foreign Currencies (Contd.)

(ii) Foreign Entities

Financial statements of foreign associated companies are translated at year-end exchange rateswith respect to the assets and liabilities, and at exchange rates at the dates of the transactions withrespect to the income statement. All resulting translation differences are taken to equity.

The principal exchange rates used for every unit of foreign currency ruling at balance sheet dateare as follows:

2005 2004RM RM

United States Dollar 3.8000 3.8000Euro 4.9261 4.6440Great Britain Pound 7.1840 6.9810Japanese Yen 0.0355 0.0367Singapore Dollar 2.2678 2.2703Australian Dollar 2.9372 2.8967

(h) Aircraft Modifications/retrofits, Spare Engines, Property and Equipment

Property and equipment are stated at cost or valuation less accumulated depreciation and impairmentlosses.

Depreciation of aircraft modifications/retrofits, spare engines, property and equipment is provided ona straight line basis to write off the cost of each asset up to its residual value over the estimated usefullife at the following annual rates:

(i) Aircraft modifications/retrofits are depreciated over 7 years or the remaining life of the lease,whichever is lesser.

(ii) Spare engines are depreciated over their estimated useful commercial lives, which ranges from 7 to15 years, having regard to their planned withdrawal from services.

(iii) Repairable and rotable aircraft spares are depreciated over the remaining lease period of the aircraftto which they relate.

(iv) Land and Buildings

Freehold land is not depreciated. Leasehold land is depreciated over the lease period, ranging from60 to 99 years.

Buildings are depreciated over periods ranging from 5 to 40 years.

Certain leasehold land and buildings of the Company were revalued by the directors in 1985 basedupon a valuation report dated 15 November 1984 prepared by the Government Valuers using the"Open Market Value" basis. The directors have not adopted a policy of regular revaluations ofthese assets. As permitted under the transitional provisions of International Accounting StandardNo. 16 (Revised): Property, Plant and Equipment adopted by the Malaysian Accounting StandardsBoard, these assets continue to be stated at their 1985 valuation less accumulated depreciation andaccumulated impairment losses.


(h) Aircraft Modifications/retrofits, Spare Engines, Property and Equipment (Contd.)

(v) Hotel Properties

Hotel properties comprise land and the hotel buildings, including the integral plant and machinery.

No depreciation is provided on hotel properties. The directors are of the opinion that it is moreappropriate not to depreciate hotel properties since it is the Company's practice to maintain all itshotel properties to a high standard and condition in order to maintain residual values at leastequal to their respective book values such that depreciation would be insignificant. The relatedmaintenance expenditures are dealt with in the income statement.

In order to establish whether hotel properties have maintained residual value at least equal totheir respective book values, all hotel properties are appraised by independent professional valuersat least once in every three (3) years.

Surpluses arising from revaluation are dealt with in the Asset Revaluation Reserve. Any deficitarising is offset against the Asset Revaluation Reserve to the extent of a previous increase for thesame property. In all other cases, a decrease in carrying amount is charged to the income statement.

Upon the disposal of an item of hotel properties, the difference between the net disposal proceedsand the carrying amount is recognised in the income statement.

(vi) Operating Equipment, Office Equipment and Motor Vehicles

Depreciation is provided to the residual values of all operating equipment, office equipment andmotor vehicles on a straight line basis over their estimated useful lives, which range from 2 to 10years.

(vii) Progress Payments on Aircraft, Simulators and Properties Under Construction

Progress payments on aircraft, simulators and properties under construction are stated at cost andare not depreciated until the respective assets are ready for their intended use.

Where an indication of impairment of a category of asset exists, the carrying amount of the category ofassets is revisited, and if found to be in excess of recoverable amount, it is written down immediately toits recoverable amount.

Upon the disposal of an item of aircraft modifications/retrofits, spare engines, property or equipment,the difference between the net disposal proceeds and the carrying amount is recognised in the incomestatement.

(i) Inventories

Inventories comprising consumable aircraft spares, catering and other stores are stated at the lower ofcost (determined on a weighted average basis) and net realisable value.



(j) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is theexpected amount of income taxes payable in respect of the taxable profit for the year and is measuredusing the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheetdate between the tax bases of assets and liabilities and their carrying amounts in the financial statements.In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferredtax assets are recognised for all deductible temporary differences, unused tax losses and unused taxcredits to the extent that it is probable that taxable profit will be available against which these can beutilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negativegoodwill or from the initial recognition of an asset or liability in a transaction which is not a businesscombination and at the time of the transaction, affects neither accounting profit nor taxable profit.

(j) Income Tax (Contd.)

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset isrealised or the liability is settled, based on tax rates that have been enacted or substantively enacted atthe balance sheet date. Deferred tax is recognised in the income statement, except when it arises froma transaction which is recognised directly in equity, in which case the deferred tax is also charged orcredited directly in equity, or when it arises from a business combination that is an acquisition, in whichcase the deferred tax is included in the resulting goodwill or negative goodwill.

(k) Employee Benefits

(i) Short Term Benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the yearin which the associated services are rendered by employees of the Group. Short term accumulatingcompensated absences such as paid annual leave are recognised when services are rendered byemployees that increase their entitlement to future compensated absences.

(ii) Defined Contribution Plans

As required by law, companies incorporated in Malaysia contribute to the state pension scheme,the Employees Provident Fund. Retirement plans for employees of overseas stations are accruedfor in accordance with the provisions of those foreign countries retirement schemes and are chargedto income statements in the period to which they relate.

(l) Leases

(i) Finance Lease

Lease of assets under which the Group assumes substantially all the benefits and risks of ownershipare classified as finance leases.

The cost of assets acquired under finance lease agreements is capitalised. The depreciation policyon these assets is similar to that of the Group’s other assets as set out in (h) above. Outstandingobligations due under the lease agreements after deducting finance expenses are included asliabilities in the financial statements. The finance expenses are recognised in the income statementover the period of the respective agreements so as to produce a constant periodic rate of charge onthe remaining balance of the obligations for each accounting period.




(ii) Operating Lease

Lease of assets under which all the risks and benefits of ownership are retained by the lessor areclassified as operating leases.

Lease rental payments on operating leases are recognised in the income statement in the year inwhich they are incurred.

(m) Trade and Other Receivables

Trade and other receivables are carried at anticipated realisable values. Bad debts are written off whenidentified. An estimate is made for doubtful debts based on review of all outstanding amounts as atthe balance sheet date.

(n) Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents include cash in hand and atbank and deposits at call and short term highly liquid investments which have an insignificant risk ofchanges in value.

(o) Trade and Other Payables

Trade and other payables are stated at cost which is the fair value of the consideration to be paid in thefuture for goods and services rendered.

(p) Provisions for Liabilities

Provisions for liabilities are recognised when the Group and the Company have a present obligation asa result of a past event and it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation, and a reliable estimate of the amount can be made. Provisionsare reviewed at each balance sheet date and adjusted to reflect the current best estimate.

(q) Aircraft Maintenance and Overhaul Costs

The costs of maintenance and overhaul conducted using the Group's own resources and conductedoutside the Group are recognised in the income statement as and when the costs are incurred. Theseinclude the costs of labour and replacement parts.

(r) Development and Training Costs

Development and training costs are recognised in the income statement in the year in which they areincurred.

(s) Frequent Flyer Programmes

The Company operates its own frequent flyer programme named "Enrich" which awards membersbased on accumulated mileage. The Company accrues for the liability under the programme andrecognises in the income statement the amount equal to the mileage earned multiplied by the applicablerates. Upon redemption by members or expiration of the mileage awards, the accrual is reducedaccordingly.



(t) Interest-Bearing Borrowings

Interest-bearing bank loans and overdrafts are recorded as the amount of proceeds received.

Interests on term loans obtained to finance progress payments for aircraft purchases and propertiesunder construction are capitalised as progress payments in those assets until the aircraft and buildingsare ready for their intended use. Interest costs incurred thereafter are recognised in the income statement.

(u) Share Capital

Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according tothe economic substance of the particular instrument.

The transaction costs of an equity transaction, other than that in the context of a business combination,are accounted for as a deduction from equity. Equity transaction costs comprise only those incrementalexternal costs directly attributable to the equity transaction which would otherwise have been avoided.Cost of issuing equity securities in connection with a business combination are included in the cost ofacquisition.

Dividends on ordinary shares are recognised in equity in the period in which they are declared.

(v) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to thecontractual provisions of the instrument. Financial instruments are classified as liabilities or equity inaccordance with the substance of the contractual arrangement. The particular recognition methodadopted for financial instruments recognised in the balance sheet is disclosed in the individual accountingpolicies associated with each item.

(w) Derivative Financial Instruments

The Group's policy on the use of derivative financial instruments is not for speculative purposes but touse these instruments as hedges against specific exposures.

The Group enters into forward foreign exchange contracts to cover a portion of future capital, revenueand operating payments in a variety of currencies in order to manage its foreign currency risk. TheGroup also enters into forward fuel contracts to manage its fuel price risk and forward interest ratecontracts to manage its operating lease rental payments for aircraft.

Gains or losses arising from forward contracts on foreign currencies, fuel and interest rates are recognisedupon maturity in the income statement as realised exchange differences, component of fuel costs andlease rental payments respectively.

(x) Impairment of Assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whetherthere is any indication of impairment. If any such indication exists, impairment is measured by comparingthe carrying values of the assets with their recoverable amounts. Recoverable amount is the higher ofnet selling price and value in use, which is measured by reference to discounted future cash flows.

An impairment loss is recognised as an expense in the income statement immediately, unless the assetis carried at a revalued amount. Any impairment loss of a revalued asset is treated as a revaluationdecrease to the extent of any unutilised previously recognised revaluation surplus for the same asset.


NOTES TO THE FINANCIAL STATEMENTSRevenue

3. REVENUE

GROUP COMPANY2005 2004 2005 2004

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

Traffic revenue:Scheduled services- passenger and baggage 9,017,364 7,346,072 8,914,548 7,346,072- cargo and mail 2,061,320 1,672,156 813,342 748,651

11,078,684 9,018,228 9,727,890 8,094,723Non-scheduled services 80,299 61,479 80,299 61,479

11,158,983 9,079,707 9,808,189 8,156,202

Other revenue:Lease of aircraft and engines - 3,530 28,127 41,133Airport handling services 147,363 89,465 147,363 89,465Unavailed credits on sales in

advance of carriage 247,492 236,746 247,492 236,746Catering and cleaning services 11,014 38,627 10,950 5,986Charter services 138,587 84,009 115,400 62,582Fuel surcharge 377,643 83,611 146,422 -Others* 300,014 304,209 76,050 46,440

12,381,096 9,919,904 10,579,993 8,638,554Less:

Traffic revenue related todomestic operations to PMB (1,430,214) (1,332,078) (1,430,214) (1,332,078)

10,950,882 8,587,826 9,149,779 7,306,476

* Included in 'Others' for the Group are revenues from the provision of computerised reservation services,coach transportation, trucking and warehousing services, retailing of goods, terminal charges, hoteloperations, tour and travel related activities.


