KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

Notes In Compliance with FRS 134 2004 

A1.	Accounting Policies 
		 
The quarterly financial statement have been prepared in accordance with FRS 1342004 (formerly known as MASB 26) - Interim Financial Reporting and Paragraph 9.22 of the Bursa Malaysia Listing Requirements.

The same accounting policies and methods of computation are followed in the quarterly financial statements as compared with the annual financial statements for the year ended 31 March 2006 except for the adoption of the following new/revised Financial Reporting Standards (FRS) effective for   financial statement of the Company for the financial year ended 31 March 2007.  

FRS 2			Share-based payment
FRS 3 			Business combinations
FRS 5			Non-current assets held for sale and discontinued operations
FRS 101		Presentation of financial statements
FRS 102		Inventories
FRS 108		Accounting policies, changes in accounting estimates and errors
FRS 110		Events after the balance sheet date
FRS 116		Property, plant and equipment
FRS 121		The effects of changes in foreign exchange rates
FRS 127		Consolidated and separate financial statements
FRS 128		Investments in associates
FRS 131		Interest in joint ventures
FRS 132		Financial instruments: disclosure and presentation
FRS 133		Earnings per share
FRS 136		Impairment of assets
FRS 138		Intangible assets 
	FRS 140 		Investment property

		The Group has elected for early adoption of the following FRSs which were in issue but effective for			financial year beginning on or after 1 October 2006:-

		FRS 117		Leases
		FRS 124		Related party disclosures
		FRS 139		Financial instruments: Recognition and measurement

The adoption of the FRSs does not have significant financial impact on the Group except for the following:

(a)	FRS 3 : Business Combination and FRS 138 : Intangible assets

The adoption of FRS 3 and FRS 138 has resulted in a change in the accounting policy relating to Goodwill and Negative Goodwill (“Reserve on Consolidation”).

The Group previously amortised Goodwill and Reserve on Consolidation arising from business combination on a straight line basis over 9 to 25 years or the expected useful life, whichever is the shorter.

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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

A1.	Accounting Policies (Cont’d)

(a)	FRS 3 : Business Combination and FRS 138 : Intangible assets (Cont’d)

The adoption of FRS 3 has resulted in discontinuation of amortisation of Goodwill arising from business combination.  Accordingly, the Group has considered any impairment to the carrying value of Goodwill in accordance with FRS 136 and consequently found that impairment is not required at the reporting date.

The adoption of FRS 3 on the Reserve on Consolidation has resulted in a change in accounting policy to recognise Reserve on Consolidation in the Consolidated Income Statement immediately for business combination effected from 1 April 2006.  The change in accounting policy for Reserve on Consolidation is applied prospectively.

Accordingly, the carrying amount of Goodwill as at 1 April 2006 ceased to be amortised and subject to impairment test annually.  This has resulted in the amortisation charge to be reduced by RM 0.6 million in the current quarter.  Furthermore, the balance of RM 3.6 million of Reserve on Consolidation as at 1 April 2006 was transferred to accumulated loss resulting in a corresponding reduction in accumulated loss.

(b)	FRS 117 : Leases

(i) 	The adoption of FRS 117 has resulted in a retrospective change in accounting policy relating to the classification of leasehold land.  The carrying value of leasehold land represents prepaid lease payments and are amortised on a straight-line basis over the lease term.  Prior to 31 March 2006, leasehold land was classified as property, plant and equipment and capital work-in-progress and was stated at cost or valuation less accumulated depreciation and impairment loss.  

Upon the adoption of FRS 117, the unamortised cost and revalued amount of leasehold land are retained as the surrogate carrying amount of prepaid lease payments as allowed by the transitional provisions of FRS 117.    

(ii)		The reclassification of the amortised leasehold land as long term prepaid lease payments has been accounted for and disclosed in Balance Sheet.  The amortisation of the prepaid lease payments for the current quarter and financial year-to-date amounted to RM 0.3 million.  

As a result of the adoption of FRS 117, comparative amounts as 30 June 2006 have been reclassified as follows:

	As previously
  stated
RM’000	Effects of reclassification RM’000	
As restated
RM’000	

Property, Plant and Equipment	
351,449	
(40,534)	
310,915	

Capital Work-in Progress	
418,216	
(368,442)	
49,774	

Long term Prepaid Leases 
(net of amortisation)	              
                   
                -	
             
408,645	

408,645	

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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

A1.	Accounting Policies (Cont’d)

(c)	 	FRS 101 : Presentation of financial statements

The current period’s presentation of the Group’s financial statements is based on the requirements of FRS 101 which affected the presentation of minority interest and certain disclosures in the Balance Sheet, Income Statement, Statement of Changes in Equity and other disclosures.