NOTES TO THE FINANCIAL STATEMENTS Expenditure

4. EXPENDITURE

GROUP COMPANY2005 2004 2005 2004

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

Fuel and oil 3,779,209 2,299,833 3,253,678 2,035,365Staff costs (Note 5) 1,904,782 1,607,011 1,784,274 1,503,113Handling, enroute charges, catering

and other related costs 1,711,558 1,527,659 1,427,788 1,249,269Hire of aircraft, operating plant

and equipment 1,856,154 1,544,029 1,478,646 1,312,268Aircraft maintenance and

overhaul 905,289 892,959 805,863 777,667Depreciation 245,273 214,258 210,078 160,603Operating inventories used 356,885 273,761 330,547 254,873Landing, parking and other

related costs 401,514 347,297 353,190 317,195Sales commission and incentives 658,351 591,054 556,320 517,750Foreign exchange (gain)/losses:

Realised (15,731) 26,432 (15,717) 26,353Unrealised 41 1,153 41 1,153

Advertising and promotions 240,605 226,540 231,717 220,700Computerised reservation

system booking fees 173,929 149,132 173,929 149,132Rental of land and buildings 134,244 140,324 132,353 138,124Provision for doubtful debts, net - 1,564 - 992Aircraft spares, property and

equipment written off 11,548 36,938 11,539 36,938Loss on disposal of investment - 684 - 684Directors' remuneration (Note 6) 1,177 1,463 1,174 1,457Auditors’ remuneration

- audit fees 661 636 460 460- other professional fees 937 753 455 657

Others 391,571 190,583 278,434 129,241

12,757,997 10,074,063 11,014,769 8,833,994

Allocation of operational costsrelated to domestic operationsto PMB (1,711,370) (1,488,822) (1,711,370) (1,488,822)

11,046,627 8,585,241 9,303,399 7,345,172


5. STAFF COSTS

GROUP COMPANY2005 2004 2005 2004

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

Salaries and wages 1,130,352 982,580 1,037,039 902,896Employees Provident Fund 142,158 119,053 132,077 111,047Social security costs 7,287 6,846 6,606 6,244Short term accumulating

compensated absences 49,636 7,108 49,458 6,945Other staff related expenses 575,349 491,424 559,094 475,981

1,904,782 1,607,011 1,784,274 1,503,113

6. DIRECTORS’ REMUNERATION

GROUP COMPANY2005 2004 2005 2004

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

Directors of the Company

Executive:Salaries and other emoluments 639 897 639 897Benefits-in-kind 1 1 1 1

640 898 640 898

Non-executive:Fees and other allowances

- current 537 435 534 429- underprovision in prior years - 130 - 130

537 565 534 559

Total 1,177 1,463 1,174 1,457

The number of directors of the Company whose total remuneration during the year fall within the followingbands is as follows:

Number of Directors2005 2004

Executive directors:RM600,001 to RM650,000 1 -RM850,001 to RM900,000 - 1

Non-executive directors:Below RM50,000 14 15RM100,001 to RM150,000 1 -RM150,001 to RM200,000 1 2

NOTES TO THE FINANCIAL STATEMENTSStaff Cost, Directors’ Remuneration


7. OTHER INCOMEGROUP COMPANY

2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000

Interest income - third parties 70,445 58,874 69,953 58,489Gain from liquidation of other

investments - 25,358 - 25,358Gain on disposal of

investments, net 18 - - -Rental income 84,041 68,561 53,721 38,764Dividend income

- subsidiaries - - 3,619 6,422- associated companies - - 6,794 5,428- unquoted shares 1,450 424 1,450 424

Gain on sale of aircraft sparesand equipment 4,178 1,721 3,460 1,290

Writeback of impairment lossesrecognised on other investments, net 45,481 3,200 47,652 4,445

Net writeback of provisionfor doubtful debts 17,680 - 33,549 -

Lease rental 28,045 - 28,045 -Others 162,089 34,856 136,351 28,953

413,427 192,994 384,594 169,573

8. GAIN ON SALE OF AIRCRAFT AND SPARE ENGINES

GROUP COMPANY2005 2004 2005 2004

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

Gain on sale of aircraft - 56,751 - 56,751Share of gain on disposal of

aircraft by holding company,PMB (Note a) 25,752 - 25,752 -

25,752 56,751 25,752 56,751

(a) In accordance with the Agreement for Aircraft and Finance Agreements Unbundling entered into withPMB, the Company is entitled to a 80% share of the gain on disposal of certain aircraft unbundled toPMB.

NOTES TO THE FINANCIAL STATEMENTS Other Income, Gain On Sale Of Aircraft And Spare Engines


9. TAXATION

GROUP COMPANY2005 2004 2005 2004

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

Current year’s provision:Malaysian 2,922 800 - -Foreign 9,045 7,171 9,045 7,171

11,967 7,971 9,045 7,171(Over)/under provision

in prior years (969) 425 (969) 936

10,998 8,396 8,076 8,107

Deferred taxation 22,341 (127,525) - -Underprovision in prior years 366 214 - -

22,707 (127,311) - -

Share of taxation of associatedcompanies 2,002 1,372 - -

35,707 (117,543) 8,076 8,107

There is no provision for Malaysian taxation for the Company in the current financial year as the Companyhas been granted an extension of the tax exemption status by the Ministry of Finance on its chargeableincome in respect of all sources of income vide the Income Tax (Exemption) (No. 25) Order 2001. The extensionis valid for a period of five years from year of assessment 2001 up to year of assessment 2005.

As at 31 March 2005, the Company has tax exempt income account of approximately RM9,499,482,000(2004 : RM9,106,255,000) available to pay tax exempt dividends up to two levels of shareholders, subject toagreement with the Inland Revenue Board.

Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2004 : 28%) of the estimatedassessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in therespective jurisdictions.

Certain subsidiaries of the Group qualify for tax incentive under small-medium enterprise by virtue of havingan issued and paid up share capital which is below RM2,500,000. Under this incentive, the subsidiaries enjoya tax rate of 20% for the first RM500,000 of the estimated assessable profit and 28% for assessable profitexceeding RM500,000.

NOTES TO THE FINANCIAL STATEMENTSTaxation


A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rateto income tax expense at the effective income tax rate of the Group and of the Company is as follows:

GROUP

2005 2004RM'000 RM'000

Profit before taxation 364,453 345,165

Taxation at Malaysian statutory rate of 28% (2004: 28%) 102,047 96,646Tax incentive obtained from differential tax rate of 20% (80) (82)Absence of tax relief for losses suffered by subsidiaries - 1Foreign income tax 9,045 7,171Effect of tax exemption status (114,455) (89,082)Income not subject to tax (5,206) (35,167)Expenses not deductible for tax purposes 62,369 35,615Deferred tax asset recognised on previously unrecognised:

- tax losses - (153,268)- other deductible temporary differences - (273)

Deferred tax assets not recognised on:- unutilised capital allowances 387 -- other deductible temporary differences 24 20,907- tax losses 835 -

Utilisation of previously unrecognised:- tax losses (541) (558)- unabsorbed capital allowances - (92)- other temporary differences (18,331) -

Underprovision of deferred tax in prior years 366 214(Over)/under provision of tax expense in prior years (753) 425

Tax expense for the year 35,707 (117,543)

COMPANY

2005 2004RM'000 RM'000

Profit before taxation 262,179 587,310

Taxation at Malaysian statutory rate of 28% (2004: 28%) 73,410 164,447Foreign income tax 9,045 7,171Effect of tax exemption status (114,455) (89,082)Income not subject to tax (666) (35,167)Expenses not deductible for tax purposes 60,042 6,864Utilisation of previously unrecognised deductible temporary

differences (18,331) (67,935)Deferred tax assets not recognised on other deductible

temporary differences - 20,873(Over)/under provision of tax in prior years (969) 936

Tax expense for the year 8,076 8,107

NOTES TO THE FINANCIAL STATEMENTS Taxation (Contd.)


10. BASIC EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the year attributable to shareholders bythe weighted average number of ordinary shares in issue during the financial year.

GROUP2005 2004

Net profit for the year attributable to shareholders (RM'000) 326,079 461,143Weighted average number of ordinary shares in issue ('000) 1,253,244 1,253,244Basic earnings per share (sen) 26.0 36.8

11.DIVIDEND

Net dividends perAmount ordinary share

2005 2004 2005 2004RM'000 RM'000 Sen Sen

Final

2.5% tax exempt on1,253,243,865 ordinary shares,in respect of the financial yearended 31 March 2004, declaredon 24 May 2004 and paid on12 October 2004 31,331 - 2.5 -

NOTES TO THE FINANCIAL STATEMENTSBasic Earnings Per Share, Dividend


12.AIRCRAFT MODIFICATIONS/RETROFITS, PROPERTY AND EQUIPMENT

Aircraft Operatingmodifications/ equipment,

retrofits, officeengines equipment

Land and and and motor Progressbuildings spares vehicles payments Total

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

GROUP

Cost/Valuation

At 1 April 2004 1,103,669 990,803 1,455,779 303,729 3,853,980Additions 18,008 366,403 68,330 226,047 678,788Disposals (1,251) (29,531) (3,074) - (33,856)Transfers 319,590 (2,389) 61,115 (378,316) -Write offs - (28,889) (5,061) - (33,950)

At 31 March 2005 1,440,016 1,296,397 1,577,089 151,460 4,464,962

Representing:At cost 1,256,582 1,296,397 1,577,089 151,460 4,281,528At valuation 183,434 - - - 183,434

1,440,016 1,296,397 1,577,089 151,460 4,464,962

Accumulated Depreciation

At 1 April 2004 455,902 568,891 1,167,213 - 2,192,006Charge for the year 27,858 135,482 81,933 - 245,273Disposals (1,117) (298) (2,955) - (4,370)Write offs - (17,454) (4,948) - (22,402)

At 31 March 2005 482,643 686,621 1,241,243 - 2,410,507

Representing:At cost 393,423 686,621 1,241,243 - 2,321,287At valuation 89,220 - - - 89,220

482,643 686,621 1,241,243 - 2,410,507

Net Book Value

At 31 March 2005At cost 863,159 609,776 335,846 151,460 1,960,241At valuation 94,214 - - - 94,214

957,373 609,776 335,846 151,460 2,054,455


647,767 421,912 288,566 303,729 1,661,974

Depreciation chargefor 31 March 2004 28,413 79,069 106,776 - 214,258

NOTES TO THE FINANCIAL STATEMENTSAircraft Modifications/Retrofits, Property And Equipment


Aircraft Operatingmodifications/ equipment,

retrofits, officeengines equipment

Land and and and motor Progressbuildings spares vehicles payments Total

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

COMPANY

Cost/Valuation

At 1 April 2004 1,097,823 990,803 1,057,573 54,834 3,201,033Additions 18,008 366,403 51,980 101,553 537,944Disposals (1,251) (29,531) (2,262) - (33,044)Transfers 2,069 (2,389) 37,692 (37,372) -Write offs - (28,889) (5,001) - (33,890)

At 31 March 2005 1,116,649 1,296,397 1,139,982 119,015 3,672,043

Representing:At cost 933,215 1,296,397 1,139,982 119,015 3,488,609At valuation 183,434 - - - 183,434

1,116,649 1,296,397 1,139,982 119,015 3,672,043


At 1 April 2004 451,907 568,891 910,599 - 1,931,397Charge for the year 27,837 135,482 46,759 - 210,078Disposals (1,117) (298) (2,145) - (3,560)Write offs - (17,454) (4,897) - (22,351)

At 31 March 2005 478,627 686,621 950,316 - 2,115,564

Representing:At cost 389,407 686,621 950,316 - 2,026,344At valuation 89,220 - - - 89,220

478,627 686,621 950,316 - 2,115,564

Net Book Value


638,022 609,776 189,666 119,015 1,556,479


645,916 421,912 146,974 54,834 1,269,636

Depreciation chargefor 31 March 2004 28,011 79,069 53,523 - 160,603

NOTES TO THE FINANCIAL STATEMENTSAircraft Modifications/Retrofits, Property And Equipment (Contd.)