The adoption of FRS 101 has no financial impact to the Group save for changes in certain presentation and disclosures.

(d)	All changes in the accounting policies have been made in accordance with the transitional provision of the standards, and are applied prospectively.  No retrospective changes, except for the restatements above, have resulted from the adoption of the new/revised accounting standards.

A2.	Audit report of previous annual financial report

The audit report of the immediate preceding annual financial statements for the year ended 31 March 2006 was not qualified.

A3.	Seasonal or Cyclical Factors

The Group’s operations for the current quarter and the financial year-to-date were not affected significantly by any seasonal or cyclical factors.

A4.	Unusual items

There were no items affecting assets, liabilities, equities, net income or cash flows that are unusual because of their nature, size or incidence during the current quarter and the financial year-to-date.	

A5.	Nature and Amount of Changes in Estimates

There were no changes in the estimates of amounts reported in previous financial years which have a material effect in the current quarter and the financial year-to-date except as stated in Note A1.

A6.	Issuance and Repayment of Debt and Equity Securities

There is no issuance and repayment of debts and equity securities, share buy-backs, share cancellations, shares held as treasury shares and resale of treasury shares for the current quarter and the financial year-to-date.

A7.	Dividend Paid
	
	There were no dividends paid during the current quarter and the financial year-to-date.

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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

A8.	Segmental Information
	
Segmental information is presented in respect of the Group’s business and geographical segments.

Segment revenue and results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 

The main business segments of the Group comprise the following:

a)	Property development		- Property development and construction of properties.
b)	Leisure & tourism			- Resorts, golf club and travel agency services.	    	 
c)	Trading						- Trading of wood products.
d)	Investment holdings		- Investment holding, venture capital and management services.
e)	Others						- Not of a sufficient size to be disclosed separately.

		Segment by activity

Current Quarter/ Financial year- to-date 30/06/2006	
Property
Development
RM’000	
Leisure &
Tourism
RM’000	

  Trading
  RM’000	Investment
Holdings
and Others
   RM’000	

Consolidated
RM’000	
Revenue						
External sales	        7,124	      17,165	      4,924	         212	       29,425	
						
Results						
Segment profit / (Loss)	            518	        3,378   	      (131)	     (1,217)	        2,548	
Depreciation/Amortisation	          (557)	    ( 2,613)    	        (23)   	          (90)     	     (3,283)	
Segment result	            (39)	           765	       (154)	     (1,307)	          (735)      	
Interest expenses	      			                              	       (6,344)	
Share of associated companies results 				           102	
Taxation					          (196)	
Loss after taxation					     (7,173)	

Segment by geographical 

Current Quarter/ Financial year- to date 30/06/06 	
Malaysia
RM’000	
Singapore
RM’000	
Others
RM’000	
Consolidated
RM’000	
					
Revenue					
External sales	      24,501    	        4,924	            -	        29,425	

A9.	Valuations of property, plant and equipment

The valuations of property, plant and equipment have been brought forward without amendment from the previous annual financial statements.

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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

A10.	Material subsequent events

There were no material subsequent events from 30 June 2006 to 29 August 2006 (being the latest practicable date which is not earlier than 7 days from the date of issue of this Quarterly Report) that have not been reflected in the financial statements for the current quarter and the financial year-to-date.

A11.	Changes in the Composition of the Group

There were no material changes in the composition of the Group during the current quarter and the financial year-to-date.

A12.	Changes in contingent liabilities or contingent assets
	
Other than corporate guarantees extended by the Company in support of banking facilities of its subsidiaries, there were no contingent liabilities or contingent assets as at 30 June 2006 (31 March 2006: nil). 

Notes in compliance with BMSB Listing Requirements 

B1. 	Review of the Performance of the Company and Its Principal Subsidiaries

The Group recorded a revenue of RM 29.4 million for the financial year-to-date ended 30 June 2006 as compared to RM 34.4 million for the preceding year corresponding period ended 30 June 2005, representing a decrease of 15%.  The reduction was mainly due to the slow down in domestic and regional travel resulting from the FIFA World Cup wherein many refrained from traveling.  This resulted in a drop in the business volume of the leisure and tourism segment of the Group.  Furthermore, revenue from the Group’s construction and property development activities dropped due to the completion and handover of various phases in the previous year.  The Group’s timber trading business also dropped due to a slow down in timber supplies.    

For the current financial year-to-date ended 30 June 2006, the Group achieved a lower pre-tax loss of RM 7 million compared to RM 8.1 million in same period last year was mainly due to a reduction of finance cost in the current quarter but partially offset by lower operating profit due to the reduction in business volume explained above. 

In the opinion of the Directors, the results for the current quarter and financial year-to-date have not been affected by any transaction or event of a material and unusual nature which has arisen between 30 June 2006 and 29 August 2006 (the latest practicable date which is not more than 7 days from the date of this Quarterly Report).

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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

B2.	Material Changes in the Quarterly Results Compared to the Results of the Preceding
		Quarter

For the current financial quarter, the Group registered a pre-tax loss of RM 7 million as compared to pre-tax profit of RM 3.8 million in the immediate preceding quarter, representing the profit reduction of RM 10.8 million.  This was mainly due to high level of construction works billed in respect of the Group’s property development activities in the preceding quarter.  A large proportion of the work done within this reporting quarter will be billed and recognised in next quarter of the financial year.

B3.	Current Year Prospects

The Group continues to experience growth in the leisure & tourism and property development segments.  Hence, the Group is optimistic that barring any unforeseen circumstances, the Group would continue to benefit from the performance of these two segments. 

B4.	Profit Forecast / Profit Guarantee 
	
Not applicable in this Quarterly Report.

B5.	Taxation

The breakdown of tax charge for the current quarter and financial year-to-date ended 30 June
2006 are as follows:

Tax Charge	Current Quarter
    RM’000	Current Year-to-date  RM’000	
Current quarter / year provision	       (196)    	                 (196)           	
Over provision in previous year/quarter	                    -	                      -	
Transfer from deferred taxation	                    -	                      -	

Total	 -----------
      (196)	            ------------
                 (196)              	
																  	       ======= 					=======

The provision of taxation generated was mainly due to certain expenses being disallowed for taxation purpose and insufficient group relief available for losses incurred by certain subsidiaries to be set off against the taxable profits of other subsidiaries. 	  

B6.	Profit/ (Loss) on Sale of Unquoted Investments and/or Properties

There was no sale of unquoted investments and properties for the current quarter and the financial year-to-date. 

B7.	Quoted Securities
	
There were no purchases or sales of quoted securities for the current quarter and the financial year-to-date and there were no investments in quoted securities at the end of the quarter.

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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

B8.	Status of Corporate Proposals Announced But Not Completed as at 29 August 2006 (being the latest practicable date which is not earlier than 7 days from the date of issue of this Quarterly Report)
	
(a)	On 31 March 2005, Affin Merchant Bank Berhad  (“Affin Merchant”) had, on behalf of the Board of Directors (“BOD”) of KCB announced to Bursa Malaysia on the following:

(i)	Appointment of Affin Merchant as the principal adviser and lead arranger for the proposed asset securitisation programme and principal adviser to the proposed extension and restructuring of the existing RM420 million nominal value zero-coupon redeemable secured bonds 2001/2005 (“2001/2005 Bonds”).

(ii)	The proposed asset securitisation programme would involve an asset-backed securitisation exercise of approximately RM1.04 billion to raise proceeds of about RM200 million from the issuance of approximately RM200 million nominal value of Senior Notes and approximately RM840 million nominal value of Junior Notes repayable over a period of seven (7) years (“Proposed Asset Securitisation Programme”), subject to finality of the terms and conditions acceptable to both parties pursuant to the proposed asset securitisation programme.

(iii)	The Company and Abrar Discounts Berhad (“ADB”) had on 31 March 2005 entered into the Heads of Agreement (“HOA”) which outline the principal terms and conditions in relation to the proposed extension and restructuring of the 2001/2005 Bonds in which ADB is the sole bondholder.

(b)	On 8 April 2005, Affin Merchant had, on behalf of BOD of KCB announced that, an application has been made to the Securities Commission (“SC”) for the proposed extension of the 2001/2005 Bonds from 11 April 2005 to 30 November 2005 pursuant to the HOA. 

(c)	On 10 November 2005, ADB had vide its letter dated 10 November 2005 agreed to extend the restructuring of the 2001/2005 Bonds from 30 November 2005 to 31 May 2006 (“Proposed Extension”).  An application to the SC for the Proposed Extension was made on 16 November 2005. An announcement to Bursa Malaysia for the same was made on 21 November 2005.