(a) Land and Buildings

Freehold Leaseholdland land Buildings Total

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

GROUP

Cost/Valuation

At 1 April 2004 6,721 54,580 1,042,368 1,103,669Additions - 16,429 1,579 18,008Disposals - - (1,251) (1,251)Transfers 1,599 74,431 243,560 319,590

At 31 March 2005 8,320 145,440 1,286,256 1,440,016

Representing:At cost 8,320 90,860 1,157,402 1,256,582At valuation - 54,580 128,854 183,434

8,320 145,440 1,286,256 1,440,016


At 1 April 2004 - 11,247 444,655 455,902Charge for the year - 756 27,102 27,858Disposals - - (1,117) (1,117)

At 31 March 2005 - 12,003 470,640 482,643

Representing:At cost - 152 393,271 393,423At valuation - 11,851 77,369 89,220

- 12,003 470,640 482,643

Net Book Value

At 31 March 2005At cost 8,320 90,708 764,131 863,159At valuation - 42,729 51,485 94,214

8,320 133,437 815,616 957,373

At 31 March 2004At cost 6,721 - 543,368 550,089At valuation - 43,333 54,345 97,678

6,721 43,333 597,713 647,767

Depreciation charge for31 March 2004 - 603 27,810 28,413



(a) Land and Buildings (Contd.)

Freehold Leaseholdland land Buildings Total

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

COMPANY

Cost/Valuation

At 1 April 2004 6,721 54,580 1,036,522 1,097,823Additions - 16,429 1,579 18,008Disposals - - (1,251) (1,251)Transfers - - 2,069 2,069

At 31 March 2005 6,721 71,009 1,038,919 1,116,649

Representing:At cost 6,721 16,429 910,065 933,215At valuation - 54,580 128,854 183,434

6,721 71,009 1,038,919 1,116,649


At 1 April 2004 - 11,247 440,660 451,907Charge for the year - 756 27,081 27,837Disposals - - (1,117) (1,117)

At 31 March 2005 - 12,003 466,624 478,627

Representing:At cost - 152 389,255 389,407At valuation - 11,851 77,369 89,220

- 12,003 466,624 478,627

Net Book Value

At 31 March 2005At cost 6,721 16,277 520,810 543,808At valuation - 42,729 51,485 94,214

6,721 59,006 572,295 638,022

At 31 March 2004At cost 6,721 - 541,517 548,238At valuation - 43,333 54,345 97,678

6,721 43,333 595,862 645,916

Depreciation charge for31 March 2004 - 603 27,408 28,011

NOTES TO THE FINANCIAL STATEMENTSAircraft Modifications/Retrofits, Property And Equipment(Contd.)


(a) Land and Buildings (Contd.)

Certain buildings of the Group and the Company have been constructed on Federal and StateGovernment land in which the lease arrangements are being formalised.

Included in the leasehold land and building is a piece of land costing approximately RM44,031,000(2004: RM44,031,000 included in progress payment) whereby the transfer of land title is pending theapproval of the relevant authorities.

Included in leasehold land is leasehold land with unexpired period of less than 50 years with net bookvalue of RM682,000 (2004 : RM702,000).

(b) Aircraft Modifications/Retrofits, Engines and Spares

Spare Aircraftengines spares Total

GROUP AND COMPANY RM'000 RM'000 RM'000

Cost

At 1 April 2004 185,818 804,985 990,803Additions 231,813 134,590 366,403Disposals (29,531) - (29,531)Transfers 22,118 (24,507) (2,389)Write offs (2,008) (26,881) (28,889)

At 31 March 2005 408,210 888,187 1,296,397


At 1 April 2004 55,768 513,123 568,891Charge for the year 84,709 50,773 135,482Disposals (298) - (298)Write offs (1,966) (15,488) (17,454)

At 31 March 2005 138,213 548,408 686,621

Net Book Value

At 31 March 2005 269,997 339,779 609,776

At 31 March 2004 130,050 291,862 421,912

Depreciation charge for31 March 2004 24,225 54,844 79,069



(c) Operating Equipment, Office Equipment and Motor Vehicles

OfficeOperating furnitureplant and and Motor

equipment equipment vehicles TotalGROUP RM'000 RM'000 RM'000 RM'000

Cost

At 1 April 2004 994,110 393,796 67,873 1,455,779Additions 49,488 17,116 1,726 68,330Disposals (116) (424) (2,534) (3,074)Transfers 34,491 24,432 2,192 61,115Write offs (4,405) (565) (91) (5,061)

At 31 March 2005 1,073,568 434,355 69,166 1,577,089


At 1 April 2004 759,736 345,939 61,538 1,167,213Charge for the year 53,103 24,455 4,375 81,933Disposals (113) (421) (2,421) (2,955)Write offs (4,335) (522) (91) (4,948)

At 31 March 2005 808,391 369,451 63,401 1,241,243

Net Book Value

At 31 March 2005 265,177 64,904 5,765 335,846

At 31 March 2004 234,374 47,857 6,335 288,566

Depreciation charge for31 March 2004 76,144 23,985 6,647 106,776



(c) Operating Equipment, Office Equipment and Motor Vehicles (Contd.)

OfficeOperating furnitureplant and and Motor

equipment equipment vehicles TotalCOMPANY RM'000 RM'000 RM'000 RM'000

Cost

At 1 April 2004 668,643 328,403 60,527 1,057,573Additions 36,028 14,846 1,106 51,980Disposals (111) (38) (2,113) (2,262)Transfers 34,491 1,366 1,835 37,692Write offs (4,405) (505) (91) (5,001)

At 31 March 2005 734,646 344,072 61,264 1,139,982


At 1 April 2004 584,979 269,530 56,090 910,599Charge for the year 22,282 20,852 3,625 46,759Disposals (110) (34) (2,001) (2,145)Write offs (4,335) (471) (91) (4,897)

At 31 March 2005 602,816 289,877 57,623 950,316

Net Book Value

At 31 March 2005 131,830 54,195 3,641 189,666

At 31 March 2004 83,664 58,873 4,437 146,974

Depreciation charge for31 March 2004 33,162 14,853 5,508 53,523

NOTES TO THE FINANCIAL STATEMENTSAircraft Modifications/Retrofits, Property And Equipment(Contd.)


(d) Progress Payments

Aircraftequipment Properties

and undersimulators construction Total

RM'000 RM'000 RM'000

GROUP

Cost

At 1 April 2004 41,535 262,194 303,729Additions 84,670 141,377 226,047Transfers (36,056) (342,260) (378,316)

At 31 March 2005 90,149 61,311 151,460

COMPANY

Cost

At 1 April 2004 41,535 13,299 54,834Additions 84,670 16,883 101,553Transfers (12,651) (24,721) (37,372)

At 31 March 2005 113,554 5,461 119,015

(e) Had the revalued land and buildings been carried at historical cost less accumulated depreciation, thenet book values of the land and buildings that would have been included in the financial statementsare as follows:

GROUP COMPANY2005 2004 2005 2004

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

Leasehold land 2,038 2,070 2,038 2,070Buildings 36,314 39,040 36,314 39,040



13.INVESTMENTS

The investments of the Group and of the Company are as follows:

GROUP COMPANY2005 2004 2005 2004

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

Investment in subsidiaries(Note a) - - 46,565 46,565

Investment in associatedcompanies (Note b) 46,845 35,629 81,274 81,274

Other investments (Note c) 147,831 125,996 143,831 125,964

194,676 161,625 271,670 253,803

(a) Investment in subsidiaries

Unquoted shares, at cost - - 180,698 180,698Less: Accumulated impairment

losses - - (134,133) (134,133)

- - 46,565 46,565

The list of subsidiaries is disclosed in Note 30.

(b) Investment in associated companies

Unquoted shares, at cost 124,919 125,198 124,919 124,919Less: Accumulated impairment losses - - (43,645) (43,645)

124,919 125,198 81,274 81,274

Group's share of post acquisition reservesand retained profits less losses (78,074) (89,569) - -

46,845 35,629 81,274 81,274

Represented by:Share of net assets 19,558 7,987Share of intangible assets 26,232 26,587

45,790 34,574

Goodwill on acquisition 1,055 1,055

46,845 35,629

The list of associated companies is disclosed in Note 31.

NOTES TO THE FINANCIAL STATEMENTSInvestments


GROUP COMPANY2005 2004 2005 2004

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

(c) Other investments

Quoted shares, at cost:- in Malaysia - 32 - -- outside Malaysia 1,377 1,377 1,377 1,377

1,377 1,409 1,377 1,377

US Government TreasuryStrips 15,682 33,517 15,682 33,517

Unquoted shares, at cost:- in Malaysia 88,803 96,186 84,803 96,186- outside Malaysia 41,786 42,340 41,786 42,340

130,589 138,526 126,589 138,526

Less: Accumulated impairmentlosses - (47,652) - (47,652)

Other Government andMunicipal Bonds 113 126 113 126

Others 70 70 70 70

130,772 91,070 126,772 91,070

Total 147,831 125,996 143,831 125,964

Market value of quoted shares:- in Malaysia - 108 - -- outside Malaysia 30,946 26,294 30,946 26,294

The US Government Treasury Strips have been pledged as substituted collateral for certain contingentliabilities as disclosed in Note 26.

NOTES TO THE FINANCIAL STATEMENTSInvestments (Contd.)


(d) Disposal of a subsidiary

As previously reported, the Company completed its partial disposal of 70% equity interest in MASCatering Sdn. Bhd. (currently known as LSG Sky Chefs-Brahim's Sdn. Bhd. ("LSG")) to Gubahan SaujanaSdn. Bhd., LSG Asia GmbH and Fahim Capital Sdn. Bhd. on 1 December 2003 for a total cash considerationof RM175 million, thus changing it from a wholly-owned subsidiary to an associated company.

The revenue, results and cash flows of LSG up to the date of disposal were as follows:

Financial Financialperiod yearended ended

1.12.03 31.03.03RM'000 RM'000

Revenue 100,953 163,938Other income 298 404Expenditure (129,672) (213,912)

Loss attributable to shareholders (28,421) (49,570)

Cash flows from operating activities (1,603) 1,518Cash flows from investing activities (915) 286

Total cash flows (2,518) 1,804

The net assets/(liabilities) of LSG were as follows:1.12.03 31.03.03RM'000 RM'000

Net assets/(liabilities) disposed of:Property, plant and equipment 102,247 115,967Investments - 10,186Inventories 2,666 2,364Trade and other receivables 4,566 6,525Cash and bank balances 385 2,903Trade and other payables (39,048) (279,031)

70,816 (141,086)

Less: Share of Group's net assets (21,245)Cost to be borne by the Group 33,953Gain on disposal to the Group 91,476

Total consideration 175,000

Net cash inflow arising on disposal:Cash consideration 175,000Cost to be borne by the Group (33,953)Cash and cash equivalents of subsidiary disposed of (385)

140,662

NOTES TO THE FINANCIAL STATEMENTSInvestments (Contd.)


14.DUE FROM SUBSIDIARIES

COMPANY2005 2004

RM'000 RM'000

Due from subsidiaries 512,302 512,595Less: Provision for doubtful debts (247,356) (252,902)

264,946 259,693

The amount due from subsidiaries is unsecured, interest free and has no fixed terms of repayment.

15.INVENTORIES

GROUP COMPANY2005 2004 2005 2004

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

At cost:

Catering and general stores 9,116 6,264 2,737 2,491Consumable aircraft spares 9,331 17,019 9,331 17,019

18,447 23,283 12,068 19,510

At net realisable value:

Catering and general stores 74,788 64,736 74,788 64,736Consumable aircraft spares 352,803 281,400 352,803 281,400

427,591 346,136 427,591 346,136

446,038 369,419 439,659 365,646

NOTES TO THE FINANCIAL STATEMENTSDue From Subsidiaries, Inventories


16. RECEIVABLES

GROUP COMPANY2005 2004 2005 2004

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

Trade receivables 1,616,976 1,503,480 1,578,702 1,482,043Less: Provision for doubtful debts (485,152) (503,653) (451,813) (485,415)

1,131,824 999,827 1,126,889 996,628

Due from holding company (Note a) 445,483 268,037 445,483 268,037Due from fellow subsidiary (Note b) 43,168 38,085 43,168 38,085Due from associated companies 2,644 - 2,644 -Security deposits 87,975 96,065 87,317 95,138Prepayments 71,290 80,022 70,598 79,783Tax recoverable 61,014 59,396 32,075 53,554Sundry receivables 164,209 123,062 152,077 114,810Less: Provision for doubtful debts (1,630) (849) - -

874,153 663,818 833,362 649,407

2,005,977 1,663,645 1,960,251 1,646,035

(a) The amount due from holding company is unsecured and has no fixed term of repayment.