(d)	SC had vide its letter dated 20 January 2006 approved the Proposed Extension to 31 May 2006 subject to the following terms and conditions :-

(i)	All relevant parties to the 2001/2005 Bonds including, but not limited to, the trustee and rating agency, be fully informed of the Proposed Extension and, where required, consented to them;
(ii)	Prior to implementation of the Proposed Extension, Affin Merchant to submit the revised principal terms and conditions for 2001/2005 Bonds to the SC;
(iii)	Affin Merchant and KCB have undertaken all necessary due diligence in relation to the Proposed Extension; and
(iv)	Affin Merchant and KCB to obtain all other regulatory approvals for the Proposed Extension, if any.

(e)	Affin Merchant had, on behalf of the BOD of KCB submitted a letter dated 25 May 2006 to the SC on compliance of all the terms and conditions imposed by the SC vide its approval letter dated 20 January 2006. The announcement to Bursa Malaysia for the same was made on 29 May 2006.

(f)	On 26 May 2006, ADB agreed to further extend the redemption and maturity date of the 2001/2005 Bonds till 31 August 2006 (“Proposed Second Extension”).  Affin Merchant had on 31 May 2006, on behalf of the BOD of KCB, submitted an application on the Proposed Second Extension to the SC to allow KCB to have sufficient time to finalise the redemption of the 2001/2005 Bonds.  KCB is currently pursuing an alternative fund-raising exercise, in the form of bank borrowing, to address the redemption of the 2001/2005 Bonds as an alternative to the Proposed Asset Securitisation Programme as announced by the Company on 31 March 2005.

	(g)	On 25 August 2006, ADB agreed to extend the redemption and maturity date of the 2001/2005 Bonds for another one (1) month (“Proposed Third Extension”) up to 30 September 2006.  Pursuant to this, Affin Merchant had, on behalf of the BOD of KCB, submitted an application to the SC on 29 May 2006 on the Proposed Third Extension.  The extension is sought as both KCB and ADB require more time to finalise the redemption terms of the 2001/2005 Bonds. The announcement to Bursa Malaysia for the same was made on the even date.
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KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

B9.	Borrowings and Debt Securities

 (a)	
Short Term Borrowings	
  RM’000	
			
	Secured		
	Term Loan I (USD5.42Million)	18,133	
	Term Loan II	77,606	
	Revolving Credits	17,000	
	Bank Overdraft	25,592	
			
	Unsecured		
	Hire Purchase Creditors	3,324	
			
	Total	141,655	
			
(b)	Long Term Borrowings	  RM’000	
			
	Unsecured		
	Hire Purchase Creditors	1,814	
			
	Total	1,814	

B10.	Off Balance Sheet Financial Instruments

As at 29 August 2006 (being the latest practicable date which is not earlier than 7 days from the date of issue of this Quarterly Report), the Group did not enter into any contract involving financial instruments with off balance sheet risk.

B11.	Material Litigation 

The Group is engaged in the following material litigation as at the date of this report.

	A minority shareholder of First Travel and Tours (M) Sdn. Bhd. (“FTT”), a subsidiary of the Company, has presented a legal petition against FTT, the Company and a director of the Company (“Respondents”) to wind-up FTT pursuant to Section 181 of the Companies Act, 1965, on allegation that the affairs of FTT were conducted in a manner oppressive to him and in disregard of his interests as a shareholder. No provision has been made for possible losses arising from the above legal proceedings as the legal proceedings are still pending.

B12.	Dividend

No dividend is recommended for the current quarter and the current financial year.

Page 12
KARAMBUNAI CORP BHD (6461-P)
Unaudited Quarterly Report on the Consolidated Results for the Financial Quarter Ended 30 June 2006

B13.	Loss Per Share	
		
		Basic Loss per share	

 	
Current
Quarter Ended
30/06/2006
RM’000	
Comparative
Quarter Ended
30/06/2005
RM’000	Current Financial  Year-to-date Ended
30/06/2006
RM’000	Preceding Financial
Year-to-date Ended
30/06/2005
RM’000	
Loss after taxation attributable to the equity holders of the parent used as numerator in the calculation of basic EPS	
    
    (7,173)	
  
       (9,130)	
   
     (7,173)	
  
    (9,130)	
					
Weighted average number of shares used as denominator in the calculation of basic EPS (‘000)	

 2,030,060	

2,030,060	
      2,030,060	

 2,030,060	

Fully diluted earnings per share

The effect on the diluted loss per share for the current quarter and the financial year-to-date arising from the assumed conversion of outstanding Warrants is anti-dilutive.

By order of the Board

_______________________
Lee Wai Tuck Philip
Chief Financial Officer
Kota Kinabalu, Sabah           
29 August 2006

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