Included in the amount due from holding company of the Group and the Company are the following :

(i) an amount of RM353,290,000 (2004 : RMNil) in respect of payment made on behalf of theholding company for the purchase of aircraft.

(ii) interest bearing amount amounting to RM92,193,000 (2004: RM268,037,000) which bearsinterest as at the balance sheet date at 3.55% (2004: 3.75%) per annum.

(b) Due from fellow subsidiary

GROUP AND COMPANY2005 2004

RM'000 RM'000

Due within one year 43,168 38,085Due after one year 395,819 441,888

438,987 479,973

The amount due from a fellow subsidiary represents prepaid lease rentals.

NOTES TO THE FINANCIAL STATEMENTSReceivables


(c) The Group's normal trade credit term ranges from 30 to 60 days. Other credit terms are assessed andapproved on a case-by-case basis.

(d) The Group has no significant concentration of credit risk that may arise from exposures to a singledebtor or to groups of debtors.

(e) Included in receivables of the Group and of the Company at the balance sheet date are balancesdenominated in the following major foreign currencies:


RM'000 RM'000

United States Dollar 778,132 571,321Euro 60,365 69,268Great Britain Pound 71,743 152,991Japanese Yen 48,474 48,129Singapore Dollar 5,479 2,935Australian Dollar 65,367 27,771

NOTES TO THE FINANCIAL STATEMENTSReceivables (Contd.)


17.CASH AND BANK BALANCES

GROUP COMPANY2005 2004 2005 2004

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

Cash and bank balance 236,999 151,697 230,880 140,464Term deposits with:

Licensed banks 931,325 945,746 909,000 940,100Licensed finance companies 82,525 9,287 81,000 -Other financial institutions 943,729 1,084,163 943,729 1,084,163

2,194,578 2,190,893 2,164,609 2,164,727

The average effective interest rates of deposits at the balance sheet date were as follows:

GROUP COMPANY2005 2004 2005 2004

% % % %

Licensed banks 1.75 - 6.50 1.65 - 5.00 1.75 - 6.50 1.65 - 5.00Licensed finance companies 2.75 - 3.00 2.90 2.75 - 3.00 -Other financial institutions 2.62 - 3.10 2.66 - 2.91 2.62 - 3.10 2.66 - 2.91

The average maturities of deposits as at the end of the financial year were as follows:

GROUP COMPANY2005 2004 2005 2004Days Days Days Days

Licensed banks 1 - 365 11 - 90 1 - 365 15Licensed finance companies 89 - 365 11 - 90 89 - 94 -Other financial institutions 1 - 365 11 - 90 1 - 365 15

Other financial institutions are merchant banks in Malaysia and other foreign banks.

Included in cash and bank balances of the Group and of the Company at the balance sheet date are balancesdenominated in the following major foreign currencies:

GROUP COMPANY2005 2004 2005 2004

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

United States Dollar 69,632 12,083 69,632 12,083Euro 84,228 43,515 84,228 43,515Great Britain Pound 106,809 5,453 106,809 5,453Japanese Yen 15,013 3,114 15,013 3,114Singapore Dollar 1,744 1,130 1,732 1,118Australian Dollar 68,656 6,312 68,656 6,312

NOTES TO THE FINANCIAL STATEMENTSCash And Bank Balances


18.DUE TO SUBSIDIARIES

The amount is unsecured, interest free and has no fixed term of repayment.

19. PAYABLES

GROUP COMPANY2005 2004 2005 2004

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

Trade payables 1,968,436 1,404,423 1,663,103 1,187,253Due to associated companies 31,096 76,697 31,096 76,411Other payables 192,949 580,384 131,898 543,828Accruals 361,093 338,431 354,646 341,779

2,553,574 2,399,935 2,180,743 2,149,271

The normal trade credit term granted to the Group ranges from 30 to 60 days.

Included in payables of the Group and of the Company at balance sheet date are balances denominated inthe following major foreign currencies:

GROUP COMPANY2005 2004 2005 2004

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

United States Dollar 165,497 75,585 164,461 75,432Euro 20,794 4,892 20,720 4,737Great Britain Pound 10,605 7,607 10,605 7,584Singapore Dollar 5,091 5,660 5,067 5,658Australian Dollar 20,737 7,598 20,729 7,598

NOTES TO THE FINANCIAL STATEMENTSDue To Subsidiaries, Payables


20.SHARE CAPITAL

Number of Shares Amount2005 2004 2005 2004

GROUP AND COMPANY '000 '000 RM'000 RM'000

Authorised

Ordinary Shares of RM1.00 each 9,000,000 9,000,000 9,000,000 9,000,000

One Special Rights RedeemablePreference Share of RM1.00 (Note a) 1 share 1 share RM1 RM1

Redeemable ConvertiblePreference Shares of RM0.01 (Note b) 100,000,000 100,000,000 1,000,000 1,000,000

109,000,000 109,000,000 10,000,000 10,000,000

Issued and fully paid

Ordinary Shares of RM1.00 each 1,253,244 1,253,244 1,253,244 1,253,244One Special Rights Redeemable

Preference Share of RM1.00 (Note a) 1 share 1 share RM1 RM1

1,253,244 1,253,244 1,253,244 1,253,244

(a) The Special Rights Redeemable Preference Share ("Special Share") would enable the Governmentthrough the Minister of Finance Incorporated ("MoF") to ensure that certain major decisions affectingthe operations of the Company are consistent with the Government's policy. The Special Share, whichmay only be held by the MoF or its successors or any Minister, representative, or any person acting onbehalf of the Government of Malaysia, carries certain special rights as provided by Article 5 of theCompany's Articles of Association (as amended at the Extraordinary General Meeting held on 19 April1995). These special rights include:

(i) the right to appoint not more than three persons at any time as directors of the Company.

(ii) the right to repayment of the capital paid up on the Special Share in priority to any othermember in the event of a winding-up of the Company.

(iii) the right to require the Company to redeem the Special Share at par at any time.

Certain matters, in particular the alterations of specified Articles of Association of the Company, requirethe prior approval of the holder of the Special Share. The Special Share does not carry any right to voteat General Meetings but the holder is entitled to attend and speak at such meetings.

NOTES TO THE FINANCIAL STATEMENTSShare Capital


(b) On 11 September 2001, the Company issued RM800 million Zero Dividend Redeemable ConvertiblePreference Shares (''RCPS'') of RM0.01 each at an issue price of RM1.00 each to Intelek Perkasa Berhad.The RCPS is redeemable by the Company within thirty days of its fifth anniversary (11 September 2006)failing which it will be automatically converted into ordinary shares at a conversion price of RM3.45 perRCPS share. The RCPS was constituted by the Subscription Agreement dated 29 August 2001.

The RCPS Investors will have the benefits of a put/call option arrangement granted by MoF as follows:

(i) the MoF will be entitled to exercise the call option to purchase all the RCPS from the RCPS Investorsseven days prior to the fifth anniversary from the date of the issue of the RCPS (''Call Option'') at anexercise price as set out below; and

(ii) conversely, the RCPS Investors will be entitled to exercise the put option to dispose of all the RCPSat a selling price as set out below at the end of the five years from the date of issuance of the RCPS(''Put Date'') if and only if the Call Option is not exercised (''Put Option'').

Under the put/call arrangement, the exercise price for the RCPS payable by the MoF will be at a premiumon the issue price of the RCPS to be calculated to give the RCPS Investors an equivalent return similar to5-year zero-coupon fixed income papers issued or guaranteed by the Government that are issued ortrading at around the time when the RCPS are issued (''Put Price'').

Subsequently, the Company can redeem the RCPS at its discretion within thirty (30) days immediatelyafter the Put Date at a price equivalent to the Put Price plus interest accrued from the Put Date to theactual date of redemption by the Company calculated using one month Treasury Bills.

As mentioned in prior years’ reports, the Company entered into an agreement with PMB whereby theCompany agreed to redeem the RCPS upon maturity, thereby changing the nature of the RCPS from anequity instrument to a debt instrument as defined by Malaysian Accounting Standard Board ("MASB")24: Financial Instruments - Disclosure and Presentation. PMB then agreed to pay the redemption sumupon maturity, resulting in the RCPS ceasing to be an obligation of the Company.

The Company has also obtained an undertaking from the MoF that in the event the MoF were tobecome the holder of the RCPS through the put and call mechanism described above, the RCPS will beallowed to lapse without any further consideration payable by the Company. Accordingly, the RCPS,comprising share capital of RM8 million and share premium of RM792 million was derecognised in thefinancial statements of the Company.

NOTES TO THE FINANCIAL STATEMENTSShare Capital (Contd.)


21.GENERAL RESERVES - DISTRIBUTABLE

The general reserve relates to transfer made from retained profits in prior years.

22.DEFERRED TAXATION

GROUP COMPANY2005 2004 2005 2004

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

At 1 April 2004 (124,970) 2,341 - -Recognised in the income statement

(Note 9) 22,707 (127,311) - -

At 31 March 2005 (102,263) (124,970) - -

Presented after appropriateoffsetting as follows:

Deferred tax assets (103,219) (126,232) - -Deferred tax liabilities 956 1,262 - -

(102,263) (124,970) - -

The components and movements of deferred tax liabilities and assets during the financial year prior tooffsetting are as follows:

Deferred tax liabilities of the Group:

AcceleratedCapital

Allowances Others TotalRM'000 RM'000 RM'000

At 1 April 2004 30,550 1,017 31,567Recognised in the income statement (299) (1,017) (1,316)

At 31 March 2005 30,251 - 30,251

At 1 April 2003 2,708 - 2,708Recognised in the income statement 27,842 1,017 28,859

At 31 March 2004 30,550 1,017 31,567

NOTES TO THE FINANCIAL STATEMENTSGeneral Reserves-Distributable, Deferred Taxation


Deferred tax assets of the Group:

Tax Losses andUnabsorbed

CapitalAllowances Provisions Others Total

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

At 1 April 2004 (155,276) (875) (386) (156,537)Recognised in the income statement 23,810 164 49 24,023

At 31 March 2005 (131,466) (711) (337) (132,514)

At 1 April 2003 - (43) (324) (367)Recognised in the income statement (155,276) (832) (62) (156,170)

At 31 March 2004 (155,276) (875) (386) (156,537)

Deferred tax assets have not been recognised in respect of the following items:

GROUP COMPANY2005 2004 2005 2004

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

Unused tax losses 9,249 9,561 - -Unabsorbed capital allowances 935,146 786,302 935,074 786,182Other deductible temporary

differences 342,208 129,529 342,279 132,094

1,286,603 925,392 1,277,353 918,276

The unused tax losses and unabsorbed capital allowances are available indefinitely for offset against futuretaxable profits of the subsidiaries in which those items arose. Deferred tax assets have not been recognisedin respect of these items as they may not be used to offset taxable profits of the other subsidiaries in theGroup and they have arisen in subsidiaries that have a recent history of losses.

The Company is in the midst of applying for an extension of its tax exemption status. As such, deferred taxassets have not been recognised in respect of the unabsorbed capital allowances and other deductibletemporary differences.

NOTES TO THE FINANCIAL STATEMENTSDeferred Taxation (Contd.)


23.SEGMENTAL INFORMATION

(a) Business Segments

The Group operates predominantly in two business segments, being airline operations and cargo services.

(i) Airline operations - operation of aircraft for passengers(ii) Cargo services - operation of aircraft for cargo and mail services

Other business segments include hotel operations, catering, engineering, computerised reservation services,coach transportation, trucking and warehousing services, retailing of goods, terminal charges and tour andtravel related activities, none of which are of a sufficient size to be reported separately.

The directors are of the opinion that all inter-segment transactions have been entered into in the normalcourse of business. Belly space charges from Airline to Cargo are based on internal pricing policy. All otherinter-segment transactions have been established on terms and conditions that are not materially differentfrom those obtainable in transactions with unrelated parties.

NOTES TO THE FINANCIAL STATEMENTSSegmental Information


(a) Business Segments (Contd.)

Airline Cargo2005 Operations Services Others Elimination Consolidated

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

REVENUE AND EXPENSES

RevenueExternal sales 8,302,323 2,580,213 68,346 - 10,950,882Inter-segment sales 847,456 - 26,267 (873,723) -

Total revenue 9,149,779 2,580,213 94,613 (873,723) 10,950,882

ResultSegment results 256,726 95,827 1,821 (10,940) 343,434Interest expense (93) (1) (43) - (137)Share of results of

associated companies - - 21,156 - 21,156

Profit before taxation 364,453Taxation (8,076) (22,931) (4,700) (35,707)

Profit after taxation 328,746Minority interests (2,667)

Net profit for the year 326,079

ASSETS AND LIABILITIES

Segment assets 6,667,184 244,310 436,423 - 7,347,917Investment in associated

companies - - 46,845 - 46,845

Consolidated total assets 7,394,762

Segment and consolidatedliabilities 3,691,071 327,055 47,198 - 4,065,324

OTHER INFORMATION

Capital expenditure 537,944 13,026 127,818 - 678,788

Depreciation 210,078 30,415 4,780 - 245,273

NOTES TO THE FINANCIAL STATEMENTSSegmental Information (Contd.)


(a) Business Segments (Contd.)

Airline Cargo2004 Operations Services Others Elimination Consolidated

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

REVENUE AND EXPENSES

RevenueExternal sales 6,501,528 1,999,756 86,542 - 8,587,826Inter-segment sales 804,948 - 95,161 (900,109) -

Total revenue 7,306,476 1,999,756 181,703 (900,109) 8,587,826

ResultSegment results 279,104 96,509 (24,140) (7,667) 343,806Interest expense (5,916) - - - (5,916)Share of results of

associated companies - - 7,275 - 7,275

Profit before taxation 345,165Taxation (8,107) 122,617 3,033 - 117,543

Profit after taxation 462,708Minority interests (1,565)

Net profit for the year 461,143

ASSETS AND LIABILITIES

Segment assets 6,013,896 256,157 309,994 - 6,580,047Investment in associated

companies - - 35,629 - 35,629

Consolidated total assets 6,615,676

Segment and consolidatedliabilities 3,327,658 231,488 20,448 - 3,579,594

OTHER INFORMATION

Capital expenditure 236,792 3,161 43,137 - 283,090

Depreciation 160,603 29,209 24,446 - 214,258



(b) Geographical Segments

2005 2004RM'000 RM'000

Revenue

Orient and North America 2,628,821 1,845,558Europe and Middle East 3,899,108 2,919,633Australia and New Zealand 1,740,107 1,402,610Asia 1,656,410 1,356,250Africa and South America 275,729 223,578

10,200,175 7,747,629Other revenue 750,707 840,197

10,950,882 8,587,826

Assets, which consist principally of flight and ground equipment that support the entire worldwidetransportation system, are mainly located in Malaysia. An analysis of assets and capital expenditure of theGroup by geographical distribution has therefore not been included.



24. SIGNIFICANT RELATED PARTY TRANSACTIONS

GROUP COMPANY2005 2004 2005 2004

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

Expenses

Expenses charged by subsidiaries:- Handling and cleaning services - - 2,776 2,581- Inflight meals - - 14,928 11,953- Other inflight services - - 8,563 6,617

Engine maintenance services renderedby an associated company,GE Engine Services MalaysiaSdn. Bhd. ("GEESM") 399,236 442,235 399,236 442,235

Purchase of aircraft spares andequipment from GEESM 93,224 82,801 93,224 82,801

Catering services paid to an associated company,Taj Madras Flight Kitchen Limited 2,196 1,985 2,196 1,985

Transit and cabin services paid to anassociated company, Pan AsiaPacific Aviation Services Limited 5,545 2,950 5,545 2,950

Purchase of meals and beverages froman associated company, LSG SkyChefs-Brahim's Sdn. Bhd. ("LSG") 264,852 79,088 264,852 79,088

Catering services paid to EvergreenSky Catering Corporation, a companyin which the Company has substantialshareholding 9,048 7,465 9,048 7,465

Catering services paid to MiascorCatering Services, a companyin which the Companyhas substantial shareholding 1,207 1,251 1,207 1,251

Computer reservation system access feepaid to Abacus International HoldingLimited, a company in which theCompany has substantial shareholding 58,491 38,199 - -

Aircraft maintenance services paid toan associated company, HoneywellAerospace Services (M) Sdn. Bhd. 6,856 7,086 6,856 7,086

Aircraft maintenance servicespaid to an associated company,Hamilton Sunstrand CustomerSupport Centre (M) Sdn. Bhd. 13,816 10,765 13,816 10,765

NOTES TO THE FINANCIAL STATEMENTSSignificant Related Party Transactions


GROUP COMPANY2005 2004 2005 2004

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

Income

Dividend received from:- Subsidiaries - - 3,619 6,422- Associated companies - - 6,794 5,428

Income received from subsidiaries:- Hire of belly space - - 819,329 750,035- Hire of aircrafts - - 28,127 37,164- Handling and cleaning services - - 2,888 2,188

Rental income received from anassociated company, GEESM 15,092 15,412 15,092 15,412

Shared services billed to LSG 47,791 8,989 47,791 8,989

Transactions with holding company and its fellow subsidiaries

Expenses

Hire of aircraft paid to PMB 362,557 315,210 362,557 315,210Lease rental paid to Aircraft

Business Malaysia Sdn. Bhd. 238,178 227,569 238,178 227,569Rental paid to Asset Global

Network Sdn. Bhd. 71,410 71,410 71,410 71,410

The directors are of the opinion that all the transactions above have been entered into in the normal courseof business and have been established on terms and conditions that are not materially different from thoseobtainable in transactions with unrelated parties.

NOTES TO THE FINANCIAL STATEMENTSSignificant Related Party Transactions (Contd.)


25.COMMITMENTS

GROUP COMPANY2005 2004 2005 2004

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

(a) Capital commitments:Due within one year- approved and contracted for 592,300 850,673 527,300 775,900- approved but not contracted for 347,700 581,482 332,700 515,300

940,000 1,432,155 860,000 1,291,200

Due within two to five years- approved and contracted for 507,100 127,600 437,100 127,600- approved but not contracted for 154,600 735,000 154,600 709,000

661,700 862,600 591,700 836,600

Total capital commitments- approved and contracted for 1,099,400 978,273 964,400 903,500- approved but not contracted for 502,300 1,316,482 487,300 1,224,300

1,601,700 2,294,755 1,451,700 2,127,800

(b) Forward contracts:Fuel contracts- Due within 1 year 157,663 28,084 157,663 28,084Foreign currency contracts- Due within 1 year 6,114 9,462 6,114 9,462

163,777 37,546 163,777 37,546

(c) Operating lease commitments:Due within one year 1,053,252 1,020,701 1,053,252 1,020,701Due between one and two years 996,496 1,010,160 996,496 1,010,160Due between two and five years 1,734,706 2,667,665 1,734,706 2,667,665Due after five years 3,057,540 3,057,540 3,057,540 3,057,540

6,841,994 7,756,066 6,841,994 7,756,066

The outstanding capital commitments relate to aircraft interior reconfiguration, upgrade of inflightentertainment system and other capital expenditure projects.

NOTES TO THE FINANCIAL STATEMENTSCommitments


26.CONTINGENT LIABILITIES


RM'000 RM'000

Guarantees (Unsecured)

Corporate guarantees given to third parties in respect ofcredit facilities provided to an associated company 5,503 5,509

Bank guarantee given to third parties in respect of servicesprovided to the Group and Company 123,419 146,447

Performance bonds given to third parties in respect of trainingof technical crew 640 640

129,562 152,596

Liabilities taken over by the holding company

Loans- secured 798,799 1,048,282- unsecured 141,419 147,665Lease payables (secured) 1,888,994 2,669,355

2,829,212 3,865,302

2,958,774 4,017,898

In connection with the Widespread Asset Unbundling ("WAU") exercise mentioned in the last report, theCompany continues to be the named borrower of finance leases and term loans which have been taken overby the holding company and is still contractually bound to meet these borrowings in the event the holdingcompany defaults on the payments. As such, the outstanding balance of the borrowings assumed by theholding company is included within the Group's and Company's contingent liabilities.

The above lease and loans mature as follows:

Loans Leases TotalRM'000 RM'000 RM'000

Within one year 253,312 537,000 790,312Between one and two years 200,363 393,381 593,744Between two and five years 421,203 732,393 1,153,596After five years 65,340 226,220 291,560

940,218 1,888,994 2,829,212

As at 31 March 2005, the Company has lease obligations amounting to RM1,514,872,000 (2004 :RM1,722,992,000) which are covered by interest bearing funds amounting to RM1,213,459,000 (2004 :RM1,066,974,000) placed with and payments made to financial institutions at the inception dates of therespective lease agreements under defeasance arrangements. The defeased lease obligations, together withthe related fund placements and payments, are therefore not included in these financial statements.

The Group has in operation 111 (2004 : 109) aircraft and 36 (2004 : 36) engines under operating leases. Ofthese, 27 (2004 : 31) aircraft relate to the borrowings assumed by the holding company which is included inthe Group's and the Company's contingent liabilities.

NOTES TO THE FINANCIAL STATEMENTSContigent Liabilities


The directors are of the opinion that the holding company, being a subsidiary of the MoF, will be able tomeet all payments to the Company in respect of the above liabilities as and when they fall due.

In 2000, Vantage Aviation Services Ltd. ("Vantage") filed a claim for TK832,161,000 (approximatelyRM48,598,000) against the Company for alleged wrongful termination of a General Sales Agency Agreementin Dhaka, Bangladesh. The Company has filed a defence to Vantage's claims, and at the same time filed acounter claim amounting to TK179,620,000 (approximately RM10,490,000) for breach of the agencyagreement. Similarly, in 2001 Shahjalal Aviation Systems Ltd. ("Shahjalal") filed a claim for TK2,670,000,000(approximately RM155,928,000) against the Company for alleged wrongful termination of a General SalesAgency Agreement in Dhaka, Bangladesh. The Company has filed a defence to Shahjalal's claims, and at thesame time filed a counter claim amounting to TK87,835,000 (approximately RM5,130,000) for breach of theagency agreement. These two cases are still pending. The directors are of the view that the cases are withoutmerit.

A writ of summons and statement of claim among others, seeking the divestment of 70% stake in LSG toGubahan Saujana Sdn. Bhd., LSG Asia GmbH and Fahim Capital Sdn. Bhd. to be declared void, was served onthe Company on 2 July 2004 as the fourth defendant in the High Court suit brought by the plaintiff, AdventGroup Management Sdn. Bhd. The directors are of the opinion that the suit filed against the Company iswithout merit.

On 16 September 2004, the Company received a notice that Advanced Cargo Logistic GmBH had initiatedproceedings against the Company at the ICC International Court of Arbitration in Paris, France seeking aclaim of Euro 62.6 million (approximately RM308.4 million) for breach of contract under a cargo handlingservices agreement. The Company is contesting the claim.

27.CONTINGENT ASSETS

As mentioned in the last report, the Company is entitled to a 80% share of the profit on disposal of certainaircraft unbundled to PMB under the Agreement for Aircraft and Finance Agreements Unbundling. Theprofit will be computed based on the excess of the value realised over the decayed cost of the aircraft. Thedecayed cost for each aircraft at future dates is stipulated by the WAU agreement. Based on publishedindustry price data, the Company's share of the profit on disposal if the applicable aircraft were to bedisposed of as at 31 March 2005 is RM747,536,000 (2004 : RM855,456,000).

28.SIGNIFICANT EVENT

On 4 October 2004, the Company entered into a termination agreement with Asset Global Network Sdn.Bhd. ("AGN") to terminate the conditional Reimbursement Agreement ("RA") dated 26 March 2003 for thereimbursement of Subang Complex A buildings. The deposit of RM1.0 million was refunded by the Companyand AGN was also reimbursed RM580,000 for the cost incurred, for the reimbursement of the Subang ComplexA buildings.

As a result, the Company and AGN will not proceed with the subsequent sub-lease of Subang Complex Abuildings, which was intended to take effect upon the completion of the RA.

NOTES TO THE FINANCIAL STATEMENTSContigent Liabilities (Contd.)


29. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group operates globally and generates revenue in various currencies. The Group's airline operationscarry certain financial and commodity risk, including the effects of changes in fuel prices, foreign currencyexchange rates, interest rates and the market value of its investments. The Group's overall riskmanagement approach is to minimise the effects of such volatility on its financial performance andreflect an inclination towards risk averse policies.

The Group's policy is not to trade in derivatives but to use these instruments to hedge against anticipatedexposures.

(b) Fuel Price Risk

The Group's earnings are affected by changes in the price of jet fuel. The Group manages this risk byusing instruments such as forward contracts, options, collars, caps and swaps. The Group's riskmanagement policy is to hedge up to 80% of the annual budget volume for 12 months and up to 50%of the volume for the tenure of such contracts up to 48 months.

(c) Interest Rate Risk

The Group's earnings are affected by changes in interest rates where they have an impact on interestincome and expense from cash, short term deposits and interest bearing financial assets and liabilitiesand operating lease payments.

The Group's policy on managing its interest rate risk is by maintaining a prudent mix of fixed andfloating rate investments and borrowings.

(d) Foreign Exchange Risk

The Group is exposed to the effects of foreign exchange rate fluctuations because of its foreign currencydenominated operating revenues and expenses. The Group's largest exposures are from United StatesDollar, Euro, Great Britain Pound, Japanese Yen, Singapore Dollar and Australian Dollar.

The Group seeks to reduce its foreign exchange exposure arising from transactions in various currenciesthrough a policy of matching, as far as possible, receipts and payments in each individual currency.Surpluses of convertible currencies are sold, either spot or forward, for Malaysian Ringgit and UnitedStates Dollar.

The Group's forward transactions in foreign currency are detailed in Note 25 (b).

(e) Liquidity Risk

The Group manages its liquidity risk by maintaining sufficient levels of cash or cash convertibleinvestments and available credit facilities to meet its working capital requirements.

Surplus funds are invested in high quality short term liquid instruments, usually bank deposits.

NOTES TO THE FINANCIAL STATEMENTSFinancial Instruments


(f) Credit Risk

Credit risk is the potential loss from a transaction in the event of default by the counterparty during theterm of the transaction or on settlement of the transaction. Credit exposure is measured as the cost toreplace existing transactions should a counterparty default. The Group has credit risk associated withtravel agents, industry settlement organisations and credit provided to direct customers. The Groupminimises this credit risk through the application of stringent credit policies and accreditation of travelagents through industry programs.

Other than the amount due from related companies, the Group does not have any significant exposureto any individual customer or counterparty nor does it have any major concentration of credit riskrelated to any financial instruments.

(g) Market Price Risk

As at 31 March 2005, the Group owned quoted investments amounting to RM1,377,000 (2004 :RM1,409,000), and the estimated market value of these quoted investments was RM30,946,000 (2004 :RM26,402,000).

The market risk associated with quoted investments is the potential loss resulting from a decrease inmarket prices.

(h) Fair Values

The aggregate net fair values of financial assets and financial liabilities which are not carried at fairvalue on the balance sheet of the Group and of the Company are represented as follows:

GROUP COMPANYCarrying Fair Carrying FairAmount Value Amount Value

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

Financial Assets

- 31 March 2005 13(c) 1,377 30,946 1,377 30,946- 31 March 2004 13(c) 1,409 26,402 1,377 26,294

NOTES TO THE FINANCIAL STATEMENTSFinancial Instruments (Contd.)


(h) Fair Values (Contd.)

The carrying amounts of all other financial assets and liabilities as at 31 March 2005 are not materiallydifferent from their fair values due to the relatively short term maturity of these financial instruments.

The nominal/notional amount and net fair value of financial instruments not recognised in the balancesheet as at 31 March 2005 and 31 March 2004 are:

GROUP AND COMPANYCarrying FairAmount Value

Note RM'000 RM'000

Contingent asset

- 31 March 2005 27 747,536 747,536- 31 March 2004 27 855,456 855,456

The method and assumption used to estimate the fair value of the contingent asset is determined byreference to the published industry price data of the aircraft.

As at 31 March 2005, the Group and the Company have entered into various fuel hedging transactionsfrom 1 April 2005 to 30 September 2007 in several lots totalling 5,445,000 (2004 : 2,715,000) barrels.The cumulative estimated proceeds from hedging of marked to market value on the existing fuel hedgingposition (from 1 April 2005 to 30 September 2007) stand at RM240,471,000 (2004 : RM37,546,000).

As at 31 March 2005, the Group and the Company have entered into interest rate forward contractswith the following notional amounts and maturities pertaining to USD obligations:

Notional Amount2005 2004

RM'000 RM'000

Within 1 year 259,667 -More than 1 year and less than 5 years 614,333 -5 years or more 665,000 -

1,539,000 -

The fixed interest rates relating to interest rate forward contracts at the balance sheet date vary from4.5% to 5.0% per annum.

The nominal/notional amount and net fair value of contingent liabilities (as disclosed in Note 26) arenot disclosed as it is not practicable to estimate the fair value of contingent liabilities reliably due tothe uncertainties of timing, costs and eventual outcome.

NOTES TO THE FINANCIAL STATEMENTSFinancial Instruments (Contd.)


30.SUBSIDIARIES

The subsidiaries, all of which are incorporated in Malaysia, are:

Effective InterestName of Company 2005 2004 Principal Activities

% %

Abacus Distribution Systems 80 80 Promotion, development, operation(Malaysia) Sdn. Bhd. and marketing of computerised

reservations systems and related services

Aerokleen Services Sdn. Bhd. 51 51 Provision of laundry and cleaning services

Malaysia Airlines Cargo 100 100 Air cargo operations, charter freighterSdn. Bhd. and all warehousing activities relating to

air cargo operations

MAS Catering (Sarawak) 60 60 Provision of catering andSdn. Bhd. cabin handling services

MAS Golden Boutiques 100 100 Retailing of inflight goodsSdn. Bhd. and boutique operations

MAS Golden Holidays Sdn. Bhd. 100 100 Tour and travel related operations

MAS Hotel & Boutiques 100 100 Provision of hotel andSdn. Bhd. boutique facilities

Pengangkutan Kargo Udara 100 100 Provision of trucking, clearanceMAS Sdn. Bhd. and warehousing services

Syarikat Pengangkutan Senai 100 100 Provision of coachSdn. Bhd. transportation services

Malaysia Airlines Capital (L) 100 100 Investment holdingLimited

Tiara Malaysia Airlines 100 100 Investment holding andSdn. Bhd. inactive

MAS Aerotechnologies 100 100 Ceased operationsSdn. Bhd.

Macnet CCN (M) Sdn. Bhd. 56.7 56.7 Ceased operations

Aircraft Engine Repair 100 100 Dormantand Overhaul (Malaysia)Sdn. Bhd.

Kelas Services Sdn. Bhd. 100 100 Dormant

MAS Academy Sdn. Bhd. 100 100 Dormant

MAS Properties Sdn. Bhd. 100 100 Dormant

MAS Wings of Gold Sdn. Bhd. 100 100 Dormant

MIR Technologies Sdn. Bhd. 100 100 Dormant

Sepang Berhad 100 100 Dormant

NOTES TO THE FINANCIAL STATEMENTSSubsidiaries


31.ASSOCIATED COMPANIES

The details of the associated companies are:

Name ofCompanies[Financial Country of Effective Interestyear end] Incorporation 2005 2004 Principal Activities

% %

Hamilton Malaysia 49 49 Repair and overhaul ofSunstrand selected aircraftCustomer environmental controlSupport systems, aircraftCentre (M) pneumatic componentsSdn. Bhd. and propeller system[31 December]

LSG Sky Malaysia 30 30 Catering relatedChefs-Brahim's services, cabin handlingSdn. Bhd. and cleaning services[31 December]

Pan Asia Hong Kong 23.5 23.5 Provision of aircraftPacific Aviation maintenance servicesServices Limited[31 March]

GE Engine Services Malaysia 30 30 Repair and overhaul ofMalaysia aircraft engineSdn. Bhd.[31 December]

Aerofine Meat Malaysia 49 49 Ceased operationsSdn. Bhd.[31 March]

Asian Frequent Singapore 33.3 33.3 Ceased operations andFlyer under members’ voluntaryPte. Ltd. liquidation[31 December]

Honeywell Aerospace Malaysia 30 30 Repairing, servicing,Services (M) overhauling and testing ofSdn. Bhd. aircraft auxiliary power units[31 December]

Taj Madras India 20 20 Inflight catering of foodFlight Kitchen and beveragesLimited[31 March]

Signforce Sdn. Bhd. Malaysia - 25 Hotel planning assistance[31 December] and management services

32.CURRENCY

All amounts are stated in Ringgit Malaysia, unless otherwise stated.

NOTES TO THE FINANCIAL STATEMENTSAssociated Companies


STATEMENT OF SHAREHOLDINGS

Share Capital

Authorised Share Capital : 109,000,000,001Issued and Fully Paid-up Capital : 1,253,243,866Class of Shares : 1,253,243,865 ordinary shares of RM1.00 each; and

one (1) special rights redeemable preference share ofRM1.00.

Voting Rights : One vote per ordinary share.The Special Share has no voting right other than thosereferred to in note 20(a) of the financial statements.

ANALYSIS OF SHAREHOLDINGS

A. Distribution of Shareholdings

Category Shareholders % Shareholdings %

Less than 100 117 1.07 1,884 0.00100 to 1,000 5,062 46.47 4,962,409 0.401,001 to 10,000 5,019 46.08 17,634,711 1.4110,001 to 100,000 540 4.96 16,216,960 1.29100,001 to less than 5% of issued shares 151 1.39 139,851,769 11.165% and above of issued shares 3 0.03 1,074,576,132 85.74

Total 10,892 100 1,253,243,865 100.00

B. List of Thirty (30) Largest Shareholders

No. Name No. of shares %

1. Penerbangan Malaysia Berhad 868,957,232 69.342. Employees Provident Fund Board 134,320,600 10.723. Amanah Raya Nominees (Tempatan) Sdn. Bhd.

<Skim Amanah Saham Bumiputera> 71,298,300 5.694. State Financial Secretary Sarawak 34,000,000 2.715. Warisan Harta Sabah Sdn. Bhd. 30,042,000 2.406. Cartaban Nominees (Tempatan) Sdn. Bhd.

<Amanah SSCM Nominees (Tempatan) Sdn. Bhd.for Employees Provident Fund Board (JF404) > 5,983,700 0.48

7. Amanah Raya Nominees (Tempatan) Sdn. Bhd.<Sekim Amanah Saham Nasional> 3,590,000 0.29

8. Universal Trustee (Malaysia) Berhad<Mayban Unit Trust Fund> 3,000,000 0.24

9. RHB Nominees (Tempatan) Sdn. Bhd.<RHB Asset Management Sdn. Bhd. forKumpulan Wang Simpanan Pekerja> 2,858,300 0.23

10. Cartaban Nominees (Asing) Sdn. Bhd.<Investors Bank and Trust Company for Ishares, Inc. > 1,839,600 0.15

11. Cimsec Nominees (Tempatan) Sdn. Bhd.<CIMB-Principal Asset Management Berhad for Employees Provident Fund Board> 1,754,000 0.14

12. Malaysia Nominees (Tempatan) Sendirian Berhad<Great Eastern Life Assurance (Malaysia) Berhad (Par1)> 1,686,200 0.13

statistics on shareholdingsas at 18 July 2005

219


STATISTICS ON SHAREHOLDINGS

No. Name No. of shares %

13. Bank Simpanan Nasional 1,597,000 0.1314. Bank Simpanan Nasional 1,597,000 0.1315. Bank Simpanan Nasional 1,597,000 0.1316. Bank Simpanan Nasional 1,597,000 0.1317. Citicorp Nominees (Asing) Sdn. Bhd.

<American International Assurance Company Limited (P Core)> 1,514,200 0.1218. Malaysian Assurance Alliance Berhad

as beneficial owner 1,345,600 0.1119. Citicorp Nominees (Tempatan) Sdn. Bhd.

<ING Insurance Berhad (INV-IL PAR) 1,242,000 0.1020. Amanah Raya Nominees (Tempatan) Sdn. Bhd.

<Amanah Saham Bank Simpanan Nasional> 1,163,100 0.0921. Citicorp Nominees (Asing) Sdn. Bhd.

<CBNY for DFA Emerging Markets Series> 1,090,600 0.0922. HSBC Nominees (Tempatan) Sdn. Bhd

<Nomura Asset Mgmt SG for Employees Provident Fund> 1,049,200 0.0823. Citicorp Nominees (Asing) Sdn. Bhd.

<Mellon Bank, N.A. For Commonwealth of PennsylvaniaPublic School Employees Retirement System > 977,000 0.08

24. Amanah Raya Nominees (Tempatan) Sdn. Bhd.<Public Growth Fund> 976,100 0.08

25. ECM Libra Securities Nominees (Tempatan) Sdn. Bhd.<Petroliam Nasional Berhad> 968,000 0.08

26. Universal Trustee (Malaysia) Berhad<Mayban Balanced Trust Fund> 950,000 0.08

27. HSBC Nominees (Asing) Sdn. Bhd.<AAGC for Asian Tigers Equity Fund > 943,900 0.08

28. Cartaban Nominees (Asing) Sdn. Bhd.<Investors Bank and Trust Company for

Global Equity Fund (Marathon GBL FD) > 811,900 0.0629. Cartaban Nominees (Asing) Sdn. Bhd.

<Investors Bank and Trust Company forMSCI Equity Index Fund B Malaysia (Barclays G Inv) > 775,668 0.06

30. Manulife Insurance (Malaysia) Berhad 773,600 0.06

TOTAL 1,180,298,800 94.18

C. Substantial Shareholders (as shown in the register of substantial shareholders)

Name of Substantial Shareholders No. of sharesheld % Notes Direct In direct

1. Penerbangan Malaysia Berhad 868,957,232 - 69.342. Employees Provident Fund Board 147,008,900 - 11.73 A

Notes:A The following are the registered holders of the 147,008,900 ordinary shares:

Name of registered holder No. of shares held %

Employees Provident Fund Board 135,393,200 10.80Nomura Asset Management 1,044,200 0.08Amanah SSCM Asset Management Bhd. 5,983,700 0.48Commerce Asset Fund Managers Sdn. Bhd. 1,754,000 0.14Rashid Hussain Asset Management Sdn. Bhd. 2,833,800 0.23


D. Directors’ Shareholding(as shown in the register of directors’ shareholding)

Name of Directors No. of shares held % Direct Indirect

1. Dato’ Dr. Mohd Munir bin Abdul Majid - - -2. Dato’ N. Sadasivan a/l N.N. Pillay - - -3. Dato’ Ahmad Fuaad bin Mohd. Dahalan - - -4. Dato’ Izzuddin bin Dali - - -5. Dato’ Zaharaah binti Shaari - - -6. Keong Choon Keat - - -7. Martin Gilbert Barrow - - -8. Dato’ Mohamed Azman bin Yahya - - -9. Dato’ Mohd Annuar bin Zaini - - -

10. Datuk Abdillah @ Abdullah bin Hassan @ S. Hassan - - -11. Datuk Amar Haji Abdul Aziz bin Haji Husain - - -12. Tengku Azmil Zahruddin bin Raja Abdul Aziz - - -13. Datu Haji Salleh bin Haji Sulaiman - - -

(Alternate Director toDatuk Amar Haji Abdul Aziz bin Haji Hussain)

14. Encik Abdul Rahman Bin Abdul Ghani - - -(Alternate Director toDatuk Abdillah @ Abdullah bin Hassan @ S Hassan)

STATISTICS ON SHAREHOLDINGS/SHARE PRICES AND TRADING VOLUME

Month Share Price Share Price VolumeHighest Lowest (‘000)

(RM) (RM)

Apr 04 5.40 4.94 6,919,400May 04 4.80 4.52 11,439,500June 04 4.76 4.60 12,653,700July 04 4.80 4.74 10,310,400Aug 04 4.72 4.08 7,738,800Sept 04 4.38 3.96 3,348,500Oct 04 4.00 3.68 3,358,500Nov 04 4.50 3.76 6,707,100Dec 04 4.70 4.42 3,533,200Jan 05 4.56 4.26 3,567,300Feb 05 4.48 3.80 4,310,800Mar 05 3.92 3.76 2,659,000

Share Prices and Trading Volumesbetween 1 April 2004 and 31 March 2005

HIGHEST (RM) LOWEST (RM) VOLUME (‘000)


Location Description Tenure Approx. Approx. Net book Net bookarea age value value as at

in sq feet (years) as at 31.3.200531.3.2005 (RM)(RM’000)

1 Federal 35 storey office building MAS, Leasehold 99 Land - 75,036 20 41,649 41,649,326Territory of Lot 1194, Section 57, years Built-up - 679,994 41,502 41,501,889Kuala Lumpur Jalan Sultan Ismail, expiring

50250 Kuala Lumpur 07 Feb 2081

2 Federal Residential building Leasehold Land - 3,440 20 137 136,939Territory of Lot 24, Taman Jasa, 999 years Built up - 2,062Labuan off Jalan Tun Mustapha, expiring

87000 W.P. Labuan 31 Dec 2867

3 State of 36 office and workshop Occupation of Land - 4,617,360 6-33 304,490 304,490,133Selangor buildings forming MAS federal land Built up - 2,284,309

office complex at Sultan pendingAbdul Aziz Shah Airport, formalisation47200 Subang of a leaseand 1 Pedestrian Bridge

Industrial land at PT 44562 Leasehold Land - 10.972 acres 1 16,277 16,276,622Mkm Sg Buloh, 99 years47200 Subang, expiringSelangor 29 Jan 2102

Computer centre, Freehold Land - 358,869 11 98,496 98,495,977hostel and training Built up - 732,010school at No 2, Jalan SS7/13,Kelana Jaya,47301 Petaling Jaya

4 State of Penang 13 shoplots Units Leasehold 99 Built up - 8,690 28 1,352 1,352,427A1.04-A1.07 & yearsA1.11-A1.14 level 1; expiring 2075A4.05-A4.08 & B114.03 level 4,Kompleks KOMTAR,Penang Road, George Town,10000 Penang

Residential building Freehold Land - 6,234 24 130 130,227No 3, Built up - 3,085Changkat Minden Lorong 8,11700 Penang

8 buildings at Yearly Built up - 331,154 25 31,933 31,932,677Penang International tenancyAirport,11900 Bayan Lepas, Penang

5 State of Perak 4 shoplots Freehold Built up - 4,102 24 473 473,397Lot G-01and 1-06, 1-07 & 1-08,Bangunan Sri Kinta,Jalan Sultan Idris Shah,30000 Ipoh

list of company properties

as at 31 March 2005

222




6 State of Pahang Vacant land Leasehold Land - 52,816 24 44 44,091Lot 51, Taman Bukit Kayangan, 60 years49000 Bukit Fraser, expiringPahang 04 Dec 2041

2 units condominium Leasehold 99 Built up - 5,226 19 150 150,361K67 & B16 Pine Resort, years 160 160,08249000 Bukit Fraser, expiringPahang 23 May 2082

Residential building Freehold Land - 4,400 20 93 92,911No 4, Lorong 49, Built up - 2,286Taman Tas Makhota,Bukit Sekilau, 25200 Kuantan

7 State of 1 engineering workshop Yearly Built up - 4,500 20 0 0Terengganu at Sultan Mahmud Airport, tenancy

21300 Kuala Terengganu

8 State of Kedah 1 engineering building at Yearly Land - 2,065 13 133 133,053Sultan Abdul Halim Airport, tenancy Built up - 5,95006200 Alor Setar

Residential building Freehold Land - 2,519 17 71 71,238No 45, Taman Sri Negeri Built up - 2,324Jalan Penarak,07000 Kuah, Langkawi

1 cargo shed at Langkawi Yearly Built up - 1,632 10 5 4,999International Airport, tenancy07100 Padang Matsirat,Langkawi

Office lot Leasehold 99 Built up - 3,210 15 390 390,350No 74, Kompleks Alor Setar, yearsJalan Lebuhraya Darul Aman, expiring 208805100 Alor Setar

Residential building Freehold Land - 6,663 12 235 234,782No 2630, Built up - 3,791Jalan Syed Sheh Shahbuddin,Taman Lumba Kuda,05250 Alor Setar

9 State of Johor Residential building Freehold Land - 4,241 24 85 85,313No 34, Jalan Sutera 5, Built up - 2,064Taman Sentosa, 80150 Johor Bahru

1 engineering workshop at 3 yearly Land - 16,000 13 469 469,008Sultan Ismail Airport, tenancy Built up - 6,314 81250 Senai, Johor Bahru expiring 2007

(renewable)

LIST OF COMPANY PROPERTIES


1 cargo building at 3 yearly Built up - 10,911 12 9 8,700Sultan Ismail Airport, tenancy81250 Senai, Johor Bahru expiring 2007

(renewable)

10 State of Negeri 5 units condominiums Leasehold 99 Built up - 5,657 17 604 603,593Sembilan A-6-10, 1-7-5, 1-5-3, years

A-5-5, A-4-2 expiring 2086Tanjung Tuan Resort,5th mile Jln Pantai,71050, Port Dickson,Negeri Sembilan

11 State of Residential building Leasehold 99 Land - 8,383 17 112 112,078Kelantan Lot 1791, years Built up - 2,595

Taman Sari off Jalan Hospital, expiring14800 Kota Bharu 06 Mar 2088

Office lots , Leasehold Built up - 4,350 15 694 694,375Ground Floor Wisma Yakin, 99 yearsJalan Gajah Mati, expiring 208815050 Kota Bharu

12 State of Sabah Residential building Leasehold Land - 7,220 22 198 198,414No 44, Taman Luyang Phase 8, 999 years Built up - 3,31688300 Kota Kinabalu expiring

19 Mar 2922

2 office lots Leasehold Built up - 3,614 20 993 993,075G030 & G038 999 yearsGrd floor expiring 2983Kompleks Karamunsing,Jalan Tuaran/ Selatan,88400 Kota Kinabalu

1 office lot Leasehold Built up - 2,472 20 336 335,765CF02, 10th Floor Block C 999 yearsKompleks Karamunsing expiring 2983Jalan Tuaran/ Selatan,88400 Kota Kinabalu

Hangar & Cargo and Leasehold 60 Hangar/Cargo 15&24 8,576 8,576,320Administration buildings and 20 years Buildingat Kota Kinabalu expiring 2044 Land - 152,460International Airport, and 2006 Built up - 118,20788740 Kota Kinabalu respectively Admin Building

Land - 16,000Built up - 31,104

Residential building on Lot Leasehold Land - 82,204 13 397 397,269CL105241807 km 2.5 999 years Built up - 3,587 161 160,620Jalan Datuk Abu Bakar, expiring91000 Titingan, Tawau 06 Mar 2904

1 Hangar/Cargo building at Yearly Built up - 16,625 3 161 160,620Tawau Airport tenancy91000 Tawau





1 Engineering / Cargo Yearly Built up - 1,675 25 2,688 2,688,424building at tenancyLahad Datu Airport,91100 Lahad Datu

Residential building Leasehold Land - 4,450 14 168 167,922No. 144, Taman Fajar 999 years Built up - 1,80091100 Lahad Datu expiring

2894

13 State of 5 storey office building Leasehold 60 Land - 5,397 19 638 638,280Sarawak Lot 215, years Built up - 38,478 2,675 2,675,397

Jalan Song Thian Cheok, expiring93100 Kuching 19 Feb 2041

Residential building Leasehold 60 Land - 5,758 22 117 117,324No 339, Fortune Garden, years Built up - 3,270Lorong Stampin Timur 5, expiring93350 Kuching 19 Sep 2042

Catering and workshop 3 yearly Land - 67,662 15-23 783 783,288building at tenancy Built up - 25,171Kuching International Airport, (renewable)93250 Kuching

1 cargo warehouse / 3 yearly Land- 40,864 19 910 910,394engineering building tenancy Built up - 19,588at Miri Airport, (renewable)98000 Miri

4 storey offce building Leasehold 60 Land - 1,800 25 297 297,031Lot 239, Beautiful Jade Centre, years Built up - 5,34098000 Miri expiring

27 Jun 2039

Residential building Leasehold 60 Land - 5,478 21 130 130,285No 126, years Built up - 3,252Lorong Hilltop Utama 10, expiringHilltop Garden, 07 Sep 204398000 Miri

Residential building Leasehold 60 Land - 4,049 20 95 95,378830A, Countrywood Estate years Built up - 1,700off Jalan Hussein Onn, expiring97000 Bintulu 20 Dec 2044

4 storey office building Freehold Land - 1,377 19 423 423,131No 129, Taman Sri Dagang, Built up - 5,533Jalan Mesjid,97000 Bintulu

Cargo/Engineering Building 3 yearly Land - 52,474 1 2,472 2,472,265Bintulu Airport, tenancyJalan Bintulu, (renewable)97000 Bintulu





4 storey office building Leasehold 60 Land - 1,199 21 308 307,860No 61, Jalan Tuanku Osman, years Built up - 5,20096000 Sibu expiring

26 Oct 2043

Residential building Leasehold 60 Land - 4,583 22 64 64,032No 16B, Jalan Kang Kong, years Built up - 2,24296000 Sibu expiring

24 Sep 2042

1 Cargo / Engineering Yearly Land - 41,592 11 1,077 1,077,116building at Sibu Airport, tenancy Built up - 10,92623km Sibu/Durin Road96000 Sibu

14 Singapore Office lots at Leasehold 99 Built up - 15,241 25 4,835 4,834,769190, Clemenceau Avenue yearsNo.0209-11, expiringSingapore Shopping Center, 30 Apr 2047Singapore239924

1 unit apartment Freehold Built up - 2,238 21 451 450,873Unit 5-01 Block 3,Hawaii Tower,No 77 Meyer Road,Singapore 437903

15 Thailand 1 condominium unit at Freehold Built up - 2,713 24 140 140,370No 3 Block B, Tai Ping Tower ,Ekamai Road, 10110Bangkok

16 The Phillipines 1 unit apartment Freehold Built up - 2,260 31 79 79,455Unit 11-D,The Makati Tuscany Condo,Ayala Avenue, Makati City,1226, Manila

1 office lot Freehold Built up - 3,240 27 133 133,498unit F, ground floor,Legaspi Tower 300,Vito Cruz Street, Malate,1004, Metro Manila

17 Hong Kong 1 unit apartment Leasehold 75 Built up - 1,874 26 0 0No 58-60, yearsSakura Court Flat A, expiring5th floor, Kennedy Road, 20 Jun 2070Hong Kong





18 Australia Residential building, Freehold Land - 8,086 27 160 159,64740, Edgewater Road, Built up - 4,333Manning, PerthWA 6152

5 storey office building Freehold Land - 2,422 14 5,380 5,380,38856, William Street, Built up - 16,824Perth WA 6000

10 storey office building Freehold Built up - 35,000 12 13,816 13,815,86716 Spring StreetSydney, N.S.W. 2000

19 England 7 storey office building Freehold Land 29,977 9 31,305 31,305,450No 247-249, Built up - 24,169Cromwell Road, LondonSW5 9GA

Residential apartment Freehold Built up - 3,300 8 5,366 5,365,862No 12 St Mary’s Place,Kensington Green,Marloes Road,London W8

21 The Netherlands Office building Freehold Land - 8,116 14 5,787 5,787,097Westeringchans 24A 1017-SG Built up - 5,602Amsterdam

22 China 1 unit apartment Leasehold 70 Built up - 1,669 8 532 532,446Unit C703A, Roman Gardens, yearsNo.18, Huixin West Street, expiringChaoyang District 27 Aug 2063Beijing, Postcode 100029

1 unit apartment Leasehold 70 Built up - 1,669 8 532 532,446Unit C1403A, Roman Garden, yearsNo.18, Huixin West Street, expiringChaoyang District 27 Aug 2063Beijing, Postcode 100029

631,722,306





Capacity tonne-km (ctkm)Capacity production (in tonnes)x distance flown (in km)

Load tonne-km (ltkm)Load carried (in tonnes)x distance flown (in km)

Overall factorLoad tonne-km expressed aspercentage of capacity tonne-km

Available seat-km (skm)Number of available seatsx distance flown (in km)

Revenue passenger-km (pkm)Number of passengers carriedx distance flown (in km)

Passenger load factorRevenue passenger-km expressedas a percentage of available seat-km

Cargo capacity tonne-kmCargo capacity production (in tonnes)x distance flown (in km)

Cargo load tonne-kmCargo load carried (in tonnes)x distance flown (in km)

Cargo load factorCargo load tonne-km expressed as apercentage of cargo capacity tonne-km

International serviceDefined as a service with the departureor arrival in any country other thanMalaysia. If a domestic sector formsan integral part of an internationalservice, this is considered as internationaleg Kuala Lumpur-Kuching-Perth

National serviceDefined as a service originating andterminating within Malaysia

Geographical Route RegionDefined as services within a particularroute region with services originatingfrom one point in Malaysia to its lastdestination pointeg Kuala Lumpur-Taipei-Los Angeles

glossary

228


MALAYSIAN AIRLINE SYSTEM BERHAD(Company No. 10601-W)

(Incorporated in Malaysia)

FORM OF PROXYShareholding represented by proxy

Shareholder’s CDS Account No.

I/We, ________________________________________________ NRIC No./Co. No __________________________________[FULL NAME IN CAPITAL LETTERS]

of ______________________________________________________________________________________________________[ADDRESS]

being a member(s) of MALAYSIAN AIRLINE SYSTEM BERHAD (“the Company”), hereby appoint

_____________________________________________________ NRIC No. _________________________________________[FULL NAME]

of ______________________________________________________________________________________________________[FULL ADDRESS]

or failing him/her, ______________________________________ NRIC No. _____________________________________ [FULL NAME]

of ______________________________________________________________________________________________________ [FULL ADDRESS]

or failing him/her, the CHAIRMAN OF THE MEETING as my/our proxy to vote for me/us on my/our behalf at theThirty Fourth Annual General Meeting of the Company to be held at Nirwana Ballroom 1, Lower Lobby, CrownePlaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Monday, 19 September, 2005 at 10.00a.m. and at any adjournment thereof in the manner indicated below:-

Please indicate with an “X” in the space below how you wish your votes to be cast. If no specific direction as tovoting is given, the proxy will vote or abstain at his/her discretion.

Resolutions For Against

Resolution 1 Adoption of Audited Accounts for the financial year ended31 March, 2005 and the Reports of the Directors and Auditors.

Resolution 2 Declaration of a final tax exempt dividend of 2.5 sen per shareResolution 3 Approval of Directors’ fees.Resolution 4 Re-election of Dato’ Mohamed Azman bin Yahya as Director.Resolution 5 Re-election of Dato’ N. Sadasivan a/l N.N. Pillay as Director.Resolution 6 Re-election of Datuk Abdillah @ Abdullah bin Hassan

@ S Hassan as Director.Resolution 7 Re-election of Dato’ Izzuddin bin Dali as Director.Resolution 8 Re-election of Dato’ Mohd Annuar bin Zaini as Director.Resolution 9 Re-election of Dato’ Zaharaah binti Shaari as Director.Resolution 10 Re-appointment of Messrs Ernst & Young as Auditors and to

authorise the Directors to fix the Auditors’ remuneration.Resolution 11 Authority under Section 132D of the Companies Act, 1965 for

Directors to issue shares.

As witness my/our hands this ___________ day of__________ , 2005No. of ordinary shares held ____________ _____________________________________

Signature of Member/Common SealNotes:

1. A member of the Company entitled to attend and vote at the Meeting isentitled to appoint a proxy to attend and vote in his stead. A proxy may butneed not be a member of the Company and a member may appoint any personto be his proxy/proxies and the provisions of Section 149(1)(b) of the CompaniesAct, 1965 shall not apply to the Company.

2. In the case of a corporate member, the instrument appointing a proxy shall beunder its Common Seal or under the hand of its officers or attorney, dulyauthorised in that behalf.

3. A holder may appoint more than two proxies to attend the Meeting. Where amember appoints two or more proxies, he shall specify the proportions of hisshare-holding to be represented by each proxy.

4. The right of Foreigners to vote in respect of their deposited securities is subjectto Section 41 (1) (e) and Section 41 (2) of the Securities Industry (CentralDepositories) Act, 1991 and the Securities Industry (Central Depositories)(Foreign Ownership) Regulations, 1996. The position of such Depositors in

this regard will be determined based on the General Meeting Record ofDepositors. Such Depositors whose shares exceed the Company’s foreignshareholding limit of 45% as at the date of the General Meeting Record ofDepositors may attend the above Meeting but are not entitled to vote.Consequently, a proxy appointed by such Depositor who is not entitled tovote will also not be entitled to vote at the above Meeting.

5. The instrument appointing a proxy must be deposited at Symphony ShareRegistrars Sdn. Bhd., Level 26 Menara Multi Purpose, Capital Square,No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than 48 hoursbefore the time for holding the Meeting or at any adjournment thereof.

6. Shareholders’ attention is hereby drawn to the Listing Requirements of theBursa Malaysia Securities Berhad, which allows a member of the Companywho is an authorised nominee as defined under the Securities Industry (CentralDepositories) Act, 1991, to appoint at least one (1) proxy in respect of eachsecurities account it holds with ordinary shares of the Company standing tothe credit of the said securities account.


The Share RegistrarSymphony Share Registrars Sdn. Bhd.,Level 26 Menara Multi Purpose,Capital Square, No. 8 Jalan Munshi Abdullah,50100 Kuala Lumpur,Malaysia.

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REQUEST FORM

To : Malaysian Airline System Berhad

Please send me/us a copy of the 2004/2005 Anual Report in Bahasa Malaysia

Name :__________________________________________________________________________________________

Address :________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Signature of Shareholder:

Date :


MALAYSIAN AIRLINE SYSTEM BERHAD (10601-W)

Tingkat 33, Bangunan MASJalan Sultan Ismail50250 Kuala LumpurMalaysia

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